AMERICAN AADVANTAGE MILEAGE FUNDS, 485APOS, 1997-12-15

AMERICAN AADVANTAGE MILEAGE FUNDS
485APOS, 1997-12-15

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<PAGE> 1
As filed with the Securities and Exchange Commission on December 15, 1997

1933 Act File No. 33-91058
1940 Act File No. 811-9018

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]

Pre-Effective Amendment No. [ ]
-----
Post-Effective Amendment No. 5 [ X ]
-----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [ X ]

Amendment No. 6
-----
(Check appropriate box or boxes.)

AMERICAN AADVANTAGE MILEAGE FUNDS
(Exact name of Registrant as Specified in Charter)
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (817) 967-3509

WILLIAM F. QUINN, PRESIDENT
4333 Amon Carter Boulevard
Fort Worth, Texas 76155
(Name and Address of Agent for Service)

Copy to:
CLIFFORD J. ALEXANDER, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036

It is proposed that this filing will become effective (check appropriate box)

[ ] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on March 1, 1998 pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ X ] on March 2, 1997 pursuant to paragraph (a)(2) of Rule 485.

Title of Securities Being Registered ...........Shares of Beneficial Interest
<PAGE> 2
Registrant has adopted a master-feeder operating structure for each of its
series. This Post-Effective Amendment includes signature pages for the AMR
Investment Services Trust and the Equity 500 Index Portfolios, the master
trusts.

<PAGE> 3
AMERICAN AADVANTAGE MILEAGE FUNDS
CONTENTS OF REGISTRATION STATEMENT

This registration statement is comprised of the following:

Cover Sheet

Contents of Registration Statement

Cross Reference Sheets

Prospectus for the following American AAdvantage Mileage
Funds: Balanced Fund, Growth and Income Fund, International
Equity Fund, S&P 500 Index Fund, Intermediate Bond Fund,
Short-Term Bond Fund, Money Market Fund, Municipal Money
Market Fund and U.S. Government Money Market Fund.

Statement of Additional Information for the following American
AAdvantage Mileage Funds: Balanced Fund, Growth and Income
Fund, International Equity Fund, S&P 500 Index Fund,
Intermediate Bond Fund, Short-Term Bond Fund, Money Market
Fund, Municipal Money Market Fund, and U.S. Government Money
Market Fund.

Prospectus for the Platinum Class of the American AAdvantage
Money Market Mileage Fund, American AAdvantage Money Market
Fund, American AAdvantage Municipal Money Market Fund and
American AAdvantage U.S. Government Money Market Fund.

Statement of Additional Information for the Platinum Class of
the American AAdvantage Money Market Mileage Fund, American
AAdvantage Money Market Fund, American AAdvantage Municipal
Money Market Fund, American AAdvantage U.S. Government Money
Market Fund.

Part C

Signature Pages

Exhibits

<PAGE> 4
AMERICAN AADVANTAGE MILEAGE FUNDS

American AAdvantage Mileage Funds -- Balanced, Growth and Income,
International Equity, Short-Term Bond, Money Market (Mileage
Class), Municipal Money Market and U.S. Government Money Market

Funds.

FORM N-1A CROSS-REFERENCE SHEET

Part A

<TABLE>
<CAPTION>
Form N-1A
Item No. PROSPECTUS CAPTION
- - -------- ------------------
<S> <C>
1 Cover Page

2 Table of Fees and Expenses

3 Financial Highlights; Yields and Total Returns

4 Cover Page; Introduction; Investment Objectives, Policies and Risks; Investment Restrictions

5 Management and Administration of the Trusts; Investment Advisers

5A Not Applicable

6 Dividends, Other Distributions and Tax Matters; General Information; Shareholder Communications

7 Management and Administration of the Trusts; AAdvantage Miles(R); How to Purchase Shares;
Valuation of Shares

8 How to Redeem Shares; Exchange Privilege

9 Inapplicable
</TABLE>

Part B

<TABLE>
<CAPTION>
FORM N-1A STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
- - -------- ---------------------
<S> <C>
10 Cover Page

11 Table of Contents

12 Cover Page

13 Investment Restrictions; Approach to Stock Selection; Other Information

14 Trustees and Officers of the Mileage Trust and the AMR Trust; Trustees and Officers of the
Equity 500 Index Portfolio
</TABLE>

<PAGE> 5
<TABLE>
<S> <C>
15 Control Persons and 5% Shareholders

16 Management, Administrative Services and Distribution Fees; Investment Advisory Agreements

17 Portfolio Securities Transactions

18 Description of the Mileage Trust; Other Information

19 Net Asset Value; Redemptions in Kind

20 Tax Information

21 Inapplicable

22 Yield and Total Return Quotations

23 Financial Statements
</TABLE>

<PAGE> 6
AMERICAN AADVANTAGE MONEY MARKET MILEAGE FUNDS
PLATINUM CLASS

FORM N-1A CROSS-REFERENCE SHEET

Part A

<TABLE>
<CAPTION>
FORM N-1A
ITEM NO. PROSPECTUS CAPTION
- - -------- ------------------
<S> <C>
1 Cover Page

2 Table of Fees and Expenses

3 Financial Highlights; Yields and Total Returns

4 Cover Page; Introduction; Investment Objectives, Policies and Risks; Investment Restrictions

5 Management and Administration of the Trusts

5A Not Applicable

6 Dividends and Tax Matters; General Information; Shareholder Communications

7 Management and Administration of the Trusts; AAdvantage(R) Miles; How to Purchase Shares;
Valuation of Shares

8 How to Redeem Shares

9 Inapplicable
</TABLE>

Part B

<TABLE>
<CAPTION>
FORM N-1A STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION CAPTION
- - -------- ---------------------
<S> <C>
10 Cover Page

11 Table of Contents

12 Cover Page

13 Investment Restrictions; Other Information

14 Trustees and Officers of the Trusts and the AMR Trust

15 Control Persons and 5% Shareholders

16 Management, Administrative Services and Distribution Fees

17 Portfolio Securities Transactions

18 Description of the Trust; Other Information
</TABLE>

<PAGE> 7
<TABLE>
<S> <C>
19 Net Asset Value; Redemptions in Kind

20 Tax Information

21 Inapplicable

22 Yield and Total Return Quotations

23 Financial Statements
</TABLE>

PART C. OTHER INFORMATION

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.

<PAGE> 8

THIS PROSPECTUS contains important information about the AMERICAN AADVANTAGE
MILEAGE FUNDS ("Mileage Trust"), an open-end investment company which consists
of the separate investment portfolios listed on this cover page (individually
referred to as a "Fund" and, collectively, the "Funds"). EACH FUND, EXCEPT THE
S&P 500 INDEX MILEAGE FUND, SEEKS ITS INVESTMENT OBJECTIVE BY INVESTING ALL OF
ITS INVESTABLE ASSETS IN A CORRESPONDING PORTFOLIO OF THE AMR INVESTMENT
SERVICES TRUST ("AMR TRUST"). THE S&P 500 INDEX MILEAGE FUND INVESTS ALL OF ITS
INVESTABLE ASSETS IN THE EQUITY 500 INDEX PORTFOLIO. (THE EQUITY 500 INDEX
PORTFOLIO AND THE PORTFOLIOS OF THE AMR TRUST ARE REFERRED TO HEREIN AS A
"PORTFOLIO" AND, COLLECTIVELY, THE "PORTFOLIOS.") EACH PORTFOLIO HAS AN
INVESTMENT OBJECTIVE IDENTICAL TO THE INVESTING FUND. The investment experience
of each Fund will correspond directly with the investment experience of each
Portfolio. Fund shares are offered to individuals and certain grantor trusts.
Prospective investors should read this Prospectus carefully before making an
investment decision and retain it for future reference.

IN ADDITION TO THIS PROSPECTUS, a Statement of Additional Information ("SAI")
dated March 1, 1998 has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. The SAI contains more detailed
information about the Funds. For a free copy of the SAI, call 800-388-3344.

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

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY SUCH STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

PROSPECTUS
March 1, 1998

[AMERICAN AADVANTAGE MILEAGE FUNDS LOGO]

BALANCED MILEAGE FUND
GROWTH AND INCOME MILEAGE FUND
INTERNATIONAL EQUITY MILEAGE FUND
S&P 500 INDEX MILEAGE FUND

INTERMEDIATE BOND MILEAGE FUND
SHORT-TERM BOND MILEAGE FUND
MONEY MARKET MILEAGE FUND
MUNICIPAL MONEY MARKET MILEAGE FUND
U.S. GOVERNMENT MONEY MARKET MILEAGE FUND

Managed by AMR Investments

<PAGE> 9

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

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

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

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

The AMERICAN AADVANTAGE INTERMEDIATE BOND MILEAGE FUND(SM) ("Intermediate Bond
Fund") seeks income and capital appreciation by investing all of its investable
assets in the Intermediate Bond Portfolio of the AMR Trust ("Intermediate Bond
Portfolio"), which in turn primarily invests in debt obligations and seeks to
maintain a dollar weighted average duration of three to seven years.

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

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

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

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

<TABLE>
<S> <C>
TABLE OF FEES AND EXPENSES.............. 3
FINANCIAL HIGHLIGHTS.................... 4
INTRODUCTION............................ 6
INVESTMENT OBJECTIVES, POLICIES AND
RISKS................................. 6
INVESTMENT RESTRICTIONS................. 16
YIELDS AND TOTAL RETURNS................ 17
MANAGEMENT AND ADMINISTRATION OF THE
TRUSTS................................ 17
INVESTMENT ADVISERS..................... 20
AADVANTAGE(R) MILES..................... 22
HOW TO PURCHASE SHARES.................. 22
HOW TO REDEEM SHARES.................... 24
EXCHANGE PRIVILEGE...................... 25
VALUATION OF SHARES..................... 25
DIVIDENDS, OTHER DISTRIBUTIONS AND TAX
MATTERS............................... 26
GENERAL INFORMATION..................... 28
SHAREHOLDER COMMUNICATIONS.............. 29
</TABLE>

PROSPECTUS

2
<PAGE> 10

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

TABLE OF FEES AND EXPENSES

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

<TABLE>
<CAPTION>
MONEY
GROWTH S&P 500 INTERMEDIATE SHORT- MARKET MUNICIPAL
AND INT'L INDEX BOND TERM FUND - MONEY
BALANCED INCOME EQUITY FUND(1) FUND(1) BOND MILEAGE MARKET
FUND FUND FUND ------- ------------ FUND CLASS FUND
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MANAGEMENT FEES 0.33% 0.33% 0.48% % % 0.25% 0.15% 0.15%

12B-1 FEES (AFTER WAIVERS) 0.00(2) 0.00(2) 0.00(2) (2) (2) 0.00(2) 0.25 0.25

OTHER EXPENSES (AFTER FEE
WAIVERS AND REIMBURSEMENTS)(3) 0.66 0.66 1.00 0.61 0.27 0.27
----- ---- ---- ----- ------- ---- -----

TOTAL OPERATING EXPENSES
(AFTER FEE WAIVERS AND
REIMBURSEMENTS)(4) 0.99% 0.99% 1.48% % % 0.86% 0.67% 0.67%
===== ==== ==== ===== ======= ==== ===== ======

<CAPTION>
U.S.
GOVERNMENT
MONEY
MARKET
FUND
<S> <C>
MANAGEMENT FEES 0.15%
12B-1 FEES (AFTER WAIVERS) 0.00(2)
OTHER EXPENSES (AFTER FEE
WAIVERS AND REIMBURSEMENTS)(3) 0.47
TOTAL OPERATING EXPENSES
(AFTER FEE WAIVERS AND
REIMBURSEMENTS)(4) 0.62%
======
</TABLE>

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

(2) Absent fee waivers, "12b-1 Fees" for the Balanced Fund, the Growth and
Income Fund, the International Equity Fund, the Short-Term Bond Fund and the
U.S. Government Money Market Fund would be .25%. The Mileage Trust
anticipates that the 12b-1 fee charged for the current fiscal year will be
used to pay for advertising and AAdvantage miles. See "AAdvantage Miles."

(3) "Other Expenses" before fee waivers and reimbursements are estimated to be
2.35% for the Balanced Fund, 1.30% for the Growth and Income Fund, 1.98% for
the International Equity Fund, 3.09% for the Short-Term Bond Fund and 0.71%
for the U.S. Government Money Market Fund.

(4) "Total Operating Expenses" before fee waivers and reimbursements are
estimated to be 2.93% for the Balanced Fund, 1.88% for the Growth and Income
Fund, 2.71% for the International Equity Fund, 3.19% for the Short-Term Bond
Fund, 0.78% for the Money Market Fund -- Mileage Class, 0.80% for the
Municipal Money Market Fund and 1.11% for the U.S. Government Money Market
Fund.

The above expenses reflect the expenses of each Fund and the Portfolio in
which it invests. The Mileage Trust Board believes that the aggregate per share
expenses of each Fund and its corresponding Portfolio will be approximately
equal to the expenses that the Fund would incur if its assets were invested
directly in the type of securities held by the Portfolio.

PROSPECTUS

3
<PAGE> 11

EXAMPLES

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
BALANCED FUND $10 $32 $55 $121

GROWTH AND INCOME FUND 10 32 55 121

INTERNATIONAL EQUITY FUND 15 47 81 177

S&P 500 INDEX FUND

INTERMEDIATE BOND FUND

SHORT-TERM BOND FUND 9 27 48 106

MONEY MARKET FUND 7 21 37 83

MUNICIPAL MONEY MARKET FUND 7 21 37 83
U.S. GOVERNMENT MONEY MARKET FUND 6 20 35 77
</TABLE>

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

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

FINANCIAL HIGHLIGHTS

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

PROSPECTUS

4
<PAGE> 12

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
GROWTH AND
BALANCED INCOME INT'L EQUITY SHORT-TERM
FUND(1)(3)(4) FUND(1)(3)(4) FUND(1)(3) BOND FUND(1)(3)
----------------- ----------------- ----------------- ----------------
1997 1996 1997 1996 1997 1996 1997 1996
------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF PERIOD(5)........ $ 13.97 $ 15.94 $ 13.15 $ 9.83
------- ------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME(6)..................... 0.49 0.34 0.20 0.59
NET GAINS (LOSSES) ON SECURITIES (BOTH
REALIZED AND UNREALIZED)(6)................ 1.65 3.16 2.03 (0.18)
------- ------- ------- ------- ------- ------- ------- ------
TOTAL FROM INVESTMENT OPERATIONS............... 2.14 3.50 2.23 0.41
------- ------- ------- ------- ------- ------- ------- ------
LESS DISTRIBUTIONS:
DIVIDENDS FROM NET INVESTMENT INCOME......... (0.10) (0.09) (0.07) (0.59)
DISTRIBUTIONS FROM NET REALIZED GAINS ON
SECURITIES................................. -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------
TOTAL DISTRIBUTIONS............................ (0.10) (0.09) (0.07) (0.59)
------- ------- ------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD................. $ 16.01 $ 19.35 $ 15.31 $ 9.65
======= ======= ======= ======= ======= ======= ======= ======
TOTAL RETURN (ANNUALIZED)...................... 15.97% 22.77% 16.58% 4.55%
======= ======= ======= ======= ======= ======= ======= ======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN THOUSANDS)..... $ 2,495 $ 6,234 $ 3,387 $1,168
RATIOS TO AVERAGE NET ASSETS
(ANNUALIZED)(6)(7):
EXPENSES................................... 1.01% 1.00% 1.48% 0.86%
NET INVESTMENT INCOME...................... 3.58% 2.13% 1.63% 6.08%
PORTFOLIO TURNOVER RATE(8)................. 76% 40% 19% 304%
AVERAGE COMMISSION RATE PAID(8)............ $0.0409 $0.0412 $0.0192 --
</TABLE>

(1) The Funds commenced active operations on November 1, 1995. Prior to March 1,
1997, the U.S. Government Money Market Fund was known as the American
AAdvantage U.S. Treasury Money Market Mileage Fund and operated under
different investment policies.

(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) Total return is calculated assuming an initial investment is made at the net
asset value last calculated on the business day before the first day of each
period reported, reinvestment of all dividends and capital gains
distributions on the payable date and a sale at net asset value on the last
day of each period reported.

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

(5) The net asset value per share for the Balanced, Growth and Income,
International Equity and Short-Term Bond Funds has been adjusted for a stock
split which occurred on November 1, 1995 in the ratio of 1.431690, 1.254705,
1.502913 and 2.034588, respectively.

(6) Per share amounts and ratios reflect income and expenses assuming inclusion
of each Fund's proportionate share of the income and expenses of its
corresponding Portfolio.

(7) Operating results exclude expenses reimbursed by the Manager. The ratios of
expenses to average net assets and of net investment income to average net
assets were 2.93% and 1.66%, respectively for the Balanced Fund, 1.88% and
1.25%, respectively for the Growth and Income Fund, 2.71% and 0.40%,
respectively for the International Equity Fund, 3.19% and 3.75%,
respectively for the Short-Term Bond Fund, 0.78% and 4.91%, respectively for
the Money Market Fund -- Mileage Class, 0.80% and 3.00%, respectively for
the Municipal Money Market Fund and 1.11% and 4.33%, respectively for the
U.S. Government Money Market Fund, for the year ended October 31, 1996.

(8) On November 1, 1995 each Fund invested all of its investable assets in its
corresponding Portfolio. Portfolio turnover rate and average commission rate
paid are those of the corresponding Portfolio.

PROSPECTUS

5
<PAGE> 13

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
MONEY U.S.
MARKET MUNICIPAL GOVERNMENT
FUND- MONEY MONEY
MILEAGE MARKET MARKET
CLASS(1)(2) FUND(1) FUND(1)
------------------ ------------------- -----------------
1997 1996 1997 1996 1997 1996
------- -------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>

NET ASSET VALUE, BEGINNING OF PERIOD(5)..................... $ 1.00 $ 1.00 $ 1.00
------- -------- ------- --------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT INCOME(6).................................. 0.05 0.03 0.05
NET GAINS (LOSSES) ON SECURITIES (BOTH REALIZED AND
UNREALIZED)(6).......................................... -- -- --
------- -------- ------- --------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS............................ 0.05 0.03 0.05
------- -------- ------- --------- ------- -------
LESS DISTRIBUTIONS:
DIVIDENDS FROM NET INVESTMENT INCOME...................... (0.05) (0.03) (0.05)
DISTRIBUTIONS FROM NET REALIZED GAINS ON SECURITIES....... -- -- --
------- -------- ------- --------- ------- -------
TOTAL DISTRIBUTIONS......................................... (0.05) (0.03) (0.05)
------- -------- ------- --------- ------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 1.00 $ 1.00 $ 1.00
======= ======== ======= ========= ======= =======
TOTAL RETURN (ANNUALIZED)................................... 5.12% 3.19% 4.98%
======= ======== ======= ========= ======= =======
RATIOS/SUPPLEMENTAL DATA:
NET ASSETS, END OF PERIOD (IN THOUSANDS).................. $106,709 $ 28,726 $10,638
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)(6)(7):
EXPENSES................................................ 0.67% 0.66% 0.62%
NET INVESTMENT INCOME................................... 5.02% 3.14% 4.82%
PORTFOLIO TURNOVER RATE(8).............................. -- -- --
AVERAGE COMMISSION RATE PAID(8)......................... -- -- -- -- -- --
</TABLE>

(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.

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

(5) The net asset value per share for the Balanced, Growth and Income,
International Equity and Limited-Term Income Funds has been adjusted for a
stock split which occurred on November 1, 1995 in the ratio of 1.431690,
1.254705, 1.502913 and 2.034588, respectively.

(6) Per share amounts and ratios reflect income and expenses assuming inclusion
of each Fund's proportionate share of the income and expenses of its
corresponding Portfolio.

(7) Operating results exclude expenses reimbursed by the Manager. The ratios of
expenses to average net assets and of net investment income to average net
assets were 2.93% and 1.66%, respectively for the Balanced Fund, 1.88% and
1.25%, respectively for the Growth and Income Fund, 2.71% and 0.40%,
respectively for the International Equity Fund, 3.19% and 3.75%,
respectively for the Limited-Term Income Fund, 0.78% and 4.91%, respectively
for the Money Market Fund -- Mileage Class, 0.80% and 3.00%, respectively
for the Municipal Money Market Fund and 1.11% and 4.33%, respectively for
the U.S. Government Money Market Fund, for the year ended October 31, 1996.

PROSPECTUS

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INTRODUCTION

The Mileage Trust is an open-end, diversified management investment company
organized as a Massachusetts business trust on February 22, 1995. The Funds are
separate investment portfolios of the Mileage Trust. Each Fund has a distinctive
investment objective and investment policies. Each Fund, except the S&P 500
Index Fund, invests all of its investable assets in a corresponding Portfolio of
the AMR Trust which has an identical investment objective. The S&P 500 Index
Fund invests all of its investable assets in the Equity 500 Index Portfolio,
which is a separate investment company advised by BT with an identical
investment objective. The Manager provides the Portfolios, except the Equity 500
Index Portfolio, with business and asset management services, including the
evaluation and monitoring of the investment advisers, and it provides the Funds
with administrative services. BT provides the Equity 500 Index Portfolio with
investment advisory, administrative and other services.

Each Fund, except for the Money Market Fund, currently consists of one
class of shares. The Money Market Fund currently consists of two classes of
shares, the Mileage Class, as described in this Prospectus, and the Platinum
Class, which is available to customers of certain broker-dealers as an
investment for cash balances in their brokerage accounts. The Funds are
available to individuals and certain grantor trusts ("Trust Accounts"). For
further information, or to obtain a Platinum Class prospectus free of charge,
call (800) 967-9009.

Although each class of shares of the Money Market Fund is designed to meet
the needs of different investors, each class of the Fund shares the same
portfolio of investments and a common investment objective. See "Investment
Objectives, Policies and Risks." Based on its value, a share of the Money Market
Fund, regardless of class, will receive a proportionate share of the investment
income and the gains (or losses) earned (or incurred) by the Fund. It also will
bear its proportionate share of expenses that are allocated to the Money Market
Fund as a whole. However, certain expenses are allocated separately to each
class of shares.

The assets of the Balanced Portfolio, the Growth and Income Portfolio and
the International Equity Portfolio are allocated by the Manager among investment
advisers designated for each of those Portfolios. BT serves as the investment
adviser to the Equity 500 Index Portfolio. The assets of the Intermediate Bond
Portfolio are allocated by the Manager between the Manager and another
investment adviser. Investment decisions for the Short-Term Bond Portfolio and
the Money Market Portfolios are made directly by the Manager. With the exception
of the S&P 500 Index Fund, each investment adviser has discretion to purchase
and sell portfolio securities in accordance with the investment objectives,
policies and restrictions described in this Prospectus and in the SAI and by
specific investment strategies developed by the Manager. There is no guarantee
that a Fund will achieve its investment objective. See "Investment Advisers."

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

Each shareholder will receive American Airlines(R) AAdvantage(R) travel
awards program ("AAdvantage") miles.(2) AAdvantage miles will be posted monthly
to each shareholder's AAdvantage account at an annual rate of one mile for every
$10 invested in any Fund. See "AAdvantage Miles."

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

2 American Airlines and AAdvantage are registered trademarks of American
Airlines, Inc.

PROSPECTUS

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INVESTMENT OBJECTIVES, POLICIES AND RISKS

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

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

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

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

PROSPECTUS

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<PAGE> 16

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

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

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

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

PROSPECTUS

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<PAGE> 17

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

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

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

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

The Portfolio may trade forward foreign currency contracts ("forward
contracts"), which are "derivatives," to hedge currency fluctuations of
underlying stock or bond positions or in other circumstances permitted by the
Commodity Futures Trading Commission ("CFTC"). Forward contracts to sell foreign
currency may be used when the management of the Portfolio believes that the
currency of a particular foreign country may suffer a decline against the U.S.
dollar. Forward contracts are also used to set the exchange rate for a future
transaction. In this manner, the Portfolio may protect itself against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar or other currency which is being used for the security purchase and the
foreign currency in which the security is denominated during the period between
the date on which the security is purchased or sold and the date on which
payment is made or received. Forward contracts involve certain risks

PROSPECTUS

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<PAGE> 18

which include, but are not limited to: (1) imperfect correlation between the
securities hedged and the contracts themselves; and (2) possible decrease in the
total return of the Portfolio. Forward contracts are discussed in greater detail
in the SAI.

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

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

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

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

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

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

BT generally will seek to match the composition of the S&P 500, but usually
will not invest the Portfolio's stock portfolio to mirror the Index exactly.
Because of the difficulty and expense of executing relatively small stock
transactions, the Portfolio may not always be invested in the less heavily
weighted S&P 500 stocks and may at times have its portfolio weighted differently
from the S&P 500. When the Portfolio's size is greater, BT expects to purchase
more of the stocks in the S&P 500 and to match the relative weighting of the S&P
500 more closely and anticipates that the Portfolio will be able to mirror,
before expenses, the performance of the S&P 500 with

PROSPECTUS

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<PAGE> 19

little variance. In addition, the Portfolio may omit or remove any S&P 500 stock
from the Portfolio if, following objective criteria, BT judges the stock to be
insufficiently liquid or believes the merit of the investment has been
substantially impaired by extraordinary events or financial conditions. BT will
not purchase the stock of Bankers Trust New York Corporation, which is included
in the Index, and instead will overweight its holdings of companies engaged in
similar businesses.

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

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

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

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

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

PROSPECTUS

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<PAGE> 20

as a representation of stocks in a particular industry group, and may be changed
from time to time. For more complete information about the Index, see the SAI.

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

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

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

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

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

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

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

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

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

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

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

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The Manager and Barrow, Hanley, Mewhinney & Strauss, Inc. currently manage
the assets of the Intermediate Bond Portfolio. See "Investment Advisers."

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

Investments in Yankeedollar and Eurodollar bonds, notes and certificates of
deposit involve risks that differ from investments in securities of domestic
issuers. See "American AAdvantage Money Market Mileage Fund" for a description
of these risks. See "American AAdvantage Intermediate Bond Mileage Fund" for a
description of the risks associated with investments in mortgage-backed
securities, CMOs and asset-backed securities and for an explanation of how the
Portfolio's debt instruments will vary in response to interest rate changes. The
Portfolio also may engage in dollar rolls, or purchase or sell securities on a
when-issued or forward commitment basis as described under "American AAdvantage
Balanced Mileage Fund."

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

The Manager serves as the sole active investment adviser to the Short-Term
Bond Portfolio.

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

AMERICAN AADVANTAGE MONEY MARKET MILEAGE FUND -- The Fund's corresponding
Portfolio may invest in obligations permitted to be purchased under Rule 2a-7 of
the 1940 Act including, but not limited to, (1) obligations of the

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U.S. Government or its agencies or instrumentalities; (2) loan participation
interests, medium-term notes, funding agreements and asset-backed securities;
(3) domestic, Yankeedollar and Eurodollar certificates of deposit, time
deposits, bankers' acceptances, commercial paper, bank deposit notes and other
promissory notes including floating or variable rate obligations issued by U.S.
or foreign bank holding companies and their bank subsidiaries, branches and
agencies; and (4) repurchase agreements involving the obligations listed above.
The Money Market Portfolio will invest only in issuers or instruments that at
the time of purchase (1) have received the highest short-term rating by two
Rating Organizations such as "A-1" by S&P and "P-1" by Moody's; (2) are single
rated and have received the highest short-term rating by a Rating Organization;
or (3) are unrated, but are determined to be of comparable quality by the
Manager pursuant to guidelines approved by the AMR Trust Board and subject to
ratification by the AMR Trust Board. See the SAI for definitions of the
foregoing instruments and rating systems. The Portfolio may invest in other
investment companies. The Portfolio also may purchase or sell securities on a
when-issued or forward commitment basis as described under "American AAdvantage
Balanced Mileage Fund."

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

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

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

AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET MILEAGE FUND -- The Fund's
corresponding Portfolio may invest in municipal obligations issued by or on
behalf of the governments of states, territories, or possessions of the United
States; the District of Columbia; and their political subdivisions, agencies and
instrumentalities if the interest these obligations provide is generally exempt
from federal income tax. The Municipal Money Market Portfolio will invest only
in issuers or instruments that at the time of purchase (1) are guaranteed by the
U.S. Government, its agencies, or instrumentalities; (2) are secured by letters
of credit that are irrevocable and issued by banks which qualify as authorized
issuers for the Money Market Portfolio (see "American AAdvantage Money Market
Mileage Fund"); (3) are guaranteed by one or more municipal bond insurance
policies that are noncancelable and are issued by third-party guarantors
possessing the highest claims-paying rating from a Rating Organization; (4) have
received one of the two highest short-term ratings from at least two Rating
Organizations; (5) are single rated and have received one of the two highest
short-term ratings from that Rating Organization; (6) have no short-term rating
but the instrument is comparable to the issuer's rated short-term debt; (7) have
no short-term rating (or

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comparable rating) but have received one of the top two long-term ratings from
all Rating Organizations rating the issuer or instrument; or (8) are unrated,
but are determined to be of comparable quality by the Manager pursuant to
guidelines approved by, and subject to the oversight of, the AMR Trust Board.
The Portfolio also may invest in other investment companies. Ordinarily at least
80% of the Portfolio's net assets will be invested in municipal obligations the
interest from which is exempt from regular federal income tax. However, should
market conditions warrant, the Portfolio may invest up to 20% (or for temporary
defensive purposes, up to 100%) of its assets in eligible investments for the
Money Market Portfolio which are subject to federal income tax.

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

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

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

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

AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET MILEAGE FUND -- The Fund's
corresponding Portfolio will invest exclusively in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements which are collateralized by such obligations. U.S.
Government securities include direct obligations of the U.S. Treasury (such as
Treasury bills, Treasury notes and Treasury bonds). The Fund may

PROSPECTUS

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invest in securities issued by the Agency for International Development, Farmers
Home Administration, Farm Credit Banks, Federal Home Loan Bank, Federal
Intermediate Credit Bank, Federal Financing Bank, Federal Land Bank, FNMA, GNMA,
General Services Administration, Rural Electrification Administration, Small
Business Administration, Tennessee Valley Authority, and others. Some of these
obligations, such as those issued by the Federal Home Loan Bank and FHLMC, are
supported only by the credit of the agency or instrumentality issuing the
obligation and the discretionary authority of the U.S. Government to purchase
the agency's obligations. Counterparties for repurchase agreements must be
approved by the AMR Trust Board. See the SAI for a further discussion of the
foregoing obligations. The Portfolio may purchase or sell securities on a
when-issued or forward commitment basis, as described under "American AAdvantage
Balanced Mileage Fund."

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

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

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

PRIVATE PLACEMENT OFFERINGS. Investments in private placement offerings are
made in reliance on the "private placement" exemption from registration afforded
by Section 4(2) of the Securities Act of 1933 (the "1933 Act"), and resold to
qualified institutional buyers under Rule 144A under the 1993 Act ("Section 4(2)
securities"). Section 4(2) securities are restricted as to disposition under the
federal securities laws, and generally are sold to institutional investors, such
as the Portfolios, that agree they are purchasing the securities for investment
and not with an intention to distribute to the public. Any resale by the
purchaser must be in an exempt transaction and may be accomplished in accordance
with Rule 144A. Section 4(2) securities normally are resold to other
institutional investors like the Portfolios through or with the assistance of
the issuer or investment dealers who make a market in the Section 4(2)
securities, thus providing liquidity. The Money Market Portfolios will not

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invest more than 10% (and the Balanced, Growth and Income, International Equity,
S&P 500 Index, Intermediate Bond and Short-Term Bond Portfolios, no more than
15%) of their respective assets in Section 4(2) securities and other illiquid
securities unless the applicable investment adviser determines, by continuous
reference to the appropriate trading markets and pursuant to guidelines approved
by the AMR Trust Board or the Equity 500 Index Portfolio Board, that any Section
4(2) securities held by such Portfolio in excess of this level are at all times
liquid.

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

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

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

No Portfolio, other than the Short-Term Bond Portfolio, currently expects
its portfolio turnover rate to exceed 100%. The portfolio turnover rate for the
Short-Term Bond Portfolio for the year ended October 31, 1997 was %. A
Portfolio's turnover rate, or the frequency of portfolio transactions, will vary
from year to year depending on market conditions and the Portfolio's cash flows.
High portfolio activity increases a Portfolio's transaction costs, including
brokerage commissions, and may result in a greater number of taxable
transactions.

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

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

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

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

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

INVESTMENT RESTRICTIONS

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

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

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

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considered separate industries). With respect to the Money Market
Portfolio, this restriction does not apply to the banking industry.

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

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

YIELDS AND TOTAL RETURNS

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

Advertised yields for the Balanced Fund, the Growth and Income Fund, the
International Equity Fund, the S&P 500 Index Fund, the Intermediate Bond Fund
and the Short-Term Bond Fund (collectively, the "Variable NAV Funds") may be
computed by dividing the net investment income per share earned by a Fund during
the relevant time period by the maximum offering price per share for that Fund
on the last day of the period. Additionally, the Intermediate Bond Fund and the
Short-Term Bond Fund may advertise a "monthly distribution rate." This rate is
based on an annualized monthly dividend accrual rate per share compared with the
month-end share price of this Fund. Total return quotations advertised by the
Funds may reflect the average annual compounded (or aggregate compounded) rate
of return during the designated time period based on a hypothetical initial
investment and the redeemable value of that investment at the end of the period.
The Funds will at times compare their performance to applicable published
indices, and also may disclose their performance as ranked by certain ranking
entities. See the SAI for more information about the calculation of yields and
total returns.

MANAGEMENT AND ADMINISTRATION OF THE TRUSTS

The Mileage Trust Board has general supervisory responsibility over the
Mileage Trust's affairs, while the business affairs of the AMR Trust and the
Equity 500 Index Portfolio are subject to the supervision of their respective
Board of Trustees. The Manager serves as investment manager and administrator to
the Portfolios pursuant to a Management Agreement dated October 1, 1995, as
amended on July 25, 1997, which obligates the Manager to provide or oversee all
administrative, investment advisory and portfolio management services for the
Portfolios. Similarly, the Manager entered into a Management Agreement dated
October 1, 1995, as amended on November 21, 1997, which obligates the Manager to
provide or oversee all administrative, investment advisory and portfolio
management services for the Funds. The Manager, located at 4333 Amon Carter
Boulevard,

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MD5645, Fort Worth, Texas 76155, is a wholly owned subsidiary of AMR Corporation
("AMR"), the parent company of American Airlines, Inc., organized in 1986 to
provide investment management, advisory, administrative and asset management
consulting services. The assets of the Balanced Portfolio, the Growth and Income
Portfolio and the International Equity Portfolio are allocated by the Manager
among multiple investment advisers designated for that Portfolio. The assets of
the Intermediate Bond Portfolio are allocated by the Manager between the Manager
and another investment adviser. BT serves as investment adviser and
administrator of, and provides custody and transfer agency services to, the
Equity 500 Index Portfolio. See "Investment Advisers." The Manager serves as the
sole investment adviser to the Money Market Portfolios and the Short-Term Bond
Portfolio. In addition, with the exception of the International Equity Portfolio
and the Equity 500 Index Portfolio, if so requested by any investment adviser,
the Manager will make the investment decisions with respect to assets allocated
to that investment adviser which the investment adviser determines should be
invested in short-term obligations of the type permitted for investment by the
Money Market Portfolio. As of December 31, 1997, the Manager had assets under
management (including assets under fiduciary advisory control) totaling
approximately $ billion including approximately $ billion under
active management and $ billion as named fiduciary or fiduciary adviser.
Of the total, approximately $ billion of assets are related to AMR.
American Airlines, Inc. is not responsible for investments made in the Mileage
Trust.

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

The Manager bears the expense of providing the above services and pays the
fees of the investment advisers of the Funds and the Portfolios of the AMR
Trust. As compensation for paying the investment advisory fees and for providing
the Portfolios with advisory and asset allocation services, the Manager receives
from the AMR Trust an annualized fee which is calculated and accrued daily,
equal to the sum of (1) 0.15% of the net assets of the Money Market Portfolios,
(2) 0.25% of the net assets of the Intermediate Bond Portfolio and the
Short-Term Bond Portfolio, (3) 0.10% of the net assets of the other Portfolios
of the AMR Trust, plus (4) all fees payable by the Manager to the investment
advisers of the Balanced, the Growth and Income and the International Equity
Portfolios as described in "Investment Advisers." To the extent that a Fund
invests all of its investable assets in its corresponding Portfolio, the Manager
will need to provide only administrative services to the Funds. As compensation
for these services, the Manager receives from the Mileage Trust an annualized
fee equal to 0.25% of the net assets of each Variable NAV Fund and 0.05% of the
net assets of the Money Market Funds. The Manager receives compensation in
connection with securities lending activities. If a Portfolio lends its
portfolio securities and receives cash collateral from the borrower, the Manager
may receive up to 25% of the net annual interest income (the gross interest
earned by the investment less the amount paid to the borrower as well as related
expenses) received from the investment of such cash. If a borrower posts
collateral other than cash, the borrower will pay to the lender a loan fee. In
addition, the Manager may receive up to 25% of the loan fees posted by
borrowers. Currently, the Manager receives 10% of the net annual interest income
from the investment of cash collateral or 10% of the loan fees posted by
borrowers. The fees received by the Manager from the Mileage Trust and the AMR
Trust are payable quarterly in arrears.

Each Management Agreement will continue in effect provided that annually
such continuance is specifically approved by a vote of the Mileage Trust Board
and the AMR Trust Board, including the affirmative votes of a majority of the
Trustees of each Board who are not parties to the Management Agreement or
"interested persons" as defined in the 1940 Act of any such party ("Independent
Trustees"), cast in person at a meeting called for the

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purpose of considering such approval, or by the vote of a Fund's shareholders or
a Portfolio's interest holders. A Management Agreement may be terminated with
respect to a Fund or a Portfolio at any time, without penalty, by a majority
vote of outstanding Fund shares or Portfolio interests on sixty (60) days'
written notice to the Manager, or by the Manager, on sixty (60) days' written
notice to the Mileage Trust or the AMR Trust. A Management Agreement will
automatically terminate in the event of its "assignment" as defined in the 1940
Act.

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

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

FUND ADVISORY AGREEMENTS -- Each investment adviser, except BT, has entered into
a separate investment advisory agreement with the Manager to provide investment
advisory services to the Funds and the Portfolios of the AMR Trust, each dated
October 1, 1995. To the extent that a Fund invests all of its investable assets
in a corresponding Portfolio, however, an investment adviser will receive an
advisory fee only on behalf of the Portfolio and not on behalf of its
corresponding Fund. As described below, the assets of the Balanced, the Growth
and Income and the International Equity Portfolios are allocated among the
investment advisers designated for that Portfolio and the assets of the
Intermediate Bond Portfolio are allocated between the Manager and another
investment adviser. The Manager is permitted to enter into new or modified
advisory agreements with existing or new investment advisers without approval of
Fund shareholders or Portfolio interest holders, but subject to approval of the
Mileage Trust Board and the AMR Trust Board. The Securities and Exchange
Commission issued an exemptive order which eliminates the need for
shareholder/interest holder approval, subject to compliance with certain
conditions. These conditions include the requirement that within 90 days of
hiring a new adviser or implementing a material change with respect to an
advisory contract, the applicable Fund send a notice to shareholders containing
information about the change that would be included in a proxy statement. The
Manager recommends investment advisers to the AMR Trust Board based upon its
continuing quantitative and qualitative evaluation of the investment advisers'
skill in managing assets using specific investment styles and strategies. The
allocation of assets among investment advisers may be changed at any time by the
Manager. Allocations among investment advisers will vary based upon a variety of
factors, including the overall investment performance of each investment
adviser, the Portfolio's cash flow needs and market conditions. The Manager need
not allocate assets to each investment adviser designated for a Portfolio. The
investment advisers can be terminated without penalty to the AMR Trust by the
Manager, the AMR Trust Board or the interest holders of the applicable
Portfolio. Short-term investment performance, by itself, is not a significant
factor in selecting or terminating an investment adviser, and the Manager does
not expect to recommend frequent changes of investment advisers. The Prospectus
will be supplemented if additional investment advisers are retained or the
contract with any existing investment adviser is terminated.

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

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

DISTRIBUTION PLAN -- The distribution plan for the Funds (the "Plan") was
adopted pursuant to Rule 12b-1 under the 1940 Act and provides that it will
continue in effect so long as its continuance is approved at least annually by a
majority of the Trustees, including the affirmative votes of a majority of the
Independent Trustees of the Mileage Trust Board, cast in person at a meeting
called for the purpose of considering such approval, or by the vote of
shareholders. The Plan may be terminated with respect to a particular Fund at
any time, without the payment of any penalty, by a vote of a majority of the
Independent Trustees of the Mileage Trust Board or by a vote of a majority of
the outstanding voting securities of the applicable Fund. Shares are distributed
through the Funds' principal underwriter, Brokers Transaction Services ("BTS").
BTS is compensated by the Manager, and not the Trust.

The Plan provides that each Fund will pay 0.25% per annum of its average
daily net assets to the Manager (or another entity approved by the Mileage Trust
Board) for distribution-related services. The fee will be payable monthly in
arrears without regard to whether the amount of the fee is more or less than the
actual expenses incurred in a particular month by the entity for the services
provided pursuant to the Plan. The primary expenses expected to be incurred
under the Plan are advertising and participation in the AAdvantage program.

ALLOCATION OF FUND EXPENSES -- Expenses of the Money Market Fund's Platinum and
Mileage Classes generally are allocated equally among the shares of the Fund,
regardless of class. However, certain expenses approved by the Mileage Trust
Board will be allocated solely to the class to which they relate.

PRINCIPAL UNDERWRITER -- BROKERS TRANSACTION SERVICES, INC., 7001 Preston Road,
Dallas, Texas 75205, serves as the principal underwriter of the Funds.

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

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

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

INVESTMENT ADVISERS

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

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advisory, administrative and other services to the Equity 500 Index Portfolio.
See "Bankers Trust Company" below for a discussion of those services.

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

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

Mr. Fields also is responsible for the portfolio management oversight of the
portion of the Intermediate Bond Fund and its corresponding Portfolio, allocated
to the Manager. Mr. Mayer is responsible for its day-to-day portfolio
management.

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

BANKERS TRUST COMPANY, 280 Park Avenue, New York, New York, 10017, is a New
York banking corporation and is a wholly owned subsidiary of Bankers Trust New
York Corporation. BT conducts a variety of general banking and trust activities
and is a major wholesale supplier of financial services to the international and
domestic institutional market, with a global network of over 120 offices in more
than 40 countries. As of September 30, 1997, Bankers Trust New York Corporation
was the seventh largest bank holding company in the United States with total
assets of approximately $ billion and approximately $ billion in assets
under management globally. Of that total, approximately $ billion are in
U.S. equity index assets alone. BT serves as investment adviser and
administrator to the Equity 500 Index Portfolio. For its services, BT receives a
fee from the Equity 500 Index Portfolio, computed daily and paid monthly, at the
annual rate of 0.08% of the average daily net assets of the Portfolio.

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

BRANDYWINE ASSET MANAGEMENT, INC. ("Brandywine"), 201 North Walnut Street,
Wilmington, Delaware 19801, is a professional investment counseling firm founded
in 1986. Brandywine is a wholly owned subsidiary of Legg Mason, Inc. As of
December 31, 1997, Brandywine had assets under management totaling approximately

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$ billion, including approximately $ million of assets of AMR and its
subsidiaries and affiliated entities. Brandywine serves as an investment adviser
to the Balanced Portfolio and the Growth and Income Portfolio. The Manager pays
Brandywine, an annualized fee equal to .25% of assets in the Growth and Income
Portfolio and .225% of assets in the Balanced Portfolio of the first $500
million of AMR Trust assets under its discretionary management, .225% of the
next $100 million on all assets, and .20% on all excess assets.

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

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

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

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

TEMPLETON INVESTMENT COUNSEL, INC. ("Templeton"), 500 East Broward Blvd.,
Suite 2100, Fort Lauderdale, Florida 33394-3091, is a professional investment
counseling firm which has been providing investment services since 1979.
Templeton is indirectly owned by Franklin Resources, Inc. As of December 31,
1997, Templeton had discretionary investment management authority with respect
to approximately $ billion of assets, including approximately $ million of
assets of AMR and its subsidiaries and affiliated entities. Templeton serves as
an

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investment adviser to the International Equity Portfolio. The Manager pays
Templeton an annualized fee equal to .50% of the first $100 million in AMR Trust
assets under its discretionary management, .35% of the next $50 million in
assets, .30% of the next $250 million in assets and .25% on assets over $400
million.

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

AADVANTAGE MILES

The AAdvantage program offers the opportunity to obtain free upgrades and
travel awards on American Airlines and AAdvantage airline participants, as well
as upgrades and discounts on car rentals and hotel accommodations. For more
information about the AAdvantage program, call American Airlines at (800)
433-7300.

AAdvantage miles will be posted monthly in arrears to each shareholder's
AAdvantage account based on the shareholder's average daily account balance
during the previous month. Miles are posted at an annual rate of one mile per
$10 maintained in a Fund. Mileage is calculated on the average daily balance and
posted monthly. The average daily balance is calculated by adding each day's
balance and dividing by the number of days in the month. For example, the
average daily balance on a $50,000 account funded on the 16th day of a month
having 30 days (and maintained at that balance through the end of the month)
would be $25,000. Mileage received for that month would be 208 miles. If the
same balance were maintained through the next month, the average daily balance
would be $50,000, and the mileage would be 417 miles that month and every month
the $50,000 investment was maintained in the Funds. These miles appear on the
monthly account statement as well as on subsequent AAdvantage program
statements.

In the case of Trust Accounts, AAdvantage miles will be posted only in a
trustee's individual name, and not in the name of the Trust Account. Before
investing in a Fund, trustees of Trust Accounts should consult their own legal
and tax advisers as to the tax effect of this arrangement and whether this
arrangement is consistent with their legal duties as trustees. American Airlines
has informed the Funds that in administering an AAdvantage member's AAdvantage
account, it shall not be required to distinguish between AAdvantage miles
accumulated by the individual in his/her capacity as trustee to a Trust Account
from AAdvantage miles accumulated in an individual capacity or from other
sources.

The Manager reserves the right to discontinue the posting of AAdvantage
miles or to change the mileage calculation at any time upon notice to
shareholders. See also "Dividends, Other Distributions and Tax Matters."

American Airlines may find it necessary to change AAdvantage program rules,
regulations, travel awards and special offers at any time. This means that
American Airlines may initiate changes impacting, for example, participant
affiliations, rules for earning mileage credit, mileage levels and rules for the
use of travel awards, continued availability of travel awards, blackout dates
and limited seating for travel awards, and the features of special offers.
American Airlines reserves the right to end the AAdvantage program with six
months' notice. AAdvantage travel awards, mileage accrual and special offers are
subject to government regulations.

HOW TO PURCHASE SHARES

Shares are sold on a continuous basis. Purchase orders should be directed to
NFDS either by mail, by pre-authorized investment or by wire as described below.
The minimum initial purchase for each Fund is $2,500. The

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Funds have no obligation to accept purchase requests or maintain accounts which
do not meet minimum purchase requirements. Accounts opened through financial
intermediaries may be subject to lower or higher minimums. The minimum for
subsequent purchases is $50, except for wire purchases for which a $500 minimum
applies. The Manager reserves the right to waive or change the minimum
investment requirements. The Manager also reserves the right to charge an annual
account fee of $12 (to offset the costs of servicing accounts with low balances)
if an account balance falls below certain asset levels.

An order to purchase shares of a Variable NAV Fund will be executed at the
next share price calculated Monday through Friday on each day on which the
Exchange is open for trading, which excludes the following business holidays:
New Year's Day, Martin Luther King's Birthday, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
("Business Day"). Shares of the Variable NAV Funds are offered and purchase
orders are accepted until the close of the Exchange, generally 4:00 p.m. Eastern
time, on each Business Day. An order to purchase shares of the Money Market
Funds will be executed at the Fund's next determined net asset value per share
on any day on which the Exchange is open for business except for Columbus Day
and Veteran's Day ("Money Market Business Day") and during which federal funds
become available to the Fund. Shares are offered and orders are accepted for the
Municipal Money Market Fund until 12:00 p.m. Eastern time, or the close of the
Exchange (whichever comes first), for the U.S. Government Money Market Fund
until 2:00 p.m. Eastern time, or the close of the Exchange (whichever comes
first), and for the Money Market Fund until 3:00 p.m. Eastern time, or the close
of the Exchange (whichever comes first), on each Money Market Business Day. The
Mileage Trust reserves the right to reject any order for the purchase of shares
and to limit or suspend, without prior notice, the offering of shares. "Federal
funds" are funds deposited by a commercial bank in an account at a federal
reserve bank that can be transferred to a similar account of another bank in one
day and thus may be made immediately available to a Money Market Fund through
its custodian.

OPENING AN ACCOUNT -- A completed and signed application is required for each
new account opened, regardless of the method chosen for making an initial
investment. If an individual opening an account is not yet a member of the
AAdvantage program, he or she automatically will be enrolled and assigned an
AAdvantage account number. If assistance is required in filling out the
application, or if extra applications are required, call (800) 388-3344.

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

American AAdvantage Funds

c/o NFDS

P.O. Box 419643

Kansas City, MO 64141-6643

Purchase checks are accepted subject to collection at full face value in
U.S. funds and must be drawn in U.S. dollars on a U.S. bank. For subsequent
purchases by mail make your check payable to the American AAdvantage Funds ($50
minimum) and include your account number on your check. Mail to the address
printed above. Include either the detachable form from your account statement,
the deposit slips from your checkbook (if you have a Money Market account and
opted for checking) or a letter with the account name and number.

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

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PURCHASES BY WIRE -- A completed application form must precede an initial
purchase by wire. Call (800) 388-3344 to wire funds. Federal funds ($2,500 for
initial purchases and $500 for subsequent purchases) should be wired to:

State Street Bank & Trust Co.

ABA Routing #0110-0002-8, Account #9905-342-3

Attention: American AAdvantage Mileage Funds, and specify the Fund to be
purchased.

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

HOW TO REDEEM SHARES

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

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

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

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

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

By establishing the telephone redemption service, you authorize the Funds or
their agent to act upon verbal instructions to redeem shares for any account for
which such service has been authorized. In an effort to prevent unauthorized or
fraudulent redemption requests by telephone, the transfer agent will employ
reasonable procedures specified by the Funds to confirm that such instructions
are genuine. For instance, all telephone redemption requests will be recorded
and proceeds of telephone redemption requests will be sent only to the address
or account designated in the application. Neither the Funds, the Trusts, the
Equity 500 Index Portfolio, the Manager, NFDS or their trustees, directors or
officers will be liable for any unauthorized or fraudulent redemption
instructions received by telephone. If reasonable procedures as described above
are not implemented, these parties may be liable for any loss due to
unauthorized or fraudulent transactions. Due to the volume of calls or other
unusual circumstances, telephone redemptions may be difficult to implement
during certain time periods. This service may be amended or terminated at any
time by the transfer agent or the Mileage Trust without prior notice.

REDEEMING BY CHECK -- If you elect so on the application, shares of the Money
Market Funds may be redeemed through the check writing feature. There is no
limit on the number of checks written per month and no check

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redemption fees. Checks must be written in amounts of $100 or more. Check drafts
however, are not returned to you. If copies of drafts are required, a service
charge of $2 per check will be assessed to you.

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

REDEEMING BY MAIL -- A letter of instruction may be mailed to the American
AAdvantage Funds, c/o NFDS, P.O. Box 419643, Kansas City, MO 64141-6643. It
should specify the Fund (Balanced, Growth and Income, International Equity, S&P
500 Index, Intermediate Bond, Short-Term Bond, Money Market, Municipal Money
Market or U.S. Government Money Market Fund), the number of shares or dollar
amount to be redeemed, your name and account number. The letter of instruction
must be signed by all persons required to sign for the account, exactly as it is
registered. Redemptions over $25,000, redemption proceeds in any amount sent to
an address other than the address of record or to a commercial bank account
other than the account designated on the application, or redemptions on an
account whose address of record has been changed within thirty days, must be
accompanied by a signature guarantee by a financial institution satisfying the
standards established by NFDS.

REDEEMING BY WIRE -- In order to redeem shares by wire you must sign up for this
option before using it. Redemption proceeds will be transmitted directly to your
predesignated account at a domestic bank upon request, for amounts of at least
$500. To verify that this option is in place, call (800) 388-3344. Your account
will be charged $12 for wire redemptions to cover transaction costs.

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

EXCHANGE PRIVILEGE

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

Shareholders may exchange shares by sending the Funds a written request or
by calling NFDS at (800) 388-3344. The exchange will be processed at the next
share price calculated after the request is received in good order by the Funds.
In establishing a telephone exchange service, shareholders authorize the Funds
or their agent to act upon verbal instructions to exchange shares from any
account for which such service is authorized to any identically registered
account(s). NFDS will use reasonable procedures specified by the Funds to
confirm that such instructions are genuine such as the recording of all
telephone exchange requests. If reasonable procedures as described above are
implemented, neither the Funds, the Trusts, the Equity 500 Index Portfolio, the
Manager, NFDS or their trustees, directors or officers will be liable for any
unauthorized or fraudulent instructions.

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

VALUATION OF SHARES

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

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by the total number of Fund shares outstanding at such time. The net asset value
of Mileage Class shares of the Money Market Fund will be based on a pro rata
allocation of the value of the Fund's corresponding Portfolio's investment
income, expenses and total capital gains and losses. The allocation will be
based on the comparative net asset value at the beginning of the day, except for
expenses related solely to one class of shares ("Class Expenses"), which will be
borne only by the appropriate class of shares. Because of Class Expenses, the
net income attributable to and the dividends payable may be different for each
class of shares.

Equity securities listed on securities exchanges, including all but United
Kingdom securities of the International Equity Portfolio, are valued at the last
quoted sales price on a designated exchange prior to the close of trading on the
Exchange or, lacking any sales, on the basis of the last current bid price prior
to the close of trading on the Exchange. Securities of the United Kingdom held
in the International Equity Portfolio are priced at the last jobber price (mid
of the bid and offer prices quoted by the leading stock jobber in the security)
prior to close of trading on the Exchange. Trading in foreign markets is usually
completed each day prior to the close of the Exchange. However, events may occur
which affect the values of such securities and the exchange rates between the
time of valuation and the close of the Exchange. Should events affect the value
of such securities materially during this period, the securities are priced at
fair value, as determined in good faith and pursuant to procedures approved by
the AMR Trust Board. Over-the-counter equity securities are valued on the basis
of the last bid price on that date prior to the close of trading. Debt
securities (other than short-term securities) will normally be valued on the
basis of prices provided by a pricing service and may take into account
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. In some cases, the prices of debt
securities may be determined using quotes obtained from brokers. Securities for
which market quotations are not readily available are valued at fair value, as
determined in good faith and pursuant to procedures approved by the AMR Trust
Board for the AMR Trust Portfolios. Assets and liabilities denominated in
foreign currencies and forward currency contracts are translated into U.S.
dollar equivalents based on prevailing market rates. Portfolio obligations held
by the Money Market Portfolios are valued in accordance with the amortized cost
method, which is designed to enable those Portfolios and their corresponding
Funds to maintain a consistent $1.00 per share net asset value. Investment grade
short-term obligations with 60 days or less to maturity held by all other
Portfolios also are valued using the amortized cost method as described in the
SAI.

DIVIDENDS, OTHER DISTRIBUTIONS AND TAX MATTERS

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

All of each Money Market Fund's net investment income and net short-term
capital gain, if any, generally will be declared as dividends on each Money
Market Business Day immediately prior to the determination of the net asset
value. Dividends generally will be paid monthly, in cash or in Fund shares, on
the first day of the following month. The Money Market Fund's net investment
income attributable to the Mileage Class consists of (1) that class' pro rata
share of the Fund's share of interest accrued and discount earned on the Money
Market Portfolio's securities less amortization of premium and expenses of both
the Portfolio and (2) the Fund's

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

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

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

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

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

Distributions by the Municipal Money Market Fund that it designates as
"exempt-interest dividends" generally may be excluded from gross income by its
shareholders. If the Municipal Money Market Portfolio earns taxable income from
any of its investments, the Municipal Money Market Fund's share of that income
will be

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

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

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

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

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

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

GENERAL INFORMATION

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

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

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

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

<TABLE>
<S> <C>
AMERICAN AADVANTAGE SHORT-TERM BOND MILEAGE FUND
%
</TABLE>

SHAREHOLDER COMMUNICATIONS

Shareholders will receive periodic reports, including annual and semi-annual
reports which will include financial statements showing the results of the
Funds' operations and other information. The financial statements of the Mileage
Trust and the AMR Trust will be audited by the independent auditors at least
annually. Shareholder inquiries and requests for information regarding the other
investment companies which also invest in the AMR Trust should be made in
writing to the Funds at P.O. Box 619003, MD5645, Dallas/Fort Worth Airport,
Texas 75261-9003 or by calling (800) 388-3344. Shareholder inquiries and
requests for information regarding the other investment companies which also
invest in the Equity 500 Index Portfolio should be made by calling (800)
730-1313

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

American AAdvantage Mileage Funds is a registered service mark of AMR
Corporation. Mileage Class is a registered service mark and Platinum Class,
American AAdvantage Balanced Mileage Fund, American AAdvantage Growth and Income
Mileage Fund, American AAdvantage International Equity Mileage Fund, American
AAdvantage Intermediate Bond Mileage Fund, American AAdvantage Short-Term Bond
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 are service marks of AMR Investment Services, Inc.

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<PAGE> 42

-- NOTES --
<PAGE> 43

-- NOTES --
<PAGE> 44

American Advantage Mileage Funds(SM) Logo

P.O. BOX 419643
KANSAS CITY, MISSOURI 64141-6643
(800) 388-3344
<PAGE> 45
STATEMENT OF ADDITIONAL INFORMATION

AMERICAN AADVANTAGE MILEAGE FUNDS(sm)

MARCH 1, 1998

American AAdvantage Mileage Funds (the "Mileage Trust") is an
open-end, diversified management investment company composed of the American
AAdvantage Balanced Mileage Fund(sm) (the "Balanced Fund"), American AAdvantage
Growth and Income Mileage Fund(sm) (the "Growth and Income Fund"), American
AAdvantage International Equity Mileage Fund(sm) (the "International Equity
Fund"), American AAdvantage S&P 500 Index Mileage Fund (the "S&P 500 Index
Funds"), American AAdvantage Intermediate Bond Mileage Fund(sm) (the
"Intermediate Bond Fund"), American AAdvantage Short-Term Bond Mileage Fund(sm)
(the "Short-Term Bond Fund"), formerly the American AAdvantage Limited-Term
Income Mileage Fund, American AAdvantage Money Market Mileage Fund(sm) (the
"Money Market Fund"), American AAdvantage Municipal Money Market Mileage
Fund(sm) (the "Municipal Money Market Fund"), and American AAdvantage U.S.
Government Money Market Mileage Fund(sm), formerly the American AAdvantage U.S.
Treasury Money Market Mileage Fund (the "U.S. Government Money Market Fund"),
(individually, a "Fund" and, collectively, the "Funds"). All Funds consist of
one class of shares, except for the Money Market Fund, which consists of two
classes of shares. With respect to the Money Market Fund, this Statement of
Additional Information ("SAI") relates only to the Mileage Class.

Each Fund, except the S&P 500 Index Fund, seeks its investment
objective by investing all of its investable assets in a corresponding
portfolio of the AMR Investment Services Trust ("AMR Trust") that has a similar
name and an identical investment objective to the investing Fund. The S&P 500
Index Fund invests all of its investable assets in the Equity 500 Index
Portfolio, which has an identical investment objective. The Equity 500 Index
Portfolio and the portfolios of the AMR Trust are referred to herein
individually as a "Portfolio" and, collectively, the "Portfolios." Each
Portfolio has an investment objective identical to the investing Fund. The AMR
Trust is a separate investment company managed by AMR Investment Services, Inc.
(the "Manager"). The Equity 500 Index Portfolio is a separate investment
company managed by Bankers Trust Company ("BT").

This SAI should be read in conjunction with the Prospectus for the
Mileage Trust dated March 1,1998 ("Prospectus"), a copy of which may be
obtained without charge by calling (800) 388-3344.

This SAI is not a prospectus and is authorized for distribution to
prospective investors only if preceded or accompanied by a current Prospectus.

INVESTMENT RESTRICTIONS

Each Fund has the following fundamental investment policy that enables
it to invest in its corresponding Portfolio:

Notwithstanding any other limitation, the Fund may invest all
of its investable assets in an open-end management investment
company with substantially the same investment objectives,
policies and limitations as the Fund. For this purpose, "all
of the Fund's investable assets" means that the only
investment securities that will be held by the Fund will be
the Fund's interest in the investment company.

All other fundamental investment policies and the non-fundamental
policies of each Fund and its corresponding Portfolio are identical. Therefore,
although the following discusses the investment policies of each Portfolio, the
AMR Trust's Board of Trustees ("AMR Trust Board") and the Equity 500 Index
Portfolio's Board of Trustees ("Equity 500 Index Portfolio Board"), it applies
equally to each Fund and the Mileage Trust's Board of Trustees ("Board").

<PAGE> 46
Portfolios of the AMR Trust

In addition to the investment limitations noted in the Prospectus, the
following seven restrictions have been adopted by each Portfolio and may be
changed with respect to any Portfolio only by the majority vote of that
Portfolio's outstanding interests. "Majority of the outstanding voting
securities" under the Investment Company Act of 1940, as amended (the "1940
Act"), and as used herein means, with respect to the Portfolio, the lesser of
(a) 67% of the interests of the Portfolio present at the meeting if the holders
of more than 50% of the interests are present and represented at the interest
holders' meeting or (b) more than 50% of the interests of the Portfolio.
Whenever a Fund is requested to vote on a change in the investment restrictions
of its corresponding Portfolio, that Fund will hold a meeting of its
shareholders and will cast its votes as instructed by its shareholders. The
percentage of a Fund's votes representing that Fund's shareholders not voting
will be voted by the Board in the same proportion as those Fund shareholders
who do, in fact, vote.

No Portfolio of the AMR Trust may:

1. Purchase or sell real estate or real estate limited
partnership interests, provided, however, that the Portfolio may
invest in securities secured by real estate or interests therein or
issued by companies which invest in real estate or interests therein
when consistent with the other policies and limitations described in
the Prospectus.

2. Purchase or sell commodities (including direct interests
and/or leases in oil, gas or minerals) or commodities contracts,
except with respect to forward foreign currency exchange contracts,
foreign currency futures contracts and when-issued securities when
consistent with the other policies and limitations described in the
Prospectus.

3. Engage in the business of underwriting securities issued by
others, except to the extent that, in connection with the disposition
of securities, the Portfolio may be deemed an underwriter under
federal securities law.

4. Make loans to any person or firm, provided, however, that the
making of a loan shall not be construed to include (i) the acquisition
for investment of bonds, debentures, notes or other evidences of
indebtedness of any corporation or government which are publicly
distributed or (ii) the entry into repurchase agreements and further
provided, however, that each Portfolio may lend its investment
securities to broker-dealers or other institutional investors in
accordance with the guidelines stated in the Prospectus.

5. Purchase from or sell portfolio securities to its officers,
Trustees or other "interested persons" of the AMR Trust, as defined in
the 1940 Act, including its investment advisers and their affiliates,
except as permitted by the 1940 Act and exemptive rules or orders
thereunder.

6. Issue senior securities, except that the Portfolio may engage
in when-issued and forward commitment transactions and the
International Equity Portfolio may engage in currency futures and
forward currency contracts.

7. Borrow money, except from banks or through reverse repurchase
agreements for temporary purposes in an aggregate amount not to exceed
10% of the value of its total assets at the time of borrowing. In
addition, although not a fundamental policy, the Portfolios intend to
repay any money borrowed before any additional portfolio securities
are purchased. See "Other Information" for a further description
regarding reverse repurchase agreements.

The following non-fundamental investment restriction applies to each
Portfolio of the AMR Trust and may be changed with respect to a Portfolio by a
majority vote of the AMR Trust Board: no Portfolio of the AMR Trust may
purchase securities on margin, effect short sales (except that the Portfolio
may obtain such short-term credits as may be necessary for the clearance of
purchases or sales of securities) or purchase or sell call options or engage in
the writing of such options.

All Portfolios of the AMR Trust may invest up to 10% of their total
assets in the securities of other investment companies to the extent permitted
by law. A Portfolio of the AMR Trust may incur duplicate advisory or management
fees when investing in another mutual fund.

Equity 500 Index Portfolio

The following investment restrictions are "fundamental policies" of
the Equity 500 Index Portfolio and may be changed with respect to the Portfolio
only by the majority vote of the Portfolio's outstanding

2
<PAGE> 47

interests, as defined above. Whenever the S&P 500 Index Fund is requested to
vote on a change in the fundamental policy of the Portfolio, the Fund will hold
a meeting of its shareholders and will cast its votes as instructed by its
shareholders. The percentage of the Fund's votes representing Fund shareholders
not voting will be voted by the Board in the same proportion as the Fund
shareholders who do, in fact, vote.

The Equity 500 Index Portfolio may not:

1. Borrow money or mortgage or hypothecate assets of the
Portfolio, except that in an amount not to exceed 1/3 of the current
value of the Portfolio's net assets, it may borrow money as a
temporary measure for extraordinary or emergency purposes and enter
into reverse repurchase agreements or dollar roll transactions, and
except that it may pledge, mortgage or hypothecate not more than 1/3
of such assets to secure such borrowings (it is intended that money
would be borrowed only from banks and only either to accommodate
requests for the withdrawal of beneficial interests (redemption of
shares) while effecting an orderly liquidation of portfolio securities
or to maintain liquidity in the event of an unanticipated failure to
complete a portfolio security transaction or other similar situations)
or reverse repurchase agreements, provided that collateral
arrangements with respect to options and futures, including deposits
of initial deposit and variation margin, are not considered a pledge
of assets for purposes of this restriction and except that assets may
be pledged to secure letters of credit solely for the purpose of
participating in a captive insurance company sponsored by the
Investment Company Institute; for additional related restrictions, see
clause (1) below. (As an operating policy, the Portfolio may not
engage in dollar roll transactions).

2. Underwrite securities issued by other persons except insofar
as the Portfolio may technically be deemed an underwriter under the
Securities Act of 1933 (the "1933 Act") in selling a portfolio
security.

3. Make loans to other persons except: (a) through the use of
repurchase agreements or the purchase of short-term obligations; or
(b) by purchasing a portion of an issue of debt securities of types
distributed publicly or privately.

4. Purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodity contracts (except futures and option contracts) in the
ordinary course of business (except that the Portfolio may hold and
sell, for the Portfolio's portfolio, real estate acquired as a result
of the Portfolio's ownership of securities).

5. Concentrate its investments in any particular industry
(excluding U.S. Government securities), but if it is deemed
appropriate for the achievement of the Portfolio's investment
objective, up to 25% of its total assets may be invested in any one
industry.

6. Issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or
the rules and regulations promulgated thereunder, provided that
collateral arrangements with respect to options and futures, including
deposits of initial deposit and variation margin, are not considered
to be the issuance of a senior security for purposes of this
restriction.

In order to comply with certain statutes and policies the Equity 500
Index Portfolio will not as a matter of operating policy:

1. Borrow money (including through dollar roll transactions) for
any purpose in excess of 10% of the Portfolio's total assets (taken at
cost) except that the Portfolio may borrow for temporary or emergency
purposes up to 1/3 of its total assets.

2. Pledge, mortgage or hypothecate for any purpose in excess of
10% of the Portfolio's total assets (taken at market value), provided
that collateral arrangements with respect to options and

3
<PAGE> 48

futures, including deposits of initial deposit and variation margin,
are not considered a pledge of assets for purposes of this
restriction.

3. Purchase any security or evidence of interest therein on
margin, except that such short-term credit as may be necessary for the
clearance of purchases and sales of securities may be obtained and
except that deposits of initial deposit and variation margin may be
made in connection with the purchase, ownership, holding or sale of
futures.

4. Sell any security that it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to
obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that
if such right is conditional the sale is made upon the same
conditions.

5. Invest for the purpose of exercising control or management.

6. Purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation; provided,
however, that securities of any investment company will not be
purchased for the Portfolio if such purchase at the time thereof would
cause: (a) more than 10% of the Portfolio's total assets (taken at the
greater of cost or market value) to be invested in the securities of
such issuers; (b) more than 5% of the Portfolio's total assets (taken
at the greater of cost or market value) to be invested in any one
investment company; or (c) more than 3% of the outstanding voting
securities of any such issuer to be held for the Portfolio; and,
provided further that, except in the case of merger or consolidation,
the Portfolio shall not invest in any other open-end investment
company unless the Portfolio (1) waives the investment advisory fee
with respect to assets invested in other open-end investment companies
and (2) incurs no sales charge in connection with the investment (as
an operating policy, the Portfolio will not invest in another open-end
registered investment company).

7. Invest more than 15% of the Portfolio's net assets (taken at
the greater of cost or market value) in securities that are illiquid
or not readily marketable not including (a) Rule 144A securities that
have been determined to be liquid by the Equity 500 Index Portfolio
Board; and (b) commercial paper that is sold under section 4(2) of the
1933 Act which: (i) is not traded flat or in default as to interest or
principal; and (ii) is rated in one of the two highest categories by
at least two nationally recognized statistical rating organizations
and the Equity 500 Index Portfolio Board has determined the commercial
paper to be liquid; or (iii) is rated in one of the two highest
categories by one nationally recognized statistical rating agency and
the Equity 500 Index Portfolio Board has determined that the
commercial paper is equivalent quality and is liquid.

8. Invest more than 10% of the Portfolio's total assets (taken at
the greater of cost or market value) in securities that are restricted
as to resale under the 1933 Act (other than Rule 144A securities
deemed liquid by the Equity 500 Index Portfolio Board).

9. No more than 5% of the Portfolio's total assets are invested
in securities issued by issuers which (including predecessors) have
been in operation less than three years.

10. With respect to 75% of the Portfolio's total assets, purchase
securities of any issuer if such purchase at the time thereof would
cause the Portfolio to hold more than 10% of any class of securities
of such issuer, for which purposes all indebtedness of an issuer shall
be deemed a single class and all preferred stock of an issuer shall be
deemed a single class, except that futures or option contracts shall
not be subject to this restriction.

11. If the Portfolio is a "diversified" fund with respect to 75%
of its assets, invest more than 5% of its total assets in the
securities (excluding U.S. Government securities) of any one issuer.

4
<PAGE> 49

12. Purchase or retain in the Portfolio's portfolio any securities
issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Equity 500 Index
Portfolio, or is an officer or partner of BT, if after the purchase of
the securities of such issuer for the Portfolio one or more of such
persons owns beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such issuer, and
such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities,
or both, all taken at market value.

13. Invest more than 5% of the Portfolio's net assets in warrants
(valued at the lower of cost or market) (other than warrants acquired
by the Portfolio as part of a unit or attached to securities at the
time of purchase), but not more than 2% of the Portfolio's net assets
may be invested in warrants not listed on the NYSE or the AMEX.

14. Make short sales of securities or maintain a short position,
unless at all times when a short position is open it owns an equal
amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for
securities of the same issue and equal in amount to, the securities
sold short, and unless not more than 10% of the Portfolio's net assets
(taken at market value) is represented by such securities, or
securities convertible into or exchangeable for such securities, at
any one time (the Portfolio has no current intention to engage in
short selling).

15. Write puts and calls on securities unless each of the
following conditions are met: (a) the security underlying the put or
call is within the investment policies of the Portfolio and the option
is issued by the Options Clearing Corporation, except for put and call
options issued by non-U.S. entities or listed on non-U.S. securities
or commodities exchanges; (b) the aggregate value of the obligations
underlying the puts determined as of the date the options are sold
shall not exceed 5% of the Portfolio's net assets; (c) the securities
subject to the exercise of the call written by the Portfolio must be
owned by the Portfolio at the time the call is sold and must continue
to be owned by the Portfolio until the call has been exercised, has
lapsed, or the Portfolio has purchased a closing call, and such
purchase has been confirmed, thereby extinguishing the Portfolio's
obligation to deliver securities pursuant to the call it has sold; and
(d) at the time a put is written, the Portfolio establishes a
segregated account with its custodian consisting of cash or short-term
U.S. Government securities equal in value to the amount the Portfolio
will be obligated to pay upon exercise of the put (this account must
be maintained until the put is exercised, has expired, or the
Portfolio has purchased a closing put, which is a put of the same
series as the one previously written).

16. Buy and sell puts and calls on securities, stock index futures
or options on stock index futures, or, financial futures or options on
financial futures unless such options are written by other persons
and: (a) the options or futures are offered through the facilities of
a national securities association or are listed on a national
securities or commodities exchange, except for put and call options
issued by non-U.S. entities or listed on non-U.S. securities or
commodities exchanges; (b) the aggregate premiums paid on all such
options which are held at any time do not exceed 20% of the
Portfolio's total net assets; and (c) the aggregate margin deposits
required on all such futures or options thereon held at any time do
not exceed 5% of the Portfolio's total assets.

TRUSTEES AND OFFICERS OF THE MILEAGE TRUST AND THE AMR TRUST

The Board provides broad supervision over the Mileage Trust's affairs.
The Manager is responsible for the management of Mileage Trust's assets, and
the Mileage Trust's officers are responsible for the Mileage Trust's
operations. The Trustees and officers of the Mileage Trust and AMR Trust are
listed below, together with their principal occupations during the past five
years. Unless otherwise indicated, the address of each person listed below is
4333 Amon Carter Boulevard, MD 5645, Fort Worth, Texas 76155.

5
<PAGE> 50

<TABLE>
<CAPTION>
POSITION WITH
NAME, AGE AND ADDRESS EACH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------ ----------------------------------------
<S> <C> <C>
William F. Quinn* (50) Trustee and President President, AMR Investment Services, Inc. (1986-
Present); Chairman, American Airlines Employees
Federal Credit Union (1989-Present); Trustee, American
Performance Funds (1990-July 1994); Director, Crescent
Real Estate Equities, Inc. (1994 - Present); Trustee,
American AAdvantage Funds (1987 - Present).

Alan D. Feld(60) Trustee Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (1960-
1700 Pacific Avenue Suite 4100 Present)#; Director, Clear Channel Communications
Dallas, Texas 75201 (1984-Present); Director, CenterPoint Properties, Inc.
(1994-Present); Trustee, American AAdvantage Funds
(1996-Present).

Ben J. Fortson (65) Trustee President and CEO, Fortson Oil Company (1958-Present);
301 Commerce Street Director, Kimbell Art Foundation (1964-Present);
Suite 3301 Director, Burnett Foundation (1987-Present); Honorary
Forth Worth, Texas 76012 Trustee, Texas Christian University (1986-Present);
Trustee, American AAdvantage Funds (1996-Present).

John S. Justin (80) Trustee Chairman and Chief Executive Officer, Justin
2821 West Seventh Street Industries, Inc. (a diversified holding company)
Fort Worth, Texas 76107 (1969-Present); Executive Board Member, Blue
Cross/Blue Shield of Texas (1985-Present); Board
Member, Zale Lipshy Hospital (1993-Present); Trustee,
Texas Christian University (1980-Present); Director
and Executive Board Member, Moncrief Radiation Center
(1985-Present); Director, Texas New Mexico Enterprises
(1984-1993); Director, Texas New Mexico Power Company
(1979-1993); Trustee, American AAdvantage Funds (1989-
Present).

Stephen D. O'Sullivan* (62) Trustee Consultant (1994-Present); Vice President and
Controller (1985- 1994), American Airlines, Inc.;
Trustee, American AAdvantage Funds (1987-Present).

Roger T. Staubach (56) Trustee Chairman of the Board and Chief Executive Officer of
6750 LBJ Freeway The Staubach Company (a commercial real estate
Dallas, Texas 75240 company) (1982-present); Director, Halliburton Company
(1991-present); Director, First USA, Inc. (1993-
present); Director, Brinker International (1993-
present); Director, Columbus Realty Trust (1994-
present); Member of the Advisory Board, The Salvation
Army; Trustee, Institute for Aerobics Research; Member
of Executive Council, Daytop/Dallas; former
quarterback of the Dallas Cowboys professional
football team; Trustee, American AAdvantage Funds
(1995-Present).

</TABLE>

6
<PAGE> 51

<TABLE>
<CAPTION>
POSITION WITH
NAME, AGE AND ADDRESS EACH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------ ----------------------------------------
<S> <C> <C>
Kneeland Youngblood, M.D. (41) Trustee Physician (1982-Present); President (1983-Present),
2305 Cedar Springs Road Youngblood Enterprises, Inc. (a health care investment
Suite 401 and management firm); Trustee, Teachers Retirement
Dallas, Texas 75201 System of Texas (1993-Present); Director, United
States Enrichment Corporation (1993-Present),
Director, Just For the Kids (1995-Present); Member,
Council on Foreign Relations (1995-Present); Trustee,
American AAdvantage Funds (1996-Present).

Nancy A. Eckl (35) Vice President Vice President, AMR Investment Services, Inc. (1990-
Present).

Michael W. Fields (44) Vice President Vice President, AMR Investment Services, Inc. (1988-
Present).

Barry Y. Greenberg (34) Vice President and Director, Legal and Compliance, AMR Investment
Assistant Secretary Services, Inc. (1995-Present); Branch Chief (1992-June
1995), and Staff Attorney (1988-1992), Securities and
Exchange Commission.

Rebecca L. Harris (31) Treasurer Director of Finance (1995-Present), Controller (1991-
1995), AMR Investment Services, Inc.

John B. Roberson (39) Vice President Vice President, AMR Investment Services, Inc. (1991-
Present).

Thomas E. Jenkins, Jr. (31) Assistant Secretary Senior Compliance Analyst, AMR Investment Services,
Inc. (1996-Present); Staff Accountant (1994-1996) and
Compliance Examiner (1991-1994), Securities and
Exchange Commission.

Adriana R. Posada (43) Assistant Secretary Senior Compliance Analyst (1996-Present) and
Compliance Analyst (1993- 1996), AMR Investment
Services, Inc.; Special Sales Representative, American
Airlines, Inc. (1991-1993).

Clifford J. Alexander (54) Secretary Partner, Kirkpatrick & Lockhart LLP (law firm)
1800 Massachusetts Ave., NW
Washington, D.C. 20036
Robert J. Zutz (45) Assistant Secretary Partner, Kirkpatrick & Lockhart LLP (law firm)
1800 Massachusetts Ave., NW
Washington, D.C. 20036
</TABLE>

7
<PAGE> 52
# The law firm of Akin, Gump, Strauss, Hauer & Feld LLP ("Akin, Gump")
provides legal services to American Airlines, Inc., an affiliate of
the Manager. Mr. Feld has advised the Trusts that he has had no
material involvement in the services provided by Akin, Gump to
American Airlines, Inc. and that he has received no material benefit
in connection with these services. Akin, Gump does not provide legal
services to the Manager of AMR Corporation.

* Messrs. Quinn and O'Sullivan, by virtue of their current or former
positions, are deemed to be "interested persons" of the Mileage Trust
and the AMR Trust as defined by the 1940 Act.

All Trustees and officers as a group own less than 1% of the
outstanding shares of any of the Funds.

As compensation for their service to theMileage Trust and the AMR
Trust, the Independent Trustees and their spouses receive free air travel from
American Airlines, Inc., an affiliate of the Manager. The Mileage Trust and the
AMR Trust do not pay for these travel arrangements. However, the Trusts
compensate each Trustee with payments in an amount equal to the Trustees'
income tax on the value of this free airline travel. Mr. O'Sullivan, who as a
retiree of American Airlines, Inc. already receives free airline travel,
receives compensation annually of up to three round trip airline tickets for
each of his three adult children. Trustees are also reimbursed for any expenses
incurred in attending Board meetings. These amounts are reflected in the
following table for the fiscal year ended October 31, 1997

<TABLE>
<CAPTION>
Pension Or Total
Aggregate Retirement Benefits Estimated Compensation
Compensation Accrued As Part Of Annual From American
From The The Benefits Upon AAdvantage
Name Of Trustee Trust Trust's Expenses Retirement Funds Complex
--------------- ------------ ------------------- ------------- -------------
<S> <C> <C> <C> <C>
William F. Quinn $ 0 $0 $0 $ 0
John S. Juston $ 225 $0 $0 $ 901
Alan D. Feld $15,962 $63,850
Ben J. Fortson $ 6,802 $27,709
Stephen D. O'Sullivan $ 493 $0 $0 $ 1,973
Roger T. Staubach $ 8,269 $0 $0 $33,076
Kneeland Youngblood, M.D. $ 9,525 $38,099
</TABLE>

TRUSTEES AND OFFICERS OF THE EQUITY 500 INDEX PORTFOLIO

The Equity 500 Index Portfolio Board oversees the activities of the
Equity 500 Index Portfolio and reviews contractual arrangements with companies
that provide services to the Portfolio. The Trustees and officers of the Equity
500 Index Portfolio and their principal occupations during the past five years
are set forth below. Their titles may have varied during that period. Unless
otherwise indicated, the address of each Trustee and officer is c/o Edgewood
Services, Inc., Clearing Operations, P.O. Box 897, Pittsburgh, PA 15230-0897.

8
<PAGE> 53

<TABLE>
<CAPTION>
POSITION WITH
EQUITY 500 INDEX
NAME, AGE AND ADDRESS PORTFOLIO PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ---------------- ----------------------------------------
<S> <C> <C>
Charles P. Biggar (65) Trustee Retired; Director of Chase/NBW Bank Advisory Board;
12 Hitching Post Lane Director, Batemen, Eichler, Hill Richards Inc.; formerly
Chappaqua, NY 10514 Vice President of International Business Machines and
President of the National Services and the Field
Engineering Divisions of IBM.

S. Leland Dill (65) Trustee Retired; Director, Coutts Group, Coutts (U.S.A.)
5070 North Ocean Drive International, and Coutts Trust Holdings Ltd.; Director,
Singer Island, FL 33404 Zweig Series Trust; formerly Partner of KPMG Peat
Marwick; Director, Vinters International Company Inc.;
General Partner of Pemco (an investment company
registered under the 1940 Act).

Philip Saunders, Jr. (60) Trustee Principal, Philip Saunders Associates (Consulting);
445 Glen Road former Director of Financial Industry Consulting, Wolf &
Weston, MA 02193 Company; President, John Hancock Home Mortgage
Corporation; and Senior Vice President of Treasury and
Financial Services, John Hancock Mutual Life Insurance
Company, Inc.

Ronald M. Petnuch (36) President and Senior Vice President, Federated Services Company
Treasurer ("FSC"); formerly Director of Proprietary Client
Services, Federated Administrative Services ("FAS") and
formerly Associate Corporate Counsel, Federated
Investors ("FI").

Charles L. Davis, Jr. (36) Vice President and Vice President, FAS.
Assistant Treasurer

Jay S. Neuman (46) Secretary Corporate Counsel, FI.

</TABLE>

No person who is an officer or director of BT is an officer or Trustee of
the Equity 500 Index Portfolio. No director, officer or employee of Edgewood
Services, Inc. ("Edgewood") or any of its affiliates will receive any
compensation from the Equity 500 Index Portfolio for serving as an officer or
Trustee of the Equity 500 Index Portfolio.

The following table reflects fees paid to the Trustees of the Equity 500
Index Portfolio for their services to that Portfolio and to certain other
investment companies advised by BT (the "BT Fund Complex") for the year ended
December 31, 1997.

9
<PAGE> 54

<TABLE>
<CAPTION>
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
FROM THE EQUITY BT FUNDS COMPLEX
NAME OF TRUSTEE 500 INDEX PORTFOLIO PAID TO TRUSTEES
--------------- ----------------------- -----------------------
<S> <C> <C>
Charles P. Biggar $ $
S. Leland Dill $ $
Philip Saunders, Jr. $ $
</TABLE>

MANAGEMENT, ADMINISTRATIVE SERVICES AND DISTRIBUTION FEES

As described more fully in the Prospectus, the Manager is paid a
management fee as compensation for paying investment advisory fees and for
providing the Portfolios with advisory and asset allocation services.
Management fees incurred by the Portfolios for the fiscal years ended October
31 were approximately as follows: 1996, $10,853,000 of which approximately
$5,403,000 was paid by the Manager to the other investment advisers; 1997,
$13,730,443 of which approximately $7,061,014 was paid by the Manager to the
other investment advisers Management fees in the amount of approximately
$44,000 and $7,309 were waived by the Manager during the fiscal years ended
October 31, 1996 and 1997, respectively.

In addition, pursuant to a Management Agreement, the Manager is paid a
fee for providing administrative and management services (other than investment
advisory services) to the Funds. Such fees for the fiscal years ended October
31, 1996 and 1997 were approximately $95,944 and $275,120, respectively.

Also as described more fully in the Prospectus, the Manager (or another
entity approved by the Board) under a distribution plan adopted pursuant to
Rule 12b-1 under the 1940 Act, is paid by each Fund 0.25% per annum of the
average daily net assets of each Fund for distribution-related services.
Distribution fees pursuant to Rule 12b-1 under the 1940 Act for the fiscal
years ended October 31, 1996 and 1997 were approximately $188,590 and $470,306,
respectively.

BT provides administrative services to the Equity 500 Index Portfolio.
Under the administration and services agreement between the Equity 500 Index
Portfolio and BT, BT is obligated on a continuous basis to provide such
administrative services as the Equity 500 Index Portfolio Board reasonably
deems necessary for the proper administration of the Portfolio. BT generally
will assist in all aspects of the Portfolio's operations; supply and maintain
office facilities (which may be in BT's own offices), statistical and research
data, data processing services, clerical, accounting, bookkeeping and
recordkeeping services (including without limitation the maintenance of such
books and records as are required under the 1940 Act and the rules thereunder,
except as maintained by other agents), internal auditing, executive and
administrative services, and stationary and office supplies; prepare reports to
investors; prepare and file tax returns; supply financial information and
supporting data for reports to and filing with the SEC and various state Blue
Sky authorities; supply supporting documentation for meetings of the Equity 500
Index Portfolio Board; provide monitoring reports and assistance regarding
compliance with its Declaration of Trust, By-Laws, investment objectives and
policies and with Federal and state securities laws; arrange for appropriate
insurance coverage; calculate net asset values, net income and realized capital
gains or losses; and negotiate arrangements with, and supervise and coordinate
the activities of, agents and others to supply services.

Pursuant to a sub-administration agreement between BT and Federated
Services Company ("Federated") (the "Sub- Administration Contract"), Federated
performs such sub-administration duties for the Equity 500 Index Portfolio as
from time to time may be agreed upon by BT and Federated. The
Sub-Administration Contract provides that Federated will receive such
compensation as from time to time may be agreed upon by Federated and BT. All
such compensation will be paid by BT.

For the years ended December 31, 1995, 1996 and 1997, BT earned,
$385,265, $752,981 and $XXX,XXX, respectively, as compensation for
administrative and other services provided to the Equity 500 Index Portfolio.

10
<PAGE> 55

Brokers Transaction Services, Inc. ("BTS") is the distributor of the
Funds' shares, and, as such, receives an annualized fee of $50,000 from the
Manager for distributing the shares of the Mileage Trust and the American
AAdvantage Funds.

APPROACH TO STOCK SELECTION

Investment advisers to the corresponding Portfolios of the Balanced, the
Growth and Income and the International Equity Funds will select equity
securities which, in their opinion, have above average growth potential and are
also selling at a discount to the market. This approach focuses on the purchase
of a diverse group of stocks below their perceived economic value. Each of the
investment advisers determines the growth prospects of firms based upon a
combination of internal and external research using fundamental economic cycle
analysis and changing economic trends. The determination of value is based
upon the analysis of several characteristics of the issuer and its equity
securities including price to earnings ratio, price to book value ratio, assets
carried below market value, financial strength and dividend yield.

REDEMPTIONS IN KIND

Although each Fund intends to redeem shares in cash, each reserves the
right to pay the redemption price in whole or in part by a distribution of
readily marketable securities held by the applicable Fund's corresponding
Portfolio. However, shareholders always will be entitled to redeem shares for
cash up to the lesser of $250,000 or 1% of the applicable Fund's net asset
value during any 90 day period. Redemption in kind is not as liquid as a cash
redemption. In addition, if redemption is made in kind, shareholders who
receive securities and sell them could receive less than the redemption value
of their securities and could incur certain transactions costs.

INVESTMENT ADVISORY AGREEMENTS

Separate Investment Advisory Agreements between the investment advisers
(except Brandywine Asset Management, Inc.) of the Balanced, the Growth and
Income, the International Equity , the Intermediate Bond, the Short-Term Bond
Funds and their corresponding Portfolios, as described in the Prospectus, were
initially approved by the Board, the AMR Trust Board and the initial
shareholders of the Mileage Trust and the AMR Trust effective as of October 1,
1995. An Investment Advisory Agreement with Brandywine Asset Management, Inc.
was approved by the shareholders of the Mileage Trust and interest holders of
the AMR Trust effective May 1, 1996. Each Fund Investment Advisory Agreement
provides that to the extent a Fund invests all of its investable assets in its
corresponding Portfolio, the adviser will not receive an advisory fee under that
Agreement. Following the acquisition of Hotchkis and Wiley ("Hotchkis") by
Merrill Lynch, Pierce, Fenner & Smith, Inc., a new Advisory Agreement with
Hotchkis was approved by the Board, effective as of November 12, 1996. Following
the acquisition of Brandywine by Legg Mason, Inc., a new Advisory Agreement with
Brandywine was approved, effective January XX, 1998.

Under the terms of the Equity 500 Index Portfolio's Investment Advisory
Agreement with BT, BT manages the Equity 500 Index Portfolio subject to the
supervision and direction of the Equity 500 Index Portfolio Board. BT has
agreed to: (1) act in strict conformity with the Equity 500 Index Portfolio's
Declaration of Trust and the 1940 Act, as the same may from time to time be
amended; (2) manage the Equity 500 Index Portfolio in accordance with the
Portfolio's investment objective, restrictions and policies; (3) make
investment decisions for the Equity 500 Index Portfolio; and (4) place purchase
and sale orders for securities and other financial institutions on behalf of
the Equity 500 Index Portfolio.

BT bears all expenses in connection with the performance of services
under the Agreement. The S&P 500 Index Fund and the Equity 500 Index Portfolio
each bear certain other expenses incurred in their operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the
Portfolio or Trustees of the Trust who are not officers, directors or employees
of BT, Edgewood, the Manager or any of their affiliates; SEC fees and state
Blue Sky qualification fees; charges of custodians

11
<PAGE> 56

and transfer and dividend disbursing agents; certain insurance premiums;
outside auditing and legal expenses; costs attributable to investor services,
including telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for regulatory purposes
and for distribution to existing shareholders; costs of shareholders' reports
and meetings of shareholders, officers and Trustees of the Equity 500 Index
Portfolio or Trustees of the Trust, and any extraordinary expenses.

For the years ended December 31, 1995, 1996 and 1997, BT earned $770,530,
$1,505,963 and $XXX,XXX, respectively, as compensation for investment advisory
services provided to the Equity 500 Index Portfolio. During the same periods,
BT reimbursed $418,814, $870,024 and $XXX,XXX, respectively, to the Equity 500
Index Portfolio to cover expenses.

BT may have deposit, loan and other commercial banking relationships with
the issuers of obligations that may be purchased on behalf of the Equity 500
Index Portfolio, including outstanding loans to such issuers that could be
repaid in whole or in part with the proceeds of securities so purchased. Such
affiliates deal, trade and invest for their own accounts in such obligations
and are among the leading dealers of various types of such obligations. BT has
informed the Equity 500 Index Portfolio that, in making its investment
decisions, it does not obtain or use material inside information in its
possession or in the possession of any of its affiliates. In making investment
recommendations for the Equity 500 Index Portfolio, BT will not inquire or take
into consideration whether an issuer of securities proposed for purchase or
sale by the Equity 500 Index Portfolio is a customer of BT, its parent or its
subsidiaries or affiliates and, in dealing with its customers, BT, its parent,
subsidiaries and affiliates will not inquire or take into consideration whether
securities of such customers are held by any fund managed by BT or any such
affiliate.

Each Investment Advisory Agreement will automatically terminate if
assigned, and may be terminated without penalty at any time by the Manager, by
a vote of a majority of the Trustees or by a vote of a majority of the
outstanding voting securities of the applicable Fund on no less than thirty
(30) days' nor more than sixty (60) days' written notice to the investment
adviser, or by the investment adviser upon sixty (60) days' written notice to
the Trust. The Investment Advisory Agreements will continue in effect provided
that annually such continuance is specifically approved by a vote of the
Trustees, including the affirmative votes of a majority of the Trustees who are
not parties to the Agreement or "interested persons" (as defined in the 1940
Act) of any such party, cast in person at a meeting called for the purpose of
considering such approval, or by the vote of shareholders.

PORTFOLIO SECURITIES TRANSACTIONS

The Investment Advisory Agreements provide, in substance, that in
executing portfolio transactions and selecting brokers or dealers, the
principal objective of each investment adviser is to seek the best net price
and execution available. It is expected that securities ordinarily will be
purchased in the primary markets, and that in assessing the best net price and
execution available, each investment adviser shall consider all factors it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis.

BT may utilize the expertise of any of its worldwide subsidiaries and
affiliates to assist in its role as investment adviser. All orders for
investment transactions on behalf of the Equity 500 Index Portfolio are placed
by BT with broker-dealers and other financial intermediaries that it selects,
including those affiliated with BT. A BT affiliate will be used in connection
with a purchase or sale of an investment for the Equity 500 Index Portfolio
only if BT believes that the affiliate's charge for the transaction does not
exceed usual and customary levels. The Equity 500 Index Portfolio will not
invest in obligations for which BT or any of its affiliates is the ultimate
obligor or accepting bank. The Portfolio may, however, invest in the
obligations of correspondents and customers of BT.

In selecting brokers or dealers to execute particular transactions,
investment advisers are authorized to consider the "brokerage and research
services" (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934), provision of statistical quotations (including the
quotations necessary to determine a Portfolio's net asset value), the sale of
Mileage Trust (or American AAdvantage Funds') shares by such broker or the
servicing of Mileage Trust (or American AAdvantage Funds') shareholders by such
broker, and other

12
<PAGE> 57
information provided to the applicable Portfolio, to the Manager and/or to the
investment advisers (or their affiliates), provided, however, that the
investment adviser determines that it has received the best net price and
execution available. The investment advisers are also authorized to cause a
Portfolio to pay a commission to a broker or dealer who provides such brokerage
and research services for executing a portfolio transaction that exceeds the
amount of the commission another broker or dealer would have charged for
effecting that transaction. The Trustees, the Manager or the investment
advisers, as appropriate, must determine in good faith, however, that such
commission was reasonable in relation to the value of the brokerage and
research services provided viewed in terms of that particular transaction or in
terms of all the accounts over which the Manager or the investment adviser
exercises investment discretion.

For the fiscal years ended October 31, 1996 and 1997, the following
brokerage commissions were paid by the corresponding Portfolios.

<TABLE>
<CAPTION>
Portfolio 1996 1997
---------- ---- ----
<S> <C> <C>
Balanced $503,947 $562,493
Growth and Income $956,767 $1,192,792
International Equity $544,844 $956,160
Intermediate Bond* $0 $0
Short-Term Bond $0 $0
Money Market Funds $0 $0
</TABLE>

*The Intermediate Bond Portfolio commenced operations on September 15,
1997.

The commissions listed above were paid by the corresponding Portfolios of
the AMR Trust. Shareholders of the Funds bear only their pro-rata portion.

For the years ended December 31, 1995, 1996 and 1997 the Equity 500 Index
Portfolio paid the following brokerage commissions: $172,924, $289,791 and
$XXX,XXX. The S&P 500 Index Fund was not operational prior to March 1, 1998.
Shareholders of the S&P 500 Index Fund bear only their pro-rata portion of
brokerage commissions.

Following is the portfolio turnover rate for the corresponding Portfolios
of the Funds for the fiscal years ended October 31, 1996 and 1997.

<TABLE>
<CAPTION>
Portfolio 1996 1997
--------- ---- ----
<S> <C> <C>
Balanced 76% %
Growth and Income 40% %
International Equity 19% %
Intermediate Bond
Short-Term Bond 304% %
Equity 500 Index Portfolio 15% %
</TABLE>

High portfolio turnover can increase a Fund's transaction costs and
generate additional capital gains or losses. The high portfolio turnover rate
for the Short-Term Bond Portfolio was due to the repositioning of the portfolio
to a different internal benchmark. The portfolio turnover rate for the Equity
500 Index Portfolio is for its fiscal years ended December 31, 1996, and
December 31, 1997. The Intermediate Bond Portfolio had not commenced operations
as of October 31, 1997.

The fees of the investment advisers are not reduced by reason of receipt
of such brokerage and research services. However, with disclosure to and
pursuant to written guidelines approved by the AMR Trust Board, or the Equity
500 Index Portfolio Board, an investment adviser of a Portfolio or its
affiliated broker-dealer may execute portfolio transactions and receive usual
and customary brokerage commissions (within the meaning of Rule 17e-1 under the
1940 Act) for doing so. During the fiscal year ended October 31, 1997, the
Balanced Portfolio and the Growth and Income Portfolio paid $XXXX and $XXXX.
respectively, in brokerage commissions to XXXXXXXXX. The percentages of total
commissions of the Balanced Portfolio and the Growth and Income Portfolio paid
to XXXXXX in 1997 were

13
<PAGE> 58

0.XX% and 0. XX%, respectively. The transactions represented 0. XX% of the
Balanced Portfolio and 0. XX% of the Growth and Income Portfolio's total dollar
value of portfolio transactions for the fiscal year ended October 31, 1997.
During the fiscal year ended October 31, 1997, the International Equity
Portfolio paid $XXXX, $XXXX, $XXXX and $XXXX, to Fleming Martin, Jardine
Fleming, Ord Minnett and Robert Fleming & Co., respectively, affiliates of Rowe
Price-Fleming International, Inc., an adviser to the International Equity
Portfolio, and $XXXX to Morgan Stanley International, an affiliate of Morgan
Stanley Asset Management also an investment adviser to the International Equity
Portfolio. The percentage of total commissions paid to affiliated brokers of
the International Equity Portfolio in 1997 was X.XX%. The transactions
represented X,X% of the International Equity Portfolio's total dollar value of
portfolio transactions for the fiscal year ending October 31, 1997.

In certain instances there may be securities that are suitable for the
Equity 500 Index Portfolio as well as for one or more of BT's other clients.
Investment decisions for the Equity 500 Index Portfolio and for BT's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable
for the investment objectives of more than one client. When two or more clients
are simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could have a detrimental
effect on the price or volume of the security as far as the Equity 500 Index
Portfolio is concerned. However, it is believed that the ability of the Equity
500 Index Portfolio to participate in volume transactions will produce better
executions for the Portfolio.

NET ASSET VALUE

It is the policy of the Money Market Fund, the Municipal Money Market
Fund and the U.S. Government Money Market Fund (collectively the "Money Market
Funds") to attempt to maintain a constant price per share of $1.00. There can
be no assurance that a $1.00 net asset value per share will be maintained. The
portfolio instruments held by the Money Market Funds' corresponding Portfolios
are valued based on the amortized cost valuation technique pursuant to Rule
2a-7 under the 1940 Act. This involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, even though the portfolio security may increase or decrease in market
value. Such market fluctuations are generally in response to changes in
interest rates. Use of the amortized cost valuation method requires the Money
Market Funds' corresponding Portfolios to purchase instruments having remaining
maturities of 397 days or less, to maintain a dollar weighted average portfolio
maturity of 90 days or less, and to invest only in securities determined by the
Trustees to be of high quality with minimal credit risks. The corresponding
portfolios of the Money Market Funds may invest in issuers or instruments that
at the time of purchase have received the highest short-term rating by two
Rating Organizations, such as "D-1" by Duff & Phelps and "F-1" by Fitch IBCA,
Inc., and have received the next highest short-term rating by other Rating
Organizations, such as "A-2" by Standard & Poors and "P-2" by Moody's Investors
Service, Inc. See "Ratings of Municipal Obligations" and "Ratings of Short-Term
Obligations" for further information concerning ratings.

TAX INFORMATION

Taxation of the Funds

To qualify as a regulated investment company ("RIC") under the Internal
Revenue Code of 1986, as amended ("Code"), each Fund (each of which is treated
as a separate corporation for these purposes) must, among other requirements:

o Derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or
(in the case of the International Equity Fund) foreign
currencies, or certain other income,

14
<PAGE> 59
including (in the case of the International Equity Fund) gains
from futures or forward contracts ("Income Requirement");

o Diversify its investments in securities within certain
statutory limits; and

o Distribute annually to its shareholders at least 90% of its
investment company taxable income (generally, taxable net
investment income plus net short-term capital gain and, in the
case of the International Equity Fund, net gains from foreign
currency transactions) plus, in the case of the Municipal
Money Market Fund, net interest income excludable from gross
income under section 103(a) of the Code ("Distribution
Requirement").

Each Fund has received either a ruling from the Internal Revenue
Service ("IRS"), or an opinion of counsel, that each Fund, as an investor in
its corresponding Portfolio, is or should be deemed to own a proportionate
share of the Portfolio's assets and to earn the income on that share for
purposes of determining whether the Fund satisfies all the income and
diversification requirements described above to qualify as a RIC.

See the next section for a discussion of the tax consequences to the
Funds of certain investments by the Portfolios.

Taxation of the Portfolios

Each Portfolio has received a ruling from the IRS or an opinion of
counsel to the effect that, among other things, each Portfolio is or should be
classified as a separate partnership for federal income tax purposes and is not
a "publicly traded partnership." As a result, each Portfolio is not or should
not be subject to federal income tax; instead, each investor in a Portfolio,
such as a Fund, is required to take into account in determining its federal
income tax liability its share of the Portfolio's income, gains, losses,
deductions, credits and tax preference items, without regard to whether it has
received any cash distributions from the Portfolio.

15
<PAGE> 60
determining whether the Fund satisfies the requirements to qualify as a RIC,
each Portfolio intends to conduct its operations so that its corresponding Fund
will be able to satisfy all those requirements.

Distributions to a Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1)gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. A Fund's basis for its interest in its
corresponding Portfolio generally will equal the amount of cash and the basis
of any property the Fund invests in the Portfolio, increased by the Fund's
share of the Portfolio's net income and gains and decreased by (a) the amount
of cash and the basis of any property the Portfolio distributes to the Fund and
(b) the Fund's share of the Portfolio's losses.

A Portfolio may acquire zero coupon or other securities issued with
original issue discount. As an investor in a Portfolio that holds those
securities, a Fund would have to include in its income its share of the
original issue discount that accrues on the securities during the taxable year,
even if the Portfolio (and, hence, the Fund) receives no corresponding payment
on the securities during the year. Because each Fund annually must distribute
substantially all of its investment company taxable income, including any
original issue discount, to satisfy the Distribution Requirement and avoid
imposition of the 4% excise tax described in the Prospectus, a Fund may be
required in a particular year to distribute as a dividend an amount that is
greater than the total amount of cash it actually receives. Those distributions
would be made from a Fund's cash assets, if any, or the proceeds of redemption
of a portion of a Fund's interest in its corresponding Portfolio (which
redemption proceeds would be paid from the Portfolio's cash assets or the
proceeds of sales of portfolio securities, if necessary). A Portfolio might
realize capital gains or losses from any such sales, which would increase or
decrease its corresponding Fund's investment company taxable income and/or net
capital gain (the excess of net long-term capital gain over net short-term
capital loss

If the Balanced, the Growth and Income or the International Equity
Portfolio acquires stock in a foreign corporation that is a "passive foreign
investment company" ("PFIC") and holds the stock beyond the end of the year of
acquisition, its corresponding Fund will be subject to federal income tax on
the Fund's share of a portion of any "excess distribution" received by the
Portfolio on the stock or of any gain realized by the Portfolio from
disposition of the stock (collectively, "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. A Fund may avoid this tax and interest if its corresponding
Portfolio elects to treat the PFIC as a "qualified electing fund"; however, the
requirements for that election are difficult to satisfy. These Portfolios
currently do not intend to acquire securities that are considered PFICs.

Hedging strategies, such as entering into forward contracts and
selling and purchasing futures contracts, involve complex rules that will
determine for federal income tax purposes the amount, character and timing of
recognition of gains and losses the International Equity Portfolio and the
Equity 500 Index Portfolio realize in connection therewith. The International
Equity Fund's share of its Portfolio's (1) income from foreign currencies
(except certain gains that may be excluded by future regulations) and (2)
income from transactions in futures and forward contracts derived with respect
to its business of investing in securities or foreign currencies will qualify
as allowable income for that Fund under the Income Requirement. Similarly, the
S&P 500 Index Fund's share of the Equity 500 Index Portfolio's income from
options and futures derived with respect to its business of investing
securities will so qualify for that Fund.

Dividends and interest received by the International Equity
Portfolio,and gains realized thereby, may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would reduce
the yield and/or total return on its securities. Tax treaties between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains on
investments by foreign investors.

Taxation of the Funds' Shareholders

Distributions by the Municipal Money Market Fund of the amount by
which the Fund's share of its corresponding Portfolio's income on tax-exempt
securities exceeds certain amounts disallowed as deductions, designated by the
Fund as "exempt-interest dividends," generally may be excluded from gross
income by its shareholders. Dividends paid by the Municipal Money Market Fund
will qualify as exempt-interest dividends if, at the close of each quarter of
its taxable year, at least 50% of the value of its total assets (including its
share of the Municipal Money Market Portfolio's assets) consists of securities
the interest on which is excludable from gross income under section 103(a) of
the Code. The Fund intends to continue to satisfy this requirement. The
aggregate dividends excludable from shareholders' gross income may not exceed
the Fund's net tax-exempt income. The shareholders' treatment of dividends from
the Fund under state and local income tax laws may differ from the treatment
thereof under the Code.

Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by private activity bonds ("PABs")
or industrial development bonds ("IDBs") should consult their tax advisers
before purchasing shares of the Municipal Money Market Fund because, for users
of certain of these facilities, the interest on those bonds is not exempt from
federal income tax. For these purposes, the term "substantial user" is defined
generally to include a "non-exempt person" who regularly uses in trade or
business a part of a facility financed from the proceeds of PABs or IDBs.

Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income
(including income from tax-exempt sources such as the Municipal Money Market
Fund) plus 50% of their benefits exceeds certain base amounts. Exempt-interest
dividends from the Municipal Money Market Fund still are tax-exempt to the
extent described above; they are only included in the calculation of whether a
recipient's income exceeds the established amounts.

If more than 50% of the value of the International Equity Fund's total
assets (including its share of the International Equity Portfolio's total
assets) at the close of its taxable year consists of securities of foreign
corporations, the Fund will be eligible to, and may, file an election with the
IRS that will enable the Fund's

16
<PAGE> 61

shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to the Fund's share of any foreign and U.S. possessions income taxes
paid by the Portfolio. If the Fund makes this election, the Fund will treat
those taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the International Equity Fund that represents income from
foreign or U.S. possessions sources as his own income from those sources and
(3) either deduct the taxes deemed paid by him in computing his taxable income
or, alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income tax. If the election is made, the Fund will
report to its shareholders shortly after each taxable year their respective
share of the Portfolio's income from foreign and U.S. possessions sources and
the taxes paid by the Portfolio to foreign countries and U.S. possessions.
Pursuant to that election, individuals who have no more than $300 ($600 for
married persons filing jointly) of creditable foreign taxes included on Forms
1099 and all of whose foreign source income is "qualified passive income" may
elect each year to be exempt from the extremely complicated foreign tax credit
limitation and will be able to claim a foreign tax credit without having to
file the detailed Form 1116 that otherwise is required.

The foregoing is only a summary of some of the important federal tax
considerations affecting the Funds and their shareholders and is not intended
as a substitute for careful tax planning. Accordingly, prospective investors
are advised to consult their own tax advisers for more detailed information
regarding the above and for information regarding federal, state, local and
foreign taxes.

YIELD AND TOTAL RETURN QUOTATIONS

The Funds commenced operations on November 1, 1995, and thus have limited
past performance. For purposes of advertising performance, and in accordance
with Securities and Exchange Commission staff interpretations, for periods
prior to November 1, 1995, the Funds have adopted the performance of the
Mileage Class of the American AAdvantage Funds, an open-end management
investment company with ten series, nine of which each have an identical
investment objective to one of the Funds and its corresponding Portfolio. The
Manager and the investment advisers described in the Prospectus also provide
investment management services to the American AAdvantage Funds. Like the
Funds, each series of the American AAdvantage Funds invests all of its
investable assets in a corresponding Portfolio of the AMR Trust. Performance
of the Funds will be different than that of the American AAdvantage Funds due
to the different expense structures between the Funds and the American
AAdvantage Funds.

A quotation of yield on shares of the Money Market Funds may appear from
time to time in advertisements and in communications to shareholders and
others. Quotations of yields are indicative of yields for the limited
historical period used but not for the future. Yield will vary as interest
rates and other conditions change. Yield also depends on the quality, length of
maturity and type of instruments invested in by the Money Market Funds, and the
applicable Fund's operating expenses. A comparison of the quoted yields offered
for various investments is valid only if yields are calculated in the same
manner. In addition, other similar investment companies may have more or less
risk due to differences in the quality or maturity of securities held.

The yields of the Money Market Funds may be calculated in one of two
ways:

(1) Current Yield--the net average annualized return without compounding
accrued interest income. For a 7-day current yield, this is computed by
dividing the net change in value over a 7 calendar-day period of a
hypothetical account having one share at the beginning of a 7
calendar-day period by the value of the account at the beginning of this
period to determine the "base period return." The quotient is multiplied
by 365 divided by 7 and stated to two decimal places. A daily current
yield is calculated by multiplying the net change in value over one day
by 365 and stating it to two decimal places. Income other than investment
income and capital changes, such as realized gains and losses from the
sale of securities and unrealized appreciation and depreciation, are
excluded in calculating the net change in value of an account. However,
this calculation includes the aggregate fees and other expenses that are
charged to all shareholder accounts in a Fund (or to a particular class
of the Money Market Fund). In determining the net change in value of a
hypothetical account, this value is adjusted to reflect the value of any
additional shares purchased with dividends from the original share and
dividends declared on both the original share and any such additional
shares.

17
<PAGE> 62
(2) Effective Yield--the net average annualized return as computed by
compounding accrued interest income. In determining the 7-day effective
yield, a class of a Fund will compute the "base period return" in the
same manner used to compute the "current yield" over a 7 calendar-day
period as described above. One is then added to the base period return
and the sum is raised to the 365/7 power. One is subtracted from the
result, according to the following formula:

365/7
effective yield = [ (base period return + 1) ] - 1

The current and effective yields for the Funds are as follows:

<TABLE>
<CAPTION>
Current yield for the Effective yield for the
American AAdvantage Current daily yield as seven-day period ended seven-day period ended
Mileage Funds: of October 31, October 31, October 31,
-------------- --------------- ------------ ------------
1997 1997 1997
<S> <C> <C> <C>
Money Market Fund 5.11% 5.10% 5.23%
Municipal Money Market Fund 3.19% 3.19% 3.24%
U.S. Treasury Money Market Fund 5.11% 5.03% 5.16%
</TABLE>

The Municipal Money Market Fund also may advertise a tax-equivalent current
and effective yield. The tax-equivalent yields are calculated as follows:

current yield/(1-applicable tax rate) = current tax-equivalent yield

effective yield/(1-applicable tax rate) = effective tax-equivalent yield

Based on these formulas, the current and effective tax-equivalent yields
for the Municipal Money Market Fund for the seven day period ending October 31,
1997 were 5.29% and 5.37%, respectively (based upon a 39.6% personal tax rate).

The advertised yields for the Variable NAV Funds (as defined in the
prospectus) are computed by dividing the net investment income per share earned
during a 30-day (or one month) period less the aggregate fees that are charged
to all shareholder accounts of the Fund in proportion to the 30-day (or one
month) period and the weighted average size of an account in that Fund by the
maximum offering price per share of the Fund on the last day of the period,
according to the following formula:

6
yield = 2{(a- b) +1) - 1}
------
cd

where, with respect to a particular Fund, "a" is the dividends and interest
earned during the period; "b" is the sum of the expenses accrued for the period
(net of reimbursement, if any) and the aggregate fees that are charged to all
shareholder accounts in proportion to the 30-day (or one month) period and the
weighted average size of an account in the Fund; "c" is the average daily
number of Fund shares outstanding during the period that were entitled to
receive dividends; and "d" is the maximum offering price per Fund share on the
last day of the period. Based on this formula, the estimated 30-day yield for
the period ended October 31, 1997 for the Short-Term Bond Fund was 5.13%.

The Short-Term Bond Fund also may advertise a monthly distribution rate.
The distribution rate gives the return of the Fund based solely on the dividend
payout to that Fund if someone was entitled to the dividends for an entire
month. A monthly distribution rate is calculated from the following formula:

monthly distribution rate = A/P*(365/n)

18
<PAGE> 63

where, with respect to the Fund, "A" is the dividend accrual per share during
the month, "P" is the share price at the end of the month and "n" is the number
of days in the month. Based on this formula, the monthly distribution rate for
the Short-Term Bond Fund for the month of October 1997 was 6.11%. The "monthly
distribution rate" is a non-standardized performance calculation and when used
in an advertisement will be accompanied by the appropriate standardized SEC
calculations.

The advertised total return for a Fund would be calculated by equating an
initial amount invested in a Fund to the ending redeemable value, according to
the following formula:

(n)
P(1 + T) = ERV

where "P" is a hypothetical initial payment of $1,000; "T" is the average
annual total return for the Fund; "n" is the number of years involved; and
"ERV" is the ending redeemable value of a hypothetical $1,000 payment made in
the Fund at the beginning of the investment period covered.

Based on this formula, annualized total returns were as follows for the
periods and the Funds indicated:

<TABLE>
<CAPTION>
For the period
from commencement
of active
For the one-year For the five-year For the ten-year operations
period ended period ended period ended through
October 31, October 31, October 31, October 31,
---------------- ----------------- ---------------- -----------------
1997(1) 1997(1)(2) 1997(1) 1997(1)(3)
<S> <C> <C> <C> <C>
Balanced Fund 19.52% 14.45% 12.88% 11.44%
Growth and Income Fund 27.60% 18.78% 16.10% 13.54%
International Equity Fund 18.44% 17.70% N/A(2) 11.87%
S&P500 Index Fund N/A(2) N/A(2) N/A(2) N/A(2)
Intermediate Bond Fund N/A(2) N/A(2) N/A(2) N/A(2)
Short-Term Bond Fund 5.90% 5.15% N/A(2) 6.78%
Money Market Fund-Mileage Class 5.14% 4.49% 5.91% 5.93%
Municipal Money Market Fund 3.18% N/A(2) N/A(2) 2.99%
U.S. Government Money Market Fund 5.00% 4.35% N/A(2) 4.27%
</TABLE>

(1) The Institutional Class is the initial class for each American AAdvantage
Fund except the S&P 500 Index Fund. Except for the S&P 500 Index Fund,
performance represents the total returns achieved by the Institutional Class of
the American AAdvantage Funds from the inception date of each Fund up to the
inception date of the Mileage Class of each American AAdvantage Fund, returns
of the Mileage Class of each American AAdvantage Fund since the inception of
the Class and returns of the Funds since their November 1, 1995 inception.
Expenses of the Funds are different from those of the Mileage and Institutional
Classes of each American AAdvantage Fund and therefore total returns for the
Funds would vary from the returns shown had they been in operation since
inception of the American AAdvantage Funds. See Appendix A for historical
performance of the S&P 500 Composite Price Index. A portion of the fees of the
Balanced, the Growth

19
<PAGE> 64

and Income, the International Equity, the Short-Term Income, the Money Market,
the Municipal Money Market and the U.S. Government Money Market Funds has been
waived since their 11/1/95 inception.

(2) The Fund was not operational during this period.

(3) The Inception dates are as follows:

<TABLE>
<CAPTION>
American AAdvantage Funds American AAdvantage Mileage Funds
Institutional Class Mileage Class
<S> <C> <C> <C>
Balanced 7/17/87 8/1/94 11/1/95
Growth and Income 7/17/87 8/1/94 11/1/95
International Equity 8/7/91 8/1/94 11/1/95
Short-Term Bond 12/3/87 8/1/94 11/1/95
Money Market 9/1/87 11/1/91 11/1/95
Municipal Money Market 11/10/93 11/10/93 11/1/95
U.S. Government Money Market 3/2/92 11/1/93 11/1/95
</TABLE>

Each class of a Fund also may use "aggregate" total return figures for
various periods which represent the cumulative change in value of an investment
in a Fund for the specific period. Such total returns reflect changes in share
prices of a class of a Fund and assume reinvestment of dividends and
distributions.

Each Fund may give total returns from inception using the date when the
current managers began active management as the inception date. However,
returns using the actual inception date of the Fund will also be provided.

In reports or other communications to shareholders or in advertising
material, each Fund may from time to time compare its performance with that of
other mutual funds in rankings prepared by Lipper Analytical Services, Inc.,
Morningstar, Inc., IBC Financial Data, Inc. and other similar independent
services which monitor the performance of mutual funds or publications such as
the "New York Times", "Barrons" and the "Wall Street Journal." Each Fund also
may compare its performance with various indices prepared by independent
services such as Standard & Poor's, Morgan Stanley or Lehman Brothers or to
unmanaged indices that may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.

Each Fund may advertise the standard deviation of its returns for various
time periods and compare its standard deviation to that of various indices.
Standard deviation of returns over time is a measure of volatility. It
indicates the spread of returns about their central tendency or mean. In
theory, a Fund that is more volatile should receive a higher return in exchange
for taking extra risk. Standard deviation is a well-accepted statistic to gauge
the riskiness of an investment strategy and measure its historical volatility
as a predictor of risk, although the measure is subject to time selection bias.

Advertisements for the Funds may mention that the Funds offer a variety
of investment options. They also may compare the Funds to federally insured
investments, such as bank certificates of deposit and credit union deposits,
including the long-term effects of inflation on these types of investments.
Advertisements also may compare the historical rate of return of different
types of investments. Information concerning broker-dealers who sell the Funds
also may appear in advertisements for the Funds, including their ranking as
established by various publications compared to other broker-dealers.

From time to time, the Manager may use contests as a means of promoting
the American AAdvantage Mileage Funds. Prizes may include free air travel
and/or hotel accommodations. Listing for certain of the Funds may be found in
newspapers under the heading "Amer AAdvant."

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<PAGE> 65

DESCRIPTION OF THE MILEAGE TRUST

The Mileage Trust, organized on February 22, 1995, (originally named
American AAdvantage Funds II) is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders of such a
trust may, under certain circumstances, be held personally liable for its
obligations. However, the Mileage Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Mileage Trust and provides for indemnification and reimbursement of expenses
out of Mileage Trust property for any shareholder held personally liable for
the obligations of the Mileage Trust. The Declaration of Trust also provides
that the Mileage Trust may maintain appropriate insurance (for example,
fidelity bonding) for the protection of the Mileage Trust, its shareholders,
Trustees, officers, employees and agents to cover possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss due to
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Mileage Trust itself was unable to meet its
obligations. The Mileage Trust has not engaged in any other business.

The corresponding Portfolios of the Balanced, the Growth and Income, the
International Equity and the Intermediate Bond Funds utilize a multi-manager
approach designed to reduce volatility by diversifying assets over multiple
investment management firms. Each adviser is carefully chosen by the Manager
through a rigorous screening process.

CONTROL PERSONS AND 5% SHAREHOLDERS

The following persons may be deemed to control certain Funds by virtue of
their ownership of more than 25% of the outstanding shares of a Fund as of
January 31, 1998 The effect of their control is:

American AAdvantage Short-Term Bond Mileage Fund

In addition, the following persons own 5% or more of the outstanding
shares of a Fund or Class as of January 31, 1996:

American AAdvantage Balanced Mileage Fund
%

American AAdvantage International Equity Mileage Fund

American AAdvantage Short-Term Bond Mileage Fund

American AAdvantage Municipal Money Market Mileage Fund
%

American AAdvantage U.S. Government Money Market Mileage Fund
%

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<PAGE> 66

OTHER INFORMATION

American Depository Receipts (ADRs), European Depository Receipts
(EDRs)-ADRs are depository receipts for foreign issuers in registered form
traded in U.S. securities markets, whereas, EDRs are in bearer form and traded
in European securities markets. These securities are not denominated in the
same currency as the securities into which they may be converted. Investing in
ADRs and EDRs involves greater risks than are normally present in domestic
investments. There is generally less publicly available information about
foreign companies and there may be less governmental regulation and supervision
of foreign stock exchanges, brokers and listed companies. In addition, such
companies may use different accounting and financial standards (and certain
currencies may become unavailable for transfer from a foreign currency),
resulting in a Fund's possible inability to convert immediately into U.S.
currency proceeds realized upon the sale of portfolio securities of the
affected foreign companies.

Bank Deposit Notes-Bank deposit notes are obligations of a bank, rather
than bank holding company corporate debt. The only structural difference
between bank deposit notes and certificates of deposit is that interest on bank
deposit notes is calculated on a 30/360 basis as are corporate notes/bonds.
Similar to certificates of deposit, deposit notes represent bank level
investments and, therefore, are senior to all holding company corporate debt.

Bankers' Acceptances-Bankers' acceptances are short-term credit
instruments designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be as
long as 270 days, most acceptances have maturities of six months or less.

Cash Equivalents-Cash equivalents include certificates of deposit, bearer
deposit notes, bankers' acceptances, government obligations, commercial paper,
short-term corporate debt securities and repurchase agreements.

Certificates of Deposit-Certificates of deposit are issued against funds
deposited in an eligible bank (including its domestic and foreign branches,
subsidiaries and agencies), are for a definite period of time, earn a specified
rate of return and are normally negotiable.

Cover-Transactions using forward contracts, future contracts, options on
futures contracts and options on indices ("Financial Instruments"), other than
purchased options, expose a Portfolio to an obligation to another party. A
Portfolio will not enter into any such transactions unless it owns either (1)
an offsetting ("covered") position in securities, currencies, or other forward
contracts, options or futures contracts, or (2) cash, receivables and liquid
assets, with a value, marked-to-market daily, sufficient to cover its potential
obligations to the extent not covered as provided in (1) above. Each Portfolio
will comply with SEC guidelines regarding cover for these instruments and will,
if the guidelines so require, set aside cash, receivables, or liquid assets in
a segregated account with its custodian in the prescribed amount.

Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Financial Instrument is open, unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of a Portfolio's assets to cover or to segregated accounts could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.

Commercial Paper-Commercial paper refers to promissory notes representing
an unsecured debt of a corporation or finance company with a fixed maturity of
no more than 270 days. A variable amount master demand note (which is a type of
commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts.

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<PAGE> 67
Debentures-Debentures are unsecured debt securities. The holder of a
debenture is protected only by the general creditworthiness of the issuer.

Derivatives-Generally, a derivative is a financial arrangement, the value
of which is based on, or "derived" from, a traditional security, asset or
market index. Some "derivatives" such as mortgage-related and other
asset-backed securities are in many respects like any other investment,
although they may be more volatile or less liquid than more traditional debt
securities. There are, in fact, many different types of derivatives and many
different ways to use them. There are a range of risks associated with those
uses.

Forward Foreign Currency Exchange Contracts-A forward foreign currency
exchange contract ("forward contract") is a contract to purchase or sell a
currency at a future date. The two parties to the contract set the number of
days and the price. Forward contracts are used as a hedge against movements in
future foreign exchange rates. The corresponding Portfolio of the International
Equity Fund may enter into forward contracts to purchase or sell foreign
currencies for a fixed amount of U.S. dollars or other foreign currency.

Forward contracts may serve as long hedges -- for example, the Portfolio
may purchase a forward contract to lock in the U.S. dollar price of a security
denominated in a foreign currency that the Portfolio intends to acquire.
Forward contracts also may serve as short hedges -- for example, the Portfolio
may sell a forward contract to lock in the U.S. dollar equivalent of the
proceeds from the anticipated sale of a security denominated in a foreign
currency or from the anticipated dividend or interest payments denominated in a
foreign currency. The Manager may seek to hedge against changes in the value of
a particular currency by using forward contracts on another foreign currency or
basket of currencies, the value of which the Manager believes will bear a
positive correlation to the value of the currency being hedged.

The cost to the Portfolio of engaging in forward contracts varies with
factors such as the currency involved, the length of the contract period and
the market conditions then prevailing. Because forward contracts are usually
entered into on a principal basis, no fees or commissions are involved. When
the Portfolio enters into a forward contract, it relies on the contra party to
make or take delivery of the underlying currency at the maturity of the
contract. Failure by the contra party to do so would result in the loss of any
expected benefit of the transaction.

Buyers and sellers of forward contracts can enter into offsetting closing
transactions by selling or purchasing, respectively, an instrument identical to
the instrument purchased or sold. Secondary markets generally do not exist for
forward contracts, with the result that closing transactions generally can be
made for forward contracts only by negotiating directly with the contra party.
Thus, there can be no assurance that the Portfolio will in fact be able to
close out a forward contract at a favorable price prior to maturity. In
addition, in the event of insolvency of the contra party, the Portfolio might
be unable to close out a forward contract at any time prior to maturity. In
either event, the Portfolio would continue to be subject to market risk with
respect to the position, and would continue to be required to maintain a
position in the securities or currencies that are the subject of the hedge or
to maintain cash or securities in a segregated account.

The precise matching of forward currency contract amounts and the value
of the securities involved generally will not be possible because the value of
such securities, measured in the foreign currency, will change after the
forward contract has been established. Thus, the Portfolio might need to
purchase or sell foreign currencies in the spot (cash) market to the extent
such foreign currencies are not covered by forward contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.

Full Faith and Credit Obligations of the U.S. Government-Securities
issued or guaranteed by the U.S. Treasury, backed by the full taxing power of
the U.S. Government or the right of the issuer to borrow from the U.S.
Treasury.

Futures Contracts-Futures contracts obligate a purchaser to take delivery
of a specific amount of an obligation underlying the futures contract at a
specified time in the future for a specified price. Likewise, the seller incurs
an obligation to deliver the specified amount of the underlying obligation
against receipt of the specified price. Futures are traded on both U.S. and
foreign commodities exchanges. Only currency futures will be permitted in the
corresponding Portfolio of the International Equity Fund. Futures contracts
will be traded for the same purposes as entering into forward contracts

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<PAGE> 68
The purchase of futures can serve as a long hedge, and the sale of
futures can serve as a short hedge.

No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract a Portfolio is required to deposit "initial
deposit" consisting of cash or U.S. Government Securities in an amount
generally equal to 10% or less of the contract value. Margin must also be
deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good- faith
deposit that is returned to the Portfolio at the termination of the transaction
if all contractual obligations have been satisfied. Under certain
circumstances, such as periods of high volatility, a Portfolio may be required
by a futures exchange to increase the level of its initial margin payment, and
initial margin requirements might be increased generally in the future by
regulatory action.

Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but rather
represents a daily settlement of a Portfolio's obligations to or from a futures
broker. When the Portfolio purchases or sells a futures contract, it is subject
to daily variation margin calls that could be substantial in the event of
adverse price movements. If a Portfolio has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.

Purchasers and sellers of futures contracts can enter into offsetting
closing transactions, by selling or purchasing, respectively, an instrument
identical to the instrument purchased or sold. Positions in futures contracts
may be closed only on a futures exchange or board of trade that provides a
secondary market. The Portfolios intend to enter into futures contracts only on
exchanges or boards of trade where there appears to be a liquid secondary
market. However, there can be no assurance that such a market will exist for a
particular contract at a particular time. In such event, it may not be possible
to close a futures contract.

Although futures contracts by their terms call for the actual delivery or
acquisition of securities or currency, in most cases the contractual obligation
is fulfilled before the date of the contract without having to make or take
delivery of the securities or currency. The offsetting of a contractual
obligation is accomplished by buying (or selling, as appropriate) on a
commodities exchange an identical futures contract calling for delivery in the
same month. Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of the securities or
currency. Since all transactions in the futures market are made, offset or
fulfilled through a clearinghouse associated with the exchange on which the
contracts are traded, a Portfolio will incur brokerage fees when it purchases
or sells futures contracts.

Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures contract can vary from the previous
day's settlement price; once that limit is reached, no trades may be made that
day at a price beyond the limit. Daily price limits do not limit potential
losses because prices could move to the daily limit for several consecutive
days with little or no trading, thereby preventing liquidation of unfavorable
positions.

If a Portfolio were unable to liquidate a futures contract due to the
absence of a liquid secondary market or the imposition of price limits, it
could incur substantial losses. The Portfolio would continue to be subject to
market risk with respect to the position. In addition, the Portfolio would
continue to be required to make daily variation margin payments and might be
required to maintain the position being hedged by the futures contract or
option thereon or to maintain cash or securities in a segregated account.

To the extent that a Portfolio enters into futures contracts, in each
case other than for bona fide hedging purposes (as defined by the Commodities
Futures Trading Commission ("CFTC"), the aggregate initial margin will not
exceed 5% of the liquidation value of a Portfolio's portfolio, after taking
into account unrealized profits and unrealized losses on any contracts that the
Portfolio has entered into. This policy does not limit to 5% the percentage of
the Portfolio's assets that are at risk in futures contracts.

Futures contracts require the deposit of initial margin valued at a
certain percentage of the contract and possibly adding "variation margin"
should the price of the contract move in an unfavorable direction. As with
forward contracts, the segregated assets must be either cash or high grade
liquid debt securities.

The ordinary spreads between prices in the cash and futures market, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit

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<PAGE> 69
and variation margin requirements. Rather than meeting additional variation
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
cash and futures markets. Second, the liquidity of the futures market depends
on participants entering into offsetting transactions rather than making or
taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the margin deposit requirements
in the futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
distortion, a correct forecast of securities price or currency exchange rate
trends by the investment adviser may still not result in a successful
transaction.

In addition, futures contracts entail risks. Although an investment
adviser believes that use of such contracts will benefit a particular
Portfolio, if that investment adviser's investment judgment about the general
direction of, for example, an index is incorrect, a Portfolio's overall
performance would be poorer than if it had not entered into any such contract.

General Obligation Bonds-General obligation bonds are secured by the
pledge of the issuer's full faith, credit, and usually, taxing power. The
taxing power may be an unlimited ad valorem tax or a limited tax, usually on
real estate and personal property. Most states do not tax real estate, but
leave that power to local units of government.

Illiquid Securities - Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the 1933 Act, securities that are otherwise not
readily marketable and repurchase agreements having a remaining maturity of
longer than seven calendar days. Securities that have not been registered under
the 1933 Act are referred to as private placements or restricted securities and
are purchased directly from the issuer or in the secondary market. Mutual funds
do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven calendar days. A mutual fund also might have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment.
However, the fact that there are contractual or legal restrictions on resale of
such investments to the general public or to certain institutions may not be
indicative of their liquidity.

Index Futures Contracts and Options on Index Futures Contracts-The Equity
500 Index Portfolio may invest in index futures contracts, options on index
futures contracts and options on securities indices.

Index Futures Contracts-U.S. futures contracts have been designed by
exchanges which have been designated "contracts markets" by the CFTC and must
be executed through a futures commission merchant, or brokerage firm, which is
a member of the relevant contract market. Futures contracts trade on a number
of exchange markets, and through their clearing corporations.

At the same time a futures contract on the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500" or the "Index") is purchased or
sold, the Portfolio must allocate cash or securities as a deposit payment
("initial deposit"). It is expected that the initial deposit would be
approximately 1-1/2% to 5% of a contract's face value. Daily thereafter, the
futures contract is valued and the payment of "variation margin" may be
required.

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<PAGE> 70

Options on Index Futures Contracts-The purchase of a call option on
an index futures contract is similar in some respects to the purchase of a call
option on such an index.

The writing of a call option on a futures contract with respect to
the Index constitutes a partial hedge against declining prices of the
underlying securities that are deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is below the
exercise price, the Portfolio will retain the full amount of the option premium
which provides a partial hedge against any decline that may have occurred in
the Portfolio's holdings. The writing of a put option on an index futures
contract constitutes a partial hedge against increasing prices of the
underlying securities that are deliverable upon exercise of the futures
contract. If the futures price at expiration of the option is higher than the
exercise price, the Portfolio will retain the full amount of the option premium
which provides a partial hedge against any increase in the price of securities
that the Portfolio intends to purchase. If a put or call option the Portfolio
has written is exercised, the Portfolio will incur a loss that will be reduced
by the amount of the premium it receives. Depending on the degree of
correlation between changes in the value of its portfolio securities and
changes in the value of its futures positions, the Portfolio's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.

The purchase of a put option on a futures contract with respect to
the Index is similar in some respects to the purchase of protective put options
on the Index. For example, the Portfolio may purchase a put option on an index
futures contract to hedge against the risk of lowering securities values.

The amount of risk the Portfolio assumes when it purchases an option
on a futures contract with respect to the Index is the premium paid for the
option plus related transaction costs. In addition to the correlation risks
discussed above, the purchase of such an option also entails the risk that
changes in the value of the underlying futures contract will not be fully
reflected in the value of the option purchased.

The Equity 500 Index Portfolio Board has adopted the requirement
that index futures contracts and options on index futures contracts be used as
a hedge. Stock index futures may be used on a continual basis to equitize cash
so that the Portfolio may maintain maximum equity exposure. The Portfolio will
not enter into any futures contracts or options on futures contracts if
immediately thereafter the amount of margin deposits on all the futures
contracts of the Portfolio and premiums paid on outstanding options on futures
contracts owned by the Portfolio would exceed 5% of the market value of the
total assets of the Portfolio.

Futures Contracts on Stock Indices-The Portfolio may enter into
contracts providing for the making and acceptance of a cash settlement based
upon changes in the value of an index of securities ("Futures Contracts"). This
investment technique is designed only to hedge against anticipated future
change in general market prices which otherwise might either adversely affect
the value of securities held by the Portfolio or adversely affect the prices of
securities which are intended to be purchased at a later date for the
Portfolio.

In general, each transaction in Futures Contracts involves the
establishment of a position which will move in a direction opposite to that of
the investment being hedged. If these hedging transactions are successful, the
futures positions taken for the Portfolio will rise in value by an amount that
approximately offsets the decline in value of the portion of the Portfolio's
investments that are being hedged. Should general market prices move in an
unexpected manner, the full anticipated benefits of Futures Contracts may not
be achieved or a loss may be realized.

Although Futures Contracts would be entered into for cash management
purposes only, such transactions do involve certain risks. These risks could
include a lack of correlation between the Futures Contract and the equity
market, a potential lack of liquidity in the secondary market and incorrect
assessments of market trends which may result in worse overall performance than
if a Futures Contract had not been entered into.

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<PAGE> 71

Brokerage costs will be incurred and "margin" will be required to be
posted and maintained as a good-faith deposit against performance of
obligations under Futures Contracts written into by the Portfolio. The
Portfolio may not purchase or sell a Futures Contract (or options thereon) if
immediately thereafter its margin deposits on its outstanding Futures Contracts
(and its premium paid on outstanding options thereon) would exceed 5% of the
market value of the Portfolio's total assets.

Options on Securities Indices-The Portfolio may write (sell) covered
call and put options to a limited extent on the Index ("covered options") in an
attempt to increase income. Such options give the holder the right to receive a
cash settlement during the term of the option based upon the difference between
the exercise price and the value of the Index. The Portfolio may forgo the
benefits of appreciation on the Index or may pay more than the market price or
the Index pursuant to call and put options written by the Portfolio.

By writing a covered call option, the Portfolio forgoes, in exchange
for the premium less the commission ("net premium"), the opportunity to profit
during the option period from an increase in the market value of the Index
above the exercise price. By writing a covered put option, the Portfolio, in
exchange for the net premium received, accepts the risk of a decline in the
market value of the Index below the exercise price.

The Portfolio may terminate its obligation as the writer of a call
or put option by purchasing an option with the same exercise price and
expiration date as the option previously written.

When the Portfolio writes an option, an amount equal to the net
premium received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The
amount of the deferred credit will be subsequently marked to market to reflect
the current market value of the option written. The current market value of a
traded option is the last sale price or, in the absence of a sale, the mean
between the closing bid and asked price. If an option expires on its stipulated
expiration date or if the Portfolio enters into a closing purchase transaction,
the Portfolio will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was sold), and the
deferred credit related to such option will be eliminated.

The Portfolio has adopted certain other nonfundamental policies
concerning index option transactions that are discussed above. The Portfolio's
activities in index options also may be restricted by the requirements of the
Code, for qualification as a RIC.

The hours of trading for options on the Index may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying
securities markets that cannot be reflected in the option markets. It is
impossible to predict the volume of trading that may exist in such options, and
there can be no assurance that viable exchange markets will develop or
continue.

Because options on securities indices require settlement in cash, BT
may be forced to liquidate portfolio securities to meet settlement obligations.

Options on Stock Indices-The Portfolio may purchase and write put
and call options on stock indices listed on stock exchanges. A stock index
fluctuates with changes in the market values of the stocks included in the
index. Options on stock indices generally are similar to options on stock
except that the delivery requirements are different. Instead of giving the
right to take or make delivery of stock at a specified price, an option on a
stock index gives the holder the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier." The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
The writer may offset its position in stock index options prior to expiration
by entering into a closing transaction on an exchange or the option may expire
unexercised.

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<PAGE> 72

Because the value of an index option depends upon movements in the
level of the index rather than the price of a particular stock, whether the
Portfolio will realize a gain or loss from the purchase or writing of options
on an index depends upon movements in the level of stock prices in the stock
market generally or, in the case of certain indices, in an industry or market
segment, rather than movements in the price of a particular stock.

Loan Participation Interests-Loan participation interests represent
interests in bank loans made to corporations. The contractual arrangement with
the bank transfers the cash stream of the underlying bank loan to the
participating investor. Because the issuing bank does not guarantee the
participations, they are subject to the credit risks generally associated with
the underlying corporate borrower. In addition, because it may be necessary
under the terms of the loan participation for the investor to assert through
the issuing bank such rights as may exist against the underlying corporate
borrower, in the event the underlying corporate borrower fails to pay principal
and interest when due, the investor may be subject to delays, expenses and
risks that are greater than those that would have been involved if the investor
had purchased a direct obligation (such as commercial paper) of such borrower.
Moreover, under the terms of the loan participation, the investor may be
regarded as a creditor of the issuing bank (rather than of the underlying
corporate borrower), so that the issuer also may be subject to the risk that
the issuing bank may become insolvent. Further, in the event of the bankruptcy
or insolvency of the corporate borrower, the loan participation may be subject
to certain defenses that can be asserted by such borrower as a result of
improper conduct by the issuing bank. The secondary market, if any, for these
loan participations is extremely limited and any such participations purchased
by the investor are regarded as illiquid.

Loan Transactions-Loan transactions involve the lending of securities to
a broker-dealer or institutional investor for its use in connection with short
sales, arbitrages or other security transactions. The purpose of a qualified
loan transaction is to afford a lender the opportunity to continue to earn
income on the securities loaned and at the same time earn fee income or income
on the collateral held by it.

Securities loans will be made in accordance with the following
conditions: (1) the Portfolio must receive at least 100% collateral in the form
of cash or cash equivalents, securities of the U.S. Government and its agencies
and instrumentalities, and approved bank letters of credit; (2) the borrower
must increase the collateral whenever the market value of the loaned securities
(determined on a daily basis) rises above the level of collateral; (3) the
Portfolio must be able to terminate the loan after notice, at any time; (4) the
Portfolio must receive reasonable interest on the loan or a flat fee from the
borrower, as well as amounts equivalent to any dividends, interest or other
distributions on the securities loaned, and any increase in market value of the
loaned securities; (5) the Portfolio may pay only reasonable custodian fees in
connection with the loan; and (6) voting rights on the securities loaned may
pass to the borrower, provided, however, that if a material event affecting the
investment occurs, the AMR Trust Board or the Equity 500 Index Portfolio Board,
as appropriate, must be able to terminate the loan and vote proxies or enter
into an alternative arrangement with the borrower to enable the AMR Trust Board
or the Equity 500 Index Portfolio Board, as appropriate, to vote proxies.

While there may be delays in recovery of loaned securities or even a loss
of rights in collateral supplied should the borrower fail financially, loans
will be made only to firms deemed by the AMR Trust Board or the Equity 500
Index Portfolio Board, as appropriate, to be of good financial standing and
will not be made unless the consideration to be earned from such loans would
justify the risk. Such loan transactions are referred to in this Statement of
Additional Information as "qualified" loan transactions.

The cash collateral so acquired through qualified loan transactions may
be invested only in those categories of high quality liquid securities
previously authorized by the AMR Trust Board.

Mortgage-Backed Securities-Mortgage-backed securities consist of both
collateralized mortgage obligations and mortgage pass-through certificates.

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<PAGE> 73
which is owned entirely by Federal Home Loan Banks. The issuers of CMOs are
structured as trusts or corporations established for the purpose of issuing
such CMOs and often have no assets other than those underlying the securities
and any credit support provided. A REMIC is a mortgage securities vehicle that
holds residential or commercial mortgages and issues securities representing
interests in those mortgages. A REMIC may be formed as a corporation,
partnership, or segregated pool of assets. The REMIC itself is generally exempt
from federal income tax, but the income from the mortgages is reported by
investors. For investment purposes, interests in REMIC securities are virtually
indistinguishable from CMOs.

Mortgage Pass-Through Certificates-Mortgage pass-through
certificates are issued by governmental, government- related and private
organizations which are backed by pools of mortgage loans.

(1) Government National Mortgage Association ("GNMA") Mortgage
Pass-Through Certificates ("Ginnie Maes")-GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
Ginnie Maes represent an undivided interest in a pool of mortgages that are
insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Ginnie Maes
entitle the holder to receive all payments (including prepayments) of principal
and interest owed by the individual mortgagors, net of fees paid to GNMA and to
the issuer which assembles the mortgage pool and passes through the monthly
mortgage payments to the certificate holders (typically, a mortgage banking
firm), regardless of whether the individual mortgagor actually makes the
payment. Because payments are made to certificate holders regardless of whether
payments are actually received on the underlying mortgages, Ginnie Maes are of
the "modified pass-through" mortgage certificate type. The GNMA is authorized
to guarantee the timely payment of principal and interest on the Ginnie Maes.
The GNMA guarantee is backed by the full faith and credit of the United States,
and the GNMA has unlimited authority to borrow funds from the U.S. Treasury to
make payments under the guarantee. The market for Ginnie Maes is highly liquid
because of the size of the market and the active participation in the secondary
market of security dealers and a variety of investors.

(2) FHLMC Mortgage Participation Certificates ("Freddie Macs")-Freddie
Macs represent interests in groups of specified first lien residential
conventional mortgages underwritten and owned by the FHLMC. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC guarantees either ultimate collection or timely payment of all
principal payments on the underlying mortgage loans. In cases where the FHLMC
has not guaranteed timely payment of principal, the FHLMC may remit the amount
due because of its guarantee of ultimate payment of principal at any time after
default on an underlying mortgage, but in no event later than one year after it
becomes payable. Freddie Macs are not guaranteed by the United States or by any
of the Federal Home Loan Banks and do not constitute a debt or obligation of
the United States or of any Federal Home Loan Bank. The secondary market for
Freddie Macs is highly liquid because of the size of the market and the active
participation in the secondary market of the FHLMC, security dealers and a
variety of investors.

(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes")-Fannie Maes represent an undivided interest in a pool of conventional
mortgage loans secured by first mortgages or deeds of trust, on one family or
two to four family, residential properties. The FNMA is obligated to distribute
scheduled monthly installments of principal and interest on the mortgages in
the pool, whether or not received, plus full principal of any foreclosed or
otherwise liquidated mortgages. The obligation of the FNMA under its guarantee
is solely its obligation and is not backed by, nor entitled to, the full faith
and credit of the United States.

(4) Mortgage-Related Securities Issued by Private Organizations-Pools
created by non-governmental issuers generally offer a higher rate of interest
than government and government-related pools because there are no direct or
indirect government guarantees of payments in such pools. However, timely
payment of interest and principal of these pools is often partially supported
by various enhancements such as over-collateralization and senior/subordination
structures and by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance. The insurance and
guarantees are issued by government entities, private insurers or the mortgage
poolers. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable.

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<PAGE> 74
lease obligation. With respect to MLOs purchased by the corresponding Portfolio
of the Municipal Money Market Fund, the AMR Trust Board has established the
following guidelines for determining the liquidity of the MLOs in its
portfolio, and, subject to review by the AMR Trust Board, has delegated that
responsibility to the investment adviser: (1) the frequency of trades and
quotes for the security; (2) the number of dealers willing to purchase or sell
the security and the number of other potential buyers; (3) the willingness of
dealers to undertake to make a market in the security; (4) the nature of the
marketplace trades; (5) the likelihood that the marketability of the obligation
will be maintained through the time the security is held by the Portfolio; (6)
the credit quality of the issuer and the lessee; (7) the essentiality to the
lessee of the property covered by the lease and (8) for unrated MLOs, the MLOs'
credit status analyzed according to the factors reviewed by rating agencies.

Private Activity Obligations-Private activity obligations are issued to
finance, among other things, privately operated housing facilities, pollution
control facilities, convention or trade show facilities, mass transit, airport,
port or parking facilities and certain facilities for water supply, gas,
electricity, sewage or solid waste disposal. Private activity obligations are
also issued to privately held or publicly owned corporations in the financing
of commercial or industrial facilities. The principal and interest on these
obligations may be payable from the general revenues of the users of such
facilities. Shareholders, depending on their individual tax status, may be
subject to the federal alternative minimum tax on the portion of a distribution
attributable to these obligations. Interest on private activity obligations
will be considered exempt from federal income taxes; however, shareholders
should consult their own tax advisers to determine whether they may be subject
to the federal alternative minimum tax.

Ratings of Long-Term Obligations-The Portfolio utilizes ratings provided
by the following nationally recognized statistical rating organizations
("Rating Organizations") in order to determine eligibility of long-term
obligations.

The four highest Moody's Investors Service, Inc. ("Moody's") ratings for
long-term obligations (or issuers thereof) are Aaa, Aa, A and Baa. Obligations
rated Aaa are judged by Moody's to be of the best quality. Obligations rated Aa
are judged to be of high quality by all standards. Together with the Aaa group,
such debt comprises what is generally known as high-grade debt. Moody's states
that debt rated Aa is rated lower than Aaa debt because margins of protection
or other elements make long-term risks appear somewhat larger than for Aaa
debt. Obligations which are rated A by Moody's possess many favorable
investment attributes and are considered "upper medium-grade obligations."
Obligations which are rated Baa by Moody's are considered to be medium grade
obligations, i.e., they are neither highly protected or poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Moody's also supplies numerical
indicators 1, 2, and 3 to rating categories. The modifier 1 indicates that the
security is in the higher end of its rating category; the modifier 2 indicates
a mid-range ranking; and modifier 3 indicates a ranking toward the lower end of
the category.

The four highest Standard & Poor's ratings for long-term obligations are
AAA, AA, A and BBB. Obligations rated AAA have the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is extremely
strong. Obligations rated AA have a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a small
degree. Obligations rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions. Obligations rated BBB by
Standard & Poor's are regarded as having adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.

Duff & Phelps' four highest ratings for long-term obligations are AAA,
AA, A and BBB. Obligations rated AAA have the highest credit quality with risk
factors being negligible. Obligations rated AA are of high credit quality and
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions. Obligations rated A have average but
adequate protection factors. However, risk factors are more variable and
greater in periods of economic stress. Obligations rated BBB have below average
protection factors with considerable variability in risk during economic
cycles, but are still considered sufficient for prudent investment.

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<PAGE> 75
term to maturity of the rated instrument. BankWatch's four highest ratings for
long-term obligations are AAA, AA, A and BBB. Obligations rated AAA indicate
that the ability to repay principal and interest on a timely basis is very
high. Obligations rated AA indicate a superior ability to repay principal and
interest on a timely basis, with limited incremental risk compared to issues
rated in the highest category. Obligations rated A indicate the ability to
repay principal and interest is strong. Issues rated A could be more vulnerable
to adverse developments (both internal and external) than obligations with
higher ratings. BBB is the lowest investment grade category and indicates an
acceptable capacity to repay principal and interest. Issues rated BBB are,
however, more vulnerable to adverse developments (both internal and external)
than obligations with higher ratings.

Fitch IBCA, Inc. ("Fitch") investment grade bond ratings provide a guide
to investors in determining the credit risk associated with a particular
security. The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt in a timely
manner. Obligations rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonable
foreseeable events. Bonds rated AA are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Bonds rated A are considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings. Bonds rated BBB are
considered to be investment grade and of satisfactory credit quality. The
obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however,
are more likely to have adverse impact on these bonds, and therefore impair
timely payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

Standard & Poor's, Duff & Phelps and Fitch apply indicators, such as
"+","-," or no character, to indicate relative standing within the major rating
categories.

Ratings of Municipal Obligations-Moody's ratings for state and municipal
short-term obligations are designated Moody's Investment Grade or "MIG" with
variable rate demand obligations being designated as "VMIG." A VMIG rating also
may be assigned to commercial paper programs which are characterized as having
variable short-term maturities but having neither a variable rate nor demand
feature. Factors used in determination of ratings include liquidity of the
borrower and short-term cyclical elements.

Standard & Poor's uses SP-1, SP-2, and SP-3 to rate short-term municipal
obligations. A rating of SP-1 denotes a very strong or strong capacity to pay
principal and interest.

Ratings of Short-term Obligations-The rating P-1 is the highest
short-term rating assigned by Moody's. Among the factors considered by Moody's
in assigning ratings are the following: (1) evaluations of the management of
the issuer; (2) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.

Short-term obligations (or issuers thereof) rated A-1 by Standard &
Poor's have the following characteristics. Liquidity ratios are adequate to
meet cash requirements. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an upward trend with
allowance made for unusual circumstances. Typically, the issuer's industry is
well established and the issuer has a strong position within the industry. The
reliability and quality of management are unquestioned. Relative strength or
weakness of the above factors determines whether the issuer's short-term
obligation is rated A-1, A-2, or A-3.

IBCA's short-term rating of A-1 indicates obligations supported by the
highest capacity for timely repayment. Where issues possess particularly
strong credit features, a rating of A-1+ is assigned. Obligations rated A-2 are
supported by a good capacity for timely repayment.

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<PAGE> 76
risk-free U.S. Treasury obligations. Obligations rated D-1 have a very high
certainty of timely payment. Risk factors are minor. Obligations rated D-1-
have a high certainty of timely payment. Risk factors are very small.
Obligations rated D-2 have good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.

Thomson BankWatch short-term ratings are intended to assess the
likelihood of an untimely or incomplete payment of principal or interest.
Obligations rated TBW-1 indicate a very high likelihood that principal and
interest will be paid on a timely basis. While the degree of safety regarding
timely payment of principal and interest is strong for an obligation rated
TBW-2, the relative degree of safety is not as high as for issues rated TBW-1.

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. A rating of F-1+ indicates exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment. Obligations rated F-1 have very strong
credit quality. Issues assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+. Issues assigned a
rating of F-2 indicate good credit quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the margin of safety
is not as great as for issues assigned F- 1+ and F-1 ratings.

Repurchase Agreements-A repurchase agreement, which provides a means to
earn income on funds for periods as short as overnight, is an arrangement under
which the purchaser (e.g., a Portfolio) purchases securities and the seller
agrees, at the time of sale, to repurchase the securities at a specified time
and price. The repurchase price will be higher than the purchase price, the
difference being income to the purchaser, or the purchase and repurchase prices
may be the same, with interest at a stated rate due to the purchaser together
with the repurchase price on repurchase. In either case, the income to the
purchaser is unrelated to the interest rate on the securities subject to the
repurchase agreement.

Each Portfolio may enter into repurchase agreements with any bank or
registered broker-dealer who, in the opinion of the AMR Trust Board, presents a
minimum risk of bankruptcy during the term of the agreement based upon
guidelines that periodically are reviewed by the AMR Trust Board. Each
Portfolio may enter into repurchase agreements as a short- term investment of
its idle cash in order to earn income. The securities will be held by a
custodian (or agent) approved by the AMR Trust Board during the term of the
agreement. However, if the market value of the securities subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Portfolio will direct the seller of the securities to deliver
additional securities so that the market value of all securities subject to the
repurchase agreement will equal or exceed the repurchase price.

In the event of the commencement of bankruptcy or insolvency proceedings
with respect to the seller of the securities before the repurchase of the
securities under a repurchase agreement, a Portfolio may encounter a delay and
incur costs before being able to sell the security being held as collateral.
Delays may involve loss of interest or decline in price of the securities.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the securities, in which case a
Portfolio may incur a loss if the proceeds to the Portfolio from the sale of
the securities to a third party are less than the repurchase price.

Reverse Repurchase Agreements-The Portfolios may borrow funds for
temporary purposes by entering into reverse repurchase agreements. Pursuant to
such agreements, a Portfolio would sell portfolio securities to financial
institutions such as banks and broker/dealers and agree to repurchase them at a
mutually agreed-upon date and price. The Portfolios intend to enter into
reverse repurchase agreements only to avoid selling securities to meet
redemptions during market conditions deemed unfavorable by the investment
adviser possessing investment authority. At the time a Portfolio enters into a
reverse repurchase agreement, it will place in a segregated custodial account
assets such as liquid high quality debt securities having a value not less than
100% of the repurchase price (including accrued interest), and will
subsequently monitor the account to ensure that such required value is
maintained. Reverse repurchase agreements involve the risk that the market
value of the securities sold by a Portfolio may decline below the price at
which such Portfolio is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by an investment company
under the 1940 Act.

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<PAGE> 77
Resource Recovery Obligations-Resource recovery obligations are a type of
municipal revenue obligation issued to build facilities such as solid waste
incinerators or waste-to-energy plants. Usually, a private corporation will be
involved and the revenue cash flow will be supported by fees or units paid by
municipalities for use of the facilities. The viability of a resource recovery
project, environmental protection regulations and project operator tax
incentives may affect the value and credit quality of these obligations.

Revenue Obligations-Revenue obligations are backed by the revenue cash
flow of a project or facility.

Rights and Warrants-Rights are short-term warrants issued in conjunction
with new stock issues. Warrants are options to purchase an issuer's securities
at a stated price during a stated term. There is no specific limit on the
percentage of assets a Portfolio may invest in rights and warrants, although
the ability of some of the Portfolios to so invest is limited by their
investment objectives or policies.

Separately Traded Registered Interest and Principal Securities and Zero
Coupon Obligations-Separately traded registered interest and principal
securities or "STRIPS" and zero coupon obligations are securities that do not
make regular interest payments. Instead they are sold at a discount from their
face value. Each Portfolio will take into account as income a portion of the
difference between these obligations' purchase prices and their face values.
Because they do not pay coupon income, the prices of STRIPS and zero coupon
obligations can be very volatile when interest rates change. STRIPS are zero
coupon bonds issued by the U.S. Treasury.

Tax, Revenue or Bond Anticipation Notes-Tax, revenue or bond anticipation
notes are issued by municipalities in expectation of future tax or other
revenues which are payable from these specific taxes or revenues. Bond
anticipation notes usually provide interim financing in advance of an issue of
bonds or notes, the proceeds of which are used to repay the anticipation notes.
Tax-exempt commercial paper is issued by municipalities to help finance
short-term capital or operating needs in anticipation of future tax or other
revenue.

U.S. Government Securities-U.S. Government securities are issued or
guaranteed by the U.S. Government and include U.S. Treasury obligations (see
definition below) and securities issued by U.S. agencies and instrumentalities.

U. S. Government agencies or instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, GNMA, General Services Administration, Central Bank
for Cooperatives, Federal Home Loan Banks, FHLMC, Federal Intermediate Credit
Banks, Federal Land Banks, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board, Inter-American Development Bank,
Asian-American Development Bank, Agency for International Development, Student
Loan Marketing Association and International Bank of Reconstruction and
Development.

Obligations of U.S. Government agencies and instrumentalities may or may
not be supported by the full faith and credit of the United States. Some are
backed by the right of the issuer to borrow from the Treasury; others are
supported by discretionary authority of the U.S. Government to purchase the
agencies' obligations; while still others, such as the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. In the
case of securities not backed by the full faith and credit of the United
States, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the United States itself in the event the agency or
instrumentality does not meet its commitment.

U.S. Treasury Obligations-U.S. Treasury obligations include bills, notes
and bonds issued by the U.S. Treasury and Separately Traded Registered Interest
and Principal component parts of such obligations known as STRIPS.

Variable or Floating Rate Obligations-A variable rate obligation is one
whose terms provide for the adjustment of its interest rate on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its par value. A floating rate obligation is one whose terms
provide for the adjustment of its interest rate whenever a specified interest
rate changes and which, at any time, can reasonably be expected to have a
market value that approximates its par value. Variable or floating rate
obligations may be secured by bank letters of credit.

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<PAGE> 78
Pursuant to Rule 2a-7 under the 1940 Act, variable or floating rate
obligations with stated maturities of more than 397 days may be deemed to have
shorter maturities as follows:

(1) An obligation that is issued or guaranteed by the United States
Government or any agency thereof which has a variable rate of interest
readjusted no less frequently than every 762 days will be deemed by a Portfolio
to have a maturity equal to the period remaining until the next readjustment of
the interest rate.

(2) A variable rate obligation, the principal amount of which is
scheduled on the face of the instrument to be paid in 397 days or less, will be
deemed by a Portfolio to have a maturity equal to the period remaining until
the next readjustment of the interest rate.

(3) A variable rate obligation that is subject to a demand feature will
be deemed by a Portfolio to have a maturity equal to the longer of the period
remaining until the next readjustment of the interest rate or the period
remaining until the principal amount can be recovered through demand.

(4) A floating rate obligation that is subject to a demand feature will
be deemed by a Portfolio to have a maturity equal to the period remaining until
the principal amount can be recovered through demand.

As used above, an obligation is "subject to a demand feature" when a
Portfolio is entitled to receive the principal amount of the obligation either
at any time on no more than 30 days' notice or at specified intervals not
exceeding one year and upon no more than 30 days' notice.

Variable Rate Auction and Residual Interest Obligations-Variable rate
auction and residual interest obligations are created when an issuer or dealer
separates the principal portion of a long-term, fixed-rate municipal bond into
two long-term, variable-rate instruments. The interest rate on one portion
reflects short-term interest rates, while the interest rate on the other
portion is typically higher than the rate available on the original fixed-rate
bond.

When-Issued and Delayed Delivery Securities-Delivery of and payment for
securities on a when-issued or delayed delivery basis may take place as long as
a month or more after the date of the purchase commitment. The value of these
securities is subject to market fluctuation during this period and no income
accrues to a Portfolio until settlement takes place. A Portfolio maintains with
the Custodian a segregated account containing high grade liquid securities in
an amount at least equal to these commitments. When entering into a when-issued
or delayed delivery transaction, the Portfolio will rely on the other party to
consummate the transaction; if the other party fails to do so, the Portfolio
may be disadvantaged.

FINANCIAL STATEMENTS

The Mileage Trust's Annual Report to Shareholders for the period ended
October 31, 1997 is supplied with the Statement of Additional Information, and
the financial statements and accompanying notes appearing therein are
incorporated by reference in this Statement of Additional Information.

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<PAGE> 79

APPENDIX A

The following table shows the performance of the S&P 500 Composite Stock
Price Index for the periods indicated. Stock prices fluctuated widely during
the periods but were higher at the end than at the beginning. The results shown
should not be considered as a representation of the income or capital gain or
loss that may be generated by the Index in the future or should this be
considered a representation of the past or future performance of the S&P 500
Index Fund.

<TABLE>
<CAPTION>
Year Total Return Year Total Return Year Total Return
<S> <C> <C> <C> <C> <C>
1997 1973 -14.66% 1949 18.79%
1996 23.03% 1972 18.98% 1948 5.50%
1995 37.49% 1971 14.31% 1947 5.71%
1994 1.32% 1970 4.01% 1946 -8.07%
1993 9.99% 1969 -8.51% 1945 36.44%
1992 7.67% 1968 11.06% 1944 19.75%
1991 30.55% 1967 23.98% 1943 25.90%
1990 -3.17% 1966 -10.06% 1942 20.34%
1989 31.49% 1965 12.45% 1941 -11.59%
1988 16.81% 1964 16.48% 1940 -9.78%
1987 5.23% 1963 22.08% 1939 -0.41%
1986 18.47% 1962 -8.73% 1938 31.12%
1985 32.16% 1961 26.89% 1937 -35.03%
1984 6.27% 1960 0.47% 1936 33.92%
1983 22.51% 1959 11.96% 1935 47.67%
1982 21.41% 1958 43.36% 1934 -1.44%
1981 -4.91% 1957 -10.78% 1933 53.99%
1980 32.42% 1956 6.56% 1932 -8.19%
1979 18.44% 1955 31.56% 1931 -43.34%
1978 6.56% 1954 52.62% 1930 -24.90%
1977 -7.18% 1953 -0.99% 1929 -8.42%
1976 23.84% 1952 18.73% 1928 43.61%
1975 37.20% 1951 24.02% 1927 37.49%
1974 -26.47% 1950 31.71% 1926 11.62%

</TABLE>

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<PAGE> 80
TABLE OF CONTENTS

<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Trustees and Officers of the Mileage Trust and the AMR Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Trustees and Officers of the Equity 500 Index Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Management, Administrative Services and Distribution Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Approach to Stock Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Redemptions in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Investment Advisory Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Portfolio Securities Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Yield and Total Return Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Description of the Mileage Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Control Persons and 5% Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

</TABLE>

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<PAGE> 81

THIS PROSPECTUS contains important information about the Platinum Class of the
AMERICAN AADVANTAGE FUNDS ("AAdvantage Trust") and the AMERICAN AADVANTAGE
MILEAGE FUNDS ("Mileage Trust"), each an open-end management investment company
which consists of multiple investment portfolios. This Prospectus pertains only
to the four funds listed on this cover page (individually referred to as a
"Fund" and, collectively, the "Funds"). EACH FUND SEEKS ITS INVESTMENT
OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE ASSETS IN A CORRESPONDING
PORTFOLIO (INDIVIDUALLY REFERRED TO AS A "PORTFOLIO" AND, COLLECTIVELY,
"PORTFOLIOS") OF THE AMR INVESTMENT SERVICES TRUST ("AMR TRUST") WHICH HAS AN
INVESTMENT OBJECTIVE IDENTICAL TO THE INVESTING FUND. The investment experience
of each Fund will correspond directly with the investment experience of each
Portfolio. Each Fund consists of multiple classes of shares designed to meet
the needs of different groups of investors. Platinum Class shares are offered
exclusively to customers of certain broker-dealers. Prospective Platinum Class
investors should read this Prospectus carefully before making an investment
decision and retain it for future reference.

IN ADDITION TO THIS PROSPECTUS, a Statement of Additional Information ("SAI")
for the Platinum Class dated March 1, 1998 has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. The SAI
contains more detailed information about the Funds. For a free copy of the SAI,
call 800-973-7977. For further information on the Funds, refer to the address
and phone number on the back cover.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

Prospectus
March 1, 1998
[AMERICAN AADVANTAGE FUNDS LOGO]
Platinum Class
MONEY MARKET FUND
MUNICIPAL MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
[AMERICAN AADVANTAGE MILEAGE FUNDS LOGO]
MONEY MARKET MILEAGE FUND

Available through

[SOUTHWEST SECURITIES LOGO]
<PAGE> 82

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

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

<TABLE>
<S> <C>
TABLE OF FEES AND EXPENSES...................... 3
FINANCIAL HIGHLIGHTS............................ 4
INTRODUCTION.................................... 7
INVESTMENT OBJECTIVES, POLICIES AND RISKS....... 8
INVESTMENT RESTRICTIONS......................... 16
YIELDS AND TOTAL RETURNS........................ 17
MANAGEMENT AND ADMINISTRATION OF THE TRUSTS..... 17
AADVANTAGE(R) MILES............................. 20
HOW TO PURCHASE SHARES.......................... 21
HOW TO REDEEM SHARES............................ 23
VALUATION OF SHARES............................. 24
DIVIDENDS AND TAX MATTERS....................... 25
GENERAL INFORMATION............................. 26
SHAREHOLDER COMMUNICATIONS...................... 27
</TABLE>

PROSPECTUS

2
<PAGE> 83

TABLE OF FEES AND EXPENSES

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

<TABLE>
<CAPTION>
MUNICIPAL U.S. GOVERNMENT MONEY
MONEY MONEY MONEY MARKET
MARKET MARKET MARKET MILEAGE
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
Management Fees 0.15% 0.15% 0.15% 0.15%

12b-1 Fees 0.25% 0.25% 0.25% 0.25%(1)

Other Expenses 0.53% 0.65% 0.60% 0.69%
---- ------ --------- -----

Total Operating Expenses 0.93% 1.05% 1.00% 1.09%
==== ====== ========= =====
</TABLE>

(1) The Mileage Trust anticipates that a portion of the "12b-1 Fees" charged for
the current fiscal year will be used to pay for AAdvantage miles. See
"AAdvantage Miles." The Manager anticipates waiving a portion of the 12b-1
fees of the Mileage Fund.

The above expenses reflect the expenses of each Fund and the Portfolio in
which it invests. The Board believes that the aggregate per share expenses of
each Fund and its corresponding Portfolio will be approximately equal to the
expenses that the Fund would incur if its assets were invested directly in the
type of securities held by the Portfolio.

EXAMPLES

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

<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
<S> <C> <C> <C> <C>
Money Market Fund 9 30 51 114

Municipal Money Market Fund 11 33 58 128

U.S. Government Money Market Fund 10 32 55 122
Money Market Mileage Fund 11 35 60 133
</TABLE>

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

PROSPECTUS

3
<PAGE> 84

FINANCIAL HIGHLIGHTS

The financial highlights in the following tables for the AAdvantage Funds and
the Mileage Fund have been derived from financial statements of the AAdvantage
Trust and the Mileage Trust, respectively. The information has been audited by
Ernst & Young LLP, independent auditor. Such information should be read in
conjunction with the financial statements and the report of the independent
auditor appearing in the Annual Report of the AAdvantage Trust and the Mileage
Trust incorporated by reference in the SAI, which contains further information
about performance of the Funds and can be obtained by investors without charge.

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
MONEY MARKET FUND
-------------------------------------------------------------------------------------------
PLATINUM CLASS
---------------------- INSTITUTIONAL CLASS
YEAR PERIOD ----------------------------------------------------------------
ENDED ENDED YEAR ENDED OCTOBER 31,
OCT. 31, OCT. 31, ----------------------------------------------------------------
1997 1996(1) 1996 1995 1994(2) 1993 1992
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ---- ----- ----- ----- ----- -----
Net investment income 0.05(3) 0.05(3) 0.06 0.04 0.03 0.04
Less dividends from net
investment income (0.05) (0.05) (0.06) (0.04) (0.03) (0.04)
------ ---- ----- ----- ----- ----- -----
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ==== ===== ===== ===== ===== =====
Total return (annualized) % 4.85%(4) 5.57% 5.96% 3.85% 3.31% 4.41%
====== ==== ===== ===== ===== ===== =====
Ratios/supplemental data:
Net assets, end of period
(in thousands) $119,981 $1,406,939 $1,206,041 $1,893,144 $2,882,947 $2,223,829
Ratios to average net
assets (annualized)(5)(6):
Expenses 0.94%(3) 0.24%(3) 0.23% 0.21% 0.23% 0.26%
Net investment income 4.63%(3) 5.41%(3) 5.79% 3.63% 3.23% 4.06%

<CAPTION>
MONEY MARKET FUND
-----------------------------------------

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

(1) The Money Market Fund commenced active operations on September 1, 1987. The
Platinum Class commenced active operations on November 7, 1995.

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

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

(4) Total return for the Platinum Class for the period ended October 31, 1996,
reflects Institutional Class returns from November 1, 1995 through November
6, 1995 and returns of the Platinum Class through October 31, 1996. Due to
the different expense structures between the classes, total return would
vary from the results shown had the Platinum Class been in operation for the
entire year.

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

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

PROSPECTUS

4
<PAGE> 85

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
MUNICIPAL MONEY MARKET FUND
----------------------------------------------------------------------------
PLATINUM CLASS INSTITUTIONAL CLASS
----------------------------- ---------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED OCT. 31, PERIOD ENDED
OCT. 31, OCT. 31, --------------------- OCT. 31,
1997 1996(1) 1996 1995 1994(1)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- --------- --- ---- -------
Net investment income 0.03(2) 0.04(3) 0.04 0.02
Less dividends from net investment income (0.03) (0.04) (0.04) (0.02)
------- --------- --- ---- -------
Net asset value, end of period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ========= === ==== =======
Total return (annualized) % 2.88%(3) 3.59% 3.75% 2.44%
======= ========= === ==== =======
Ratios/supplemental data:
Net assets, end of period (in thousands) $49,862 $ 6 $ 7 $9,736
Ratios to average net assets (annualized)(4)(5):
Expenses 0.97%(2) 0.27%(2) 0.35% 0.30%
Net investment income 2.72%(2) 3.49%(2) 3.70% 2.38%
</TABLE>

(1) The Municipal Money Market Fund commenced active operations on November 10,
1993. The Platinum Class commenced active operations on November 7, 1995.

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

(3) Total return for the Platinum Class for the period ended October 31, 1996,
reflects Institutional Class returns from November 1, 1995 through November
6, 1995 and returns of the Platinum Class through October 31, 1996. Due to
the different expense structures between the classes, total return would
vary from the results shown had the Platinum Class been in operation for the
entire year.

(4) Operating results of the Municipal Money Market Fund exclude management and
administrative services fees waived by the Manager. Had the Fund paid such
fees, the ratio of expenses and net investment income to average net assets
of the Institutional Class would have been 0.50% and 2.18%, respectively for
the period ended October 31, 1994; 0.55% and 3.50%, respectively, for the
year ended October 31, 1995, and 0.33% and 3.43%, respectively for the year
ended October 31, 1996. The ratio of expenses and net investment income to
average net assets of the Platinum Class would have been 1.02% and 2.67%,
respectively for the period ended October 31, 1996.

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

PROSPECTUS

5
<PAGE> 86

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND
-------------------------------------------------------------------------------------------------
PLATINUM CLASS INSTITUTIONAL CLASS
------------------------- -------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED OCTOBER 31, PERIOD ENDED
OCT. 31, OCT. 31, ------------------------------------------------- OCT. 31,
1997 1996(1) 1996 1995 1994(2) 1993 1992(1)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ -------- ----- ----- ----- ----- --------
Net investment income 0.04(3) 0.05(3) 0.06 0.04 0.03 0.02
Less dividends from net
investment income (0.04) (0.05) (0.06) (0.04) (0.03) (0.02)
------ -------- ----- ----- ----- ----- --------
Net asset value, end of period $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ======== ===== ===== ===== ===== ========
Total return (annualized) % 4.58%(4) 5.29% 5.67% 3.70% 3.07% 3.61%
====== ======== ===== === ===== ===== ========
Ratios/supplemental data:
Net assets, end of period (in
thousands) $52,153 $25,595 $ 47,184 $67,607 $136,813 $91,453
Ratios to average net assets
(annualized)(5)(6):
Expenses 1.00%(3) 0.32%(3) 0.32% 0.25% 0.23% 0.27%(7)
Net investment income 4.35%(3) 5.16%(3) 5.49% 3.44% 2.96% 3.46%(7)
</TABLE>

(1) Prior to March 1, 1997 the U.S. Government Money Market Fund was known as
the American AAdvantage U.S. Treasury Money Market Fund and operated under
different investment policies. The American AAdvantage U.S. Treasury Money
Market Fund commenced active operations on March 2, 1992. The Platinum Class
commenced active operations on November 7, 1995.

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

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

(5) Operating results of the Municipal Money Market Fund exclude management and
administrative services fees waived by the Manager. Had the Fund paid such
fees, the ratio of expenses and net investment income to average net assets
of the Institutional Class would have been 0.50% and 2.18%, respectively for
the period ended October 31, 1994; 0.55% and 3.50%, respectively, for the
year ended October 31, 1995, and 0.33% and 3.43%, respectively for the year
ended October 31, 1996. The ratio of expenses and net investment income to
average net assets of the Platinum Class would have been 1.02% and 2.67%,
respectively for the period ended October 31, 1996.

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

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

PROSPECTUS

6
<PAGE> 87

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
MONEY MARKET MILEAGE FUND
---------------------------------------------------------------
PLATINUM CLASS
------------------------------------------ MILEAGE CLASS
YEAR ENDED PERIOD ENDED -----------------
------------------- ------------------- YEAR ENDED
OCTOBER 31, 1996(1) OCTOBER 31, 1996(1) OCTOBER 31, 1996
------------------- ------------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00
------ ------ -------
Net investment income 0.03 0.05
Less dividends from net
investment income (0.03) (0.05)
------ ------ -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00
====== ====== =======
Total return (annualized) % 4.78%(2) 5.12%
====== ====== =======
Ratios/supplemental data:
Net assets, end of period
(in thousands) $15,429 $106,709
Ratios to average net
assets
(annualized)(3)(4):
Expenses 1.09% 0.67%
Net investment income 4.48% 5.02%
</TABLE>

(1) 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.

(2) Total return for the Platinum Class for the period ended October 31, 1996,
reflects Mileage Class returns from November 1, 1995 through January 27,
1996 and returns of the Platinum Class through October 31, 1996. Due to the
different expense structures between the classes, total return would vary
from the results shown had the Platinum Class been in operation for the
entire year.

(3) The per share amounts reflect income and expenses assuming inclusion of the
Fund's proportionate share of the income and expenses of the Money Market
Portfolio.

(4) Operating results exclude expenses reimbursed by the Manager. Had the Fund
paid such fees, the ratio of expenses and net investment income to average
net assets would have been 1.24% and 4.33%, respectively for the Platinum
Class for the period ended October 31, 1996 and 0.78% and 4.91%,
respectively for the Mileage Class for the year ended October 31, 1996.

PROSPECTUS

7
<PAGE> 88

INTRODUCTION

The AAdvantage Trust and the Mileage Trust are open-end, diversified
management investment companies, organized as Massachusetts business trusts on
January 16, 1987 and February 22, 1995, respectively. The AAdvantage Funds are
three of the several investment portfolios of the AAdvantage Trust and the
Mileage Fund is a separate investment portfolio of the Mileage Trust. Each Fund
has the same investment objective but may have different investment policies.
Each Fund invests all of its investable assets in a corresponding Portfolio of
the AMR Trust with an identical investment objective. Each AAdvantage Fund
currently consists of three classes of shares, including: the "Platinum Class,"
which is available to customers of certain broker-dealers as an investment for
cash balances in their brokerage accounts; the "Institutional Class," which is
available to institutional investors investing at least $2 million in the Funds;
and the "PlanAhead Class," which is available to all investors, including
smaller institutional investors, investors using intermediary organizations such
as discount brokers or plan sponsors, individual retirement accounts and self-
employed individual retirement plans. The Money Market Mileage Fund currently
consists of two classes of shares: the "Platinum Class," as described above; and
the "Mileage Class." The Money Market Mileage Fund is available only to
individuals and certain grantor trusts. Qualified retirement plans (i.e, IRAs,
Keogh, profit sharing plans) and institutional investors are not eligible to
invest in the Money Market Mileage Fund. This Prospectus relates only to the
Platinum Class. For further information about the other classes, or to obtain a
prospectus free of charge, call (800) 967-9009 or write to P.O. Box 619003, MD
5645, Dallas/Ft. Worth Airport, Texas 75261.

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

The Manager provides the Funds and their corresponding Portfolios with
investment advisory and administrative services. Investment decisions for the
Portfolios are made by the Manager in accordance with the investment objectives,
policies and restrictions described in this Prospectus and in the SAI.

Shares are sold without a sales charge at the next share price calculated
after an investment is received and accepted. Shares will be redeemed at the
next share price calculated after receipt of a redemption order. See "How to
Purchase Shares" and "How to Redeem Shares."

PROSPECTUS

8
<PAGE> 89

Each shareholder in the Mileage Fund will receive American Airlines(R)
AAdvantage(R) travel awards program ("AAdvantage") miles.((1)) AAdvantage miles
will be posted monthly to each shareholder's AAdvantage account at an annual
rate of one mile for every $10 invested in the Fund. See "AAdvantage Miles."

INVESTMENT OBJECTIVES, POLICIES AND RISKS

The investment objective and policies of each Fund and its corresponding
Portfolio are described below. Except as otherwise indicated, the investment
policies of any Fund may be changed at any time by the applicable Board to the
extent that such changes are consistent with the investment objective of the
applicable Fund. However, each Fund's investment objective may not be changed
without a majority vote of that Fund's outstanding shares, which is defined as
the lesser of (a) 67% of the shares of the applicable Fund present or
represented if the holders of more than 50% of the shares are present or
represented at the shareholders' meeting, or (b) more than 50% of the shares of
the applicable Fund (hereinafter, "majority vote"). A Portfolio's investment
objective may not be changed without a majority vote of that Portfolio's
interest holders.

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

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

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

(1) American Airlines and AAdvantage are registered trademarks of American
Airlines, Inc.

PROSPECTUS

9
<PAGE> 90

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

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

PROSPECTUS

10
<PAGE> 91

variable amount master demand notes must satisfy the same criteria as set forth
for other promissory notes (e.g. commercial paper). The Portfolio will invest in
variable amount master demand notes only when such notes are determined by the
Manager, pursuant to guidelines established by the AMR Trust Board, to be of
comparable quality to rated issuers or instruments eligible for investment by
the Portfolio. In determining average dollar-weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the longer of the period of time remaining until the next readjustment of the
interest rate or the period of time remaining until the principal amount can be
recovered from the issuer on demand.

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

AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET FUND -- The Fund's corresponding
Portfolio may invest in municipal obligations issued by or on behalf of the
governments of states, territories, or possessions of the United States; the
District of Columbia; and their political subdivisions, agencies and
instrumentalities if the interest these obligations provide is generally exempt
from federal income tax. The Municipal Money Market Portfolio will invest only
in issuers or instruments that at the time of purchase (1) are guaranteed by the
U.S. Government, its agencies, or instrumentalities; (2) are secured by letters
of credit that are irrevocable and issued by banks which qualify as authorized
issuers for the Money Market Portfolio (see "American AAdvantage Money Market
Fund"); (3) are guaranteed by one or more municipal bond insurance policies that
cannot be canceled and are issued by third-party guarantors possessing the

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highest claims-paying rating from a Rating Organization; (4) have received one
of the two highest short-term ratings from at least two Rating Organizations;
(5) are single rated and have received one of the two highest short-term ratings
from that Rating Organization; (6) have no short-term rating but the instrument
is comparable to the issuer's rated short-term debt; (7) have no short-term
rating (or comparable rating) but have received one of the top two long-term
ratings from all Rating Organizations rating the issuer or instrument; or (8)
are unrated, but are determined to be of comparable quality by the Manager
pursuant to guidelines approved by, and subject to the oversight of, the AMR
Trust Board. The Portfolio also may invest in other investment companies.
Ordinarily at least 80% of the Portfolio's net assets will be invested in
municipal obligations, the interest from which is exempt from federal income
tax. However, should market conditions warrant, the Portfolio may invest up to
20% (or for temporary defensive purposes, up to 100%) of its assets in eligible
investments for the Money Market Portfolio which are subject to federal income
tax.

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

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this practice. However, this risk is mitigated because it is anticipated that
most of the Portfolio's assets will be insured or backed by bank letters of
credit. Additionally, the Portfolio may invest more than 25% of the value of its
total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users.

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

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

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

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may be accomplished in accordance with Rule 144A. Section 4(2) securities
normally are resold to other institutional investors such as the Portfolios
through or with the assistance of the issuer or dealers that make a market in
the Section 4(2) securities, thus providing liquidity. The Portfolios will not
invest more than 10% of their respective net assets in Section 4(2) securities
and other illiquid securities unless the Manager determines, by continuous
reference to the appropriate trading markets and pursuant to guidelines approved
by the AMR Trust Board, that any Section 4(2) securities held by such Portfolio
in excess of this level are at all times liquid.

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

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

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

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

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returns from investors in another investment company that invests exclusively in
that Fund's corresponding Portfolio.

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

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

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

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INVESTMENT RESTRICTIONS

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

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

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

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YIELDS AND TOTAL RETURNS

From time to time the Platinum Class of the Funds may advertise its "current
yield" and "effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The current yield
refers to the investment income generated by an investment over a seven
calendar-day period (which period will be stated in the advertisement). This
yield is then annualized by assuming the amount of investment income generated
during that week is earned each week over a one-year period, and is shown as a
percentage of the investment. The effective yield is calculated similarly but,
when annualized, the investment income earned is assumed to be reinvested. The
effective yield will be slightly higher than the current yield because of the
compounding effect of this assumed reinvestment. The Municipal Money Market Fund
also may quote "tax equivalent yields," which show the taxable yields a
shareholder would have to earn before federal income taxes to equal this Fund's
tax-exempt yields. The tax equivalent yield is calculated by dividing the Fund's
tax-exempt yield by the result of one minus a stated federal income tax rate. If
only a portion of the Fund's income was tax-exempt, only that portion is
adjusted in the calculation. As stated earlier, the Fund considers interest on
private activity obligations to be exempt from federal income tax. Total return
quotations advertised by the Funds may reflect the average annual compounded (or
aggregate compounded) rate of return during the designated time period based on
a hypothetical initial investment and the redeemable value of that investment at
the end of the period. The Funds will at times compare their performance to
applicable published indices, and also may disclose their performance as ranked
by certain ranking entities. Each class of a Fund has different expenses which
will impact its performance. See the SAI for more information about the
calculation of yields and total returns.

MANAGEMENT AND ADMINISTRATION OF THE TRUSTS

FUND MANAGEMENT AGREEMENT -- The AAdvantage Trust's Board and the Mileage
Trust's Board have general supervisory responsibility over their respective
Trust's affairs. The Manager provides or oversees all administrative, investment
advisory and portfolio management services for the AAdvantage Trust pursuant to
a Management Agreement, dated April 3, 1987, as amended on July 25, 1997,
together with the Administrative Services Agreement described below. The Manager
provides or oversees all administrative, investment advisory and portfolio
management services for the Mileage Trust pursuant to a Management Agreement,
dated October 1, 1995 as amended November 21, 1997. The AMR Trust and the
Manager also entered into a Management Agreement dated, October 1, 1995, as
amended July 25, 1997, which obligates the Manager to provide or oversee all
administrative, investment advisory and portfolio management services for the
AMR Trust. The Manager, located at 4333 Amon Carter Boulevard, MD 5645, Fort
Worth, Texas 76155, is a wholly owned subsidiary of AMR Corporation ("AMR"), the
parent company of American

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Airlines, Inc., and was organized in 1986 to provide investment management,
advisory, administrative and asset management consulting services. The Manager
serves as the sole investment adviser to the Portfolios. As of December 31,
1997, the Manager had assets under management totaling approximately $
billion, including approximately $ billion under active management and
$ billion as named fiduciary or fiduciary adviser. Of the total,
approximately $ billion of assets are related to AMR. American Airlines,
Inc. is not responsible for investments made in the American AAdvantage Funds or
the American AAdvantage Mileage Funds.

The Manager provides the AAdvantage Trust, the Mileage Trust and the AMR
Trust with office space, office equipment and personnel necessary to manage and
administer the Trusts' operations. This includes complying with reporting
requirements; corresponding with shareholders; maintaining internal bookkeeping,
accounting and auditing services and records; and supervising the provision of
services to the Trusts by third parties. The Manager oversees each Portfolio's
participation in securities lending activities and any actions taken by a
securities lending agent in connection with those activities to ensure
compliance with all applicable regulatory and investment guidelines. The Manager
also develops the investment programs for each Portfolio.

The Manager bears the expense of providing the above services. As
compensation for providing the Portfolios with advisory services, the Manager
receives from the AMR Trust an annualized advisory fee that is calculated and
accrued daily, equal to 0.15% of the net assets of the Portfolios. To the extent
that a Fund invests all of its investable assets in its corresponding Portfolio,
the Manager receives no advisory fee from the AAdvantage Trust or the Mileage
Trust. The Manager receives compensation in connection with securities lending
activities. If a Portfolio lends its portfolio securities and receives cash
collateral from the borrower, the Manager may receive up to 25% of the net
annual interest income (the gross interest earned by the investment less the
amount paid to the borrower as well as related expenses) received from the
investment of such cash. If a borrower posts collateral other than cash, the
borrower will pay to the lender a loan fee. The Manager may receive up to 25% of
the loan fees posted by borrowers. Currently, the Manager receives 10% of the
net annual interest income from the investment of cash collateral or 10% of the
loan fees posted by borrowers. The fees received by the Manager from the AMR
Trust are payable quarterly in arrears. In addition, the Manager is compensated
through the Administrative Services Agreement as described below for other
services provided.

Each Management Agreement will continue in effect provided that annually
such continuance is specifically approved by a vote of the applicable Board
including the affirmative votes of a majority of the Trustees of each Board who
are not parties to the Management Agreement or "interested persons" as defined
in the 1940 Act of any such party ("Independent Trustees"), cast in person at a
meeting called for the purpose of considering such approval, or by the vote of a
Fund's shareholders or a Portfolio's

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interest holders. A Management Agreement may be terminated with respect to a
Fund or a Portfolio at any time, without penalty, by a majority vote of
outstanding Fund shares or Portfolio interests on sixty (60) days' written
notice to the Manager, or by the Manager, on sixty (60) days' written notice to
the AAdvantage Trust, the Mileage Trust or the AMR Trust. A Management Agreement
will automatically terminate in the event of its "assignment" as defined in the
1940 Act.

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

A majority of the Independent Trustees of each Board has adopted written
procedures reasonably appropriate to deal with potential conflicts of interest
between the AAdvantage Trust or the Mileage Trust and the AMR Trust.

ADMINISTRATIVE SERVICES PLAN -- The Manager has entered into separate
Administrative Services Plans with the AAdvantage Trust and the Mileage Trust
which obligate the Manager to provide the Platinum Class with administrative
services either directly or through the various broker-dealers that offer
Platinum Class shares. These services include, but are not limited to, the
payment of fees for record maintenance, forwarding shareholder communications to
the shareholders and aggregating and processing orders for the purchase and
redemption of Platinum Class shares. As compensation for these services, the
Manager receives an annualized fee of up to 0.50% and 0.55% of the net assets of
the Platinum Class of the AAdvantage Funds and the Mileage Fund, respectively.
The fee is payable quarterly in arrears.

DISTRIBUTION PLAN -- The AAdvantage Trust and the Mileage Trust have each
adopted a Platinum Class distribution plan (the "Plans") pursuant to Rule 12b-1
under the 1940 Act, which will continue in effect so long as approved at least
annually by a majority of the applicable Board's Trustees, including the
affirmative votes of a majority of the Independent Trustees of the applicable
Board, cast in person at a meeting called for the purpose of considering such
approval, or by the vote of shareholders of the Platinum Class. The Plans may be
terminated with respect to a particular Platinum Class at any time, without
payment of any penalty, by a vote of a majority of the Independent Trustees of
the applicable Board or by a vote of a majority of the outstanding voting
securities of that class.

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The Plans provide that each Platinum Class will pay 0.25% per annum of its
average daily net assets to the Manager (or another entity approved by the
applicable Board) for distribution-related services. The fee will be payable
quarterly in arrears without regard to whether the amount of the fee is more or
less than the actual expenses incurred in a particular quarter by the entity for
the services provided pursuant to the Plans. The Plans authorize the Manager, or
any other entity approved by the applicable Board, to spend Rule 12b-1 fees on
any activities or expenses intended to result in the sale or servicing of
Platinum Class shares including but not limited to, advertising, expenses of
various broker-dealers relating to selling efforts, transfer agency fees and the
preparation and distribution of advertising material and sales literature. In
addition, the Mileage Fund's Plan authorizes expenses incurred in connection
with participation in the AAdvantage program.

ALLOCATION OF FUND EXPENSES -- Expenses of each Fund generally are allocated
equally among the shares of that Fund, regardless of class. However, certain
expenses approved by the applicable Board will be allocated solely to the class
to which they relate.

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

CUSTODIAN AND TRANSFER AGENT -- STATE STREET BANK & TRUST COMPANY, Boston,
Massachusetts, serves as custodian for the Portfolios and the Funds and as
transfer agent for the Platinum Class.

INDEPENDENT AUDITOR -- The independent auditor for the Funds and the AMR Trust
is ERNST & YOUNG LLP, Dallas, Texas.

AADVANTAGE(R) MILES

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maintained at that balance through the end of the month) would be $25,000.
Mileage received for that month would be 208 miles. If the same balance were
maintained through the next month, the average daily balance would be $50,000,
and the mileage would be 417 miles that month and every month the $50,000
investment was maintained in the Mileage Fund. These miles appear on subsequent
AAdvantage program statements.

In the case of Trust Accounts, AAdvantage miles will be posted only in a
trustee's individual name, and not in the name of the Trust Account. Before
investing in a Fund, trustees of the Trust Accounts should consult their own
legal and tax advisers as to the tax effect of this arrangement and whether this
arrangement is consistent with their legal duties as trustees. American Airlines
has informed the Funds that in administering an AAdvantage member's AAdvantage
account, it shall not be required to distinguish between AAdvantage miles
accumulated by the individual in his/her capacity as trustee to a Trust Account
from AAdvantage miles accumulated in an individual capacity or from other
sources.

The Manager reserves the right to discontinue the posting of AAdvantage
miles or to change the mileage calculation at any time upon notice to
shareholders. See also "Dividends and Tax Matters."

HOW TO PURCHASE SHARES

Platinum Class shares are offered on a continuous basis at net asset value
through selected financial services firms. The Platinum Class has established a
minimum initial investment of $1,000 and $100 minimum for subsequent
investments, but these minimums may be changed at any time at the AAdvantage
Trust's or the Mileage Trust's discretion.

An order to purchase Platinum Class shares received by wire transfer in the
form of federal funds will be effected at the next determined net asset value.

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Orders for purchase accompanied by a check or other negotiable bank draft
will be accepted and effected as of 3:00 p.m. Eastern time on the next Business
Day following receipt and such shares will receive the dividend for the Business
Day following the day the purchase is effected. If an order is accompanied by a
check drawn on a foreign bank, funds must normally be collected from such check
before shares will be purchased. The AAdvantage Trust and the Mileage Trust
reserve the right to reject any order for the purchase of shares and to limit or
suspend, without prior notice, the offering of shares.

Shares are offered and orders are accepted for the Money Market Fund, and
the Mileage Fund until 3:00 p.m. Eastern time, or the close of the Exchange
(whichever comes first) Monday through Friday, excluding the following business
holidays: New Year's Day, Martin Luther King's Birthday, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day ("Business Day"). Shares are offered and
orders are accepted for the U.S. Government Money Market Fund until 2:00 p.m.
Eastern time, or the close of the Exchange (whichever comes first) on each
Business Day and for the Municipal Money Market Fund until 12:00 p.m. Eastern
time, or close of the Exchange (whichever comes first) on each Business Day.
These purchases will receive that day's dividend.

Firms provide varying arrangements for their clients with respect to the
purchase and redemption of Platinum Class shares and the confirmation thereof
and may arrange with their clients for other investment or administrative
services. Such firms are responsible for the prompt transmission of purchase and
redemption orders. Some firms may establish higher or lower minimum investment
requirements than set forth above. Such firms may independently establish and
charge additional amounts to their clients for their services, which charges
would reduce their clients' yield or return. Firms also may hold Platinum Class
shares in nominee or street name as agent for and on behalf of their clients. In
such instances, the transfer agent will have no information with respect to or
control over the accounts of specific shareholders. Such shareholders may obtain
access to their accounts and information about their accounts only from their
firm. Certain of these firms may receive compensation from the Manager for
recordkeeping and other expenses relating to these nominee accounts. In
addition, certain privileges with respect to the purchase and redemption of
shares (such as check writing or a debit card) may not be available through such
firms or may only be available subject to certain conditions or limitations.
Some firms may participate in a program allowing them access to their clients'
accounts for servicing, including, without limitation, transfers of registration
and dividend payee changes, and may perform functions such as generation of
confirmation statements and disbursements of cash dividends.

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HOW TO REDEEM SHARES

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

Firms may charge a fee for wire redemptions to cover transaction costs.
Redemption proceeds generally will be sent within one Business Day. However, if
making immediate payment could affect a Fund adversely, it may take up to seven
days to send payment.

To ensure acceptance of a redemption request, be sure to adhere to the
following procedures.

REDEEMING BY CHECK -- Upon request, shareholders will be provided with drafts to
be drawn on the shareholder's Fund account ("Redemption Checks"). Redemption
Checks may be made payable to the order of any person for an amount not less
than $250 and not more than $5 million. When a Redemption Check is presented for
payment, a sufficient number of full and fractional shares in the shareholder's
account will be redeemed at the next determined net asset value to cover the
amount of the Redemption Check. This will enable the shareholder to continue
earning dividends until the Fund receives the Redemption Check. A shareholder
wishing to use this method of redemption must complete and file an account
application which is available from the Funds or firm through which shares were
purchased. Redemption Checks should not be used to close an account since the
account normally includes accrued but unpaid dividends. The Funds reserve the
right to terminate or modify this privilege at any time. This privilege may not
be available through some firms that distribute shares of the Funds. In
addition, firms may impose minimum balance requirements in order to obtain this
feature. Firms also may impose fees on investors for this privilege or, if
approved by the Funds, establish variations on minimum check amounts.

Unless only one signature is authorized on the account application,
Redemption Checks must be signed by all shareholders. Any change in the
signature authorization must be made by written notice to the firm. Shares
purchased by check or through an Automated Clearing House ("ACH") transaction
may not be redeemed by

PROSPECTUS

24
<PAGE> 105

Redemption Check until the shares have been on the Fund's books for at least 15
days. The Funds reserve the right to terminate or modify this privilege at any
time.

The Funds may refuse to honor Redemption Checks whenever the right of
redemption has been suspended or postponed, or whenever the account is otherwise
impaired. A $15 service fee will be charged when a Redemption Check is presented
to redeem Fund shares in excess of the value of that Fund account or for an
amount less than $250 or when a Redemption Check is presented that would require
redemption of shares that were purchased by check or ACH transaction within 15
days. A fee of $12 will be charged when "stop payment" of a Redemption Check is
requested. Firms may charge different service fees in place of or in addition to
these fees.

PRE-AUTHORIZED AUTOMATIC REDEMPTIONS -- Shareholders purchasing through some
firms can arrange to have a pre-authorized amount ($100 or more) redeemed from
their shareholder account and automatically deposited into a bank account on one
or more specified day(s) of each month. For more information regarding
pre-authorized automatic redemptions, contact your firm.

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

VALUATION OF SHARES

The net asset value of each share (share price) of the Funds is determined
as of the close of the Exchange, generally 4:00 p.m. Eastern time, on each
Business Day. The net asset value of Platinum Class Shares of the Funds will be
determined based on a pro rata allocation of the Fund's corresponding
Portfolio's investment income, expenses and total capital gains and losses. The
allocation will be based on comparative net asset value at the beginning of the
day except for expenses related solely to one class of shares ("Class Expenses")
which will be borne only by the appropriate class of shares. Because of Class
Expenses, the net income attributable to and the dividends payable may be
different for each class of shares.

Obligations held by the Portfolios are valued in accordance with the
amortized cost method, which is designed to enable those Portfolios and their
corresponding Funds to maintain a consistent $1.00 per share net asset value.
The amortized cost method is described in the SAI.

PROSPECTUS

25
<PAGE> 106

DIVIDENDS AND TAX MATTERS

Dividends paid on each class of a Fund's shares are calculated at the same
time and in the same manner. All of each Fund's net investment income and net
short-term capital gain, if any, generally will be declared as dividends on each
Business Day immediately prior to the determination of the net asset value.
Dividends generally are paid on the first day of the following month. A Fund's
net investment income attributable to the Platinum Class consists of that class'
pro rata share of the Fund's share of interest accrued and discount earned on
its corresponding Portfolio's securities, less amortization of premium, and the
estimated expenses of both the Portfolio and the Fund attributable to the
Platinum Class. The Portfolios do not expect to realize net capital gain,
therefore the Funds do not foresee paying any capital gain distributions. If any
Fund (either directly or indirectly through its corresponding Portfolio)
incurred or anticipated any unusual expenses, loss or depreciation that would
adversely affect its net asset value or income for a particular period, the
Board would at that time consider whether to adhere to the dividend policy
described above or to revise it in the light of the then prevailing
circumstances.

Unless a shareholder elects otherwise on the account application, all
dividends on a Fund's Platinum Class shares will be automatically paid in
additional Platinum Class shares of that Fund. However, a shareholder may choose
to have dividends paid in cash. An election may be changed at any time by
delivering written notice to your firm at least ten days prior to the payment
date for a dividend.

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

PROSPECTUS

26
<PAGE> 107

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

Each Fund notifies its shareholders following the end of each calendar year
of the amounts of dividends paid (or deemed paid) that year. The notice sent by
the Municipal Money Market Fund specifies the amounts of exempt-interest
dividends (and the portion thereof, if any, that is a tax preference item for
purposes of the AMT) and any taxable dividends. The Mileage Fund's notice also
might include in taxable dividends a nominal amount reflecting the value of
AAdvantage Miles credited to the shareholders' accounts, which are deemed by the
Internal Revenue Service to constitute taxable distributions by the Fund. Each
Fund is required to withhold 31% of all taxable dividends payable to any
individuals and certain other non-corporate shareholders who do not provide the
Fund with a correct taxpayer identification number or who otherwise are subject
to back-up withholding.

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

GENERAL INFORMATION

The AAdvantage Trust currently is comprised of ten separate investment
portfolios and the Mileage Trust currently is comprised of nine separate
investment portfolios. Each AAdvantage Fund included in this Prospectus is
comprised of three classes of shares. The Mileage Fund is comprised of two
classes of shares. Shares of each AAdvantage Fund and each Mileage Fund can be
issued in an unlimited number. Each AAdvantage Fund and Mileage Fund share
represents an equal proportionate beneficial interest in that Fund and is
entitled to one vote. Only shares of a particular

PROSPECTUS

27
<PAGE> 108

class may vote on matters affecting that class. Only shares of a particular Fund
may vote on matters affecting that Fund. All shares of a Trust vote on matters
affecting that Trust as a whole. Share voting rights are not cumulative, and
shares have no preemptive or conversion rights. Shares of the AAdvantage Trust
and the Mileage Trust are nontransferable.

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

As Massachusetts business trusts, the AAdvantage Trust and the Mileage Trust
are not obligated to conduct annual shareholder meetings. However, the Trusts
will hold special shareholder meetings whenever required to do so under the
federal securities laws or their Declarations of Trust or By-Laws. Trustees of
either Trust can be removed by a shareholder vote at special shareholder
meetings.

SHAREHOLDER COMMUNICATIONS

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

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

PROSPECTUS

28
<PAGE> 109

American AAdvantage Funds and American AAdvantage Mileage Funds are registered
service marks of AMR Corporation. Mileage Class, American AAdvantage Money
Market Fund and PlanAhead Class are registered service marks and Platinum Class,
American AAdvantage Money Market Mileage Fund, American AAdvantage Municipal
Money Market Fund and American AAdvantage U.S. Government Money Market Fund are
service marks of AMR Investment Services, Inc.

PROSPECTUS

29
<PAGE> 110

[AMERICAN ADVANTAGE FUNDS LOGO]

P.O. BOX 619003
DALLAS/FORT WORTH AIRPORT, TEXAS
75261-9003

Available through

[SOUTHWEST SECURITIES LOGO]

1201 Elm Street, Suite 3500
Dallas, Texas
75270

(800) 973-7977
<PAGE> 111
STATEMENT OF ADDITIONAL INFORMATION

AMERICAN AADVANTAGE FUNDS(R)
AMERICAN AADVANTAGE MILEAGE FUNDS(sm)

-- PLATINUM CLASS(sm) --

MARCH 1, 1998

The American AAdvantage Money Market Fund(sm) (the "Money Market Fund"),
the American AAdvantage Municipal Money Market Fund(sm) (the "Municipal Money
Market Fund"), and the American AAdvantage U.S. Government Money Market
Fund(sm), formerly the American AAdvantage U.S. Treasury Money Market Fund (the
"U.S. Government Money Market Fund"), are three separate investment portfolios
of the American AAdvantage Funds (the "AAdvantage Trust"). The American
AAdvantage Money Market Mileage Fund (the "Mileage Fund") is a separate
investment portfolio of the American AAdvantage Mileage Funds (the "Mileage
Trust") (individually, a "Fund" and, collectively, the "Funds"). The
AAdvantage Trust and the Mileage Trust (collectively the "Trusts") are
open-end, diversified management investment companies. Each Fund consists of
multiple classes of shares designed to meet the needs of different groups of
investors. This Statement of Additional Information ("SAI") relates only to
the Platinum Class of the Funds.

Each Fund seeks its investment objective by investing all of its
investable assets in a corresponding portfolio (individually, a "Portfolio"
and, collectively, the "Portfolios") of the AMR Investment Services Trust ("AMR
Trust") that has a similar name and an identical investment objective to the
investing Fund.

This SAI should be read in conjunction with the Platinum Class prospectus
dated March 1, 1998 ("Prospectus"), a copy of which may be obtained without
charge by calling (800) 388-3344.

This SAI is not a prospectus and is authorized for distribution to
prospective investors only if preceded or accompanied by a current Prospectus.

INVESTMENT RESTRICTIONS

Each Fund has the following fundamental investment policy that enables it
to invest in a corresponding Portfolio of the AMR Trust:

Notwithstanding any other limitation, the Fund may invest all of
its investable assets in an open-end management investment company
with substantially the same investment objectives, policies and
limitations as the Fund. For this purpose, "all of the Fund's
investable assets" means that the only investment securities that
will be held by the Fund will be the Fund's interest in the
investment company.

All other fundamental investment policies and the non-fundamental
policies of each Fund and its corresponding Portfolio are identical.
Therefore, although the following discusses the investment policies of each
Portfolio and the AMR Trust's Board of Trustees ("AMR Trust Board"), it applies
equally to each Fund and the AAdvantage Trust's Board of Trustees ("AAdvantage
Board") and the Mileage Trust's Board of Trustees ("Mileage Trust Board"), as
applicable.

In addition to the investment limitations noted in the Prospectus, the
following seven restrictions have been adopted by each Portfolio and may be
changed with respect to any Portfolio only by the majority vote of that
Portfolio's outstanding interests. "Majority of the outstanding voting
securities" under the Investment Company Act of 1940, as amended (the "1940
Act"), and as used herein means, with respect to the Portfolio, the lesser of
(a) 67% of the interests of the Portfolio present at the meeting if the holders
of more than 50% of the interests are present and represented at the interest
holders' meeting or (b) more than 50% of the interests of the Portfolio.
Whenever a Fund is requested to vote on a change in the investment restrictions
of its corresponding Portfolio, that Fund will hold a meeting of its
shareholders and will cast its votes as instructed by its shareholders. The
percentage of a Fund's votes representing that Fund's shareholders not voting
will be voted by the AAdvantage Board and the Mileage Trust Board in the same
proportion as those Fund shareholders who do, in fact, vote.
<PAGE> 112
No Portfolio may:

1. Purchase or sell real estate or real estate limited partnership
interests, provided, however, that the Portfolio may invest in securities
secured by real estate or interests therein or issued by companies which
invest in real estate or interests therein when consistent with the other
policies and limitations described in the Prospectus.

2. Purchase or sell commodities (including direct interests and/or
leases in oil, gas or minerals) or commodities contracts, except with
respect to forward foreign currency exchange contracts, foreign currency
futures contracts and when-issued securities when consistent with the
other policies and limitations described in the Prospectus.

3. Engage in the business of underwriting securities issued by
others except to the extent that, in connection with the disposition of
securities, the Portfolio may be deemed an underwriter under federal
securities law.

4. Make loans to any person or firm, provided, however, that the
making of a loan shall not be construed to include (i) the acquisition
for investment of bonds, debentures, notes or other evidences of
indebtedness of any corporation or government which are publicly
distributed or (ii) the entry into repurchase agreements and further
provided, however, that each Portfolio may lend its investment securities
to broker-dealers or other institutional investors in accordance with the
guidelines stated in the Prospectus.

6. Issue senior securities except that the Portfolio may engage in
when-issued and forward commitment transactions.

7. Borrow money, except from banks or through reverse repurchase
agreements for temporary purposes in an aggregate amount not to exceed
10% of the value of its total assets at the time of borrowing. In
addition, although not a fundamental policy, the Portfolios intend to
repay any money borrowed before any additional portfolio securities are
purchased. See "Other Information" for a further description regarding
reverse repurchase agreements.

The following non-fundamental investment restriction applies to each
Portfolio and may be changed with respect to a Portfolio by a majority vote of
the AMR Trust Board: no Portfolio may purchase securities on margin, effect
short sales (except that the Portfolio may obtain such short-term credits as
may be necessary for the clearance of purchases or sales of securities) or
purchase or sell call options or engage in the writing of such options.

All Portfolios may invest up to 10% of their total assets in the
securities of other investment companies to the extent permitted by law. A
Portfolio may incur duplicate advisory or management fees when investing in
another mutual fund.

TRUSTEES AND OFFICERS OF THE TRUSTS AND THE AMR TRUST

The AAdvantage Board, the Mileage Trust Board and the AMR Trust Board
provide broad supervision over each Trust's affairs. AMR Investment Services,
Inc. (the "Manager") is responsible for the management and the administration
of each Trust's assets, and each Trust's officers are responsible for the
respective Trust's operations. The Trustees and officers of the Trusts and the
AMR Trust are listed below, together with their principal occupations during
the past five years. Unless otherwise indicated, the address of each person
listed below is 4333 Amon Carter Boulevard, MD 5645, Fort Worth, Texas 76155.

2
<PAGE> 113

<TABLE>
<CAPTION>
POSITION WITH
NAME, AGE AND ADDRESS EACH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------- ----------------------------------------
<S> <C> <C>
William F. Quinn* (50) Trustee and President, AMR Investment Services, Inc. (1986-
President Present); Chairman, American Airlines Employees
Federal Credit Union (October 1989-Present);
Trustee, American Performance Funds (1990-1994);
Director, Crescent Real Estate Equities, Inc.
(1994 - Present); Trustee, American AAdvantage
Funds (1987-Present); Trustee, American
AAdvantage Mileage Funds (1995-Present).

Alan D. Feld (60) Trustee Partner, Akin, Gump, Strauss, Hauer & Feld, LLP
1700 Pacific Avenue (1960-Present)#; Director, Clear Channel
Suite 4100 Communications (1984-Present); Director,
Dallas, Texas 75201 CenterPoint Properties, Inc. (1994-Present);
Trustee, American AAdvantage Funds (1993-
Present); Trustee, American AAdvantage
Funds(1996- Present); Trustee American
AAdvantage Mileage Funds (1996-Present).

Ben J. Fortson (65) Trustee President and CEO, Fortson Oil Company (1958-
301 Commerce Street Present); Director, Kimbell Art Foundation
Suite 3301 (1964-Present); Director, Burnett Foundation
Fort Worth, Texas 76102 (1987-Present); Honorary Trustee, Texas
Christian University (1986-Present); Trustee,
American AAdvantage Funds (1996-Present);
Trustee, American AAdvantage Mileage Funds
(1996-Present).

John S. Justin (81) Trustee Chairman and Chief Executive Officer, Justin
2821 West Seventh Street Industries, Inc. (a diversified holding company)
Fort Worth, Texas 76107 (1969-Present); Executive Board Member, Blue
Cross/Blue Shield of Texas (1985-Present); Board
Member, Zale Lipshy Hospital (June 1993-
Present); Trustee, Texas Christian University
(1980-Present); Director and Executive Board
Member, Moncrief Radiation Center (1985-
Present); Director, Texas New Mexico Enterprises
(1984-1993); Director, Texas New Mexico Power
Company (1979-1993); Trustee, American
AAdvantage Funds (1989-Present); Trustee,
American AAdvantage Mileage Funds (1995-
Present).

Stephen D. O'Sullivan* (62) Trustee Consultant (1994-Present); Vice President and
Controller (1985-1994), American Airlines, Inc.;
Trustee, American AAdvantage Funds (1987-
Present); Trustee, American AAdvantage Mileage
Funds (1995-Present).
</TABLE>

3
<PAGE> 114

<TABLE>
<CAPTION>
POSITION WITH
NAME, AGE AND ADDRESS EACH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------- ----------------------------------------
<S> <C> <C>
Roger T. Staubach (56) Trustee Chairman of the Board and Chief Executive
6750 LBJ Freeway Officer of The Staubach Company (a commercial
Dallas, TX 75240 real estate company) (1982-present); Director,
Halliburton Company (1991-present); Director,
First USA, Inc. (1993-present); Director,
Brinker International (1993-present); Director,
Columbus Realty Trust (1994-present); Member of
the Advisory Board, The Salvation Army; Trustee,
Institute for Aerobics Research; Member of
Executive Council, Daytop/Dallas; former
quarterback of the Dallas Cowboys professional
football team; Trustee, American AAdvantage
Funds (1995-Present); Trustee, American
AAdvantage Mileage Funds (1995-Present).

Kneeland Youngblood, M.D. (41) Trustee Physician (1982-Present); President, Youngblood
2305 Cedar Springs Road Enterprises, Inc. (a health care investment and
Suite 401 management firm) (1983-Present); Trustee,
Dallas, Texas 75201 Teachers Retirement System of Texas (1993-
Present); Director, United States Enrichment
Corporation (1993-Present), Director, Just For
the Kids (1995-Present); Member, Council on
Foreign Relations (1995-Present); Trustee,
=
American AAdvantage Funds (1996-Present);
Trustee, American AAdvantage Mileage Funds
(1996-Present).

Nancy A. Eckl (35) Vice President Vice President, AMR Investment Services, Inc.
(December 1990-Present).

Michael W. Fields (44) Vice President Vice President, AMR Investment Services, Inc.
(August 1988-Present).

Barry Y. Greenberg (34) Vice President Director, Legal and Compliance, AMR Investment
and Assistant Services, Inc. (1995-Present); Branch Chief
Secretary (1992-1995) and Staff Attorney (1988-1992),
Securities and Exchange Commission.

Rebecca L. Harris (31) Treasurer Director of Finance (1995-Present), Controller
(1991-1995), AMR Investment Services, Inc.

John B. Roberson (39) Vice President Vice President, AMR Investments Services, Inc.
(1991-Present).

Thomas E. Jenkins, Jr. (31) Assistant Senior Compliance Analyst, AMR Investment
Secretary Services, Inc. (1996-Present); Staff Accountant
(1994-1996) and Compliance Examiner (1991-1994),
Securities and Exchange Commission.
</TABLE>

4
<PAGE> 115

<TABLE>
<CAPTION>
POSITION WITH
NAME, AGE AND ADDRESS EACH TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------- ----------------------------------------
<S> <C> <C>
Adriana R. Posada (43) Assistant Senior Compliance Analyst (1996-Present) and
Secretary Compliance Analyst (1993- 1996), AMR Investment
Services, Inc.; Special Sales Representative,
American Airlines, Inc. (1991-1993).

Clifford J. Alexander (54) Secretary Partner, Kirkpatrick & Lockhart LLP (law firm)
1800 Massachusetts Ave. NW
Washington, D.C. 20036

Robert J. Zutz (45) Assistant Partner, Kirkpatrick & Lockhart LLP (law firm)
1800 Massachusetts Ave. NW Secretary
Washington, D.C. 20036
</TABLE>

# The law firm of Akin, Gump, Strauss, Hauer & Feld LLP ("Akin, Gump")
provides legal services to American Airlines, Inc., an affiliate of the
Manager. Mr. Feld has advised the Trusts that he has had no material
involvement in the services provided by Akin, Gump to American Airlines,
Inc. and that he has received no material benefit in connection with these
services. Akin, Gump does not provide legal services to the Manager or
AMR Corporation.

* Messrs. Quinn and O'Sullivan, by virtue of their current or former
positions, are deemed to be "interested persons" of each Trust and the AMR
Trust as defined by the 1940 Act.

All Trustees and officers as a group own less than 1% of the outstanding
shares of any of the Funds.

As compensation for their service to the Trusts and the AMR Trust, the
Independent Trustees and their spouses receive free air travel from American
Airlines, Inc., an affiliate of the Manager. The Trusts and the AMR Trust do
not pay for these travel arrangements. However, the Trusts and the AMR Trust
compensate each Trustee with payments in an amount equal to the Trustees'
income tax on the value of this free airline travel. Mr. O'Sullivan, whom as a
retiree of American Airlines, Inc. already receives free airline travel,
receives compensation annually of up to three round trip airline tickets for
each of his three adult children. Trustees are also reimbursed for any
expenses incurred in attending Board meetings. These amounts are reflected in
the following table for the fiscal year ended October 31, 1997.

<TABLE>
<CAPTION>
Pension or
Retirement
Aggregate Aggregate Benefits
Compensation Compensation Accrued as Part Estimated Total
From the From the of the Annual Compensation
AAdvantage Mileage Trusts' Benefits Upon From AAdvantage
Name of Trustee Trust Trust Expenses Retirement Funds Complex
--------------- ------------ ------------ --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
William F. Quinn $ 0 $ 0 $ 0 $ 0 $ 0
Alan D. Feld $ 15,962 $ 15,962 $ 0 $ 0 $ 63,850
Ben J. Fortson $ 6,802 $ 6,802 $ 0 $ 0 $ 27,209
John S. Justin $ 225 $ 225 $ 0 $ 0 $ 901
Stephen D. O'Sullivan $ 493 $ 493 $ 0 $ 0 $ 1,973
Roger T. Staubach $ 8,269 $ 8,269 $ 0 $ 0 $ 33,076
Kneeland Youngblood, M.D. $ 9,525 $ 9,525 $ 0 $ 0 $ 38,099
</TABLE>

5
<PAGE> 116

MANAGEMENT, ADMINISTRATIVE SERVICES AND DISTRIBUTION FEES

As described more fully in the Prospectus, the Manager is paid a
management fee as compensation for its administrative services, for paying
investment advisory fees and for providing the Portfolios with advisory and
asset allocation services. Management fees for the AAdvantage Trust for the
fiscal years ended October 31 were approximately as follows: 1995, $7,603,000
of which approximately $3,985,000 was paid by the Manager to the other
investment advisers; 1996, $10,853,000 of which approximately $5,403,000 was
paid by the Manager to the other investment advisers; and 1997, $13,730,443 of
which approximately $7,061,014 was paid by the Manager to the other investment
advisers. Management fees in the amount of approximately $29,000, $44,000 and
$7,309 were waived by the Manager during the fiscal years ended October 31,
1995 , 1996 and 1997, respectively. These amounts include payments by
Portfolios in the AAdvantage Trust other than the Funds.

In addition to the management fee, the Manager is paid an administrative
services fee for providing administrative and management services (other than
investment advisory services) to the Funds. Administrative services fees for
the AAdvantage Trust for the fiscal years ended October 31 were approximately
as follows: 1995, $2,731,000; 1996, $2,893,400; and 1997, $4,538,345.
Administrative service fees in the amount of approximately $9,000 were waived
by the Manager during the fiscal year ended October 31, 1995. These amounts
include payments by Portfolios in the AAdvantage Trust other than the Funds.

Brokers Transaction Services, Inc. ("BTS"), is the distributor of the
Funds' shares and, as such, receives an annualized fee of $50,000 from the
Manager for distributing the shares of the Trusts.

REDEMPTIONS IN KIND

NET ASSET VALUE

It is the policy of the Funds to attempt to maintain a constant price per
share of $1.00. There can be no assurance that a $1.00 net asset value per
share will be maintained. The portfolio instruments held by each Fund's
corresponding Portfolio are valued based on the amortized cost valuation
technique pursuant to Rule 2a-7 under the 1940 Act. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, even though the portfolio security may
increase or decrease in market value. Such market fluctuations are generally
in response to changes in interest rates. Use of the amortized cost valuation
method requires the Funds' corresponding Portfolios to purchase instruments
having remaining maturities of 397 days or less, to maintain a dollar-weighted
average portfolio maturity of 90 days or less, and to invest only in securities
determined by the AMR Trust Board to be of high quality with minimal credit
risks. The corresponding portfolios of the Money Market Funds may invest in
issuers or instruments that at the time of purchase have received the highest
short-term rating by two Rating Organizations, such as "D-1" by Duff & Phelps
and "F-1" by Fitch IBCA, Inc., and have received the next highest short-term
rating by other Rating Organizations, such as "A-2" by Standard & Poors and
"P-2" by Moody's Investors Service, Inc. See "Ratings of Municipal
Obligations" and "Ratings of Short-Term Obligations" for further information
concerning ratings.

6
<PAGE> 117
TAX INFORMATION

TAXATION OF THE FUNDS

To qualify for treatment as a regulated investment company ("RIC") under
the Internal Revenue Code of 1986, as amended ("Code"), each Fund (each of
which is treated as a separate corporation for these purposes) must, among
other requirements:

Derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans and gains from the
sale or other disposition of securities or certain other income;

Diversify its investments in securities within certain statutory limits;
and

Distribute annually to its shareholders at least 90% of its investment
company taxable income (generally, taxable net investment income plus net
short-term capital gain) plus, in the case of the Municipal Money Market
Fund, net interest income excludable from gross income under Section
103(a) of the Code ("Distribution Requirement").

Each Fund has received either a ruling from the Internal Revenue Service
("IRS") or an opinion of counsel that the Fund, as an investor in its
corresponding Portfolio, is deemed to own a proportionate share of the
Portfolio's assets and to earn the income on that share for purposes of
determining whether the Fund satisfies the income and diversification
requirements described above to qualify as a RIC.

See the next section for a discussion of the tax consequences to the
Funds of certain investments by the Portfolios.

TAXATION OF THE PORTFOLIOS

Because, as noted above, each Fund is deemed to own a proportionate share
of its corresponding Portfolio's assets and to earn a proportionate share of
its corresponding Portfolio's income for purposes of determining whether the
Fund satisfies the requirements to qualify as a RIC, each Portfolio intends to
conduct its operations so that its corresponding Fund will be able to satisfy
all those requirements.

Distributions to a Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in the Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. A Fund's basis for its interest in its
corresponding Portfolio generally will equal the amount of cash and the basis
of any property the Fund invests in the Portfolio, increased by the Fund's
share of the Portfolio's net income and gains and decreased by (a) the amount
of cash and the basis of any property the Portfolio distributes to the Fund and
(b) the Fund's share of the Portfolio's losses.

The Municipal Money Market Fund's corresponding Portfolio may acquire
zero coupon or other securities issued with original issue discount. As an
investor in the Portfolio that holds those securities, the Municipal

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<PAGE> 118
Money Market Fund would have to include in its income its share of the original
issue discount that accrues on the securities during the taxable year, even if
the Portfolio (and, hence, the Fund) receives no corresponding payment on the
securities during the year. Because each Fund annually must distribute
substantially all of its investment company taxable income, including any
original issue discount, to satisfy the Distribution Requirement and avoid
imposition of the 4% excise tax described in the Prospectus, the Municipal
Money Market Fund may be required in a particular year to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. Those distributions would be made from the Fund's cash assets, if
any, or the proceeds of redemption of a portion of the Municipal Money Market
Fund's interest in its corresponding Portfolio (which redemption proceeds would
be paid from the Portfolio's cash assets or the proceeds of sales of portfolio
securities, if necessary). The Portfolio might realize capital gains or losses
from any such sales, which would increase or decrease the Municipal Money
Market Fund's investment company taxable income and/or net capital gain (the
excess of net long-term capital gain over net short-term capital loss). In
addition, any such gains might be realized on the disposition of securities
held for less than three months. Because of the Short-Short Limitation
applicable to the Fund, any such gains would reduce the Portfolio's ability to
sell other securities held for less than three months that it might wish to
sell in the ordinary course of its portfolio management.

TAXATION OF THE FUNDS' SHAREHOLDERS

Distributions by the Municipal Money Market Fund of the amount by which
the Fund's share of its corresponding Portfolio's income on tax-exempt
securities exceeds certain amounts disallowed as deductions, designated by the
Fund as "exempt-interest dividends," generally may be excluded from gross
income by its shareholders. Dividends paid by the Municipal Money Market Fund
will qualify as exempt-interest dividends if, at the close of each quarter of
its taxable year, at least 50% of the value of its total assets (including its
share of the Municipal Money Market Portfolio's assets) consists of securities
the interest on which is excludable from gross income under Section 103(a) of
the Code. The Municipal Money Market Fund intends to continue to satisfy this
requirement. The aggregate dividends excludable from shareholders' gross
income may not exceed the Municipal Money Market Fund's net tax-exempt income.
The shareholders' treatment of dividends from the Municipal Money Market Fund
under state and local income tax laws may differ from the treatment thereof
under the Code.

Exempt-interest dividends received by a corporate shareholder may be
indirectly subject to the alternative minimum tax. In addition, entities or
persons who are "substantial users" (or persons related to "substantial users")
of facilities financed by private activity bonds ("PABs") or industrial
development bonds ("IDBs") should consult their tax advisers before purchasing
shares of the Municipal Money Market Fund because, for users of certain of
these facilities, the interest on those bonds is not exempt from federal income
tax. For these purposes, the term "substantial user" is defined generally to
include a "non-exempt person" who regularly uses in trade or business a part of
a facility financed from the proceeds of PABs or IDBs.

YIELD AND TOTAL RETURN QUOTATIONS

The Platinum Class of the AAdvantage Trust commenced operations on
November 7, 1995 and the Platinum Class of the Mileage Trust commenced
operations on January 29, 1996. For purposes of advertising performance, and
in accordance with Securities and Exchange Commission staff interpretations,
the Funds in the AAdvantage Trust have adopted the performance of the
Institutional Class of the Funds in the AAdvantage Trust for periods prior to
the inception date. The Mileage Fund has adopted the performance of the
American AAdvantage Money Market Mileage Fund - Mileage Class for periods prior
to its inception date. The performance results for the Platinum Class will be
lower, because the figures for the other classes (except for the Mileage

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<PAGE> 119
Fund) do not reflect the 12b-1 fees, Administrative Services Plan fees or other
class expenses that will be borne by the Platinum Class.

A quotation of yield on shares of the Funds may appear from time to time
in advertisements and in communications to shareholders and others. Quotations
of yields are indicative of yields for the limited historical period used but
not for the future. Yield will vary as interest rates and other conditions
change. Yield also depends on the quality, length of maturity and type of
instruments invested in by the Funds, and the applicable Fund's operating
expenses. A comparison of the quoted yields offered for various investments is
valid only if yields are calculated in the same manner. In addition, other
similar investment companies may have more or less risk due to differences in
the quality or maturity of securities held.

The yields of the Funds may be calculated in one of two ways:

(1) Current Yield--the net average annualized return without compounding
accrued interest income. For a 7-day current yield, this is computed by
dividing the net change in value over a 7 calendar-day period of a
hypothetical account having one share at the beginning of a 7
calendar-day period by the value of the account at the beginning of this
period to determine the "base period return". The quotient is multiplied
by 365 divided by 7 and stated to two decimal places. A daily current
yield is calculated by multiplying the net change in value over one day
by 365 and stating it to two decimal places. Income other than
investment income and capital changes, such as realized gains and losses
from the sale of securities and unrealized appreciation and depreciation,
are excluded in calculating the net change in value of an account.
However, this calculation includes the aggregate fees and other expenses
that are charged to all shareholder accounts in a Fund. In determining
the net change in value of a hypothetical account, this value is adjusted
to reflect the value of any additional shares purchased with dividends
from the original share and dividends declared on both the original share
and any such additional shares.

(2) Effective Yield--the net average annualized return as computed by
compounding accrued interest income. In determining the 7-day effective
yield, a Fund will compute the "base period return" in the same manner
used to compute the "current yield" over a 7 calendar-day period as
described above. One is then added to the base period return and the sum
is raised to the 365/7 power. One is subtracted from the result,
according to the following formula:

EFFECTIVE YIELD = [ (BASE PERIOD RETURN + 1)365/7 ] - 1

The current and effective yields for the Funds are as follows:

<TABLE>
<CAPTION>
Current yield for Effective yield for
Current daily the seven-day period the seven-day period
yield as of ended ended
Platinum Class October 31, 1997 October 31, 1997 October 31, 1997
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Money Market Fund 4.83% 4.82% 4.94%
Municipal Money Market Fund 2.79% 2.79% 2.83%
U.S. Government Money Market Fund 4.72% 4.64% 4.75%
Mileage Fund 4.69% 4.68% 4.79%
</TABLE>

The Municipal Money Market Fund also may advertise a tax-equivalent
current and effective yield. The tax- equivalent yields are calculated as
follows:

CURRENT YIELD/(1 - APPLICABLE TAX RATE) = CURRENT TAX-EQUIVALENT YIELD

EFFECTIVE YIELD/(1 - APPLICABLE TAX RATE) = EFFECTIVE TAX-EQUIVALENT YIELD

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<PAGE> 120

Based on these formulas, the current and effective tax-equivalent yields
for the Municipal Money Market Fund for the seven day period ending October 31,
1997 were 4.62% and 4.69%, respectively (based upon a 39.6% personal tax
rate).

The advertised total return for a class of a Fund would be calculated by
equating an initial amount invested in a class of a Fund to the ending
redeemable value, according to the following formula:

P(1 + T)(N)= ERV

Based on this formula, annualized total returns were as follows for the
periods indicated:

<TABLE>
<CAPTION>
For the period
For the one- For the five- from commencement
year period year period For the ten-year of operations
ended October ended October period ended through October
31, 1997(1) 31, 1997(1) October 31, 31, 1997(1)
1997(1)
<S> <C> <C> <C> <C>
Platinum Class
Money Market Fund 4.88% 4.59% 5.95% 5.98%
Municipal Money Market Fund 2.82% N/A(2) N/A(2) 2.97%
U. S. Government Money Mkt. Fund (3) 4.63% 4.35% N/A(2) 4.25%
Mileage Fund 4.72% 4.36% 5.81% 5.84%
</TABLE>

(1) Performance of the Funds of the AAdvantage Trust represents total returns
achieved by the Institutional Class from the inception date of each Fund up to
the inception date of the Platinum Class on 11/7/95. Performance of the
Mileage Fund represents total return of the Money Market Fund-Institutional
Class (9/1/87-10/31/91); the Money Market Fund- Mileage Class
(11/1/91-10/31/95); the Money Market Mileage Fund-Mileage Class
(11/1/95-1/28/96) and the Money Market Mileage Fund-Platinum Class since its
1/29/96 inception. Total returns have not been adjusted for any difference
between the fees and expenses of each Fund and the historical fees and expenses
of the predecessor Funds. Inception dates are: Money Market Fund-Institutional
Class, 9/1/87; Municipal Money Market Fund-Institutional Class, 11/10/93; U.S.
Government Money Market Fund-Institutional Class, 3/1/92.

(2) The Fund was not operational during this period.

(3) Prior to March 1, 1997, the U.S. Government Money Market Fund was known as
the U.S. Treasury Money Market Fund and operated under different investment
policies.

Each Fund also may use "aggregate" total return figures for various
periods which represent the cumulative change in value of an investment in a
Fund for the specific period. Such total returns reflect changes in share
prices of a Fund and assume reinvestment of dividends and distributions.

In reports or other communications to shareholders or in advertising
material, each class of a Fund may from time to time compare its performance
with that of other mutual funds in rankings prepared by Lipper Analytical
Services, Inc., Morningstar, Inc., IBC Financial Data, Inc. and other similar
independent services which monitor the performance of mutual funds or
publications such as the "New York Times," "Barrons" and the "Wall Street
Journal." Each Fund also may compare its performance with various indices
prepared by independent services such as Standard & Poor's, Morgan Stanley or
Lehman Brothers or to unmanaged indices that may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.

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<PAGE> 121

Advertisements for the Funds may mention that the Funds offer a variety
of investment options. They also may compare the Funds to federally insured
investments such as bank certificates of deposit and credit union deposits,
including the long-term effects of inflation on these types of investments.
Advertisements also may compare the historical rate of return of different
types of investments. Information concerning broker-dealers who sell the Funds
also may appear in advertisements for the Funds, including their ranking as
established by various publications compared to other broker-dealers.

From time to time, the Manager may use contests as a means of promoting
the American AAdvantage Funds and the American AAdvantage Mileage Funds.
Prizes may include free air travel and/or hotel accommodations. Listings for
certain of the Funds may be found in newspapers under the heading Amer AAdvant.

Each Fund may advertise the standard deviation of its returns for various
time periods and compare its standard deviation to that of various indices.
Standard deviation of returns over time is a measure of volatility. It
indicates the spread of returns about their central tendency or mean. In
theory, a Fund that is more volatile should receive a higher return in exchange
for taking extra risk. Standard deviation is a well-accepted statistic to
gauge the riskiness of an investment strategy and measure its historical
volatility as a predictor of risk, although the measure is subject to time
selection bias.

DESCRIPTION OF THE TRUST

The AAdvantage Trust, organized on January 16, 1987 and the Mileage
Trust, organized on February 22, 1995, (originally named American AAdvantage
Funds II) are entities of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable for its obligations. However,
each Trust's Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and provides for indemnification
and reimbursement of expenses out of Trust property for any shareholder held
personally liable for the obligations of the Trust. The Declaration of Trust
also provides that the Trusts may maintain appropriate insurance (for example,
fidelity bonding) for the protection of the Trust, its shareholders, Trustees,
officers, employees and agents to cover possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss due to shareholder
liability is limited to circumstances in which both inadequate insurance
existed and the Trust itself was unable to meet its obligations. The Trust has
not engaged in any other business. The Platinum Class was created as an
investment vehicle for cash balances of customers of certain broker-dealers.

CONTROL PERSONS AND 5% SHAREHOLDERS

There are no persons deemed to control any Funds by virtue of their
ownership of more than 25% of the outstanding shares of a Fund as of January
31, 1997:

OTHER INFORMATION

Bankers' Acceptances-Bankers' acceptances are short-term credit
instruments designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptances can be
as long as 270 days, most acceptances have maturities of six months or less.

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<PAGE> 122
Cash Equivalents-Cash equivalents include certificates of deposit, bearer
deposit notes, bankers' acceptances, government obligations, commercial paper,
short-term corporate debt securities and repurchase agreements.

Commercial Paper-Commercial paper refers to promissory notes representing
an unsecured debt of a corporation or finance company with a fixed maturity of
no more than 270 days. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts.

Illiquid Securities. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the 1933 Act, securities that are otherwise not
readily marketable and repurchase agreements having a remaining maturity of
longer than seven calendar days. Securities that have not been registered
under the 1933 Act are referred to as private placements or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions within seven calendar days. A mutual fund also might have to
register such restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.

12
<PAGE> 123
Loan Transactions-Loan transactions involve the lending of securities to
a broker-dealer or institutional investor for its use in connection with short
sales, arbitrages or other security transactions. The purpose of a qualified
loan transaction is to afford a lender the opportunity to continue to earn
income on the securities loaned and at the same time earn fee income or income
on the collateral held by it.

Securities loans will be made in accordance with the following
conditions: (1) the Portfolio must receive at least 100% collateral in the
form of cash or cash equivalents, securities of the U.S. Government and its
agencies and instrumentalities, and approved bank letters of credit; (2) the
borrower must increase the collateral whenever the market value of the loaned
securities (determined on a daily basis) rises above the level of collateral;
(3) the Portfolio must be able to terminate the loan after notice, at any time;
(4) the Portfolio must receive reasonable interest on the loan or a flat fee
from the borrower, as well as amounts equivalent to any dividends, interest or
other distributions on the securities loaned, and any increase in market value
of the loaned securities; (5) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (6) voting rights on the securities
loaned may pass to the borrower, provided, however, that if a material event
affecting the investment occurs, the AMR Trust Board must be able to terminate
the loan and vote proxies or enter into an alternative arrangement with the
borrower to enable the AMR Trust Board to vote proxies.

While there may be delays in recovery of loaned securities or even a loss
of rights in collateral supplied should the borrower fail financially, loans
will be made only to firms deemed by the AMR Trust Board to be of good
financial standing and will not be made unless the consideration to be earned
from such loans would justify the risk. Such loan transactions are referred to
in this Statement of Additional Information as "qualified" loan transactions.

The cash collateral so acquired through qualified loan transactions may
be invested only in those categories of high quality liquid securities
previously authorized by the AMR Trust Board.

Mortgage-Backed Securities-Mortgage-backed securities consist of both
collateralized mortgage obligations and mortgage pass-through certificates.

Collateralized Mortgage Obligations ("CMOs")-CMOs and interests in real
estate mortgage investment conduits ("REMICs") are debt securities
collateralized by mortgages, or mortgage pass-through securities. CMOs divide
the cash flow generated from the underlying mortgages or mortgage pass-through
securities into different groups referred to as "tranches," which are then
retired sequentially over time in order of priority. The principal governmental
issuers of such securities are the Federal National Mortgage Association
("FNMA"), a government sponsored corporation owned entirely by private
stockholders and the Federal Home Loan Mortgage Corporation ("FHLMC"), a
corporate instrumentality of the United States created pursuant to an act of
Congress which is owned entirely by Federal Home Loan Banks. The issuers of CMOs
are structured as trusts or corporations established for the purpose of issuing
such CMOs and often have no assets other than those underlying the securities
and any credit support provided. A REMIC is a mortgage securities vehicle that
holds residential or commercial mortgages and issues securities representing
interests in those mortgages. A REMIC may be formed as a corporation,
partnership, or segregated pool of assets. The REMIC itself is generally exempt
from federal income tax, but the income from the mortgages is reported by
investors. For investment purposes, interests in REMIC securities are virtually
indistinguishable from CMOs.

Mortgage Pass-Through Certificates-Mortgage pass-through certificates are
issued by governmental, government- related and private organizations which are
backed by pools of mortgage loans.

(1) Government National Mortgage Association ("GNMA") Mortgage
Pass-Through Certificates ("Ginnie Maes")-GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
Ginnie Maes represent an undivided interest in a pool of mortgages that are
insured by the Federal Housing Administration or the Farmers Home
Administration or guaranteed by the Veterans Administration. Ginnie Maes
entitle the holder to receive all payments (including prepayments) of principal
and interest owed by the individual mortgagors, net of fees paid to GNMA and to
the issuer which assembles the mortgage pool and passes through the monthly
mortgage payments to the certificate holders (typically, a mortgage banking
firm), regardless of whether the individual mortgagor actually makes the
payment. Because payments are made to certificate holders regardless of
whether payments are actually received on the underlying mortgages, Ginnie Maes
are of the "modified pass-through" mortgage certificate type. The GNMA is
authorized to guarantee the timely payment of principal and interest on the
Ginnie Maes. The GNMA guarantee is backed by the full faith and credit of the
United States, and the GNMA has unlimited authority to borrow funds from the
U.S. Treasury to make payments under the guarantee. The market for Ginnie Maes
is highly liquid

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<PAGE> 124
because of the size of the market and the active participation in the secondary
market of security dealers and a variety of investors.

(2) FHLMC Mortgage Participation Certificates ("Freddie Macs")-Freddie
Macs represent interests in groups of specified first lien residential
conventional mortgages underwritten and owned by the FHLMC. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC guarantees either ultimate collection or timely payment of
all principal payments on the underlying mortgage loans. In cases where the
FHLMC has not guaranteed timely payment of principal, the FHLMC may remit the
amount due because of its guarantee of ultimate payment of principal at any
time after default on an underlying mortgage, but in no event later than one
year after it becomes payable. Freddie Macs are not guaranteed by the United
States or by any of the Federal Home Loan Banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank. The
secondary market for Freddie Macs is highly liquid because of the size of the
market and the active participation in the secondary market of the FHLMC,
security dealers and a variety of investors.

(3) FNMA Guaranteed Mortgage Pass-Through Certificates ("Fannie
Maes")-Fannie Maes represent an undivided interest in a pool of conventional
mortgage loans secured by first mortgages or deeds of trust, on one family or
two to four family, residential properties. The FNMA is obligated to
distribute scheduled monthly installments of principal and interest on the
mortgages in the pool, whether or not received, plus full principal of any
foreclosed or otherwise liquidated mortgages. The obligation of the FNMA under
its guarantee is solely its obligation and is not backed by, nor entitled to,
the full faith and credit of the United States.

Municipal Lease Obligations ("MLOs")-MLOs are issued by state and local
governments and authorities to acquire land and a wide variety of equipment and
facilities. These obligations typically are not fully backed by the
municipality's credit and thus interest may become taxable if the lease is
assigned. If funds are not appropriated for the following year's lease
payments, a lease may terminate with the possibility of default on the lease
obligation. With respect to MLOs purchased by the corresponding Portfolio of
the Municipal Money Market Fund, the AMR Trust Board has established the
following guidelines for determining the liquidity of the MLOs in its
portfolio, and, subject to review by the AMR Trust Board, has delegated that
responsibility to the investment adviser: (1) the frequency of trades and
quotes for the security; (2) the number of dealers willing to purchase or sell
the security and the number of other potential buyers; (3) the willingness of
dealers to undertake to make a market in the security; (4) the nature of the
marketplace trades; (5) the likelihood that the marketability of the obligation
will be maintained through the time the security is held by the Portfolio; (6)
the credit quality of the issuer and the lessee; (7) the essentiality to the
lessee of the property covered by the lease and (8) for unrated MLOs, the MLOs'
credit status analyzed according to the factors reviewed by rating agencies.

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<PAGE> 125
The two highest Moody's Investors Service, Inc. ("Moody's") ratings for
long-term obligations (or issuers thereof) are Aaa and Aa. Obligations rated
Aaa are judged by Moody's to be of the best quality. Obligations rated Aa are
judged to be of high quality by all standards. Together with the Aaa group,
such debt comprises what is generally known as high-grade debt. Moody's states
that debt rated Aa is rated lower than Aaa debt because margins of protection
or other elements make long-term risks appear somewhat larger than for Aaa
debt. Moody's also supplies numerical indicators 1, 2, and 3 to rating
categories. The modifier 1 indicates that the security is in the higher end of
its rating category; the modifier 2 indicates a mid-range ranking; and modifier
3 indicates a ranking toward the lower end of the category.

The two highest Standard & Poor's ratings for long-term obligations are
AAA and AA. Obligations rated AAA have the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is extremely strong.
Obligations rated AA have a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.

Duff & Phelps' two highest ratings for long-term obligations are AAA and
AA. Obligations rated AAA have the highest credit quality with risk factors
being negligible. Obligations rated AA are of high credit quality and strong
protection factors. Risk is modest but may vary slightly from time to time
because of economic conditions.

Thomson BankWatch ("BankWatch") long-term debt ratings apply to specific
issues of long-term debt and preferred stock. They specifically assess the
likelihood of an untimely repayment of principal or interest over the term to
maturity of the rated instrument. BankWatch's two highest ratings for
long-term obligations are AAA and AA. Obligations rated AAA indicate that the
ability to repay principal and interest on a timely basis is very high.
Obligations rated AA indicate a superior ability to repay principal and
interest on a timely basis, with limited incremental risk compared to issues
rated in the highest category.

Standard & Poor's, Duff & Phelps and Fitch apply indicators, such as
"+","-," or no character, to indicate relative standing within the major rating
categories.

Ratings of Municipal Obligations-Moody's ratings for state and municipal
short-term obligations are designated Moody's Investment Grade or "MIG" with
variable rate demand obligations being designated as "VMIG." A VMIG rating
also may be assigned to commercial paper programs which are characterized as
having variable short-term maturities but having neither a variable rate nor
demand feature. Factors used in determination of ratings include liquidity of
the borrower and short-term cyclical elements.

Standard & Poor's uses SP-1, SP-2, and SP-3 to rate short-term municipal
obligations. A rating of SP-1 denotes a very strong or strong capacity to pay
principal and interest.

Ratings of Short-term Obligations-The rating P-1 is the highest
short-term rating assigned by Moody's. Among the factors considered by Moody's
in assigning ratings are the following: (1) evaluations of the management of
the issuer; (2) economic evaluation of the issuer's industry or industries and
an appraisal of speculative-type risks which may be inherent in certain areas;
(3) evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of
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<PAGE> 126
earnings over a period of ten years; (7) financial strength of a parent company
and the relationships which exist with the issuer; and (8) recognition by the
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations.

The distinguishing feature of Duff & Phelps Credit Ratings' short-term
rating is the refinement of the traditional 1 category. The majority of
short-term debt issuers carry the highest rating, yet quality differences exist
within that tier. Obligations rated D-1+ indicate the highest certainty of
timely payment. Safety is just below risk-free U.S. Treasury obligations.
Obligations rated D-1 have a very high certainty of timely payment. Risk
factors are minor. Obligations rated D-1- have a high certainty of timely
payment. Risk factors are very small. Obligations rated D-2 have good
certainty of timely payment. Liquidity factors and company fundamentals are
sound. Although ongoing funding needs may enlarge total financing
requirements, access to capital markets is good. Risk factors are small.

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes. A rating of F-1+ indicates exceptionally strong credit
quality. Issues assigned this rating are regarded as having the strongest
degree of assurance for timely payment. Obligations rated F-1 have very
strong credit quality. Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than issues rated F-1+. Issues
assigned a rating of F-2 indicate good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F- 1+ and F-1 ratings.

Each Portfolio may enter into repurchase agreements with any bank or
registered broker-dealer who, in the opinion of the AMR Trust Board presents a
minimum risk of bankruptcy during the term of the agreement based upon
guidelines that periodically are reviewed by the AMR Trust Board. Each
Portfolio may enter into repurchase agreements as a short-term investment of
its idle cash in order to earn income. The securities will be held by a
custodian (or agent) approved by the AMR Trust Board during the term of the
agreement. However, if the market value of the securities subject to the
repurchase agreement becomes less than the repurchase price (including
interest), the Portfolio will direct the seller of the securities to deliver
additional securities so that the market value of all securities subject to the
repurchase agreement will equal or exceed the repurchase price.

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<PAGE> 127
of interest or decline in price of the securities. Apart from the risk of
bankruptcy or insolvency proceedings, there is also the risk that the seller
may fail to repurchase the securities, in which case a Portfolio may incur a
loss if the proceeds to the Portfolio from the sale of the securities to a
third party are less than the repurchase price.

Resource Recovery Obligations-Resource recovery obligations are a type of
municipal revenue obligation issued to build facilities such as solid waste
incinerators or waste-to-energy plants. Usually, a private corporation will be
involved and the revenue cash flow will be supported by fees or units paid by
municipalities for use of the facilities. The viability of a resource recovery
project, environmental protection regulations and project operator tax
incentives may affect the value and credit quality of these obligations.

Revenue Obligations-Revenue obligations are backed by the revenue cash
flow of a project or facility.

17
<PAGE> 128
U.S. Treasury Obligations-U.S. Treasury obligations include bills, notes
and bonds issued by the U.S. Treasury and Separately Traded Registered Interest
and Principal component parts of such obligations known as STRIPS.

Pursuant to Rule 2a-7 under the 1940 Act, variable or floating rate
obligations with stated maturities of more than 397 days may be deemed to have
shorter maturities as follows:

FINANCIAL STATEMENTS

The American AAdvantage Money Market Funds' and the American AAdvantage
Mileage Funds' Annual Reports to Shareholders for the fiscal year ended October
31, 1997, as audited by Ernst & Young, LLP, are supplied with the SAI, and the
financial statements and accompanying notes appearing therein are incorporated
by reference in this SAI.

18
<PAGE> 129
TABLE OF CONTENTS

<TABLE>
<S> <C>
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Trustees and Officers of the Trust and the AMR Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Management, Administrative Services and Distribution Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Redemptions in Kind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Net Asset Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Yield and Total Return Quotations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Description of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Control Persons and 5% Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>

<PAGE> 130
AMERICAN AADVANTAGE MILEAGE FUNDS

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements included as a part of this Registration
Statement:

Included in Part A of the Registration Statement: Financial
Highlights

American AAdvantage Mileage Balanced, Growth and Income,
International Equity, Short-Term Bond, Money Market, Municipal
Money Market and U.S. Government Money Market Funds -- for
the period November 1, 1995 (commencement of operations) to
October 31, 1995 and the one year period ended October 31,
1996.

Platinum Class - American AAdvantage Mileage Money Market
Fund: for the period January 29, 1996 (commencement of
offering Platinum Class shares) to October 31, 1996.

Platinum Class: American AAdvantage Money Market, Municipal
Money Market and U.S. Government Money Market Funds: - for
the period November 7, 1995, (commencement of offering
Platinum Class shares) to October 31, 1996.

Institutional Class: American AAdvantage Money Market Fund:
for the nine years ended October 31, 1996. Municipal Money
Market Fund: for the period November 10, 1993 (commencement of
operations) to October 31, 1994, for the two years ended
October 31, 1996. U.S. Government Money Market Fund: for the
period March 2, 1992 (commencement of operations) to October
31, 1992, for the four years ended October 31, 1996.

Included in Part B of the Registration Statement: None

(b) Exhibits:

(1) Amended and Restated Declaration of Trust - filed
herewith
(2) Amended Bylaws - filed herewith

(3) Voting trust agreement -- none

(4) Specimen security - none

(5) (a)(i) Management Agreement between American
AAdvantage Mileage Funds and AMR Investment
Services, Inc. dated October 1,
1995 - filed herewith
<PAGE> 131
(a)(ii) Supplement to Management Agreement dated
December 17, 1996 *

(b)(i) Investment Advisory Agreement between AMR
Investment Services, Inc. and Independence
Investment Associates, Inc. dated November 1,
1995 - filed herewith

(b)(ii) Investment Advisory Agreement between AMR
Investment Services, Inc. and Morgan Stanley
Asset Management Inc. dated November 1, 1995
- filed herewith

(b)(iii) Investment Advisory Agreement between AMR
Investment Services, Inc. and
Templeton Investment Counsel, Inc. dated
November 1, 1995 - filed herewith

(b)(iv) Investment Advisory Agreement between AMR
Investment Services, Inc. and Barrow, Hanley,
Mewhinney & Strause, Inc. dated November 1,
1995 - filed herewith

(b)(v) Investment Advisory Agreement between AMR
Investment Services, Inc. and GSB Investment
Management, Inc. dated November 1, 1995 -
filed herewith

(b)(vi) Investment Advisory Agreement between AMR
Investment Services, Inc. and Brandywine
Asset Management, Inc. dated May 1, 1996 *

(b)(vii) Investment Advisory Agreement between AMR
Investment Services, Inc. and Hotchkis and
Wiley, a division of the Capital Management
Group of Merrill Lynch Asset Management,
L.P. dated November 12, 1996 **

(6) Distribution Agreement among the American AAdvantage
Mileage Funds, the American AAdvantage Funds and
Brokers Transaction Services, Inc. dated September 1,
1995 - filed herewith

(7) Bonus, profit sharing or pension plans -- none

(8) Custodian Agreement between the American AAdvantage
Mileage Funds and NationsBank of Texas, N.A. dated
November 1, 1995 - filed herewith

(9) Transfer Agency and Registrar Agreement among the
American AAdvantage Mileage Funds, AMR Investment
Services, Inc. and Goldman, Sachs & Co. dated
November 1, 1995 - filed herewith

(10) Opinion and consent of counsel - filed herewith

(11) Consent of Independent Auditors - none

(12) Financial statements omitted from prospectus
(not applicable)

(13) Letter of investment intent - filed herewith

(14) Prototype retirement plan -- (not applicable)
<PAGE> 132
(15) (a) Plan pursuant to Rule 12b-1 for the Mileage
Class - filed herewith
(b) Plan pursuant to Rule 12b-1 for the Platinum
Class - filed herewith
(c) Administrative Services Plan for the
Platinum Class - filed herewith
(16) Schedule for Computation of Performance Quotations -
filed herewith

(17) Financial Data Schedules - none

(18) Plan Pursuant to Rule 18f-3 - filed herewith

Other: Powers of Attorney for Trustees **

- - ------------------
* Incorporated by reference to Post-Effective Amendment No. 3 to the
American AAdvantage Mileage Funds' Registration Statement on Form N-1A
as filed with the Securities and Exchange Commission on May 1, 1996.
** Incorporated by reference to Post-Effective Amendment No. 4 to the
American AAdvantage Mileage Funds' Registration Statement on Form N-1A
as filed with the Securities and Exchange Commission on February 13,
1997.

Item 25. Persons Controlled by or under
Common Control with Registrant

None.

Item 26. Number of Holders of Securities

<TABLE>
<CAPTION>
Number of Record Holders
Title of Fund as of November 30, 1997
- - ------------- -----------------------
<S> <C>
American AAdvantage Mileage Funds:
Balanced Mileage Fund 130
Growth and Income Mileage Fund 311
Short -Term Bond Mileage Fund 22
international Equity Mileage Fund 199
Money Market Mileage Fund 1,421
Municipal Money Market Mileage Fund 245
U.S. Government Money Market Mileage Fund 166
Platinum Class:
Money Market Mileage Fund 978
</TABLE>

<PAGE> 133
Item 27. Indemnification

Article XI, Section 2 of the Declaration of Trust of the Mileage Trust
provides that:

(a) Subject to the exceptions and limitations contained in
paragraph (b) below:

(i) every person who is, or has been, a Trustee or officer of
the Mileage Trust (hereinafter referred to as "Covered
Person") shall be indemnified by the appropriate
portfolios to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in
the settlement thereof;

(ii) the words "claim," "action," "suit," or "proceeding" shall
apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened
while in office or thereafter, and the words "liability"
and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.

(b) No indemnification shall be provided hereunder to a Covered
Person:

(i) who shall have been adjudicated by a court or body
before which the proceeding was brought (A) to be liable to the Mileage Trust
or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office or (B) not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Mileage Trust; or

(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office (A) by the court or other body approving
the settlement; (B) by at least a majority of those Trustees who are neither
interested persons of the Mileage Trust nor are parties to the matter based
upon a review of readily available facts (as opposed to a full trial-type
inquiry); or (C) by written opinion of independent legal counsel based upon a
review of readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees, or by independent counsel.

(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Mileage Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who has ceased to
be such Trustee or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. Nothing contained herein shall
affect any rights to indemnification to which Mileage Trust personnel, other
than Trustees and officers, and other persons may be entitled by contract or
otherwise under law.

(d) Expenses in connection with the preparation and presentation
of a defense to any

<PAGE> 134
claim, action, suit, or proceeding of the character described in paragraph (a)
of this Section 2 may be paid by the applicable Portfolio from time to time
prior to final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to the
Mileage Trust if it is ultimately determined that he is not entitled to
indemnification under this Section 2; provided, however, that:

(i) such Covered Person shall have provided appropriate
security for such undertaking;

(ii) the Mileage Trust is insured against losses arising
out of any such advance payments; or

(iii) either a majority of the Trustees who are neither
interested persons of the Mileage Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a trial-type inquiry or
full investigation), that there is reason to believe that such Covered Person
will be found entitled to indemnification under this Section 2.

According to Article XII, Section 1 of the Declaration of Trust, the
Mileage Trust is a trust, not a partnership. Trustees are not liable
personally to any person extending credit to, contracting with or having any
claim against the Mileage Trust, a particular Portfolio or the Trustees. A
Trustee, however, is not protected from liability due to willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.

Article XII, Section 2 provides that, subject to the provisions of
Section 1 of Article XII and to Article XI, the Trustees are not liable for
errors of judgment or mistakes of fact or law, or for any act or omission in
accordance with advice of counsel or other experts or for failing to follow
such advice.

Item 28. I. Business and Other Connections of Investment Manager

AMR Investment Services, Inc., 4333 Amon Carter Boulevard, MD 5645,
Fort Worth, Texas 76155, offers investment management and administrative
services. Information as to the officers and directors of the Manager is
included in its current Form ADV filed with the SEC and is incorporated by
reference herein.

II. Business and Other Connections of Investment Advisers

The investment advisers listed below provide investment advisory
services to the Mileage Trust.

Barrow, Hanley, Mewhinney & Strauss, 3232 McKinney Avenue, Dallas,
Texas 75204.

Brandywine Asset Management, Inc., 201 North Walnut Street,
Wilmington, Delaware 19801.

<PAGE> 135
GSB Investment Management, Inc., 301 Commerce Street, Suite 1501, Fort
Worth, Texas 76102.

Hotchkis & Wiley, 800 West Sixth Street, 5th Floor, Los Angeles,
California 90017.

Independence Investment Associates, Inc., 53 State Street, Boston,
Massachusetts 02109.

Morgan Stanley Asset Management Inc., 1221 Avenue of the Americas,
21st Floor, New York, New York 10020.

Templeton Investment Counsel, Inc. 500 East Broward Blvd., Ft.
Lauderdale, Florida 33394.

Information as to the officers and directors of each of the above
investment advisers is included in that adviser's current Form ADV filed with
the SEC and is incorporated by reference herein.

Item 29. Principal Underwriter

(a) Brokers Transaction Services, Inc., 7001 Preston
Road, Dallas, TX 75205, is the principal underwriter for the Mileage Trust and
the American AAdvantage Funds.

(b) The directors and officers of the Mileage Trust's
principal underwriter are:

<TABLE>
<CAPTION>
Positions & Offices Position
Name with Underwriter with Registrant
- - ---- ------------------- ---------------
<S> <C> <C>
Don A. Buckholz Chairman, Director and Chief None
Executive Officer

Raymond E. Wooldridge Chief Operating Officer, None
Director and President

William D. Felder Director, Executive Vice None
President

Sue H. Peden Vice President None
</TABLE>

<PAGE> 136
Item 30. Location of Accounts and Records

The books and other documents required by Rule 31a-1 under the
Investment Company Act of 1940 are maintained as follows: 31a-1(b)(1) -
Journals - in the physical possession of the Trust's custodian (NationsBank of
Texas, N.A.); 31- 1(b)(2)(I), (ii) & (iii) - in the physical possession of the
Trust's custodian; 31a-1()(2)(iv) - in the physical possession of the Trust's
transfer agents (NationsBank of Texas, N.A. and Goldman, Sachs & Co.);
31a-1(b)(4) - in the physical possession of the Trust's Manager; 31a-1(b)(5) -
in the physical possession of the Trust's investment advisers; 31a-1(b)(6) - in
the physical possession of the Trust's Manager, investment advisers and
custodian; 31a-1(b)(7) - in the physical possession of the Trust's custodian;
31a-1(b)(8) - in the physical possession of the Trust's custodian; 31a- 1(b)(9)
- - - in the physical possession of the Trust's investment advisers; 31a-1(b)(10) -
in the physical possession of the Trust's Manager; 31a-1(b)(11) - in the
physical possession of the Trust's Manager; 31a-1(b)(12) - in the physical
possession of the Trust's Manager, investment advisers and custodian.

Item 31. Management Services

All substantive provisions of any management-related service
contract are discussed in Part A or Part B.

Item 32. Undertakings

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of its latest annual report to
Shareholders, upon request and without charge.

Registrant hereby undertakes to carry out all indemnification
provisions of its Declaration of Trust in accordance with Investment Company
Act Release No. 11330 (September 4, 1980) and successor releases.

Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended ("1933 Act"), may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the provisions in under
Item 27 herein, or otherwise, the Registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed
in the 1933 Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication.

<PAGE> 137

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Post-Effective Amendment No. 5 to its Registration Statement
on Form N-1A to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Worth and the State of Texas on December 15,
1997.

AMERICAN AADVANTAGE MILEAGE FUNDS

By: /s/ William F. Quinn
-----------------------------
William F. Quinn
President
Attest:

/s/ Barry Y. Greenberg
- - --------------------------------------
Barry Y. Greenberg
Vice President and Assistant Secretary

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 5 to the Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated.

Signature Title Date
- - --------- ----- ----
<S> <C> <C>
/s/ William F. Quinn President and December 15, 1997
- - ------------------------- Trustee
William F. Quinn

Alan D. Feld* Trustee December 15, 1997
- - -------------------------
Alan D. Feld

Ben J. Fortson* Trustee December 15, 1997
- - -------------------------
Ben J. Fortson

John S. Justin* Trustee December 15, 1997
- - -------------------------
John S. Justin

Stephen D. O'Sullivan* Trustee December 15, 1997
- - -------------------------
Stephen D. O'Sullivan

Roger T. Staubach* Trustee December 15, 1997
- - -------------------------
Roger T. Staubach

Dr. Kneeland Youngblood * Trustee December 15, 1997
- - -------------------------
Dr. Kneeland Youngblood

*By /s/ William F. Quinn
----------------------------------
William F. Quinn, Attorney-In-Fact
</TABLE>

<PAGE> 138

SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, AMR Investment
Services Trust has duly caused this Post-Effective Amendment No. 5 to the
Registration Statement on Form N-1A as it relates to the AMR Investment
Services Trust to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Worth and the State of Texas on December 15,
1997.

AMR INVESTMENT SERVICES TRUST

By: /s/ William F. Quinn
-------------------------
William F. Quinn
President
Attest:

/s/ Barry Y. Greenberg
- - -------------------------
Barry Y. Greenberg
Vice President and Assistant Secretary

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 5 to the Registration Statement for
the American AAdvantage Mileage Funds has been signed below by the following
persons in the capacities and on the dates indicated.