-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QrF5ayZnx6fO3wrmBaN7ZXvL4cBmc1fxWEmgIB3knKm5chsscCHFCvz7s8Skz3cK h0GjLW4MnYKhZJPX71dx7A== 0000809593-04-000001.txt : 20040108 0000809593-04-000001.hdr.sgml : 20040108 20040107191353 ACCESSION NUMBER: 0000809593-04-000001 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20031031 FILED AS OF DATE: 20040108 EFFECTIVENESS DATE: 20040108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN AADVANTAGE FUNDS CENTRAL INDEX KEY: 0000809593 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-04984 FILM NUMBER: 04514125 BUSINESS ADDRESS: STREET 1: 4151 AMON CARTER BLVD STREET 2: MD 2450 CITY: FORT WORTH STATE: TX ZIP: 76155 BUSINESS PHONE: 8179673509 MAIL ADDRESS: STREET 1: PO BOX 619003 STREET 2: MD 2450 CITY: DFW AIRPORT STATE: TX ZIP: 75261-9003 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN EAGLE FUNDS DATE OF NAME CHANGE: 19890813 N-CSR 1 ncsr1003.txt FORM N-CSR FOR PERIOD ENDED 10/31/2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-4984 AMERICAN AADVANTAGE FUNDS (Exact name of registrant as specified in charter) 4151 Amon Carter Boulevard, MD 2450 Fort Worth, Texas 76155 (Address of principal executive offices)-(Zip code) WILLIAM F. QUINN, PRESIDENT 4151 Amon Carter Boulevard, MD 2450 Fort Worth, Texas 76155 (Name and address of agent for service) Registrant's telephone number, including area code: (817) 967-3509 Date of fiscal year end: October 31, 2003 Date of reporting period: October 31, 2003 ITEM 1. REPORT TO STOCKHOLDERS. (AA EAGLE) About AMR Investments - -------------------------------- AMR Investments is an experienced provider of investment advisory services to institutional and retail markets. We act as manager of the American AAdvantage Funds, a family of diversified mutual funds, and offer customized fixed income portfolio management services. Our clients include defined benefit plans, defined contribution plans, foundations, endowments, corporations, and other institutional investors. AMR Investments is a wholly owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. Incorporated in 1986, we are directly responsible for the investment management and oversight of AMR Corporation's defined benefit and defined contribution plans, as well as its fixed income investments.
Contents ----------------------------------------- President's Message........... 1 American AAdvantage Funds' Performance................ 2 Market and Performance Overviews.................. 3 American AAdvantage Schedules of Investments Balanced Fund.............. 22 Large Cap Value Fund....... 30 Large Cap Growth Fund...... 34 Small Cap Value Fund....... 38 Emerging Markets Fund...... 44 High Yield Bond Fund....... 50 Enhanced Income Fund....... 56 Intermediate Bond Fund..... 61 Short-Term Bond Fund....... 67 AMR Investment Services Trust Schedules of Investments International Equity Portfolio............... 109 Additional Information........Inside Back Cover
Any opinions herein, including forecasts, reflect our judgement as of the end of the reporting period and are subject to change. Each adviser's strategies and each Fund's portfolio composition will change depending on economic and market conditions. This report is not a complete analysis of market conditions and therefore, should not be relied upon as investment advice. Although economic and market information has been compiled from reliable sources, AMR Investment Services, Inc. makes no representation as to the completeness or accuracy of the statements contained herein. American AAdvantage Funds October 31, 2003 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, I am pleased to present you with the Annual Report for the American AAdvantage Funds for the twelve months ended October 31, 2003. During this time, the American AAdvantage Funds performed very well versus their peers. During the past year, investors experienced both upward and downward market turns while hoping to avoid a fourth consecutive annual decline in the stock market as of December 2003 (something that has not occurred since 1932). Fortunately, the up markets outpaced downward periods by a large margin. The reality seems to be that the economic recovery has arrived. Several unique factors impacted both domestic and global markets: the War with Iraq, the occupation of Afghanistan, the SARS outbreak, the lowest Fed Funds rate in 45 years at 1.0%, along with corporate earnings growth, and signals of a growing economy. Investors welcomed an "upswing" in the market as the major market indices posted significant gains for the fiscal year ended October 31, 2003. The S&P 500 Index reported a gain of 20.80%, the MSCI EAFE Index increased 27.04%, and the Dow Jones Industrial Average was up 19.53%. During the "upswing", the American AAdvantage Funds performed very well. All of the Institutional Class Equity funds outpaced their respective Lipper benchmarks for the twelve-month period. Additionally, the Balanced, Small Cap Value, International Equity, and Emerging Markets Funds all outperformed their respective Lipper benchmarks for the one-year, three-year, and since inception time periods as of October 31, 2003. On the fixed-income front, the High Yield Bond, Intermediate Bond and Short-Term Bond Funds posted positive returns for the fiscal year. The Institutional Class of the Short-Term Bond Fund outperformed its Lipper benchmark for the one, three, five, and ten-year time periods. As the economy rebounds, the American AAdvantage Funds continue to emphasize fundamental investing on behalf of our shareholders. We believe proper asset allocation, management diversification, and low costs will produce superior results over the long term. Please review the enclosed portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. Should you have any questions about the enclosed information, please do not hesitate to contact us at 800-967-9009. You may also access Fund and account information at www.aafunds.com. Thank you for your continued confidence in the American AAdvantage Funds. Sincerely, /s/ WILLIAM F. QUINN William F. Quinn President, American AAdvantage Funds 1 AMERICAN AADVANTAGE FUNDS October 31, 2003 - --------------------------------------------------------------------------------
AVERAGE ANNUALIZED TOTAL RETURN ------------------------------------------ INCEPTION TICKER 10 YEAR/ DATE SYMBOL 1 YEAR 3 YEAR 5 YEAR SINCE INCEPTION --------- ------ ------ ------ ------ --------------- Balanced Fund -- Institutional 7/17/87 AADBX 19.77% 5.74% 4.56% 8.56% Balanced Fund -- PlanAhead 8/1/94 AABPX 19.36% 5.53% 4.32% 8.29% Balanced Fund -- AMR 8/1/94 AABNX 20.06% 6.09% 4.87% 8.84% Lipper Balanced Funds Index 16.21% -0.69% 3.54% 7.81% Large Cap Value Fund -- Institutional 7/17/87 AADEX 27.30% 3.54% 3.43% 9.50% Large Cap Value Fund -- PlanAhead 8/1/94 AAGPX 26.99% 3.25% 3.14% 9.18% Large Cap Value Fund -- AMR 8/1/94 AAGAX 27.64% 3.79% 3.68% 9.76% Lipper Multi-Cap Value Funds Index 27.28% 1.81% 4.96% 10.00% Large Cap Growth Fund -- Institutional 7/31/00 ALCGX 21.15% -16.81% N/A -16.84% Large Cap Growth Fund -- AMR 7/31/00 ALFIX 21.09% -16.73% N/A -16.74% Lipper Large-Cap Growth Funds Index 18.51% -16.80% N/A -16.92% Small Cap Value Fund -- Institutional 12/31/98 AVFIX 47.45% 22.32% N/A 14.06% Small Cap Value Fund -- PlanAhead 3/1/99 AVPAX 47.12% 21.91% N/A 13.77% Small Cap Value Fund -- Service 5/1/03 AASSX 46.84% 21.84% N/A 13.72% Small Cap Value Fund -- AMR 3/1/99 AASVX 47.93% 22.67% N/A 14.37% Lipper Small-Cap Value Funds Index 41.48% 14.02% N/A 11.18% International Equity Fund -- Institutional 8/7/91 AAIEX 31.61% -0.57% 3.84% 7.79% International Equity Fund -- PlanAhead 8/1/94 AAIPX 31.62% -0.69% 3.65% 7.54% International Equity Fund -- Service 5/1/03 AAISX 31.28% -0.78% 3.60% 7.51% International Equity Fund -- AMR 8/1/94 AAIAX 31.77% -0.36% 4.09% 8.05% Lipper International Funds Index 26.54% -4.84% 1.87% 4.99% Emerging Markets Fund -- Institutional 7/31/00 AEMFX 48.45% 9.92% N/A 2.55% Emerging Markets Fund -- PlanAhead 10/1/02 AAEPX 48.07% 9.78% N/A 2.42% Emerging Markets Fund -- AMR 7/31/00 AAMRX 48.84% 10.17% N/A 2.80% Lipper Emerging Market Funds Index 48.38% 7.34% N/A 1.38% High Yield Bond Fund -- Institutional 12/29/00 AYBFX 20.11% N/A N/A 10.98% High Yield Bond Fund -- PlanAhead 3/1/02 AHYPX 19.57% N/A N/A 10.48% High Yield Bond Fund -- Service 5/1/03 AAHSX 18.77% N/A N/A 10.22% Lipper High Yield Bond Funds Index 30.27% N/A N/A 5.96% Enhanced Income Fund -- PlanAhead 6/30/03 AANPX N/A N/A N/A 0.32% Lipper Interm. Invest. Grade Index N/A N/A N/A -0.76% Intermediate Bond Fund -- Institutional 9/15/97 AAIBX 4.31% 7.52% 5.87% 6.75% Intermediate Bond Fund -- PlanAhead 3/2/98 AAPAX 4.25% 7.32% 5.30% 6.23% Intermediate Bond Fund -- AMR 3/1/99 AABDX 4.62% 7.82% 5.70% 6.61% Lipper Interm. Invest. Grade Index 6.68% 8.12% 6.15% 6.71% Short-Term Bond Fund -- Institutional 12/3/87 AADFX 3.58% 5.92% 5.22% 5.25% Short-Term Bond Fund -- PlanAhead 8/1/94 AALPX 3.38% 5.68% 4.96% 5.03% Short-Term Bond Fund -- AMR 8/1/94 AASBX 3.82% 6.11% 5.44% 5.47% Lipper Short Invest. Grade Index 3.17% 5.26% 4.99% 5.21%
Performance shown for the PlanAhead and AMR Classes prior to their inception dates is that of the Institutional Class. Performance shown for the Service Class prior to its inception date is that of the Institutional and PlanAhead Classes since their inception dates. Past performance is not indicative of future performance. Fund performance does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 DOMESTIC EQUITY MARKET OVERVIEW October 31, 2003 - -------------------------------------------------------------------------------- After a rocky start at the beginning of the fiscal period, the U.S. equity markets staged a surprisingly strong rally that stoked a renewed sense of investor optimism. For the twelve months ended October 31, 2003 the S&P 500 Index and Russell 2000 Index returned 20.8 % and 43.4%, respectively. For the first six months of the year, investors struggled with reconciling the future of the U.S. economy and corporate earnings against a nearly constant flow of negative news. Corporate scandals, low consumer confidence, terrorism, and the war in Iraq weighed heavily on the market. The consumer confidence index fell to almost a ten-year low, and unemployment was a concern. Rising energy costs further depressed the economy as surging oil prices decreased consumer spending. Nevertheless, the combination of low interest rates, federal income tax cuts, and the end of major corporate cost cutting programs set the stage for improved economic performance. During the year, mortgage refinancing activity soared, as yields on 10-year Treasury Notes fell to a 45-year low. In addition, the $350 billion tax cut package provided stimulation to GDP. The combination of tax refunds and lower consumer credit rates (both mortgage and credit card) enabled the average consumer to continue to spend. With the end of major combat in Iraq and money in the pocket, consumer confidence recovered and spending increased. This stimulus and large ongoing productivity gains had a very positive impact on corporate confidence and put an end to negative quarterly earnings surprises. With the end of the war, investors began to anticipate the impact of economic recovery, which sparked a broad-based market rally led by economically sensitive small cap stocks. In the early stages of the rally, investment style was not a significant factor as both high and low P/E stocks performed well. Later in the rally, growth or high P/E stocks appeared to gain more momentum as speculation was back in vogue in certain sectors, such as technology. October 2003 concluded with strong economic improvement, including high productivity gains and improving corporate profits. Revised GDP growth was over 8% in the third quarter. Investors were optimistic enough to create a late summer mini technology rally, despite the lack of positive earnings or revenue growth in many technology companies. Unemployment remains high despite strong GDP growth; however, employment improvements typically lag economic growth. Investors remain sensitive to news on the economy and specific earnings developments. Earnings growth expectations appear to be high, and overall market prices have risen sharply over the past year. Capital and consumer spending will be key determinants of economic strength in the coming months. Any opinions expressed in the Market and Performance overviews, including forecasts, reflect our judgement as of this date and are subject to change. 3 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE BALANCED FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Balanced Fund's Institutional Class returned 19.8% for the twelve months ended October 31, 2003, outperforming the 60% S&P 500 Barra Value/40% Lehman Brothers Aggregate Index benchmark return of 16.9% and the Lipper Balanced Funds Index return of 16.2%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/93 THROUGH 10/31/03 (GRAPH)
INSTITUTIONAL LIPPER S&P 500 S&P 500/ LEHMAN BALANCED CLASS BALANCED INDEX BARRA VALUE BROTHERS COMPOSITE FUNDS INDEX AGG INDEX INDEX INDEX 10/93 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10,000.00 10/94 9,992.00 9,939.00 10,387.00 10,218.00 9,632.00 9,986.00 10/95 11,929.00 11,687.00 13,133.00 12,570.00 11,139.00 11,993.00 10/96 13,893.00 13,382.00 16,297.00 15,664.00 11,789.00 14,013.00 10/97 16,677.00 16,092.00 21,530.00 20,316.00 12,840.00 16,985.00 10/98 18,185.00 17,823.00 26,265.00 22,701.00 14,037.00 18,938.00 10/99 18,281.00 20,064.00 33,007.00 27,016.00 14,112.00 21,114.00 10/00 19,219.00 21,651.00 35,017.00 29,632.00 15,142.00 23,017.00 10/01 20,001.00 19,756.00 26,298.00 24,173.00 17,346.00 21,613.00 10/02 18,973.00 18,251.00 22,324.00 20,359.00 18,368.00 20,104.00 10/03 22,724.00 21,209.00 26,968.00 25,412.00 19,270.00 23,504.00
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/03 $10,000 --------------------------- 10/31/93- 1 YEAR 5 YEARS 10 YEARS 10/31/03 ------ ------- -------- --------- Institutional Class(1).... 19.77% 4.56% 8.56% $22,724 PlanAhead Class(1,2)...... 19.36% 4.32% 8.29% $22,180 AMR Class(1,2)............ 20.06% 4.87% 8.84% $23,333 Lipper Balanced Funds Index.................... 16.21% 3.54% 7.81% $21,209 S&P 500 Index............. 20.80% 0.53% 10.43% $26,968 S&P 500/Barra Value Index.................... 24.82% 2.28% 9.78% $25,412 Lehman Bros. Aggregate Index.................... 4.91% 6.54% 6.78% $19,270 Balanced Composite Index*................... 16.91% 4.41% 8.92% $23,504
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance represents the total returns achieved by the Institutional Class from 10/31/93 up to 8/1/94, the inception date of the PlanAhead and AMR Classes, and the returns of the PlanAhead and AMR Classes since inception of these Classes. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 10/31/93. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in existence since 10/31/93. * 60% S&P 500 Barra Value, 40% Lehman Bros. Aggregate Index During the twelve-month period, the Fund's assets on average were invested 63% in equities (and equitized cash), 36% in fixed-income securities and less than 1% in non-equitized cash, ending the period with 66% in equities (and equitized cash) and 34% in fixed-income securities. The equity portion of the Fund returned 28.8%, outperforming the S&P 500 Barra Value Index ("Barra Value Index") return of 24.8%. The Fund's equity holdings added value relative to the Barra Value Index through stock selection. The Consumer Discretionary sector contributed most to the Fund's excess performance as the Fund returned 46.1% versus a Barra Value Index return of 24.3% in the sector. The Fund's positions in Sears Roebuck (up 107.0%), Centex (up 114.9%) and Yum Brands (up 51.5%) had the most impact in this sector. The Financials sector holdings were also a source of significant added value, primarily through FleetBoston Financial (up 81.6%), J.P. Morgan Chase (up 81.2%) and CIT Group (up 93.2%). The Fund's Information Technology sector holdings returned a solid 44.6% for the twelve-month period; however, they underperformed the Barra Value Index return of 74.0% for the sector. The Fund's positions in Electronic Data Systems (up 47.6%) and International Business Machines (up 14.2%) detracted from performance relative to the Barra Value Index. Equity sector selection had little net impact on the Fund's relative returns during the fiscal year. The benefit from underweighting Telecommunication Services, the worst performing sector of the Barra Value Index, was negated by overweighting Consumer Staples, the second worst performing sector. The fixed-income portion of the Fund returned 7.6% for the twelve-month period, ahead of the Lehman Brothers Aggregate Index return of 4.9%. The Fund's outperformance was due mostly to a larger than double weighting in Corporates, the best performing sector of the Lehman Brothers Aggregate Index. A significant underweighting in Treasuries, the worst performing sector of the Lehman Brothers Aggregate Index, also contributed to the Fund's excess performance. 4 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE BALANCED FUND(SM) -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- The sub-advisers continue to search for attractive fixed-income securities in a difficult interest rate environment. Their equity philosophy of investing in companies that have attractive valuations and earnings growth potential should cause the Fund to benefit from the economic recovery currently under way. TOP TEN EQUITY HOLDINGS
% OF EQUITIES -------- CitiGroup, Incorporated 2.3% Altria Group, Incorporated 2.3% Conoco Phillips 2.1% Allstate Corporation 2.1% Washington Mutual, Incorporated 2.0% Bank of America Corporation 2.0% Sears Roebuck & Company 1.9% American Electric Power Company, Incorporated 1.9% Boeing Company 1.7% MetLife, Incorporated 1.7% ----- Total 20.0% Top Ten Equity Holdings as % of Total Net Assets 11.6%
EQUITY SECTOR ALLOCATION
% OF EQUITIES ---------- Financials 28.5% Industrials 14.3% Consumer Discretionary 12.0% Energy 9.5% Health Care 8.0% Consumer Staples 8.0% Materials 6.3% Information Technology 6.2% Utilities 5.6% Telecommunication Services 1.0% Real Estate 0.6%
FIXED INCOME SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 47.6% Treasury 27.0% Mortgage Backed 22.9% Agency 2.5%
5 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE LARGE CAP VALUE FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Institutional Class of the Large Cap Value Fund returned 27.3% for the twelve months ended October 31, 2003, well ahead of the S&P 500/Barra Value Index return of 24.8% and matching the Lipper Multi-Cap Value Funds Index return of 27.3%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/93 THROUGH 10/31/03 (GRAPH)
INSTITUTIONAL LIPPER MULTI- S&P 500 S&P 500/ CLASS CAP VALUE INDEX BARRA VALUE FUNDS INDEX INDEX 10/93 10,000.00 10,000.00 10,000.00 10,000.00 10/94 10,336.00 10,379.00 10,387.00 10,218.00 10/95 12,475.00 12,465.00 13,133.00 12,570.00 10/96 15,390.00 15,027.00 16,297.00 15,664.00 10/97 19,707.00 19,425.00 21,530.00 20,316.00 10/98 20,944.00 20,359.00 26,265.00 22,701.00 10/99 21,304.00 22,373.00 33,007.00 27,016.00 10/00 22,329.00 24,579.00 35,017.00 29,632.00 10/01 21,836.00 23,023.00 26,298.00 24,173.00 10/02 19,471.00 20,380.00 22,324.00 20,359.00 10/03 24,787.00 25,940.00 26,968.00 25,412.00
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/03 $10,000 --------------------------- 10/31/93- 1 YEAR 5 YEARS 10 YEARS 10/31/03 ------ ------- -------- --------- Institutional Class(1).... 27.30% 3.43% 9.50% $24,786 PlanAhead Class(1,2)...... 26.99% 3.14% 9.18% $24,066 AMR Class(1,2)............ 27.64% 3.68% 9.76% $25,378 Lipper Multi-Cap Value Funds Index.............. 27.28% 4.96% 10.00% $25,940 S&P 500 Index............. 20.80% 0.53% 10.43% $26,968 S&P 500/Barra Value Index.................... 24.82% 2.28% 9.78% $25,412
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance represents the total returns achieved by the Institutional Class from 10/31/93 up to 8/1/94, the inception date of the PlanAhead and AMR Classes, and the returns of the PlanAhead and AMR Classes since inception of these Classes. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 10/31/93. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in existence since 10/31/93. Similar to the S&P 500/Barra Value Index ("Index"), the Fund produced absolute positive returns in every sector except Telecommunication Services. Overall, the Fund added value relative to the Index through strong stock selection and, to a lesser extent, through positive sector allocation. The Fund benefited from its stock selection in seven of the ten economic sectors. The largest contributors were holdings in the Consumer Discretionary sector, where the Fund returned 43.1% versus an Index return of 24.3%. Positions in Sears Roebuck (up 107.0%), Centex (up 114.9%) and Yum Brands (up 51.5%) had the largest impact in this sector. Significant value also was added through stock selection in the Financials sector, led by holdings in FleetBoston Financial (up 81.6%), J.P. Morgan Chase (up 81.2%) and CIT Group (up 93.2%). While the Fund's Information Technology sector holdings produced strong absolute returns of 47.6% for the twelve-month period, they still underperformed the Index return of 74.0% in that sector. The Fund's positions in Electronic Data Systems (up 47.6%) and International Business Machines (up 14.2%) detracted from performance relative to the Index. Sector weightings also added value, primarily through underweighting Telecommunication Services, the worst performing sector of the Index. Unfortunately, overweighting Consumer Staples, the second worst performing sector, offset much of the value otherwise attained through sector selection. We believe the sub-advisers' philosophy of investing in companies that have attractive valuations and earnings growth potential should allow the Fund to benefit from the economic recovery currently under way. TOP TEN HOLDINGS
% OF NET ASSETS ---------- Altria Group, Incorporated 2.2% ConocoPhillips 1.9% Allstate Corporation 1.8% Citigroup, Incorporated 1.8% Sears Roebuck & Company 1.7% Cendant Corporation 1.6% Tyco International Limited 1.6% Washington Mutual, Incorporated 1.6% Boeing Company 1.5% MetLife, Incorporated 1.5%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 27.5% Industrials 14.5% Consumer Discretionary 12.0% Consumer Staples 8.8% Energy 8.2% Health Care 7.7% Information Technology 7.5% Utilities 5.7% Materials 5.6% Telecommunication Services 1.6% Real Estate 0.9%
6 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE LARGE CAP GROWTH FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Institutional Class of the Large Cap Growth Fund returned 21.15% for the twelve months ended October 31, 2003, compared to the Russell 1000(R) Growth Index return of 21.81% and the Lipper Large Cap Growth Funds Index return of 18.51%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/03 (GRAPH)
INSTITUTIONAL RUSSELL 1000 LIPPER LARGE CLASS GROWTH CAP GROWTH INDEX FUNDS INDEX 7/00 10,000.00 10,000.00 10,000.00 10/00 9,540.00 9,407.00 9,505.00 10/01 5,665.00 5,649.00 5,678.00 10/02 4,534.00 4,541.00 4,620.00 10/03 5,493.00 5,531.00 5,476.00
* Inception of Large Cap Growth Fund
ANNUALIZED TOTAL RETURNS ----------------------------- PERIODS ENDED 10/31/03 VALUE OF ----------------------------- $10,000 SINCE 7/31/00- 1 YEAR 3 YEAR INCEPTION 10/31/03 ------ -------- --------- --------- Institutional Class(1).............. 21.15% (16.81)% (16.84)% $5,493 AMR Class(1)............ 21.09% (16.73)% (16.74)% $5,514 Lipper Large-Cap Growth Funds Index........... 18.51% (16.80)% (16.92)% $5,476 Russell 1000 Growth Index.......... 21.81% (16.22)% (16.66)% $5,531
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. As these returns indicate, it has been a positive period for growth stocks, and the Fund participated fully in the upside movement. During the Fund's fiscal year, all sectors in the Russell 1000 Growth Index ("Index") posted positive returns. The Fund added value almost exclusively through good stock selection, although sector weighting decisions were mildly beneficial. From a stock selection standpoint, the largest value added sector for the Fund relative to the Index was Financials. Owning Countrywide Financial (up 123.1%), Capital One (up 100.1%) and E-Trade (up 128.9%) contributed to this sector's outstanding relative performance. In Healthcare, positions in Gilead Sciences (up 57.1%), Pacificare Health Systems (up 65.1%) and Guidant (up 73.1%) were the largest contributors relative to the Index. Conversely, stock selection in the Information Technology and Consumer Discretionary sectors detracted from performance relative to the Index. In Information Technology, the largest drag on relative performance was Microsoft (down 1.3%). In the Consumer Discretionary sector, the Fund's relative performance was hurt as a result of positions in Viacom (down 10.5%), Wal Mart (up 10.8%) and Time Warner (up 10.4%). Looking forward, the Fund's sub-advisers will continue to maintain a disciplined, long-term approach to equity investing in larger stocks with above average growth potential. TOP TEN HOLDINGS
% OF NET ASSETS ---------- General Electric Company 4.6% Intel Corporation 4.2% Pfizer, Incorporated 4.1% Microsoft Corporation 3.8% Wal-Mart Stores, Incorporated 2.8% Procter & Gamble Company 2.6% Cisco Systems, Incorporated 2.4% Amgen, Incorporated 2.2% Coca-Cola Company 1.8% Dell, Incorporated 1.7%
SECTOR ALLOCATION
% OF EQUITIES -------- Information Technology 25.3% Health Care 23.8% Consumer Discretionary 18.3% Consumer Staples 10.2% Industrials 9.2% Financials 8.6% Energy 2.0% Materials 1.4% Telecommunication Services 1.1% Utilities 0.1%
Russell 1000 (R) Growth Index is a service mark of the Frank Russell Company 7 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SMALL CAP VALUE FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Institutional Class of the Small Cap Value Fund returned 47.4% for the twelve months ended October 31, 2003, outperforming the Russell 2000(R) Value Index return of 40.3% and the Lipper Small-Cap Value Funds Index return of 41.5% for the same period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 12/31/98* THROUGH 10/31/03 (GRAPH)
INSTITUTIONAL LIPPER SMALL-CAP RUSSELL 2000 CLASS VALUE FUNDS INDEX VALUE INDEX 12/98 10,000.00 10,000.00 10,000.00 10/99 9,070.00 9,513.00 9,508.00 10/00 10,320.00 11,261.00 11,153.00 10/01 12,400.00 12,151.00 12,129.00 10/02 12,808.00 11,799.00 11,822.00 10/03 18,886.00 16,693.00 16,584.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS ---------------------------- PERIODS ENDED 10/31/03 VALUE OF ---------------------------- $10,000 SINCE 12/31/98- 1 YEAR 3 YEARS INCEPTION 10/31/03 ------ ------- --------- --------- Institutional Class(1)............ 47.45% 22.32% 14.06% $18,886 PlanAhead Class(1,2).. 47.12% 21.91% 13.77% $18,654 AMR Class(1,2)........ 47.93% 22.67% 14.37% $19,140 Service Class(1,3).... 46.84% 21.84% 13.72% $18.618 Lipper Small-Cap Value Funds Index......... 41.48% 14.02% 11.18% $16,693 Russell 2000 Value Index............... 40.29% 14.14% 11.03% $16,584
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance represents the total returns achieved by the Institutional Class from 12/31/98 up to 3/1/99, the inception date of the PlanAhead and AMR Classes, and the returns of the PlanAhead and AMR Classes since inception of these Classes. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 12/31/98. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in existence since 12/31/98. 3 Fund performance represents the total returns achieved by the Institutional Class from 12/31/98 up to 3/1/99, the returns of the PlanAhead Class from 3/1/99 up to 5/1/03 (the inception date of the Service Class), and the returns of the Service Class since its inception. Expenses of the Service Class are higher than those of the Institutional and PlanAhead Classes. Therefore, total returns shown may be higher than they would have been had the Service Class been in existence since 12/31/98. The Fund generated positive returns in every sector and outperformed the Russell 2000 Value Index ("Index") during the fiscal year. Stock selection accounted for the excess performance over the Index, as sector selection detracted from the Fund's relative performance. Stock selection in the Financials sector had the greatest impact, accounting for 6.1% of the Fund's excess performance relative to the Index. Positions in Allmerica Financial, Tierone and Friedman Billings Ramsey were the major contributors to the sector's positive impact on the Fund's performance. The Consumer Discretionary and Industrials sectors also contributed significantly to the Fund's excess return, adding 2.2% and 1.5%, respectively, from stock selection. Holdings such as Toll Brothers and Foot Locker in the Consumer Discretionary sector and Brookfield Homes and Joy Global in Industrials helped to produce the positive results. The Fund's underweighting in the Information Technology sector detracted 1.4% from relative performance. Information Technology was the second best performing sector in the Index for the twelve-month period, up 84.4%. As the economy improves, we believe that the attractively valued stocks in the Fund's portfolio should continue to provide strong returns. TOP TEN HOLDINGS
% OF NET ASSETS --------------- Valassis Communications, Incorporated 2.1% Beazer Homes USA, Incorporated 1.9% Allmerica Financial Corporation 1.9% MI Developments, Incorporated 1.7% The Warnaco Group, Incorporated 1.5% LNR Property Corporation 1.4% BJ's Wholesale Club, Incorporated 1.3% WCI Communities, Incorporated 1.2% Foot Locker, Incorporated 1.1% Rotech Healthcare, Incorporated 1.1%
SECTOR ALLOCATION
% OF EQUITIES ------------- Consumer Discretionary 25.7% Financials 23.2% Industrials 17.8% Utilities 8.7% Materials 6.4% Health Care 6.2% Energy 4.7% Information Technology 3.8% Consumer Staples 3.3% Telecommunication Services 0.2%
Russell 2000(R) Value Index is a service mark of the Frank Russell Company. 8 INTERNATIONAL EQUITY/EMERGING MARKETS OVERVIEW October 31, 2003 - -------------------------------------------------------------------------------- INTERNATIONAL EQUITY The twelve months ended October 31, 2003 can be divided into two distinct periods: the war-ridden, economically feeble months of November through March, and the cyclical upturn in April through October. The combined result was a strong EAFE Index return of 27.0% for the twelve-month period ended October 31, 2003, which was driven by both strong local markets and foreign currencies appreciating against the U.S. dollar. In the first period, the global economy weathered the war in Iraq, rising oil prices, and deflationary threats. The war in Iraq and global economic uncertainty damaged sentiment in the U.S., Europe and Japan. In Germany, business confidence suffered another sharp decline in March, dashing the hopes of analysts who expected German firms to rebound from their slump. In the U.S. and Europe, continuing weak labor market data gave central banks a reason to lower interest rates one last time in this cycle. In late spring, the overthrow of Saddam Hussein and a dip in oil prices incited optimism in global economic growth. Meanwhile, the seemingly untiring U.S. consumer kept on spending as retail sales rose by 6.0% in the twelve months through May 2003. Other signs of initial global economic strength were the continued rise in natural resource commodity prices, an improvement in demand for technology evident in rising semiconductor pricing, and improving business confidence. By late October, a rise in equity markets signaled that the global recovery was sustainable, even in regions such as Japan, ever susceptible to a false dawn. Central banks in Australia, Canada and the UK raised short-term interest rates in October, acting pre-emptively and withdrawing stimulus that was no longer suited to the improving environment. With a recovery in the global economy, other monetary authorities began considering similar action. Even China, after reporting a stunning 9.1% annual growth, decided to tighten its monetary policy. Beijing drained funds out of the banking system to slow the lending boom. With improved growth across many countries, some economists have been placing a high probability on a synchronized global economic recovery, which they believe might currently be under way. Even the sluggish global job market, widely considered the main hurdle of the current recovery, gave some positive signs toward the end of this reporting period. EMERGING MARKETS Global emerging markets, as measured by the MSCI Emerging Markets Free Index (the Index") rebounded from early year weakness to return an impressive 48.3% during the twelve months ended October 31, 2003. All regions ended with strong double-digit gains with particular strength in Latin America and Asia. Meanwhile, oil producing countries were also strong performers as they benefited from firm oil prices. During the first half of the fiscal year, the consistent threat of the U.S.-led war against Iraq, concerns over the global recovery and pessimistic corporate outlooks depressed an already weak investor sentiment worldwide. Most of the period was characterized by growing risk aversion and steady selling by global investors. The markets rebounded sharply by mid-March once diplomacy over Iraq broke down and it became clear that the U.S. would initiate war with Iraq, helping to remove some uncertainty in the market and increasing prospects for a U.S.-led global recovery. After reaching lows on March 12, 2003, the Index posted seven consecutive months of positive performance. Investor sentiment worldwide appeared to improve particularly during the second calendar quarter as expectations for better economic growth grew following the successful U.S. campaign in Iraq and the subsequent easing in the price of oil. Momentum in the markets remained strong particularly in the latter half of the period. Positive sentiment continued to be supported by strong foreign buying, domestic and global monetary easing, and economic strength among most emerging markets. In addition, there were signs of further improvements in the U.S. and Japanese economies. 9 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Institutional Class of the International Equity Fund returned 31.6% for the twelve months ended October 31, 2003. The Fund outperformed the MSCI EAFE Index return of 27.0% and the Lipper International Funds Index return of 26.5%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/93 THROUGH 10/31/03 (GRAPH)
INSTITUTIONAL LIPPER INT'L CLASS FUNDS MSCI EAFE INDEX INDEX 10/93 10,000.00 10,000.00 10,000.00 10/94 11,177.00 11,151.00 11,010.00 10/95 12,060.00 11,099.00 10,969.00 10/96 14,143.00 12,499.00 12,118.00 10/97 16,841.00 14,170.00 12,679.00 10/98 17,547.00 14,828.00 13,902.00 10/99 21,053.00 18,244.00 17,104.00 10/00 21,550.00 18,874.00 16,608.00 10/01 17,985.00 14,325.00 12,468.00 10/02 16,095.00 12,854.00 10,821.00 10/03 21,183.00 16,265.00 13,747.00
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/03 $10,000 --------------------------- 10/31/93- 1 YEAR 5 YEARS 10 YEARS 10/31/03 ------ ------- -------- --------- Institutional Class(1)............. 31.61% 3.84% 7.79% $21,183 PlanAhead Class(1,2)... 31.62% 3.65% 7.54% $20,690 AMR Class(1,2)......... 31.77% 4.09% 8.05% $21,683 Service Class(1,3)..... 31.28% 3.60% 7.51% $20,637 Lipper Int'l. Funds Index................ 26.54% 1.87% 4.99% $16,265 MSCI EAFE Index........ 27.04% (0.23)% 3.23% $13,747
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance represents the total returns achieved by the Institutional Class from 10/31/93 up to 8/1/94, the inception date of the PlanAhead and AMR Classes, and the returns of the PlanAhead and AMR Classes since inception of these Classes. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in place since 10/31/93. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in place since 10/31/93. 3 Fund performance represents the total returns achieved by the Institutional Class from 10/31/93 up to 8/1/94, the returns of the PlanAhead Class from 8/1/94 up to 5/1/03 (the inception date of the Service Class), and the returns of the Service Class since its inception. Expenses of the Service Class are higher than those of the Institutional and PlanAhead Classes. Therefore, total returns shown may be higher than they would have been had the Service Class been in existence since 10/31/93. The turnaround that began in October of 2002 continued throughout the twelve-month period ended October 31, 2003, helping to drive the strong returns of the Fund. All twenty-one developed countries in the MSCI EAFE Index ("Index") produced a return in excess of 10%. The Fund outperformed the Index over the past fiscal year due to strong stock selection, while country allocation was slightly negative. In the Netherlands, significant positions in Philips Electronics (up 53.9%), Vedior (up 142.6%) and ABN AMRO (up 51.4%) contributed nearly 2% in relative performance as compared to the Index. In Switzerland, the Fund added value by owning Credit Suisse (up 85.0%) and Adecco (up 97.9% during the period it was held by the Fund), while UK holdings, Reuters and Hanson (both up nearly 60%), also contributed to the Fund's outperformance. Country allocation detracted value as the Fund had a nearly double-digit underweighting in Japan versus the Index, while the Japanese market gained over 33% during the period. Sector performance resembled country performance for the period as each sector produced returns in excess of 10%. Although most of the value added was achieved through stock selection, sector allocation was also positive. Stock selection was particularly strong in the Energy, Consumer Discretionary, Financial and Information Technology sectors. Within the Energy sector, Petrochina gained over 90%, while Repsol and Norsk Hydro (along with Consumer Discretionary stocks Philips Electronics and Reuters) helped Fund performance as each rose over 50%. Depfa Bank (Financial) gained nearly 150% while Konica Minolta (Information Technology) rose nearly 100%. From a sector allocation perspective, the Fund added value by overweighting Industrials, the second best performing sector for the period (up over 40%), and by underweighting Health Care, the second worst performing sector (up 13.9%). Although economic and market conditions vary from period to period, the Fund's primary strategy remains consistent as it focuses on investing in undervalued companies with above-average earnings growth expectations. 10 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Koninklijke (Royal) Philips Electronics NV 2.2% Total SA 1.5% Vodafone Group PLC 1.5% Aventis SA 1.4% Unilever PLC 1.4% Credit Suisse Group 1.4% Telefonica SA 1.3% Diageo PLC 1.3% Canon, Incorporated 1.3% GlaxoSmithKline PLC 1.3%
SECTOR ALLOCATION
% OF EQUITIES ---------- Financials 26.0% Industrials 15.3% Consumer Discretionary 12.6% Telecommunication Services 9.4% Consumer Staples 8.8% Materials 7.4% Energy 7.1% Health Care 6.6% Information Technology 4.2% Utilities 2.6%
REGIONAL ALLOCATION* (PIE CHART) REGIONAL ALLOCATION*
% OF EQUITIES -------- Europe 75.5% Pacific Rim 21.6% North America 2.6% Central America 0.3%
* Allocations based upon gross investments in AMR Investment Services Trust International Equity Portfolio. 11 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Institutional Class of the Emerging Markets Fund returned 48.5% for the twelve months ended October 31, 2003. The Fund slightly outperformed both the MSCI EM Free Index return of 48.3% and the Lipper Emerging Market Funds Index return of 48.4%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/03 (GRAPH)
INSTITUTIONAL MSCI EMG MKTS LIPPER EMG MKT CLASS FREE INDEX FUNDS INDEX 07/00 10,000.00 10,000.00 10,000.00 10/00 8,170.00 8,499.00 8,455.00 10/01 6,657.00 6,488.00 6,578.00 10/02 7,309.00 7,023.00 7,047.00 10/03 10,851.00 10,417.00 10,456.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS ---------------------------- PERIODS ENDED 10/31/03 VALUE OF ---------------------------- $10,000 SINCE 7/31/00- 1 YEAR 3 YEARS INCEPTION 10/31/03 ------ ------- --------- -------- Institutional Class(1)............ 48.45% 9.92% 2.55% $10,851 PlanAhead Class(1,2).. 48.07% 9.78% 2.42% $10,808 AMR Class(1).......... 48.84% 10.17% 2.80% $10,938 Lipper Emg Mkt Funds Index............... 48.38% 7.34% 1.38% $10,456 MSCI Emerging Markets Free Index.......... 48.33% 7.02% 1.26% $10,417
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance represents the total returns achieved by the Institutional Class from 7/31/00 up to 10/1/02, the inception date of the PlanAhead Class, and the returns of the PlanAhead Class since its inception. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 7/31/00. All twenty-six emerging market countries in the MSCI EM Free Index ("Index") produced a return in excess of 20%. Twenty-one of the countries within the Index produced a return in excess of 40%, and nine countries produced a return in excess of 80%. The Fund outperformed the Index over the past fiscal year due to stock selection and country allocation, but much of the outperformance was negated due to the Fund's cash position. Although the Fund held a small amount in cash (the average cash position was 4.2% during the fiscal year), it created a significant performance drag due to the strength of each country's equity market. Stock selection was strong in India as positions in State Bank of India (up 186.2%), GAIL (India) Limited (up 126.6%), Tata Engineering (up 176.1%) and Hindalco Industries Limited (up 140.5%) contributed to the outperformance as compared to the Index. In Indonesia, positions in PT Astra International (up 194.7%) and PT Telekomunikasi Indonesia (up 127.2%) added significant value as well. From a country allocation perspective, the Fund added value by overweighting Indonesia, the second best performing market for the period, and India. Unfortunately, some of the value added was offset by underweighting Chile, the third best performing market in the Index (up 91.8%), and by overweighting Mexico, the worst performing market for the period. Similar to country performance, sector performance was very strong within the Index as each sector produced returns in excess of 30%. The Fund's sector outperformance was due to stock selection, as sector allocation was slightly negative. Stock selection was particularly strong in the Consumer Discretionary, Telecommunication Services, Information Technology and Financial sectors. Within the Consumer Discretionary sector, PT Astra International and Tata Engineering gained over 194% and 176%, respectively. PT Telekomunikasi Indonesia and American Movil (both Telecommunication Services) posted returns of over 127% and 78%, respectively. Samsung SDI (Information Technology) gained over 71% while State Bank of India (Financials) rose 186%. From a sector allocation viewpoint, the Fund detracted value by underweighting Materials, the third best performing sector for the period (up 60.8%) and by overweighting Telecommunication Services, the second worst performing sector for the period (up 37%). Despite the outperformance of the emerging markets asset class, the Fund's basic philosophy remains focused on investing in undervalued companies with above-average earnings growth expectations. 12 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM) -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Samsung Electronics Company Limited 3.3% Anglo American PLC 3.0% Telefonos de Mexico SA, ADR 2.3% Samsung SDI Company Limited 1.6% LUKOIL Oil Company, ADR 1.6% Petroleo Brasileiro SA, ADR 1.4% Sasol Limited 1.4% Korea Electric Power Corporation 1.2% Mining and Metallurgical Co. Norilsk Nickel, ADR 1.1% United Microelectronics Corporation 1.0%
SECTOR ALLOCATION
% OF EQUITIES ---------- Financials 18.3% Information Technology 13.7% Materials 13.5% Telecommunication Services 12.8% Industrials 11.0% Energy 9.6% Consumer Discretionary 8.7% Consumer Staples 7.7% Utilities 3.9% Health Care 0.8%
COUNTRY ALLOCATION (PIE CHART) COUNTRY ALLOCATION
% OF EQUITIES -------- South Korea 17.6% South Africa 15.3% Taiwan 12.4% Other Europe, Middle East, Africa 11.4% Brazil 8.7% Mexico 8.6% India 7.4% Other Asia 7.2% China 6.6% Malaysia 3.0% Israel 1.6% Other Latin America 0.2%
13 HIGH YIELD BOND MARKET OVERVIEW October 31, 2003 - -------------------------------------------------------------------------------- The economic environment improved steadily, albeit slowly, over the twelve months ended October 31,2003. In November 2002, the Federal Reserve cut the Fed Funds rate by 0.50% to 1.25%, which was followed by a further 0.25% cut in June 2003. At its latest meeting in October 2003, the Federal Reserve voted unanimously to keep the benchmark U.S. interest rate at 1.00%, a 45-year low (1958). The high yield market, as measured by the Lehman Brothers High Yield Index ("Index"), returned an impressive 33.8% during the twelve months ended October 31, 2003. After the U.S. attack on Iraq in March, April's "relief rally" saw the major stock indices gain ground after months of underperformance. GDP, as revised, for the third quarter of 2003 exceeded 8%, which was the fastest pace in two decades. Although the high yield market was strong throughout the period, the U.S. Treasury provided no help, with a total return actually below the coupon. The low quality Caa segment of the market, which comprised 15% of the Index, returned 71.9% for the twelve months ended October 31, 2003. The lowest-rated segment of the Index (Ca-D segment) was up 89.1% for the twelve months. High yield new issuance, at $114 billion for the first ten months of 2003, is on track to reach over $130 billion for the year, putting it in the running to be the highest year of new issuance. In 2003, there have been four months, in which new issues topped $15 billion, compared to only one such month in the prior history of the market. (High yield new issuance volume totaled $126 billion for the 12 months ended October 31, 2003.) At the current rate, the size of the high yield market could reach the $1 trillion mark sometime in the middle of 2004. The high yield market is in a tug-of-war between investors seeking yield and others being cautious on the theory that such an extraordinary run means that the market will take a breather, no matter how good things look today. 14 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE HIGH YIELD BOND FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Institutional Class of the High Yield Bond Fund returned 20.1% for the twelve months ended October 31, 2003. Despite its strong absolute return, the Fund trailed the Lipper High Current Yield Funds Index return of 30.3%, the Citigroup High Yield Cash Pay Index return of 35.3% and the Lehman Brothers High Yield Index return of 33.8%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 12/29/00* THROUGH 10/31/03 (GRAPH)
INSTITUTIONAL LEHMAN CITIGROUP LIPPER HIGH CLASS BROS. CORP. HIGH YIELD YIELD BOND HIGH YIELD CASH PAY FUNDS INDEX INDEX INDEX 12/00 10,000.00 10,000.00 10,000.00 10,000.00 10/01 10,533.00 10,199.00 10,385.00 9,618.00 10/02 11,194.00 9,640.00 9,780.00 9,045.00 10/03 13,446.00 12,896.00 13,230.00 11,783.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS ------------------ PERIODS ENDED 10/31/03 VALUE OF ------------------ $10,000 SINCE 12/29/00- 1 YEAR INCEPTION 10/31/03 ------ --------- --------- Institutional Class(1)................ 20.11% 10.98% $13,446 PlanAhead Class(1,2).................. 19.57% 10.48% $13,271 Service Class(1,3).................... 18.77% 10.22% $13,182 Lehman Bros. Corp. High Yield Index... 35.28% 10.38% $12,896 Citigroup High Yield Cash Pay Index... 35.28% 10.38% $13,230 Lipper High Yield Bond Funds Index.... 30.27% 5.96% $11,783
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance represents the total returns achieved by the Institutional Class from 12/29/00 up to 3/1/02, the inception date of the PlanAhead Class, and the returns of the PlanAhead Class since its inception. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 12/29/00. 3 Fund performance represents the total returns achieved by the Institutional Class from 12/29/00 up to 3/1/02, the returns of the PlanAhead Class from 3/1/02 up to 5/1/03 (the inception date of the Service Class), and the returns of the Service Class since its inception. Expenses of the Service Class are higher than those of the Institutional and PlanAhead Classes. Therefore, total returns shown may be higher than they would have been had the Service Class been in existence since 12/29/00. The high yield market enjoyed strong returns over the past fiscal year. The Lehman Brothers High Yield Index ("Index") return for the twelve-month period ended October 2003 ranked as the best twelve-month return since March 1992. The Index also posted positive returns in eleven of the twelve months ended October 31, 2003. The Fund's focus on companies with strong cash flows and fundamental credit strength was not in favor during the period. The riskier segments of the high yield market were the top performers, resulting in the Fund's overall underperformance versus the Index. The Fund underweighted the Communications sector by over 10% and the Utility sector by over 9%, each of which outperformed the Index as a whole. Communications returned 53.2%, while the Utility sector gained 61.6%. The Fund overweighted Capital Goods by over 4%, Consumer Cyclical by almost 13% and Consumer Non-Cyclical by over 8% as each of these sectors underperformed the total Index return. From a more positive perspective, the Fund had a 5.1% underweighting in Basic Industry, which was the worst performing sector for the period with a return of just over 17%. Additionally, the Fund overweighted Technology (up 57.8%) and Other Industrial (up 36.2%) during the period. Despite underperforming the Index for the twelve-month time period, the Fund's sub-adviser continues to focus on fundamental research and downside protection to identify and invest in companies with strong cash flows. The sub-adviser believes that their research approach, which has generated outperformance for the Fund in the past, should deliver superior performance over time. TOP TEN HOLDINGS
% OF NET ASSETS ---------- Horseshoe Gaming, LLC, 8.625%, Due 5/15/2009 2.5% Tenet Healthcare Corporation, 7.375%, Due 2/1/2013 2.0% Xerox Credit Corporation, 6.10%, Due 12/16/2003 1.9% EchoStar Communications Corporation, 9.375%, Due 2/1/2009 1.6% aaiPharma Incorporated, 11.00%, Due 4/1/2010 1.5% Turning Stone Casino Resort, 9.125%, Due 12/15/2010 1.4% Regal Cinemas Corporation, 9.375%, Due 2/1/2012 1.3% US Oncology, Incorporated, 9.625%, Due 2/1/2012 1.3% Interline Brands, Incorporated, 11.50%, Due 5/15/2011 1.3% Star Gas Partners L.P., 10.25%, Due 2/15/2013 1.3%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 100.0%
15 U.S. FIXED-INCOME MARKET OVERVIEW October 31, 2003 - -------------------------------------------------------------------------------- For the twelve-month period ended October 31, 2003, the investment grade fixed-income market, as defined by the Lehman Brothers Aggregate Index (the "Index"), produced a 4.9% total return. The individual sector returns within the Index were broadly distributed, with the highest return coming from the credit sector at 10.6%, and the lowest return coming from mortgages at 2.8%. Interest rates along the Treasury yield curve steepened during the period with long-term interest rates rising in response to the gradual economic recovery and short-term rates declining in response to the Federal Reserve's final cut in the Fed Funds rate to 1.0%. Within the credit sector, triple-B rated bonds returned nearly 16%, and the non-investment grade credit market returned in excess of 33% for the period.
TOTAL RETURNS ---------------------- PERIODS ENDED 10/31/03 ---------------------- SECTOR 6 MONTH 12 MONTH - ------ ------- -------- Lehman Aggregate 0.57% 4.91% Lehman Gov/Credit 0.62% 6.17% US Treasury (0.24)% 2.82% US Agency (0.08)% 3.08% Mortgage Backed 0.41% 2.75% U.S. Credit 1.66% 10.57% Asset Backed 3.21% 8.06% - ----------------------------------------------------- CREDIT RATING Aaa 0.45% 4.28% Aa 0.51% 6.08% A 1.20% 9.77% Baa 3.01% 15.86%
(source: Lehman Brothers) The credit spread chart below reflects the incredible strength in investor demand for corporate bonds. Although the year ended on a positive note, the beginning of this period was not as pleasant. In October 2002, triple-B rated credit spreads reached nearly 400, a level traditionally reserved for the high yield bond market. Many of the largest issuers, including auto, telecommunication and media corporations, were targets of the selling pressure that pushed spreads to such wide levels. The credit markets had their share of problems as record-breaking bankruptcies, fraudulent corporate managers and unsustainable leverage took toll on investor confidence. Yet with surprising speed, by the end of 2002, investors returned to the bond market in droves. LB AGGREGATE INDEX CREDIT SPREADS (GRAPH)
INDEX AAA CREDIT AA CREDIT A CREDIT BAA CREDIT 1/4/02............... 185 82 112 178 255 1/11/02.............. 185 77 109 178 260 1/18/02.............. 186 77 110 176 263 1/25/02.............. 180 77 105 168 258 2/1/02............... 188 75 107 179 267 2/8/02............... 198 76 113 193 277 2/15/02.............. 196 73 108 189 278 2/22/02.............. 197 72 108 192 280 3/1/02............... 189 70 104 184 266 3/8/02............... 177 70 97 168 253 3/15/02.............. 183 72 102 175 258 3/22/02.............. 182 74 102 174 258 3/29/02.............. 182 73 103 175 257 4/5/02............... 185 81 109 176 259 4/12/02.............. 190 89 117 180 264 4/19/02.............. 179 71 103 172 252 4/26/02.............. 187 66 102 160 286 5/3/02............... 198 70 107 168 305 5/10/02.............. 182 70 105 163 269 5/17/02.............. 180 63 100 158 272 5/24/02.............. 177 61 97 155 272 5/31/02.............. 165 59 92 141 253 6/7/02............... 171 61 95 147 263 6/14/02.............. 172 62 97 149 263 6/21/02.............. 178 61 99 156 274 6/28/02.............. 189 62 105 160 296 7/5/02............... 193 64 105 162 305 7/12/02.............. 194 64 105 166 306 7/19/02.............. 201 64 107 171 322 7/26/02.............. 222 65 118 186 366 8/2/02............... 231 74 129 201 365 8/9/02............... 235 72 128 211 367 8/16/02.............. 238 71 130 214 374 8/23/02.............. 224 69 125 199 349 8/30/02.............. 220 68 123 199 341 9/6/02............... 225 70 126 204 348 9/13/02.............. 219 69 121 197 342 9/20/02.............. 225 71 124 205 347 9/27/02.............. 232 72 127 211 362 10/4/02.............. 235 79 130 216 362 10/11/02............. 254 85 137 240 387 10/18/02............. 250 80 132 242 378 10/25/02............. 249 79 128 247 368 11/1/02.............. 240 80 124 237 354 11/8/02.............. 223 74 115 214 337 11/15/02............. 210 71 114 196 320 11/22/02............. 203 71 109 195 302 11/29/02............. 192 67 107 185 286 12/6/02.............. 195 69 107 189 289 12/13/02............. 189 65 102 183 281 12/20/02............. 186 65 101 180 277 12/27/02............. 184 63 98 175 278 1/3/03............... 180 63 99 174 268 1/10/03.............. 176 62 96 171 261 1/17/03.............. 171 59 94 163 256 1/24/03.............. 173 61 95 164 260 1/31/03.............. 169 59 89 161 257 2/7/03............... 169 58 90 161 256 2/14/03.............. 167 54 89 158 256 2/21/03.............. 165 54 89 157 251 2/28/03.............. 162 53 85 155 247 3/7/03............... 167 57 87 163 249 3/14/03.............. 167 56 89 167 245 3/21/03.............. 165 55 90 168 238 3/28/03.............. 161 53 85 161 235 4/4/03............... 159 53 86 159 229 4/11/03.............. 157 52 85 155 227 4/17/03.............. 149 51 80 146 217 4/25/03.............. 144 48 78 139 210 5/2/03............... 134 47 76 130 193 5/9/03............... 128 42 70 125 186 5/16/03.............. 130 43 70 126 191 5/23/03.............. 132 44 72 128 192 5/30/03.............. 128 42 69 125 186 6/6/03............... 128 43 69 127 184 6/13/03.............. 124 41 66 120 181 6/20/03.............. 123 41 67 120 178 6/27/03.............. 124 41 67 120 179 7/3/03............... 124 40 67 122 180 7/11/03.............. 122 41 66 118 176 7/18/03.............. 119 42 68 116 169 7/25/03.............. 118 42 69 114 168 8/1/03............... 128 55 81 124 176 8/8/03............... 121 45 73 116 171 8/15/03.............. 126 48 76 121 179 8/22/03.............. 121 48 72 115 173 8/29/03.............. 120 48 73 115 169 9/5/03............... 119 49 54 93 174 9/12/03.............. 117 47 51 91 172 9/19/03.............. 113 46 54 88 165 9/26/03.............. 114 45 53 88 167 10/3/03.............. 115 48 57 89 167 10/10/03............. 114 44 57 90 165 10/17/03............. 109 44 56 85 157 10/24/03............. 112 47 56 86 164 10/31/03............. 108 45 54 83 156
The primary beneficiaries of the corporate bond market's enthusiasm were those sectors that, only one year ago, were under the most duress. According to Lehman Brothers, for the twelve-month period ended October 31, 2003, the wireless telecommunications sector returned 25.2%, the media-cable sector returned 22.4% and the utility sector returned 14.2%. The largest sector in the Index, the automotive sector, returned over 16%. The lowest returning sectors were the more traditional, low volatility sectors such as food/beverage at 5.9%, pharmaceuticals at 5.7% and consumer products at 5.3%. Among the other sectors in the U.S. bond market, Treasuries returned 2.8% and government agencies returned 3.1%. Interest rates rose slightly during the period along most of the Treasury curve, but these two sectors were still able to produce positive total returns. US TREASURY YIELD CURVE (GRAPH)
2 YR. 5 YRS. 10 YRS. 30 YRS. 10/31/2003 1.67% 2.73% 3.89% 4.99% 10/31/2002 1.82% 3.24% 4.29% 5.13%
Finally, the mortgage backed sector produced a total return of 2.8%. Generally, the mortgage market performs well in rising interest rate environments. However, with interest rates at 40-year lows, mortgage refinancing activity hit record highs during the period, resulting in early repayments of principal to mortgage holders and lower total returns accordingly. 16 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE ENHANCED INCOME FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The PlanAhead Class of the Enhanced Income Fund returned 0.3% from its inception on June 30, 2003 through October 31, 2003. Its benchmark, a blend of 37.5% Lehman Brothers Gov/Credit Intermediate Index, 37.5% Lehman Brothers Intermediate Aggregate Index and 25% Merrill Lynch Convertible Bonds Index, returned 0.9%. The Fund's peer group, the Lipper Intermediate Investment Grade Index, returned -0.8% over the four months ended October 31, 2003.
TOTAL RETURNS ---------------------- PERIODS ENDED 10/31/03 ---------------------- SINCE INCEPTION ---------------------- PlanAhead Class(1).................... 0.32% Lipper Intermediate Inv. Grade Index............................... (0.76)% Enhanced Income Composite Index*...... 0.89%
1 Past performance is not indicative of future performance. Fund performance shown in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. * 37.5% Lehman Bros. Gov/Credit Intermediate Index, 37.5% Lehman Bros. Aggregate Index, 25% Merrill Lynch Convertibles Index. The Fund's assets have been allocated approximately 75% to a sub-adviser who invests in income producing, short- and intermediate-term, investment grade bonds and 25% to a sub-adviser who invests in convertible bonds, convertible preferreds, high yield bonds and equities in order to enhance the yield of the overall Fund. Slightly negative total returns in the short, intermediate and high yield bond portions of the Fund were primarily the result of a rapid rise in interest rates during the months of July and August followed by a fairly range bound rate environment. The dramatic increase in rates was unusual in that the Federal Reserve Bank had very recently lowered the Fed Funds rate by 25 basis points to 1.0% to support a struggling economy with declining inflation. The negative return for the bond portion of the Fund was more than offset by returns in the Fund's convertible preferred stocks, convertible bonds and equities, where the Fund was positioned in areas of the market which tend to perform well during an economic recovery. Going forward, the Fund will continue to invest about three-quarters of its assets in income producing, short- to intermediate-term, investment grade bonds. The remainder of the Fund's assets will continue to be invested primarily in convertible bonds, convertible preferreds, and to a lesser extent, equity and high yield securities with emphasis on sectors that the sub-adviser expects will benefit from an expanding economy. TOP TEN HOLDINGS
% OF NET ASSETS ---------- Heller Financial, Incorporated, 6.375%, Due 3/15/2006 2.7% Prudential Insurance Company of America, 6.375%, Due 7/23/2006 2.2% Citibank Credit Card Master Trust I 1999-7 A, 6.90%, Due 10/15/2007 2.2% Salomon, Incorporated, 6.75%, Due 1/15/2006 2.2% DaimlerChrysler Auto Trust, 4.63%, Due 12/6/2006 2.0% Honda Auto Receivables Owner Trust 2003-4, 2.79% Due 3/16/2009 2.0% MassMutual Global Funding II, 3.80%, Due 4/15/2009 2.0% Coca-Cola Enterprises, Incorporated, 2.50%, Due 9/15/2006 2.0% International Lease Finance Corporation, 6.375%, Due 3/15/2009 1.9% Ford Motor Credit Company, 7.375%, Due 10/28/2009 1.7%
FIXED INCOME SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 78.4% Corporate Convertibles 10.9% Asset-Backed 8.2% Treasury 1.2% Agency 0.7% Mortgage-Backed 0.6%
EQUITY SECTOR ALLOCATION
% OF EQUITIES -------- Information Technology 34.8% Financials 20.3% Consumer Discretionary 17.4% Industrials 13.2% Energy 7.0% Telecommunication Services 4.3% Health Care 3.0%
17 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Institutional Class of the Intermediate Bond Fund returned 4.3% for the twelve months ended October 31, 2003, trailing the Lehman Brothers Aggregate Index return of 4.9% and the Lipper Intermediate Investment Grade Index return of 6.7%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 9/15/97* THROUGH 10/31/03 (GRAPH)
INSTITUTIONAL LIPPER LEHMAN BROS. CLASS INTERMEDIATE AGGREGATE INV. GRADE INDEX INDEX 9/97 10,000.00 10,000.00 10,000.00 10/97 10,241.00 10,211.00 10,295.00 10/98 11,215.00 11,045.00 11,254.00 10/99 11,123.00 11,074.00 11,314.00 10/00 12,001.00 11,775.00 12,140.00 10/01 13,724.00 13,462.00 13,908.00 10/02 14,302.00 13,952.00 14,727.00 10/03 14,918.00 14,884.00 15,450.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS ---------------------------- PERIODS ENDED 10/31/03 VALUE OF ---------------------------- $10,000 SINCE 9/15/97- 1 YEAR 5 YEARS INCEPTION 10/31/03 ------ ------- --------- -------- Institutional Class(1,3)............ 4.31% 5.87% 6.75% $14,918 PlanAhead Class(1,2).... 4.25% 5.30% 6.23% $14,479 AMR Class(1,2).......... 4.62% 5.70% 6.61% $14,799 Lipper Intermediate Inv. Grade Index........... 6.68% 6.15% 6.71% $14,884 Lehman Bros. Agg. Index(4).............. 4.91% 6.54% 7.31% $15,450
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance represents the total returns achieved by the Institutional Class from 9/15/97 up to 3/2/98, the inception date of the PlanAhead Class, and 3/1/99, the inception date of the AMR Class, respectively, and the returns of the PlanAhead and AMR Class since inception of each Class. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 9/15/97. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in existence since 9/15/97. 3 The Fund's performance includes the effects of a favorable accounting adjustment which occurred during the processing of a large shareholder redemption on July 6, 2000. In the absence of this adjustment, the Fund's performance would have been less than depicted. 4 Since Inception performance is as of 8/31/97. Before expenses, the Fund performed in line with the Lehman Brothers Aggregate Index ("Index"). Unfortunately, the Fund did not generate enough excess performance to offset its expenses. The Fund added 0.8% of value relative to the Index from its large overweighting in Corporates, the best performing sector of the Index. However, the Fund's Corporate holdings returned approximately 9.3% versus the Index return of 11.0% for the sector mostly due to the Fund's security selection in the Industrial and Financial industries, which detracted 0.7% from relative returns. The Fund also added value through its security selection in U.S. Treasuries; however, this performance advantage was offset by underperformance of the Fund's holdings in the Mortgage sector. Although the Fund's holdings in the Corporate sector underperformed the Index during the period, the Fund's sub-advisers remain focused on a conservative approach towards the Corporate sector that they believe will add value during this unusually volatile period in the market. TOP TEN HOLDINGS
% OF NET ASSETS ---------- Federal National Mortgage Association, TBA, 15 yr., 4.50% 2.3% Government National Mortgage Association, Pool #579750, 6.00%, Due 9/15/2032 2.1% Federal Home Loan Mortgage Corporation, 5.00%, Due 3/1/2018 1.7% Federal National Mortgage Association, TBA, 15 yr., 6.00% 1.5% Federal National Mortgage Association, TBA, 30 yr., 6.50% 1.5% Federal National Mortgage Association, Pool #713706, 5.50%, Due 8/1/2033 1.4% International Lease Finance Corporation, 6.375%, Due 3/15/2009 1.3% United States Treasury Bonds, 6.875%, Due 8/15/2025 1.2% Government National Mortgage Association, Pool #780747, 6.50%, Due 3/15/2028 1.2% Ford Motor Credit Company, 7.375%, Due 10/28/2009 1.1%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporates 60.7% Mortgage Backed 27.5% Treasury 6.8% Agency 4.4% Asset Backed 0.6%
18 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) October 31, 2003 - -------------------------------------------------------------------------------- The Institutional Class of the Short-Term Bond Fund returned 3.6% for the twelve months ended October 31, 2003, outperforming the Merrill Lynch 1-3 Year Gov./Corp. Index return of 3.1% and the Lipper Short Investment Grade Bond Funds Index return of 3.2%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/93 THROUGH 10/31/03 (GRAPH)
INST'L CLASS LIPPER SHORT INV. LINKED ML 1-3 YR. GRADE BOND LIPPER GOV./CORP. FUNDS INDEX AVERAGE INDEX 10/93 10,000.00 10,000.00 10,000.00 10,000.00 10/94 10,042.00 10,096.00 10,013.00 10,125.00 10/95 10,863.00 10,937.00 10,879.00 11,036.00 10/96 11,417.00 11,541.00 11,373.00 11,698.00 10/97 12,136.00 12,299.00 12,061.00 12,465.00 10/98 12,937.00 13,028.00 12,776.00 13,411.00 10/99 13,268.00 13,456.00 13,149.00 13,844.00 10/00 14,041.00 14,247.00 13,898.00 14,698.00 10/01 15,583.00 15,686.00 15,276.00 16,360.00 10/02 16,108.00 16,105.00 15,684.00 17,152.00 10/03 16,685.00 16,615.00 16,156.00 17,687.00
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/03 $10,000 --------------------------- 10/31/93- 1 YEAR 5 YEARS 10 YEARS 10/31/03 ------ ------- -------- --------- Institutional Class(1).............. 3.58% 5.22% 5.25% $16,685 PlanAhead Class(1,2).... 3.38% 4.96% 5.03% $16,328 AMR Class(1,2).......... 3.82% 5.44% 5.47% $17,037 Lipper Short Inv. Grade Bond Funds Index(3)... 3.17% 4.99% 5.21% $16,615 Linked Lipper Average*.. 3.01% 4.81% 4.92% $16,156 Merrill Lynch 1-3 Yr Gov./Corp. Index...... 3.12% 5.87% 5.87% $17,687
1 Past performance is not indicative of future performance. Fund performance shown in the chart and table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance represents the total returns achieved by the Institutional Class from 10/31/93 up to 8/1/94, the inception date of the PlanAhead and AMR Classes, and the returns of the PlanAhead and AMR Classes since inception of these Classes. Expenses of the PlanAhead Class are higher than those of the Institutional Class. Therefore, total returns shown may be higher than they would have been had the PlanAhead Class been in place since 10/31/93. Expenses of the AMR Class are lower than those of the Institutional Class. As a result, total returns shown may be lower than they would have been had the AMR Class been in existence since 10/31/93. 3 The Lipper Short Investment Grade Bond Funds Index hereby replaces the Linked Lipper Average as the Fund's benchmark, because it better reflects the principal strategies of the Fund. * The Linked Lipper Average is created by linking the Lipper Short-Term (1-5 year) Investment Grade Debt Average from 10/31/92 through 12/31/95, the Lipper Short-Intermediate Investment Grade Debt Average from 1/1/96 through 7/31/96 and the Lipper Short-Term (1-3 Year) Investment Grade Debt Average since 8/1/96. The short-term, fixed-income markets continued to enjoy the benefits of the declining interest rate environment during the year ended October 31, 2003. While longer-term interest rates increased along the Treasury curve, shorter-term rates declined in response to the Federal Reserve Bank (the "Fed") lowering the Fed Funds rate to 1.0% in June 2003. Addressing the tepid economic recovery, the Fed went further to clearly indicate its intent to keep rates low going forward to allow for sustainable growth and to prevent inflation from declining further. Only one year ago, the corporate bond market was roiling under the weight of record-breaking bankruptcies, fraudulent corporate management, and unsustainable leverage. Then, in late 2002 and with remarkable speed, investors returned to the corporate bond market in droves. Interest rates were at 40-year lows and a nascent economic recovery was underway, so investors found the incremental yield in the corporate bond market very attractive. As a result, the corporate bond market witnessed a tremendous recovery during the period. Within the short-term, investment-grade, fixed-income markets represented by the Merrill Lynch 1-3 Year Index, the Corporate sector produced, by far, the highest total return at 6.8%. The remaining sector returns were meager by comparison with Government Agencies at 2.4%, Treasuries at 2.0% and Mortgages at 1.7%. During the twelve-month period, the Fund's duration remained neutral to its benchmarks, and thus did not contribute to the Fund's excess performance. The Fund's outperformance relative to its benchmarks was primarily due to its overweighted position in the Corporate sector. Within Corporates, some of the best performing industries were telecommunications, cable/media, and autos, all of which the Fund overweighted during the period. We will likely maintain the Fund's overweighted position in the Corporate sector going forward, as we 19 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- believe that relative value opportunities still exist. Additionally, given the Fed's overtly accommodative monetary policy, we plan to maintain the Fund's duration at short to neutral relative to its benchmarks as long as the prospects for a continuing economic recovery remain in place. TOP TEN HOLDINGS
% OF NET ASSETS ---------- Prudential Insurance Company of America, 6.375% Due 7/23/2006 3.2% Household Finance Corporation, 8.00%, Due 5/9/2005 3.2% General Motors Acceptance Corporation, 6.75%, Due 1/15/2006 3.2% Chemical Master Credit Card Trust 1996-2 A, 5.98%, Due 9/15/2008 3.1% Synovus Financial Corporation, 7.25%, Due 12/15/2005 2.7% Wachovia Corporation, 6.40%, Due 4/1/2008 2.7% Heller Financial, Incorporated, 6.375%, Due 3/15/2006 2.7% Ford Motor Credit Company, 7.50%, Due 3/15/2005 2.6% Discover Card Master Trust 1999-6 A, 6.85%, Due 7/17/2007 2.6% MetLife, Incorporated, 3.911%, Due 5/15/2005 2.6%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 79.4% Asset Backed 12.6% Mortgage Backed 8.0%
20 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Shareholders and Board of Trustees American AAdvantage Balanced Fund American AAdvantage Large Cap Value Fund American AAdvantage Large Cap Growth Fund American AAdvantage Small Cap Value Fund American AAdvantage International Equity Fund American AAdvantage Emerging Markets Fund American AAdvantage High Yield Bond Fund American AAdvantage Enhanced Income Fund American AAdvantage Intermediate Bond Fund American AAdvantage Short-Term Bond Fund We have audited the accompanying statements of assets and liabilities of the American AAdvantage Funds, comprised of the American AAdvantage Balanced Fund, the American AAdvantage Large Cap Value Fund, the American AAdvantage Large Cap Growth Fund, the American AAdvantage Small Cap Value Fund, the American AAdvantage International Equity Fund, the American AAdvantage Emerging Markets Fund, the American AAdvantage High Yield Bond Fund, the American AAdvantage Enhanced Income Fund, the American AAdvantage Intermediate Bond Fund and the American AAdvantage Short-Term Bond Fund, (collectively, "the Funds"), including the schedules of investments, as of October 31, 2003, and the related statements of operations, statements of changes in net assets and financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of investments owned as of October 31, 2003, by correspondence with the custodian and brokers or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective American AAdvantage Funds at October 31, 2003, the results of their operations, the changes in their net assets, and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Chicago, Illinois December 19, 2003 - -------------------------------------------------------------------------------- 21 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 8.53% U.S. TREASURY NOTES - 4.59% 3.25%, Due 5/31/2004*.......... $ 5,000 $ 5,062 1.625%, Due 9/30/2005*......... 4,000 3,988 4.625%, Due 5/15/2006*......... 2,685 2,849 4.375%, Due 5/15/2007*......... 2,000 2,116 2.625%, Due 5/15/2008*......... 5,800 5,686 3.00%, Due 7/15/2012*.......... 905 991 4.375%, Due 8/15/2012*......... 3,000 3,045 3.625%, Due 5/15/2013*......... 2,985 2,858 -------- TOTAL U.S. TREASURY NOTES.................... 26,595 -------- U.S. TREASURY BILLS - 2.92% Discount Note, Due 3/25/2004... 17,000 16,933 -------- TOTAL U.S. TREASURY BILLS.................... 16,933 -------- U.S. TREASURY BONDS - 1.02% 7.50%, Due 11/15/2016*......... 480 607 8.125%, Due 8/15/2019*......... 930 1,248 6.875%, Due 8/15/2025.......... 1,280 1,552 6.25%, Due 5/15/2030*.......... 900 1,029 5.375%, Due 2/15/2031*......... 1,420 1,467 -------- TOTAL U.S. TREASURY BONDS.................... 5,903 -------- TOTAL U.S. TREASURY OBLIGATIONS.............. 49,431 -------- U.S. AGENCY OBLIGATIONS - 0.86% Federal National Mortgage Association, 1.875%, Due 12/15/2004......... 3,890 3,906 7.25%, Due 5/15/2030........... 900 1,089 -------- TOTAL U.S. AGENCY OBLIGATIONS.............. 4,995 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 7.26% FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.04% 3.25%, Due 11/15/2004.......... 4,500 4,585 6.50%, Due 3/1/2008............ 1,064 1,115 5.13%, Due 10/15/2008*......... 500 535 6.00%, Due 3/1/2013............ 215 224 6.00%, Due 11/1/2016........... 347 361 5.50%, Due 8/1/2017............ 179 184 5.00%, Due 3/1/2018............ 1,774 1,802 5.50%, Due 6/1/2018............ 365 376 6.50%, Due 5/1/2029............ 340 354 6.50%, Due 6/1/2029............ 54 56 6.50%, Due 7/1/2029............ 846 880 6.00%, Due 1/1/2033............ 321 329 6.00%, Due 8/1/2033............ 995 1,021 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION..... 11,822 --------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.19% Pool #313522, 7.00%, Due 5/1/2012..................... $ 1,061 $ 1,127 Pool #323223, 6.50%, Due 7/1/2013..................... 183 193 Pool #323309, 6.00%, Due 9/1/2013..................... 387 403 Pool #488099, 5.50%, Due 2/1/2014..................... 657 679 Pool #323789, 6.00%, Due 6/1/2014..................... 540 562 Pool #535846, 6.00%, Due 4/1/2016..................... 394 410 Pool #648511, 6.00%, Due 6/1/2017..................... 1,567 1,630 Pool #100292, 10.00%, Due 9/1/2018..................... 384 431 Pool #581864, 6.50%, Due 7/1/2031..................... 313 325 Pool #577440, 7.00%, Due 11/1/2031.................... 610 642 Pool #647747, 7.00%, Due 5/1/2032..................... 781 823 Pool #650077, 7.50%, Due 7/1/2032..................... 1,074 1,144 Pool #665380, 7.00%, Due 10/1/2032.................... 484 510 Pool #678220, 6.50%, Due 12/1/2032.................... 205 213 Pool #688459, 6.00%, Due 3/1/2033..................... 2,606 2,675 Pool #713706, 5.50%, Due 8/1/2033..................... 784 792 Pool #730570, 6.00%, Due 8/1/2033..................... 330 339 Pool #727223, 5.50%, Due 9/1/2033..................... 1,582 1,598 Pool #741901, 5.50%, Due 10/1/2033.................... 600 606 TBA, 4.50%, 15 yr.............. 3,400 3,394 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION..... 18,496 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.03% Pool #780030, 7.00%, Due 6/15/2024.................... 354 378 Pool #780400, 7.00%, Due 12/15/2025................... 341 362 Pool #781200, 8.00%, Due 12/15/2025................... 395 429 Pool #780615, 6.50%, Due 8/15/2027.................... 619 650 Pool #780651, 7.00%, Due 10/15/2027................... 730 774 Pool #780680, 6.50%, Due 11/15/2027................... 697 732
See accompanying notes - -------------------------------------------------------------------------------- 22 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Pool #780747, 6.50%, Due 3/15/2028.................... $ 652 $ 684 Pool #780788, 6.50%, Due 4/15/2028.................... 696 729 Pool #780842, 8.50%, Due 8/20/2028.................... 420 455 Pool #780936, 7.50%, Due 12/15/2028................... 810 868 Pool #781035, 6.50%, Due 5/15/2029.................... 637 668 Pool #002754, 6.50%, Due 5/20/2029.................... 454 474 Pool #781273, 6.00%, Due 4/15/2031.................... 804 832 Pool #574846, 7.00%, Due 11/15/2031................... 633 671 Pool #555732, 6.50%, Due 3/15/2032.................... 608 636 Pool #553235, 6.00%, Due 5/15/2033.................... 2,354 2,432 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION..... 11,774 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS.............. 42,092 -------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 0.59% Countrywide Home Loan, Incorporated, 3.50%, Due 12/19/2005........ 800 816 3.25%, Due 5/21/2008......... 810 790 5.50%, Due 8/25/2033......... 838 835 General Electric Commercial Mortgage Corporation, 4.17%, Due 7/10/2037................ 430 433 Wachovia Bank Commercial Mortgage Trust, 3.989%, Due 6/15/2035.................... 570 532 -------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS.............. 3,406 -------- CORPORATE BONDS - 16.25% BANKS - 2.79% Banco Popular North America Inc, 4.25%, Due 4/1/2008..... 300 303 Bank of America Corporation, 7.40%, Due 1/15/2011......... 1,000 1,167 Bank One Corporation, 7.125%, Due 5/15/2007........ 350 394 4.90%, Due 4/30/2015......... 300 292 2.625%, Due 6/30/2008........ 480 458 Branch Banking and Trust Company, 4.875%, Due 1/15/2013........ 800 794
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Capital One, 6.70%, Due 5/15/2008......... $ 1,000 $ 1,090 5.75%, Due 9/15/2010......... 210 220 Citigroup, Incorporated, 6.20%, Due 3/15/2009......... 1,000 1,109 6.50%, Due 1/18/2011......... 400 450 6.00%, Due 10/31/2033........ 400 398 Credit Suisse First Boston, 6.50%, Due 5/1/2008.......... 500 553 First Tennessee Bank, NA, 5.75%, Due 12/1/2008......... 475 515 FleetBoston Financial Corporation, 3.85%, Due 2/15/2008......... 600 607 Fleet Norstar Financial Group, Incorporated, 8.625%, Due 1/15/2007........ 400 464 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)...... 300 296 Inter-American Development Bank, 5.375%, Due 11/18/2008....... 1,280 1,391 John Hancock Global Funding, 3.75%, Due 9/30/2008......... 500 497 J P Morgan Chase & Company, 6.75%, Due 8/15/2008......... 650 733 KeyCorp Limited, 4.625%, Due 5/16/2005.................... 335 349 PNC Funding Corporation, 7.50%, Due 11/1/2009......... 525 616 Synovus Financial Corporation, 4.875%, Due 2/15/2013........ 300 294 US Bank, NA, 5.70%, Due 12/15/2008........ 675 732 6.375%, Due 8/1/2011......... 700 778 Wachovia Corporation, 4.95%, Due 11/1/2006......... 285 302 Washington Mutual Financial Corporation, 6.875%, Due 5/15/2011........ 425 477 Washington Mutual, Incorporated, 4.375%, Due 1/15/2008........ 400 410 Wells Fargo Bank, NA, 6.45%, Due 2/1/2011.......... 450 503 -------- TOTAL BANKS................ 16,192 -------- FINANCE - 5.99% Aegon, NV, 8.00%, Due 8/15/2006......... 300 342 Allstate Corporation, 2.50%, Due 6/20/2008, 144A (Note A)................... 300 284 American General Finance Corporation, 5.375%, Due 9/1/2009......... 285 302
See accompanying notes - -------------------------------------------------------------------------------- 23 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Bear Stearns Companies, Incorporated, 3.00%, Due 3/30/2006......... $ 500 $ 506 2.875%, Due 7/2/2008......... 300 289 Boeing Capital Corporation, 5.40%, Due 11/30/2009........ 650 671 Caterpillar Financial Services Corporation, 2.50%, Due 10/3/2006......... 575 571 Cendant Corporation, 6.875%, Due 8/15/2006........ 1,015 1,115 Ford Motor Credit Company, 6.50%, Due 1/25/2007......... 375 387 7.375%, Due 10/28/2009....... 1,400 1,448 General Electric Capital Corporation, 3.25%, Due 6/15/2009......... 630 608 7.375%, Due 1/19/2010*....... 850 992 General Motors Acceptance Corporation, 6.125%, Due 8/28/2007........ 320 337 7.25%, Due 3/2/2011.......... 1,000 1,054 Goldman Sachs Group, Incorporated, 7.35%, Due 10/1/2009......... 750 868 4.75%, Due 7/15/2013......... 650 628 5.25%, Due 10/15/2013........ 500 501 Household Finance Corporation, 5.75%, Due 1/30/2007......... 800 864 7.875%, Due 3/1/2007......... 400 459 6.375%, Due 11/27/2012....... 280 305 4.75%, Due 7/15/2013......... 400 387 International Lease Finance Corporation, 6.375%, Due 3/15/2009........ 1,625 1,782 Liberty Mutual Corporation, 7.875%, Due 10/15/2026, 144A (Note A)..................... 1,500 1,432 MBNA Credit Card Master Trust, 2.65%, Due 11/15/2010........ 820 788 Merrill Lynch & Company, Incorporated, 6.56%, Due 12/16/2007........ 800 895 3.125%, Due 7/15/2008........ 555 542 Monumental Global Funding, 3.85%, Due 3/3/2008, 144A (Note A)..................... 800 804 Morgan Stanley Dean Witter & Company, 6.10%, Due 4/15/2006......... 450 488 4.34%, Due 6/13/2041......... 400 403 PHH Corporation, 6.00%, Due 3/1/2008.......... 300 321
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Prudential Financial, Incorporated, 3.75%, Due 5/1/2008.......... $ 485 $ 483 4.50%, Due 7/15/2013......... 325 310 SLM Corporation, 2.00%, Due 3/15/2005......... 11,000 11,042 3.95%, Due 8/15/2008......... 420 423 5.125%, Due 8/27/2012........ 800 804 Sprint Capital Corporation, 7.90%, Due 3/15/2005......... 500 536 6.125%, Due 11/15/2008....... 195 205 Travelers Property Casualty Corporation, 5.00%, Due 3/15/2013......... 200 199 Verizon Global Funding Corporation, 4.375%, Due 6/1/2013......... 400 373 -------- TOTAL FINANCE.............. 34,748 -------- FOREIGN - 0.04% United Mexican States, 7.50%, Due 4/8/2033................. 240 245 -------- TOTAL FOREIGN.............. 245 -------- INDUSTRIAL - 6.14% Akzo Nobel, Incorporated, 6.00%, Due 11/15/2003, 144A (Note A)..................... 2,880 2,884 Allstate Corporation, 5.375, Due 12/1/2006......... 260 280 Anheuser Busch Companies, Incorporated, 6.50%, Due 1/1/2028.......... 522 563 AT&T Broadband Corporation, 8.375%, Due 3/15/2013........ 748 904 AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006.......... 855 938 8.125%, Due 5/1/2012......... 350 406 8.75%, Due 3/1/2031.......... 265 319 Atlantic Richfield Company, 9.125%, Due 3/1/2011......... 425 548 AutoZone, Incorporated, 4.375%, Due 6/1/2013......... 240 223 Bemis, Incorporated, 6.70%, Due 7/1/2005.......... 1,000 1,075 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013......... 300 298 Bunge Limited Financial Corporation, 7.80%, Due 10/15/2012........ 250 288 Campbell Soup Company, 5.00%, Due 12/3/2012......... 240 243 Cargill, Incorporated, 6.25%, Due 5/1/2006, 144A (Note A)..................... 1,000 1,091
See accompanying notes - -------------------------------------------------------------------------------- 24 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Clear Channel Communications, 4.25%, Due 5/15/2009......... $ 315 $ 313 5.75%, Due 1/15/2013......... 205 212 Comcast Cable Communications, 7.625%, Due 2/15/2008........ 200 225 6.75%, Due 1/30/2011......... 255 282 Computer Sciences Corporation, 3.50%, Due 4/15/2008......... 400 396 Conagra Foods, Incorporated, 7.125%, Due 10/1/2026........ 410 470 7.00%, Due 10/1/2028......... 400 438 ConocoPhillips, 3.625%, Due 10/15/2007....... 425 427 Continental Cablevision, Incorporated, 8.30%, Due 5/15/2006......... 270 302 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 970 969 7.75%, Due 1/18/2011......... 1,000 1,105 John Deere Capital Corporation, 4.125%, Due 7/15/2005........ 410 424 Dell Computer Corporation, 6.55%, Due 4/15/2008......... 400 446 Deutsche Telekom International, 8.50%, Due 6/15/2010......... 280 337 Emerson Electric Company, 5.00%, Due 12/15/2014........ 240 240 General Motors Corporation, 8.375%, Due 7/15/2033........ 410 433 Harley Davidson Motorcycle, 2.69%, Due 4/15/2011......... 610 605 Hershey Foods Corporation, 6.95%, Due 3/1/2007.......... 1,000 1,128 Hertz Corporation, 4.70%, Due 10/2/2006......... 450 444 Hewlett Packard Company, 5.75%, Due 12/15/2006........ 470 508 International Business Machines Corporation, 4.875%, Due 10/1/2006........ 505 536 4.75%, Due 11/29/2012........ 400 400 Kroger Company, 7.375%, Due 3/1/2005......... 450 481 Lockheed Martin Corporation, 7.20%, Due 5/1/2036.......... 600 702 Martin Marietta Material, Incorporated, 6.90%, Due 8/15/2007......... 200 218 Norfolk Southern Corporation, 7.05%, Due 5/1/2037.......... 495 542 Northrop Grumman Corporation, 7.125%, Due 2/15/2011........ 905 1,040
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Occidental Petroleum Corporation, 4.25%, Due 3/15/2010......... $ 395 $ 394 6.75%, Due 1/15/2012......... 400 450 Pepsi Bottling Group, Incorporated, 7.00%, Due 3/1/2029.......... 425 485 Reed Elsevier Capital, Incorporated, 6.125%, Due 8/1/2006......... 615 671 Safeway, Incorporated, 3.80%, Due 8/15/2005......... 300 306 Sara Lee Corporation, 6.00%, Due 1/15/2008......... 1,200 1,302 Simon Property Group, 7.625%, Due 5/15/2005, 144A (Note A)..................... 750 810 Target Corporation, 7.00%, Due 7/15/2031......... 450 508 Time Warner, Incorporated, 7.625%, Due 4/15/2031........ 250 279 Tyson Foods, Incorporated, 6.625%, Due 10/1/2004........ 340 353 Unilever Capital Corporation, 7.125%, Due 11/1/2010........ 2,000 2,316 Univision Communications, Incorporated, 3.875%, Due 10/15/2008....... 365 361 Verizon Communications, Incorporated, 6.36%, Due 4/15/2006......... 550 598 Verizon Virginia, 4.625%, Due 3/15/2013........ 600 574 Verizon Wireless Capital LLC, 5.375%, Due 12/15/2006....... 420 449 Viacom, Incorporated, 5.625%, Due 8/15/2012........ 495 523 Vodafone Group plc, 3.95%, Due 1/30/2008......... 400 405 Wal-Mart Stores, Incorporated, 7.55%, Due 2/15/2030......... 450 553 The Walt Disney Company, 5.375%, Due 6/1/2007......... 235 251 Weyerhaeuser Company, 5.95%, Due 11/1/2008......... 340 364 -------- TOTAL INDUSTRIAL........... 35,635 -------- PHARMACEUTICAL - 0.17% Bristol Myers Squibb Company, 4.00%, Due 8/15/2008, 144A (Note A)..................... 465 471 Wyeth Corporation, 6.70%, Due 3/15/2011......... 450 506 -------- TOTAL PHARMACEUTICAL....... 977 --------
See accompanying notes - -------------------------------------------------------------------------------- 25 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) TRANSPORTATION - 0.43% CNF Transportation, Incorporated, 8.875%, Due 5/1/2010......... $ 1,850 $ 1,967 Union Pacific Corporation, 6.50%, Due 4/15/2012......... 450 499 -------- TOTAL TRANSPORTATION....... 2,466 -------- UTILITY - 0.69% AEP Texas Central Company, 6.65%, Due 2/15/2033......... 120 124 Appalachian Power Company, 5.95%, Due 5/15/2033......... 120 112 Consolidated Natural Gas Company, 6.875%, Due 10/15/2026....... 360 398 Devon Energy Corporation, 2.75%, Due 8/1/2006.......... 420 420 Dominion Resources, Incorporated, 5.00%, Due 3/15/2013......... 210 208 Enterprise Products Partners LP, 7.50%, Due 2/1/2011.......... 230 265 FirstEnergy Corporation, 6.45%, Due 11/15/2011........ 180 191 Kerr-McGee Corporation, 5.875%, Due 9/15/2006........ 420 450 Marathon Oil Corporation, 5.375%, Due 6/1/2007......... 260 278 MidAmerican Energy Holdings Company, 3.50%, Due 5/15/2008......... 395 384 5.875%, Due 10/01/2012....... 305 316 Oncor Electric Delivery Company, 7.25%, Due 1/15/2033......... 155 174 Union Oil Company of California, 7.90%, Due 4/18/2008......... 100 114 Xcel Energy, Incorporated, 7.00%, Due 12/1/2010......... 500 562 -------- TOTAL UTILITY.............. 3,996 -------- TOTAL CORPORATE BONDS...... 94,259 --------
SHARES ----------- COMMON STOCK - 58.05% CONSUMER DISCRETIONARY - 6.94% AUTO COMPONENTS - 0.10% Delphi Corporation............. 63,200 562 -------- TOTAL AUTO COMPONENTS...... 562 -------- HOTELS, RESTAURANTS & LEISURE - 2.02% Carnival Corporation........... 85,900 2,999
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Mandalay Resort Group.......... 68,800 $ 2,700 Park Place Entertainment Corporation+................. 81,200 779 Wendy's International, Incorporated................. 31,000 1,149 Yum Brands, Incorporated+...... 120,500 4,114 -------- TOTAL HOTELS, RESTAURANTS & LEISURE.................. 11,741 -------- HOUSEHOLD DURABLES - 1.38% Centex Corporation............. 41,300 4,027 Fortune Brands, Incorporated... 27,300 1,779 Konnklijke Philips Electronics NV........................... 82,431 2,212 -------- TOTAL HOUSEHOLD DURABLES... 8,018 -------- LEISURE EQUIPMENT & PRODUCTS - 0.52% Eastman Kodak Company.......... 123,600 3,020 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS................. 3,020 -------- MULTILINE RETAIL - 2.69% Federated Department Stores, Incorporated................. 57,500 2,734 May Department Stores Company...................... 96,900 2,709 J.C. Penney Company, Incorporated................. 158,000 3,737 Sears Roebuck & Company........ 121,800 6,410 -------- TOTAL MULTILINE RETAIL..... 15,590 -------- TEXTILES & APPAREL - 0.23% Jones Apparel Group, Incorporated................. 18,600 642 Liz Claiborne, Incorporated.... 18,000 664 -------- TOTAL TEXTILES & APPAREL... 1,306 -------- TOTAL CONSUMER DISCRETIONARY............ 40,237 -------- CONSUMER STAPLES - 4.64% FOOD PRODUCTS - 1.75% Albertson's, Incorporated*..... 80,000 1,623 Conagra, Incorporated.......... 130,200 3,104 Dean Foods Company+............ 35,000 1,059 Kraft Foods, Incorporated...... 78,600 2,287 Sara Lee Company............... 103,574 2,064 -------- TOTAL FOOD PRODUCTS........ 10,137 -------- TOBACCO - 2.89% Altria Group, Incorporated..... 168,600 7,840 Gallaher Group, plc, ADR....... 64,400 2,573 Imperial Tobacco Group, plc, ADR.......................... 94,800 3,150
See accompanying notes - -------------------------------------------------------------------------------- 26 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) UST, Incorporated.............. 94,500 $ 3,215 -------- TOTAL TOBACCO.............. 16,778 -------- TOTAL CONSUMER STAPLES..... 26,915 -------- ENERGY - 5.50% ENERGY EQUIPMENT & SERVICES - 0.51% Duke Energy Corporation........ 161,900 2,938 -------- TOTAL ENERGY EQUIPMENT & SERVICES................. 2,938 -------- OIL & GAS - 4.99% BP plc, ADR.................... 80,380 3,407 ChevronTexaco Corporation...... 43,814 3,255 ConocoPhillips................. 122,688 7,012 Devon Energy Corporation....... 50,800 2,464 El Paso Corporation............ 45,500 334 Equitable Resources, Incorporated................. 28,600 1,178 Kerr-McGee Corporation......... 14,000 581 Marathon Oil Corporation....... 26,500 784 Occidental Petroleum Corporation.................. 131,400 4,633 Royal Dutch Petroleum Company...................... 26,500 1,176 Sunoco, Incorporated........... 65,009 2,845 Teekay Shipping Corporation.... 27,000 1,300 -------- TOTAL OIL & GAS............ 28,969 -------- TOTAL ENERGY............... 31,907 -------- FINANCIALS - 16.56% BANKS - 6.16% Bank of America Corporation.... 88,111 6,673 Bank One Corporation........... 14,500 616 FleetBoston Financial Corporation.................. 91,300 3,688 KeyCorp Limited................ 124,500 3,517 PNC Financial Services Group, Incorporated................. 64,178 3,438 UnionBanCal Corporation........ 28,700 1,555 U.S. Bancorp, Incorporated..... 88,860 2,419 Wachovia Corporation........... 86,000 3,945 Washington Mutual, Incorporated................. 153,500 6,716 Wells Fargo & Company.......... 56,600 3,188 -------- TOTAL BANKS................ 35,755 -------- DIVERSIFIED FINANCIALS - 5.18% American Express Company....... 27,000 1,267 Bear Stearns Companies, Incorporated................. 22,300 1,700 Cinergy Corporation............ 3,200 116 CIT Group, Incorporated........ 112,400 3,779 Citigroup, Incorporated........ 165,842 7,861 Federal National Mortgage Association.................. 30,800 2,208 J P Morgan Chase & Company..... 145,650 5,229
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Merrill Lynch & Company, Incorporated................. 36,600 $ 2,167 Morgan Stanley Dean Witter & Company...................... 36,400 1,997 Principal Financial Group...... 87,600 2,746 SLM Corporation................ 24,300 952 -------- TOTAL DIVERSIFIED FINANCIALS............... 30,022 -------- INSURANCE - 5.22% Ace Limited.................... 61,600 2,218 Allmerica Financial Corporation+................. 31,400 836 Allstate Corporation........... 174,800 6,905 Hartford Financial Services Group, Incorporated.......... 10,000 549 Loews Corporation.............. 26,000 1,118 MetLife, Incorporated.......... 181,580 5,702 MGIC Investments Corporation... 66,200 3,397 Prudential Financial, Incorporated................. 90,900 3,512 St. Paul Companies, Incorporated................. 100,000 3,813 XL Capital Limited............. 31,800 2,210 -------- TOTAL INSURANCE............ 30,260 -------- TOTAL FINANCIALS........... 96,037 -------- HEALTH CARE - 4.67% HEALTH CARE EQUIPMENT & SUPPLIES - 0.61% Bausch & Lomb, Incorporated.... 26,700 1,286 Baxter International, Incorporated................. 83,900 2,230 -------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES............... 3,516 -------- HEALTH CARE PROVIDERS & SERVICES - 2.10% Aetna, Incorporated............ 66,700 3,829 Cigna Corporation.............. 23,700 1,352 HCA, Incorporated.............. 32,400 1,239 Health Net, Incorporated+...... 24,200 764 Tenet Healthcare Corporation+.. 322,500 4,451 Wellpoint Health Networks, Incorporated+................ 5,900 525 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES............... 12,160 -------- PHARMACEUTICALS - 1.96% Bristol-Myers Squibb Company... 193,700 4,914 Merck & Company, Incorporated................. 25,300 1,120 Pfizer, Incorporated........... 44,400 1,403 Schering Plough Corporation.... 164,000 2,504 Wyeth Corporation.............. 31,700 1,399 -------- TOTAL PHARMACEUTICALS...... 11,340 -------- TOTAL HEALTH CARE.......... 27,016 --------
See accompanying notes - -------------------------------------------------------------------------------- 27 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) INDUSTRIALS - 8.32% AEROSPACE & DEFENSE - 3.18% Boeing Company................. 151,900 $ 5,847 Honeywell International, Incorporated................. 94,600 2,896 Lockheed Martin Corporation.... 30,600 1,418 Raytheon Company............... 86,000 2,277 Textron, Incorporated.......... 76,500 3,801 United Technologies Corporation.................. 26,000 2,202 -------- TOTAL AEROSPACE & DEFENSE.................. 18,441 -------- COMMERCIAL SERVICES & SUPPLIES - 1.76% Cendant Corporation+........... 271,200 5,541 Concord EFS, Incorporated+..... 31,000 331 Waste Management, Incorporated................. 167,079 4,331 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES................. 10,203 -------- ELECTRICAL EQUIPMENT - 0.85% Emerson Electrical Company..... 87,100 4,943 -------- TOTAL ELECTRICAL EQUIPMENT................ 4,943 -------- INDUSTRIAL CONGLOMERATES - 0.89% Tyco International Limited..... 246,701 5,151 -------- TOTAL INDUSTRIAL CONGLOMERATES............ 5,151 -------- MACHINERY - 0.81% Caterpillar, Incorporated...... 38,100 2,792 ITT Industries, Incorporated... 28,400 1,931 -------- TOTAL MACHINERY............ 4,723 -------- TRANSPORTATION - 0.83% Burlington Northern Santa Fe Corporation.................. 85,500 2,474 CSX Corporation................ 73,900 2,351 -------- TOTAL TRANSPORTATION....... 4,825 -------- TOTAL INDUSTRIALS.......... 48,286 -------- INFORMATION TECHNOLOGY - 3.57% COMPUTERS & PERIPHERALS - 1.23% Gateway, Incorporated+......... 89,100 449 Hewlett Packard Company........ 142,800 3,186 International Business Machines Corporation.................. 38,900 3,481 -------- TOTAL COMPUTERS & PERIPHERALS.............. 7,116 -------- IT CONSULTING & SERVICES - 1.29% Computer Sciences Corporation+................. 56,500 2,239 Electronic Data Systems Corporation.................. 245,000 5,255 -------- TOTAL IT CONSULTING & SERVICES................. 7,494 --------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) OFFICE ELECTRONICS - 0.21% IKON Office Solutions, Incorporated*................ 142,800 $ 1,199 -------- TOTAL OFFICE ELECTRONICS... 1,199 -------- SOFTWARE - 0.84% Cadence Design Systems, Incorporated+................ 65,000 1,000 Computer Associates International, Incorporated................. 164,700 3,874 -------- TOTAL SOFTWARE............. 4,874 -------- TOTAL INFORMATION TECHNOLOGY............... 20,683 -------- MATERIALS - 3.67% CHEMICALS - 1.99% Air Products & Chemicals, Incorporated................. 25,500 1,158 Crompton Corporation........... 121,113 649 E. I. du Pont de Nemours & Company...................... 28,500 1,151 Eastman Chemical Company....... 40,400 1,311 Hercules, Incorporated+........ 128,400 1,342 Imperial Chemical Industries, plc, ADR..................... 108,300 1,414 Lyondell Chemical Company...... 165,700 2,370 PPG Industries, Incorporated... 37,600 2,168 -------- TOTAL CHEMICALS............ 11,563 -------- METALS & MINING - 0.50% Alcoa, Incorporated............ 92,396 2,917 -------- TOTAL METALS & MINING...... 2,917 -------- PAPER & FOREST PRODUCTS - 1.18% Plum Creek Timber Company, Incorporated................. 47,047 1,240 Sappi Limited, ADR............. 218,000 2,790 UPM Kymmene Corporation, ADR*......................... 106,200 1,995 Weyerhaeuser Company........... 13,800 831 -------- TOTAL PAPER & FOREST PRODUCTS................. 6,856 -------- TOTAL MATERIALS............ 21,336 -------- REAL ESTATE INVESTMENT TRUSTS - 0.35% Equity Office Properties Trust........................ 72,900 2,042 -------- TOTAL REAL ESTATE INVESTMENT TRUSTS........ 2,042 -------- TELECOMMUNICATION SERVICES - 0.60% SBC Communications, Incorporated................. 31,300 751 Verizon Communications, Incorporated................. 80,428 2,702 -------- TOTAL TELECOMMUNICATION SERVICES................. 3,453 --------
See accompanying notes - -------------------------------------------------------------------------------- 28 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) UTILITIES - 3.23% ELECTRIC UTILITIES - 3.05% American Electric Power Company, Incorporated........ 222,200 $ 6,264 Centerpoint Energy, Incorporated*................ 132,600 1,301 DTE Energy Company............. 26,200 966 Entergy Corporation............ 69,400 3,741 FirstEnergy Corporation........ 54,700 1,881 Northeast Utilities............ 54,800 1,032 Reliant Resources, Incorporated+................ 144,956 717 The Southern Company........... 31,400 936 Teco Energy, Incorporated*..... 64,300 844 -------- TOTAL ELECTRIC UTILITIES... 17,682 -------- MULTI-UTILITIES - 0.18% Scana Corporation.............. 30,644 1,051 -------- TOTAL MULTI-UTILITIES...... 1,051 -------- TOTAL UTILITIES............ 18,733 -------- TOTAL COMMON STOCK......... 336,645 --------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) SHORT-TERM INVESTMENTS - 15.24% UNITED STATES TREASURY BILLS - 0.70% 1.00%, Due 12/11/2003 (Note B)........................... $ 4,050 $ 4,046 -------- TOTAL UNITED STATES TREASURY BILLS........... 4,046 --------
SHARES ----------- OTHER SHORT-TERM INVESTMENTS - 14.54% American AAdvantage Money Market Select Fund........... 71,941,241 71,941 AMR Investments Enhanced Yield Business Trust............... 12,493,430 12,493 -------- TOTAL OTHER SHORT-TERM INVESTMENTS.............. 84,434 -------- TOTAL SHORT-TERM INVESTMENTS.............. 88,480 -------- TOTAL INVESTMENTS - 106.78% (COST $564,625).............. 619,308 -------- LIABILITIES, NET OF OTHER ASSETS - (6.78%)............. (39,334) -------- TOTAL NET ASSETS - 100%........ $579,974 ========
- --------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $8,072 or 1.39% of net assets. (B) At October 31, 2003, securities held as collateral for open futures contracts. * - All or a portion of this security is on loan at October 31, 2003. See Note 4. + - non-income producing See accompanying notes - -------------------------------------------------------------------------------- 29 AMERICAN AADVANTAGE LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) COMMON STOCK - 92.67% CONSUMER DISCRETIONARY - 11.11% AUTO COMPONENTS - 0.15% Delphi Corporation.............. 107,100 $ 953 -------- TOTAL AUTO COMPONENTS....... 953 -------- HOTELS, RESTAURANTS & LEISURE - 2.77% Carnival Corporation............ 112,300 3,920 Mandalay Resort Group*.......... 99,200 3,894 Park Place Entertainment Corporation+.................. 133,700 1,284 Wendy's International, Incorporated.................. 49,800 1,845 Yum Brands, Incorporated+....... 202,600 6,917 -------- TOTAL HOTELS, RESTAURANTS & LEISURE................... 17,860 -------- HOUSEHOLD DURABLES - 2.42% Centex Corporation.............. 69,600 6,786 Fortune Brands, Incorporated.... 42,700 2,782 Konnklijke Philips Electronics NV............................ 110,666 2,970 Matsushita Electric Industrial Company Limited, ADR.......... 115,000 1,509 Newell Rubbermaid, Incorporated.................. 68,300 1,557 -------- TOTAL HOUSEHOLD DURABLES.... 15,604 -------- LEISURE EQUIPMENT & PRODUCTS - 0.74% Eastman Kodak Company*.......... 195,700 4,781 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS.................. 4,781 -------- MEDIA - 0.52% Clear Channel Communications, Incorporated+................. 40,000 1,633 Liberty Media Corporation+...... 173,000 1,746 -------- TOTAL MEDIA................. 3,379 -------- MULTILINE RETAIL - 4.20% Federated Department Stores, Incorporated.................. 77,900 3,704 May Department Stores Company... 135,900 3,800 J.C. Penney Company, Incorporated.................. 348,400 8,240 Sears Roebuck & Company......... 206,600 10,873 Target Corporation.............. 10,000 397 -------- TOTAL MULTILINE RETAIL...... 27,014 -------- TEXTILES & APPAREL - 0.31% Jones Apparel Group, Incorporated.................. 31,600 1,090
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Liz Claiborne, Incorporated..... 25,000 $ 922 -------- TOTAL TEXTILES & APPAREL.... 2,012 -------- TOTAL CONSUMER DISCRETIONARY............. 71,603 -------- CONSUMER STAPLES - 8.14% FOOD & DRUG RETAILING - 0.43% Albertson's, Incorporated*...... 135,600 2,751 -------- TOTAL FOOD & DRUG RETAILING................. 2,751 -------- FOOD PRODUCTS - 2.63% Archer-Daniels-Midland Company*...................... 131,000 1,880 Conagra, Incorporated........... 189,100 4,508 Dean Foods Company+............. 57,100 1,727 Kellogg Company................. 53,000 1,756 Kraft Foods, Incorporated....... 133,400 3,882 Sara Lee Company................ 160,328 3,195 -------- TOTAL FOOD PRODUCTS......... 16,948 -------- HOUSEHOLD PRODUCTS - 0.26% Kimberly Clark Corporation...... 32,000 1,690 -------- TOTAL HOUSEHOLD PRODUCTS.... 1,690 -------- PERSONAL PRODUCTS - 0.36% Gillette Company................ 72,000 2,297 -------- TOTAL PERSONAL PRODUCTS..... 2,297 -------- TOBACCO - 4.46% Altria Group, Incorporated...... 300,700 13,983 Gallaher Group, plc, ADR........ 79,800 3,188 Imperial Tobacco Group, plc, ADR........................... 188,900 6,277 UST, Incorporated............... 154,800 5,266 -------- TOTAL TOBACCO............... 28,714 -------- TOTAL CONSUMER STAPLES...... 52,400 -------- ENERGY - 7.59% ENERGY EQUIPMENT & SERVICES - 0.28% Weatherford International Limited+*..................... 51,000 1,772 -------- TOTAL ENERGY EQUIPMENT & SERVICES.................. 1,772 -------- OIL & GAS - 7.31% BP plc, ADR..................... 109,136 4,625 ChevronTexaco Corporation....... 69,781 5,185 ConocoPhillips.................. 212,022 12,117 Devon Energy Corporation........ 79,900 3,875 El Paso Corporation*............ 53,300 391 Equitable Resources, Incorporated.................. 36,100 1,487 Kerr-McGee Corporation.......... 19,000 789 Marathon Oil Corporation........ 35,700 1,056
See accompanying notes - -------------------------------------------------------------------------------- 30 AMERICAN AADVANTAGE LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Occidental Petroleum Corporation................... 222,900 $ 7,859 Royal Dutch Petroleum Company... 48,100 2,135 Sunoco, Incorporated............ 108,805 4,761 Teekay Shipping Corporation*.... 58,100 2,796 -------- TOTAL OIL & GAS............. 47,076 -------- TOTAL ENERGY................ 48,848 -------- FINANCIALS - 25.47% BANKS - 9.18% Bank of America Corporation..... 121,903 9,232 Bank One Corporation............ 24,600 1,044 Comerica, Incorporated.......... 31,000 1,596 FleetBoston Financial Corporation................... 103,400 4,176 KeyCorp Limited................. 192,300 5,432 Mitsubishi Tokyo Financial Group, Incorporated, ADR*..... 237,000 1,740 PNC Financial Services Group, Incorporated.................. 123,827 6,633 UnionBanCal Corporation......... 48,700 2,638 U.S. Bancorp, Incorporated...... 126,060 3,431 Wachovia Corporation............ 114,000 5,229 Washington Mutual, Incorporated.................. 228,700 10,006 Wells Fargo & Company*.......... 141,200 7,952 -------- TOTAL BANKS................. 59,109 -------- DIVERSIFIED FINANCIALS - 7.58% American Express Company........ 36,500 1,713 Bear Stearns Companies, Incorporated.................. 33,000 2,516 Charles Schwab Corporation...... 100,000 1,356 CIT Group, Incorporated......... 190,600 6,408 Citigroup, Incorporated......... 239,638 11,359 Federal National Mortgage Association................... 40,600 2,911 Ing Groep NV, ADR............... 110,417 2,301 J P Morgan Chase & Company...... 211,142 7,580 Merrill Lynch & Company, Incorporated.................. 58,800 3,481 Morgan Stanley Dean Witter & Company....................... 53,500 2,936 Principal Financial Group, Incorporated.................. 148,500 4,655 SLM Corporation................. 39,900 1,562 -------- TOTAL DIVERSIFIED FINANCIALS................ 48,778 -------- INSURANCE - 8.71% Ace Limited..................... 103,800 3,737 Allmerica Financial Corporation+.................. 46,800 1,246 Allstate Corporation............ 298,328 11,784 American International Group, Incorporated.................. 8,000 487 Chubb Corporation............... 34,000 2,272 Cincinnati Financial Corporation................... 63,000 2,578 Hartford Financial Services Group, Incorporated........... 17,400 955
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Loews Corporation............... 42,000 $ 1,806 MetLife, Incorporated........... 316,000 9,922 MGIC Investments Corporation.... 107,700 5,526 Prudential Financial, Incorporated.................. 153,800 5,943 St. Paul Companies, Incorporated.................. 160,300 6,112 XL Capital Limited.............. 53,400 3,711 -------- TOTAL INSURANCE............. 56,079 -------- TOTAL FINANCIALS............ 163,966 -------- HEALTH CARE - 7.16% HEALTH CARE EQUIPMENT & SUPPLIES - 1.29% Alcon, Incorporated*............ 36,000 1,984 C. R. Bard, Incorporated........ 6,000 480 Bausch & Lomb, Incorporated..... 45,300 2,182 Baxter International, Incorporated.................. 137,900 3,665 -------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES................ 8,311 -------- HEALTH CARE PROVIDERS & SERVICES - 3.03% Aetna, Incorporated............. 112,600 6,464 Cigna Corporation............... 35,500 2,025 HCA, Incorporated............... 55,100 2,108 Health Net, Incorporated+....... 37,100 1,172 Tenet Healthcare Corporation+... 502,400 6,933 Wellpoint Health Networks, Incorporated+................. 8,700 773 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES................ 19,475 -------- PHARMACEUTICALS - 2.84% Astrazeneca, plc, ADR*.......... 48,000 2,289 Bristol-Myers Squibb Company.... 258,400 6,556 Merck & Company, Incorporated... 38,000 1,682 Pfizer, Incorporated............ 57,300 1,811 Schering Plough Corporation..... 267,700 4,088 Wyeth Corporation............... 42,700 1,885 -------- TOTAL PHARMACEUTICALS....... 18,311 -------- TOTAL HEALTH CARE........... 46,097 -------- INDUSTRIALS - 13.43% AEROSPACE & DEFENSE - 3.30% Boeing Company.................. 258,200 9,938 L3 Communications Holding Corporation+*................. 40,000 1,870 Lockheed Martin Corporation..... 51,900 2,406 Raytheon Company................ 155,900 4,128 United Technologies Corporation................... 34,100 2,888 -------- TOTAL AEROSPACE & DEFENSE... 21,230 -------- COMMERCIAL SERVICES & SUPPLIES - 2.89% Cendant Corporation+............ 511,000 10,440 Concord EFS, Incorporated+...... 46,200 494 Deluxe Corporation.............. 9,300 375
See accompanying notes - -------------------------------------------------------------------------------- 31 AMERICAN AADVANTAGE LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Waste Management, Incorporated.. 280,695 $ 7,276 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.................. 18,585 -------- ELECTRICAL EQUIPMENT - 1.44% Emerson Electrical Company...... 126,900 7,202 Molex, Incorporated*............ 78,000 2,068 -------- TOTAL ELECTRICAL EQUIPMENT................. 9,270 -------- INDUSTRIAL CONGLOMERATES - 3.53% 3M Company...................... 26,000 2,051 Honeywell International, Incorporated.................. 177,300 5,427 Textron, Incorporated........... 99,200 4,929 Tyco International Limited...... 493,100 10,296 -------- TOTAL INDUSTRIAL CONGLOMERATES............. 22,703 -------- MACHINERY - 1.09% Caterpillar, Incorporated....... 52,900 3,877 ITT Industries, Incorporated.... 46,500 3,162 -------- TOTAL MACHINERY............. 7,039 -------- TRANSPORTATION - 1.18% Burlington Northern Santa Fe Corporation................... 133,500 3,863 CSX Corporation................. 117,700 3,745 -------- TOTAL TRANSPORTATION........ 7,608 -------- TOTAL INDUSTRIALS........... 86,435 -------- INFORMATION TECHNOLOGY - 6.95% COMMUNICATIONS EQUIPMENT - 0.54% Lucent Technologies, Incorporated+*................ 550,000 1,760 Motorola, Incorporated.......... 128,000 1,732 -------- TOTAL COMMUNICATIONS EQUIPMENT................. 3,492 -------- COMPUTERS & PERIPHERALS - 2.36% Apple Computer, Incorporated+... 98,000 2,243 Gateway, Incorporated+.......... 151,100 762 Hewlett Packard Company......... 186,200 4,154 International Business Machines Corporation................... 69,400 6,210 NCR Corporation+*............... 51,000 1,833 -------- TOTAL COMPUTERS & PERIPHERALS............... 15,202 -------- IT CONSULTING & SERVICES - 1.83% Computer Sciences Corporation+.. 71,800 2,845 Electronic Data Systems Corporation................... 415,200 8,906 -------- TOTAL IT CONSULTING & SERVICES.................. 11,751 -------- OFFICE ELECTRONICS - 0.63% IKON Office Solutions, Incorporated*................. 287,500 2,415
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Xerox Corporation+*............. 156,000 $ 1,638 -------- TOTAL OFFICE ELECTRONICS.... 4,053 -------- SOFTWARE - 1.59% Autodesk, Incorporated*......... 110,000 2,118 Cadence Design Systems, Incorporated+................. 101,400 1,561 Computer Associates International, Incorporated... 279,100 6,564 -------- TOTAL SOFTWARE.............. 10,243 -------- TOTAL INFORMATION TECHNOLOGY................ 44,741 -------- MATERIALS - 5.19% CHEMICALS - 3.17% Air Products & Chemicals, Incorporated*................. 75,200 3,415 Crompton Corporation............ 209,808 1,125 Cytec Industries, Incorporated+................. 60,000 2,095 E. I. du Pont de Nemours & Company....................... 42,700 1,725 Hercules, Incorporated+......... 173,400 1,812 Imperial Chemical Industries, plc, ADR...................... 156,900 2,049 Lyondell Chemical Company....... 237,700 3,399 Millennium Chemicals, Incorporated+................. 117,100 1,173 PPG Industries, Incorporated.... 62,700 3,615 -------- TOTAL CHEMICALS............. 20,408 -------- METALS & MINING - 0.74% Alcoa, Incorporated............. 151,168 4,772 -------- TOTAL METALS & MINING....... 4,772 -------- PAPER & FOREST PRODUCTS - 1.28% Sappi Limited, ADR.............. 337,000 4,314 UPM Kymmene Corporation, ADR*... 134,000 2,518 Weyerhaeuser Company............ 23,100 1,391 -------- TOTAL PAPER & FOREST PRODUCTS.................. 8,223 -------- TOTAL MATERIALS............. 33,403 -------- REAL ESTATE INVESTMENT TRUSTS - 0.83% Equity Office Properties Trust......................... 122,500 3,431 Plum Creek Timber Company, Incorporated.................. 72,043 1,898 -------- TOTAL REAL ESTATE INVESTMENT TRUSTS.................... 5,329 -------- TELECOMMUNICATION SERVICES - 1.45% DIVERSIFIED TELECOMMUNICATION - 1.16% SBC Communications, Incorporated*................. 120,400 2,887 Verizon Communications, Incorporated.................. 136,346 4,581 -------- TOTAL DIVERSIFIED TELECOMMUNICATION......... 7,468 --------
See accompanying notes - -------------------------------------------------------------------------------- 32 AMERICAN AADVANTAGE LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) WIRELESS TELECOMMUNICATION - 0.29% Vodafone Group, plc, ADR*....... 89,000 $ 1,882 -------- TOTAL WIRELESS TELECOMMUNICATION......... 1,882 -------- TOTAL TELECOMMUNICATION SERVICES.................. 9,350 -------- UTILITIES - 5.35% ELECTRIC UTILITIES - 4.46% American Electric Power Company, Incorporated.................. 348,900 9,835 Centerpoint Energy, Incorporated*................. 217,700 2,136 Cinergy Corporation............. 5,400 196 DTE Energy Company.............. 45,300 1,671 Entergy Corporation............. 115,000 6,198 FirstEnergy Corporation......... 92,600 3,185 Northeast Utilities............. 92,200 1,737 Reliant Resources, Incorporated+................. 238,147 1,179 The Southern Company............ 51,600 1,538 Teco Energy, Incorporated*...... 77,500 1,018 -------- TOTAL ELECTRIC UTILITIES.... 28,693 -------- MULTI-UTILITIES - 0.89% Duke Energy Corporation......... 219,500 3,984 Scana Corporation............... 51,602 1,769 -------- TOTAL MULTI-UTILITIES....... 5,753 -------- TOTAL UTILITIES............. 34,446 -------- TOTAL COMMON STOCK.......... 596,618 --------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) SHORT-TERM INVESTMENTS - 12.22% U.S. TREASURY BILLS - 0.50% 1.00%, Due 12/11/2003 (Note A)............................ $ 3,230 $ 3,227 -------- TOTAL U.S. TREASURY BILLS... 3,227 --------
SHARES ---------- OTHER SHORT-TERM INVESTMENTS - 11.72% American AAdvantage Money Market Select Fund................... 67,291,457 67,291 AMR Investments Enhanced Yield Business Trust................ 8,024,136 8,024 -------- TOTAL OTHER SHORT-TERM INVESTMENTS............... 75,315 -------- TOTAL SHORT-TERM INVESTMENTS............... 78,542 -------- TOTAL INVESTMENTS - 104.89% (COST $596,321)............... 675,160 -------- LIABILITIES, NET OF OTHER ASSETS - (4.89%).............. (31,448) -------- TOTAL NET ASSETS - 100%......... $643,712 ========
- --------------- (A) At October 31, 2003, security held as collateral for open futures contracts. * - All or a portion of this security is on loan at October 31, 2003. See Note 4 + - non-income producing See accompanying notes - -------------------------------------------------------------------------------- 33 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) COMMON STOCK - 98.13% CONSUMER DISCRETIONARY - 18.01% AUTO COMPONENTS - 0.31% Autoliv, Incorporated.............. 2,200 $ 73 Johnson Controls, Incorporated..... 400 43 Lear Corporation+.................. 600 35 ------- TOTAL AUTO COMPONENTS.......... 151 ------- AUTOMOBILES - 1.62% AutoNation, Incorporated+.......... 11,400 213 Ford Motor Company................. 3,300 40 Harley Davidson, Incorporated...... 11,400 540 ------- TOTAL AUTOMOBILES.............. 793 ------- HOTELS, RESTAURANTS & LEISURE - 0.80% Carnival Corporation............... 100 3 CBRL Group, Incorporated........... 2,400 93 GTECH Holdings Corporation......... 900 40 McDonald's Corporation............. 4,500 113 Yum Brands, Incorporated+.......... 4,200 143 ------- TOTAL HOTELS, RESTAURANTS & LEISURE...................... 392 ------- INTERNET & CATALOG RETAIL - 1.89% Amazon.com, Incorporated+.......... 7,000 381 Ebay, Incorporated+................ 9,000 503 MSC Industrial Direct Company, Incorporated..................... 1,700 40 ------- TOTAL INTERNET & CATALOG RETAIL....................... 924 ------- LEISURE EQUIPMENT & PRODUCTS - 0.36% Mattel, Incorporated............... 9,100 176 ------- TOTAL LEISURE EQUIPMENT & PRODUCTS..................... 176 ------- HOUSEHOLD DURABLES - 0.87% Centex Corporation................. 1,000 98 NVR, Incorporated+................. 50 24 Whirlpool Corporation.............. 4,300 303 ------- TOTAL HOUSEHOLD DURABLES....... 425 ------- MEDIA - 3.87% Comcast Corporation, Class A Common Stock+........................... 4,300 146 Cox Communications, Incorporated+.. 700 24 Cox Radio, Incorporated+........... 3,100 69 Fox Entertainment Group, Incorporated+.................... 11,900 330 Gannett Company, Incorporated...... 1,100 93 General Motors Corporation+........ 700 12 Hearst-Argyle Television, Incorporated+.................... 1,100 27 Liberty Media Corporation+......... 4,300 43 McGraw Hill Companies, Incorporated..................... 400 27 The E. W. Scripps Company.......... 2,100 195
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) Time Warner, Incorporated+......... 9,700 $ 148 Tribune Company.................... 1,700 83 Viacom, Incorporated............... 14,000 558 The Walt Disney Company............ 6,200 140 ------- TOTAL MEDIA.................... 1,895 ------- MULTILINE RETAIL - 4.04% Dollar General Corporation......... 5,000 112 Family Dollar Stores, Incorporated..................... 1,400 61 Federated Department Stores, Incorporated..................... 700 33 Kohl's Corporation+................ 3,800 213 Target Corporation................. 5,000 199 Wal-Mart Stores, Incorporated...... 23,000 1,356 ------- TOTAL MULTILINE RETAIL......... 1,974 ------- SPECIALTY RETAIL - 3.61% Abercrombie and Fitch Company+..... 4,300 123 Bed Bath & Beyond, Incorporated+... 800 34 Best Buy Company, Incorporated+.... 3,200 187 Blockbuster, Incorporated.......... 1,600 31 Gap Inc............................ 5,400 103 Home Depot, Incorporated........... 15,400 571 Lowe's Companies, Incorporated..... 4,900 289 Staples, Incorporated+............. 16,000 429 ------- TOTAL SPECIALTY RETAIL......... 1,767 ------- TEXTILES & APPAREL - 0.64% Coach, Incorporated+............... 800 28 Jones Apparel Group, Incorporated.. 3,600 124 Nike, Incorporated................. 2,500 160 ------- TOTAL TEXTILES & APPAREL....... 312 ------- TOTAL CONSUMER DISCRETIONARY... 8,809 ------- CONSUMER STAPLES - 10.03% BEVERAGES - 1.80% Coca Cola Company.................. 18,500 858 PepsiCo, Incorporated.............. 500 24 ------- TOTAL BEVERAGES................ 882 ------- FOOD & DRUG RETAILING - 1.48% CVS Corporation.................... 5,100 179 Sysco Corporation.................. 14,800 498 Walgreen Company................... 1,400 49 ------- TOTAL FOOD & DRUG RETAILING.... 726 ------- FOOD PRODUCTS - 2.00% Archer-Daniels-Midland Company..... 24,000 344 Kraft Foods, Incorporated.......... 10,300 300 Tyson Foods, Incorporated.......... 23,400 334 ------- TOTAL FOOD PRODUCTS............ 978 ------- HOUSEHOLD PRODUCTS - 2.70% Black & Decker Corporation......... 400 19 Boise Cascade Corporation.......... 800 22
See accompanying notes - -------------------------------------------------------------------------------- 34 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) Procter & Gamble Company........... 13,000 $ 1,278 ------- TOTAL HOUSEHOLD PRODUCTS....... 1,319 ------- PERSONAL PRODUCTS - 1.28% Gillette Company................... 19,700 628 ------- TOTAL PERSONAL PRODUCTS........ 628 ------- TOBACCO - 0.77% Altria Group, Incorporated......... 5,300 246 R.J. Reynolds Tobacco Holdings, Incorporated..................... 2,700 130 ------- TOTAL TOBACCO.................. 376 ------- TOTAL CONSUMER STAPLES......... 4,909 ------- ENERGY - 1.95% ENERGY EQUIPMENT & SERVICES - 1.25% Baker Hughes, Incorporated......... 600 17 Cooper Cameron Corporation+........ 2,800 120 Halliburton Company................ 4,700 112 Pride International, Incorporated+.................... 4,400 72 Rowan Companies, Incorporated+..... 300 7 Transocean, Incorporated+.......... 14,800 284 ------- TOTAL ENERGY EQUIPMENT & SERVICES..................... 612 ------- OIL & GAS - 0.70% Anadarko Petroleum Corporation..... 300 13 ConocoPhillips..................... 800 46 Kinder Morgan, Incorporated........ 400 21 Sunoco, Incorporated............... 6,000 263 ------- TOTAL OIL & GAS................ 343 ------- TOTAL ENERGY................... 955 ------- FINANCIALS - 8.46% BANKS - 0.87% Bank of America Corporation........ 400 30 FleetBoston Financial Corporation...................... 300 12 Greenpoint Financial Corporation... 2,550 79 Hudson City Bancorp, Incorporated.. 3,200 111 SunTrust Banks, Incorporated....... 400 27 U.S. Bancorp, Incorporated......... 6,000 163 Washington Mutual, Incorporated.... 100 4 ------- TOTAL BANKS.................... 426 ------- DIVERSIFIED FINANCIALS - 5.69% AmeriCredit Corporation+*.......... 18,200 244 Capital One Financial Corporation...................... 1,800 109 CIT Group, Incorporated............ 1,300 44 Citigroup, Incorporated............ 600 28 Countrywide Financial Corporation.. 3,200 336 E*Trade Group, Incorporated+....... 5,300 55 Federal Home Loan Mortgage Corporation...................... 3,800 213 Federal National Mortgage Corporation...................... 1,700 122 Goldman Sachs Group, Incorporated.. 1,000 94 J P Morgan Chase & Company......... 9,300 334
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) Janus Capital Group, Incorporated..................... 100 $ 1 MBNA Corporation................... 16,900 418 Moody's Corporation................ 5,700 330 Morgan Stanley Dean Witter & Company.......................... 2,100 115 Nuveen Investments, Incorporated... 1,800 50 SLM Corporation.................... 7,400 290 ------- TOTAL DIVERSIFIED FINANCIALS... 2,783 ------- INSURANCE - 1.85% Allstate Corporation............... 2,200 87 Ambac Financial Group, Incorporated..................... 6,100 432 Aon Corporation.................... 200 4 Hartford Financial Services Group, Incorporated..................... 800 44 The Progressive Corporation........ 200 15 Protective Life Corporation........ 100 3 Prudential Financial, Incorporated..................... 8,300 321 ------- TOTAL INSURANCE................ 906 ------- REAL ESTATE - 0.05% CarrAmerica Realty Corporation..... 800 24 ------- TOTAL REAL ESTATE.............. 24 ------- TOTAL FINANCIALS............... 4,139 ------- HEALTH CARE - 23.30% BIOTECHNOLOGY - 4.17% Amgen, Incorporated+............... 17,352 1,072 Genentech, Incorporated+........... 4,100 336 Gilead Sciences, Incorporated+..... 9,100 497 Human Genome Sciences, Incorporated+.................... 2,900 40 MedImmune, Incorporated+........... 3,600 96 ------- TOTAL BIOTECHNOLOGY............ 2,041 ------- HEALTH CARE EQUIPMENT & SUPPLIES - 5.19% Baxter International, Incorporated..................... 5,800 154 Becton Dickinson & Company......... 1,600 58 Boston Scientific Corporation+..... 6,900 467 Guidant Corporation................ 16,100 821 Medtronic, Incorporated............ 12,900 588 St. Jude Medical, Incorporated+.... 400 23 Zimmer Holdings, Incorporated+..... 6,700 428 ------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES..................... 2,539 ------- HEALTH CARE PROVIDERS & SERVICES - 2.91% Aetna, Incorporated................ 5,100 293 Anthem, Incorporated+.............. 3,300 226 Cardinal Health, Incorporated...... 500 30 Cigna Corporation.................. 800 46 HCA, Incorporated.................. 300 11 Health Net, Incorporated+.......... 6,600 208 IMS Health, Incorporated........... 1,900 45 Manor Care, Incorporated........... 2,400 80 McKesson HBOC, Incorporated........ 10,900 330
See accompanying notes - -------------------------------------------------------------------------------- 35 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) Unitedhealth Group, Incorporated... 3,100 $ 158 ------- TOTAL HEALTH CARE PROVIDERS & SERVICES..................... 1,427 ------- PHARMACEUTICALS - 11.03% Abbott Laboratories................ 6,400 273 Allergan, Incorporated............. 1,000 76 American Pharmaceutical Partners, Incorporated+*................... 5,600 136 Bristol-Myers Squibb Company....... 4,800 122 Eli Lilly & Company................ 8,900 593 Endo Pharmaceuticals Holdings, Incorporated+.................... 8,700 142 Forest Laboratories, Incorporated+.................... 7,500 375 Johnson & Johnson.................. 11,600 584 Medco Health Solutions, Incorporated+.................... 277 9 Merck & Company, Incorporated...... 4,700 208 Mylan Laboratories, Incorporated... 13,200 319 Perrigo Company.................... 1,500 20 Pfizer, Incorporated............... 62,960 1,990 Wyeth Corporation.................. 12,500 552 ------- TOTAL PHARMACEUTICALS.......... 5,399 ------- TOTAL HEALTH CARE.............. 11,406 ------- INDUSTRIALS - 9.00% AEROSPACE & DEFENSE - 1.10% Lockheed Martin Corporation........ 4,600 213 Northrop Grumman Corporation....... 100 9 Raytheon Company................... 1,900 50 Rockwell Collins, Incorporated..... 2,500 69 United Technologies Corporation.... 2,300 195 ------- TOTAL AEROSPACE & DEFENSE...... 536 ------- COMMERCIAL SERVICES & SUPPLIES - 1.52% Cintas Corporation................. 200 9 Concord EFS, Incorporated+......... 1,700 18 Convergys Corporation+............. 9,200 148 First Data Corporation............. 10,100 361 ITT Educational Services, Incorporated+.................... 2,100 105 United Parcel Service, Incorporated..................... 1,000 73 Waste Management, Incorporated..... 1,300 34 ------- TOTAL COMMERCIAL SERVICES & SUPPLIES..................... 748 ------- CONSTRUCTION & ENGINEERING - 0.14% American Standard Companies, Incorporated+.................... 100 10 Masco Corporation.................. 2,100 58 ------- TOTAL CONSTRUCTION & ENGINEERING.................. 68 ------- INDUSTRIAL CONGLOMERATES - 5.94% 3M Company......................... 4,500 355 General Electric Company........... 77,800 2,257
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) Tyco International Limited......... 14,000 $ 292 ------- TOTAL INDUSTRIAL CONGLOMERATES................ 2,904 ------- MACHINERY - 0.03% Eaton Corporation.................. 100 10 SPX Corporation+................... 100 5 ------- TOTAL MACHINERY................ 15 ------- TRANSPORTATION - 0.27% Norfolk Southern Corporation....... 1,500 30 Overseas Shipholding Group, Incorporated..................... 3,800 104 ------- TOTAL TRANSPORTATION........... 134 ------- TOTAL INDUSTRIALS.............. 4,405 ------- INFORMATION TECHNOLOGY - 24.85% COMMUNICATIONS EQUIPMENT - 3.31% Avaya, Incorporated+............... 3,900 50 Cisco Systems, Incorporated+....... 56,000 1,175 Corning, Incorporated+............. 2,600 29 Juniper Networks, Incorporated+*... 6,300 113 Lucent Technologies, Incorporated+.................... 1,200 4 Qualcomm, Incorporated............. 5,200 247 ------- TOTAL COMMUNICATIONS EQUIPMENT.................... 1,618 ------- COMPUTERS & PERIPHERALS - 4.05% Dell, Incorporated+................ 23,600 852 EMC Corporation+................... 4,900 68 Hewlett Packard Company............ 4,000 89 International Business Machines Corporation...................... 2,700 242 Lexmark International, Incorporated+.................... 1,700 125 NCR Corporation+................... 3,900 140 Network Appliance, Incorporated+... 5,700 141 SanDisk Corporation+............... 4,000 322 ------- TOTAL COMPUTERS & PERIPHERALS.................. 1,979 ------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.20% Arrow Electronics, Incorporated+... 1,100 23 Avnet, Incorporated+............... 1,400 27 Intersil Corporation+.............. 700 18 Thermo Electron Corporation+....... 1,400 31 ------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS.................. 99 ------- INTERNET SOFTWARE & SERVICES - 0.10% Electronic Arts, Incorporated+..... 500 50 ------- TOTAL INTERNET SOFTWARE & SERVICES..................... 50 ------- IT CONSULTING & SERVICES - 1.49% Accenture Limited+................. 12,700 297 Affiliated Computer Services, Incorporated+.................... 300 15 BearingPoint, Incorporated+........ 3,700 35
See accompanying notes - -------------------------------------------------------------------------------- 36 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) Computer Sciences Corporation+..... 4,300 $ 170 SunGard Data Systems, Incorporated+.................... 7,500 210 ------- TOTAL IT CONSULTING & SERVICES..................... 727 ------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 9.14% Altera Corporation+................ 21,800 441 Analog Devices, Incorporated+...... 2,200 98 Intel Corporation.................. 61,900 2,046 Linear Technology Corporation...... 100 4 LSI Logic Corporation+............. 6,600 61 Maxim Integrated Products, Incorporated..................... 13,900 691 National Semiconductor Corporation+..................... 8,500 345 Novellus Systems, Incorporated+.... 3,500 145 QLogic Corporation+................ 2,300 129 Texas Instruments, Incorporated.... 10,700 309 Xilinx, Incorporated+.............. 6,400 203 ------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS..................... 4,472 ------- SOFTWARE - 6.56% Adobe Systems, Incorporated........ 7,400 324 BMC Software, Incorporated+........ 13,300 231 Citrix Systems, Incorporated+...... 7,600 192 Computer Associates International, Incorporated..................... 13,200 310 Microsoft Corporation.............. 71,100 1,859 Oracle Corporation+................ 7,400 89 Siebel Systems, Incorporated+...... 4,300 54 Take-Two Interactive Software, Incorporated+.................... 1,700 67 VERITAS Software Corporation+...... 2,300 83 ------- TOTAL SOFTWARE................. 3,209 ------- TOTAL INFORMATION TECHNOLOGY... 12,154 ------- MATERIALS - 1.39% CHEMICALS - 0.81% Eastman Chemical Company........... 400 13 Monsanto Company................... 13,600 340 Praxair, Incorporated.............. 600 42 ------- TOTAL CHEMICALS................ 395 ------- CONTAINERS & PACKAGING - 0.16% Sealed Air Corporation+............ 1,500 80 ------- TOTAL CONTAINERS & PACKAGING... 80 -------
SHARES VALUE --------- --------- (DOLLARS IN THOUSANDS) METALS & MINING - 0.42% Alcoa, Incorporated................ 2,700 $ 85 Freeport-McMoRan Copper & Gold, Incorporated..................... 1,100 43 United States Steel Corporation.... 3,200 76 ------- TOTAL METALS & MINING.......... 204 ------- TOTAL MATERIALS................ 679 ------- TELECOMMUNICATION SERVICES - 1.08% DIVERSIFIED TELECOMMUNICATION - 0.23% Scientific-Atlanta, Incorporated... 1,200 36 Verizon Communications, Incorporated..................... 2,300 77 ------- TOTAL DIVERSIFIED TELECOMMUNICATION............ 113 ------- WIRELESS TELECOMMUNICATION SERVICE - 0.85% AT&T Wireless Services, Incorporated+.................... 46,500 337 Sprint Corporation+................ 10,700 47 United States Cellular Corporation+..................... 1,000 34 ------- TOTAL WIRELESS TELECOMMUNICATION SERVICE.... 418 ------- TOTAL TELECOMMUNICATION SERVICES..................... 531 ------- UTILITIES - 0.06% PG&E Corporation+.................. 700 17 Pinnacle West Capital Corporation...................... 300 11 ------- TOTAL UTILITIES................ 28 ------- TOTAL COMMON STOCK............. 48,015 ------- SHORT-TERM INVESTMENTS - 2.51% American AAdvantage Money Market Select Fund...................... 979,268 979 AMR Investments Enhanced Yield Business Trust................... 125,000 125 iShares Russell 1000 Growth Index Fund............................. 2,670 120 ------- TOTAL SHORT-TERM INVESTMENTS... 1,224 ------- TOTAL INVESTMENTS - 100.64% (COST $44,302)......................... 49,239 ------- LIABILITIES, NET OF OTHER ASSETS - (0.64%)................. (312) ------- TOTAL NET ASSETS - 100%............ $48,927 =======
- --------------- * - All or a portion of this security is on loan at October 31, 2003. See Note 4 + - non-income producing See accompanying notes - -------------------------------------------------------------------------------- 37 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) COMMON STOCK - 89.41% CONSUMER DISCRETIONARY - 23.01% AUTO COMPONENTS - 1.78% Aftermarket Technology Corporation+................ 8,870 $ 105 American Axle & Manufacturing Holdings, Incorporated+..... 26,200 907 Arvinmeritor, Incorporated.... 71,900 1,207 Bandag, Incorporated.......... 3,600 116 Borg-Warner Automotive, Incorporated................ 28,000 2,229 Cooper Tire & Rubber Company..................... 77,200 1,518 Dana Corporation.............. 156,000 2,540 -------- TOTAL AUTO COMPONENTS..... 8,622 -------- AUTOMOBILES - 0.04% Monaco Coach Corporation+*.... 7,600 183 -------- TOTAL AUTOMOBILES......... 183 -------- HOTELS RESTAURANTS & LEISURE - 4.90% Aztar Corporation+............ 27,900 583 Bally Total Fitness Holdings Corporation+*............... 25,600 170 Bob Evans Farms, Incorporated................ 42,500 1,256 California Pizza Kitchen, Incorporated+*.............. 109,300 2,033 CEC Entertainment, Incorporated+............... 13,900 680 Isle of Capri Casinos, Incorporated+*.............. 111,500 2,325 Jack in the Box, Incorporated+............... 177,100 3,221 Kerzner International Limited+*................... 78,900 2,915 Lone Star Steakhouse & Saloon, Incorporated................ 114,100 2,495 Magna Entertainment Corporation+*............... 104,200 465 Mandalay Resort Group......... 119,800 4,702 Papa John's International, Incorporated+*.............. 36,800 968 Ryan's Family Steak Houses, Incorporated+............... 35,150 490 Sonic Corporation+*........... 51,400 1,429 -------- TOTAL HOTELS RESTAURANTS & LEISURE................. 23,732 -------- HOUSEHOLD DURABLES - 5.61% American Greetings Corporation+................ 33,500 715 Beazer Homes USA, Incorporated+*.............. 94,400 9,393 Furniture Brands International, Incorporated+*.............. 159,800 3,877 La-Z-Boy, Incorporated........ 65,700 1,327
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Libbey, Incorporated.......... 11,300 $ 300 M.D.C. Holdings, Incorporated................ 5,017 338 Maytag Corporation............ 96,100 2,441 Standard Pacific Corporation................. 9,800 469 Toll Brothers, Incorporated+............... 26,000 958 The Toro Company.............. 14,600 726 Tupperware Corporation........ 44,900 676 WCI Communities, Incorporated+*.............. 273,100 5,954 -------- TOTAL HOUSEHOLD DURABLES................ 27,174 -------- INTERNET & CATALOG RETAIL - 0.09% School Specialty, Incorporated+*.............. 15,600 435 -------- TOTAL INTERNET & CATALOG RETAIL.................. 435 -------- LEISURE EQUIPMENT & PRODUCTS - 1.01% The Boyds Collection, Limited+*................... 48,600 243 Brunswick Corporation......... 91,600 2,718 Callaway Golf Company......... 25,200 410 JAKKS Pacific, Incorporated+*.............. 18,800 244 Nautilus Group, Incorporated*............... 33,400 521 Polaris Industries, Incorporated*............... 8,900 762 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS................ 4,898 -------- MEDIA - 0.52% R.H. Donnelley Corporation+... 13,400 575 Reader's Digest Association, Incorporated................ 100,700 1,483 Scholastic Corporation+....... 14,700 455 -------- TOTAL MEDIA............... 2,513 -------- MULTILINE RETAIL - 1.67% BJ's Wholesale Club, Incorporated+............... 244,100 6,271 Burlington Coat Factory Warehouse Corporation....... 52,100 1,118 Dillard's, Incorporated....... 11,400 184 ShopKo Stores, Incorporated+*.............. 32,800 508 -------- TOTAL MULTILINE RETAIL.... 8,081 -------- SPECIALTY RETAIL - 5.55% Advance Auto Parts, Incorporated+*.............. 19,800 1,549 Barnes & Noble, Incorporated+............... 67,900 2,023 Borders Group, Incorporated+............... 78,500 1,778 Brookstone, Incorporated+..... 127,850 2,612 Buckle, Incorporated+......... 16,200 363 Cato Corporation*............. 22,900 483
See accompanying notes - -------------------------------------------------------------------------------- 38 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Foot Locker, Incorporated..... 310,000 $ 5,549 Genesco, Incorporated+*....... 171,600 2,891 Handleman Company+............ 26,900 477 Hollywood Entertainment Corporation+................ 44,200 672 Hughes Supply, Incorporated... 18,200 703 The Men's Wearhouse, Incorporated+*.............. 92,300 2,719 Payless Shoesource, Incorporated+............... 19,200 254 Rent-A-Center, Incorporated+............... 8,750 274 Stage Stores, Incorporated+*.............. 85,387 2,457 Too, Incorporated+............ 28,100 464 United Auto Group, Incorporated+*.............. 29,900 777 United Rentals, Incorporated+............... 1,400 24 Zale Corporation+............. 15,600 807 -------- TOTAL SPECIALTY RETAIL.... 26,876 -------- TEXTILES & APPAREL - 1.84% Brown Shoe Company, Incorporated................ 4,300 149 Phillips-Van Heusen Corporation................. 35,500 608 Russell Corporation........... 39,200 717 Skechers U.S.A., Incorporated+*.............. 9,000 68 The Warnaco Group, Incorporated+............... 421,300 7,352 -------- TOTAL TEXTILES & APPAREL................. 8,894 -------- TOTAL CONSUMER DISCRETIONARY........... 111,408 -------- CONSUMER STAPLES - 2.94% BEVERAGES - 0.46% Adolph Coors Company.......... 39,600 2,220 -------- TOTAL BEVERAGES........... 2,220 -------- FOOD & DRUG RETAILING - 0.88% Duane Reade, Incorporated+.... 9,200 127 Pathmark Stores, Incorporated+*.............. 268,100 1,836 Ruddick Corporation........... 56,900 908 Winn-Dixie Stores, Incorporated*............... 174,400 1,411 -------- TOTAL FOOD & DRUG RETAILING............... 4,282 -------- FOOD PRODUCTS - 1.13% American Italian Pasta Company+*................... 56,000 2,141 Del Monte Foods Company+...... 214,500 2,040 Interstate Bakeries Corporation................. 13,300 195
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Sensient Technologies Corporation................. 57,700 $ 1,108 -------- TOTAL FOOD PRODUCTS....... 5,484 -------- PERSONAL PRODUCTS - 0.08% Playtex Products, Incorporated+............... 61,200 368 -------- TOTAL PERSONAL PRODUCTS... 368 -------- TOBACCO - 0.39% Dimon, Incorporated........... 34,500 248 Schweitzer Mauduit International, Incorporated................ 13,000 346 Universal Corporation......... 30,200 1,316 -------- TOTAL TOBACCO............. 1,910 -------- TOTAL CONSUMER STAPLES.... 14,264 -------- ENERGY - 4.23% ENERGY EQUIPMENT & SERVICES - 0.65% GulfMark Offshore, Incorporated+*.............. 6,419 90 Oceaneering International, Incorporated+............... 60,100 1,386 Offshore Logistics, Incorporated+............... 28,100 613 Oil States International, Incorporated+............... 76,500 937 Veritas DGC, Incorporated+.... 11,100 98 -------- TOTAL ENERGY EQUIPMENT & SERVICES................ 3,124 -------- OIL & GAS - 3.58% Berry Petroleum Company....... 11,400 207 Chesapeake Energy Corporation*................ 249,900 2,981 Cimarex Energy Company+....... 32,900 673 Encore Acquisition Company+*.. 136,200 3,133 The Houston Exploration Company+.................... 35,800 1,253 Newfield Exploration Company+.................... 68,300 2,714 Stelmar Shipping Limited+*.... 147,100 2,899 Stone Energy Corporation+..... 34,300 1,240 Teekay Shipping Corporation... 45,900 2,209 -------- TOTAL OIL & GAS........... 17,309 -------- TOTAL ENERGY.............. 20,433 -------- FINANCIALS - 20.77% BANKS - 7.73% Anchor BanCorp Wisconsin, Incorporated................ 28,696 715 Bank Hawaii Corporation....... 73,700 2,904 Berkshire Hill Bancorp, Incorporated................ 43,942 1,581 Chemical Financial Corporation................. 18,310 636
See accompanying notes - -------------------------------------------------------------------------------- 39 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) City National Corporation..... 10,900 $ 656 Colonial Bancgroup, Incorporated................ 152,300 2,388 Commercial Federal Corporation................. 53,900 1,387 Community Bank System, Incorporated................ 10,000 488 Community First Bankshares, Incorporated................ 6,400 174 Corus Bankshares, Incorporated................ 10,900 641 Cullen/Frost Bankers, Incorporated................ 56,500 2,190 Downey Financial Corporation.. 34,100 1,565 First Citizens Bancshares, Incorporated................ 6,800 775 First Federal Capital Corporation................. 21,934 482 First Republic Bank*.......... 10,600 379 FirstFed Financial Corporation+................ 13,000 585 FirstMerit Corporation........ 56,705 1,462 Gold Banc Corporation, Incorporated................ 18,100 234 Greater Bay Bancorp*.......... 63,700 1,717 Hudson United Bancorp......... 21,200 769 International Bancshares Corporation................. 12,500 574 Irwin Financial Corporation*................ 22,900 642 Klamath First Bancorp, Incorporated................ 68,900 1,667 MAF Bancorp, Incorporated..... 5,400 226 NetBank, Incorporated......... 14,000 192 Old National Bancorp.......... 14,320 318 PFF Bancorp, Incorporated..... 11,200 418 Provident Financial Group, Incorporated*............... 21,761 641 Republic Bancorp, Incorporated................ 44,290 643 Roslyn Bancorp, Incorporated................ 75,100 2,023 Sky Financial Group, Incorporated................ 2,655 65 Tierone Corporation+.......... 25,600 606 Timberland Bancorp, Incorporated................ 14,800 357 The Trust Company of New Jersey...................... 8,947 281 Trustmark Corporation......... 47,500 1,352 Unizan Financial Corporation*................ 24,900 508 Washington Federal, Incorporated................ 80,500 2,120 Webster Financial Corporation of Waterbury................ 55,900 2,499 Westcorp, Incorporated*....... 14,054 532 -------- TOTAL BANKS............... 37,392 --------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) DIVERSIFIED FINANCIALS - 2.31% Brookfield Homes Corporation.. 241,600 $ 5,231 Credit Acceptance Corporation+*............... 900 11 Friedman, Billings, Ramsey Group, Incorporated......... 166,000 3,307 IndyMac Bancorp, Incorporated................ 68,300 2,008 Walter Industries, Incorporated................ 51,200 608 -------- TOTAL DIVERSIFIED FINANCIALS.............. 11,165 -------- INSURANCE - 5.88% Alfa Corporation.............. 3,270 42 Allmerica Financial Corporation+................ 350,800 9,342 American Financial Group, Incorporated................ 81,600 1,817 AmerUs Group Company*......... 47,800 1,804 Commerce Group, Incorporated.. 38,600 1,534 Crawford & Company*........... 5,800 41 Delphi Financial Group, Incorporated................ 4,300 217 FBL Financial Group, Incorporated*............... 32,700 853 First American Corporation.... 95,000 2,722 Fremont General Corporation*.. 63,500 1,056 Landamerica Financial Group, Incorporated................ 22,900 1,145 National Western Life Insurance Company+.......... 2,500 360 Protective Life Corporation... 84,400 2,740 Reinsurance Group of America, Incorporated................ 56,100 2,241 StanCorp Financial Group, Incorporated................ 7,700 485 Stewart Information Services Corporation+................ 12,900 402 Triad Guaranty, Incorporated+*.............. 16,100 794 UICI+......................... 57,100 854 -------- TOTAL INSURANCE........... 28,449 -------- REAL ESTATE - 4.85% American Financial Realty Trust, 144A (Note A)+....... 338,100 5,126 Arden Realty, Incorporated.... 60,300 1,687 La Quinta Corporation+*....... 191,900 1,184 LNR Property Corporation...... 162,700 6,654 MI Developments, Incorporated+*.............. 315,500 7,988 The St. Joe Company........... 25,900 856 -------- TOTAL REAL ESTATE......... 23,495 -------- TOTAL FINANCIALS.......... 100,501 --------
See accompanying notes - -------------------------------------------------------------------------------- 40 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) HEALTH CARE - 5.53% BIOTECHNOLOGY - 0.11% Albany Molecular Research, Incorporated+*.............. 36,900 $ 542 -------- TOTAL BIOTECHNOLOGY....... 542 -------- HEALTH CARE EQUIPMENT & SUPPLIES - 1.00% Bausch & Lomb, Incorporated... 36,700 1,767 CONMED Corporation+........... 400 8 Haemonetics Corporation+*..... 101,300 2,336 Mine Safety Appliances Company..................... 7,500 425 Sola International, Incorporated+............... 19,000 326 -------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES.... 4,862 -------- HEALTH CARE PROVIDERS & SERVICES - 4.30% AMN Healthcare Services, Incorporated+*.............. 44,300 670 Beverly Enterprises, Incorporated+*.............. 26,100 158 Cross Country Healthcare, Incorporated+*.............. 14,595 203 Genesis Health Ventures, Incorporated+............... 36,582 984 Humana Inc+................... 88,400 1,794 LifePoint Hospitals, Incorporated+............... 163,800 4,211 Orthodontic Centers of America, Incorporated+*..... 26,800 237 Owens & Minor, Incorporated... 13,600 277 Pacificare Health Systems, Incorporated+............... 27,800 1,654 Rotech Healthcare, Incorporated+*.............. 192,800 5,398 Service Corporation International+.............. 74,700 362 Stewart Enterprises, Incorporated+............... 91,700 374 Sunrise Assisted Living, Incorporated+*.............. 25,600 740 US Oncology, Incorporated+.... 344,501 3,769 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES.... 20,831 -------- PHARMACEUTICALS - 0.12% Enzon Pharmaceuticals, Incorporated+*.............. 53,500 597 -------- TOTAL PHARMACEUTICALS..... 597 -------- TOTAL HEALTH CARE......... 26,832 --------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) INDUSTRIALS - 15.92% AEROSPACE & DEFENSE - 1.09% GenCorp, Incorporated*........ 33,400 $ 316 Kaman Corporation............. 16,800 205 Precision Castparts Corporation................. 62,000 2,550 Triumph Group, Incorporated+*.............. 18,200 594 United Defense Industrials, Incorporated+............... 49,100 1,591 -------- TOTAL AEROSPACE & DEFENSE................. 5,256 -------- BUILDING PRODUCTS - 0.54% NCI Building Systems, Incorporated+............... 13,400 291 Universal Fastener Products, Incorporated................ 13,600 403 Watsco, Incorporated.......... 3,600 77 York International Corporation................. 46,500 1,848 -------- TOTAL BUILDING PRODUCTS... 2,619 -------- COMMERCIAL SERVICES & SUPPLIES - 7.50% Allied Waste Industries, Incorporated+............... 124,000 1,399 BISYS Group, Incorporated+.... 86,000 1,230 Bowne & Company, Incorporated................ 238,300 3,575 Brinks Company................ 19,600 393 Convergys Corporation+........ 74,700 1,200 CSG Systems International, Incorporated+............... 60,500 695 Deluxe Corporation............ 45,300 1,829 John H. Harland Company....... 34,300 934 Heidrick & Struggles International, Incorporated+*.............. 181,000 3,575 Herman Miller, Inc............ 29,600 680 Interpool, Incorporated....... 21,100 308 Kelly Services, Incorporated................ 197,000 4,827 Mac Gray Corporation+......... 39,100 194 McGrath Rentcorp.............. 900 26 NCO Group, Incorporated+...... 12,900 307 New England Business Service, Incorporated................ 10,000 291 Spherion Corporation+*........ 522,900 4,549 Valassis Communications, Incorporated+*.............. 398,100 10,311 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.............. 36,323 --------
See accompanying notes - -------------------------------------------------------------------------------- 41 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) CONSTRUCTION & ENGINEERING - 0.38% EMCOR Group, Incorporated+.... 18,300 $ 690 The Shaw Group, Incorporated+*.............. 37,700 515 URS Corporation+.............. 28,500 624 -------- TOTAL CONSTRUCTION & ENGINEERING............. 1,829 -------- ELECTRICAL EQUIPMENT - 1.05% Acuity Brands, Incorporated... 15,300 329 Brady Corporation............. 71,100 2,510 Genlyte Group, Incorporated+.. 15,800 745 Rayovac Corporation+.......... 39,800 654 Tecumseh Products Company..... 15,700 643 Wesco International, Incorporated+............... 31,200 216 -------- TOTAL ELECTRICAL EQUIPMENT............... 5,097 -------- INDUSTRIAL CONGLOMERATES - 0.18% Pentair, Incorporated......... 19,700 808 Standex International Corporation................. 3,100 79 -------- TOTAL INDUSTRIAL CONGLOMERATES........... 887 -------- MACHINERY - 3.24% Albany International Corporation................. 8,052 249 Flowserve Corporation+*....... 149,000 3,049 Harsco Corporation............ 66,000 2,528 Joy Global, Incorporated+..... 175,100 3,337 Kaydon Corporation*........... 95,300 2,265 Lincoln Electric Holdings, Incorporated................ 32,400 790 Terex Corporation+*........... 137,200 3,095 Thomas Industries, Incorporated*............... 10,100 305 Watts Industries, Incorporated................ 2,300 41 -------- TOTAL MACHINERY........... 15,659 -------- MARINE - 1.01% Alexander & Baldwin, Incorporated................ 99,400 3,082 Kirby Corporation+............ 48,800 1,434 Overseas Shipholding Group, Incorporated................ 13,000 354 -------- TOTAL MARINE.............. 4,870 --------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) TRANSPORTATION - 0.93% J.B. Hunt Transport Services, Incorporated+*.............. 93,700 $ 2,378 USF Corporation............... 66,800 2,132 -------- TOTAL TRANSPORTATION...... 4,510 -------- TOTAL INDUSTRIALS......... 77,050 -------- INFORMATION TECHNOLOGY - 3.40% COMMUNICATIONS EQUIPMENT - 0.09% Black Box Corporation......... 10,600 456 -------- TOTAL COMMUNICATIONS EQUIPMENT............... 456 -------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.56% IKON Office Solutions, Incorporated 180,300 1,515 Tech Data Corporation+........ 35,700 1,175 -------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS........... 2,690 -------- IT CONSULTING & SERVICES - 1.10% Bearingpoint, Incorporated+... 484,600 4,555 Investment Technology Group, Incorporated+............... 39,900 792 -------- TOTAL IT CONSULTING & SERVICES................ 5,347 -------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.03% ESS Technology, Incorporated+............... 12,000 167 -------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS.... 167 -------- SOFTWARE - 1.62% Activision, Incorporated+..... 138,850 2,095 Compuware Corporation+........ 279,000 1,568 Mentor Graphics Corporation+*............... 150,800 2,526 Parametric Technology Corporation+................ 532,800 1,657 -------- TOTAL SOFTWARE............ 7,846 -------- TOTAL INFORMATION TECHNOLOGY.............. 16,506 -------- MATERIALS - 5.69% CHEMICALS - 4.03% Agrium, Incorporated.......... 161,100 2,476 Celanese AG*.................. 56,700 1,956 FMC Corporation+.............. 166,000 4,650 H.B. Fuller Company*.......... 105,500 2,614 IMC Global, Incorporated...... 231,500 1,618 Lubrizol Corporation.......... 34,700 1,051 Lyondell Chemical Company*.... 132,200 1,891
See accompanying notes - -------------------------------------------------------------------------------- 42 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Millennium Chemicals, Incorporated+............... 80,300 $ 805 PolyOne Corporation+.......... 509,300 2,460 -------- TOTAL CHEMICALS........... 19,521 -------- CONSTRUCTION MATERIALS - 1.15% Centex Construction Products, Incorporated................ 2,700 146 Insituform Technologies, Incorporated+*.............. 139,600 1,996 Lafarge North America, Incorporated................ 76,600 2,765 Lennox International, Incorporated*............... 39,200 648 -------- TOTAL CONSTRUCTION MATERIALS............... 5,555 -------- CONTAINERS & PACKAGING - 0.13% Silgan Holdings, Incorporated+............... 19,479 623 -------- TOTAL CONTAINERS & PACKAGING............... 623 -------- METALS & MINING - 0.38% Quanex Corporation............ 18,700 749 Steel Dynamics, Incorporated+*.............. 58,470 1,089 -------- TOTAL METALS & MINING..... 1,838 -------- TOTAL MATERIALS........... 27,537 -------- TELECOMMUNICATION SERVICES - 0.19% Metrocall Holdings, Incorporated+............... 28,500 926 -------- TOTAL TELECOMMUNICATION SERVICES................ 926 -------- UTILITIES - 7.73% ELECTRIC UTILITIES - 5.09% Alliant Corporation*.......... 167,000 4,018 Black Hills Corporation....... 38,700 1,245 Cleco Corporation............. 58,200 975 DPL Inc....................... 154,900 2,822 Duquesne Light Holdings, Incorporated................ 91,600 1,472 Great Plains Energy, Incorporated................ 84,700 2,700 Hawaiian Electric Industries, Incorporated*............... 28,200 1,291 Northeast Utilities........... 286,500 5,398
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) NSTAR......................... 21,200 $ 990 OGE Energy Corporation*....... 104,400 2,381 PNM Resources, Incorporated*.. 30,100 851 UIL Holdings Corporation*..... 11,200 421 WPS Resources Corporation..... 2,000 89 -------- TOTAL ELECTRIC UTILITIES............... 24,653 -------- GAS UTILITIES - 2.64% AGL Resources, Incorporated... 78,000 2,196 National Fuel Gas Company..... 99,500 2,224 Nicor, Incorporated*.......... 54,200 1,858 ONEOK, Incorporated........... 107,500 2,138 Peoples Energy Corporation*... 27,500 1,112 Vectren Corporation........... 83,400 1,968 WGL Holdings, Incorporated.... 46,000 1,272 -------- TOTAL GAS UTILITIES....... 12,768 -------- TOTAL UTILITIES........... 37,421 -------- TOTAL COMMON STOCK........ 432,878 -------- PAR AMOUNT ------------ SHORT-TERM INVESTMENTS - 26.86% U. S. TREASURY BILLS - 0.79% 1.00%, Due 12/11/2003 (Note B).......................... $ 3,850 3,846 -------- TOTAL U. S. TREASURY BILLS................... 3,846 -------- SHARES ------------ OTHER SHORT-TERM INVESTMENTS - 26.07% American AAdvantage Money Market Select Fund.......... 105,083,390 105,083 AMR Investments Enhanced Yield Business Trust.............. 20,949,386 20,949 -------- TOTAL OTHER SHORT-TERM INVESTMENTS............. 126,032 -------- TOTAL SHORT-TERM INVESTMENTS............. 129,878 -------- TOTAL INVESTMENTS - 116.27% (COST $501,189)............. 562,756 -------- LIABILITIES, NET OF OTHER ASSETS - (16.27%)........... (78,728) -------- TOTAL NET ASSETS - 100%....... $484,028 ========
- --------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $5,126 or 1.06% of net assets. (B) At October 31, 2003, security held as collateral for open futures contracts. * - All or a portion of this security is on loan at October 31, 2003. See Note 4. + - non-income producing See accompanying notes - -------------------------------------------------------------------------------- 43 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) STOCKS - 95.92% ARGENTINA COMMON STOCK - 0.09% Tenaris S.A., ADR................ 1,900 $ 52 ------- TOTAL ARGENTINA COMMON STOCK...................... 52 ------- BRAZIL - 8.33% BRAZIL PREFERRED STOCK - 1.49% Companhia Vale do Rio Doce, ADR............................ 7,688 311 Petroleo Brasileiro S.A., ADR.... 16,816 366 Telesp - Telecommunicacoes de Sao Paulo S.A.+.................... 10,500,000 150 ------- TOTAL BRAZIL PREFERRED STOCK...................... 827 ------- BRAZIL COMMON STOCK - 6.84% Aracruz Celulose S.A., ADR....... 2,200 62 Banco Bradesco S.A.+............. 25,625,000 108 Banco Bradesco S.A., ADR+*....... 2,421 51 Banco Itau Holding Financeira S.A. .......................... 421,000 34 Banco Itau Holding Financeira S.A., ADR+..................... 9,336 381 Brasil Telecom Participacoes S.A., ADR...................... 2,100 77 Companhia Brasileira de Distribuicao Grupo Pao de Acucar, ADR.................... 7,200 145 Companhia de Bebidas das Americas, ADR.................. 14,359 304 Companhia de Saneamento Basico do Estado de Sao Paulo+........... 4,650,000 208 Companhia de Tecidos Norte de Minas.......................... 2,500,000 170 Companhia Energetica de Minas Gerais+........................ 19,891,213 295 Companhia Energetica de Minas Gerais, ADR+................... 5,000 73 Companhia Siderurgica Nacional S.A., ADR...................... 2,500 103 Duratex S.A.+.................... 3,100,000 78 Empresa Brasileira de Aeronautica S.A. (Embraer), ADR............ 11,210 291 Petroleo Brasileiro S.A., ADR.... 33,002 776 Tele Celular Sul Participacoes S.A., ADR*..................... 7,550 93 Tele Norte Leste Participacoes S.A., ADR*..................... 5,500 78 Telecomunicacoes Brasileiras S.A., ADR*..................... 4,660 160 Telemar Norte Leste S.A.+........ 3,500,000 71 Telemig Celular Participacoes S.A. .......................... 20,000,000 32 Ultrapar Participacoes S.A., ADR*........................... 3,500 39
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Unibanco - Uniao de Bancos Brasileiros S.A., GDR.......... 5,200 $ 115 Votorantim Celulose e Papel S.A., ADR............................ 2,050 56 ------- TOTAL BRAZIL COMMON STOCK.... 3,800 ------- TOTAL BRAZIL................. 4,627 ------- CHINA COMMON STOCK - 3.55% BYD Company Limited.............. 47,000 123 China Mobile (Hong Kong) Limited........................ 137,000 389 China Mobile (Hong Kong) Limited, ADR*........................... 15,900 225 China Oilfield Services Limited........................ 386,000 112 China Shipping Development Company Limited................ 132,000 87 CNOOC Limited.................... 242,000 457 Chunghwa Telecom Company Limited, ADR............................ 15,100 234 Huaneng Power International, Incorporated................... 92,000 141 Sinopec Shanghai Petrochemical Company Limited................ 301,000 85 TPV Technology Limited........... 239,000 122 ------- TOTAL CHINA COMMON STOCK..... 1,975 ------- EGYPT COMMON STOCK - 1.01% Commercial International Bank.... 5,480 40 Commercial International Bank, GDR, 144A (Note A)............. 15,300 103 Egyptian Company for Mobile Services (MobiNil)+............ 2,900 33 Misr International Bank S.A.E., GDR, 144A (Note A)............. 26,562 32 Orascom Construction Industries S.A.E.......................... 9,741 108 Orascom Construction Industries S.A.E., GDR.................... 7,861 153 Suez Cement Company, GDR, 144A (Note A)....................... 11,969 90 ------- TOTAL EGYPT COMMON STOCK..... 559 ------- HONG KONG COMMON STOCK - 2.75% Asia Aluminum Holdings Limited... 332,000 66 AviChina Industry & Technology Company Limited+............... 296,000 61 China Merchants Holdings International Company Limited.. 50,000 68 China Resources Enterprises Limited*....................... 221,000 260 China Unicom Limited*............ 144,000 136 Fountain Set (Holdings) Limited.. 115,000 80 The Grande Holdings Limited...... 37,000 39
See accompanying notes - -------------------------------------------------------------------------------- 44 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Hopewell Highway Infrastructure Limited+....................... 111,000 $ 63 PICC Property & Casualty Company Limited+....................... 22,000 5 Qingling Motors Company Limited.. 492,000 91 Shandong International Power Development Company Limited.... 658,000 212 Shanghai Industrial Holdings Limited*....................... 113,000 226 Shougang Concord Century Holdings Limited........................ 285,000 37 Sinopec Yizheng Chemical Fibre Company Limited................ 835,000 174 Victory City International Holdings Limited............... 27,000 11 ------- TOTAL HONG KONG COMMON STOCK...................... 1,529 ------- HUNGARY COMMON STOCK - 1.81% Egis Gyogyszergyar Reszvnytarsas AG+............................ 603 23 Gedeon Richter Rt................ 3,092 318 Magyar Olaj-es Gazipari Reszvenytarsasag............... 7,865 244 Magyar Tavkozlesi Rt............. 68,142 245 Magyar Tavkozlesi Rt., ADR....... 2,274 41 OTP Bank Rt.+.................... 10,900 134 ------- TOTAL HUNGARY COMMON STOCK... 1,005 ------- INDIA COMMON STOCK - 7.13% Bajaj Auto Limited, GDR, 144A (Note A)....................... 2,750 56 Bharat Petroleum Corporation Limited........................ 15,733 119 GAIL (India) Limited, GDR........ 5,650 120 GAIL (India) Limited, GDR, 144A (Note A)....................... 8,100 172 Gujarat Ambuja Cements Limited, GDR............................ 16,050 91 Hindalco Industries Limited, GDR, 144A (Note A).................. 10,700 264 Hindalco Industries Limited, GDR, 144A (Note A)+................. 5,000 123 ICICI Bank Limited+.............. 21,700 119 ICICI Bank Limited, ADR.......... 14,000 178 Indian Hotels Company Limited+... 9,250 72 Infosys Technologies Limited, ADR*........................... 1,800 152 ITC Limited...................... 15,200 291 ITC Limited, GDR................. 8,450 173 Larsen & Toubro Limited, GDR..... 3,850 67 Mahanagar Telephone Nigam Limited........................ 47,000 112 Mahanagar Telephone Nigam Limited, ADR*.................. 42,150 204
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Ranbaxy Laboratories Limited, GDR............................ 4,620 $ 106 Reliance Industries Limited...... 44,405 476 Reliance Industries Limited, GDR, 144A (Note A).................. 5,060 121 Satyam Computer Services Limited........................ 38,000 257 State Bank of India, GDR+........ 9,000 270 State Bank of India, GDR, 144A (Note A)....................... 3,700 111 Tata Engineering, GDR............ 33,100 278 Tata Tea Limited, GDR............ 4,500 27 ------- TOTAL INDIA COMMON STOCK..... 3,959 ------- INDONESIA COMMON STOCK - 3.04% Hindustan Petroleum Corporation Limited........................ 17,000 123 NIIT Limited..................... 24,232 94 PT Astra Agro Lestari Tbk........ 290,000 59 PT Astra International Tbk+...... 327,538 168 PT Bank Central Asia Tbk......... 218,000 90 PT Bank Mandiri+................. 491,500 55 PT Bank Rakyat Indonesia+........ 391,000 41 PT Gudang Garam Tbk.............. 101,400 157 PT Hanjaya Mandala Sampoerna Tbk............................ 141,000 72 PT Indocement Tunggal Prakarsa Tbk+........................... 157,000 36 PT Indofood Sukses Makmur Tbk.... 1,714,000 141 PT Indonesian Satellite Corporation Tbk................ 123,000 173 PT Ramayana Lestari Sentosa Tbk.. 250,000 138 PT Telekomunikasi Indonesia...... 483,500 341 ------- TOTAL INDONESIA COMMON STOCK...................... 1,688 ------- ISRAEL COMMON STOCK - 1.49% Bank Hapoalim Limited+........... 133,280 281 Check Point Software Technologies+.................. 24,290 413 ECI Telecom Limited+............. 3,711 18 Supersol Limited................. 52,000 115 ------- TOTAL ISRAEL COMMON STOCK.... 827 ------- MALAYSIA COMMON STOCK - 2.87% Astro All Asia Networks plc+..... 41,000 51 Commerce Asset-Holding Berhad.... 179,000 207 Genting Berhad................... 44,700 218 Magnum Corporation Berhad........ 109,000 81 Malayan Banking Berhad........... 89,800 241 Malaysia International Shipping Corporation Berhad............. 62,900 202 Perusahaan Otomobil Nasional Berhad......................... 35,000 75
See accompanying notes - -------------------------------------------------------------------------------- 45 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Resorts World Berhad............. 25,000 $ 72 Sime Darby Berhad................ 212,000 312 SP Setia Berhad.................. 81,499 77 YTL Corporation Berhad........... 46,000 56 ------- TOTAL MALAYSIA COMMON STOCK...................... 1,592 ------- MEXICO COMMON STOCK - 8.28% America Movil S.A. De C.V., ADR.. 22,355 532 Apasco S.A. de C.V. ............. 7,700 58 Cemex S.A. de C.V. .............. 45,825 220 Cemex S.A. de C.V., ADR.......... 7,100 170 Coca-Cola Femsa, S.A. de C.V., ADR+*.......................... 18,875 381 Controladora Commercial Mexicana S.A. de C.V.+.................. 224,000 186 Desc S.A. de C.V. ............... 389,400 121 Embotelladoras Arca S.A. ........ 18,000 33 Fomento Economico Mexicano, S.A. de C.V.+....................... 4,000 14 Fomento Economico Mexicano, S.A. de C.V., ADR................... 1,079 39 Grupo Aeroportuario del Sureste S.A. de C.V., ADR.............. 7,530 130 Grupo Continential, S.A. ........ 97,850 135 Grupo Financiero BBVA Bancomer, S.A. de C.V.+.................. 453,100 385 Grupo Financiero BBVA Bancomer, S.A. de C.V., ADR+............. 3,900 66 Grupo Televisa, S.A., ADR........ 1,400 54 Kimberly-Clark de Mexico, S.A. de C.V. .......................... 175,500 425 Organizacion Soriana S.A. de C.V.+.......................... 38,000 83 Telefonos de Mexico, S.A. de C.V., ADR...................... 39,478 1,269 Wal-Mart de Mexico, S.A. de C.V., A Shares....................... 25,700 67 Wal-Mart de Mexico, S.A. de C.V., Series C....................... 82,926 231 ------- TOTAL MEXICO COMMON STOCK.... 4,599 ------- PHILIPPINES COMMON STOCK - 0.49% ABS-CBN Broadcasting Corporation+................... 85,000 44 Bank of the Philippine Islands... 160,780 132 Manila Electric Company.......... 176,900 66 Philippine Long Distance Telephone Company+............. 2,400 33 ------- TOTAL PHILIPPINES COMMON STOCK...................... 275 ------- POLAND COMMON STOCK - 1.64% Bank Pekao SA.................... 2,264 65 Bank Pekao SA, GDR+.............. 1,439 41 Bank Przemyslowo-Handlowy SA..... 1,567 136
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) KGHM Polska Miedz SA+............ 35,191 $ 226 Polski Koncern Naftowy Orlen SA.. 42,547 272 Polski Koncern Naftowy Orlen SA, GDR............................ 1,600 20 Telekomunikacja Polska SA+....... 43,400 152 ------- TOTAL POLAND COMMON STOCK.... 912 ------- RUSSIA - 4.44% RUSSIA PREFERRED STOCK - 0.08% JSC Surgutneftegaz, ADR.......... 1,328 42 ------- TOTAL RUSSIA PREFERRED STOCK...................... 42 ------- RUSSIA COMMON STOCK - 4.36% JSC Surgutneftegaz, ADR*......... 17,011 403 LUKOIL Oil Company, ADR+......... 10,727 867 Mining and Metallurgical Company Norilsk Nickel, ADR............ 11,249 582 Mobile Telesystems, ADR.......... 800 62 Mobile Telesystems, GDR, 144A (Note A)+...................... 1,800 121 RAO Gazprom, ADR................. 2,200 53 RAO Gazprom+..................... 7,200 173 Yukos Oil Company, ADR........... 3,621 164 ------- TOTAL RUSSIA COMMON STOCK.... 2,425 ------- TOTAL RUSSIA................. 2,467 ------- SOUTH AFRICA COMMON STOCK - 14.65% ABSA Group Limited............... 31,100 180 African Bank Investments Limited........................ 33,600 40 Anglo American plc............... 82,213 1,679 Anglo American Platinum Corporation Limited............ 2,400 103 AngloGold Limited................ 4,100 159 AngloGold Limited, ADR........... 1,300 50 Aveng Limited.................... 64,300 76 Bidvest Group Limited............ 66,330 404 Dimension Data Holdings plc+..... 164,900 92 FirstRand Limited+............... 188,595 223 Gold Fields Limited.............. 12,375 177 Gold Fields Limited, ADR......... 5,500 79 Harmony Gold Mining Company Limited........................ 2,806 43 Harmony Gold Mining Company Limited, ADR................... 800 12 Illovo Sugar Limited............. 45,000 49 Impala Platinum Holdings Limited........................ 2,829 260 Imperial Holdings Limited........ 13,100 115 Metro Cash and Carry Limited+.... 485,852 151 MTN Group Limited+............... 58,040 208 Nampak Limited................... 186,200 351 Naspers Limited.................. 11,700 55 Nedcor Limited................... 59,100 540
See accompanying notes - -------------------------------------------------------------------------------- 46 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Old Mutual....................... 245,787 $ 426 Sanlam Limited+.................. 154,050 190 Sappi Limited.................... 26,056 330 Sappi Limited, ADR............... 1,520 19 Sasol Limited.................... 59,302 774 Sasol Limited, ADR............... 3,425 45 Shoprite Holdings Limited........ 102,000 111 Standard Bank Group Limited...... 70,540 342 Steinhoff International Holdings Limited+....................... 147,724 150 Telkom South Africa Limited+..... 30,500 237 Telkom South Africa Limited, ADR+*.......................... 1,750 54 Tiger Brands Limited............. 25,550 272 The Tongaat-Hulett Group Limited........................ 30,000 144 ------- TOTAL SOUTH AFRICA COMMON STOCK...................... 8,140 ------- SOUTH KOREA - 16.86% SOUTH KOREA PREFERRED STOCK - 0.41% Daishin Securities Company Limited+....................... 3,310 25 Samsung Electronics Company Limited+....................... 1,030 205 ------- TOTAL SOUTH KOREA PREFERRED STOCK...................... 230 ------- SOUTH KOREA COMMON STOCK - 16.45% Cheil Communications, Incorporated................... 950 116 Chohung Bank+.................... 18,350 59 CJ Corporation................... 4,430 221 Daewoo Shipbuilding & Marine Engineering Company Limited+... 17,720 238 Daishin Securities Company Limited........................ 11,450 165 Good Morning Shinhan Securities Company Limited+............... 14,360 59 Hankook Tire Company Limited+.... 11,570 80 Honam Petrochemical Corporation.. 4,070 163 Hyundai Department Store Company Limited........................ 7,580 192 Hyundai Development Company...... 5,440 50 Hyundai Mobis.................... 10,060 388 Hyundai Motor Company Limited.... 7,010 234 Inchon Iron & Steel Company Limited, GDR, 144A (Note A).... 10,500 67 Kangwon Land Incorporated+....... 11,300 143 Kia Motors Corporation........... 23,000 161 Kookmin Bank..................... 11,531 421 Kookmin Bank, ADR................ 7,800 287 Korea Electric Power Corporation.................... 35,590 687 Korea Exchange Bank Credit Services Company Limited+...... 22,857 129 KT Corporation, ADR.............. 17,600 347
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) KT&G Corporation................. 6,140 $ 118 KT&G Corporation, GDR, 144A (Note A)............................. 25,400 248 LG Card Company Limited.......... 18,739 191 LG Electronics, Incorporated..... 475 25 POSCO............................ 3,420 399 POSCO, ADR....................... 1,400 41 Samsung Corporation.............. 31,960 236 Samsung Electro Mechanics Company Limited........................ 180 6 Samsung Electronics Company Limited........................ 4,600 1,827 Samsung Fire & Marine Insurance Company Limited................ 2,330 133 Samsung SDI Company Limited...... 8,580 884 Shinhan Financial Group Company Limited........................ 7,590 109 STX Corporation.................. 3,700 28 STX Shipbuilding Company Limited+....................... 6,000 100 SK Telecom Company Limited....... 2,720 480 Tong Yang Confectionery Corporation.................... 1,550 106 ------- TOTAL SOUTH KOREA COMMON STOCK...................... 9,138 ------- TOTAL SOUTH KOREA............ 9,368 ------- TAIWAN COMMON STOCK - 11.90% Accton Technology Corporation.... 159,396 99 Acer, Incorporated............... 62,888 93 Advanced Semiconductor Engineering, Incorporated+..... 126,683 117 Advanced Semiconductor Engineering, Incorporated, ADR+*.......................... 18,309 86 Asia Optical Company, Incorporated................... 32,200 212 Asustek Computer, Incorporated... 73,125 174 AU Optronics Corporation......... 141,000 190 Catcher Technology Company Limited........................ 15,000 44 Cathay Financial Holding Company Limited........................ 115,000 190 Chinatrust Financial Holding Company Limited................ 157,387 165 CTCI Corporation................. 104,000 78 Delta Electronics, Incorporated................... 45,000 57 Elan Microelectronics Corporation+................... 133,060 121 Evergreen Marine Corporation..... 167,880 147 First Financial Holding Company Limited+....................... 84,000 56 Fubon Financial Holding Company Limited........................ 116,000 122
See accompanying notes - -------------------------------------------------------------------------------- 47 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Grand Hall Enterprise Company Limited........................ 7,000 $ 34 Hon Hai Precision Industry Company Limited................ 63,100 282 Infortrend Technology, Incorporated................... 14,640 46 Kaulin Manufacturing Company Limited........................ 33,000 53 Largan Precision Company Limited........................ 10,440 112 Nan Ya Plastics Corporation...... 239,366 319 Nien Hsing Textile Company Limited........................ 30,000 31 Novatek Microelectronics Corporation Limited............ 25,550 80 Phoenixtec Power Company Limited........................ 87,355 104 Pihsiang Machinery Manufacturing Company Limited................ 2,600 8 Polaris Securities Company Limited+....................... 306,920 153 President Chain Store Corporation.................... 86,048 133 Quanta Computer, Incorporated+... 127,820 348 Richtek Technology Corporation+.. 12,896 68 SinoPac Holdings................. 501,736 272 Standard Foods Corporation, GDR, 144A (Note A).................. 27,272 35 Sunplus Technology Company Limited+....................... 33,000 57 Taishin Financial Holdings Company Limited+............... 226,000 160 Taiwan Cellular Corporation...... 418,635 376 Taiwan Cement Corporation........ 321,480 162 Taiwan Navigation Company Limited........................ 107,600 71 Taiwan Semiconductor Manufacturing Company Limited+....................... 260,315 513 United Microelectronics Corporation+................... 604,529 553 United Microelectronics Corporation, ADR+*............. 21,402 112 Waffer Technology Company Limited........................ 34,000 74 Ya Hsin Industrial Company Limited........................ 142,000 194 Yaego Corporation+............... 371,000 177 Yuanta Core Pacific Securities Company........................ 133,423 83 Zyxel Communications Corporation.................... 23,000 50 ------- TOTAL TAIWAN COMMON STOCK.... 6,611 -------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) THAILAND COMMON STOCK - 3.42% Bangkok Bank Public Company Limited+....................... 115,600 $ 271 BEC World Public Company Limited........................ 5,600 35 Charoen Pokphand Foods Public Company Limited+............... 445,000 55 Italian-Thai Development Public Company Limited+............... 51,400 108 Kasikornbank Public Company Limited+....................... 258,100 288 Kasikornbank Public Company Limited, NVDR+................. 82,800 88 Krung Thai Bank Public Company Limited........................ 740,000 158 Land & Houses Public Company Limited........................ 433,600 147 PTT Exploration and Production Public Company Limited......... 37,200 177 The Siam Cement Public Company Limited, NVDR+................. 36,600 185 Siam Commercial Bank Public Company Limited+............... 303,000 313 Siam Makro Public Company Limited+....................... 51,600 44 Thai Plastic and Chemicals Public Company Limited+............... 7,200 28 ------- TOTAL THAILAND COMMON STOCK...................... 1,897 ------- TURKEY COMMON STOCK - 2.05% Akbank T.A.S..................... 41,216,452 193 Akcansa Cimento A.S.............. 23,471,200 82 Arcelik A.S...................... 24,646,150 119 Enka Insaat ve Sanayi A.S........ 2,137,923 75 Ford Otomotiv Sanayi A.S.+....... 2,692,000 15 Hurriyet Gazetecilik ve Matbaacilik A.S.+.............. 64,338,800 170 Tofas Turk Otomobil Fabrikasi A.S.+.......................... 29,961,607 48 Tupras-Turkiye Petrol Rafinerileri A.S............... 9,230,000 75 Turkcell Iletisim Hizmetleri A.S.+.......................... 15,384,300 117 Turkiye Garanti Bankasi A.S.+.... 33,974,600 80 Turkiye Is Bankasi (Isbank)+..... 26,951,900 136 Trakya Cam Sanayii A.S........... 9,942,000 29 ------- TOTAL TURKEY COMMON STOCK.... 1,139 ------- VENEZUELA COMMON STOCK - 0.12% Compania Anonima Nacional Telfonos de Venezuela, ADR..... 4,309 64 ------- TOTAL VENEZUELA COMMON STOCKS..................... 64 ------- TOTAL STOCKS................. 53,285 -------
See accompanying notes - -------------------------------------------------------------------------------- 48 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) SHORT TERM INVESTMENTS - 6.39% American AAdvantage Money Market Select Fund.................... 2,296,863 $ 2,297 AMR Investments Enhanced Yield Business Trust................. 1,250,000 1,250 ------- TOTAL SHORT TERM INVESTMENTS................ 3,547 ------- TOTAL INVESTMENTS - 102.31% (COST $44,407)....................... 56,832 ------- LIABILITIES, NET OF OTHER ASSETS - (2.31%)............... (1,285) ------- TOTAL NET ASSETS - 100%.......... $55,547 =======
- --------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,543 or 2.78% of net assets. * - All or a portion of this security is on loan at October 31, 2003. See Note 4. + - non-income producing AMERICAN AADVANTAGE EMERGING MARKETS FUND EMERGING MARKETS SECTOR DIVERSIFICATION October 31, 2003 - --------------------------------------------------------------------------------
PERCENT OF NET ASSETS ---------- Consumer Discretionary...................................... 8.33% Consumer Staples............................................ 7.37% Energy...................................................... 9.18% Financials.................................................. 17.58% Health Care................................................. 0.82% Industrials................................................. 10.55% Information Technology...................................... 13.11% Materials................................................... 12.94% Short-Term Investments...................................... 6.39% Telecommunication Services.................................. 12.32% Utilities................................................... 3.72% Other Liabilities........................................... (2.31%) ------- NET ASSETS............................................. 100.00% =======
See accompanying notes - -------------------------------------------------------------------------------- 49 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) CORPORATE BONDS - 91.12% CONSUMER DISCRETIONARY - 29.87% AUTO COMPONENTS - 5.24% Advanced Accessory Systems LLC, 10.75%, Due 6/15/2011, 144A (Note A).................................................. $ 1,750 $ 1,873 American Axle & Manufacturing Holdings, Incorporated, 9.75%, Due 3/1/2009.............................................. 750 801 ArvinMeritor, Incorporated, 8.75%, Due 3/1/2012............. 2,000 2,100 Asbury Automotive Group, Incorporated, 9.00%, Due 6/15/2012................................................. 2,100 2,184 Collins & Aikman Corporation, 10.75%, Due 12/31/2011*....... 1,675 1,407 Dana Corporation, 6.25%, Due 3/1/2004....................................... 1,000 1,007 7.00%, Due 3/1/2029....................................... 1,250 1,109 GenCorp, Incorporated, 9.50%, Due 8/15/2013, 144A (Note A)*....................................................... 2,850 2,914 LDM Technologies, Incorporated, 10.75%, Due 1/15/2007....... 1,650 1,650 -------- TOTAL AUTO COMPONENTS................................... 15,045 -------- HOTELS, RESTAURANTS & LEISURE - 8.97% Aztar Corporation, 8.875%, Due 5/15/2007..................................... 1,440 1,505 9.00%, Due 8/15/2011...................................... 1,000 1,080 Booth Creek Ski Holdings, Incorporated, 12.50%, Due 3/15/2007................................................. 2,500 2,487 Carmike Cinemas, Incorporated, 10.375%, Due 2/1/2009........ 2,960 3,108 Chumash Casino & Resort Enterprises, 9.00%, Due 7/15/2010, 144A (Note A)............................................. 1,250 1,369 Horseshoe Gaming, LLC, 8.625%, Due 5/15/2009................ 6,674 7,099 MTR Gaming Group, Incorporated, 9.75%, Due 4/1/2010*........ 700 737 Regal Cinemas Corporation, 9.375%, Due 2/1/2012............. 3,371 3,809 Town Sports International, Incorporated, 9.625%, Due 4/15/2011................................................. 500 536 Turning Stone Casino Resort, 9.125%, Due 12/15/2010, 144A (Note A).................................................. 3,710 4,021 -------- TOTAL HOTELS, RESTAURANTS & LEISURE..................... 25,751 -------- HOUSEHOLD DURABLES - 0.87% American Greetings Corporation, 11.75%, Due 7/15/2008..................................... 500 571 6.10%, Due 8/1/2028....................................... 1,900 1,931 -------- TOTAL HOUSEHOLD DURABLES................................ 2,502 -------- MEDIA - 6.27% American Lawyer Media, Incorporated, 9.75%, Due 12/15/2007................................................ 1,000 951 Capitol Records, Incorporated, 8.375%, Due 8/15/2009, 144A (Note A).................................................. 1,000 1,020 Dex Media West LLC, 9.875%, Due 10/1/2013, 144A (Note A).... 900 1,024 EchoStar Communications Corporation, 5.75%, Due 10/1/2008...................................... 1,475 1,469 9.125%, Due 1/15/2009..................................... 195 219 9.375%, Due 2/1/2009...................................... 4,350 4,600 General Motors Corporation, 7.125%, Due 7/15/2013*.......... 2,950 3,070 Houghton Mifflin Company, 8.25%, Due 2/1/2011....................................... 630 666 9.875%, Due 2/1/2013...................................... 2,500 2,703 PEI Holdings, Incorporated, 11.00%, Due 3/15/2010........... 2,000 2,260 -------- TOTAL MEDIA............................................. 17,982 -------- RETAIL - 7.35% AutoNation, Incorporated, 9.00%, Due 8/1/2008............... 3,070 3,500 Dollar General Corporation, 8.625%, Due 6/15/2010........... 3,180 3,550 Group 1 Automotive, Incorporated, 8.25%, Due 8/15/2013, 144A (Note A).................................................. 1,000 1,085
See accompanying notes - -------------------------------------------------------------------------------- 50 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) NationsRent, Incorporated, 9.50%, Due 10/15/2013, 144A (Note A)........................................................ $ 1,250 $ 1,294 Pep Boys, Incorporated 6.71%, Due 11/3/2004...................................... 1,000 1,005 7.00%, Due 6/1/2005....................................... 700 709 6.88%, Due 3/6/2006....................................... 1,000 1,008 Samsonite Corporation, 10.75%, Due 6/15/2008................ 3,000 3,150 United Rentals (North America), Incorporated, 10.75%, Due 4/15/2008*.................................... 1,967 2,208 10.75%, Due 4/18/2008..................................... 500 561 Woolworth Corporation, 8.50%, Due 1/15/2022................. 2,900 3,020 -------- TOTAL RETAIL............................................ 21,090 -------- TEXTILES & APPAREL - 1.17% Dan River, Incorporated, 12.75%, Due 4/15/2009, 144A (Note A)........................................................ 1,500 420 Payless ShoeSource, Incorporated, 8.25%, Due 8/1/2013, 144A (Note A).................................................. 2,500 2,437 Phillips-Van Heusen Corporation, 7.75%, Due 11/15/2023...... 500 495 -------- TOTAL TEXTILES & APPAREL................................ 3,352 -------- TOTAL CONSUMER DISCRETIONARY............................ 85,722 -------- CONSUMER STAPLES - 4.74% Advantica Restaurant Group, Incorporated, 12.75, Due 9/30/2007................................................. 1,500 1,523 Borden, Incorporated, 9.20%, Due 3/15/2021...................................... 2,250 1,935 7.875%, Due 2/15/2023..................................... 2,400 2,040 Corn Products International, Incorporated, 8.25%, Due 7/15/2007...................................... 1,000 1,110 8.45%, Due 8/15/2009...................................... 1,600 1,796 Herbalife International, Incorporated, 11.75%, Due 7/15/2010................................................. 2,975 3,421 Jack in the Box, Incorporated, 8.375%, Due 4/15/2008........ 1,750 1,794 -------- TOTAL CONSUMER STAPLES.................................. 13,619 -------- ENERGY - 12.61% Calpine Corporation, 8.50%, Due 7/15/2010*.................. 2,100 1,922 Citgo Petroleum Corporation, 11.375%, Due 2/1/2011.......... 1,500 1,695 Cleco Corporation, 7.00%, Due 5/1/2008...................... 1,500 1,479 Coastal Corporation, 6.20%, Due 5/15/2004*.................. 2,000 1,995 Compton Petroleum Corporation, 9.90%, Due 5/15/2009......... 1,500 1,642 Comstock Resources, Incorporated, 11.25%, Due 5/1/2007...... 1,943 2,108 Dynegy Holdings, Incorporated, 10.125%, Due 7/15/2013....... 2,400 2,604 Edison International, 6.875%, Due 9/15/2004................. 2,500 2,578 El Paso Production Holdings Company, 7.75%, Due 6/1/2013, 144A (Note A)............................................. 3,350 3,216 Energy Partners Limited, 8.75%, Due 8/1/2010................ 1,000 1,030 Ferrellgas Partners, Limited, 8.75%, Due 6/15/2012.......... 1,500 1,635 Frontier Oil Corporation, 11.75%, Due 11/15/2009............ 1,000 1,130 Nevada Power Company, 6.20%, Due 4/15/2004.................. 1,400 1,407 Newfield Exploration Company, 8.375%, Due 8/15/2012......... 1,000 1,105 Paramount Resources Limited, 7.875%, Due 11/1/2010.......... 1,500 1,493 PG&E Gas Transmission, Northwest Company, 7.80%, Due 6/1/2025.................................................. 2,500 2,462 Sierra Pacific Power Company, 8.00%, Due 6/1/2008........... 1,900 1,995 Star Gas Partners, Limited Partnership, 10.25%, Due 2/15/2013................................................. 3,425 3,682 Tennessee Gas Pipeline Company, 8.375%, Due 6/15/2032....... 1,000 1,013 -------- TOTAL ENERGY............................................ 36,191 --------
See accompanying notes - -------------------------------------------------------------------------------- 51 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) FINANCIALS - 4.52% DIVERSIFIED FINANCIALS - 3.10% Dana Credit Corporation, 8.375%, Due 8/15/2007.............. $ 750 $ 778 Thornburg Mortgage, Incorporated, 8.00%, 5/15/2013.......... 2,500 2,625 Xerox Credit Corporation, 6.10%, Due 12/16/2003............. 5,500 5,500 -------- TOTAL DIVERSIFIED FINANCIALS............................ 8,903 -------- INSURANCE - 0.52% Provident Companies, Incorporated, 7.00%, Due 7/15/2018..... 1,500 1,496 -------- TOTAL INSURANCE......................................... 1,496 -------- REAL ESTATE - 0.90% HMH Properties, Incorporated, 7.875%, Due 8/1/2005.......... 2,503 2,576 -------- TOTAL REAL ESTATE....................................... 2,576 -------- TOTAL FINANCIALS........................................ 12,975 -------- HEALTH CARE - 10.85% BIOTECHNOLOGY - 1.51% aaiPharma Incorporated, 11.00%, Due 4/1/2010................ 3,900 4,329 -------- TOTAL BIOTECHNOLOGY..................................... 4,329 -------- EQUIPMENT & SUPPLIES - 0.99% Bausch & Lomb, Incorporated, 6.75%, Due 12/15/2004..................................... 880 911 7.125%, Due 8/1/2028...................................... 1,972 1,937 -------- TOTAL EQUIPMENT & SUPPLIES.............................. 2,848 -------- HEALTHCARE PROVIDERS & SERVICES - 8.35% Beverly Enterprises, Incorporated, 9.00%, Due 2/15/2006..... 1,705 1,739 Mallinckrodt Group, Incorporated, 6.50%, Due 11/15/2007..... 900 947 National Health Investors, 7.30%, Due 7/16/2007............. 1,000 991 NDCHealth Corporation, 10.50%, Due 12/1/2012................ 1,800 2,007 Pacificare Health Systems, Incorporated, 10.75%, Due 6/1/2009.................................................. 2,500 2,875 Senior Housing Properties Trust, 8.625%, Due 1/15/2012..................................... 1,500 1,635 7.875%, Due 4/15/2015..................................... 875 921 Tenet Healthcare Corporation, 7.375%, Due 2/1/2013*......... 5,800 5,626 Triad Hospitals, Incorporated, 11.00%, Due 5/15/2009........ 2,000 2,206 Vicar Operating, Incorporated, 9.875%, Due 12/1/2009........ 1,116 1,244 US Oncology, Incorporated, 9.625%, Due 2/1/2012............. 3,550 3,781 -------- TOTAL HEALTHCARE PROVIDERS & SERVICES................... 23,972 -------- TOTAL HEALTH CARE....................................... 31,149 -------- INFORMATION TECHNOLOGY - 1.86% COMMUNICATIONS EQUIPMENT - 1.11% Corning, Incorporated, 7.00%, Due 3/15/2007...................................... 1,300 1,300 6.30%, Due 3/1/2009....................................... 1,900 1,891 -------- TOTAL COMMUNICATIONS EQUIPMENT.......................... 3,191 -------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.69% Flextronics International Limited, 6.50%, Due 5/15/2013, 144A (Note A)............................................. 2,000 1,975 -------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS................ 1,975 --------
See accompanying notes - -------------------------------------------------------------------------------- 52 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) SOFTWARE - 0.06% Peregrine Systems, Incorporated, 6.50%, Due 8/15/2007....... $ 174 $ 162 -------- TOTAL SOFTWARE.......................................... 162 -------- TOTAL INFORMATION TECHNOLOGY............................ 5,328 -------- INDUSTRIALS - 11.28% AEROSPACE & ENGINEERING - 1.25% BE Aerospace, Incorporated, 8.50%, Due 10/1/2010, 144A (Note A)........................................................ 750 773 K & F Industries, Incorporated, 9.625%, Due 12/15/2010...... 2,000 2,240 Transdigm, Incorporated, 8.375%, Due 7/15/2011, 144A (Note A)........................................................ 550 584 -------- TOTAL AEROSPACE & ENGINEERING........................... 3,597 -------- CONSTRUCTION & ENGINEERING - 4.42% Interline Brands, Incorporated, 11.50%, Due 5/15/2011, 144A (Note A).................................................. 3,500 3,780 K. Hovnanian Enterprises, Incorporated, 8.875%, Due 4/1/2012*................................................. 2,700 2,943 KB Home, 9.50%, Due 2/15/2011............................... 1,450 1,610 Schuler Homes, Incorporated, 9.375%, Due 7/15/2009.......... 1,500 1,682 Standard-Pacific Corporation, 8.50%, Due 4/1/2009........... 1,000 1,050 Technical Olympic USA, Incorporated, 9.00%, Due 7/1/2010.... 1,000 1,066 Toll Corporation, 8.25%, Due 12/1/2011...................... 500 555 -------- TOTAL CONSTRUCTION & ENGINEERING........................ 12,686 -------- COMMERCIAL SERVICES & SUPPLIES - 4.86% Advanstar Communications, Incorporated, 8.63%, Due 8/15/2008...................................... 1,250 1,300 10.75%, Due 8/15/2010..................................... 2,500 2,656 AGCO Corporation, 8.50%, Due 3/15/2006...................... 1,340 1,340 Corrections Corporation of America, 7.50%, Due 5/1/2011, 144A (Note A)............................................. 900 940 IMCO Recycling, Incorporated, 10.375%, Due 10/15/2010....... 625 619 Sheridan Acquisition Corporation, 10.25%, Due 8/15/2011, 144A (Note A)............................................. 750 784 United Components, Incorporated, 9.375%, Due 6/15/2013, 144A (Note A).................................................. 1,500 1,537 UNOVA, Incorporated, 6.875%, Due 3/15/2005..................................... 1,000 1,000 7.00%, Due 3/15/2008...................................... 1,000 960 Xerox Corporation, 7.15%, Due 8/1/2004....................................... 1,000 1,025 7.625%, Due 6/15/2013..................................... 1,750 1,785 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.................... 13,946 -------- MACHINERY - 0.75% Joy Global, Incorporated, 8.75%, Due 3/15/2012.............. 1,950 2,155 -------- TOTAL MACHINERY......................................... 2,155 -------- TOTAL INDUSTRIAL........................................ 32,384 -------- MATERIALS - 10.06% CHEMICALS - 4.01% FMC Corporation, 6.75%, Due 5/5/2005....................................... 2,000 2,035 7.00%, Due 5/15/2008...................................... 2,200 2,189 IMC Global, Incorporated, 11.25%, Due 6/1/2011...................................... 3,500 3,614 Methanex Corporation, 7.75%, Due 8/15/2005.................. 1,000 1,052 Nalco Company, 8.875%, Due 11/15/2013, 144A (Note A)........ 1,000 1,040
See accompanying notes - -------------------------------------------------------------------------------- 53 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Westlake Chemical Corporation, 8.75%, Due 7/15/2011, 144A (Note A)*................................................. $ 1,500 $ 1,583 -------- TOTAL CHEMICALS......................................... 11,513 -------- CONTAINERS & PACKAGING - 3.89% Crown Holdings, Incorporated, 9.50%, Due 3/1/2011....................................... 2,250 2,497 10.875%, Due 3/1/2013..................................... 2,000 2,280 Owens-Brockway Glass Containers, Incorporated, 8.875%, Due 2/15/2009, 144A (Note A)...................... 2,990 3,244 8.75%, Due 11/15/2012..................................... 1,250 1,369 Owens-Illinois, Incorporated, 7.15%, Due 5/15/2005.......... 750 769 Silgan Holdings, Incorporated, 6.75%, Due 11/15/2013, 144A (Note A).................................................. 1,000 1,001 -------- TOTAL CONTAINERS & PACKAGING............................ 11,160 -------- PAPER & FOREST PRODUCTS - 2.16% Appleton Papers, Incorporated, 12.50%, Due 12/15/2008....... 1,000 1,105 Boise Cascade Corporation, 7.00%, Due 11/1/2013............. 2,050 2,100 Fort James Corporation, 6.70%, Due 11/15/2003............... 3,000 3,000 -------- TOTAL PAPER & FOREST PRODUCTS........................... 6,205 -------- TOTAL MATERIALS......................................... 28,878 -------- TELECOMMUNICATION SERVICES - 5.33% Cincinnati Bell, Incorporated, 7.25%, Due 7/15/2013, 144A (Note A).................................................. 2,000 2,040 Dobson Communications Corporation, 8.875%, Due 10/1/2013, 144A (Note A)............................................. 2,850 2,893 FairPoint Communications, Incorporated, 11.875%, Due 3/1/2010.................................................. 2,000 2,340 GST Equipment Funding, Incorporated, 13.25%, Due 5/1/2007*................................................. 2,500 87 Qwest Capital Funding, Incorporated, 5.875%, Due 8/3/2004... 750 747 Qwest Services Corporation, 13.00%, Due 12/15/2007, 144A (Note A)*.................... 2,500 2,838 13.50%, Due 12/15/2010, 144A (Note A)..................... 3,000 3,502 US West Communication, 8.875%, Due 6/1/2031................. 800 840 -------- TOTAL TELECOMMUNICATION SERVICES........................ 15,287 -------- TOTAL CORPORATE BONDS................................... 261,533 -------- SHARES ----------- COMMON STOCKS - 0.20% Peregrine Systems, Incorporated*............................ 28,000 567 -------- TOTAL COMMON STOCKS..................................... 567 -------- SHORT TERM INVESTMENTS - 15.71% American AAdvantage Money Market Select Fund................ 20,891,341 20,891 Short-Term Investment Company Liquid Asset Fund............. 1,763,727 1,764
See accompanying notes - -------------------------------------------------------------------------------- 54 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Bunge Asset Funding Corp. Discount Commercial Paper, Due 11/3/2003................................................. $ 6,970 6,970 Credit Suisse First Boston Tri Party Repo, 1.113%, Due 11/3/2003, (Note B)....................................... 8,500 8,500 Morgan Stanley Tri Party Repo, 1.113%, Due 11/3/2003, (Note C)........................................................ 7,000 7,000 -------- TOTAL SHORT TERM INVESTMENTS............................ 45,125 -------- TOTAL INVESTMENTS - 107.03% (COST $295,872)................. 307,225 -------- LIABILITIES, NET OF OTHER ASSETS - (7.03%).................. (20,190) -------- TOTAL NET ASSETS - 100%..................................... $287,035 ========
- --------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $49,187 or 17.14% of net assets. (B) Collateral held at J.P.Morgan Chase consists of Continental Airlines Inc, 7.918%, Due 5/1/2010, Market Value - $6,059, Niagara Mohawk Power, 7.75%, Due 10/1/2008, Market Value - $55, Brascan Corporation, 7.375%, Due 3/1/2033, Market Value - $1,867 and 7.125%, Due 12/16/2003, Market Value - $679. (C) Collateral held at the Bank of New York consists of Reed Elsevier Capital, 6.125%, Due 8/1/2006, Market Value - $1,362, Public Service Electric & Gas, 5.0%, Due 1/1/2013, Market Value - $1,084, Dow Chemical, 6.125%, Due 2/1/2011, Market Value - $1,906, 5.97%, Due 1/15/2009, Market Value - $506 and 6.85%, Due 8/15/2013, Market Value - $2,282. * - All or a portion of this security is on loan at October 31, 2003. See note 4. See accompanying notes - -------------------------------------------------------------------------------- 55 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 1.05% 8.75%, Due 8/15/2020........................................ $ 750 $ 1,065 -------- TOTAL U.S. TREASURY OBLIGATIONS......................... 1,065 -------- U.S. AGENCY OBLIGATIONS - 0.57% Federal National Mortgage Association, 6.625%, Due 11/15/2010................................................ 500 571 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 571 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 0.53% Federal Home Loan Mortgage Corporation, 5.13%, Due 10/15/2008................................................ 500 535 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 535 -------- ASSET-BACKED SECURITIES - 7.18% Citibank Credit Card Master Trust I 1999-7 A, 6.90%, Due 10/15/2007................................................ 2,000 2,179 DaimlerChrysler Auto Trust, 4.63%, Due 12/6/2006............ 2,000 2,066 Honda Auto Receivables Owner Trust 2002-3, 3.00%, Due 5/18/2006................................................. 1,000 1,012 Honda Auto Receivables Owner Trust 2003-4, 2.79%, Due 3/16/2009................................................. 2,000 1,997 -------- TOTAL ASSET-BACKED SECURITIES........................... 7,254 -------- CORPORATE BONDS - 68.50% BANKS - 13.83% Banco Popular North America Inc, 6.125%, Due 10/15/2006.................................... 500 544 4.25%, Due 4/1/2008....................................... 300 303 Bank of America Corporation, 4.32%, Due 2/22/2005...................................... 1,420 1,467 7.40%, Due 1/15/2011...................................... 350 409 Bank One Corporation, 7.125%, Due 5/15/2007..................................... 300 338 4.90%, Due 4/30/2015...................................... 300 292 Branch Banking and Trust Company, 4.875%, Due 1/15/2013..... 450 447 Capital One Bank, 6.50%, Due 7/30/2004...................... 1,077 1,112 Citigroup, Incorporated, 6.20%, Due 3/15/2009............... 350 388 Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 500 553 First Tennessee Bank, NA, 5.75%, Due 12/1/2008.............. 300 325 FleetBoston Financial Corporation, 8.625%, Due 1/15/2007..................................... 200 232 3.85%, Due 2/15/2008...................................... 350 354 J P Morgan Chase & Company, 6.75%, Due 8/15/2008............ 450 507 HSBC Bank USA, Incorporated, 7.00%, Due 11/1/2006........... 1,500 1,689 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 300 296 St. George Bank Limited, 7.15%, Due 10/15/2005, 144A (Note A)........................................................ 1,510 1,645 US Bank, NA, 6.375%, Due 8/1/2011........................... 200 222 Wachovia Corporation, 6.40%, Due 4/1/2008................... 1,500 1,653 Washington Mutual, Incorporated, 2.40%, Due 11/3/2005...................................... 1,000 999 4.375%, Due 1/15/2008..................................... 200 205 -------- TOTAL BANKS............................................. 13,980 -------- FINANCE - 37.82% Aegon, NV, 8.00%, Due 8/15/2006............................. 225 257 Allstate Corporation, 2.50%, Due 6/20/2008, 144A, (Note A)........................................................ 300 284 American General Finance Corporation, 5.875%, Due 12/15/2005................................................ 540 579 American Honda Finance Corporation, 2.875%, Due 4/3/2006, 144A (Note A)............................................. 650 657
See accompanying notes - -------------------------------------------------------------------------------- 56 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Bear Stearns Companies, Incorporated, 3.00%, Due 3/30/2006...................................... $ 500 $ 506 2.875%, Due 7/2/2008...................................... 300 289 Boeing Capital Corporation, 5.40%, Due 11/30/2009........... 700 723 Caterpillar Financial Services Corporation, 2.35%, Due 9/15/2006*................................................ 1,500 1,483 Cendant Corporation, 6.875%, Due 8/15/2006.................. 1,100 1,209 Countrywide Home Loan, Incorporated 3.50%, Due 12/19/2005..................................... 1,250 1,275 3.25%, Due 5/21/2008...................................... 300 292 Credit Suisse First Boston USA, Incorporated, 5.875%, Due 8/1/2006*................................................. 1,500 1,620 Ford Motor Credit Company, 7.375%, Due 10/28/2009........... 1,700 1,758 General Electric Capital Corporation, 7.375%, Due 1/19/2010*................................................ 350 408 General Motors Acceptance Corporation, 6.75%, Due 1/15/2006...................................... 1,000 1,066 7.25%, Due 3/2/2011....................................... 1,000 1,054 Goldman Sachs Group, Incorporated, 7.35%, Due 10/1/2009...................................... 525 608 4.75%, Due 7/15/2013...................................... 675 652 John Hancock Global Funding, 5.625%, Due 6/27/2006..................................... 1,400 1,503 3.75%, Due 9/30/2008...................................... 1,000 993 Heller Financial, Incorporated, 6.375%, Due 3/15/2006....... 2,500 2,728 Household Finance Corporation, 5.75%, Due 1/30/2007...................................... 250 270 7.875%, Due 3/1/2007...................................... 200 230 Lehman Brothers Holdings, Incorporated, 3.50%, Due 8/7/2008*................................................. 1,000 985 International Lease Finance Corporation, 6.375%, Due 3/15/2009................................................. 1,750 1,919 MassMutual Global Funding II, 3.80%, Due 4/15/2009, 144A (Note A).................................................. 2,000 1,993 Merrill Lynch & Company, Incorporated, 6.56%, Due 12/16/2007................................................ 450 504 Metlife, Incorporated, 3.911%, Due 5/15/2005................ 1,000 1,033 Monumental Global Funding, 3.85%, Due 3/3/2008, 144A (Note A)........................................................ 450 452 Morgan Stanley Dean Witter & Company, 6.10%, Due 4/15/2006................................................. 550 596 PHH Corporation, 6.00%, Due 3/1/2008*....................... 300 321 Prudential Financial, Incorporated, 3.75%, Due 5/1/2008..... 300 299 Prudential Insurance Company of America, 6.375%, Due 7/23/2006, 144A (Note A).................................. 2,000 2,193 Salomon, Incorporated, 6.75%, Due 1/15/2006................. 2,000 2,178 SLM Corporation, 5.125%, Due 8/27/2012*..................... 450 452 Sprint Capital Corporation, 7.90%, Due 3/15/2005............ 1,500 1,607 Synovus Financial Corporation, 7.25%, Due 12/15/2005..................................... 1,500 1,654 4.875%, Due 2/15/2013..................................... 300 294 Transamerica Corporation, 6.75%, Due 11/15/2006............. 1,000 1,110 Verizon Global Funding Corporation, 4.375%, Due 6/1/2013.... 200 187 -------- TOTAL FINANCE........................................... 38,221 -------- INDUSTRIAL - 16.09% Allied Waste North America, Incorporated, 10.00%, Due 8/1/2009*................................................. 400 435 AmeriPath, Incorporated, 10.50%, Due 4/1/2013............... 400 422 Anheuser Busch Companies, Incorporated, 6.50%, Due 1/1/2028.................................................. 200 216 AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 500 604 AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006... 600 658 Bally's Health & Tennis Corporation, 10.50%, Due 7/15/2011, 144A (Note A)............................................. 400 414 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013............. 300 299 Coca-Cola Enterprises, Incorporated, 2.50%, Due 9/15/2006... 2,000 1,991
See accompanying notes - -------------------------------------------------------------------------------- 57 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Computer Sciences Corporation, 3.50%, Due 4/15/2008......... $ 200 $ 198 Conagra Foods, Incorporated, 7.00%, Due 10/1/2028........... 200 219 Continental Cablevision, Incorporated, 8.30%, Due 5/15/2006................................................. 250 280 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 450 450 Deutsche Telekom International, 8.25%, Due 6/15/2005...................................... 175 191 3.875%, Due 7/22/2008..................................... 500 498 Dole Food Company, Incorporated, 8.875%, Due 3/15/2011...... 400 432 Dell Computer Corporation, 6.55%, Due 4/15/2008............. 200 223 Equistar Chemicals, LP, 10.625%, Due 5/1/2011, 144A (Note A)........................................................ 400 418 First Data Corporation, 3.375%, Due 8/1/2008................ 1,000 987 Freeport-McMoRan Copper & Gold, Incorporated, 10.125%, Due 2/1/2010.................................................. 400 456 Georgia-Pacific Corporation, 8.00%, Due 1/15/2014........... 400 430 Jacuzzi Brands, Incorporated, 9.625%, Due 7/1/2010, 144A (Note A).................................................. 400 424 Hertz Corporation, 4.70%, Due 10/2/2006..................... 500 494 International Business Machines Corporation, 4.75%, Due 11/29/2012................................................ 200 200 Legrand SA, 8.50%, Due 2/15/2025............................ 400 420 Leucadia National Corporation, 7.00%, Due 8/15/2013, 144A (Note A).................................................. 400 393 Mediacom Communications Corporation, 9.50%, Due 1/15/2013*................................................ 400 380 Northrop Grumman Corporation, 7.125%, Due 2/15/2011......... 500 575 Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 200 225 Premcor Refining Group, Incorporated, 7.50%, Due 6/15/2015................................................. 400 409 Pope & Talbot, Incorporated, 8.375%, Due 6/1/2013........... 355 346 Royal Caribbean Cruises Limited, 7.50%, Due 10/15/2027...... 400 372 Safeway, Incorporated, 3.80%, Due 8/15/2005................. 300 306 Shopping Center Associates, 7.625%, Due 5/15/2005, 144A (Note A).................................................. 665 718 Verizon Virginia, 4.625%, Due 3/15/2013..................... 600 574 Vodafone Group plc, 3.95%, Due 1/30/2008 *.................. 200 203 Xerox Corporation, 7.625%, Due 6/15/2013.................... 400 408 -------- TOTAL INDUSTRIAL........................................ 16,268 -------- UTILITY - 0.76% Calpine Corporation, 8.50%, Due 2/15/2011*.................. 500 358 Teco Energy, Incorporated, 7.50%, Due 6/15/2010............. 400 411 -------- TOTAL UTILITY........................................... 769 -------- TOTAL CORPORATE BONDS................................... 69,238 -------- CONVERTIBLE BONDS - 9.51% CONSUMER DISCRETIONARY - 0.92% General Motors Corporation, 6.25%, Due 7/15/2033*........... 16 447 Lear Corporation, 0.00%, Due 2/20/2022+..................... 950 482 -------- TOTAL CONSUMER DISCRETIONARY............................ 929 -------- ENERGY - 0.41% Centerpoint Energy, Incorporated, 3.75%, Due 5/15/2023, 144A (Note A).................................................. 390 418 -------- TOTAL ENERGY............................................ 418 -------- FINANCIALS - 1.02% QLT, Incorporated, 3.00%, Due 9/15/2023, 144A (Note A)...... 250 294 Quanta Services, Incorporated, 4.50%, Due 10/1/2023, 144A (Note A).................................................. 55 60 Silicon Valley Bancshares, 0.00%, Due 6/15/2008+............ 240 281 Travelers Property Casualty Corporation, 4.50%, Due 4/15/2032................................................. 17 395 -------- TOTAL FINANCIALS........................................ 1,030 --------
See accompanying notes - -------------------------------------------------------------------------------- 58 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) HEALTH CARE - 1.23% Invitrogen Corporation, 2.00%, Due 8/1/2023, 144A (Note A)........................................................ $ 250 $ 292 Pharmaceutical Resources, Incorporated, 2.875%, Due 9/30/2010, 144A (Note A).................................. 180 206 Roche Holdings, Incorporated, 0.00%, Due 1/19/2015, 144A (Note A)+................................................. 460 354 Watson Pharmaceuticals, Incorporated, 1.75%, Due 3/15/2023, 144A (Note A)............................................. 335 391 -------- TOTAL HEALTH CARE....................................... 1,243 -------- INDUSTRIALS - 5.93% Agilent Technologies, Incorporated, 3.00%, Due 12/1/2021.... 240 248 Andrew Corporation, 3.25%, Due 8/15/2013, 144A (Note A)..... 425 533 Carnival Corporation, 0.00%, Due 10/24/2021+................ 715 464 Computer Associates International, Incorporated, 5.00%, Due 3/15/2007................................................. 330 400 Comverse Technology, Incorporated, 0.00%, Due 5/15/2023+.... 370 441 Corning, Incorporated, 3.50%, Due 11/1/2008................. 85 109 Cypress Semiconductor Corporation, 1.25%, Due 6/15/2008, 144A (Note A)............................................. 385 587 Electronic Data Systems Corporation, 3.875%, Due 7/15/2023, 144A (Note A)............................................. 200 199 Four Seasons Hotel, Incorporated, 0.00%, Due 9/23/2029+..... 375 121 General Mills, Incorporated, 0.00%, Due 10/28/2022+*........ 350 243 Halliburton Company, 3.125%, Due 7/15/2023, 144A (Note A)... 210 211 International Game Technology, 0.00%, Due 1/29/2033+........ 315 232 Juniper Networks, Incorporated, 0.00, Due 6/15/2008, 144A (Note A)+................................................. 215 244 Kaydon Corporation, 4.00%, Due 5/23/2023.................... 230 243 Keane, Incorporated, 2.00%, Due 6/15/2013, 144A (Note A).... 200 196 Liberty Media Corporation, 0.75%, Due 3/30/2023, 144A (Note A)........................................................ 355 383 LSI Logic Corporation, 4.00%, Due 5/15/2010, 144A (Note A)........................................................ 228 254 STMicroelectronics NV, 0.00%, Due 7/5/2013+................. 240 259 Tyco International Group S.A., 2.75%, Due 1/15/2018, 144A (Note A).................................................. 375 414 VERITAS Software Corporation, 0.25%, Due 8/1/2013, 144A, (Note A).................................................. 200 215 -------- TOTAL INDUSTRIALS....................................... 5,996 -------- TOTAL CONVERTIBLE BONDS................................. 9,616 -------- SHARES ----------- CONVERTIBLE PREFERRED STOCK - 2.62% CONSUMER DISCRETIONARY - 0.43% Ford Motor Company Capital Trust II......................... 9,400 437 -------- TOTAL CONSUMER DISCRETIONARY............................ 437 -------- ENERGY - 0.63% Kerr-McGee Corporation...................................... 8,500 362 New York Community Capital Trust V+......................... 3,800 274 -------- TOTAL ENERGY............................................ 636 -------- FINANCIALS - 0.43% Prudential Financial, Incorporated.......................... 7,100 438 -------- TOTAL FINANCIALS........................................ 438 -------- INDUSTRIALS - 0.74% Northrop Grumman Corporation+............................... 3,900 394 Raytheon Company+........................................... 7,000 353 -------- TOTAL INDUSTRIALS....................................... 747 --------
See accompanying notes - -------------------------------------------------------------------------------- 59 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) TELECOMMUNICATION SERVICES - 0.39% Alltel Corporation+*........................................ 7,960 $ 390 -------- TOTAL TELECOMMUNICATION SERVICES........................ 390 -------- TOTAL CONVERTIBLE PREFERRED STOCK....................... 2,648 -------- COMMON STOCK - 6.41% CONSUMER DISCRETIONARY - 1.14% Home Depot, Incorporated.................................... 13,600 504 International Game Technology*.............................. 7,800 255 McDonald's Corporation...................................... 15,500 388 -------- TOTAL CONSUMER DISCRETIONARY............................ 1,147 -------- FINANCIALS - 1.40% Humana, Incorporated+....................................... 21,000 426 MBIA, Incorporated*......................................... 9,300 554 Washington Mutual, Incorporated*............................ 10,000 438 -------- TOTAL FINANCIALS........................................ 1,418 -------- HEALTH CARE - 0.27% Invitrogen Corporation+*.................................... 4,300 273 -------- TOTAL HEALTH CARE....................................... 273 -------- INFORMATION TECHNOLOGY - 3.15% Avaya, Incorporated+*....................................... 39,500 511 Brooks Automation, Incorporated+*........................... 22,200 554 Cisco Systems, Incorporated+................................ 22,700 476 EMC Corporation+............................................ 41,000 567 Juniper Networks, Incorporated+*............................ 16,300 293 Mentor Graphics Corporation+*............................... 11,905 199 Synopsys, Incorporated+*.................................... 10,800 343 VERITAS Software Corporation+............................... 6,500 235 -------- TOTAL INFORMATION TECHNOLOGY............................ 3,178 -------- INDUSTRIALS - 0.45% Cendant Corporation+*....................................... 22,500 460 -------- TOTAL INDUSTRIALS....................................... 460 -------- TOTAL COMMON STOCK...................................... 6,476 -------- SHORT-TERM INVESTMENTS - 13.96% American AAdvantage Money Market Select Fund................ 14,107,323 14,107 -------- TOTAL SHORT-TERM INVESTMENTS............................ 14,107 -------- TOTAL INVESTMENTS - 110.33% (COST $111,195)................. 111,510 -------- LIABILITIES, NET OF OTHER ASSETS - (10.33%)................. (10,438) -------- TOTAL NET ASSETS - 100%..................................... $101,072 ========
- --------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $15,138 or 14.98% of net assets. * - All or a portion of this security is on loan at October 31, 2003. See Note 4. + - non-income producing See accompanying notes - -------------------------------------------------------------------------------- 60 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 6.64% U.S. TREASURY BONDS - 4.22% 7.50%, Due 11/15/2016*...................................... $ 1,000 $ 1,265 8.125%, Due 8/15/2019*...................................... 825 1,107 6.875%, Due 8/15/2025....................................... 1,370 1,661 6.25%, Due 5/15/2030*....................................... 600 686 5.375% Due 2/15/2031*....................................... 915 946 -------- TOTAL U.S. TREASURY BONDS............................... 5,665 -------- U.S. TREASURY NOTES - 2.42% 2.625%, Due 5/15/2008*...................................... 802 786 3.00%, Due 7/15/2012*....................................... 1,049 1,147 3.625%, Due 5/15/2013*...................................... 1,375 1,317 -------- TOTAL U.S. TREASURY NOTES............................... 3,250 -------- TOTAL U.S. TREASURY OBLIGATIONS......................... 8,915 -------- U.S. AGENCY OBLIGATIONS - 4.35% FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.54% 5.125%, Due 10/15/2008*..................................... 500 535 5.00%, Due 3/1/2018......................................... 2,217 2,253 6.00%, Due 1/1/2033......................................... 918 942 6.00%, Due 8/1/2033......................................... 995 1,021 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 4,751 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.81% 7.25%, Due 5/15/2030........................................ 900 1,089 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 1,089 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 5,840 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 26.53% FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.80% Pool #G11202, 6.00%, Due 11/1/2016.......................... 527 548 Pool #G00738, 8.00%, Due 7/1/2027........................... 486 525 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 1,073 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 15.35% Pool #323223, 6.50%, Due 7/1/2013........................... 275 289 Pool #439957, 6.00%, Due 11/1/2013.......................... 351 366 Pool #488099, 5.50%, Due 2/1/2014........................... 908 938 Pool #323788, 6.50%, Due 6/1/2014........................... 143 150 Pool #323789, 6.00%, Due 6/1/2014........................... 405 422 Pool #557390, 7.50%, Due 10/1/2015.......................... 147 157 Pool #535846, 6.00%, Due 4/1/2016........................... 1,050 1,092 Pool #545449, 6.50%, Due 2/1/2017........................... 1,120 1,179 Pool #545823, 5.50%, Due 8/1/2017........................... 1,085 1,118 Pool #100293, 9.50%, Due 8/1/2029........................... 352 389 Pool #599321, 7.00%, Due 7/1/2031........................... 260 274 Pool #545759, 6.50%, Due 7/1/2032........................... 355 369 Pool #705607, 6.00%, Due 6/1/2033........................... 447 459 Pool #713706, 5.50%, Due 8/1/2033........................... 1,911 1,929 Pool #730570, 6.00%, Due 8/1/2033........................... 1,020 1,047 Pool #727223, 5.50%, Due 9/1/2033........................... 742 749 Pool #741901, 5.50%, Due 10/1/2033.......................... 750 757
See accompanying notes - -------------------------------------------------------------------------------- 61 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) TBA, 15 yr, 6.00%........................................... $ 1,923 $ 2,000 TBA, 30 yr, 6.50%........................................... 1,883 1,956 TBA, 30 yr, 7.00%........................................... 830 874 TBA, 30 yr, 7.50%........................................... 949 1,011 TBA 15 yr, 4.50%............................................ 3,100 3,094 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 20,619 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.38% Pool #780921, 7.00%, Due 11/15/2013......................... 666 711 Pool #780085, 11.50%, Due 8/15/2018......................... 250 276 Pool #780400, 7.00%, Due 12/15/2025......................... 975 1,037 Pool #780454, 7.00%, Due 10/15/2026......................... 722 768 Pool #780509, 6.50%, Due 2/15/2027.......................... 498 523 Pool #002379, 8.00%, Due 2/20/2027.......................... 461 495 Pool #780615, 6.50%, Due 8/15/2027.......................... 996 1,046 Pool #780680, 6.50%, Due 11/15/2027......................... 830 872 Pool #780747, 6.50%, Due 3/15/2028.......................... 1,522 1,596 Pool #780936, 7.50%, Due 12/15/2028......................... 675 724 Pool #781273, 6.00%, Due 4/15/2031.......................... 1,183 1,223 Pool #550284, 7.00%, Due 8/15/2031.......................... 198 210 Pool #574846, 7.00%, Due 11/15/2031......................... 319 338 Pool #552404, 7.50%, Due 2/15/2032.......................... 55 59 Pool #555732, 6.50%, Due 3/15/2032.......................... 409 428 Pool #579750, 6.00%, Due 9/15/2032.......................... 2,784 2,877 Pool #553235, 6.00%, Due 5/15/2033.......................... 738 763 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 13,946 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 35,638 -------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 0.39% General Electric Commercial Mortgage Corporation, 4.17%, Due 7/10/2037................................................. 515 518 -------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 518 -------- CORPORATE OBLIGATIONS - 59.30% FINANCIAL - 32.30% Aegon, N.V., 8.00%, Due 8/15/2006........................... 300 342 American General Finance Corporation, 5.375%, Due 9/1/2009.................................................. 360 381 Banco Popular North America Inc, 4.25%, Due 4/1/2008........ 400 405 Bank of America Corporation, 7.40%, Due 1/15/2011........... 950 1,109 Bank One Corporation, 7.125%, Due 5/15/2007..................................... 350 394 2.625%, Due 6/30/2008..................................... 570 544 4.90%, Due 4/30/2015...................................... 400 390 Boeing Capital Corporation, 5.40%, Due 11/30/2009........... 650 672 Bear Stearns Companies, Incorporated, 2.875%, Due 7/2/2008.................................................. 400 385 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013............. 400 398 Branch Banking & Trust Company, 4.875%, Due 1/15/2013....... 750 745 Capital One, 6.70%, Due 5/15/2008...................................... 900 981 5.75%, Due 9/15/2010...................................... 235 246 Caterpillar Financial Services, 2.50%, Due 10/3/2006........ 650 645 Cendant Corporation, 6.875%, Due 8/15/2006.................. 995 1,093
See accompanying notes - -------------------------------------------------------------------------------- 62 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Citigroup, Incorporated, 6.20%, Due 3/15/2009...................................... $ 950 $ 1,054 6.50%, Due 1/18/2011...................................... 625 703 6.00%, Due 10/31/2033..................................... 415 413 Countrywide Home Loan, Incorporated, 3.50%, Due 12/19/2005*.................................... 750 765 3.25%, Due 5/21/2008...................................... 1,045 1,019 5.50%, Due 8/25/2033...................................... 876 873 Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 600 664 Deutsche Telekom International, 8.00%, Due 6/15/2010........ 350 421 John Deere Capital Corporation, 4.125%, Due 7/15/2005....... 790 818 First Tennessee Bank, NA, 5.75%, Due 12/1/2008.............. 475 515 Fleet Norstar Financial Group, Incorporated, 8.625%, Due 1/15/2007................................................. 400 464 FleetBoston Financial Corporation, 3.85%, Due 2/15/2008..... 550 557 Ford Motor Credit Company, 6.50%, Due 1/25/2007...................................... 405 418 7.375, Due 10/28/2009..................................... 1,400 1,448 General Electric Capital Corporation, 3.25%, Due 6/15/2009...................................... 805 777 7.375%, Due 1/19/2010..................................... 800 933 General Motors Acceptance Corporation, 6.125%, Due 8/28/2007..................................... 320 337 7.25%, Due 3/2/2011....................................... 1,000 1,054 8.375%, Due 7/15/2033..................................... 525 554 Goldman Sachs Group, Incorporated, 7.35%, Due 10/1/2009...................................... 725 839 4.75%, Due 7/15/2013...................................... 675 652 5.25%, Due 10/15/2013..................................... 500 501 John Hancock Global Funding, 3.75%, Due 9/30/2008........... 500 497 Household Finance Corporation, 5.75%, Due 1/30/2007...................................... 750 810 7.875%, Due 3/1/2007...................................... 400 459 6.375%, Due 11/27/2012.................................... 410 446 4.75%, Due 7/15/2013...................................... 600 580 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 400 395 International Lease Finance Corporation, 6.375%, Due 3/15/2009................................................. 1,625 1,782 Kerr McGee Corporation, 5.875%, Due 9/15/2006............... 475 509 KeyCorp Limited, 4.625%, Due 5/16/2005...................... 290 302 Merrill Lynch & Company, Incorporated, 6.56%, Due 12/16/2007..................................... 750 839 3.125%, Due 7/15/2008..................................... 675 659 Monumental Global Funding, 3.85%, Due 3/3/2008, 144A (Note A)........................................................ 750 754 J P Morgan Chase & Company, 6.75%, Due 8/15/2008............ 625 704 Morgan Stanley Dean Witter Discover & Company, 4.34%, Due 6/13/2041................................................. 495 499 PHH Corporation, 6.00%, Due 3/1/2008*....................... 400 428 PNC Funding Corporation, 7.50%, Due 11/1/2009............... 685 803 Prudential Financial, Incorporated, 3.75%, Due 5/1/2008....................................... 750 748 4.50%, Due 7/15/2013...................................... 675 644 SLM Corporation, 3.95%, Due 8/15/2008...................................... 505 508 5.125%, Due 8/27/2012..................................... 750 753
See accompanying notes - -------------------------------------------------------------------------------- 63 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Sprint Capital Corporation, 7.90%, Due 3/15/2005...................................... $ 600 $ 643 6.125%, Due 11/15/2008.................................... 375 395 Synovus Financial Corporation, 4.875%, Due 2/15/2013........ 400 391 Travelers Property Casualty Corporation, 5.00%, Due 3/15/2013*................................................ 375 374 US Bank, NA, 5.70%, Due 12/15/2008..................................... 510 553 6.375%, Due 8/1/2011...................................... 645 717 Verizon Global Funding Corporation, 4.375%, Due 6/1/2013.... 400 373 Wachovia Bank Commercial Mortgage Trust, 3.989%, Due 6/15/2035................................................. 730 682 Wachovia Corporation, 4.95%, Due 11/1/2006.................. 320 339 Washington Mutual Financial Corporation, 6.875%, Due 5/15/2011................................................. 250 281 Washington Mutual, Incorporated, 4.375%, Due 1/15/2008...... 400 410 Wells Fargo & Company, 6.45%, Due 2/1/2011.................. 550 615 -------- TOTAL FINANCIAL......................................... 43,401 -------- INDUSTRIAL - 22.79% Allstate Corporation, 2.50%, Due 6/20/2008, 144A (Note A)....................... 400 378 5.375%, Due 12/1/2006..................................... 555 598 Anheuser Busch Companies, Incorporated, 6.50%, Due 1/1/2028.................................................. 500 540 AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 748 904 AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006....................................... 800 878 8.125%, Due 5/1/2012...................................... 430 499 8.75%, Due 3/1/2031....................................... 475 571 Atlantic Richfield Company, 9.125%, Due 3/1/2011...................................... 330 426 8.50%, Due 4/1/2012....................................... 450 564 AutoZone, Incorporated, 4.375%, Due 6/1/2013................ 455 424 Bristol Myers Squibb Company, 4.00%, Due 8/15/2008, 144A (Note A).................................................. 540 547 Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012.... 500 576 Campbell Soup Company, 5.00%, Due 12/3/2012................. 350 355 Clear Channel Communications, 4.25%, Due 5/15/2009...................................... 405 402 5.75%, Due 1/15/2013...................................... 310 321 Comcast Cable Communications, 7.625%, Due 2/15/2008..................................... 380 427 6.75%, Due 1/30/2011...................................... 385 426 Computer Sciences Corporation, 3.50%, Due 4/15/2008......... 400 396 Conagra Foods, Incorporated, 7.125%, Due 10/1/2026..................................... 590 676 7.00%, Due 10/1/2028...................................... 400 438 ConocoPhillips, 3.625%, Due 10/15/2007...................... 575 578 Continental Cablevision, Incorporated, 8.30%, Due 5/15/2006................................................. 250 280 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 965 964 Dell Computer Corporation, 6.55%, Due 4/15/2008............. 400 446 Harley Davidson Motorcycle, 2.69%, Due 4/15/2011............ 650 645 Hertz Corporation, 4.70%, Due 10/2/2006..................... 450 445 Hewlett Packard Company, 5.75%, Due 12/15/2006.............. 620 670
See accompanying notes - -------------------------------------------------------------------------------- 64 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) International Business Machines Corporation, 4.875%, Due 10/1/2006..................................... $ 665 $ 705 4.75%, Due 11/29/2012..................................... 400 400 Kroger Company, 7.375%, Due 3/1/2005........................ 550 587 Lockheed Martin Corporation, 7.20%, Due 5/1/2036............ 770 900 Martin Marietta Material, Incorporated, 6.90%, Due 8/15/2007................................................. 300 326 Norfolk Southern Corporation, 7.05%, Due 5/1/2037........... 615 674 Northrop Grumman Corporation, 7.125%, Due 2/15/2011......... 860 988 Occidental Petroleum Corporation, 4.25%, Due 3/15/2010...................................... 575 574 6.75%, Due 1/15/2012...................................... 400 450 Pepsi Bottling Group, Incorporated, 7.00%, Due 3/1/2029..... 575 658 Reed Elsevier Capital, Incorporated, 6.125%, Due 8/1/2006... 735 801 Safeway, Incorporated, 3.80%, Due 8/15/2005................. 400 408 Simon Property Group, 7.625%, Due 5/15/2005, 144A (Note A)........................................................ 850 918 Target Corporation, 7.00%, Due 7/15/2031.................... 550 621 Time Warner, Incorporated, 7.625%, Due 4/15/2031............ 350 391 Tyson Foods, Incorporated, 6.625%, Due 10/1/2004............ 660 685 Union Oil Company of California, 7.90%, Due 4/18/2008....... 100 114 Union Pacific Corporation, 6.50%, Due 4/15/2012............. 550 610 Univision Communications, Incorporated, 3.875%, Due 10/15/2008................................................ 390 385 Verizon Communications, Incorporated, 6.36%, Due 4/15/2006................................................. 550 598 Verizon Virginia, 4.625%, Due 3/15/2013..................... 800 765 Verizon Wireless Capital LLC, 5.375%, Due 12/15/2006........ 635 678 Viacom, Incorporated, 5.625%, Due 8/15/2012................. 495 523 Vodafone Group plc, 3.95%, Due 1/30/2008.................... 400 405 Wal-Mart Stores, Incorporated, 7.55%, Due 2/15/2030......... 550 675 Walt Disney Company, 5.375%, Due 6/1/2007................... 360 384 Weyerhaeuser Company, 5.95%, Due 11/1/2008.................. 380 407 Wyeth Corporation, 6.70%, Due 3/15/2011..................... 550 618 -------- TOTAL INDUSTRIAL........................................ 30,622 -------- UTILITIES - 3.98% AEP Texas Central Company, 6.65%, Due 2/15/2033............. 155 160 Appalachian Power Company, 5.95%, Due 5/15/2033............. 230 215 Consolidated Natural Gas Company, 6.875%, Due 10/15/2026.... 550 608 Devon Energy Corporation, 2.75%, Due 8/1/2006............... 515 514 Dominion Resources, Incorporated, 5.00%, Due 3/15/2013...... 300 297 Emerson Electrical Company, 5.00%, Due 12/15/2014........... 350 350 Enterprise Products Partners LP, 7.50%, Due 2/1/2011........ 260 300 FirstEnergy Corporation, 6.45%, Due 11/15/2011.............. 225 239 Marathon Oil Corporation, 5.375%, Due 6/1/2007.............. 500 534 MidAmerican Energy Holdings Company, 3.50%, Due 5/15/2008...................................... 760 739 5.875%, Due 10/1/2012..................................... 400 414 Oncor Electric Delivery Company, 7.25%, Due 1/15/2033....... 260 292 Xcel Energy, Incorporated, 7.00%, Due 12/1/2010............. 615 691 -------- TOTAL UTILITIES......................................... 5,353 --------
See accompanying notes - -------------------------------------------------------------------------------- 65 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) FOREIGN - 0.23% United Mexican States, 7.50%, Due 4/8/2033.................. $ 300 $ 306 -------- TOTAL FOREIGN........................................... 306 -------- TOTAL CORPORATE OBLIGATIONS............................. 79,682 -------- ASSET-BACKED SECURITIES - 0.57% MBNA Credit Card Master Trust, 2.65%, Due 11/15/2010........ 800 768 -------- TOTAL ASSET-BACKED SECURITIES........................... 768 -------- SHARES ----------- SHORT-TERM INVESTMENTS - 8.83% American AAdvantage Money Market Select Fund................ 9,229,022 9,229 AMR Investments Enhanced Yield Business Trust............... 2,637,652 2,638 -------- TOTAL SHORT-TERM INVESTMENTS............................ 11,867 -------- TOTAL INVESTMENTS - 106.61% (COST $141,837)................. 143,228 -------- LIABILITIES, NET OF OTHER ASSETS - (6.61%).................. (8,882) -------- TOTAL NET ASSETS - 100%..................................... $134,346 ========
- --------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,992 or 2.23% of net assets. * - All or a portion of this security is on loan at October 31, 2003. See Note 4. See accompanying notes - -------------------------------------------------------------------------------- 66 AMERICAN AADVANTAGE SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 7.75% FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.77% REMIC, M H-1 A, 10.15%, Due 4/15/2006....................... $ 1 $ 1 Pool #E44213, 7.00%, Due 1/1/2008........................... 471 496 Pool #G10084, 6.50%, Due 3/1/2008........................... 710 743 Pool #E00228, 6.50%, Due 7/1/2008........................... 531 559 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 1,799 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.91% Pool #050763, 7.00%, Due 7/1/2008........................... 251 267 Pool #050952, 6.50%, Due 12/1/2008.......................... 597 630 Pool #252448, 5.50%, Due 4/1/2009........................... 578 607 Pool #313430, 6.50%, Due 3/1/2012........................... 590 622 Pool #323980, 6.00%, Due 4/1/2014........................... 933 973 Pool #545038, 6.00%, Due 9/1/2014........................... 831 867 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 3,966 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 2.07% Pool # 780286, 7.00%, Due 6/15/2008......................... 694 738 Pool # 351992, 6.00%, Due 12/15/2008........................ 1,299 1,364 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 2,102 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 7,867 -------- CORPORATE OBLIGATIONS - 77.49% FINANCIAL - 59.44% American General Finance Corporation, 6.75%, Due 11/15/2004................................................ 1,000 1,052 American Honda Finance Corporation, 2.875%, Due 4/3/2006, 144A (Note A)............................................. 1,150 1,163 Bank of America Corporation, 5.25%, Due 2/1/2007............ 2,000 2,136 Bank One Corporation, 7.625%, Due 8/1/2005.................. 2,000 2,188 Bear Stearns Companies, Incorporated, 3.00%, Due 3/30/2006................................................. 2,000 2,026 Boeing Capital Corporation, 5.65%, Due 5/15/2006............ 1,252 1,335 Capital One Bank, 6.50%, Due 7/30/2004...................... 2,000 2,065 Caterpillar Financial Services, 2.35%, Due 9/15/2006*....... 2,500 2,472 Citigroup, Incorporated, 6.75%, Due 12/1/2005............... 2,000 2,179 Countrywide Funding Corporation, 3.50%, Due 12/19/2005...... 2,200 2,243 FleetBoston Financial Corporation, 3.85%, Due 2/15/2008..... 2,500 2,531 Ford Motor Credit Company, 7.50%, Due 3/15/2005............. 2,500 2,627 General Electric Capital Corporation, 2.75%, Due 9/25/2006*................................................ 1,000 1,000 General Motors Acceptance Corporation, 6.75%, Due 1/15/2006................................................. 3,000 3,199 Goldman Sachs Group, Incorporated, 7.625%, Due 8/17/2005.... 2,000 2,195 Heller Financial, Incorporated, 6.375%, Due 3/15/2006....... 2,500 2,728 Household Finance Corporation, 8.00%, Due 5/9/2005.......... 3,000 3,268 International Lease Finance Corporation, 2.95%, Due 5/23/2006................................................. 2,000 2,006 John Hancock Global Funding, 5.625%, Due 6/27/2006.......... 1,000 1,074 Merrill Lynch & Company, Incorporated, 7.00%, Due 3/15/2006................................................. 1,660 1,822 MetLife, Incorporated, 3.911%, Due 5/15/2005................ 2,500 2,582 Monumental Global Funding, 5.20%, Due 1/30/2007, 144A (Note A)........................................................ 1,200 1,293 Prudential Insurance Company of America, 6.375%, Due 7/23/2006, 144A (Note A).................................. 3,000 3,289 Simon Property Group, L.P., 7.75%, Due 8/15/2004, 144A (Note A)........................................................ 1,090 1,140 SLM Corporation, 2.90%, Due 7/1/2005........................ 2,000 2,037 Synovus Financial Corporation, 7.25%, Due 12/15/2005........ 2,500 2,757 Wachovia Corporation, 6.40%, Due 4/1/2008................... 2,500 2,755
See accompanying notes - -------------------------------------------------------------------------------- 67 AMERICAN AADVANTAGE SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Washington Mutual Financial Corporation, 2.40%, Due 11/3/2005................................................. $ 1,000 $ 999 Wells Fargo & Company, 5.125%, Due 2/15/2007................ 2,000 2,132 -------- TOTAL FINANCIAL......................................... 60,293 -------- INDUSTRIAL - 18.05% AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006... 1,400 1,536 Cendant Corporation, 6.875%, Due 8/15/2006.................. 2,140 2,352 Computer Sciences Corporation, 7.50%, Due 8/8/2005.......... 1,000 1,092 Conagra Foods, Incorporated, 9.875%, Due 11/15/2005......... 1,000 1,143 Continental Cablevision, Incorporated, 8.30%, Due 5/15/2006................................................. 1,960 2,195 DaimlerChrysler North America, 7.40%, Due 1/20/2005......... 2,000 2,114 Deutsche Telekom International Finance Corporation, 8.25%, Due 6/15/2005............................................. 325 355 Hertz Corporation, 4.70%, Due 10/2/2006..................... 600 593 Kroger Company, 7.375%, Due 3/1/2005........................ 1,000 1,068 Northrop Grumman Corporation, 7.00%, Due 3/1/2006........... 2,000 2,209 Sprint Capital Corporation, 7.90%, Due 3/15/2005............ 400 428 Unilever Capital Corporation, 6.875%, Due 11/1/2005......... 1,000 1,092 Verizon Wireless Capital LLC, 5.375%, Due 12/15/2006........ 2,000 2,136 -------- TOTAL INDUSTRIAL........................................ 18,313 -------- TOTAL CORPORATE OBLIGATIONS............................. 78,606 -------- ASSET-BACKED SECURITIES - 12.31% American Express Credit Account Master Trust 2000-1 A, 7.20%, Due 9/17/2007...................................... 2,395 2,564 Capital Auto Receivables Asset Trust 2002-2 A4, 4.50%, Due 10/15/2007................................................ 2,000 2,074 Chase Credit Card Owner Trust 1999-3 A, 6.66%, Due 1/15/2007................................................. 2,000 2,083 Chemical Master Credit Card Trust 1996-2 A, 5.98%, Due 9/15/2008................................................. 3,000 3,179 Discover Card Master Trust 1999-6 A, 6.85%, Due 7/17/2007... 2,438 2,586 -------- TOTAL ASSET-BACKED SECURITIES........................... 12,486 -------- SHARES ----------- SHORT-TERM INVESTMENTS - 4.64% American AAdvantage Money Market Select Fund................ 4,701,589 4,702 -------- TOTAL SHORT-TERM INVESTMENTS............................ 4,702 -------- TOTAL INVESTMENTS - 102.19% (COST $102,675)................. 103,661 -------- LIABILITIES, NET OF OTHER ASSETS - (2.19%).................. (2,222) -------- TOTAL NET ASSETS - 100%..................................... $101,439 ========
- --------------- (A) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $6,885 or 6.79% of net assets. * - All or a portion of this security is on loan at October 31, 2003. See Note 4. See accompanying notes - -------------------------------------------------------------------------------- 68 (AMERICAN EAGLE LOGO) - -------------------------------------------------------------------------------- 69 AMERICAN AADVANTAGE FUNDS STATEMENTS OF ASSETS AND LIABILITIES October 31, 2003 - --------------------------------------------------------------------------------
LARGE CAP LARGE CAP BALANCED VALUE GROWTH ----------- ----------- ---------- (IN THOUSANDS) ASSETS: Investments in securities, at value*.................... $ 619,308 $ 675,160 $ 49,239 Investments in Portfolio, at value...................... -- -- -- Cash.................................................... -- -- 29 Cash denominated in foreign currency (cost $773 Emerging Markets).............................................. -- -- -- Dividends and interest receivable....................... 2,581 854 30 Receivable for investments sold......................... 1,084 1,356 276 Receivable for fund shares sold......................... 491 398 160 Receivable for variation margin on open futures contracts............................................. 49 40 -- Other assets............................................ -- 4 -- ----------- ----------- ---------- TOTAL ASSETS........................................ 623,513 677,812 49,734 ----------- ----------- ---------- LIABILITIES: Payable for investments purchased....................... 3,894 196 315 Payable upon return of securities loaned................ 38,976 33,294 403 Payable for fund shares redeemed........................ 155 2 -- Payable for variation margin on open futures contracts............................................. -- -- -- Dividends payable....................................... -- -- -- Management and investment advisory fees payable (Note 2).................................................... 421 502 82 Other liabilities....................................... 93 106 7 ----------- ----------- ---------- TOTAL LIABILITIES................................... 43,539 34,100 807 ----------- ----------- ---------- NET ASSETS.................................................. $ 579,974 $ 643,712 $ 48,927 =========== =========== ========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... 523,566 612,186 59,715 Undistributed net investment income..................... 11,918 7,137 89 Accumulated net realized gain (loss).................... (11,567) (55,686) (15,819) Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................ 56,057 80,075 4,942 ----------- ----------- ---------- NET ASSETS.................................................. $ 579,974 $ 643,712 $ 48,927 =========== =========== ========== Shares outstanding (no par value): Institutional Class..................................... 695,816 1,505,299 109 =========== =========== ========== PlanAhead Class......................................... 1,074,330 1,417,425 N/A =========== =========== ========== Service Class........................................... N/A N/A N/A =========== =========== ========== AMR Class............................................... 44,250,862 38,777,478 8,920,547 =========== =========== ========== Net asset value, offering and redemption price per share: Institutional Class..................................... $ 12.99 $ 15.62 $ 5.47 =========== =========== ========== PlanAhead Class......................................... $ 12.40 $ 15.05 N/A =========== =========== ========== Service Class........................................... N/A N/A N/A =========== =========== ========== AMR Class............................................... $ 12.60 $ 15.44 $ 5.48 =========== =========== ========== *Cost of investments........................................ $ 564,625 $ 596,321 $ 44,302
See accompanying notes - -------------------------------------------------------------------------------- 70 - --------------------------------------------------------------------------------
SMALL CAP INTERNATIONAL EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM VALUE EQUITY MARKETS BOND INCOME BOND BOND ----------- ------------- ---------- ----------- ----------- ------------ ----------- (IN THOUSANDS) $ 562,756 $ -- $ 56,832 $ 307,225 $ 111,510 $ 143,228 $ 103,661 -- 1,212,199 -- -- -- -- -- -- -- -- 11 -- -- -- -- -- 779 -- -- -- -- 313 -- 89 6,366 1,028 1,436 1,308 1,790 -- 368 6,897 247 1,413 1,085 3,071 11,109 217 3,621 99 133 8 -- -- -- -- -- -- -- 88 -- -- -- -- -- 2 ----------- ----------- ---------- ----------- ----------- ----------- ----------- 568,018 1,223,308 58,285 324,120 112,884 146,210 106,064 ----------- ----------- ---------- ----------- ----------- ----------- ----------- 3,853 -- 488 9,433 1,510 3,508 999 79,214 -- 2,132 24,245 9,940 8,212 3,548 14 467 -- 2,199 -- 105 43 278 -- -- -- -- -- -- -- -- -- 639 254 1 9 557 188 94 471 86 28 26 74 93 24 98 22 10 -- ----------- ----------- ---------- ----------- ----------- ----------- ----------- 83,990 748 2,738 37,085 11,812 11,864 4,625 ----------- ----------- ---------- ----------- ----------- ----------- ----------- $ 484,028 $ 1,222,560 $ 55,547 $ 287,035 $ 101,072 $ 134,346 $ 101,439 =========== =========== ========== =========== =========== =========== =========== 407,691 1,212,686 46,886 271,986 101,190 141,442 109,736 1,892 8,624 292 -- -- -- (924) 12,561 (152,977) (4,062) 3,696 (433) (8,487) (8,359) 61,884 154,227 12,431 11,353 315 1,391 986 ----------- ----------- ---------- ----------- ----------- ----------- ----------- $ 484,028 $ 1,222,560 $ 55,547 $ 287,035 $ 101,072 $ 134,346 $ 101,439 =========== =========== ========== =========== =========== =========== =========== 5,524,773 46,724,929 334,927 15,041,515 N/A 97,963 401,704 =========== =========== ========== =========== =========== =========== =========== 4,193,937 11,562,938 46,674 11,705,367 10,149,779 135,314 620,001 =========== =========== ========== =========== =========== =========== =========== 88 86 N/A 104 N/A N/A N/A =========== =========== ========== =========== =========== =========== =========== 20,308,138 20,767,643 4,832,645 N/A N/A 12,879,454 9,873,019 =========== =========== ========== =========== =========== =========== =========== $ 16.21 $ 15.46 $ 10.62 $ 10.73 N/A $ 10.45 $ 9.32 =========== =========== ========== =========== =========== =========== =========== $ 15.95 $ 15.34 $ 10.55 $ 10.73 $ 9.96 $ 10.31 $ 9.33 =========== =========== ========== =========== =========== =========== =========== $ 15.92 $ 15.31 N/A $ 10.73 N/A N/A N/A =========== =========== ========== =========== =========== =========== =========== $ 16.13 $ 15.54 $ 10.66 N/A N/A $ 10.24 $ 9.31 =========== =========== ========== =========== =========== =========== =========== $ 501,189 N/A $ 44,407 $ 295,872 $ 111,195 $ 141,837 $ 102,675
- -------------------------------------------------------------------------------- 71 AMERICAN AADVANTAGE FUNDS STATEMENTS OF OPERATIONS Year Ended October 31, 2003 - --------------------------------------------------------------------------------
LARGE CAP LARGE CAP SMALL CAP BALANCED VALUE GROWTH VALUE -------- --------- --------- --------- (IN THOUSANDS) INVESTMENT INCOME: Interest income......................................... $ 9,447 $ 484 $ 7 $ 280 Dividend income (net of foreign taxes of $81, $154 $0, $11, $0, $110, $0, $0, $0, $0, respectively).......... 8,226 13,775 391 3,859 Investment Income allocated from the Portfolio.......... -- -- -- -- Income derived from commission recapture................ 23 111 4 46 Income derived from securities lending, net............. 59 31 1 82 Expenses allocated from the AMR Investment Services Portfolio............................................. -- -- -- -- Other income............................................ 1 22 -- -- -------- -------- ------- -------- TOTAL INVESTMENT INCOME............................. 17,756 14,423 403 4,267 -------- -------- ------- -------- EXPENSES: Management and investment advisory fees (Note 2)........ 1,580 1,837 229 1,442 Administrative service fees (Note 2): Institutional Class................................... 23 55 -- 48 PlanAhead Class....................................... 28 44 -- 101 Transfer agent fees: Institutional Class................................... 1 4 -- 5 PlanAhead Class....................................... 8 10 -- 24 Service Class......................................... -- -- -- 7 AMR Class............................................. 26 22 1 17 Fund Accounting fees.................................... 246 261 15 113 Professional fees....................................... 25 30 -- 15 Registration fees and expenses.......................... 19 18 1 24 Service Fees -- PlanAhead Class (Note 2)................ 28 44 -- 101 Other expenses.......................................... 94 79 6 60 -------- -------- ------- -------- Total expenses...................................... 2,078 2,404 252 1,957 -------- -------- ------- -------- Less fees waived (Note 2)............................... -- -- -- 7 -------- -------- ------- -------- NET EXPENSES........................................ 2,078 2,404 252 1,950 -------- -------- ------- -------- NET INVESTMENT INCOME....................................... 15,678 12,019 151 2,317 -------- -------- ------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on: Investments........................................... 6,535 (8,654) (889) 5,725 Foreign currency transactions......................... -- -- -- -- Futures contracts..................................... 9,226 7,330 66 8,404 Net realized loss allocated from the Portfolio.......... -- -- -- -- Change in net unrealized appreciation or depreciation of: Investments........................................... 66,152 128,670 8,067 95,640 Foreign currency translations......................... -- -- -- -- Futures contracts..................................... (156) 1,198 3 11 Change in net unrealized gain allocated from the Portfolio............................................. -- -- -- -- -------- -------- ------- -------- NET GAIN (LOSS) ON INVESTMENTS...................... 81,757 128,544 7,247 109,780 -------- -------- ------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 97,435 $140,563 $ 7,398 $112,097 ======== ======== ======= ========
- --------------- (1) Commencement of Operations June 30, 2003. See accompanying notes - -------------------------------------------------------------------------------- 72 - --------------------------------------------------------------------------------
INTERNATIONAL EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM EQUITY MARKETS BOND INCOME(1) BOND BOND ------------- -------- ---------- --------- ------------ ---------- (IN THOUSANDS) $ -- $ 14 $16,316 $ 902 $ 9,347 $5,268 -- 979 -- 72 -- -- 27,597 -- -- -- -- -- -- -- -- -- -- -- -- 8 39 2 53 4 (4,917) -- -- -- -- -- -- -- -- -- -- -- -------- ------- ------- ----- ------- ------ 22,680 1,001 16,355 976 9,400 5,272 -------- ------- ------- ----- ------- ------ -- 347 1,273 108 507 271 1,503 6 267 -- 121 16 305 -- 220 77 10 10 125 -- 34 -- 16 -- 93 -- 27 6 2 1 7 -- 4 -- -- -- 5 2 -- -- 8 6 -- 220 50 9 52 30 62 8 13 4 21 15 50 28 24 6 22 20 305 -- 220 77 10 10 148 15 41 4 26 11 -------- ------- ------- ----- ------- ------ 2,603 626 2,173 291 795 390 -------- ------- ------- ----- ------- ------ 7 -- 112 -- -- -- -------- ------- ------- ----- ------- ------ 2,596 626 2,061 291 795 390 -------- ------- ------- ----- ------- ------ 20,084 375 14,294 685 8,605 4,882 -------- ------- ------- ----- ------- ------ -- 912 5,981 (433) 5,796 107 -- 558 -- -- -- -- -- -- -- -- -- -- (14,862) -- -- -- -- -- -- 14,437 13,317 315 (3,389) (879) -- 1,420 -- -- -- -- -- -- -- -- -- -- 290,167 -- -- -- -- -- -------- ------- ------- ----- ------- ------ 275,305 17,327 19,298 (118) 2,407 (772) -------- ------- ------- ----- ------- ------ $295,389 $17,702 $33,592 $ 567 $11,012 $4,110 ======== ======= ======= ===== ======= ======
- -------------------------------------------------------------------------------- 73 AMERICAN AADVANTAGE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) - --------------------------------------------------------------------------------
BALANCED LARGE CAP VALUE LARGE CAP GROWTH SMALL CAP VALUE ---------------------- ---------------------- ----------------------- ----------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, ---------------------- ---------------------- ----------------------- ----------------------- 2003 2002 2003 2002 2003 2002 2003 2002 --------- ---------- --------- ---------- ---------- ---------- ---------- ---------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income... $ 15,678 $ 22,820 $ 12,019 $ 13,729 $ 151 $ 85 $ 2,317 $ 2,581 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions.......... 15,761 (19,434) (1,324) (41,557) (823) (8,539) 14,129 5,775 Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations.......... 65,996 (31,940) 129,868 (39,427) 8,070 1,396 95,651 (30,512) Change in unrealized gain (loss) allocated from the Portfolio.... -- -- -- -- -- -- -- -- -------- --------- -------- --------- ------- ------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS... 97,435 (28,554) 140,563 (67,255) 7,398 (7,058) 112,097 (22,156) -------- --------- -------- --------- ------- ------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class... (105) (5,693) (502) (211) -- -- (11) (22) PlanAhead Class....... (421) (435) (333) (222) -- -- (371) (7) AMR Class............. (22,194) (20,504) (12,821) (14,794) (107) (29) (2,228) (1,747) Net realized gain on investments: Institutional Class... -- (1,030) -- (121) -- -- (125) (156) PlanAhead Class....... -- (84) -- (149) -- -- (849) (64) AMR Class............. -- (3,458) -- (7,694) -- -- (4,420) (9,735) -------- --------- -------- --------- ------- ------- -------- -------- NET DISTRIBUTIONS TO SHAREHOLDERS...... (22,720) (31,204) (13,656) (23,191) (107) (29) (8,004) (11,731) -------- --------- -------- --------- ------- ------- -------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares................ 72,230 111,202 37,911 85,242 24,357 20,300 236,616 199,422 Reinvestment of dividends and distributions......... 22,704 31,145 13,368 23,106 107 29 8,003 11,729 Cost of shares redeemed.............. (96,756) (271,864) (83,291) (145,685) (10,846) (9,029) (83,990) (99,330) Shares acquired from merger................ -- -- -- -- -- -- -- -- Redemption fees......... -- -- -- -- -- -- -- -- -------- --------- -------- --------- ------- ------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS...... (1,822) (129,517) (32,012) (37,337) 13,618 11,300 160,629 111,821 -------- --------- -------- --------- ------- ------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS................ 72,893 (189,275) 94,895 (127,783) 20,909 4,213 264,722 77,934 -------- --------- -------- --------- ------- ------- -------- -------- NET ASSETS: Beginning of period..... 507,081 696,356 548,817 676,600 28,018 23,805 219,306 141,372 -------- --------- -------- --------- ------- ------- -------- -------- END OF PERIOD*.......... $579,974 $ 507,081 $643,712 $ 548,817 $48,927 $28,018 $484,028 $219,306 ======== ========= ======== ========= ======= ======= ======== ======== * Includes undistributed net investment income (loss) of............. $ 11,918 $ 14,238 $ 7,137 $ 8,825 $ 89 $ 56 $ 1,892 $ 2,192 ======== ========= ======== ========= ======= ======= ======== ========
- --------------- (1) Commencement of Operations See accompanying notes - -------------------------------------------------------------------------------- 74 - --------------------------------------------------------------------------------
INTERNATIONAL EQUITY EMERGING MARKETS HIGH YIELD BOND ENHANCED INCOME(1) INTERMEDIATE BOND ------------------------ ---------------------- ---------------------- ------------------ ---------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, JUNE 30 TO YEAR ENDED OCTOBER 31, ------------------------ ---------------------- ---------------------- OCTOBER 31, ---------------------- 2003 2002 2003 2002 2003 2002 2003 2003 2002 ---------- ----------- --------- ---------- ---------- --------- ------------------ ---------- --------- $ 20,084 $ 16,465 $ 375 $ 471 $ 14,294 $ 6,426 $ 685 $ 8,605 $ 8,707 (14,862) (78,487) 1,470 (1,557) 5,981 (1,471) (433) 5,796 (373) -- -- 15,857 1,421 13,317 (1,561) 315 (3,389) (660) 290,167 (33,591) -- -- -- -- -- -- -- ---------- ----------- ------- -------- --------- -------- -------- --------- -------- 295,389 (95,613) 17,702 335 33,592 3,394 567 11,012 7,674 ---------- ----------- ------- -------- --------- -------- -------- --------- -------- (15,830) (9,850) (12) (21) (8,012) (6,388) -- (1,957) (3,441) (2,465) (1,966) -- -- (6,282) (38) (685) (153) (28) (8,401) (6,474) (319) (366) -- -- -- (6,495) (5,238) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------- ----------- ------- -------- --------- -------- -------- --------- -------- (26,696) (18,290) (331) (387) (14,294) (6,426) (685) (8,605) (8,707) ---------- ----------- ------- -------- --------- -------- -------- --------- -------- 569,324 1,875,187 17,731 25,988 312,581 76,632 104,430 65,108 128,116 24,545 17,162 331 387 8,009 5,932 1 6,687 8,444 (542,508) (1,811,884) (14,387) (13,977) (161,695) (23,965) (3,241) (160,564) (71,882) -- -- -- -- -- -- -- -- 101 815 268 -- -- -- -- -- -- -- ---------- ----------- ------- -------- --------- -------- -------- --------- -------- 52,176 80,733 3,675 12,398 158,895 58,599 101,190 (88,769) 64,779 ---------- ----------- ------- -------- --------- -------- -------- --------- -------- 320,869 (33,170) 21,046 12,346 178,193 55,567 101,072 (86,362) 63,746 ---------- ----------- ------- -------- --------- -------- -------- --------- -------- 901,691 934,861 34,501 22,155 108,842 53,275 -- 220,708 156,962 ---------- ----------- ------- -------- --------- -------- -------- --------- -------- $1,222,560 $ 901,691 $55,547 $ 34,501 $ 287,035 $108,842 $101,072 $ 134,346 $220,708 ========== =========== ======= ======== ========= ======== ======== ========= ======== $ 8,624 $ 22,632 $ 292 $ 260 $ -- $ -- $ -- $ -- $ -- ========== =========== ======= ======== ========= ======== ======== ========= ======== SHORT-TERM BOND ----------------------- YEAR ENDED OCTOBER 31, ----------------------- 2003 2002 ---------- ---------- $ 4,882 $ 4,024 107 (545) (879) (429) -- -- -------- -------- 4,110 3,050 -------- -------- (317) (321) (181) (104) (5,040) (4,120) -- -- -- -- -- -- -------- -------- (5,538) (4,545) -------- -------- 31,785 56,909 5,349 4,451 (36,115) (44,870) -- -- -- -- -------- -------- 1,019 16,490 -------- -------- (409) 14,995 -------- -------- 101,848 86,853 -------- -------- $101,439 $101,848 ======== ======== $ (924) $ -- ======== ========
- -------------------------------------------------------------------------------- 75 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS October 31, 2003 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES American AAdvantage 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. These financial statements and notes to the financial statements relate to the American AAdvantage Balanced Fund, the American AAdvantage Large Cap Value Fund, the American AAdvantage Large Cap Growth Fund, the American AAdvantage Small Cap Value Fund, the American AAdvantage International Equity Fund, the American AAdvantage Emerging Markets Fund, the American AAdvantage High Yield Bond Fund, the American AAdvantage Enhanced Income Fund, the American AAdvantage Intermediate Bond Fund and the American AAdvantage Short-Term Bond Fund (each a "Fund" and collectively, the "Funds"), each a series of the Trust. 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. Each Fund, except the Enhanced Income Fund, has multiple classes of shares. Differences between the classes include the services offered to and the expenses borne by each class and certain voting rights. Investment income, net capital gains (losses) and all expenses incurred by the Funds are allocated based on relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares. The American AAdvantage International Equity Fund (the "International Fund") invests all of its investable assets in the International Equity Portfolio (the "Portfolio") of the AMR Investment Services Trust, which has the same investment objectives as the International Fund. The Portfolio is an open-end management investment company registered under the Act. The value of the investment in the Portfolio reflects the International Fund's proportionate interest in the net assets of the Portfolio. At October 31, 2003 the International Fund's investment was 94.49% of the Portfolio. The financial statements of the Portfolio, including Notes to Financial Statements, are included elsewhere in this report and should be read in conjunction with the International Fund's financial statements. The Notes to Financial Statements of the Portfolio includes a discussion of investment valuation, security transactions and investment income, the Management Agreement and securities lending. Reorganization On February 28, 2002, the American AAdvantage Intermediate Bond Fund -- Plan Ahead Class acquired all the net assets of the American AAdvantage Intermediate Bond Mileage Fund pursuant to a Plan of Reorganization approved by the shareholders on February 20, 2002. The acquisition was accomplished by a tax-free exchange of 9,983.218 shares of the Plan Ahead Class of the American AAdvantage Intermediate Bond Fund for 9,904.962 shares of the American AAdvantage Intermediate Bond Mileage Fund outstanding on February 28, 2002. On that date the American AAdvantage Intermediate Bond Mileage Fund had net assets of $101,130, including $16,041 of unrealized appreciation. The following is a summary of the significant accounting policies followed by the Funds. - -------------------------------------------------------------------------------- 76 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- Security Valuation Equity securities that are primarily traded on domestic securities exchanges are valued at the last quoted sales price on a designated exchange at the close of trading on the New York Stock Exchange (the "Exchange") on each day the Exchange is open for trading or, lacking any current sales, on the basis of the last current bid price prior to the close of trading on the Exchange. Securities that are primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on their respective exchanges where primarily traded. Over-the-counter equity securities are valued on the basis of the last bid price on that date prior to the close of trading. Securities traded on NASDAQ will be valued at the NASDAQ official closing price. Debt securities (other than short-term securities) normally are 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. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method. Securities for which the above valuation procedures are inappropriate, or are deemed not to reflect fair value, are valued at fair value, as determined in good faith and pursuant to procedures approved by the Trust's Board of Trustees (the "Board"). 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. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Dividend income is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Funds. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. The International Fund records its share of net investment income and realized and unrealized gain (loss) in the Portfolio each day. All net investment income and realized and unrealized gain (loss) of the Portfolio is allocated pro rata among the International Fund and other investors in the Portfolio at the time of such determination. Currency Translation All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the bid price of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect - -------------------------------------------------------------------------------- 77 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses in the Fund's Statement of Operations. Forward Foreign Currency Contracts The Emerging Markets Fund may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of fund securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. Repurchase Agreements Under the terms of a repurchase agreement, securities are acquired by a Fund from a securities dealer or a bank which are subject to resale at a later date. Repurchase agreements are fully collateralized by U.S. Treasury or Government agency securities. All collateral is held at the Fund's custodian bank, State Street Bank and Trust Company, or at subcustodian banks. The collateral is monitored daily by each Fund so that the collateral's market value exceeds the carrying value of the repurchase agreement. Futures Contracts Futures contracts are contracts to buy or sell a standard quantity of securities at a specified price on a future date. The Balanced, Large Cap Value, Large Cap Growth, Small Cap Value, Emerging Markets, High Yield Bond and Enhanced Income Funds may enter into financial futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock or bond market, as applicable. Upon entering into a futures contract, the Fund is required to deposit with a financial intermediary an amount ("initial margin") equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Fund dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When entering into a closing transaction, the Fund will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded. Dividends to Shareholders Dividends from net investment income of the Balanced, Large Cap Value, Large Cap Growth, Small Cap Value, International Equity and Emerging Markets Funds normally will be declared and paid annually. The High Yield Bond, Enhanced Income, Intermediate Bond and Short-Term Bond Funds generally declare dividends from net investment income daily, payable monthly. Distributions, if any, of net realized capital gains normally will be paid annually after the close of the fiscal year in which realized. Dividends are determined in accordance with income tax principles which may treat certain transactions differently than generally accepted accounting principles. Accordingly, the character of - -------------------------------------------------------------------------------- 78 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. The tax character of distributions during the year ended October 31, 2003 and the fiscal year ended October 31, 2002 were as follows:
LARGE CAP GROWTH BALANCED LARGE CAP VALUE --------------------- ------------------------- ------------------------- YEAR ENDED YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, OCTOBER 31, ------------------------- ------------------------- --------------------- 2003 2002 2003 2002 2003 2002 ----------- ----------- ----------- ----------- -------- -------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class................. $ 105,000 $ 5,693,000 $ 502,000 $ 211,000 $ -- $ -- Plan Ahead Class.................... 421,000 435,000 333,000 222,000 -- -- AMR Class........................... 22,194,000 20,504,000 12,821,000 14,794,000 107,000 29,000 LONG-TERM CAPITAL GAIN Institutional Class................. -- 1,030,000 -- 121,000 -- -- Plan Ahead Class.................... -- 84,000 -- 149,000 -- -- AMR Class........................... -- 3,458,000 -- 7,694,000 -- -- ----------- ----------- ----------- ----------- -------- -------- TOTAL DISTRIBUTIONS PAID........ $22,720,000 $31,204,000 $13,656,000 $23,191,000 $107,000 $ 29,000 ----------- ----------- ----------- ----------- -------- --------
EMERGING MARKETS SMALL CAP VALUE INTERNATIONAL EQUITY --------------------- ------------------------- ------------------------- YEAR ENDED YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, OCTOBER 31, ------------------------- ------------------------- --------------------- 2003 2002 2003 2002 2003 2002 ----------- ----------- ----------- ----------- -------- -------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class................. $ 117,000 $ 119,000 $15,830,000 $ 9,850,000 $ 12,000 $ 21,000 Plan Ahead Class.................... 1,089,000 47,000 2,465,000 1,966,000 -- -- AMR Class........................... 5,971,000 7,821,000 8,401,000 6,474,000 319,000 366,000 LONG-TERM CAPITAL GAIN Institutional Class................. 19,000 59,000 -- -- -- -- Plan Ahead Class.................... 130,000 24,000 -- -- -- -- AMR Class........................... 678,000 3,661,000 -- -- -- -- ----------- ----------- ----------- ----------- -------- -------- TOTAL DISTRIBUTIONS PAID........ $ 8,004,000 $11,731,000 $26,696,000 $18,290,000 $331,000 $387,000 ----------- ----------- ----------- ----------- -------- --------
HIGH YIELD BOND INTERMEDIATE BOND SHORT-TERM BOND ------------------------ ENHANCED INCOME ----------------------- ----------------------- YEAR ENDED OCTOBER 31, JUNE 30 TO YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, ------------------------ OCTOBER 31, ----------------------- ----------------------- 2003 2002 2003 2001 2002 2003 2002 ----------- ---------- --------------- ---------- ---------- ---------- ---------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class....... $ 6,546,000 $6,388,000 $ -- $1,957,000 $3,441,000 $ 316,000 $ 321,000 Plan Ahead Class.......... 6,220,000 38,000 685,000 153,000 28,000 181,000 104,000 AMR Class................. -- -- -- 6,370,000 5,238,000 5,040,000 4,120,000 LONG-TERM CAPITAL GAIN Institutional Class....... -- -- -- -- -- -- -- Plan Ahead Class.......... -- -- -- -- -- -- -- AMR Class................. -- -- -- -- -- -- -- ----------- ---------- -------- ---------- ---------- ---------- ---------- TOTAL DISTRIBUTIONS PAID................ $12,766,000 $6,426,000 $685,000 $8,480,000 $8,707,000 $5,537,000 $4,545,000 ----------- ---------- -------- ---------- ---------- ---------- ----------
- -------------------------------------------------------------------------------- 79 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- As of October 31, 2003, the components of distributable earnings were as follows (in thousands):
BALANCED LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL EMERGING FUND VALUE FUND GROWTH FUND VALUE FUND EQUITY FUND MARKETS FUND -------- ---------- ------------- ---------- ------------- ------------ Cost basis of Investments for federal income tax purposes..... $572,070 $607,714 $ 46,442 $503,149 $1,234,433 $45,736 Unrealized appreciation.......... 65,949 103,970 4,848 68,147 190,129 12,286 Unrealized depreciation.......... (18,711) (36,524) (2,051) (8,540) (54,318) (1,190) -------- -------- -------- -------- ---------- ------- Net unrealized/(depreciation).... 47,238 67,446 2,797 59,607 135,811 11,096 Undistributed ordinary income.... 12,379 7,619 90 13,222 12,031 291 Undistributed long-term gain/(loss)..................... (2,273) (42,322) (13,675) 3,495 (135,182) (2,733) -------- -------- -------- -------- ---------- ------- Distributable earnings........... $57,344 $ 32,743 $(10,788) $ 76,324 $ 12,660 $ 8,654 ======== ======== ======== ======== ========== ======= ENHANCED HIGH YIELD INCOME INTERMEDIATE SHORT-TERM BOND FUND FUND BOND FUND BOND FUND ---------- ------------- ------------- ---------- Cost basis of Investments for federal income tax purposes..... $295,901 $111,195 $142,033 $103,705 Unrealized appreciation.......... 13,010 1,588 2,371 821 Unrealized depreciation.......... (1,686) (1,273) (1,176) (865) -------- -------- -------- -------- Net unrealized/(depreciation).... 11,324 315 1,195 (44) Undistributed ordinary income.... 4,478 287 501 545 Undistributed long-term gain/(loss)..................... 866 (433) (8,269) (8,365) -------- -------- -------- -------- Distributable earnings........... $ 16,668 $ 169 $ (6,573) $ (7,864) ======== ======== ======== ========
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains/(losses) on certain derivative instruments, the difference between book and tax amortization for premium and market discount, and the realization for tax purposes of unrealized gains/(losses) on investment in passive foreign investment companies. Federal Income and Excise Taxes It is the policy of each of the Funds to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all net investment income as well as any net realized capital gains on the sale of investments. Therefore, no federal income or excise tax provision is required. At October 31, 2003, capital loss carryforward positions for federal income tax purposes were as follows (in thousands):
FUND AMOUNT EXPIRES - ---- -------- ------- Balanced.................................................... $ 2,273 2010 Large Cap Value............................................. 42,322 2010-2011 Large Cap Growth............................................ 13,675 2008-2011 International Equity........................................ 135,182 2009-2011 Emerging Markets............................................ 2,733 2009-2010 Enhanced Income............................................. 433 2011 Intermediate Bond........................................... 8,269 2008-2010 Short-Term Bond............................................. 8,365 2004-2011
Expenses Expenses directly attributable to a Fund are charged to that Fund's operations. Expenses directly attributable to a class of shares are charged to that class. Expenses incurred by the Trust with respect to any two or more of the Funds are allocated in proportion to the net assets of each Fund, except where allocations of direct expenses to each Fund can otherwise be made fairly. Each share of each Fund, regardless of class, bears equally those expenses that are allocated to the Fund as a whole. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect - -------------------------------------------------------------------------------- 80 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement which obligates the Manager to provide or oversee the provision of all administrative, investment advisory, fund management and securities lending services. Investment assets of the International Fund are invested in the Portfolio. Management Fees paid by the Portfolio are discussed in Note 1 of the Portfolio's Notes to Financial Statements which are included elsewhere in this report. Investment assets of the Balanced, Large Cap Value, Large Cap Growth, Small Cap Value, Emerging Markets, High Yield Bond, Enhanced Income and Intermediate Bond Funds are managed by multiple investment advisers which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Balanced Fund, Large Cap Value Fund, Large Cap Growth Fund, Small Cap Value Fund, Emerging Markets Fund, High Yield Bond Fund and Enhanced Income Fund an annualized fee equal to .10% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Funds. The Manager receives an annualized fee of ..25% of the average daily net assets of the Intermediate Bond Fund and pays a portion of their fee to an investment adviser hired by the Manager to direct investment activities of a portion of the Fund. Management fees paid during the year ended October 31, 2003 were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY FEE RATE FEE ADVISERS MANAGER ----------- ---------- --------------- ----------- Balanced Fund...................................... .225%-.70% $1,580 $1,051 $529 Large Cap Value Fund............................... .225%-.70% 1,837 1,266 571 Large Cap Growth Fund.............................. .50%-.70% 229 192 37 Small Cap Value Fund............................... .35%-.60% 1,442 1,167 275 Emerging Markets Fund.............................. .80%-1.20% 347 306 41 High Yield Bond Fund............................... 0.65% 1,273 1,078 195 Enhanced Income Fund............................... .25%-.85% 108 77 31 Intermediate Bond Fund............................. .25% 507 217 290
The Manager serves as the sole investment adviser to the Short-Term Bond Fund. Pursuant to the Management Agreement, the Manager receives from the Fund an annualized fee equal to .25% of the average daily net assets of the Short-Term Bond Fund. The Manager and the Investment Adviser of the High Yield Bond Fund have each contractually agreed to waive a portion of their fees through October 31, 2003 to the extent that Total Fund Operating Expenses exceed 0.90%. During the year ended October 31, 2003, management fees waived were as follows (in thousands):
WAIVED BY INVESTMENT WAIVED BY ADVISER MANAGER ---------- --------- High Yield Bond Fund........................................ $56 $56
- -------------------------------------------------------------------------------- 81 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- As compensation for services provided by the Manager in connection with securities lending activities, the lending Fund pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers when a borrower posts collateral other than cash, a fee up to 25% of such loan fees. During the period, securities lending fees paid to the Manager were as follows (in thousands): Balanced Fund............................................... $ 9 Large Cap Value Fund........................................ 5 Small Cap Value Fund........................................ 13 Emerging Markets Fund....................................... 1 High Yield Bond Fund........................................ 5 Intermediate Bond Fund...................................... 7
Administrative Services Agreement The Manager and the Trust entered into an Administrative Services Agreement which obligates the Manager to provide or oversee administrative and management services to the Funds. As compensation for performing the duties required under the Administrative Services Agreement, the Manager receives an annualized fee of ..25% of the average daily net assets of the Institutional, PlanAhead and Service Classes of each of the Funds. Distribution Plans The Trust, except for the Service Class of the Funds, has adopted a "defensive" Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Investment Company Act of 1940, pursuant to which no fees may be charged to the Funds for distribution purposes. However, the Plan authorizes the management fees received by the Manager and the investment advisers hired by the Manager to be used for distribution purposes. Under this Plan, the Trust does not intend to compensate the Manager or any other party, either directly or indirectly, for the distribution of Trust shares. A separate Distribution Plan (the "Distribution Plan") has been adopted pursuant to Rule 12b-1 under the Act for the Service Class of the Funds. Under the Distribution Plan, as compensation for distribution assistance, the Manager receives an annual fee of 0.25% of the average daily net assets of the Service Class. 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. Service Plans The Manager and the Trust entered into Service Plans which obligates the Manager to oversee additional shareholder servicing of the PlanAhead and Service Classes. As compensation for performing the duties required under the Service Plans, the Manager receives 0.25% based on the daily net assets of the PlanAhead and Service Classes of each Fund. - -------------------------------------------------------------------------------- 82 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- Investment in Affiliated Funds The Balanced, Large Cap Value, Large Cap Growth, Small Cap Value, Emerging Markets, High Yield Bond, Enhanced Income, Intermediate Bond and Short-Term Bond Funds may invest in the American AAdvantage Money Market Select Fund (the "Select Fund"), an open-end management investment company managed by the Manager. The Manager receives from the Select Fund an annualized fee equal to 0.10% of the average daily net assets. During the period, fees earned by the Manager from the Select Fund on investments made by the Fund in the Select Fund were as follows: Balanced.................................................... $68,191 Large Cap Value............................................. 58,786 Large Cap Growth............................................ 1,023 Emerging Markets............................................ 3,518 Small Cap Value............................................. 44,177 High Yield Bond............................................. 17,987 Enhanced Income............................................. 1,957 Intermediate Bond........................................... 29,344 Short Term Bond............................................. 4,043
Income distributions in thousands from the Select Fund are recorded as interest income in the accompanying financial statements and totaled $249, $287, $5, $35, $13, $213, $20 and $34 during the period for the Balanced, Large Cap Value, Large Cap Growth, Small Cap Value, Emerging Markets, Enhanced Income, Intermediate Bond and Short-Term Bond Funds, respectively. Cash collateral received by certain Funds in connection with securities lending is invested in the Select Fund and the AMR Enhanced Yield Business Trust (the "Business Trust"). See further discussion on securities lending in Note 4. Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Unaffiliated Trustees and their spouses are provided free unlimited air transportation on American. However, the Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the value of this free airline travel. For the year ended October 31, 2003, the cost of air transportation was not material to any of the Funds. One Trustee, as a retiree of American, already receives flight benefits. This Trustee receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. At October 31, 2003, AMR Corporation and subsidiary companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of the Funds. Reimbursement of Expenses The Manager reimbursed expenses totaling $6,829 and $6,830 for the Small Cap Value and International Equity Funds, respectively during the year ended October 31, 2003. - -------------------------------------------------------------------------------- 83 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- 3. INVESTMENT TRANSACTIONS Investment transactions for the year ended October 31, 2003 (excluding short-term investments) are as follows (in thousands):
LARGE CAP LARGE CAP EMERGING HIGH YIELD ENHANCED INTERMEDIATE BALANCED VALUE GROWTH SMALL CAP MKT BOND INCOME BOND SHORT-TERM -------- --------- --------- --------- -------- ---------- -------- ------------ ---------- Purchases............ $338,890 $143,776 $64,562 $311,752 $35,663 $351,806 $149,647 $363,130 $87,755 Proceeds from sales.............. $354,371 $173,760 $51,060 $193,893 $33,165 $201,117 $ 51,684 $434,256 $84,485
The Intermediate Bond Fund had purchases and sales of U.S. Government securities of $80,094 and $112,783, respectively. 4. SECURITIES LENDING The Balanced, Large Cap Value, Large Cap Growth, Small Cap Value, Emerging Markets, High Yield Bond, Enhanced Income, Intermediate Bond and Short-Term Bond Funds participate in a securities lending program under which securities are loaned to selected institutional investors. All such loans require collateralization with cash, securities of the U.S. Government and its agencies or letters of credit that will generally equal at least 100% of the market value of the loaned securities plus accrued interest. The Funds bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of securities fail financially. The Funds receive interest on the collateral less any fees and rebates paid to agents and transferees of securities. The Funds also continue to receive income on the securities loaned, and any gain or loss in the market price of securities loaned that may occur during the term of the loan. At October 31, 2003, the Funds had securities on loan as follows (in thousands):
MARKET VALUE OF FUND SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL - ---- ------------------ ------------------- --------------- Balanced................................ $ 38,207 $ -- $ 38,976 Large Cap Value......................... 32,431 -- 33,294 Large Cap Growth........................ 390 -- 403 Small Cap Value......................... 77,424 -- 79,214 Emerging Markets........................ 2,072 -- 2,132 High Yield Bond......................... 23,482 -- 24,245 Enhanced Income......................... 9,686 -- 9,940 Intermediate Bond....................... 8,093 -- 8,212 Short Term Bond......................... 3,475 -- 3,548
The Custodian for each Fund, other than High Yield Bond, invested the cash collateral in the Business Trust and the Select Fund. These amounts have been included as investments in each Fund's Schedule of Investments and Statements of Assets & Liabilities. Income earned on these investments is reported as Income derived from securities lending in the Statements of Operations. The Manager serves as Trustee and as investment adviser to the Business Trust and the Select Fund. The Manager receives from the Business Trust and Select Fund an annualized fee equal to 0.10% of the average daily net assets. - -------------------------------------------------------------------------------- 84 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- 5. COMMISSION RECAPTURE The Funds have established brokerage commission recapture arrangements with certain brokers or dealers. If a Fund's investment adviser chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Fund. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Fund. 6. FUTURES CONTRACTS A summary of futures contracts at October 31, 2003 is as follows (in thousands):
UNREALIZED MARKET APPRECIATION/ TYPE OF FUTURE EXPIRATION CONTRACTS VALUE (DEPRECIATION) - -------------- ------------- --------- ------- -------------- BALANCED FUND: S&P 500 Index......................................... December 2003 180 $47,228 $1,373 LARGE CAP VALUE FUND: Emini S&P 500 Index................................... December 2003 160 41,980 1,236 LARGE CAP GROWTH FUND: Emini S&P 500 Index................................... December 2003 11 577 5 SMALL CAP VALUE FUND: Russell 2000 Index.................................... December 2003 191 50,457 317
7. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Funds (in thousands): Period Ended October 31, 2003
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS ------------------- -------------------- ------------------ BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ------------- ------- -------- ------- --------- ------- -------- Shares sold..................................... 381 $ 4,168 319 $ 3,669 5,544 $ 64,393 Reinvestment of dividends....................... 8 92 39 418 2,049 22,194 Shares redeemed................................. (513) (5,769) (261) (2,914) (7,735) (88,073) ------- -------- ------- ------- ------ -------- Net increase (decrease) in shares outstanding... (124) $ (1,509) 97 $ 1,173 (142) $ (1,486) ======= ======== ======= ======= ====== ========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS ------------------- -------------------- ------------------ LARGE CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- -------- ------- --------- ------- -------- Shares sold..................................... 559 $ 7,483 421 $ 5,507 1,874 $ 24,921 Reinvestment of dividends....................... 17 214 27 334 1,022 12,820 Shares redeemed................................. (791) (10,435) (349) (4,356) (5,346) (68,500) ------- -------- ------- ------- ------ -------- Net increase (decrease) in shares outstanding... (215) $ (2,738) 99 $ 1,485 (2,450) $(30,759) ======= ======== ======= ======= ====== ========
INSTITUTIONAL CLASS AMR CLASS -------------------- -------------------- LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT - --------------------- ------- --------- ------- --------- Shares sold.................................. -- $ -- 5,050 $ 24,357 Reinvestment of dividends.................... -- -- 24 107 Shares redeemed.............................. -- -- (2,328) (10,846) ------- --------- ------- --------- Net increase in shares outstanding........... -- $ -- 2,746 $ 13,618 ======= ========= ======= =========
- -------------------------------------------------------------------------------- 85 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- -------------------- ----------------- ------------------- SMALL CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------- --------- ------- ------ ------- -------- Shares sold............ 5,804 $ 86,593 3,895 $ 50,470 -- $1 7,133 $ 99,552 Reinvestment of dividends............ 12 135 107 1,219 -- -- 579 6,649 Shares redeemed........ (2,235) (27,191) (1,251) (16,693) -- -- (3,437) (40,106) ------- --------- ------- --------- ------- -- ------ -------- Net increase in shares outstanding.......... 3,581 $ 59,537 2,751 $ 34,996 -- $1 4,275 $ 66,095 ======= ========= ======= ========= ======= == ====== ========
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS INTERNATIONAL EQUITY -------------------- -------------------- ------------------- ------------------ FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------- --------- ------- -------- ------- -------- Shares sold............ 17,587 $ 222,848 23,195 $ 310,919 -- $ 1 2,789 $ 35,557 Reinvestment of dividends............ 1,158 13,713 207 2,431 -- -- 707 8,401 Shares redeemed*....... (16,430) (212,287) (20,177) (271,010) -- -- (4,456) (58,396) ------- --------- ------- --------- ------- -------- ------ -------- Net increase (decrease) in shares outstanding.......... 2,315 $ 24,274 3,225 $ 42,340 -- $ 1 (960) $(14,438) ======= ========= ======= ========= ======= ======== ====== ========
* Net of Redemption Fees
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ------------------- ------------------ EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - --------------------- ------- --------- ------- -------- ------- -------- Shares sold.................................... 88 $ 767 47 $ 406 1,889 $ 16,558 Reinvestment of dividends...................... 2 12 -- -- 42 319 Shares redeemed................................ -- -- -- -- (1,629) (14,387) ------- --------- ------- -------- ------ -------- Net increase in shares outstanding............. 90 $ 779 47 $ 406 302 $ 2,490 ======= ========= ======= ======== ====== ========
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS -------------------- ------------------- ------------------ HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------- -------- ------- -------- Shares sold.................................... 14,111 $ 146,141 16,319 $166,439 -- $ 1 Reinvestment of dividends...................... 683 7,122 89 887 -- -- Shares redeemed................................ (10,637) (107,921) (5,121) (53,774) -- -- ------- --------- ------- -------- ------ -------- Net increase in shares outstanding............. 4,157 $ 45,342 11,287 $113,552 -- $ 1 ======= ========= ======= ======== ====== ========
PLANAHEAD CLASS -------------------- ENHANCED INCOME FUND SHARES AMOUNT - -------------------- ------- --------- Shares sold.................................... 10,478 $ 104,430 Reinvestment of dividends...................... -- 1 Shares redeemed................................ (329) (3,241) ------- --------- Net increase in shares outstanding............. 10,149 $ 101,190 ======= =========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ------------------- ------------------ INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ---------------------- ------- --------- ------- -------- ------- -------- Shares sold.................................... 300 $ 3,165 1,175 $ 12,285 4,798 $ 49,658 Reinvestment of dividends...................... 13 142 5 50 628 6,495 Shares redeemed................................ (7,403) (79,198) (1,209) (12,736) (6,647) (68,630) ------- --------- ------- -------- ------ -------- Net decrease in shares outstanding............. (7,090) $ (75,891) (29) $ (401) (1,221) $(12,477) ======= ========= ======= ======== ====== ========
- -------------------------------------------------------------------------------- 86 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------------- ------------------- SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------- ----------- ------- --------- Shares sold................................ 174 $ 1,640 889 $ 8,365 2,305 $ 21,780 Reinvestment of dividends.................. 16 150 17 160 535 5,039 Shares redeemed............................ (677) (6,395) (658) (6,206) (2,498) (23,514) ------- --------- ------- ----------- ------ --------- Net increase (decrease) in shares outstanding.............................. (487) $ (4,605) 248 $ 2,319 342 $ 3,305 ======= ========= ======= =========== ====== =========
Year Ended October 31, 2002
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------------- ------------------- BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ------------- ------- --------- ------- ----------- ------- --------- Shares sold................................ 3,527 $ 41,875 416 $ 4,967 5,439 $ 64,360 Reinvestment of dividends.................. 554 6,667 44 516 1,997 23,962 Shares redeemed............................ (16,328) (188,773) (507) (5,958) (6,696) (77,133) ------- --------- ------- ----------- ------ --------- Net increase (decrease) in capital shares outstanding.............................. (12,247) $(140,231) (47) $ (475) 740 $ 11,189 ======= ========= ======= =========== ====== =========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------------- ------------------- LARGE CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------- ----------- ------- --------- Shares sold................................ 1,292 $ 17,936 2,268 $ 30,589 2,534 $ 36,717 Reinvestment of dividends.................. 16 246 25 371 1,514 22,489 Shares redeemed............................ (282) (3,985) (1,852) (25,285) (8,442) (116,415) ------- --------- ------- ----------- ------ --------- Net increase (decrease) in capital shares outstanding.............................. 1,026 $ 14,197 441 $ 5,675 (4,394) $ (57,209) ======= ========= ======= =========== ====== =========
INSTITUTIONAL CLASS AMR CLASS -------------------- ---------------------- LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT - --------------------- ------- --------- ------- ----------- Shares sold................................ -- $ -- 3,748 $ 20,300 Reinvestment of dividends.................. -- -- 5 29 Shares redeemed............................ -- -- (1,774) (9,029) ------- --------- ------- ----------- Net increase in capital shares outstanding.............................. -- $ -- 1,979 $ 11,300 ======= ========= ======= ===========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------------- ------------------- SMALL CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------- ----------- ------- --------- Shares sold................................ 2,296 $ 32,038 1,910 $ 25,673 10,370 $ 141,711 Reinvestment of dividends.................. 14 178 6 70 927 11,481 Shares redeemed............................ (568) (6,849) (577) (7,272) (7,036) (85,209) ------- --------- ------- ----------- ------ --------- Net increase in capital shares outstanding.............................. 1,742 $ 25,367 1,339 $ 18,471 4,261 $ 67,983 ======= ========= ======= =========== ====== =========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------------- ------------------- INTERNATIONAL EQUITY FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ------------------------- ------- --------- ------- ----------- ------- --------- Shares sold................................ 56,942 $ 789,155 76,125 $ 1,032,877 3,890 $ 53,155 Reinvestment of dividends.................. 625 8,727 142 1,961 461 6,474 Shares redeemed............................ (50,862) (712,783) (76,321) (1,039,202) (4,403) (59,899) ------- --------- ------- ----------- ------ --------- Net increase (decrease) in capital shares outstanding.............................. 6,705 $ 85,099 (54) $ (4,096) (52) $ (270) ======= ========= ======= =========== ====== =========
- -------------------------------------------------------------------------------- 87 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------------- ------------------- EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - --------------------- ------- --------- ------- ----------- ------- --------- Shares sold................................ 18 $ 152 -- $ 1 3,113 $ 25,835 Reinvestment of dividends.................. 3 21 -- -- 49 366 Shares redeemed............................ -- -- -- -- (1,737) (13,977) ------- --------- ------- ----------- ------ --------- Net increase in capital shares outstanding.............................. 21 $ 173 -- $ 1 1,425 $ 12,224 ======= ========= ======= =========== ====== =========
INSTITUTIONAL CLASS PLANAHEAD CLASS -------------------- -------------------- HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------- --------- Shares sold.................................. 7,138 $ 71,171 566 $ 5,461 Reinvestment of dividends.................... 594 5,900 3 32 Shares redeemed.............................. (2,275) (22,513) (151) (1,452) ------- --------- ------- --------- Net increase in capital shares outstanding... 5,457 $ 54,558 418 $ 4,041 ======= ========= ======= =========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- -------------------- ------------------- INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ---------------------- ------- --------- ------- --------- ------- --------- Shares sold.................................. 3,344 $ 34,250 224 $ 2,267 9,032 $ 91,599 Reinvestment of dividends.................... 310 3,180 3 26 519 5,238 Shares redeemed.............................. (2,256) (23,199) (100) (1,015) (4,753) (47,668) Shares acquired from merger.................. -- -- 10 101 -- -- ------- --------- ------- --------- ------ --------- Net increase in capital shares outstanding... 1,398 $ 14,231 137 $ 1,379 4,798 $ 49,169 ======= ========= ======= ========= ====== =========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- -------------------- ------------------- SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------- --------- ------- --------- Shares sold.................................. 2,306 $ 21,752 1,052 $ 9,909 2,674 $ 25,248 Reinvestment of dividends.................... 24 233 10 95 437 4,123 Shares redeemed.............................. (1,881) (17,746) (821) (7,729) (2,054) (19,395) ------- --------- ------- --------- ------ --------- Net increase in capital shares outstanding... 449 $ 4,239 241 $ 2,275 1,057 $ 9,976 ======= ========= ======= ========= ====== =========
- -------------------------------------------------------------------------------- 88 (AMERICAN EAGLE LOGO) - -------------------------------------------------------------------------------- 89 AMERICAN AADVANTAGE BALANCED FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------------------------- 2003 2002 2001(D E G) 2000(B) 1999 ------ ------ ----------- -------- -------- Net asset value, beginning of period........................ $10.97 $12.07 $ 12.27 $ 13.01 $ 14.56 ------ ------ -------- -------- -------- Income from investment operations: Net investment income(A C).............................. 0.30 0.11 0.51 0.58 0.50 Net gains (losses) on securities (both realized and unrealized)(C)........................................ 1.85 (0.69) (0.03) (0.03) (0.39) ------ ------ -------- -------- -------- Total income (loss) from investment operations.............. 2.15 (0.58) 0.48 0.55 0.11 ------ ------ -------- -------- -------- Less distributions: Dividends from net investment income.................... (0.13) (0.44) (0.68) (0.51) (0.49) Distributions from net realized gains on securities..... -- (0.08) -- (0.78) (1.17) ------ ------ -------- -------- -------- Total distributions......................................... (0.13) (0.52) (0.68) (1.29) (1.66) ------ ------ -------- -------- -------- Net asset value, end of period.............................. $12.99 $10.97 $ 12.07 $ 12.27 $ 13.01 ====== ====== ======== ======== ======== Total return................................................ 19.77% (5.14)% 4.07% 5.13% 0.53% ====== ====== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $9,041 $8,994 $157,775 $260,880 $139,519 Ratios to average net assets (annualized): Expenses(C)........................................... 0.63% 0.62% 0.62% 0.61% 0.59% Net investment income(C).............................. 2.74% 3.12% 3.56% 4.39% 3.55% Portfolio turnover rate(F).............................. 69% 84% 122% 121% 90%
- --------------- (A) Class expenses per share were subtracted from net investment income per share for the Fund before class expenses to determine net investment income per share. (B) GSB Investment Management, Inc. was removed as an investment adviser to the Balanced Fund on March 1, 2000. (C) 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 AMR Investment Services Balanced Portfolio through February 28, 2002. (D) On September 7, 2001, AMR Investment Services, Inc. assumed management of the fixed income portion of the Balanced Fund's assets previously managed by Merrill Lynch Investment Managers, L.P. (E) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed management of the equity portion of the Balanced Fund's assets previously managed by Merrill Lynch Investment Managers, L.P. (F) The American AAdvantage Balanced Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (G) Independence Investment LLC was removed as an investment adviser to the Balanced Fund on November 30, 2000. - -------------------------------------------------------------------------------- 90 - --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS - ---------------------------------------------------------- -------------------------------------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, - ---------------------------------------------------------- -------------------------------------------------------------- 2003 2002 2001(D E G) 2000(B) 1999 2003 2002 2001(D E G) 2000(B) 1999 - ------- ------- ----------- ------- ------- -------- -------- ----------- -------- -------- $ 10.81 $ 11.88 $ 12.08 $ 12.79 $ 14.35 $ 10.98 $ 12.06 $ 12.27 $ 13.02 $ 14.57 - ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- 0.36 0.41 0.51 0.53 0.44 0.34 0.48 0.56 0.61 0.54 1.66 (0.99) (0.06) -- (0.39) 1.78 (1.01) (0.05) (0.03) (0.39) - ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- 2.02 (0.58) 0.45 0.53 0.05 2.12 (0.53) 0.51 0.58 0.15 - ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- (0.43) (0.41) (0.65) (0.46) (0.44) (0.50) (0.47) (0.72) (0.55) (0.53) -- (0.08) -- (0.78) (1.17) -- (0.08) -- (0.78) (1.17) - ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- (0.43) (0.49) (0.65) (1.24) (1.61) (0.50) (0.55) (0.72) (1.33) (1.70) - ------- ------- ------- ------- ------- -------- -------- -------- -------- -------- $ 12.40 $ 10.81 $ 11.88 $ 12.08 $ 12.79 $ 12.60 $ 10.98 $ 12.06 $ 12.27 $ 13.02 ======= ======= ======= ======= ======= ======== ======== ======== ======== ======== 19.36% (5.18)% 3.84% 4.88% 0.22% 20.06% (4.71)% 4.38% 5.37% 0.83% ======= ======= ======= ======= ======= ======== ======== ======== ======== ======== $13,321 $10,561 $12,176 $11,643 $22,753 $557,612 $487,526 $526,405 $525,040 $840,935 0.94% 0.90% 0.84% 0.90% 0.90% 0.38% 0.35% 0.36% 0.35% 0.34% 2.40% 2.83% 3.29% 4.01% 3.21% 2.98% 3.39% 3.77% 4.54% 3.81% 69% 84% 122% 121% 90% 69% 84% 122% 121% 90%
- -------------------------------------------------------------------------------- 91 AMERICAN AADVANTAGE LARGE CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ----------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------- 2003 2002 2001(B G) 2000(E) 1999(D) ------- ------- --------- ------- ------- Net asset value, beginning of period.............. $ 12.55 $ 14.51 $ 15.83 $ 18.69 $ 20.93 ------- ------- ------- ------- ------- Income from investment operations: Net investment income (loss)(A C).............. 0.20 0.27 0.28 0.47 0.38 Net gains (losses) on securities (both realized and unrealized)(C)........................... 3.16 (1.76) (0.61) 0.06 0.04 ------- ------- ------- ------- ------- Total income (loss) from investment operations.... 3.36 (1.49) (0.33) 0.53 0.42 ------- ------- ------- ------- ------- Less distributions: Dividends from net investment income........... (0.29) (0.30) (0.50) (0.34) (0.40) Distributions from net realized gains on securities................................... -- (0.17) (0.49) (3.05) (2.26) ------- ------- ------- ------- ------- Total distributions............................... (0.29) (0.47) (0.99) (3.39) (2.66) ------- ------- ------- ------- ------- Net asset value, end of period.................... $ 15.62 $ 12.55 $ 14.51 $ 15.83 $ 18.69 ======= ======= ======= ======= ======= Total return...................................... 27.30% (10.83)% (2.21)% 4.81% 1.72% ======= ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)....... $23,512 $23,512 $10,081 $ 7,594 $45,039 Ratios to average net assets (annualized): Expenses(C).................................. 0.66% 0.61% 0.64% 0.53% 0.59% Net investment income(C)..................... 1.88% 1.82% 1.76% 3.71% 1.94% Portfolio turnover rate(F)..................... 27% 34% 60% 58% 33%
- --------------- (A) Class expenses per share were subtracted from net investment income per share for the Fund before class expenses to determine net investment income per share. (B) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed management of the Large Cap Value Fund's assets previously managed by Merrill Lynch Investment Managers, L.P. (C) 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 AMR Investment Services Large Cap Value Portfolio through February 28, 2002. (D) Prior to March 1, 1999, the Large Cap Value Fund was known as the Growth and Income Fund. (E) GSB Investment Management, Inc. was removed as an investment adviser to the Large Cap Value Fund on March 1, 2000. (F) The American AAdvantage Large Cap Value Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (G) Metropolitan West Capital Management, LLC replaced Independence Investment LLC as investment adviser to the Large Cap Value Fund on December 1, 2000. - -------------------------------------------------------------------------------- 92 - --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS ----------------------------------------------------- ---------------------------------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, ----------------------------------------------------- ---------------------------------------------------------- 2003 2002 2001(B G) 2000(E) 1999(D) 2003 2002 2001(B G) 2000(E) 1999(D) ----------- ------- --------- ------- ------- ----------- -------- --------- -------- ---------- $ 12.09 $ 14.00 $ 15.40 $ 18.41 $ 20.67 $ 12.40 $ 14.34 $ 15.75 $ 18.77 $ 21.03 ------- ------- -------- ------- ------- -------- -------- -------- -------- ---------- 0.10 0.25 0.26 0.60 0.35 0.29 0.31 0.34 0.65 0.49 3.11 (1.74) (0.62) (0.13) 0.01 3.06 (1.75) (0.63) (0.09) (0.02) ------- ------- -------- ------- ------- -------- -------- -------- -------- ---------- 3.21 (1.49) (0.36) 0.47 0.36 3.35 (1.44) (0.29) 0.56 0.47 ------- ------- -------- ------- ------- -------- -------- -------- -------- ---------- (0.25) (0.25) (0.55) (0.43) (0.36) (0.31) (0.33) (0.63) (0.53) (0.47) -- (0.17) (0.49) (3.05) (2.26) -- (0.17) (0.49) (3.05) (2.26) ------- ------- -------- ------- ------- -------- -------- -------- -------- ---------- (0.25) (0.42) (1.04) (3.48) (2.62) (0.31) (0.50) (1.12) (3.58) (2.73) ------- ------- -------- ------- ------- -------- -------- -------- -------- ---------- $ 15.05 $ 12.09 $ 14.00 $ 15.40 $ 18.41 $ 15.44 $ 12.40 $ 14.34 $ 15.75 $ 18.77 ======= ======= ======== ======= ======= ======== ======== ======== ======== ========== 26.99% (11.13)% (2.47)% 4.56% 1.41% 27.64% (10.62)% (1.98)% 5.08% 1.97% ======= ======= ======== ======= ======= ======== ======== ======== ======== ========== $21,331 $15,941 $ 12,280 $11,507 $20,095 $598,869 $511,287 $654,239 $737,111 $1,384,358 0.95% 0.93% 0.89% 0.84% 0.90% 0.39% 0.36% 0.36% 0.34% 0.34% 1.57% 1.53% 1.54% 2.51% 1.62% 2.13% 2.06% 2.09% 3.07% 2.17% 27% 34% 60% 58% 33% 27% 34% 60% 58% 33%
- -------------------------------------------------------------------------------- 93 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS AMR CLASS ------------------------------------------ ------------------------------------------- YEAR ENDED YEAR ENDED OCTOBER 31, JULY 31 TO OCTOBER 31, JULY 31 TO ---------------------------- OCTOBER 31, ----------------------------- OCTOBER 31, 2003 2002 2001 2000 2003 2002 2001 2000 ------- ------- ------- ----------- -------- ------- ------- ----------- Net asset value, beginning of period... $ 4.53 $ 5.66 $ 9.54 $10.00 $ 4.54 $ 5.67 $ 9.55 $ 10.00 ------- ------- ------- ------ -------- ------- ------- ------- Income from investment operations: Net investment income (loss)(A)..... 0.02 0.03 (0.01) -- 0.02 0.02 0.01 0.01 Net gains (losses) on securities (both realized and unrealized)(A).................... 0.94 (1.16) (3.86) (0.46) 0.93 (1.14) (3.87) (0.46) ------- ------- ------- ------ -------- ------- ------- ------- Total income (loss) from investment operations............................ 0.96 (1.13) (3.87) (0.46) 0.95 (1.12) (3.86) (0.45) ------- ------- ------- ------ -------- ------- ------- ------- Less distributions: Dividends from net investment income............................ (0.02) -- (0.01) -- (0.01) (0.01) (0.02) -- ------- ------- ------- ------ -------- ------- ------- ------- Total distributions.................... (0.02) -- (0.01) -- (0.01) (0.01) (0.02) -- ------- ------- ------- ------ -------- ------- ------- ------- Net asset value, end of period......... $ 5.47 $ 4.53 $ 5.66 $ 9.54 $ 5.48 $ 4.54 $ 5.67 $ 9.55 ======= ======= ======= ====== ======== ======= ======= ======= Total return........................... 21.15% (19.96)% (40.62)% (4.60)%(C) 21.09% (19.85)% (40.51)% (4.50)%(C) ======= ======= ======= ====== ======== ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)........................ $ 1 $ 1 $ 1 $ 1 $ 48,926 $28,017 $23,804 $19,505 Ratios to average net assets (annualized)(A): Expenses.......................... 0.87% 0.87% 0.99% 0.99% 0.68% 0.67% 0.70% 0.74% Net investment income (loss)...... 0.18% 0.06% (0.26)% -- 0.40% 0.30% 0.08% 0.25% Decrease reflected in above expense ratio due to absorption of expenses by the Manager(A)... -- -- 0.02% 0.29% -- -- 0.02% 0.14% Portfolio turnover rate(B).......... 138% 135% 85% 9%(C) 138% 135% 85% 9%(C)
- --------------- (A) 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 AMR Investment Services Large Cap Growth Portfolio through February 28, 2001. (B) The American AAdvantage Large Cap Growth Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2001. Portfolio turnover rate through February 28, 2001 was that of the Portfolio. (C) Not annualized. - -------------------------------------------------------------------------------- 94 (AMERICAN EAGLE LOGO) - -------------------------------------------------------------------------------- 95 AMERICAN AADVANTAGE SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS --------------------------------------------------------- DECEMBER 31, YEAR ENDED OCTOBER 31, 1998 TO ----------------------------------------- OCTOBER 31, 2003(D) 2002 2001(C) 2000 1999 -------- ------- ------- ------- ------------ Net asset value, beginning of period........................ $ 11.28 $ 11.69 $ 10.08 $ 9.07 $ 10.00 -------- ------- ------- ------- ------- Income from investment operations: Net investment income (loss)(A).......................... (0.01) (0.01) 0.16 0.21 0.07 Net gains (losses) on securities (both realized and unrealized)(A)......................................... 5.24 0.47 1.81 1.01 (1.00) -------- ------- ------- ------- ------- Total income (loss) from investment operations.............. 5.23 0.46 1.97 1.22 (0.93) -------- ------- ------- ------- ------- Less distributions: Dividends from net investment income..................... (0.02) (0.11) (0.19) (0.04) -- Distributions from net realized gains on securities...... (0.28) (0.76) (0.17) (0.17) -- -------- ------- ------- ------- ------- Total distributions......................................... (0.30) (0.87) (0.36) (0.21) -- -------- ------- ------- ------- ------- Net asset value, end of period.............................. $ 16.21 $ 11.28 $ 11.69 $ 10.08 $ 9.07 ======== ======= ======= ======= ======= Total return................................................ 47.45% 3.29% 20.16% 13.78% (9.30)%(E) ======== ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)................. $ 89,579 $21,936 $ 2,364 $ 1,955 $ 2,117 Ratios to average net assets (annualized): Expenses(A)............................................ 0.89% 0.82% 0.89% 0.92% 0.96% Net investment income(loss)(A)......................... 0.60% 0.81% 1.38% 1.62% 0.84% Decrease reflected in above expense ratio due to absorption of expenses by the Manager(A)............. -- -- -- 0.06% 1.23% Portfolio turnover rate(B)............................... 75% 81% 93% 63% 31%(E)
- --------------- (A) 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 AMR Investment Services Small Cap Value Portfolio through February 28, 2002. (B) The American AAdvantage Small Cap Value Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (C) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed management of the Small Cap Value Fund's assets previously managed by Merrill Lynch Investment Managers, L.P. (D) Barrow, Hanley, Mewhinney & Strauss, Inc. was added as an investment adviser to the Small Cap Value Fund on September 18, 2003. (E) Not annualized. (F) Portfolio turnover rate is for the period November 1, 2002 through October 31, 2003. - -------------------------------------------------------------------------------- 96 - --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS AMR CLASS - ------------------------------------------------------- ------------- ------------------------------------------------------ YEAR ENDED OCTOBER 31, MARCH 1 TO MAY 1 TO YEAR ENDED OCTOBER 31, MARCH 1 TO ------------------------------------- OCTOBER 31, OCTOBER 31, ---------------------------------------- OCTOBER 31, 2003(D) 2002 2001(C) 2000 1999 2003(D) 2003(D) 2002 2001(C) 2000 1999 ------- ------- ------- ------- ----------- ------------- -------- -------- -------- ------- ----------- $ 11.22 $ 11.64 $ 10.08 $ 9.05 $ 9.13 $ 11.88 $ 11.30 $ 11.71 $ 10.10 $ 9.08 $ 9.13 ------- ------- ------- ------- ------- --------- -------- -------- -------- ------- ------- 0.05 0.06 0.15 0.08 0.02 -- 0.10 0.15 0.15 0.22 0.04 5.08 0.36 1.76 1.14 (0.10) 4.04 5.15 0.34 1.85 1.04 (0.09) ------- ------- ------- ------- ------- --------- -------- -------- -------- ------- ------- 5.13 0.42 1.91 1.22 (0.08) 4.04 5.25 0.49 2.00 1.26 (0.05) ------- ------- ------- ------- ------- --------- -------- -------- -------- ------- ------- (0.12) (0.08) (0.18) (0.02) -- -- (0.14) (0.14) (0.22) (0.07) -- (0.28) (0.76) (0.17) (0.17) -- -- (0.28) (0.76) (0.17) (0.17) -- ------- ------- ------- ------- ------- --------- -------- -------- -------- ------- ------- (0.40) (0.84) (0.35) (0.19) -- -- (0.42) (0.90) (0.39) (0.24) -- ------- ------- ------- ------- ------- --------- -------- -------- -------- ------- ------- $ 15.95 $ 11.22 $ 11.64 $ 10.08 $ 9.05 $ 15.92 $ 16.13 $ 11.30 $ 11.71 $ 10.10 $ 9.08 ======= ======= ======= ======= ======= ========= ======== ======== ======== ======= ======= 47.12% 2.99% 19.58% 13.76% (0.88)%(E) 34.01%(E) 47.93% 3.54% 20.52% 14.19% (0.55)%(E) ======= ======= ======= ======= ======= ========= ======== ======== ======== ======= ======= $66,906 $16,190 $ 1,197 $ 440 $ 74 $ 1 $327,542 $181,180 $137,811 $53,715 $64,662 1.16% 1.11% 1.17% 1.18% 1.28% 1.49% 0.61% 0.56% 0.64% 0.68% 0.70% 0.39% 0.52% 1.06% 1.71% 0.57% (0.05)% 0.95% 1.09% 1.55% 1.89% 1.14% -- -- -- 0.06% 0.18% 1,087.55% -- -- -- 0.06% 0.24% 75% 81% 93% 63% 31%(E) 75%(F) 75% 81% 93% 63% 31%(E)
- -------------------------------------------------------------------------------- 97 AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS -------------------------------------------------------- YEAR ENDED OCTOBER 31, -------------------------------------------------------- 2003(F) 2002 2001(E) 2000 1999(B) -------- -------- -------- -------- -------- Net asset value, beginning of period........................ $ 12.10 $ 13.77 $ 17.95 $ 19.36 $ 16.93 -------- -------- -------- -------- -------- Income from investment operations: Net investment income(A D)............................... 0.25 0.21 0.24 0.36 0.35 Net gains (losses) on securities (both realized and unrealized)(D).......................................... 3.47 (1.62) (2.96) 0.18 2.92 -------- -------- -------- -------- -------- Total income (loss) from investment operations.............. 3.72 (1.41) (2.72) 0.54 3.27 -------- -------- -------- -------- -------- Less distributions: Dividends from net investment income..................... (0.36) (0.26) (0.22) (0.31) (0.35) Distributions from net realized gains on securities...... -- -- (1.24) (1.64) (0.49) -------- -------- -------- -------- -------- Total distributions......................................... (0.36) (0.26) (1.46) (1.95) (0.84) -------- -------- -------- -------- -------- Net asset value, end of period.............................. $ 15.46 $ 12.10 $ 13.77 $ 17.95 $ 19.36 ======== ======== ======== ======== ======== Total return................................................ 31.61% (10.51)% (16.54)% 2.36% 19.98% ======== ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................. $722,333 $537,476 $519,151 $587,869 $601,923 Ratios to average net assets (annualized): Expenses(D)............................................. 0.79% 0.75% 0.78% 0.72% 0.64% Net investment income(D)................................ 1.97% 1.56% 1.54% 1.64% 2.00% Decrease reflected in above expense ratio due to absorption of expenses by the Manager (D)............. -- -- -- -- -- Portfolio turnover rate(C)............................... 44% 43% 36% 45% 63%
- --------------- (A) Class expenses per share were subtracted from net investment income per share for the Fund before class expenses to determine net investment income per share. (B) Morgan Stanley Asset Management, Inc. was replaced by Lazard Asset Management LLC and Independence Investment LLC as investment adviser to the International Equity Fund on March 1, 1999. (C) The American AAdvantage International Equity Fund invests all of its investable assets in its corresponding Portfolio. Portfolio turnover rate is that of the Portfolio. (D) 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 AMR Investment Services International Equity Portfolio. (E) Causeway Capital Management, LLC replaced Merrill Lynch Investment Managers, L.P. as investment adviser to the International Equity Fund on August 31, 2001. (F) Independence Investment LLC was removed as an investment adviser to the International Equity Fund on October 24, 2003. (G) Not annualized (H) Portfolio turnover rate is for the period November 1, 2002 through October 31, 2003. - -------------------------------------------------------------------------------- 98 - --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS AMR CLASS - ----------------------------------------------------- ------------- ---------------------------------------------------- YEAR ENDED OCTOBER 31, MAY 1 TO YEAR ENDED OCTOBER 31, ------------------------------------------------- OCTOBER 31, ---------------------------------------------------- 2003(F) 2002 2001(E) 2000 1999(B) 2003(F) 2003(F) 2002 2001(E) 2000 1999(B) -------- ------- -------- ------- ------- ------------- -------- -------- -------- -------- -------- $ 11.95 $ 13.58 $ 17.72 $ 19.13 $ 16.75 $ 12.18 $ 12.18 $ 13.86 $ 18.07 $ 19.46 $ 17.01 -------- ------- -------- ------- ------- ---------- -------- -------- -------- -------- -------- 0.22 0.15 0.19 0.31 0.30 0.09 0.29 0.24 0.28 0.41 0.39 3.46 (1.56) (2.92) 0.18 2.89 3.04 3.46 (1.62) (2.98) 0.20 2.94 -------- ------- -------- ------- ------- ---------- -------- -------- -------- -------- -------- 3.68 (1.41) (2.73) 0.49 3.19 3.13 3.75 (1.38) (2.70) 0.61 3.33 -------- ------- -------- ------- ------- ---------- -------- -------- -------- -------- -------- (0.29) (0.22) (0.17) (0.26) (0.32) -- (0.39) (0.30) (0.27) (0.36) (0.39) -- -- (1.24) (1.64) (0.49) -- -- -- (1.24) (1.64) (0.49) -------- ------- -------- ------- ------- ---------- -------- -------- -------- -------- -------- (0.29) (0.22) (1.41) (1.90) (0.81) -- (0.39) (0.30) (1.51) (2.00) (0.88) -------- ------- -------- ------- ------- ---------- -------- -------- -------- -------- -------- $ 15.34 $ 11.95 $ 13.58 $ 17.72 $ 19.13 $ 15.31 $ 15.54 $ 12.18 $ 13.86 $ 18.07 $ 19.46 ======== ======= ======== ======= ======= ========== ======== ======== ======== ======== ======== 31.62% (10.57)% (16.79)% 2.08% 19.68% 25.70%(G) 31.77% (10.26)% (16.35)% 2.69% 20.27% ======== ======= ======== ======= ======= ========== ======== ======== ======== ======== ======== $177,425 $99,636 $113,948 $85,680 $60,602 $ 1 $322,801 $264,579 $301,762 $428,329 $602,593 1.10% 1.04% 1.10% 1.01% 0.93% 1.50% 0.52% 0.49% 0.52% 0.46% 0.39% 1.68% 1.35% 1.22% 1.43% 1.71% 1.33% 2.22% 1.81% 1.78% 1.92% 2.25% -- -- -- -- -- 1,137.58% -- -- -- -- -- 44% 43% 36% 45% 63% 44%(H) 44% 43% 36% 45% 63%
- -------------------------------------------------------------------------------- 99 AMERICAN AADVANTAGE EMERGING MARKETS FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------- YEAR ENDED OCTOBER 31, JULY 31 TO ---------------------------- OCTOBER 31, 2003 2002 2001 2000 ------- ------ ------- ----------- Net asset value, beginning of period........................ $ 7.20 $ 6.64 $ 8.17 $ 10.00 ------- ------ ------- ------- Income from investment operations: Net investment income(A)................................ 0.04 0.09 0.11 -- Net gains (losses) on securities (both realized and unrealized)(A)........................................ 3.43 0.56 (1.62) (1.83) ------- ------ ------- ------- Total income (loss) from investment operations.............. 3.47 0.65 (1.51) (1.83) ------- ------ ------- ------- Less distributions: Dividends from net investment income.................... (0.05) (0.09) (0.01) -- Distributions from net realized gains on securities..... -- -- (0.01) -- ------- ------ ------- ------- Total distributions......................................... (0.05) (0.09) (0.02) -- ------- ------ ------- ------- Net asset value, end of period.............................. $ 10.62 $ 7.20 $ 6.64 $ 8.17 ======= ====== ======= ======= Total return................................................ 48.45% 9.80% (18.52)% (18.30)%(C) ======= ====== ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)................ $ 3,557 $1,769 $ 1,495 $ 1 Ratios to average net assets (annualized): Expenses(A)........................................... 1.76% 1.51% 1.43% 1.87% Net investment income (loss)(A)....................... 0.62% 1.11% 2.07% (0.47)% Portfolio turnover rate(B).............................. 80% 94% 95% 23%(C)
- --------------- (A) 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 AMR Investment Services Emerging Markets Portfolio through February 28, 2002. (B) The American AAdvantage Emerging Markets Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (C) Not annualized. (D) Portfolio turnover rate is for the period November 1, 2001 through October 31, 2002. - -------------------------------------------------------------------------------- 100 - --------------------------------------------------------------------------------
AMR CLASS PLANAHEAD CLASS ----------------------------------------------- - -------------------------------- YEAR ENDED YEAR ENDED OCTOBER 1 TO OCTOBER 31, JULY 31 TO OCTOBER 31, OCTOBER 31, ------------------------------- OCTOBER 31, 2003 2002 2003 2002 2001 2000 ----------- ------------ ------- ------- ------- ----------- $ 7.19 $ 6.86 $ 7.22 $ 6.65 $ 8.18 $ 10.00 ------- ------ ------- ------- ------- ------- 0.09 -- 0.07 0.09 0.13 -- 3.34 0.33 3.44 0.59 (1.63) (1.82) ------- ------ ------- ------- ------- ------- 3.43 0.33 3.51 0.68 (1.50) (1.82) ------- ------ ------- ------- ------- ------- (0.07) -- (0.07) (0.11) (0.02) -- -- -- -- -- (0.01) -- ------- ------ ------- ------- ------- ------- (0.07) -- (0.07) (0.11) (0.03) -- ------- ------ ------- ------- ------- ------- $ 10.55 $ 7.19 $ 10.66 $ 7.22 $ 6.65 $ 8.18 ======= ====== ======= ======= ======= ======= 48.07% 4.81%(C) 48.84% 10.10% (18.40)% (18.20)%(C) ======= ====== ======= ======= ======= ======= $ 492 $ 1 $51,498 $32,731 $20,660 $17,308 2.08% 1.87% 1.50% 1.26% 1.30% 1.60% 0.57% (0.25)% 0.92% 1.35% 1.76% (0.19)% 80% 94%(D) 80%(C) 94% 95% 23%(C)
- -------------------------------------------------------------------------------- 101 AMERICAN AADVANTAGE HIGH YIELD BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS SERVICE CLASS --------------------------------------- PLANAHEAD CLASS ------------- YEAR ENDED ------------------------- OCTOBER 31, DECEMBER 29, 2000 YEAR ENDED MARCH 1 TO MAY 1 TO ------------------- TO OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, 2003 2002 2001 2003 2002 2003 -------- -------- ----------------- ----------- ----------- ------------- Net asset value, beginning of period.............................. $ 9.63 $ 9.82 $ 10.00 $ 9.63 $10.10 $ 10.47 -------- -------- ------- -------- ------ -------- Income from investment operations: Net investment income............. 0.78 0.80 0.71 0.75 0.50 0.29 Net gains (losses) on securities (both realized and unrealized)..................... 1.10 (0.19) (0.18) 1.10 (0.47) 0.32 -------- -------- ------- -------- ------ -------- Total income from investment operations.......................... 1.88 0.61 0.53 1.85 0.03 0.61 -------- -------- ------- -------- ------ -------- Less distributions: Dividends from net investment income.......................... (0.78) (0.80) (0.71) (0.75) (0.50) (0.35) -------- -------- ------- -------- ------ -------- Total distributions................... (0.78) (0.80) (0.71) (0.75) (0.50) (0.35) -------- -------- ------- -------- ------ -------- Net asset value, end of period........ $ 10.73 $ 9.63 $ 9.82 $ 10.73 $ 9.63 $ 10.73 ======== ======== ======= ======== ====== ======== Total return.......................... 20.11% 6.28% 5.33%(A) 19.57% (0.26)%(A) 5.46%(A) ======== ======== ======= ======== ====== ======== Ratios and supplemental data: Net assets, end of period (in thousands)...................... $161,380 $104,813 $53,275 $125,654 $4,029 $ 1 Ratios to average net assets (annualized): Expenses........................ 0.90% 0.90% 0.90% 1.24% 1.27% 1.71% Net investment income........... 7.51% 8.02% 8.48% 7.11% 7.20% 6.51% Decrease reflected in above expense ratio due to absorption of expenses by the Manager....................... 0.10% 0.08% 0.17% -- -- 805.12% Portfolio turnover rate........... 114% 163% 145%(A) 114% 163%(B) 114%(C)
- --------------- (A) Not annualized. (B) Portfolio turnover rate is for the period November 1, 2001 through October 31, 2002. (C) Portfolio turnover rate is for the period November 1, 2002 through October 31, 2003. - -------------------------------------------------------------------------------- 102 AMERICAN AADVANTAGE ENHANCED INCOME FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
PLANAHEAD CLASS --------------- JUNE 30 TO OCTOBER 31, 2003 --------------- Net asset value, beginning of period........................ $ 10.00 Income from investment operations: Net investment income................................... 0.07(B) Net losses on securities (both realized and unrealized)............................................ (0.04) -------- Total income from investment operations..................... 0.03 -------- Less distributions: Dividends from net investment income.................... (0.07) Distributions from net realized gains on securities..... -- -------- Total distributions......................................... (0.07) -------- Net asset value, end of period.............................. $ 9.96 ======== Total return................................................ 0.32%(A) ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $101,072 Ratios to average net assets (annualized): Expenses.............................................. 0.93% Net investment income................................. 2.20% Portfolio turnover rate................................. 57%(A)
- --------------- (A) Not annualized. (B) Based on average shares outstanding. - -------------------------------------------------------------------------------- 103 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ----------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------- 2003 2002 2001 2000 1999 ------- ------- ------- ------ -------- Net asset value, beginning of period........................ $ 10.42 $ 10.51 $ 9.72 $ 9.58 $ 10.50 ------- ------- ------- ------ -------- Income from investment operations: Net investment income(A)................................ 0.41 0.51 0.57 0.59 0.56 Net gains (losses) on securities (both realized and unrealized)(A)........................................ 0.03 (0.09) 0.79 0.14 (0.63) ------- ------- ------- ------ -------- Total income (loss) from investment operations.............. 0.44 0.42 1.36 0.73 (0.07) ------- ------- ------- ------ -------- Less distributions: Dividends from net investment income.................... (0.41) (0.51) (0.57) (0.59) (0.56) Distributions from net realized gains on securities..... -- -- -- -- (0.29) ------- ------- ------- ------ -------- Total distributions......................................... (0.41) (0.51) (0.57) (0.59) (0.85) ------- ------- ------- ------ -------- Net asset value, end of period.............................. $ 10.45 $ 10.42 $ 10.51 $ 9.72 $ 9.58 ======= ======= ======= ====== ======== Total return................................................ 4.31% 4.21% 14.36% 7.89% (0.83)% ======= ======= ======= ====== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $ 1,024 $74,919 $60,842 $ 115 $205,218 Ratios to average net assets (annualized): Expenses(A)........................................... 0.58% 0.56% 0.54% 0.59% 0.55% Net investment income(A).............................. 4.02% 4.99% 5.55% 6.31% 5.62% Decrease reflected in above expense ratio due to absorption of expenses by the Manager(A)............ -- -- -- -- -- Portfolio turnover rate(B).............................. 187% 185% 164% 102% 123%
- --------------- (A) 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 AMR Investment Services Intermediate Bond Portfolio through February 28, 2002. (B) The American AAdvantage Intermediate Bond Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (C) Not annualized. (D) Portfolio turnover rate is for the period November 1, 1998 through October 31, 1999. - -------------------------------------------------------------------------------- 104 - --------------------------------------------------------------------------------
PLAN AHEAD CLASS AMR CLASS - ----------------------------------------------- ----------------------------------------------------- MARCH 1 YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, TO ------------------------------------------- --------------------------------------- OCTOBER 31, 2003 2002 2001 2000 1999 2003 2002 2001 2000 1999 ------ ------ ------- ------ ------ -------- -------- ------- ------- ----------- $10.27 $10.34 $ 9.57 $ 9.63 $10.55 $ 10.22 $ 10.30 $ 9.53 $ 9.58 $ 9.95 ------ ------ ------- ------ ------ -------- -------- ------- ------- ------- 0.39 0.48 0.53 0.59 0.53 0.45 0.53 0.58 0.64 0.39 0.04 (0.07) 0.77 (0.06) (0.63) 0.02 (0.08) 0.77 (0.05) (0.37) ------ ------ ------- ------ ------ -------- -------- ------- ------- ------- 0.43 0.41 1.30 0.53 (0.10) 0.47 0.45 1.35 0.59 0.02 ------ ------ ------- ------ ------ -------- -------- ------- ------- ------- (0.39) (0.48) (0.53) (0.59) (0.53) (0.45) (0.53) (0.58) (0.64) (0.39) -- -- -- -- (0.29) -- -- -- -- -- ------ ------ ------- ------ ------ -------- -------- ------- ------- ------- (0.39) (0.48) (0.53) (0.59) (0.82) (0.45) (0.53) (0.58) (0.64) (0.39) ------ ------ ------- ------ ------ -------- -------- ------- ------- ------- $10.31 $10.27 $ 10.34 $ 9.57 $ 9.63 $ 10.24 $ 10.22 $ 10.30 $ 9.53 $ 9.58 ====== ====== ======= ====== ====== ======== ======== ======= ======= ======= 4.25% 4.10% 13.91% 5.76% (0.98)% 4.62% 4.57% 14.58% 6.39% (0.17)%(C) ====== ====== ======= ====== ====== ======== ======== ======= ======= ======= $1,395 $1,691 $ 300 $ 102 $1,545 $131,927 $144,098 $95,820 $40,555 $46,655 0.86% 0.86% 0.83% 0.87% 0.85% 0.32% 0.30% 0.30% 0.39% 0.30% 3.70% 4.60% 5.04% 6.07% 5.32% 4.32% 5.23% 5.84% 6.72% 6.12% -- -- 0.01% 0.02% -- -- -- -- -- -- 187% 185% 164% 102% 123% 187% 185% 164% 102% 123%(D)
- -------------------------------------------------------------------------------- 105 AMERICAN AADVANTAGE SHORT-TERM BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS --------------------------------------------------- YEAR ENDED OCTOBER 31, --------------------------------------------------- 2003 2002 2001 2000 1999 ------ ------ ------- ------ ------ Net asset value, beginning of period........................ $ 9.45 $ 9.62 $ 9.21 $ 9.30 $ 9.63 ------ ------ ------- ------ ------ Income from investment operations: Net investment income(B)................................ 0.37 0.42 0.57 0.62 0.53 Net gains (losses) on securities (both realized and unrealized)(B)........................................ (0.04) (0.11) 0.41 (0.10) (0.29) ------ ------ ------- ------ ------ Total income from investment operations..................... 0.33 0.31 0.98 0.52 0.24 ------ ------ ------- ------ ------ Less distributions: Dividends from net investment income.................... (0.46) (0.48) (0.57) (0.61) (0.57) ------ ------ ------- ------ ------ Total distributions......................................... (0.46) (0.48) (0.57) (0.61) (0.57) ------ ------ ------- ------ ------ Net asset value, end of period.............................. $ 9.32 $ 9.45 $ 9.62 $ 9.21 $ 9.30 ====== ====== ======= ====== ====== Total return................................................ 3.58% 3.37% 10.98% 5.83% 2.56% ====== ====== ======= ====== ====== Ratios and supplemental data: Net assets, end of period (in thousands)................ $3,745 $8,396 $ 4,226 $3,687 $5,034 Ratios to average net assets (annualized): Expenses(B)........................................... 0.54% 0.44% 0.51% 0.58% 0.62% Net investment income(B).............................. 4.30% 4.47% 6.06% 6.61% 5.92% Decrease reflected in above expense ratio due to absorption of expenses by the Manager(B)............ -- -- -- -- -- Portfolio turnover rate(A).............................. 81% 63% 104% 89% 115%
- --------------- (A) The American AAdvantage Short-Term Bond Fund invested all of its investable assets in its corresponding Portfolio through February 28, 2002. Portfolio turnover rate through February 28, 2002 was that of the Portfolio. (B) 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 AMR Investment Services Short-Term Bond Portfolio through February 28, 2002. - -------------------------------------------------------------------------------- 106 - --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS - --------------------------------------------------- ------------------------------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, - --------------------------------------------------- ------------------------------------------------------- 2003 2002 2001 2000 1999 2003 2002 2001 2000 1999 - ------ ------ ------- ------ ------ ------- ------- ------- ------- ------- $ 9.45 $ 9.62 $ 9.21 $ 9.30 $ 9.64 $ 9.44 $ 9.60 $ 9.20 $ 9.29 $ 9.62 - ------ ------ ------- ------ ------ ------- ------- ------- ------- ------- 0.39 0.43 0.55 0.59 0.54 0.42 0.44 0.59 0.63 0.59 (0.08) (0.14) 0.41 (0.09) (0.33) (0.07) (0.11) 0.40 (0.09) (0.33) - ------ ------ ------- ------ ------ ------- ------- ------- ------- ------- 0.31 0.29 0.96 0.50 0.21 0.35 0.33 0.99 0.54 0.26 - ------ ------ ------- ------ ------ ------- ------- ------- ------- ------- (0.43) (0.46) (0.55) (0.59) (0.55) (0.48) (0.49) (0.59) (0.63) (0.59) - ------ ------ ------- ------ ------ ------- ------- ------- ------- ------- (0.43) (0.46) (0.55) (0.59) (0.55) (0.48) (0.49) (0.59) (0.63) (0.59) - ------ ------ ------- ------ ------ ------- ------- ------- ------- ------- $ 9.33 $ 9.45 $ 9.62 $ 9.21 $ 9.30 $ 9.31 $ 9.44 $ 9.60 $ 9.38 $ 9.29 ====== ====== ======= ====== ====== ======= ======= ======= ======= ======= 3.38% 3.16% 10.69% 5.56% 2.21% 3.82% 3.60% 11.07% 6.09% 2.83% ====== ====== ======= ====== ====== ======= ======= ======= ======= ======= $5,783 $3,520 $ 1,257 $ 489 $1,638 $91,911 $89,932 $81,370 $56,714 $66,767 0.86% 0.73% 0.75% 0.84% 0.84% 0.33% 0.30% 0.33% 0.33% 0.35% 4.00% 4.16% 5.76% 6.29% 5.75% 4.54% 4.63% 6.26% 6.88% 6.26% -- 0.04% -- 0.10% 0.09% -- -- -- -- -- 81% 63% 104% 89% 115% 81% 63% 104% 89% 115%
- -------------------------------------------------------------------------------- 107 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS Shareholders and Board of Trustees AMR Investment Services International Equity Portfolio We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of the AMR Investment Services International Equity Portfolio (the "Portfolio"), as of October 31, 2003, and the related statement of operations for the year then ended, statements of changes in net assets for the two years then ended and the financial highlights for each of the five years then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of investments owned as of October 31, 2003, by correspondence with the custodian and brokers or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the AMR Investment Services International Equity Portfolio at October 31, 2003, the results of its operations for the year then ended, the changes in its net assets for the two years then ended and the financial highlights for each of the five years then ended, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Chicago, Illinois December 19, 2003 - -------------------------------------------------------------------------------- 108 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) STOCKS - 92.49% AUSTRALIA - 2.21% AUSTRALIA PREFERRED STOCK - 0.20% The News Corporation+*....... 345,000 $ 2,539 ---------- TOTAL AUSTRALIA PREFERRED STOCK.................. 2,539 ---------- AUSTRALIA COMMON STOCK - 2.01% Alumina Limited*............. 842,900 3,565 Australia & New Zealand Banking Group Limited*..... 318,520 4,023 Australia & New Zealand Banking Group Limited, (Rights)+.................. 57,912 177 BHP Billiton Limited......... 928,800 7,724 Commonwealth Bank of Australia*................. 125,000 2,439 Iluka Resources Limited*..... 387,194 1,283 Mayne Group Limited.......... 1,341,200 3,464 WMC Resources Limited+*...... 842,900 3,062 ---------- TOTAL AUSTRALIA COMMON STOCK.................. 25,737 ---------- TOTAL AUSTRALIA.......... 28,276 ---------- BELGIUM COMMON STOCK - 0.39% Fortis+*..................... 282,500 5,038 ---------- TOTAL BELGIUM COMMON STOCK.................. 5,038 ---------- CANADA COMMON STOCK - 2.41% Alcan, Incorporated.......... 134,200 5,356 BCE, Incorporated............ 249,200 5,644 Celestica, Incorporated+..... 620,870 8,809 Husky Energy, Incorporated+.. 309,200 5,081 Manulife Financial Corporation................ 200,265 6,078 ---------- TOTAL CANADA COMMON STOCK.................. 30,968 ---------- DENMARK COMMON STOCK - 0.44% Novo Nordisk A/S............. 156,400 5,625 ---------- TOTAL DENMARK COMMON STOCK.................. 5,625 ---------- FINLAND COMMON STOCK - 1.61% KCI Konecranes Oyj........... 124,600 3,724 M-real Oyj................... 214,800 1,895 Stora Enso Oyj............... 227,600 3,096 UPM-Kymmene Oyj.............. 640,100 11,980 ---------- TOTAL FINLAND COMMON STOCK.................. 20,695 ---------- FRANCE COMMON STOCK - 8.35% Accor S.A.*.................. 52,690 2,072 Aventis S.A.*................ 345,773 18,309 AXA*......................... 791,604 15,000
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) BNP Paribas S.A.*............ 265,827 $ 13,968 Compagnie Generale des Etablissements Michelin*... 115,400 4,528 Credit Agricole S.A.*........ 228,300 4,849 Credit Agricole S.A. (Rights)+.................. 228,300 53 Lagardere S.C.A.*............ 76,900 3,868 Pechiney S.A. ............... 55,600 3,073 PSA Peugeot Citroen S.A.*.... 151,614 6,504 Schneider Electric S.A.*..... 50,700 2,968 Societe BIC S.A.+*........... 57,447 2,379 Suez S.A.*................... 202,580 3,250 Total S.A.*.................. 124,057 19,282 Vinci S.A.*.................. 96,551 6,998 ---------- TOTAL FRANCE COMMON STOCK.................. 107,101 ---------- GERMANY - 5.30% GERMANY PREFERRED STOCK - 0.54% Fresenius Medical Care AG.... 169,846 6,970 ---------- TOTAL GERMANY PREFERRED STOCK.................. 6,970 ---------- GERMANY COMMON STOCK - 4.76% BASF AG+*.................... 71,900 3,298 Bayer AG*.................... 111,600 2,682 Bayerische Motoren Werke Aktiengesellschaft......... 44,600 1,785 Celesio AG*.................. 148,865 6,230 Deutsche Post AG............. 592,000 11,390 Deutsche Telekom AG+......... 464,100 7,310 E.ON AG+*.................... 94,500 4,777 Fresenius Medical Care AG*... 45,000 2,566 Hugo Boss AG................. 253,350 5,166 Merck KGaA................... 94,000 3,292 Muenchener Rueckversicherung- Gesellschaft AG+*.......... 16,176 1,929 Muenchener Rueckversicherung- Gesellschaft AG (Rights)+.. 16,176 134 Porsche AG................... 3,300 1,621 Siemens AG*.................. 76,400 5,151 Volkswagen AG................ 73,830 3,724 ---------- TOTAL GERMANY COMMON STOCK.................. 61,055 ---------- TOTAL GERMANY............ 68,025 ---------- HONG KONG COMMON STOCK - 2.25% Cheung Kong Holdings Limited.................... 531,000 4,427 CLP Holdings Limited+........ 630,000 2,839 Henderson Land Development Company Limited............ 1,588,000 6,666
See accompanying notes - -------------------------------------------------------------------------------- 109 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Hutchison Whampoa Limited.... 177,000 $ 1,368 Swire Pacific Limited+....... 2,223,500 13,572 ---------- TOTAL HONG KONG COMMON STOCK.................. 28,872 ---------- IRELAND COMMON STOCK - 2.67% Allied Irish Banks plc....... 867,022 12,690 Bank of Ireland.............. 404,400 4,983 CRH plc...................... 248,125 4,462 Depfa Bank plc+.............. 58,044 6,498 Greencore Group.............. 1,543,341 5,562 ---------- TOTAL IRELAND COMMON STOCK.................. 34,195 ---------- ITALY COMMON STOCK - 1.82% Eni S.p.A.*.................. 925,947 14,704 Riunione Adriatica di Sicurta S.p.A.*.................... 192,193 3,003 Snam Rete Gas S.p.A.+........ 763,200 2,875 Telecom Italia S.p.A.+....... 1,040,929 2,717 ---------- TOTAL ITALY COMMON STOCK.................. 23,299 ---------- JAPAN COMMON STOCK - 12.01% Acom Company Limited*........ 242,800 10,866 Canon, Incorporated*......... 342,000 16,550 DENSO Corporation............ 96,000 1,821 East Japan Railway Company*.. 1,395 6,319 FANUC Limited*............... 39,500 2,375 Hitachi Limited+*............ 522,000 3,067 Honda Motor Company Limited.................... 288,200 11,378 Kao Corporation*............. 153,300 3,151 Komatsu Limited.............. 764,000 4,135 Konica Corporation........... 1,092,340 14,358 Japan Tobacco, Incorporated.. 139 928 NEC Corporation*............. 372,000 3,286 NEC Electronics Corporation*............... 19,000 1,462 Nintendo Company Limited*.... 30,500 2,355 Nippon Telegraph & Telephone Corporation+............... 913 4,078 Nissan Motor Company Limited*................... 802,600 8,994 Nomura Holdings, Incorporated*.............. 543,000 9,325 NTT DoCoMo, Incorporated..... 1,977 4,280 Promise Company Limited*..... 199,050 8,944 Rohm Company Limited......... 14,500 1,955 Sanyo Shinpan Finance Company Limited.................... 145,800 4,960 Seiko Epson Corporation...... 63,700 2,295 Shin-Etsu Chemical Company Limited.................... 52,600 1,957 Sompo Japan Insurance, Incorporated............... 709,000 5,869
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Sony Corporation*............ 95,700 $ 3,334 Takeda Chemical Industries Limited*................... 145,100 5,134 Takefuji Corporation*........ 139,930 8,286 Tokyo Gas Company Limited*... 772,000 2,647 ---------- TOTAL JAPAN COMMON STOCK.................. 154,109 ---------- MEXICO COMMON STOCK - 0.28% Telefonos de Mexico S.A. de C.V., ADR.................. 111,700 3,591 ---------- TOTAL MEXICO COMMON STOCK.................. 3,591 ---------- NETHERLANDS COMMON STOCK - 7.44% ABN AMRO Holding N.V. ....... 521,071 10,933 Akzo Nobel N.V.*............. 119,326 3,773 CNH Global NV................ 77,320 1,033 Heineken N.V.*............... 123,600 4,411 IHC Caland N.V. ............. 64,180 2,738 ING Groep N.V. .............. 718,454 14,917 Koninklijke (Royal) KPN N.V.+...................... 843,500 6,413 Koninklijke (Royal) Philips Electronics N.V. .......... 1,062,998 28,657 Royal Dutch Petroleum Company+*.................. 164,900 7,317 TPG N.V.+.................... 271,560 5,856 Vedior N.V. ................. 650,613 9,379 ---------- TOTAL NETHERLANDS COMMON STOCK.................. 95,427 ---------- NEW ZEALAND COMMON STOCK - 0.71% Carter Holt Harvey Limited... 2,333,889 2,624 Telecom Corporation of New Zealand Limited............ 2,164,043 6,436 ---------- TOTAL NEW ZEALAND COMMON STOCK.................. 9,060 ---------- NORWAY COMMON STOCK - 1.91% Norsk Hydro ASA.............. 156,900 8,830 Statoil ASA.................. 183,700 1,727 Telenor ASA.................. 2,554,259 13,905 ---------- TOTAL NORWAY COMMON STOCK.................. 24,462 ---------- PORTUGAL COMMON STOCK - 0.99% Portugal Telecom, SGPS, S.A. ...................... 1,504,989 12,649 ---------- TOTAL PORTUGAL COMMON STOCK.................. 12,649 ---------- SINGAPORE COMMON STOCK - 1.92% Creative Technology Limited*................... 659,320 6,855 Development Bank of Singapore Group Holdings Limited..... 579,795 4,762
See accompanying notes - -------------------------------------------------------------------------------- 110 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Oversea-Chinese Banking Corporation Limited........ 576,650 $ 4,008 United Overseas Bank Limited.................... 1,157,849 9,045 ---------- TOTAL SINGAPORE COMMON STOCK.................. 24,670 ---------- SOUTH KOREA COMMON STOCK - 0.84% Kookmin Bank, ADR*........... 140,510 5,164 Korea Electric Power Corporation................ 86,860 1,677 LG Electronics, Incorporated............... 76,760 3,976 ---------- TOTAL SOUTH KOREA COMMON STOCK.................. 10,817 ---------- SPAIN COMMON STOCK - 4.30% Altadis S.A.*................ 354,923 8,607 Antena 3 Television S.A+..... 4,635 151 Banco Popular Espanol S.A.*.. 90,200 4,690 Banco Santander Central Hispano S.A.*.............. 662,134 6,350 Endesa S.A.+*................ 436,845 6,932 Iberdrola S.A. .............. 215,157 3,589 Repsol YPF S.A.+............. 446,600 7,788 Telefonica S.A.+............. 1,370,072 17,042 ---------- TOTAL SPAIN COMMON STOCK.................. 55,149 ---------- SWEDEN COMMON STOCK - 2.50% Atlas Copco AB............... 140,350 4,930 Autoliv, Incorporated+*...... 134,200 4,421 Electrolux AB................ 193,300 3,965 ForeningsSparbanken AB....... 223,400 3,723 Nordea AB.................... 475,000 2,954 Sandvik AB................... 111,900 3,329 Securitas AB................. 150,250 1,849 Stora Enso Oyj, Series A+.... 66,662 893 Stora Enso Oyj, Series R+.... 163,902 2,217 Volvo AB*.................... 135,560 3,788 ---------- TOTAL SWEDEN COMMON STOCK.................. 32,069 ---------- SWITZERLAND COMMON STOCK - 7.23% Adecco SA.................... 163,210 9,625 Clariant AG+................. 150,000 2,112 Compagnie Financiere Richemont AG+.............. 226,400 5,095 Credit Suisse Group.......... 502,687 17,712 Geberit AG................... 15,982 6,583 Nestle SA+................... 17,800 3,919 Novartis AG.................. 141,187 5,382 SIG Holding AG............... 119,251 16,008 Swiss Reinsurance............ 140,710 8,857
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) UBS AG....................... 153,300 $ 9,414 Zurich Financial Services AG+........................ 63,259 8,101 ---------- TOTAL SWITZERLAND COMMON STOCK.................. 92,808 ---------- UNITED KINGDOM COMMON STOCK - 24.91% Amersham plc*................ 401,920 4,987 Arriva plc................... 1,496,174 9,902 Aviva plc.................... 785,393 6,444 BAA plc...................... 278,600 2,203 BAE Systems plc+............. 3,292,405 10,224 Barclays plc................. 1,068,100 9,008 BHP Billiton plc............. 924,279 7,258 Boots Group plc.............. 636,300 7,693 BP plc....................... 1,263,030 8,766 Brambles Industries plc...... 700,641 2,122 British American Tobacco Industries plc............. 551,101 6,663 BT Group plc+................ 1,649,053 5,191 Cable and Wireless plc+...... 1,452,300 3,358 Cadbury Schweppes plc........ 2,411,582 15,459 Celltech Group plc+.......... 171,700 1,337 Diageo plc................... 1,419,455 16,692 Dimension Data Holdings plc+....................... 9,413,347 5,271 FirstGroup plc............... 895,952 4,580 GlaxoSmithKline plc+......... 762,200 16,323 Hanson plc................... 1,421,345 9,841 Hays plc..................... 3,548,019 7,345 HSBC Holdings plc............ 808,765 12,146 Imperial Chemical Industries plc+....................... 723,981 2,380 Imperial Tobacco Group plc... 259,140 4,296 J. Sainsbury plc............. 429,500 2,064 Kesa Electricals plc......... 225,100 932 Kidde plc.................... 1,680,500 2,873 Kingfisher plc............... 1,349,739 6,470 Lloyds TSB Group plc......... 786,050 5,459 Marks & Spencer Group plc+... 434,561 2,122 National Grid Transco plc.... 381,170 2,434 Reed Elsevier plc+........... 626,560 4,870 Rentokil Initial plc......... 1,278,400 4,843 Reuters Group plc+........... 2,757,625 12,015 Rio Tinto plc................ 150,000 3,637 Rolls-Royce plc.............. 966,500 3,112 Royal Bank of Scotland Group plc........................ 552,258 14,798 SABMiller plc+............... 85,983 726 Shell Transport & Trading Company plc................ 1,781,756 11,127 Shire Pharmaceuticals Group plc+....................... 323,900 2,454 Smiths Group plc............. 466,890 5,558 Standard Chartered plc....... 127,780 2,044
See accompanying notes - -------------------------------------------------------------------------------- 111 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2003 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Tesco plc.................... 1,445,500 $ 5,795 TI Automotive+............... 681,500 -- Unilever plc................. 2,097,207 17,883 Vodafone Group plc........... 8,994,039 18,887 Wolseley plc................. 582,535 7,140 WPP Group plc................ 296,000 2,820 ---------- TOTAL UNITED KINGDOM COMMON STOCK........... 319,552 ---------- TOTAL STOCKS............. 1,186,457 ---------- PAR AMOUNT ------------ FRANCE CORPORATE BONDS - 0.02% AXA, 0.00%, Due 12/21/2004+................ $ 12 215 ---------- TOTAL FRANCE CORPORATE BONDS.................. 215 ----------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) SHORT TERM INVESTMENTS - 20.53% American AAdvantage Money Market Select Fund......... 90,688,532 90,689 AMR Investments Enhanced Yield Business Trust....... 172,848,354 172,848 ---------- TOTAL SHORT TERM INVESTMENTS............ 263,537 ---------- TOTAL INVESTMENTS - 113.04% (COST $1,293,429).......... 1,450,209 ---------- LIABILITIES, NET OF OTHER ASSETS - (13.04%).......... (167,274) ---------- TOTAL NET ASSETS - 100%...... $1,282,935 ==========
- --------------- * - All or a portion of this security is on loan at October 31, 2003. See Note 5. + - non-income producing AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO INTERNATIONAL EQUITY SECTOR DIVERSIFICATION October 31, 2003 - --------------------------------------------------------------------------------
PERCENT OF NET ASSETS ---------- Consumer Discretionary...................................... 11.69% Consumer Staples............................................ 8.09% Energy...................................................... 6.60% Financials.................................................. 23.99% Health Care................................................. 6.13% Industrials................................................. 14.17% Information Technology...................................... 3.86% Materials................................................... 6.87% Short-Term Investments...................................... 20.53% Telecommunications Services................................. 8.69% Utilities................................................... 2.42% Other Liabilities........................................... (13.04%) ------- NET ASSETS............................................ 100.00% =======
See accompanying notes - -------------------------------------------------------------------------------- 112 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES October 31, 2003 (in thousands) - -------------------------------------------------------------------------------- ASSETS: Investments in securities, at value..................... $1,450,209 Cash.................................................... 12,465 Cash denominated in foreign currency (cost $38)......... 38 Unrealized appreciation on foreign currency contracts... 864 Dividends and interest receivable....................... 1,991 Reclaims receivable..................................... 13 Receivable for investments sold......................... 1,538 ---------- TOTAL ASSETS........................................ 1,467,118 ---------- LIABILITIES: Payable for investments purchased....................... 653 Payable upon return of securities loaned................ 181,807 Payable for variation margin on open futures contracts.............................................. 334 Management and investment advisory fees payable (Note 2)..................................................... 1,158 Other liabilities....................................... 231 ---------- TOTAL LIABILITIES................................... 184,183 ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $1,282,935 ========== Cost of investments......................................... $1,293,429
STATEMENT OF OPERATIONS Year ended October 31, 2003 (in thousands) - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest income......................................... $ 877 Dividend income (net of foreign taxes of $4,871)........ 26,632 Income derived from commission recapture (Note 6)....... 198 Income derived from securities lending, net (Note 5).... 1,468 -------- TOTAL INVESTMENT INCOME............................. 29,175 -------- EXPENSES: Management and investment advisory fees (Note 2)........ 3,890 Custodian fees.......................................... 1,189 Professional fees....................................... 50 Other expenses.......................................... 71 -------- TOTAL EXPENSES...................................... 5,200 -------- NET INVESTMENT INCOME....................................... 23,975 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) on: Investments........................................... (68,266) Foreign currency transactions......................... 40,931 Futures contracts..................................... 11,634 Change in net unrealized appreciation or depreciation of: Investments........................................... 206,247 Foreign currency contracts and translations........... 100,990 Futures contracts..................................... (518) -------- NET GAIN ON INVESTMENTS............................. 291,018 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $314,993 ========
See accompanying notes - -------------------------------------------------------------------------------- 113 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, ------------------------ 2003 2002 ---------- ----------- (IN THOUSANDS) INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income................................... $ 23,975 $ 20,039 Net realized loss on investments, futures contracts and foreign currency transactions.......................... (15,701) (82,834) Change in net unrealized appreciation or depreciation of investments, futures contracts and foreign currency translations........................................... 306,719 (35,456) ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.......................................... 314,993 (98,251) ---------- ----------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions........................................... 571,390 1,880,250 Withdrawals............................................. (552,053) (1,824,540) ---------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS..... 19,337 55,710 ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS....................... 334,330 (42,541) ---------- ----------- NET ASSETS: Beginning of period..................................... 948,605 991,146 ---------- ----------- END OF PERIOD........................................... $1,282,935 $ 948,605 ========== ===========
- -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS: - --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, ------------------------------------------------ 2003 2002 2001 2000 1999 1998 ------ ------- ----- ----- ----- ----- TOTAL RETURN................................................ 31.97% (10.25%) N/A N/A N/A N/A RATIOS TO AVERAGE NET ASSETS: Expenses................................................ 0.49% 0.47% 0.49% 0.44% 0.37% 0.53% Net investment income................................... 2.26% 1.86% 1.82% 1.93% 2.27% 2.29% PORTFOLIO TURNOVER RATE..................................... 44% 43% 36% 45% 63% 24%
See accompanying notes - -------------------------------------------------------------------------------- 114 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS October 31, 2003 - -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES AMR Investment Services Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a no-load, open-end management investment company which was organized as a trust under the laws of the State of New York pursuant to a Declaration of Trust dated as of June 27, 1995 and amended on August 11, 1995. The AMR Investment Services International Equity Portfolio (the "Portfolio") is one of the portfolios of the Trust. The Portfolio commenced active operations on November 1, 1995. The Declaration of Trust permits the Board of Trustees (the "Board") to issue beneficial interests in the Portfolio. AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary of AMR Corporation, the parent company of American Airlines, Inc. ("American"), and was organized in 1986 to provide business management, advisory, administrative and asset management consulting services. The following is a summary of the significant accounting policies followed by the Portfolio. Security Valuation Equity securities that are primarily traded on domestic securities exchanges are valued at the last quoted sales price on a designated exchange at the close of trading on the New York Stock Exchange (the "Exchange") on each day the Exchange is open for trading or, lacking any current sales, on the basis of the last current bid price prior to the close of trading on the Exchange. Portfolio securities that are primarily traded on foreign securities exchanges are generally valued at the preceding closing values of such securities on their respective exchanges where primarily traded. Over-the-counter equity securities are valued on the basis of the last bid price on that date prior to the close of trading. Debt securities (other than short-term securities) normally are 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. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Investment grade short-term obligations with 60 days or less to maturity are valued using the amortized cost method. Securities for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are valued at fair value, as determined in good faith and pursuant to procedures approved by the Board. Security Transactions and Investment Income Security transactions are recorded on the trade date of the security purchase or sale. Dividend income is recorded on the ex-dividend date except certain dividends from foreign securities which are recorded as soon as the information is available to the Portfolio. Interest income is earned from settlement date, recorded on the accrual basis, and adjusted, if necessary, for accretion of discounts and amortization of premiums. For financial and tax reporting purposes, realized gains and losses are determined on the basis of specific lot identification. - -------------------------------------------------------------------------------- 115 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- There is uncertainty regarding the collectibility of tax reclaims by the Portfolio due to its partnership status for federal income tax purposes. As such, the Portfolio did not accrue tax reclaims totaling $1,506,000 during the period. Upon determination of the Portfolio's entitlement to benefits under foreign tax treaties, if any, tax reclaim income will be accrued. Currency Translation All assets and liabilities initially expressed in foreign currency values are converted into U.S. dollar values at the bid price of such currencies against U.S. dollars as last quoted by a recognized dealer. Income, expenses and purchases and sales of investments are translated into U.S. dollars at the rate of exchange prevailing on the respective dates of such transactions. The effect of changes in foreign currency exchange rates on investments is separately identified from the fluctuations arising from changes in market values of securities held and is reported with all other foreign currency gains and losses in the Fund's Statement of Operations. Forward Foreign Currency Contracts The Portfolio may enter into forward foreign currency contracts to hedge the exchange rate risk on investment transactions or to hedge the value of portfolio securities denominated in foreign currencies. Forward foreign currency contracts are valued at the forward exchange rate prevailing on the day of valuation. Futures Contracts The Portfolio may enter into financial futures contracts which are contracts to buy a standard quantity of securities at a specified price on a future date. The Portfolio may purchase or sell futures contracts and options on futures contracts as a method for keeping assets readily convertible to cash if needed to meet shareholder redemptions or for other needs while maintaining exposure to the stock market. Upon entering into a futures contract, the Portfolio is required to deposit with a financial intermediary an amount ("initial margin") equal to a certain percentage of the face value indicated in the futures contract. Subsequent payments ("variation margin") are made or received by the Portfolio dependent upon the daily fluctuations in the value of the underlying security and are recorded for financial reporting purposes as unrealized gains or losses by the Portfolio. When entering into a closing transaction, the Portfolio will realize a gain or loss equal to the difference between the value of the futures contract to sell and the futures contract to buy. Futures contracts are valued at the most recent settlement price established each day by the exchange on which they are traded. Federal Income and Excise Taxes The Portfolio will be treated as a partnership for federal income tax purposes. As such, each investor will be taxed on its share of the Portfolio's ordinary income and capital gains. It is intended that the Portfolio's assets will be managed in such a way that an investor in the Portfolio will be able to satisfy the requirements of subchapter M of the Internal Revenue Code. - -------------------------------------------------------------------------------- 116 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimated. 2. TRANSACTIONS WITH AFFILIATES Management Agreement The Trust and the Manager are parties to a Management Agreement which obligates the Manager to provide or oversee the provision of all administrative, investment advisory, portfolio management and securities lending services. Investment assets of the Portfolio are managed by multiple investment advisers which have entered into separate investment advisory agreements with the Manager. As compensation for performing the duties required under the Management Agreement, the Manager receives from the Portfolio an annualized fee equal to ..10% of the average daily net assets plus amounts paid by the Manager to the investment advisors hired by the Manager to direct investment activities of the Portfolio. Management fees paid during the period were as follows (dollars in thousands):
AMOUNTS PAID TO NET AMOUNTS MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY FEE RATE FEE ADVISORS MANAGER ---------- ---------- --------------- ----------- International Equity Portfolio..................... .25%-.60% $3,890 $2,829 $1,061
As compensation for services provided by the Manager in connection with securities lending activities, the Portfolio pays to the Manager, with respect to cash collateral posted by borrowers, a fee up to 25% of the net monthly interest income (the gross interest income earned by the investment of cash collateral, less the amount paid to borrowers and related expenses) from such activities and, with respect to loan fees paid by borrowers when a borrower posts collateral other than cash, a fee up to 25% of such loan fees. During the period, the Portfolio paid securities lending fees of $237,000 to the Manager. Investment in Affiliated Funds The Portfolio may invest in the American AAdvantage Money Market Select Fund (the "Select Fund"), an open-end management investment company managed by the Manager. The Manager receives from the Select Fund an annualized fee equal to 0.10% of the average daily net assets. During the period, the Manager earned fees from the Select Fund totaling $119,000 on the Portfolio's investment in the Select Fund. Income distributions from the Select Fund are recorded as interest income in the accompanying financial statements and totaled $651,000 during the year ended October 31, 2003 for the Portfolio. Other Certain officers or Trustees of the Trust are also current or former officers or employees of the Manager or American. The Trust makes no direct payments to its officers. Unaffiliated Trustees and their spouses are provided free unlimited air transportation on American. However, the Trust compensates each Trustee with payments in an amount equal to the Trustee's income tax on the - -------------------------------------------------------------------------------- 117 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- value of this free airline travel. For the year ended October 31, 2003, the cost of air transportation was not material to the Portfolio. One Trustee, as a retiree of American, already receives flight benefits. This Trustee receives an annual retainer of $40,000 plus $1,250 for each Board meeting attended. 3. INVESTMENT TRANSACTIONS The aggregate cost of purchases and proceeds from sales of investments, other than short-term obligations, (in thousands), for the year ended October 31, 2003 were $433,694 and $418,534, respectively. 4. COMMITMENTS In order to protect itself against a decline in the value of particular foreign currencies against the U.S. dollar, the Portfolio has entered into forward contracts to deliver or receive foreign currency in exchange for U.S. dollars as described below. The Portfolio bears the market risk that arises from changes in foreign exchange rates, and accordingly, the unrealized gain (loss) on these contracts is reflected in the accompanying financial statements. The Portfolio also bears the credit risk if the counterparty fails to perform under the contract. At October 31, 2003, the Portfolio had outstanding forward foreign currency contracts as follows:
SETTLEMENT UNREALIZED CONTRACTS TO RECEIVE DATE VALUE GAIN - -------------------- ---------- ------- ---------- (AMOUNTS IN THOUSANDS) 5,250 Australian Dollar.......................................... 12/17/03 $ 3,699 $146 6,400 Canadian Dollar............................................ 12/17/03 4,841 79 17,400 Euro Currency.............................................. 12/17/03 20,175 91 1,700,000 Japanese Yen............................................... 12/17/03 15,463 127 11,500 Pound Sterling............................................. 12/17/03 19,435 375 8,900 Swiss Franc................................................ 12/17/03 6,662 46 11,000 Swedish Krona.............................................. 12/17/03 1,406 0 ------- ---- Total contracts to receive (Payable amount $70,817)................... $71,681 $864 ======= ====
The Portfolio may purchase securities with delivery or payment to occur at a later date. At the time the Portfolio enters into a commitment to purchase a security, the transaction is recorded and the value of the security is reflected in the net asset value. The value of the security may vary with market fluctuations. No interest accrues to the Portfolio until payment takes place. 5. SECURITIES LENDING The Portfolio participates in a securities lending program under which securities are loaned to selected institutional investors. All such loans require collateralization with cash, securities of the U.S. Government and its agencies or letters of credit that will generally equal at least 100% of the market value of the loaned securities plus accrued interest. The Portfolio may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of securities fail financially. The Portfolio receives the interest on the collateral less any fees and rebates paid to agents and transferees of securities. The Portfolio also continues to receive income on the securities - -------------------------------------------------------------------------------- 118 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2003 - -------------------------------------------------------------------------------- loaned, and any gain or loss in the market price of securities loaned that may occur during the term of the loan will be for the account of the Portfolio. At October 31, 2003, securities with a market value of approximately $171,957,000 were loaned by the Portfolio. Cash collateral held by the custodian for the Portfolio in an investment in the AMR Investments Enhanced Yield Business Trust and the American AAdvantage Money Market Select Fund (the "Funds") totaled $181,807,000. The Manager serves as Trustee and as investment adviser to the Funds. The Manager receives from the Funds annualized fees equal to 0.10% of the average daily net assets. 6. COMMISSION RECAPTURE The Portfolio has established brokerage commission recapture arrangements with certain brokers or dealers. If a Portfolio investment adviser chooses to execute a transaction through a participating broker, the broker rebates a portion of the commission back to the Portfolio. Any collateral benefit received through participation in the commission recapture program is directed exclusively to the Portfolio. 7. FUTURES CONTRACTS A summary of obligations under these financial instruments at October 31, 2003 is as follows:
UNREALIZED MARKET APPRECIATION/ TYPE OF FUTURE EXPIRATION CONTRACTS VALUE (DEPRECIATION) - -------------- ------------- --------- ------------ -------------- France CAC 40 Index................................ December 2003 287 $ 11,290,294 $ 250,562 Germany DAX Index.................................. December 2003 73 7,762,798 323,510 UK FTSE 100 Index.................................. December 2003 422 30,771,348 132,867 Hang Seng Index.................................... November 2003 27 2,102,611 225 Italy MIB 30 Index................................. December 2003 29 4,387,851 67,755 Japan Nikkei 300 Index............................. December 2003 155 2,835,356 (26,789) Tokyo FE TOPIX Index............................... December 2003 259 24,654,876 (456,770) Spain IBEX 35 Index................................ November 2003 49 4,063,990 67,400 Sweden OMX Index................................... November 2003 339 2,687,260 10,460 Canada S&PCDA 60 Index............................. December 2003 121 8,012,503 89,843 Australia SPI Index................................ December 2003 106 6,127,922 22,138 ------------ --------- $104,696,808 $ 481,202 ============ =========
- -------------------------------------------------------------------------------- 119 TRUSTEES AND OFFICERS OF THE TRUST AND THE AMR INVESTMENT SERVICES TRUST (Unaudited) - -------------------------------------------------------------------------------- The Trustees and officers of the 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 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-five funds in the fund complex that includes the AMR Trust, the American AAdvantage Funds, the American AAdvantage Mileage Funds, and the American AAdvantage Select Funds. The Trust's Statement of Additional Information contains additional information about the Trustees and is available without charge by calling 1-800-658-5811.
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS - --------------------- ----------------- ------------------------------------------- INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* William F. Quinn** (55) Trustee since 1987 President, AMR Investment Services, Inc. (1986-Present); and President Chairman (1989-2003) and Director (2003-Present), American since 1986 Airlines Federal Credit Union; Director, Crescent Real Estate Equities, Inc. (1994-Present); Director, MW Pritchard, Hubble & Herr, LLC (2001-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Director, Southern Methodist University Endowment Fund Investment Committee (1996-Present); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002); Trustee, American AAdvantage Mileage Funds (1995-Present); Trustee, American AAdvantage Select Funds (1999-Present). Alan D. Feld** (66) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-Present); Director, Clear Channel Communications (1984-Present); Trustee, CenterPoint Properties (1994-Present); Trustee, American AAdvantage Mileage Funds (1996-Present); Trustee, American AAdvantage Select Funds (1999-Present). NON-INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* Stephen D. O'Sullivan (68) Trustee since 1987 Consultant (1994-Present); Trustee, American AAdvantage Mileage Funds (1995-Present); Trustee, American AAdvantage Select Funds (1999-Present).
- -------------------------------------------------------------------------------- 120 TRUSTEES AND OFFICERS OF THE TRUST AND THE AMR INVESTMENT SERVICES TRUST -- CONTINUED (Unaudited) - --------------------------------------------------------------------------------
POSITION, TERM OF OFFICE AND LENGTH OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS - --------------------- ----------------- ------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) R. Gerald Turner (57) Trustee since 2001 President, Southern Methodist University (1995-Present); 225 Perkins Admin. Bldg. Director, ChemFirst (1986-Present); Director, J.C. Penney Southern Methodist Univ. Company, Inc. (1996-Present); Director, California Federal Dallas, Texas 75275 Preferred Capital Corp. (2001-Present); Member, United Way of Dallas Board of Directors; Member, Salvation Army of Dallas Board of Directors; Member, Methodist Hospital Advisory Board; Member, Knight Commission on Intercollegiate Athletics; Member, National Association of Independent Colleges and Universities Board of Directors; Trustee, American AAdvantage Mileage Funds (2001-Present); Trustee, American AAdvantage Select Funds (2001-Present). Kneeland Youngblood (47) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private 100 Crescent Court equity firm) (1998-Present); Trustee, The Hockaday School Suite 1740 (1997-Present); Director, Starwood Hotels and Resorts Dallas, Texas 75201 (2001-Present); Member, Council on Foreign Relations (1995-Present); Director, Just For the Kids (1995-Present); Director, L&B Realty Advisors (1998-2000); Trustee, Teachers Retirement System of Texas (1993-1999); Director, United States Enrichment Corporation (1993-1998), Director, Starwood Financial Trust (1998-2001); Trustee, American AAdvantage Mileage Funds (1996-Present); Trustee, American AAdvantage Select Funds (1999-Present). OFFICERS TERM ------------------ One Year Nancy A. Eckl (41) VP since 1990 Vice President, Trust Investments, AMR Investment Services, Inc. (1990-Present). Michael W. Fields (49) VP since 1989 Vice President, Fixed Income Investments, AMR Investment Services, Inc. (1988-Present). Barry Y. Greenberg (40) VP and Assistant Vice President, Legal and Compliance, AMR Investment Secretary since Services, Inc. (1995-Present). 1995 Rebecca L. Harris (36) Treasurer since Vice President, Finance, AMR Investment Services, Inc. 1995 (1995- Present). John B. Roberson (45) VP since 1989 Vice President, Director of Sales, AMR Investment Services, Inc. (1991-Present). Robert J. Zutz (50) Secretary since Partner, Kirkpatrick & Lockhart LLP (law firm). 1800 Massachusetts Ave. NW 1998 2nd Floor Washington, D.C. 20036
- --------------- * The Board has adopted a retirement plan that requires Trustees to retire no later than the last day of the calendar year in which they reach the age of 70, with the exception of Mr. Quinn. ** Messrs. Quinn and Feld are deemed to be "interested persons" of the Trust, as defined by the 1940 Act. Mr. Quinn is President of the Manager. Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP has provided legal services within the past two years to one or more of the Trust's investment advisers. - -------------------------------------------------------------------------------- 121 AMERICAN AADVANTAGE FUNDS PRIVACY POLICY (Unaudited) - -------------------------------------------------------------------------------- The American AAdvantage Funds recognizes and respects the privacy of our shareholders. We are providing this notice to you so you will understand how shareholder information may be collected and used. We may collect nonpublic personal information about you from one or more of the following sources: - information we receive from you on applications or other forms; - information about your transactions with us or our service providers; and - information we receive from third parties. We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. We restrict access to your nonpublic personal information to those employees or service providers who need to know that information to provide products or services to you. To ensure the confidentiality of your nonpublic personal information, we maintain safeguards that comply with federal standards. - -------------------------------------------------------------------------------- 122 (AMERICAN EAGLE LOGO) (AMERICAN EAGLE LOGO) (AMERICAN AADVANTAGE FUNDS LOGO) - -------------------------------------------------------------------------------- TO OBTAIN MORE INFORMATION ABOUT THE FUNDS: (GRAPHIC) (GRAPHIC) BY E-MAIL: ON THE INTERNET: american_aadvantage.funds@AA.com Visit our website at www.aafunds.com
- -------------------------------------------------------------------------------- (GRAPHIC) (GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American AAdvantage Funds Call (800) 658-5811 P.O. Box 619003, MD 2450 AMR Class(SM) DFW Airport, TX 75261-9003 Call (800) 345-2345 PlanAhead Class(R) Call (800) 388-3344
FUND SERVICE PROVIDERS: CUSTODIAN TRANSFER AGENT INDEPENDENT AUDITORS DISTRIBUTOR STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES ERNST & YOUNG LLP SWS FINANCIAL SERVICES Boston, Massachusetts Kansas City, Missouri Chicago, Illinois Dallas, Texas
This report is prepared for shareholders of the American AAdvantage Funds and may be distributed to others only if preceded or accompanied by a current prospectus. - -------------------------------------------------------------------------------- American Airlines, Inc. is not responsible for investments made in the American AAdvantage Funds. American AAdvantage Funds is a registered service mark of AMR Corporation. American AAdvantage Balanced Fund, American AAdvantage Large Cap Value Fund, American AAdvantage Large Cap Growth Fund, American AAdvantage Small Cap Value Fund, American AAdvantage International Equity Fund, American AAdvantage Emerging Markets Fund, American AAdvantage High Yield Bond Fund, American AAdvantage Enhanced Income Fund, American AAdvantage Intermediate Bond Fund and American AAdvantage Short-Term Bond Fund are service marks of AMR Investment Services, Inc. [BACK COVER] AR 10/03 529449 ITEM 2. CODE OF ETHICS. The Trust has adopted a code of ethics that applies to its principal executive and financial officers (the "Code"). The Trust did not amend the Code nor did it grant any waivers to the provisions of the Code during the period covered by the shareholder report presented in Item 1. The Code is filed herewith as Exhibit 99.CODE ETH. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Trust's Board of Trustees has determined that Stephen O'Sullivan, a member of the Trust's audit committee, is an "audit committee financial expert" as defined in Form N-CSR. Mr. O'Sullivan is "independent" as defined in Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not Applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not Applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not Applicable. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. Based upon an evaluation within 90 days of the filing date of this report, the principal executive and financial officers concluded that the disclosure controls and procedures of the Trust are effective. There were no changes in the Trust's internal control over financial reporting during the Trust's last fiscal half-year that materially affected, or were reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Filed herewith as EX-99.CODE ETH. (a)(2) A separate certification for each principal executive officer and principal financial officer of the Trust as required by Rule 30a-2(a) under the Investment Company Act of 1940 is attached hereto as EX-99.CERT. (b) The certifications required by Rule 30a-2(b) under the Investment Company Act of 1940 are attached hereto as EX-99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): American AAdvantage Funds By /s/ William F. Quinn -------------------- William F. Quinn President Date: January 6, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ William F. Quinn -------------------- William F. Quinn President Date: January 6, 2004 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: January 6, 2004 EX-99.CODE ETH 3 ex99code.txt OFFICER CODE OF ETHICS For period ended 10/31/2003 Registrant Name: American AAdvantage Funds File Number: 811-4984 EXHIBIT 99.CODE ETH AMERICAN AADVANTAGE FUNDS AMERICAN AADVANTAGE MILEAGE FUNDS AMERICAN AADVANTAGE SELECT FUNDS AMR INVESTMENT SERVICES TRUST Code of Ethics for Principal Executive and Financial Officers Dated: September 3, 2003 Purpose The American AAdvantage Funds, the American AAdvantage Mileage Funds, the American AAdvantage Select Funds, and the AMR Investment Services Trust (collectively, the "Trusts") have adopted this Code of Ethics for Principal Executive and Financial Officers (the "Code"), which applies to the Trusts' Principal Executive Officer and Principal Financial Officer (the "Covered Officers" as set forth in Exhibit A), for the purpose of promoting: * honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; * full, fair, accurate, timely, and understandable disclosure in reports and documents that a Trust files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the registrant; * compliance with applicable governmental laws, rules, and regulations; * the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and * accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. Conflicts of Interest For purposes of this Code, a "conflict of interest" occurs when a Covered Officer's "personal interests" interfere with the interests of, or his/her service to, the Trusts. For example, a conflict of interest would arise if a Covered Officer, or a member of his/her family, receives improper personal benefits as a result of his/her position with the Trusts. Certain conflicts of interest arise out of the relationship between Covered Officers and the Trusts and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Trusts because of their status as "affiliated persons" of the Trusts. Conflicts also may arise from a Covered Officer's position or employment at AMR Investment Services, Inc. ("AMR Investments"), the Trusts' manager, and his/her position with each Trust. This Code recognizes that the Covered Officers will, in the normal course of their duties, be involved in establishing policies and implementing decisions that will have different effects on AMR Investments and the Trusts. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trusts and AMR Investments and is consistent with the performance by the Covered Officers of their duties as officers of the Trusts. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trusts. Each Covered Officer should not: * use his/her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Trusts whereby the Covered Officer would benefit personally to the detriment of the Trusts; or * cause the Trusts to take action, or fail to take action, for the personal benefit of the Covered Officer rather than the benefit of the Trusts. At times, certain situations may arise that may, or may not, be considered conflicts of interest under this Code. Covered Officers are encouraged to discuss such situations with the Trusts' Chief Legal Officer ("CLO"). Examples of these types of situations include: * service as a director on the board of any public or private company; * the receipt of any non-nominal gifts in excess of $150; * the receipt of any entertainment from any company with which the Trusts have current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; * any ownership interest in, or any consulting or employment relationship with, any of the Trusts' service providers, other than AMR Investments, the distributor for the Trusts' shares, or any affiliated person thereof; * a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trusts for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. Disclosure and Compliance Each Covered Officer: * should familiarize himself/herself with the disclosure requirements generally applicable to the Trusts; * should not knowingly misrepresent, or cause others to misrepresent, facts about the Trusts to others, whether within or outside the Trusts, including to the Trusts' Trustees and auditors, and to governmental regulators and self-regulatory organizations; * should, to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Trusts and AMR Investments with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; and 2 * is responsible to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. Reporting and Accountability Each Covered Officer must: * upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he/she has received, read, and understands the Code; * annual thereafter affirm to the Board that he/she has complied with the requirements of the Code; * complete at least annually the Officer Questionnaire by detailing any directorships with public or private companies and/or material relationships or transactions with affiliated persons of any Trust or its series; * not retaliate against any other Covered Officer or any employee of the Trusts or their affiliated persons for reports of potential violations that are made in good faith; and * notify the Legal Officer promptly if he/she knows of any violations of this Code. Failure to do so is itself a violation of this Code. The CLO is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. In addition, the CLO is authorized and encouraged to consult with counsel to the Trusts and counsel to the Independent Trustees of the Trusts' Boards of Trustees. However, any approvals or waivers sought by the Covered Officers will be considered by the Independent Trustees. The Trusts will follow these procedures in investigating and enforcing this Code: * the CLO will take all appropriate action to investigate any potential violations reported to him; * if, after such investigation, the CLO believes that no violation has occurred, the CLO is not required to take any further action; * any matter that the CLO believes is a violation will be reported to the Independent Trustees; * if the Independent Trustees concur that a violation has occurred, they will inform and make a recommendation to the applicable Trust's Board of Trustees, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of AMR Investments or its board; or a recommendation to dismiss the Covered Officer; * the Independent Trustees will be responsible for granting waivers, as appropriate; and * any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. 3 Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trusts, AMR Investments, the distributor for the Trusts' shares, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Trusts' and AMR Investments' codes of ethics under Rule 17j-1 under the Investment Company Act and the more detailed policies and procedures set forth in the Trusts' Statement of Policy on Material Non-Public Information are separate requirements applying to the Covered Officers and others, and are not part of nor replaced by this Code. Amendments Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of Independent Trustees. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board of Trustees, its counsel and AMR Investments. Internal Use This Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion. 4 EXHIBIT A Persons Covered by this Code of Ethics
Position with each Trust Name Principal Executive Officer President William F. Quinn Principal Financial Officer Treasurer Rebecca L. Harris
5 EX-99.CERT 4 ex99cert.txt FORM N-CSR CERTIFICATIONS For period ended 10/31/2003 Registrant Name: American AAdvantage Funds File Number: 811-4984 EXHIBIT 99.CERT I, Rebecca L. Harris, certify that: 1. I have reviewed this report on Form N-CSR of American AAdvantage Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 6, 2004 /s/ Rebecca L. Harris ----------------- --------------------- Rebecca L. Harris Treasurer American AAdvantage Funds I, William F. Quinn, certify that: 1. I have reviewed this report on Form N-CSR of American AAdvantage Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 6, 2004 /s/ William F. Quinn ----------------- -------------------- William F. Quinn President American AAdvantage Funds EX-99.906 CERT 5 ex906cert.txt SECTION 906 CERTIFICATIONS For period ended 10/31/2003 Registrant Name: American AAdvantage Funds File Number: 811-4984 EXHIBIT 99.906CERT William F. Quinn and Rebecca L. Harris, respectively, the President and Treasurer of the American AAdvantage Funds (the "Registrant"), each certify to the best of his or her knowledge and belief that: 1. the Registrant's report on Form N-CSR for the period ended October 31, 2003 (the "Form N-CSR") fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934, as amended; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. /s/ William F. Quinn /s/ Rebecca L. Harris - -------------------- --------------------- William F. Quinn Rebecca L. Harris President Treasurer American AAdvantage Funds American AAdvantage Funds Date: January 6, 2004 A signed original of this written statement required by Section 906 has been provided to American AAdvantage Funds and will be retained by American AAdvantage Funds and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----