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AMERICAN AADVANTAGE
MILEAGE FUNDS(SM)
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SEMI-ANNUAL REPORT
JUNE 30, 2000
[AMR LOGO]
S&P 500 INDEX MILEAGE FUND
MANAGED BY AMR INVESTMENT SERVICES, INC.
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American AAdvantage S&P 500 Index Mileage Fund
LETTER TO SHAREHOLDERS
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Dear Fellow Shareholder:
We are pleased to report to you on the performance of the American AAdvantage
S&P 500 Index Mileage Fund (the "Fund"), and to provide you with a copy of the
semi-annual report for the six months ended June 30, 2000. The Fund's total
return for the period was -0.74%, compared to the returns of -0.42% for the S&P
500 Index and -0.59% for the Lipper S&P 500 Index for the same period.
MARKET ACTIVITY
The equity market was a bit calmer by the close of June compared to earlier in
the year, but the overall results for 2000 have been flat to negative for most
equity investors. During the first half of the year, the S&P 500 Index fell
0.42%, while the broader Russell 3000 Index gained 1.0%. Small cap stocks
outperformed large cap stocks during the same time period as the Russell 2000
Index returned 3.0%. Despite the continued volatility in tech and telecom
stocks, growth stocks did better than value once again as the S&P 500 Barra
Growth Index increased 2.6% and the S&P 500 Barra Value Index declined 4.1%.
There has been a shift in market leadership as healthcare replaced technology as
the leading economic sector. Other more defensive sectors such as Utilities
posted positive returns for the first half of the year. Market leadership has
also broadened as the largest companies in the S&P have modestly underperformed
the 500 stock average for the first time in five years.
The Fed raised its Fed Funds rate another 50 basis points in May for the sixth
increase in the past twelve months. Historically, this number of rate hikes has
led to negative stock market returns 3-12 months later. Although the Fed made no
changes in June, their bias remained unchanged--toward tightening. Most market
watchers anticipate at least one more rate hike by October, but believe the
central bank is near the end of this tightening cycle. Core inflation, though
higher than at the start of the year, remains manageable at the producer and
consumer levels. As such, we believe that the Fed will have little impetus to
continue tightening.
<TABLE>
<CAPTION>
TEN LARGEST STOCK HOLDINGS
<S> <C>
General Electric Co. Exxon Mobil Corp.
Intel Corp. Wal-Mart Stores, Inc.
Cisco Systems, Inc. Oracle Corp.
Microsoft Corp. Citigroup, Inc.
Pfizer, Inc. Nortel Networks Corp.
</TABLE>
OUTLOOK
Market valuations for equities have improved modestly as earnings growth has
been strong. Nevertheless, equity valuations remain above historical averages.
Productivity gains, globalization and structural reforms have all contributed to
the extraordinary run in the US equity market. While there is no question that
there are limits to what a rational investor should pay for an investment, we
continue to experience unprecedented growth and productivity.
It is important to realize that, as an index fund, the goal is to replicate the
performance of the S&P 500 Index. The Fund manager does not manage the portfolio
according to a specific outlook or forecast for the market or the overall
economy.
As always, we appreciate your ongoing support of the American AAdvantage S&P 500
Index Mileage Fund, and we look forward to continuing to serve your investment
needs for many years to come.
Sincerely,
William F. Quinn
President
American AAdvantage Mileage Funds
2
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AMERICAN AADVANTAGE S&P 500 INDEX MILEAGE FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
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<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE AMOUNTS)
<S> <C>
ASSETS
Investment in the State Street Equity 500 Index
Portfolio, at Value.................................... $ 5,702
Receivable for Expense Reimbursement (Note 2)........... 7
--------
TOTAL ASSETS........................................ 5,709
--------
LIABILITIES
Administrative Service Fees Payable (Note 2)............ 2
Other Liabilities....................................... 24
--------
TOTAL LIABILITIES................................... 26
--------
NET ASSETS.................................................. $ 5,683
========
COMPOSITION OF NET ASSETS
Paid-in Capital......................................... $ 5,048
Undistributed Net Investment Income..................... 9
Accumulated Net Realized Loss from Investments and
Futures Transactions................................... (523)
Net Unrealized Appreciation on Investments and Futures
Contracts.............................................. 1,149
--------
NET ASSETS.................................................. $ 5,683
========
SHARES OUTSTANDING (no par value)........................... 408,372
========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE.... $ 13.92
========
</TABLE>
See accompanying notes
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AMERICAN AADVANTAGE S&P 500 INDEX MILEAGE FUND
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2000 (Unaudited)
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<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
INVESTMENT INCOME
Income Allocated from the State Street Equity 500 Index
Portfolio, net......................................... $ 22
Income Allocated from the BT Equity 500 Index Portfolio,
net.................................................... 9
----
TOTAL INVESTMENT INCOME............................. 31
EXPENSES
Administrative Service Fees............................. 8
Transfer Agency Fees.................................... 2
Professional Fees....................................... 5
Registration Fees....................................... 6
Distribution Fees....................................... 6
Other Expenses.......................................... 4
----
TOTAL EXPENSES...................................... 31
LESS: EXPENSES ABSORBED BY AMR INVESTMENT SERVICES, INC..... (19)
----
NET EXPENSES........................................ 12
----
NET INVESTMENT INCOME....................................... 19
----
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FUTURES
CONTRACTS
Net Realized Loss from Investment Transactions.......... (26)
Net Realized Gain from Futures Transactions............. 2
Net Change in Unrealized Appreciation on Investments and
Futures Contracts...................................... 29
----
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FUTURES
CONTRACTS................................................. 5
----
NET INCREASE IN NET ASSETS FROM OPERATIONS.................. $ 24
====
</TABLE>
See accompanying notes
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STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1999
------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net Investment Income................................... $ 19 $ 39
Net Realized Loss from Investments and Futures
Transactions.......................................... (24) (34)
Net Change in Unrealized Appreciation on Investments and
Futures Contracts..................................... 29 725
--------- ---------
NET INCREASE IN NET ASSETS FROM OPERATIONS.......... 24 730
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net Investment Income................................... (10) (39)
--------- ---------
TOTAL DISTRIBUTIONS................................. (10) (39)
--------- ---------
CAPITAL TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST:
Proceeds from Sales of Shares........................... 2,814 23,891
Dividend Reinvestments.................................. 9 35
Cost of Shares Redeemed................................. (1,839) (22,483)
--------- ---------
NET INCREASE FROM CAPITAL TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST............................... 984 1,443
--------- ---------
TOTAL INCREASE IN NET ASSETS................................ 998 2,134
NET ASSETS:
Beginning of Period..................................... 4,685 2,551
--------- ---------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT
INCOME OF $9 AND $0, RESPECTIVELY).................... $ 5,683 $ 4,685
========= =========
</TABLE>
See accompanying notes
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AMERICAN AADVANTAGE S&P 500 INDEX MILEAGE FUND
FINANCIAL HIGHLIGHTS
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Contained below are selected data for a share outstanding, total investment
return, ratios to average net assets and other supplemental data for the
American AAdvantage S&P 500 Index Mileage Fund
<TABLE>
<CAPTION>
SIX MONTHS
ENDED MARCH 2,
JUNE 30, YEAR ENDED 1998
2000 DECEMBER 31, DECEMBER 31,
(UNAUDITED)(A) 1999 1998
-------------- ------------ ------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD........................ $14.05 $11.78 $10.00
------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income..................................... 0.05 0.11 0.10
Net Realized and Unrealized Gain(Loss) on Investments and
Futures Transactions.................................... (0.15) 2.27 1.78
------ ------ ------
Total from Investment Operations............................ (0.10) 2.38 1.88
------ ------ ------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income..................................... (0.03) (0.11) (0.10)
------ ------ ------
Total Distributions......................................... (0.03) (0.11) (0.10)
------ ------ ------
NET ASSET VALUE, END OF PERIOD.............................. $13.92 $14.05 $11.78
====== ====== ======
TOTAL INVESTMENT RETURN..................................... (0.74%) 20.31% 18.92%
SUPPLEMENTAL DATA AND RATIOS:
Net Assets, End of Period (000s omitted).................. $5,683 $4,685 $2,551
Ratios to Average Net Assets (annualized):
Net Investment Income................................... 0.74% 0.87% 1.00%
Expenses, including expenses of the master portfolios,
after waivers(B)...................................... 0.55% 0.55% 0.55%
Expenses, including expenses of the master portfolios,
before waivers(B)..................................... 1.29% 1.72% 3.36%
Decrease Reflected in Above Expense Ratio Due to
Absorption of Expenses by BT Alex Brown and AMR
Investment Services, Inc.............................. 0.74% 1.17% 2.81%
</TABLE>
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(A) On March 1, 2000, the Fund invested all of its investable assets in the
State Street Bank Equity 500 Portfolio. Prior to March 1, 2000, the Fund
invested all of its investable assets in the BT Equity 500 Portfolio.
(B) Includes expenses of the BT Equity 500 Index Portfolio for the period
January 1, 2000 to February 29, 2000 and the expenses of the State Street
Bank Equity 500 Index Portfolio for the period March 1, 2000 to June 30,
2000.
See accompanying notes
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AMERICAN AADVANTAGE S&P INDEX MILEAGE FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
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1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. Organization
American AAdvantage Mileage Funds (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940 (the "Act"), as amended, as a no load, open-end management investment
company. The American AAdvantage S&P 500 Index Mileage Fund (the "Fund") is one
of the ten funds offered under the Trust and commenced active operations on
March 2, 1998. Information in these financial statements pertains only to the
Fund.
The Fund invests all of its investable assets in the State Street Equity
500 Index Portfolio (the "Portfolio"). The Portfolio is an open-end management
investment company registered under the Act. The value of such investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio. At June 30, 2000, the Fund's investment was 0.16% of the Portfolio.
Prior to March 1, 2000, the Fund invested all of its investable assets in
the BT Equity 500 Index Portfolio. On March 1, 2000, the Fund withdrew its
interest in the BT Portfolio. The Fund received a distribution of cash and
securities from the BT Portfolio with a market value equal to the Fund's
investment in the BT Portfolio at the close of business on February 29, 2000,
which totaled approximately $4,722,000. The Fund immediately contributed those
securities to the State Street Equity 500 Index Portfolio, which commenced
operations on March 1, 2000.
The Portfolio and the BT Portfolio have identical investment objectives and
fundamental policies. The most notable difference between the portfolios relates
to the fees received by the respective managers. State Street Bank and Trust
Company receives an annualized advisory fee of 0.045% of the Portfolio's average
daily net assets. Bankers Trust Company received an annualized advisory fee of
0.075% of the BT Portfolio's average daily net assets.
These financial statements relate to the Fund. The financial statements of
the Portfolio are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
B. Valuation of Investments
Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
C. Investment Income
The Fund records its share of net investment income and realized and
unrealized gains and losses from the security transactions of the Portfolio each
day. All net investment income and realized and unrealized gains (losses) of the
Portfolio are allocated pro rata among the investors in the Portfolio at the
time of such determination.
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AMERICAN AADVANTAGE S&P INDEX MILEAGE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
June 30, 2000 (Unaudited)
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D. Dividends
Dividends from net investment income of the Fund normally will be declared
and paid quarterly. Distributions of net realized capital gains earned by the
Fund, if any, will be paid annually. Dividends are determined in accordance with
income tax principles which may treat certain transactions differently than
generally accepted accounting principles.
E. Federal Income and Excise Taxes
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies, and to distribute
substantially all net investment income as well as any net realized capital
gains on the sale of investments. Therefore, no federal income or excise tax
provision is required. The Fund has a capital loss carryforward of $496,871
which expires in year 2006.
F. Deferred Organization Expenses
Expenses incurred by the Fund in connection with its organization are being
amortized on a straight-line basis over a five-year period.
G. Expenses
Expenses directly attributable to the Fund are charged to the Fund's
operations. Expenses incurred by the Trust with respect to any two of more of
the Funds are allocated in proportion to the net assets of each Fund, except
where allocations of direct expenses to each Fund can otherwise be made fairly.
Each share of each Fund bears equally those expenses that are allocated to the
Fund as a whole.
H. Valuation of Shares
The price per share is calculated on each day on which shares are offered
for sale and orders accepted or upon receipt of a redemption request. Net asset
value per share is computed by dividing the value of the Fund's total assets
(which includes the value of the Fund's investment in the Portfolio), less
liabilities, by the number of Fund shares outstanding.
I. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements. Actual
results could differ from those estimates.
2. FEES AND TRANSACTIONS WITH AFFILIATES
A. Administrative Services Agreement
The Manager and the Trust entered into an Administrative Services Agreement
that obligates the Manager to provide or oversee administrative and management
services to the Fund. As compensation for performing the duties required under
the Administrative Services Agreement, the Manager receives an annualized fee of
.30% of the Fund's average daily net assets. The Manager has contractually
agreed to waive distribution fees and to reimburse the Fund for other expenses
through December 31, 2000 to the extent that total annual fund operating
expenses exceed 0.55%.
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AMERICAN AADVANTAGE S&P INDEX MILEAGE FUND
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
June 30, 2000 (Unaudited)
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B. Distribution Plan
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Act. Under the plan, as compensation for distribution
assistance, the Manager receives an annual fee of .25% of the average daily net
assets. The fee will be payable without regard to whether the amount of the fee
is more or less than the actual expenses incurred in a particular month by the
Manager for distribution assistance. During the period ended June 30, 2000, the
Manager waived distribution fees totaling $6,380.
C. Other
Certain officers or trustees of the Trust are also officers of the Manager
or American. The Trust makes no direct payments to its officers. Unaffiliated
trustees and their spouses are provided unlimited air transportation on
American. However, the Trust compensates each Trustee with payments in an amount
equal to the Trustee's income tax on the value of this free airline travel. For
the period ended June 30, 2000, the cost of air transportation for the trustees
was not material to any of the Funds. One trustee, as a retiree of American,
already receives flight benefits. The Trust compensates this trustee up to
$10,000 annually to cover his personal flight service charges for his three
children, as well as the income tax charged on the value of these benefits.
Prior to March 1, 2000, the Trust compensated this trustee up to $10,000
annually to cover his personal flight service charges and the charges for his
three adult children, as well as the income tax charged on the value of these
benefits. Beginning March 1, 2000, the trustee will receive an annual retainer
of $20,000 plus $1,250 for each Board meeting attended.
D. Reimbursement of Expenses
For the period ended June 30, 2000, the Manager reimbursed expenses
totaling $12,289 to the Fund.
3. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED FOR THE PERIOD ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold............................ 208,033 $ 2,814,467 1,913,188 $ 23,891,255
Reinvested...................... 627 9,034 2,697 34,655
Redeemed........................ (133,680) (1,838,924) (1,799,001) (22,483,627)
-------- ----------- ---------- ------------
Net increase.................... 74,980 $ 984,577 116,884 $ 1,442,283
======== =========== ========== ============
</TABLE>
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AMERICAN AADVANTAGE
MILEAGE FUNDS(SM)
P.O. Box 219643
Kansas City, Missouri 64121-9643
(800) 388-3344
www.aafunds.com
american [email protected]
MANAGED BY
AMR INVESTMENT SERVICES, INC.
This report is prepared for shareholders of the American AAdvantage Mileage
Funds and may be distributed to others only if preceded or accompanied by a
current prospectus.
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American Airlines is not responsible for investments made in the American
AAdvantage Mileage Funds. American AAdvantage Mileage Funds is a registered
service mark of AMR Corporation. American AAdvantage S&P 500 Mileage Fund is a
service mark of AMR Investment Services, Inc.
