-----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, T3kA5sONTFMfN/N21a/OFLciRnT48WfycaFyZEqgZd2/0pk40YCikwGbm7bw02o9 qX5E8JPdNwiDYO894qctig== 0000809593-05-000001.txt : 20050107 0000809593-05-000001.hdr.sgml : 20050107 20050107153043 ACCESSION NUMBER: 0000809593-05-000001 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041031 FILED AS OF DATE: 20050107 DATE AS OF CHANGE: 20050107 EFFECTIVENESS DATE: 20050107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN AADVANTAGE FUNDS CENTRAL INDEX KEY: 0000809593 IRS NUMBER: 000000000 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: 05518231 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 ncsr1004.txt AADVANTAGE N-CSR FOR 10/31/2004 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, 2004 Date of reporting period: October 31, 2004 ITEM 1. REPORT TO STOCKHOLDERS. [AMERICAN AADVANTAGE FUNDS LOGO] - ---------------------------------------o--------------------------------------- ANNUAL REPORT October 31, 2004 [GLOBE GRAPHIC] [EAGLE GRAPHIC] EQUITY FUNDS Balanced Fund Large Cap Value Fund Large Cap Growth Fund Mid-Cap Value Fund Small Cap Value Fund International Equity Fund Emerging Markets Fund BOND FUNDS High Yield Bond Fund Enhanced Income Fund Intermediate Bond Fund Short-Term Bond Fund MANAGED BY AMR INVESTMENT(R) (AA EAGLE WATERMARK) 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.................. 3-36 American AAdvantage Schedules of Investments Balanced Fund.............. 38 Large Cap Value Fund....... 46 Large Cap Growth Fund...... 50 Mid-Cap Value Fund......... 54 Small Cap Value Fund....... 56 Emerging Markets Fund...... 64 High Yield Bond Fund....... 71 Enhanced Income Fund....... 79 Intermediate Bond Fund..... 85 Short-Term Bond Fund....... 91 AMR Investment Services Trust Schedules of Investments International Equity Portfolio............... 141 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, 2004 (BILL QUINN PICTURE) FELLOW SHAREHOLDERS, Enclosed please find the Annual Report for the American AAdvantage Funds for the fiscal year ended October 31, 2004. During this time, the Dow Jones Industrial Average posted gains of 4.45%, the S&P 500 Index increased by 9.42%, while the MSCI EAFE Index returned 18.84%. As of October 31, 2004 the 10-Year Treasury interest rate was 4.03%, contributing to a 5.53% total return for the bond market, as defined by the Lehman Brothers Aggregate Index. Additionally, the Federal Reserve raised the Fed Funds Rate to 2.0% from its 40-year low of 1% and is expected to continue increasing rates for the near term. All of the American AAdvantage equity funds posted strong performances for the fiscal year. The Small Cap Value Fund-Institutional Class continued to outperform its Lipper benchmark with returns of 19.86%, 22.22%, and 20.07% for the one-year, three-year, and five-year time periods, respectively. Additionally, the Large Cap Value Fund-Institutional Class continued its long-term record of success with returns of 18.59%, 10.42%, 6.65%, and 11.02% for the one-year, three-year, five-year, and ten-year time periods, respectively, as of October 31, 2004. The American AAdvantage fixed income funds, which include the High Yield Bond, Enhanced Income, Intermediate Bond and Short-Term Bond Funds, all posted gains for the twelve-month period. Once again, the Institutional Class of the Short-Term Bond Fund outperformed its Lipper benchmark for the one, three, five, and ten-year time periods. Please review the enclosed market overviews, portfolio listings and detailed financial data. As always, we welcome the opportunity to serve your financial needs. To obtain further details about the American AAdvantage Funds family or access your account information, please visit our web site 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 Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. 1 AMERICAN AADVANTAGE FUNDS - --------------------------------------------------------------------------------
AVERAGE ANNUALIZED TOTAL RETURN AS OF OCTOBER 31, 2004 ------------------------------------------ INCEPTION TICKER 10 YEAR/ DATE SYMBOL 1 YEAR 3 YEAR 5 YEAR SINCE INCEP. --------- ------ ------ ------ ------ --------------- Balanced Fund -- Institutional 7/17/87 AADBX 12.87% 8.64% 7.01% 9.89% Balanced Fund -- PlanAhead 8/1/94 AABPX 12.44% 8.37% 6.75% 9.59% Balanced Fund -- AMR 8/1/94 AABNX 13.13% 8.98% 7.32% 10.20% Lipper Balanced Funds Index 8.20% 5.12% 2.72% 8.73% Large Cap Value Fund -- Institutional 7/17/87 AADEX 18.59% 10.42% 6.65% 11.02% Large Cap Value Fund -- PlanAhead 8/1/94 AAGPX 18.26% 10.10% 6.36% 10.68% Large Cap Value Fund -- AMR 8/1/94 AAGAX 18.89% 10.69% 6.91% 11.30% Lipper Multi-Cap Value Funds Index 12.93% 8.36% 5.54% 10.93% Large Cap Growth Fund -- Institutional 7/31/00 ALCGX 6.71% 1.14% N/A -11.81% Large Cap Growth Fund -- AMR 7/31/00 ALFIX 6.88% 1.23% N/A -11.70% Lipper Large-Cap Growth Funds Index 2.63% -0.35% N/A -12.68% Mid-Cap Value Fund -- Institutional 6/30/04 AMDIX N/A N/A N/A 2.70% Lipper Mid-Cap Value Funds Index N/A N/A N/A 0.58% Small Cap Value Fund -- Institutional 12/31/98 AVFIX 19.86% 22.22% 20.07% 15.03% Small Cap Value Fund -- PlanAhead 3/1/99 AVPAX 19.56% 21.91% 19.77% 14.74% Small Cap Value Fund -- Service 5/1/03 AASSX 19.24% 21.72% 19.66% 14.65% Small Cap Value Fund -- AMR 3/1/99 AASVX 20.12% 22.53% 20.42% 15.34% Lipper Small-Cap Value Funds Index 17.12% 17.18% 15.50% 12.18% International Equity Fund -- Institutional 8/7/91 AAIEX 22.49% 13.00% 4.27% 8.79% International Equity Fund -- PlanAhead 8/1/94 AAIPX 22.16% 12.87% 4.08% 8.52% International Equity Fund -- Service 5/1/03 AAISX 21.88% 12.68% 3.98% 8.46% International Equity Fund -- AMR 8/1/94 AAIAX 22.84% 13.25% 4.53% 9.07% Lipper International Funds Index 16.56% 9.79% 0.77% 5.45% Emerging Markets Fund -- Institutional 7/31/00 AEMFX 19.65% 24.94% N/A 6.34% Emerging Markets Fund -- PlanAhead 10/1/02 AAEPX 19.33% 24.66% N/A 6.17% Emerging Markets Fund -- AMR 7/31/00 AAMRX 20.00% 25.28% N/A 6.61% Lipper Emerging Markets Funds Index 21.58% 24.56% N/A 5.81% High Yield Bond Fund -- Institutional 12/29/00 AYBFX 10.19% 12.05% N/A 10.78% High Yield Bond Fund -- PlanAhead 3/1/02 AHYPX 9.94% 11.47% N/A 10.34% High Yield Bond Fund -- Service 5/1/03 AAHSX 9.41% 11.05% N/A 10.01% Lipper High Current Yield Funds Index 11.11% 10.79% N/A 7.26% Enhanced Income Fund -- PlanAhead 6/30/03 AANPX 4.70% N/A N/A 3.76% Lipper Interm. Investment Grade Index 5.20% N/A N/A 3.28% Intermediate Bond Fund -- Institutional 9/15/97 AAIBX 4.90% 4.47% 7.07% 6.49% Intermediate Bond Fund -- PlanAhead 3/2/98 AAPAX 4.86% 4.40% 6.51% 6.03% Intermediate Bond Fund -- AMR 3/1/99 AABDX 5.38% 4.85% 7.04% 6.43% Lipper Interm. Investment Grade Index 5.20% 5.16% 7.17% 6.49% Short-Term Bond Fund -- Institutional 12/3/87 AADFX 2.21% 3.05% 5.15% 5.44% Short-Term Bond Fund -- PlanAhead 8/1/94 AALPX 1.84% 2.79% 4.88% 5.17% Short-Term Bond Fund -- AMR 8/1/94 AASBX 2.39% 3.27% 5.35% 5.66% Lipper Short Investment Grade Index 2.10% 2.65% 4.74% 5.33%
Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. 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. 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 - -------------------------------------------------------------------------------- Toward the end of 2003, the U.S. equity markets rallied, posting particularly strong results. In the fourth quarter of 2003, all major indices posted double digit returns, the best such returns since the three year market decline began in 2000. In the first quarter of 2004, the equity market rose modestly, although performance was muted due, in part, to residual doubts about the strength and persistence of the economic rebound as well as potential geopolitical concerns raised by the Madrid terrorist bombings in March. In the U.S., one key worry was employment, as there were no signs that the economy was creating jobs in a meaningful way, leading to fears of a "jobless" economic recovery. However, healthy job creation was reported during the months of March and April 2004. Volatility came back slightly in the second calendar quarter of 2004, but was still low. U.S. equity markets were up 1.3% in the quarter, after rising 2.2% in the first quarter. Although returns were muted, this was the fifth consecutive positive quarter for equity markets in the U.S. Fears seemed to shift from concern about the sustainability of the recovery to concern that the economy might be overheating. Indeed, a U.S. rate hike - which was by no means a foregone conclusion when the quarter began - ended up closing out the quarter with a Federal Reserve announcement on June 30. With crude oil up as much as 20% during the quarter (compared to the end of first quarter 2004), worries about energy prices may also have helped keep equity growth in check. During the summer, additional concerns surfaced around the sustainability of the economic recovery amidst high oil prices, rising interest rates, slowing corporate profits, and no clear winner in the upcoming Presidential election. Equity markets slumped in the third quarter of 2004, with most U.S. indices either flat or down for the period. Over the quarter, value indices fared better than their growth counterparts, while the S&P 500 Index edged out the Russell 2000 Index for the second quarter in a row. Large caps outpaced small caps in most sectors, particularly in the Technology sector. Towards the end of October, the markets began to pick up steam once again as oil prices fell significantly and investors looked forward to closure on the outcome of the Presidential election. Major U.S. Indices posted positive returns for the month. The S&P 500 Index gained 1.53%, while the Russell 1000 Growth Index was up 1.56%. Small-cap stocks outperformed large caps, with the Russell 2000 Index returning 1.97% for the period. 3 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE BALANCED FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Balanced Fund's Institutional Class returned 12.87% for the twelve months ended October 31, 2004, outperforming the 60% S&P 500 Barra Value/40% Lehman Brothers Aggregate Index benchmark return of 10.83% and the Lipper Balanced Funds Index return of 8.20%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/94 THROUGH 10/31/04 (LINE GRAPH)
LIPPER S&P 500 / BALANCED INSTITUTIONAL BALANCED S&P 500 BARRA VALUE LEHMAN BROS COMPOSITE CLASS FUNDS INDEX INDEX INDEX AGG INDEX INDEX ------------- ----------- ------- ----------- ----------- --------- 10/94 10000.00 10000.00 10000.00 10000.00 10000.00 10000.00 10/95 11939.00 11759.00 12644.00 12302.00 11565.00 12010.00 10/96 13904.00 13464.00 15690.00 15330.00 12239.00 14032.00 10/97 16691.00 16191.00 20728.00 19882.00 13331.00 17009.00 10/98 18199.00 17933.00 25286.00 22217.00 14573.00 18965.00 10/99 18296.00 20187.00 31777.00 26440.00 14651.00 21144.00 10/00 19234.00 21784.00 33712.00 28999.00 15720.00 23049.00 10/01 20017.00 19877.00 25318.00 23658.00 18009.00 21643.00 10/02 18988.00 18363.00 21492.00 19924.00 19070.00 20132.00 10/03 22742.00 21339.00 25963.00 24870.00 20006.00 23537.00 10/04 25669.00 23089.00 28408.00 28466.00 21112.00 26086.00
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/04 $10,000 --------------------------- 10/31/94- 1 YEAR 5 YEARS 10 YEARS 10/31/04 ------ ------- -------- --------- Institutional Class(1).... 12.87% 7.01% 9.89% $25,669 PlanAhead Class(1)........ 12.44% 6.75% 9.59% $24,979 AMR Class(1).............. 13.13% 7.32% 10.20% $26,417 Lipper Balanced Funds Index.................... 8.20% 2.72% 8.73% $23,089 S&P 500 Index............. 9.42% (2.22)% 11.01% $28,408 S&P 500/Barra Value Index.................... 14.46% 1.49% 11.03% $28,466 Lehman Bros. Aggregate Index.................... 5.53% 7.58% 7.76% $21,112 Balanced Composite Index(2)................. 10.83% 4.29% 10.06% $26,086
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. 60% S&P 500/Barra Value, 40% LB Aggregate Index During the twelve-month period, the Fund's assets on average were invested 67% in equities (including equitized cash) and 33% in fixed-income securities, ending the period with 66% in equities/ equitized cash and 34% in fixed-income securities. The equity portion of the Fund returned 20.1%, outperforming the S&P 500/Barra Value Index ("Barra Value Index") return of 14.5%. The Fund added value relative to the Barra Value Index through stock selection, which was positive in eight out of ten sectors. The effect of the Fund's equity sector allocation was neutral. Stock selection in the Financials sector contributed most to the Fund's excess performance. The Fund's positions in Bank of America Corp. (up 23.1%), Allstate Corp. (up 24.7%) and MetLife, Inc. (up 23.0%) had the largest impact in this sector. Holdings in the Energy, Industrials, Consumer Discretionary and Consumer Staples sectors were also a source of significant added value. Strong performers included Valero Energy Corp. in the Energy sector, Tyco International Ltd. in the Industrials sector, Carnival Corp., MGM Mirage, Inc. and J.C. Penney Company, Inc. in the Consumer Discretionary sector and Imperial Tobacco Group plc in the Consumer Staples sector. The Fund's Health Care sector holdings detracted from performance relative to the Barra Value Index, due mostly to the Fund's positions in Merck & Company, Inc. and Tenet Healthcare Corp. Equity sector allocation had no net impact on the Fund's relative returns during the twelve-month period. The Fund benefited from underweighting Financials and Information Technology, two of the worst performing sectors of the Barra Value Index, but those relative gains were offset by underweighting Energy which was the best performing sector of the Barra Value Index. The fixed-income portion of the Fund returned 5.8% for the twelve-month period, ahead of the Lehman Brothers Aggregate Index return of 5.5%. The Fund's outperformance was due mostly to a large overweight in Corporates, the best performing sector of the Lehman Brothers Aggregate Index. Good security selection in Treasuries also added value. 4 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE BALANCED FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The sub-advisers continue to focus on the selection of attractive securities in a volatile and changing environment. TOP TEN EQUITY HOLDINGS
% OF EQUITIES -------- Bank of America Corporation 3.1% ConocoPhillips 2.6% Citigroup, Incorporated 2.3% Altria Group, Incorporated 2.3% MetLife, Incorporated 2.0% J P Morgan Chase & Company 2.0% Allstate Corporation 1.8% Tyco International Limited 1.8% Washington Mutual, Incorporated 1.7% Occidental Petroleum Corporation 1.6% ----- Total 21.2% Top Ten Equity Holdings as % of Total Net Assets 12.5%
EQUITY SECTOR ALLOCATION
% OF EQUITIES -------- Financials 30.7% Industrials 13.9% Consumer Discretionary 10.3% Energy 10.0% Consumer Staples 9.1% Health Care 7.0% Utilities 6.1% Materials 6.1% Information Technology 5.2% Telecommunication Services 1.6%
FIXED-INCOME SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporates 33.3% U.S. Treasury 27.5% Mortgage-Backed 25.6% Agency 12.5% Asset-Backed 1.1%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. 5 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE BALANCED FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,049.12 $3.15 Hypothetical $1,000.00 $1,022.06 $3.11 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,047.69 $4.86 Hypothetical $1,000.00 $1,020.39 $4.80 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,051.55 $1.89 Hypothetical $1,000.00 $1,023.30 $1.86 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.31%, 0.47%, 0.18%, for the Institutional, PlanAhead, and AMR Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 6 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE LARGE CAP VALUE FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the Large Cap Value Fund returned 18.59% for the twelve months ended October 31, 2004, well ahead of the S&P 500/Barra Value Index ("Index") return of 14.46% and the Lipper Multi-Cap Value Funds Index return of 12.93%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/94 THROUGH 10/31/04 (LINE GRAPH)
LIPPER MULTI-CAP S&P 500/BARRA INSTITUTIONAL CLASS VALUE FUNDS INDEX S&P 500 INDEX VALUE INDEX ------------------- ----------------- ------------- ------------- 10/94 10000.00 10000.00 10000.00 10000.00 10/95 12069.00 12010.00 12644.00 12302.00 10/96 14890.00 14478.00 15690.00 15330.00 10/97 19066.00 18716.00 20728.00 19882.00 10/98 20263.00 19616.00 25286.00 22217.00 10/99 20612.00 21556.00 31777.00 26440.00 10/00 21603.00 23681.00 33712.00 28999.00 10/01 21126.00 22182.00 25318.00 23658.00 10/02 18838.00 19636.00 21492.00 19924.00 10/03 23981.00 24993.00 25963.00 24870.00 10/04 28439.00 28224.00 28408.00 28466.00
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/04 $10,000 --------------------------- 10/31/94- 1 YEAR 5 YEARS 10 YEARS 10/31/04 ------ ------- -------- --------- Institutional Class(1).... 18.59% 6.65% 11.02% $28,439 PlanAhead Class(1)........ 18.26% 6.36% 10.68% $27,575 AMR Class(1).............. 18.89% 6.91% 11.30% $29,172 Lipper Multi-Cap Value Funds Index.............. 12.93% 5.54% 10.93% $28,224 S&P 500 Index............. 9.42% -2.22% 11.01% $28,408 S&P 500/Barra Value Index.................... 14.46% 1.49% 11.03% $28,466
1 Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. The Fund produced positive returns in every sector, and outperformed the Index in every sector except Health Care and Telecommunication Services. The Fund outperformed the Index mostly through strong stock selection, as sector allocation detracted slightly from performance. The Fund benefited from its stock selection in eight of the ten economic sectors. The largest contributors were in the Information Technology and Financials sectors. The companies with most impact in the Information Technology sector were Apple Computer, Inc. (up 129.5%), Autodesk, Inc. (up 175.0% during the period it was held by the Fund) and NCR Corp. (up 56.8%). In the Financials sector, Bank of America Corp. (up 23.1%), Allstate Corp. (up 24.7%) and MetLife, Inc. (up 23.0%) were the largest contributors. Positive stock selection in Energy (primarily Valero Energy Corp. and Occidental Petroleum Corp.), Industrials (Tyco International Ltd. and Boeing Co.), Consumer Staples (Imperial Tobacco Group plc and UST, Inc.), and Consumer Discretionary (J.C. Penney Company, Inc., Carnival Corp. and MGM Mirage, Inc.), also added meaningful value versus the Index. Sector weightings detracted a minimal amount, as an underweight position in Energy and Telecommunication Services, which were the first and fourth best performing sectors of the Index, respectively, and an overweight position in Health Care, which was one of the worst performing sectors of the Index, more than offset the value otherwise attained through sector allocation. The sub-advisers continue to implement their philosophy of investing in a broadly diversified portfolio of companies which they believe have attractive valuations and above average earnings growth potential. This approach should allow the Fund to continue to benefit in the current economic environment and longer-term. TOP TEN HOLDINGS
% OF NET ASSETS ---------- ConocoPhillips 2.4% Bank of America Corporation 2.3% JP Morgan Chase & Company 2.0% Altria Group, Incorporated 2.0% Tyco International Limited 1.9% Citigroup, Incorporated 1.7% MetLife, Incorporated 1.6% Boeing Company 1.6% Allstate Corporation 1.5% Electronic Data Systems Corporation 1.3%
7 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE LARGE CAP VALUE FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- SECTOR ALLOCATION
% OF EQUITIES -------- Financials 28.8% Industrials 12.9% Consumer Discretionary 10.8% Consumer Staples 9.7% Energy 9.4% Information Technology 7.6% Health Care 6.9% Materials 6.2% Utilities 5.5% Telecommunication Services 2.2%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,061.74 $3.40 Hypothetical $1,000.00 $1,021.84 $3.33 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,059.82 $4.88 Hypothetical $1,000.00 $1,020.40 $4.79 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,062.50 $1.96 Hypothetical $1,000.00 $1,023.24 $1.92 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.33%, 0.47%, 0.19%, for the Institutional, PlanAhead, and AMR Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 8 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE LARGE CAP GROWTH FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the Large Cap Growth Fund returned 6.71% for the twelve months ended October 31, 2004, compared to the Russell 1000 Growth Index ("Index") return of 3.38% and the Lipper Large-Cap Growth Funds Index return of 2.63%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/04 (LINE GRAPH)
LIPPER LARGE-CAP RUSSELL 1000 GROWTH INSTITUTIONAL CLASS GROWTH FUNDS INDEX INDEX ------------------- ------------------ ------------------- 7/00 10000.00 10000.00 10000.00 10/00 9540.00 9505.00 9407.00 10/01 5665.00 5678.00 5649.00 10/02 4534.00 4620.00 4541.00 10/03 5493.00 5476.00 5531.00 10/04 5862.00 5620.00 5718.00
* Inception of Fund
ANNUALIZED TOTAL RETURNS ------------------------ PERIODS ENDED 10/31/04 VALUE OF ------------------------ $10,000 SINCE 7/31/04- 1 YEAR 3 YEAR INCEP. 10/31/04 ------ ------ ------ -------- Institutional Class(1)..... 6.71% 1.14% (11.81)% $5,862 AMR Class(1)............... 6.88% 1.23% (11.70)% $5,893 Lipper Large-Cap Growth Funds Index............... 2.63% (0.35)% (12.68)% $5,620 Russell 1000 Growth Index.. 3.38% 0.41% (12.32)% $5,718
Russell 1000 (R) Growth Index is a service mark of the Frank Russell Company. 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. During the Fund's fiscal year, nine out of ten 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 Fund added value in eight sectors. The largest value added sectors for the Fund relative to the Index were Financials and Consumer Staples. Positions in Moody's Corp. (up 35.1%) and Freddie Mac (up 20.9%) contributed most to the Financial sector's outstanding relative performance. In Consumer Staples, positions in Reynolds American, Inc., Gillette Company and Kraft Foods, Inc. were the largest contributors relative to the Index. 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 ---------- Pfizer, Incorporated 5.1% Johnson & Johnson 4.6% Microsoft Corporation 4.0% Qualcomm, Incorporated 2.5% Procter & Gamble Company 2.5% International Business Machines Corporation 2.1% Intel Corporation 2.1% Gillette Company 1.8% Viacom, Incorporated 1.8% Cisco Systems, Incorporated 1.7%
SECTOR ALLOCATION
% OF EQUITIES -------- Information Technology 26.1% Health Care 23.5% Consumer Discretionary 17.7% Financials 12.4% Consumer Staples 8.8% Industrials 7.7% Telecommunication Services 1.5% Materials 0.8% Energy 0.8% Utilities 0.7%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the 9 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE LARGE CAP GROWTH FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the Institutional Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the Institutional Class that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,003.45 $4.03 Hypothetical $1,000.00 $1,021.12 $4.06 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,005.16 $3.48 Hypothetical $1,000.00 $1,021.66 $3.51 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.40%, 0.35%, for the Institutional and AMR Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 10 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE MID-CAP VALUE FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the Mid-Cap Value Fund returned 2.70% for the four-month period from its inception on June 30 through October 31, 2004. The Fund trailed the Russell Mid-Cap Value Index ("Index") return of 4.09% but was well ahead of the Lipper Mid-Cap Value Funds Index return of 0.58%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 6/30/04* THROUGH 10/31/04 (LINE GRAPH)
LIPPER MID-CAP VALUE RUSSELL MIDCAP VALUE INSTITUTIONAL CLASS FUNDS INDEX INDEX ------------------- -------------------- -------------------- 6/04 10000.00 10000.00 10000.00 10/04 10270.00 10058.00 10409.00
* Inception of Fund
TOTAL RETURNS PERIODS ENDED VALUE OF 10/31/04 $10,000 --------------------- 6/30/04- 3 MOS. SINCE INCEP. 10/31/04 ------ ------------ -------- Institutional Class(1)... 4.26% 2.70% $ 10,270 Lipper Mid-Cap Value Funds Index............ 4.65% 0.58% $ 10,058 Russell Midcap Value Index.................. 6.99% 4.09% $ 10,409
1 Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. During July, the first month of the period, the Fund's -1.5% return exceeded the -2.7% return of the Index. The Fund benefited from having a large cash position at inception and in the early days of its existence during a month when the equity markets were down across the board. However, the Fund lost its initial advantage during the last three months of the period, returning 4.3% versus the Index return of 7.0%. The Fund trailed the Index due to stock selection and sector allocation. The Fund's investments in the Financials sector detracted most from performance, due to a large position in AON Corp. (down 22.2% during the last three months of the period). The Consumer Discretionary and Utilities sectors also hurt the Fund's performance. In the Consumer Discretionary sector, Rent-A-Center, Inc., Brinker International, Inc., Whirlpool Corp. and Weight Watchers International, Inc. had the largest impact, while CenterPoint Energy, Inc., Wisconsin Energy Corp. and Xcel Energy, Inc. were responsible for most of the underperformance in the Utilities sector. The Fund's holdings in the Consumer Staples sector added value relative to the Index, with Loews Corp. - Carolina Group (up 16.0%) accounting for most of the excess performance in the sector. Sector weightings also detracted from performance from the end of July through the end of October. An overweight position in the Health Care and Consumer Staples sectors, the two worst performing sectors of the Index, was responsible for most of the underperformance attributable to sector allocation. The sub-advisers' philosophy of investing in undervalued companies that exhibit improving profitability and earnings growth potential should allow the Fund to benefit longer-term. TOP TEN HOLDINGS
% OF NET ASSETS ---------- Loews Corporation 2.2% XL Capital Limited 1.6% Lear Corporation 1.5% Wellchoice, Incorporated 1.5% Kerr-McGee Corporation 1.5% R.H. Donnelley Corporation 1.5% Wisconsin Energy Corporation 1.5% Willis Group Holdings Limited 1.4% BearingPoint, Incorporated 1.4% American Power Conversion Corporation 1.4%
11 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE MID-CAP VALUE FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- SECTOR ALLOCATION
% OF EQUITIES -------- Financials 29.7% Consumer Discretionary 18.8% Industrials 16.4% Utilities 9.0% Health Care 7.1% Consumer Staples 5.8% Materials 5.5% Information Technology 4.1% Energy 3.6%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the inception of the Fund and held for the entire period from June 30, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID ACCOUNT ACCOUNT DURING PERIOD* VALUE VALUE 6/30/04- 6/30/04** 10/31/04 10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,027.00 $3.87 Hypothetical $1,000.00 $1,013.12 $3.85 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratio for the four-month period of 0.84%, for the Institutional Class, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the four-month period (124) by days in the year (366) to reflect the four-month period. ** Commencement of operations, June 30, 2004. 12 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SMALL CAP VALUE FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the Small Cap Value Fund returned 19.86% for the twelve months ended October 31, 2004, outperforming the Russell 2000 Value Index ("Index") return of 17.99% and the Lipper Small-Cap Value Funds Index return of 17.12% for the same period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 12/31/98* THROUGH 10/31/04 (LINE GRAPH)
LIPPER SMALL-CAP VALUE RUSSELL 2000 VALUE INSTITUTIONAL CLASS FUNDS INDEX INDEX ------------------- ---------------------- ------------------ 12/98 10000.00 10000.00 10000.00 10/99 9070.00 9513.00 9508.00 10/00 10320.00 11261.00 11153.00 10/01 12400.00 12151.00 12129.00 10/02 12808.00 11799.00 11822.00 10/03 18886.00 16693.00 16584.00 10/04 22637.00 19551.00 19567.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS --------------------------- PERIODS ENDED 10/31/04 VALUE OF --------------------------- $10,000 SINCE 12/31/98- 1 YEAR 5 YEARS INCEP. 10/31/04 ------ ------- -------- --------- Institutional Class(1).... 19.86% 20.07% 15.03% $22,637 PlanAhead Class(1,2)...... 19.56% 19.77% 14.74% $22,302 AMR Class(1,2)............ 20.12% 20.42% 15.34% $22,991 Service Class(1,3)........ 19.24% 19.66% 14.65% $22,200 Lipper Small-Cap Value Funds Index.............. 17.12% 15.50% 12.18% $19,551 Russell 2000 Value Index.. 17.99% 15.53% 12.20% $19,567
* Russell 2000 (R) Value Index is a service mark of the Frank Russell Company. 1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the since inception period 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. As a result, 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. Fund performance for the five-year and since inception periods 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. As a result, 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 except Consumer Staples and Information Technology and outperformed the Index in seven out of ten sectors during the period. Both stock selection and sector allocation added to the Fund's relative performance. Stock selection in the Consumer Discretionary and Industrials sectors had the greatest impact. Positions in Jack in the Box, Inc. (up 83.5%), Mandalay Resort Group (up 76.7%), Foot Locker, Inc. (up 33.4%) and Brunswick Corp. (up 60.8%) were the major contributors to the Consumer Discretionary sector's positive impact on the Fund's performance. Holdings such as Valassis Communications, Inc., Terex Corp. and Brady Corp. in the Industrials sector contributed significantly. The Consumer Staples sector detracted from performance, mostly due to a large position in American Italian Pasta Co., but not enough to offset the superior performance in other sectors. The Fund's underweighting in the Information Technology sector, which was the second worst performing sector of the Index, and overweighting of the top-performing Energy sector, contributed significantly to the Fund's excess performance relative to the Index. However, underweighting the Financials sector and overweighting the Consumer Discretionary sector erased some of that advantage. The sub-advisers continue to focus on stock selection, uncovering investment opportunities in the current economic environment. 13 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SMALL CAP VALUE FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Valassis Communications, Incorporated 1.5% Encore Acquisition Company 1.1% Kerzner International Limited 0.9% Del Monte Foods Company 0.8% Beazer Homes USA, Incorporated 0.8% Reinsurance Group of America, Incorporated 0.8% NSTAR 0.8% Kirby Corporation 0.8% WCI Communities, Incorporated 0.8% Bank Hawaii Corporation 0.8%
SECTOR ALLOCATION
% OF EQUITIES -------- Consumer Discretionary 21.1% Financials 20.9% Industrials 18.3% Utilities 9.4% Materials 7.4% Information Technology 7.2% Health Care 5.9% Energy 5.4% Consumer Staples 4.0% Telecommunication Services 0.4%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher. 14 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SMALL CAP VALUE FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - --------------------------------------------------------------------------------
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,061.97 $4.62 Hypothetical $1,000.00 $1,020.65 $4.53 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,060.64 $5.90 Hypothetical $1,000.00 $1,019.41 $5.78 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,063.42 $3.11 Hypothetical $1,000.00 $1,022.13 $3.04 (5% return before expenses) SERVICE CLASS Actual $1,000.00 $1,059.60 $7.11 Hypothetical $1,000.00 $1,018.23 $6.97 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.45%, 0.57%, 0.30%, 0.69%, for the Institutional, PlanAhead, AMR, and Service Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 15 INTERNATIONAL EQUITY MARKET OVERVIEW - -------------------------------------------------------------------------------- Despite concerns about the outlook for corporate earnings growth and the rise in oil prices and interest rates, the global economy continued to grow rapidly during the fiscal year ended October 31, 2004. Continued economic strength reflected strong consumer and business confidence in China, the U.S., Japan and Europe. Although the 12-nation euro zone lagged other regions in the current recovery, the European Central Bank forecasted a growth rate between 1.6% and 2.2% for 2004. This compares to GDP growth of only 0.5% in 2003. In Japan, the economy has been emerging from a decade-long deflationary period. During the fiscal year, Japan's consumer and business confidence reached their highest levels since 1991. However, second quarter 2004 GDP growth was only 1.3% annualized, significantly below the 7.0% annualized average of the preceding two quarters. Japan continues to struggle with falling prices in the absence of a stronger response by its central bank. Despite relatively higher growth rates in the U.S., the dollar continued to depreciate and reached an all time low vs. the euro, and an 11-year low vs. the pound sterling. The dollar's decline bolstered U.S. corporate profits and aided the Fed's deflation battle. By making imports more expensive, the weak dollar should ameliorate the current U.S. account deficit (which by year end reached approximately 6% of GDP). By late spring, despite preemptive actions by its authorities to engineer a soft landing, markets feared a potentially sharp downturn in the Chinese credit cycle. Chinese imports have become an important source of external demand in the global economy. A slowdown in the Chinese economy implies a potentially significant amount of collateral damage to several of its trading partners. Euro zone economies continued to show few signs of vitality. The rise in the euro vs. the U.S. dollar since its low in July 2001 has depressed revenue growth of many European multinational companies. However, the seemingly insatiable Chinese demand for industrial equipment, especially German capital goods, has soothed some of the pain from the euro's appreciation. In recognition of this precarious regional economic recovery, the European Central Bank pursued a course of neutral monetary policy. The Japanese trade surplus reached new highs as Japanese firms continued to benefit from the Asian trade boom. Nonetheless, excess capacity shows no sign of abating and private credit demand remains dormant in Japan. On June 30th, the U.S. Federal Reserve Bank raised interest rates for the first time in four years to 1.25%. The Fed appeared ready to continue tightening until real short-term interest rates reach 0% (roughly 2% nominal). The Fed raised rates by a quarter point at each subsequent FOMC meeting, reaching 1.75% by the end of the fiscal year. Overnight lending rates remained 0% in Japan, while the European Central Bank made no adjustment with interest rates unchanged at a six-decade low of 2%. Central banks in the UK and Australia already reached an end to their tightening cycle and have achieved the desired effect of cooling their respective economies without creating havoc in the property sector. Consumer spending remained buoyant in the U.S. and some parts of Europe such as the UK and France, but did not revive in Germany. Industrial production and business confidence are improving in all euro regions excluding Germany. In an effort to keep their currencies from appreciating, Asian central banks (particularly the Bank of Japan) have acted to support domestic growth by intervening in the currency markets. Meanwhile, China's economy continued to grow, with no obvious signs of cooling, benefiting from the indomitable U.S. consumption. U.S. unemployment continued to accommodate a gradual recovery by remaining low. American housing, meanwhile, posted strong results from both existing and new home sales. Oil prices soared to a new high in October, touching $55 per barrel (West Texas Intermediate), an 85% increase over the past year. The Canadian dollar has benefited more from high energy and natural resource prices than any other currency. This boom has encouraged the Bank of Canada to raise interest rates twice in recent months to 2.5%. Soaring energy costs add a sizable cost burden to manufacturing and transportation throughout oil importing nations. The European Central Bank has continued to hold interest rates steady at 2.0% (a six decade low) as a result of both escalating energy costs and rising unemployment impacting the euro region's sluggish recovery. China's GDP growth slowed modestly from 9.6% annualized to 9.1%; meanwhile consumer prices rose 5.2%. In late October, in an effort to cool its economy, the Chinese central bank jolted global markets by announcing a surprise 27 basis point interest rate hike -- its first in nine years. It is possible that this is the beginning of a fundamental change in China, and the start of a shift towards a more market-based approach to monetary and economic policy. Rising global interest rates along with high input prices (both energy and raw materials) indicate that global growth is likely to moderate in the next 12 months. 16 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the International Equity Fund returned 22.49% for the twelve months ended October 31, 2004. The Fund outperformed the MSCI EAFE Index (the "Index") return of 18.84% and the Lipper International Funds Index return of 16.56%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/94 THROUGH 10/31/04 (LINE GRAPH)
LIPPER INTERNATIONAL INSTITUTIONAL CLASS FUNDS INDEX MSCI EAFE INDEX ------------------- -------------------- --------------- 10/94 10000.00 10000.00 10000.00 10/95 10790.00 9953.00 9963.00 10/96 12653.00 11209.00 11006.00 10/97 15068.00 12708.00 11516.00 10/98 15699.00 13297.00 12627.00 10/99 18836.00 16361.00 15535.00 10/00 19280.00 16926.00 15084.00 10/01 16091.00 12846.00 11324.00 10/02 14400.00 11527.00 9828.00 10/03 18952.00 14586.00 12486.00 10/04 23214.00 17002.00 14838.00
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/04 $10,000 --------------------------- 10/31/94- 1 YEAR 5 YEARS 10 YEARS 10/31/04 ------ ------- -------- --------- Institutional Class(1).... 22.49% 4.27% 8.79% $23,214 PlanAhead Class(1)........ 22.16% 4.08% 8.52% $22,648 AMR Class(1).............. 22.84% 4.53% 9.07% $23,830 Service Class(1,2)........ 21.88% 3.98% 8.46% $22,537 Lipper Int'l. Funds Index.................... 16.56% 0.77% 5.45% $17,002 MSCI EAFE Index........... 18.84% (0.92)% 4.02% $14,838
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2. Fund performance for the five-year and ten-year periods represents the total returns achieved by the PlanAhead Class from 10/31/94 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 PlanAhead Class. As a result, total returns shown may be higher than they would have been had the Service Class been in existence since 10/31/94. The Fund outperformed the Index over the past fiscal year primarily due to strong stock selection, although country allocation was also positive. In France, significant positions in Aventis (up 59.5% during the period it was held by the Fund), Vinci (up 68.6%) and Total (up 37.5%) contributed over 1% in relative performance as compared to the Index. In the United Kingdom, the Fund added value by owning BAE Systems (up 46.5%) and Reuters Group (up 60.4%), while German holdings, Celesio and E.ON (both up over 65%), also contributed to the Fund's outperformance. Country allocation added value primarily due to the Fund's nearly 9% underweighting in Japan versus the Index as the Japanese market gained only 8.9% during the period. Similar to country attribution, most of the value added from a sector perspective was due to stock selection although sector allocation was also positive. Stock selection was particularly strong in the Health Care, Industrials and Information Technology sectors. Within the Health Care sector, Aventis and Celesio contributed over 1% in relative performance as compared to the Index. Industrial companies SIG Holding (up 39.6%), Geberit (up 61.0%), Vinci (up 68.6%) and BAE Systems (up 46.5%) also contributed in excess of 1% relative to the Index. Within the Information Technology sector, Amadeus Global Travel Distribution gained 27.1% during the time it was held by the Fund. From a sector allocation perspective, the Fund added value by underweighting Information Technology, which was the worst sector for the period (and only sector with a negative return) as it dropped by just over 1%. 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. 17 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Sanofi-Synthelabo 2.1% Vodafone Group plc 2.1% GlaxoSmithKline plc 2.1% Total S.A. 1.7% Royal Bank of Scotland Group plc 1.6% Koninklijke (Royal) Philips Electronics N.V. 1.6% Diageo plc 1.4% Telefonica S.A. 1.3% Royal Dutch Petroleum Company 1.3% Unilever plc 1.2%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 25.6% Industrials 13.3% Consumer Discretionary 11.6% Telecommunication Services 10.0% Health Care 8.4% Energy 8.0% Materials 8.0% Consumer Staples 7.8% Utilities 4.2% Information Technology 3.1%
REGIONAL ALLOCATION* (PIE CHART)
EUROPE PACIFIC RIM NORTH AMERICA CENTRAL AMERICA - ------ ----------- ------------- --------------- 77.9 19.40 2.50 0.20
* Allocation based upon gross investments in AMR Investment Services International Equity Portfolio. FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as redemption fees, and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA 18 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as redemption fees. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,080.12 $3.92 Hypothetical $1,000.00 $1,021.37 $3.81 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,078.92 $5.25 Hypothetical $1,000.00 $1,020.09 $5.10 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,081.49 $2.49 Hypothetical $1,000.00 $1,022.74 $2.42 (5% return before expenses) SERVICE CLASS Actual $1,000.00 $1,077.33 $6.61 Hypothetical $1,000.00 $1,018.77 $6.43 (5% return before expenses)
* Expense amounts are inclusive of the Fund's proportionate share of expenses of the AMR Investment Services Trust International Equity Portfolio. Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.38%, 0.50%, 0.24%, 0.64%, for the Institutional, PlanAhead, AMR, and Service Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 19 EMERGING MARKETS OVERVIEW - -------------------------------------------------------------------------------- Global emerging markets had strong returns with the MSCI EM Index gaining over 19% during the twelve months ended October 31, 2004, though not without volatility. Latin America and Europe, Middle East and Africa (EMEA) were the star regions, returning 37% and 33% respectively. Brazil gained 41% and Mexico rose 37%. In EMEA, Russia and South Africa each gained 32% and 33% respectively, while Turkey gained 44%. Asia lagged gaining only 7%. Indonesia gained 43%, China and South Korea each rose 10%, while Taiwan fell 7%. In Africa and the Middle East, geopolitical turmoil and climbing oil prices made for an interesting investing backdrop. South Africa experienced a strong Rand, in addition to exceptional performance by the many materials producers there. Asia was a very active region in the last year. Chinese authorities announced plans during the first quarter of 2004 to reign in capital spending by lowering the allowable debt value for future cement, steel, and construction projects in an attempt to orchestrate a "soft landing." Asia was the hardest hit by the news, as investors moved quickly to ward off market weakness caused by a possible slowdown in trade activity. More recently, the People's Bank of China surprised capital markets by raising interest rates for the first time in nine years, triggering more uncertainty in the pacific rim. Despite worries that a second quarter election upset in India would hamper the privatization movement from which the country has benefited in recent years, the newly-elected Congress party has been more liberal than anticipated regarding business matters. Steel producers experienced record demand, resulting from the torrid Chinese infrastructure expansion that seemingly culminated in the last twelve months. The emerging markets successfully outperformed both the U.S. market, as defined by the S&P 500 Index, and developed international markets, as defined by the MSCI EAFE Index, over the year ended October 31, 2004. Emerging markets outperformed the U.S. market by 10%, and the EAFE Index by less than 1%. On a 5 year basis, emerging markets outperformed the U.S. market by 8% annualized and the EAFE Index by 7% annualized. Despite the success of the emerging markets asset class, earnings have kept pace such that the asset class was trading at a 35% discount to the S&P 500 on a 12-month forward price-to-earnings basis as of October 31st. Additionally, the emerging markets are second only to the U.S. as far as corporate profitability as defined by return on earnings. 20 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the Emerging Markets Fund returned 19.65% for the twelve months ended October 31, 2004. The Fund outperformed the MSCI Emerging Markets Index ("Index") return of 19.02%, but underperformed the Lipper Emerging Markets Funds Index return of 21.58%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/04 (LINE GRAPH)
MSCI EMG MKTS FREE LIPPER EMG MKT FUNDS INSTITUTIONAL CLASS INDEX INDEX ------------------- ------------------ -------------------- 7/00 10000.00 10000.00 10000.00 10/00 8170.00 8499.00 8455.00 10/01 6657.00 6488.00 6578.00 10/02 7309.00 7023.00 7047.00 10/03 10851.00 10417.00 10456.00 10/04 12983.00 12398.00 12713.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS --------------------------- PERIODS ENDED 10/31/04 VALUE OF --------------------------- $10,000 SINCE 7/31/00- 1 YEAR 3 YEARS INCEP. 10/31/04 ------ ------- -------- --------- Institutional Class(1).... 19.65% 24.94% 6.34% $12,983 PlanAhead Class(1,2)...... 19.33% 24.66% 6.17% $12,897 AMR Class(1) 20.00%... 25.28% 6.61% $13,126 Lipper Emg Mkt Funds Index.................... 21.58% 24.56% 5.81% $12,713 MSCI Emg Mkts Index....... 19.02% 24.09% 5.19% $12,398
1. Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the 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. The Fund outperformed the Index over the past twelve months due mostly to country allocation, although stock selection added value as well. From a country allocation perspective, overweighting Egypt (the second best market in the Index during the period, up 117.3%) and Brazil (up 40.4%) added value. Also the Fund benefited from underweighting China (up 11.1%) and Israel (the third worst market for the period up 6.1%), as both markets underperformed the Index. Stock selection was particularly strong in South Africa, Russia, India and Israel. Significant positions in African Bank Investments (up over 130%) and Bidvest Group (up nearly 90%) added value in South Africa, while Russian stocks LUKOIL (up nearly 60%) and non-Index stock Mobile Telesystems (up over 90%) outperformed. While a number of stocks helped in India, Check Point Software stood out in Israel as it gained 33.1%. Turning to sector attribution, both stock selection and sector allocation added value. Stock selection was particularly strong in the Telecomm Services and Health Care sectors. Within the Telecomm Services sector, the Fund's positions in non-Index stocks America Movil (up 85.7%) and Mobile Telesystems (up 91.3%) added value, while several stocks in the Health Care sector added value. From a sector allocation perspective, most of the added value was attributable to underweighting the two worst performing sectors, Information Technology and Health Care, which fell 5.5% and 3.7%, respectively. Despite the strong performance of the emerging markets asset class, the Fund's basic philosophy remains focused on investing in undervalued companies with above-average earnings growth expectations. 21 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Samsung Electronics Company Limited 2.3% Petroleo Brasileiro S.A., ADR 1.7% LUKOIL Oil Company, ADR 1.6% Samsung SDI Company Limited 1.4% Korea Electric Power Corporation 1.3% America Movil S.A. de C.V., ADR 1.2% Telefonos de Mexico, S.A. de C.V., ADR 1.2% United Microelectronics Corporation 1.1% Anglo American plc 1.1% Nedcor Limited 1.1%
SECTOR ALLOCATION
% OF EQUITIES -------- Financials 18.4% Telecommunication Services 14.2% Information Technology 12.6% Consumer Discretionary 11.6% Materials 10.8% Energy 9.9% Industrials 8.8% Consumer Staples 7.5% Utilities 4.6% Health Care 1.6%
COUNTRY ALLOCATION (PIE CHART) South Korea 16.1 South Africa 15 Other Europe, Middle East, Africa 12 Taiwan 11.5 Brazil 10.8 India 8.3 Mexico 8.1 Other Asia 7.1 China 6.6 Malaysia 2.7 Israel 1.2 Other Latin America 0.6
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as redemption fees, and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is 22 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund, such as redemption fees. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,081.27 $ 9.59 Hypothetical $1,000.00 $1,015.92 $ 9.29 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,079.24 $11.24 Hypothetical $1,000.00 $1,014.32 $10.89 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,081.84 $ 8.27 Hypothetical $1,000.00 $1,017.19 $ 8.01 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.926%, 1.08%, 0.79%, for the Institutional, PlanAhead, and AMR, Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 23 DOMESTIC BOND MARKET OVERVIEW - -------------------------------------------------------------------------------- HIGH YIELD The high yield market continued along its upward trend over the twelve months ended October 31, 2004, with the Lehman U.S. Corporate High Yield Index returning 12.32%. While fiscal 2004 generated very nice returns, this was clearly a long way from the nearly 34% of the prior fiscal year. In 2003 and 2004, taking risk and extending duration were the two most successful portfolio strategies. With fundamental credit analysis again becoming an important factor and yield spread compression in effect, this provided a marked contrast to 2003 and 2004, when a "rising tide lifted all boats". Starting in the first quarter of 2004, the market shifted back to valuing fundamental results. The size of the high yield market appears to be stabilizing after a decade of continuous growth. Even though 2004 has had record new debt issuance, the market has not increased in size because the new issue proceeds have been used primarily for refinancing existing securities and not for capital growth. Entering fiscal 2005, the high yield market is experiencing very few defaults, more upgrades than downgrades and very strong demand balanced with modest supply. The underlying strength in the U.S. economy should have a positive effect on earnings and stability of corporate balance sheets. INVESTMENT GRADE For the twelve-month period ended October 31, 2004, the investment grade fixed-income markets, as defined by the Lehman Brothers Aggregate Index (the "Index"), produced a 5.53% total return. The individual sectors within the Index generally performed well with the U.S. Corporate sector continuing to produce the highest total return at 6.59%. Asset-backed securities produced the lowest return at 4.13%. The Treasury curve flattened during the period with short-term rates rising in response to the Fed's interest rate hikes, and longer-term rates declining. The U.S. Corporate markets improved during the period with credit spreads tightening in response to improved economic growth and strong corporate profitability. Within the credit spectrum, triple-B rated securities continued to perform well producing a 7.83% return during the period.
TOTAL RETURNS ----------------------- PERIODS ENDED 10/31/04 ----------------------- SECTOR 6 MONTH* 12 MONTH - ------ -------- -------- Lehman Aggregate 4.23% 5.53% Lehman Gov/Credit 4.35% 5.57% U.S. Treasury 4.18% 4.97% U.S. Agency 3.49% 4.53% Mortgage-Backed 4.12% 5.57% Commercial MBS 4.40% 5.56% U.S. Corporate 4.92% 6.59% Asset-Backed 2.55% 4.13% - ----------------------------------------------------- CREDIT RATING Aaa 3.58% 4.49% Aa 4.10% 5.15% A 4.90% 6.18% Baa 5.49% 7.83%
(source: Lehman Brothers) With the Federal Reserve Bank embarking on a measured pace of interest rate increases, beginning June 30, 2004, the short end of the yield curve moved up accordingly. The employment recovery has been choppy and inflation was still low by historical standards, but the Fed made it clear that a 1.00% Fed Funds rate was too low for the economic environment. The Fed Funds rate ended the period at 1.75% with many investors expecting further increases in the near future. Despite rising short-term rates, the 2-year Treasury produced an attractive 1.82% total return during the period. While short-term interest rates were watching the Fed, longer-term rates were watching inflation. The core inflation indicators, which reached a bottom in mid-2003, rebounded somewhat during the period but were still comfortably below 2.00%. Yet, with prices surging in many of the commodity sectors, markets were skeptical about longer-term interest rates. Companies are paying higher prices for raw materials, but they are not able to pass higher prices through to the consumer. With mild inflation at the consumer level, investors in longer term Treasuries found interest rates attractive, which sent yields down slightly. 24 BOND MARKET OVERVIEW - -------------------------------------------------------------------------------- (US TREASURY YIELD CURVE GRAPH)
0.95 1.89 ---- ---- 1.03 2.12 1.16 2.19 1.29 2.26 1.43 2.33 1.56 2.41 1.69 2.48 2 Yr. 1.82 2.55 1.94 2.61 2.06 2.67 2.17 2.73 2.29 2.79 2.41 2.85 2.53 2.92 2.65 2.98 2.77 3.04 2.89 3.10 3.00 3.16 3.12 3.22 5 Yr. 3.24 3.28 3.29 3.32 3.35 3.36 3.40 3.39 3.45 3.43 3.50 3.47 3.56 3.50 3.61 3.54 3.66 3.58 3.71 3.62 3.77 3.65 3.82 3.69 3.87 3.73 3.93 3.76 3.98 3.80 4.03 3.84 4.08 3.87 4.14 3.91 4.19 3.95 4.24 3.99 10 Yr. 4.29 4.02 4.30 4.03 4.31 4.04 4.32 4.05 4.33 4.06 4.35 4.07 4.36 4.08 4.37 4.09 4.38 4.10 4.39 4.11 4.40 4.12 4.41 4.13 4.42 4.14 4.43 4.15 4.44 4.16 4.45 4.17 4.46 4.18 4.47 4.19 4.48 4.20 4.49 4.20 4.50 4.21 4.51 4.22 4.52 4.23 4.53 4.24 4.54 4.25 4.55 4.26 4.57 4.27 4.58 4.28 4.59 4.29 4.60 4.30 4.61 4.31 4.62 4.32 4.63 4.33 4.64 4.34 4.65 4.35 4.66 4.36 4.67 4.37 4.68 4.38 4.69 4.39 4.70 4.40 4.71 4.41 4.72 4.42 4.73 4.43 4.74 4.43 4.75 4.44 4.76 4.45 4.77 4.46 4.79 4.47 4.80 4.48 4.81 4.49 4.82 4.50 4.83 4.51 4.84 4.52 4.85 4.53 4.86 4.54 4.87 4.55 4.88 4.56 4.89 4.57 4.90 4.58 4.91 4.59 4.92 4.60 4.93 4.61 4.94 4.62 4.95 4.63 4.96 4.64 4.97 4.65 4.98 4.65 4.99 4.66 5.01 4.67 5.02 4.68 5.03 4.69 5.04 4.70 5.05 4.71 5.06 4.72 5.07 4.73 5.08 4.74 5.09 4.75 5.10 4.76 5.11 4.77 5.12 4.78 30 Yr. 5.13 4.79
The U.S. Corporate sector continued to produce strong total returns during the period as credit spreads tightened reflecting improved corporate fundamentals and investor appetite for yield. Economic data was showing signs of strength, geopolitical concerns were abating, elections were near, and corporate spreads were still attractive. Companies continued to improve their balance sheets and have significantly reduced debt issuance as compared to prior years. Cash flows have been strong and balance sheet repair has been a key variable to the overall economic recovery. The industries that benefited from this environment were the consumer cyclical and commodity related industries, which perform well in periods of sustained consumer spending and rising basic commodity prices. On the other hand, the industries that paid the higher prices did not fare so well, including transportation and capital goods manufacturers. (LB AGGREGATE INDEX CREDIT SPREADS GRAPH)
INDEX AAA CREDIT AA CREDIT A CREDIT BAA CREDIT ----- ---------- --------- -------- ---------- Jan-03 180.00 63.00 99.00 174.00 268.00 176.00 62.00 96.00 171.00 261.00 171.00 59.00 94.00 163.00 256.00 173.00 61.00 95.00 164.00 260.00 169.00 59.00 89.00 161.00 257.00 169.00 58.00 90.00 161.00 256.00 167.00 54.00 89.00 158.00 256.00 165.00 54.00 89.00 157.00 251.00 162.00 53.00 85.00 155.00 247.00 167.00 57.00 87.00 163.00 249.00 167.00 56.00 89.00 167.00 245.00 165.00 55.00 90.00 168.00 238.00 161.00 53.00 85.00 161.00 235.00 Apr-03 159.00 53.00 86.00 159.00 229.00 157.00 52.00 85.00 155.00 227.00 149.00 51.00 80.00 146.00 217.00 144.00 48.00 78.00 139.00 210.00 134.00 47.00 76.00 130.00 193.00 128.00 42.00 70.00 125.00 186.00 130.00 43.00 70.00 126.00 191.00 132.00 44.00 72.00 128.00 192.00 128.00 42.00 69.00 125.00 186.00 128.00 43.00 69.00 127.00 184.00 124.00 41.00 66.00 120.00 181.00 123.00 41.00 67.00 120.00 178.00 124.00 41.00 67.00 120.00 179.00 Jul-03 124.00 40.00 67.00 122.00 180.00 122.00 41.00 66.00 118.00 176.00 119.00 42.00 68.00 116.00 169.00 118.00 42.00 69.00 114.00 168.00 128.00 55.00 81.00 124.00 176.00 121.00 45.00 73.00 116.00 171.00 126.00 48.00 76.00 121.00 179.00 121.00 48.00 72.00 115.00 173.00 120.00 48.00 73.00 115.00 169.00 119.00 49.00 54.00 93.00 174.00 117.00 47.00 51.00 91.00 172.00 113.00 46.00 54.00 88.00 165.00 114.00 45.00 53.00 88.00 167.00 Oct-03 115.00 48.00 57.00 89.00 167.00 114.00 44.00 57.00 90.00 165.00 109.00 44.00 56.00 85.00 157.00 112.00 47.00 56.00 86.00 164.00 108.00 45.00 54.00 83.00 156.00 109.00 47.00 55.00 84.00 158.00 102.00 41.00 49.00 78.00 149.00 103.00 41.00 50.00 80.00 151.00 100.00 39.00 48.00 79.00 146.00 101.00 40.00 49.00 80.00 144.00 100.00 39.00 48.00 81.00 143.00 99.00 39.00 50.00 80.00 141.00 98.00 38.00 49.00 79.00 139.00 Jan-04 97.00 39.00 50.00 79.00 136.00 95.00 38.00 49.00 78.00 134.00 95.00 38.00 49.00 78.00 134.00 96.00 40.00 49.00 79.00 134.00 97.00 40.00 49.00 79.00 136.00 100.00 41.00 53.00 82.00 141.00 95.00 36.00 48.00 77.00 135.00 96.00 35.00 48.00 79.00 136.00 96.00 37.00 49.00 78.00 137.00 97.00 38.00 48.00 78.00 138.00 99.00 38.00 48.00 78.00 143.00 99.00 39.00 48.00 79.00 142.00 99.00 39.00 48.00 79.00 142.00 Apr-04 98.00 40.00 48.00 80.00 140.00 97.00 40.00 48.00 80.00 137.00 98.00 40.00 50.00 80.00 138.00 96.00 41.00 50.00 80.00 133.00 97.00 40.00 51.00 80.00 137.00 103.00 45.00 55.00 86.00 144.00 103.00 42.00 53.00 85.00 147.00 103.00 42.00 53.00 86.00 145.00 102.00 40.00 54.00 85.00 144.00 103.00 41.00 56.00 85.00 145.00 102.00 42.00 56.00 86.00 144.00 102.00 42.00 56.00 86.00 143.00 101.00 41.00 55.00 85.00 141.00 Jul-04 103.00 42.00 57.00 87.00 145.00 103.00 42.00 56.00 87.00 145.00 102.00 41.00 56.00 87.00 142.00 101.00 42.00 56.00 86.00 141.00 99.00 41.00 54.00 85.00 137.00 101.00 42.00 54.00 87.00 141.00 99.00 38.00 52.00 84.00 140.00 99.00 39.00 53.00 85.00 138.00 97.00 38.00 53.00 83.00 136.00 96.00 38.00 53.00 82.00 134.00 96.00 39.00 52.00 82.00 135.00 94.00 40.00 51.00 81.00 132.00 94.00 38.00 51.00 79.00 132.00 Oct-04 94.00 40.00 54.00 80.00 131.00 93.00 40.00 53.00 79.00 130.00 93.00 39.00 52.00 79.00 131.00 95.00 39.00 52.00 78.00 135.00 93.00 38.00 51.00 77.00 131.00 89.00 37.00 48.00 75.00 127.00
The Mortgage sector of the Index also produced a relatively attractive return of 5.57%, during the period, reflecting lower prepayment rates and higher yields to maturity. Although the government agency, Fannie Mae, was the subject of criticism during the period due to its accounting practices, its mortgage and agency bonds performed well despite the headlines. Overall, the fixed-income markets performed well during this period in an improving economy and a rising Fed Funds rate. In the past, this type of environment did not bode well for the bond market; however, given the mildness of the recovery and the comfortable level of inflation, fixed-income investors were rewarded for their participation. 25 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE HIGH YIELD BOND FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the High Yield Bond Fund returned 10.19% for the twelve months ended October 31, 2004. Despite its strong absolute return, the Fund trailed the Lipper High Current Yield Bond Funds Index return of 11.11%, the Lehman Brothers Corporate High Yield Index return of 12.32% and the Lehman Brothers corporate High Yield Index ("Lehman Index") return of 12.32%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 12/29/00* THROUGH 10/31/04 (LINE GRAPH)
LEHMAN BROS CORP HIGH LIPPER HIGH CURRENT INSTITUTIONAL CLASS YIELD INDEX YIELD FUNDS INDEX ------------------- --------------------- ------------------- 12/00 10000.00 10000.00 10000.00 10/01 10533.00 10199.00 9618.00 10/02 11194.00 9640.00 9045.00 10/03 13446.00 12896.00 11783.00 10/04 14816.00 14484.00 13092.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS ------------------------- PERIODS ENDED 10/31/04 VALUE OF ------------------------- $10,000 SINCE 7/31/00- 1 YEAR 3 YEARS INCEP. 10/31/04 ------ ------- ------ -------- Institutional Class(1).... 10.19% 12.05% 10.78% $14,816 PlanAhead Class(1,2)...... 9.94% 11.47% 10.34% $14,590 Service Class(1,3)........ 9.41% 11.05% 10.01% $14,422 Lehman Bros. High Yield Index................... 12.32% 12.40% 10.15% $14,484 Lipper High Current Yield Funds Index............. 11.11% 10.79% 7.26% $13,092
1 Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance for the three-year and since inception periods 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. As a result, 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 for the three-year and since inception periods 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. As a result, total returns shown may be higher than they would have been had the Service Class been in existence since 12/29/00. The Fund, relative to the Lehman Index, was underweighted in the three best performing sectors. The Basic Industry sector was the top sector for the period with a return of 16.7%. The Utility and Financial sectors also outperformed the Lehman Index with returns of 16.3% and 15.6%, respectively. While the underweighting in Financials averaged only 1% during the past twelve months, the underweightings to Basic Industry and Utilities averaged 4.2% and 9.3%, respectively. An overweighting in the Technology sector also impacted the Fund, as Technology lagged the Lehman Index with a return of 9.8%. On a positive note, the Fund had a 2% underweighting in Transportation which was by far the worst sector in the Lehman Index over the past twelve months with a return of only 0.7%. Additionally, the Fund underweighted Communications by an average of over 8% and the sector underperformed the Lehman Index by over 2%. 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 as the market increases its credit discrimination, their research-intensive investment process will again result in enhanced performance. 26 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE HIGH YIELD BOND FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Echostar DBS Corporation, 6.625%, Due 10/1/2014 1.8% Qwest Services Corporation, 13.50%, Due 12/15/2010 1.6% Freescale Semiconductor, Incorporated, 7.125%, 7/15/2014 1.1% Turning Stone Casino Resort, 9.125%, Due 12/15/2010 1.0% Hexcel Corporation, 9.75%, Due 1/15/2009 1.0% Kabel Deutschland GMBH, 10.625%, Due 7/1/2014 1.0% United Rentals North America, Incorporated, 6.50%, Due 2/15/2012 0.9% Interline Brands, Incorporated, 11.50%, Due 5/15/2011 1.0% Biovail Corporation, 7.875%, Due 4/1/2010 0.9% Owens-Brockway Glass Containers, Incorporated, 8.875%, Due 2/15/2009 0.9%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 100.0%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, distribution (12b-1) fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher. 27 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE HIGH YIELD BOND FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - --------------------------------------------------------------------------------
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,050.49 $4.51 Hypothetical $1,000.00 $1,020.73 $4.45 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,050.04 $5.87 Hypothetical $1,000.00 $1,019.41 $5.78 (5% return before expenses) SERVICE CLASS Actual $1,000.00 $1,047.63 $7.99 Hypothetical $1,000.00 $1,017.33 $7.87 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.44%, 0.57%, 0.78%, for the Institutional, PlanAhead, and Service Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 28 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE ENHANCED INCOME FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The PlanAhead Class of the Enhanced Income Fund returned 4.70% for the twelve months ended October 31, 2004. Its benchmark, a blend of 75% Lehman Brothers Gov/Credit Intermediate Index and 25% Merrill Lynch All U.S. Convertibles Index ("Benchmark"), returned 5.29%. The Fund's peer group, the Lipper Intermediate Investment Grade Index, returned 5.20% over the period. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 7/1/03* THROUGH 10/31/04 (LINE GRAPH)
LIPPER INTERMEDIATE ENHANCED INCOME PLANAHEAD CLASS INVESTMENT GRADE INDEX COMPOSITE INDEX --------------- ---------------------- --------------- 7/03 10000.00 10000.00 10000.00 10/03 10032.00 9924.00 10073.00 10/04 10504.00 10440.00 10564.00
* Inception of fund
ANNUALIZED TOTAL RETURNS PERIODS ENDED 10/31/04 VALUE OF ------------------- $10,000 SINCE 7/01/03- 1 YEAR INCEPTION 10/31/04 ------ --------- -------- PlanAhead Class(1)........... 4.70% 3.76% $10,504 Lipper Intermediate Investment Grade Index..... 5.20% 3.28% $10,440 Enhanced Income Composite Index*..................... 4.87% 4.20% $10,564
1 Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. 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. * 75% Lehman Bros. Gov/Credit Intermediate Index, 25% Merrill Lynch All U.S. Convertibles Index The Fund's assets have been allocated approximately 75% to AMR Investment Services, Inc. (the "Manager") which invests primarily in income producing, short- and intermediate-term, investment grade bonds and 25% to a sub-adviser who invests in securities including convertible bonds, convertible preferreds, high yield bonds and equities in order to try to enhance the return of the overall Fund. For the twelve-month period, the investment grade bond portion of the Fund returned 4.6% compared before expenses to a 4.3% return for its portion of the Benchmark. The Manager's underweight position in Treasuries (the worst performing segment of the Lehman Gov/Credit Intermediate Index) and approximate double-weight position in Corporates (the best performing segment) added relative value. The duration of the Manager's portion of the Fund was generally neutral versus the Index and did not play a significant role in relative total returns. The remaining portion of the Fund managed by the Fund's sub-adviser returned 8.7% before expenses. These results not only beat the 8.1% return of its portion of the Benchmark but also enhanced the Fund's overall return. This portion of the Fund benefited most from owning equity securities as well as corporate bonds. The Fund's investment advisers remain focused on the Fund's investment objectives of generating income and capital appreciation. TOP TEN HOLDINGS
% OF NET ASSETS ---------- U.S. Treasury Notes, 4.75%, Due 5/15/2014 3.9% U.S. Treasury Notes, 4.00%, Due 2/15/2014 2.9% U.S. Treasury Notes, 5.00%, Due 8/15/2011 2.7% Prudential Insurance Company of America, 6.375%, Due 7/23/2006 2.0% Household Finance Corporation, 5.75%, Due 1/30/2007 1.8% Wachovia Corporation, 6.40%, Due 4/1/2008 1.6% Credit Suisse First Boston USA, Incorporated, 5.875%, Due 8/1/2006 1.5% Heller Financial, Incorporated, 6.375%, Due 3/15/2006 1.5% Synovus Financial Corporation, 7.25%, Due 12/15/2005 1.5% St. George Bank Limited, 7.15%, Due 10/15/2005 1.5%
29 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE ENHANCED INCOME FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- FIXED-INCOME SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 59.4% U.S. Treasury 13.7% Corporate Convertibles 12.9% Mortgage-Backed 11.7% U.S. Agency 1.2% Asset-Backed 1.1%
EQUITY SECTOR ALLOCATION
% OF EQUITIES -------- Consumer Discretionary 38.5% Industrials 23.9% Financials 22.7% Energy 10.4% Telecommunication Services 4.5%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher.
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- PLANAHEAD CLASS Actual $1,000.00 $1,024.05 $5.17 Hypothetical $1,000.00 $1,020.03 $5.16 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratio for the six-month period of 0.51% for the PlanAhead Class, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 30 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the Intermediate Bond Fund returned 4.90% for the twelve months ended October 31, 2004, trailing the Lehman Brothers Aggregate Index ("Index") return of 5.53% and the Lipper Intermediate Investment Grade Index return of 5.20%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 9/15/97* THROUGH 10/31/04 (LINE GRAPH)
LIPPER INTERMEDIATE LEHMAN BROS. INSTITUTIONAL CLASS INVESTMENT GRADE INDEX AGGREGATE INDEX ------------------- ---------------------- --------------- 9/97 10000.00 10000.00 10000.00 10/97 10241.00 10211.00 10295.00 10/98 11215.00 11045.00 11254.00 10/99 11123.00 11074.00 11314.00 10/00 12001.00 11775.00 12140.00 10/01 13724.00 13462.00 13908.00 10/02 14302.00 13952.00 14727.00 10/03 14918.00 14884.00 15450.00 10/04 15649.00 15658.00 16304.00
* Inception of Institutional Class of Fund
ANNUALIZED TOTAL RETURNS ------------------------- PERIODS ENDED 10/31/04 VALUE OF ------------------------- $10,000 SINCE 9/15/97- 1 YEAR 5 YEARS INCEP. 10/31/04 ------ ------- ------ --------- Institutional Class(1)............. 4.90% 7.07% 6.49% $15,649 PlanAhead Class(1,2)... 4.86% 6.51% 6.03% $15,183 AMR Class(1,3)......... 5.38% 7.04% 6.43% $15,596 Lipper Intermediate Inv Grade Index.......... 5.20% 7.17% 6.49% $15,658 Lehman Bros. Agg. Index(4)............. 5.53% 7.58% 7.06% $16,304
1 Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. 2 Fund performance for the since inception period 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 the returns of the PlanAhead Class since its inception. Expenses of the PlanAhead Class are higher than those of the Institutional Class. As a result, total returns shown may be higher than they would have been had the PlanAhead Class been in existence since 9/15/97. 3 Fund performance for the since inception period represents the total returns achieved by the Institutional Class from 9/15/97 up to 3/1/99, the inception date of the AMR Class, and the returns of the AMR Class since its inception. 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. 4 Since inception return is from 8/31/97. The Fund outperformed the Index on a gross-of-fees basis. After the deduction of expenses, the Fund slightly underperformed the Index. The Fund added value relative to the Index from its large overweighting in Corporates, the best performing sector of the Index. The Fund's average weighting in Corporates during the twelve-month period was 47% versus the Index average weighting of 22%, ending the period with a 37% weighting in Corporates versus the Index weighting of 21%. The Fund also added value by underweighting U.S. Treasuries and Agencies, two of the worst performing sectors of the Index. While the Fund's security selection in Treasuries and Agencies added value, some of that advantage was lost through selection in the Corporate and Mortgage sectors. Overweighting A and BBB rated securities, the best performing among the investment grade quality ranges, also helped relative performance. The Fund's weighted average duration during the period was only slightly longer than that of the Index and therefore did not play a significant role in relative performance. The Fund's investment managers remain focused on a conservative approach toward investing in the bond market, focusing on issuer-specific opportunities. 31 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Federal Home Loan Mortgage Corporation, 6.00%, Due 12/11/2033 3.1% Federal National Mortgage Association, Discount Note, Due 11/15/2004 3.1% U.S. Treasury Bonds, 5.375%, Due 2/15/2031 2.0% U.S. Treasury Notes, 4.75%, Due 5/15/2014 1.9% U.S. Treasury Notes, 4.00%, Due 2/15/2014 1.9% Government National Mortgage Association, Pool #003515, 5.50%, Due 2/20/2034 1.9% Federal National Mortgage Association, Pool #555880, 5.50%, Due 11/1/2033 1.8% Federal National Mortgage Association, Pool #254545, 5.00%, Due 12/1/2017 1.8% U.S. Treasury Notes, 3.875%, Due 5/15/2009 1.7% Federal National Mortgage Association, Pool #725238, 5.00%, Due 3/1/2034 1.5%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 37.4% Mortgage-Backed 37.3% U.S. Treasury 15.4% U.S. Agency 7.8% Asset-Backed 2.1%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher. 32 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - --------------------------------------------------------------------------------
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,039.37 $1.90 Hypothetical $1,000.00 $1,023.28 $1.88 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,036.61 $4.83 Hypothetical $1,000.00 $1,020.39 $4.79 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,038.94 $1.68 Hypothetical $1,000.00 $1,023.49 $1.66 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.19%, 0.47%, 0.16%, for the Institutional, PlanAhead, and AMR Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 33 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- The Institutional Class of the Short-Term Bond Fund returned 2.21% for the twelve months ended October 31, 2004, ahead of the Merrill Lynch 1-3 Year Gov/Corp Index return of 2.09% and the Lipper Short Investment Grade Bond Funds Index return of 2.10%. COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT FOR THE PERIOD FROM 10/31/94 THROUGH 10/31/04 (LINE GRAPH)
LIPPER SHORT INV. GRADE ML 1-3 YR. GOV./CORP. INSTITUTIONAL CLASS BOND FUNDS INDEX INDEX ------------------- ----------------------- --------------------- 10/94 10000.00 10000.00 10000.00 10/95 10818.00 10833.00 10900.00 10/96 11370.00 11431.00 11554.00 10/97 12085.00 12182.00 12311.00 10/98 12882.00 12904.00 13245.00 10/99 13212.00 13328.00 13673.00 10/00 13983.00 14111.00 14517.00 10/01 15518.00 15537.00 16158.00 10/02 16041.00 15951.00 16941.00 10/03 16615.00 16457.00 17469.00 10/04 16982.00 16803.00 21120.00
ANNUALIZED TOTAL RETURNS --------------------------- VALUE OF PERIODS ENDED 10/31/04 $10,000 --------------------------- 10/31/94- 1 YEAR 5 YEARS 10 YEARS 10/31/04 ------ ------- -------- --------- Institutional Class(1).............. 2.21% 5.15% 5.44% $16,982 PlanAhead Class(1)...... 1.84% 4.88% 5.17% $16,553 AMR Class(1)............ 2.39% 5.35%. 5.66% $17,342 Lipper Short Inv. Grade Index................. 2.10% 4.74% 5.33% $16,803 Merrill Lynch 1-3 Yr Gov./Corp. Index...... 2.09% 5.46% 5.96% $21,120
1 Performance shown is historical and may not be indicative of future returns. Investment returns and principal value will vary, and shares may be worth more or less at redemption than at original purchase. Performance shown is as of date indicated and may differ from current performance. To obtain more current performance information, please visit www.aafunds.com or call 1-800-967-9009. Fund performance in the table above does not reflect the deduction of taxes a shareholder would pay on distributions or the redemption of shares. According to the Merrill Lynch 1-3 Year Index, the Mortgage sector produced the highest total return, at 3.61%, followed by U.S. Corporate at 2.85%, Agencies at 2.06%, and Treasuries at 1.73%. The Mortgage sector's outperformance stems from its relatively low duration in a rising interest rate environment and from a slowing of prepayment activity. U.S. Corporate returns reflect continued improvement in credit spreads and investor appetite for incremental yield in the low interest rate environment. Lower-rated bonds continued to outperform higher-rated alternatives as credit fundamentals improved. Treasury and Agency returns reflect the rise in interest rates and investors' general desire to look for higher yields elsewhere. The Fund's assets were substantially invested in the U.S. Corporate sector, which was consistent with the Fund's total return during this period as compared to the Index. The best performing industries were in the consumer sector, such as autos, in which the Fund was overweighted, and basic industries (oil, chemicals, paper, metals), in which the Fund was underweighted. The strong performance from these industries reflected healthy consumer sentiment and rising commodity prices. The capital goods manufacturing industry, which paid higher commodity prices, underperformed during this period as margins were squeezed. The Fund was underweighted in this industry. The Fund generally maintained an overweight position in the financials, which performed in line with the U.S. Corporate portion of the Index. The Fund also maintained an overweight position in asset-backed securities, which performed in line with high-quality Corporate bonds. Throughout the period, the Fund's duration was maintained at neutral and did not play a significant role in relative total returns. If, however, the risks to short term interest rates were to increase in the upcoming period, a more defensive duration posture may be justified. 34 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - -------------------------------------------------------------------------------- TOP TEN HOLDINGS
% OF NET ASSETS ---------- Prudential Insurance Company of America, 6.375%, Due 7/23/2006, 144A (Note A) 3.5% Chemical Master Credit Card Trust 1996-2 A, 5.98%, Due 9/15/2008 3.4% Hertz Corporation, 4.70%, Due 10/2/2006 3.3% Met Life Global Funding I, 3.375%, Due 10/5/2007 3.3% Wachovia Corporation, 6.40%, Due 4/1/2008 3.0% Heller Financial, Incorporated, 6.375%, Due 3/15/2006 2.9% Synovus Financial Corporation, 7.25%, Due 12/15/2005 2.9% Wells Fargo Financial Auto Owner Trust, 2.67%, Due 8/16/2010 2.8% FleetBoston Financial Corporation, 3.85%, Due 2/15/2008 2.8% Caterpillar Financial Services, 2.35%, Due 9/15/2006 2.7%
SECTOR ALLOCATION
% OF FIXED INCOME ------------ Corporate 77.8% Asset-Backed 16.0% Mortgage-Backed 6.2%
FUND EXPENSE EXAMPLE As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, administrative service fees, and other Fund expenses. The subsequent examples are intended to help you understand the ongoing cost (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period in each Class and held for the entire period from May 1, 2004 through October 31, 2004. ACTUAL EXPENSES The "Actual" lines of the table provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The "Hypothetical" lines of the table provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the Fund's actual return). You may compare the ongoing costs of investing in the Fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. Shareholders of the PlanAhead and Institutional Classes that invest in the Fund through an IRA may be subject to a custodial IRA fee of $12 that is typically deducted each December. If your account was subject to a custodial IRA fee during the period, your costs would have been $12 higher. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs charged by the Fund. Similarly, the expense examples for other funds do not reflect any transaction costs charged by those funds, such as sales charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the table are useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If you were subject to any transaction costs during the period, your costs would have been higher. 35 PERFORMANCE OVERVIEW AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) -- CONTINUED October 31, 2004 (Unaudited) - --------------------------------------------------------------------------------
BEGINNING ENDING ACCOUNT ACCOUNT EXPENSES PAID VALUE VALUE DURING PERIOD* 5/1/04 10/31/04 5/1/04-10/31/04 --------- --------- --------------- INSTITUTIONAL CLASS Actual $1,000.00 $1,012.04 $3.13 Hypothetical $1,000.00 $1,022.02 $3.15 (5% return before expenses) PLANAHEAD CLASS Actual $1,000.00 $1,010.73 $4.41 Hypothetical $1,000.00 $1,020.75 $4.44 (5% return before expenses) AMR CLASS Actual $1,000.00 $1,012.39 $1.65 Hypothetical $1,000.00 $1,023.50 $1.66 (5% return before expenses)
* Expenses are equal to the Fund's annualized expense ratios for the six-month period of 0.31%, 0.44%, 0.16%, for the Institutional, PlanAhead, and AMR Classes, respectively, multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half-year (184) by days in the year (366) to reflect the half-year period. 36 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees of: American AAdvantage Balanced Fund American AAdvantage Large Cap Value Fund American AAdvantage Large Cap Growth Fund American AAdvantage Mid-Cap Value 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 statement 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 Mid-Cap Value 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, 2004, 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 Fund'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 the standards of the Public Company Accounting Oversight Board (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. Our procedures included confirmation of investments owned as of October 31, 2004, by correspondence with the custodian and brokers or by 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, 2004, 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 U.S. generally accepted accounting principles. -s- Ernst & Young Chicago, Illinois December 17, 2004 37 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 4.01% U.S. TREASURY NOTES - 2.51% 4.625%, Due 5/15/2006*......... $ 3,910 $ 4,042 3.375%, Due 11/15/2008*........ 2,000 2,021 3.875%, Due 5/15/2009*......... 1,985 2,041 3.375%, Due 9/15/2009*......... 680 683 5.00%, Due 2/15/2011*.......... 1,350 1,458 5.00%, Due 8/15/2011*.......... 700 756 4.375%, Due 8/15/2012*......... 2,000 2,075 4.00%, Due 2/15/2014*.......... 1,265 1,265 4.75%, Due 5/15/2014*.......... 1,660 1,755 4.25%, Due 8/15/2014*.......... 590 600 -------- TOTAL U.S. TREASURY NOTES.................... 16,696 -------- U.S. TREASURY BONDS - 1.50% 7.50%, Due 11/15/2016*......... 1,055 1,366 9.125%, Due 5/15/2018*......... 1,000 1,474 7.875%, Due 2/15/2021*......... 500 683 6.875%, Due 8/15/2025*......... 1,580 2,006 6.25%, Due 5/15/2030*.......... 1,850 2,225 5.375%, Due 2/15/2031*......... 2,035 2,210 -------- TOTAL U.S. TREASURY BONDS.................... 9,964 -------- TOTAL U.S. TREASURY OBLIGATIONS.............. 26,660 -------- U.S. AGENCY OBLIGATIONS - 4.31% FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.10% 3.25%, Due 11/15/2004.......... 4,500 4,502 1.875%, Due 1/15/2005.......... 8,500 8,497 5.875%, Due 3/21/2011.......... 415 454 4.875%, Due 11/15/2013......... 500 517 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION..... 13,970 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 2.21% Discount Note, Due 11/15/2004................... 4,800 4,797 1.875%, Due 12/15/2004......... 3,890 3,889 5.125%, Due 1/2/2014........... 515 529 7.25%, Due 5/15/2030*.......... 550 701 6.00%, Due 12/11/2033.......... 4,655 4,824 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION..... 14,740 -------- TOTAL U.S. AGENCY OBLIGATIONS.............. 28,710 --------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 8.18% FEDERAL HOME LOAN MORTGAGE CORPORATION - 2.77% Pool #G10084, 6.50%, Due 3/1/2008..................... $ 983 $ 1,020 Pool #G11202, 6.00%, Due 11/1/2016.................... 206 217 Pool #E90777, 5.50%, Due 8/1/2017..................... 127 132 Pool #E96536, 5.00%, Due 3/1/2018..................... 1,365 1,394 Pool #E01386, 5.00%, Due 6/1/2018..................... 449 458 Pool #E97381, 5.50%, Due 6/1/2018..................... 269 278 Pool #E01492, 5.50%, Due 10/1/2018.................... 1,154 1,196 Pool #B12563, 5.00%, Due 2/1/2019..................... 688 703 Pool #E01602, 4.50%, Due 3/1/2019..................... 1,408 1,413 Pool #C26472, 6.50%, Due 5/1/2029..................... 169 178 Pool #C27089, 6.50%, Due 6/1/2029..................... 29 30 Pool #C00835, 6.50%, Due 7/1/2029..................... 473 498 Pool #G01457, 6.00%, Due 8/1/2029..................... 220 228 Pool #G01533, 6.00%, Due 3/1/2033..................... 1,056 1,095 Pool #C01598, 5.00%, Due 8/1/2033..................... 1,589 1,588 Pool #A12149, 6.00%, Due 8/1/2033..................... 840 871 Pool #A15436, 5.50%, Due 11/1/2033.................... 778 794 Pool #C01786, 5.50%, Due 2/1/2034..................... 2,362 2,409 Pool #C01796, 5.00%, Due 3/1/2034..................... 1,934 1,930 Pool #C01848, 6.00%, Due 6/1/2034..................... 1,926 1,997 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION..... 18,429 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.46% Pool #488099, 5.50%, Due 2/1/2014..................... 457 475 Pool #323789, 6.00%, Due 6/1/2014..................... 359 378 Pool #535846, 6.00%, Due 4/1/2016..................... 886 930 Pool #648511, 6.00%, Due 6/1/2017..................... 939 986
See accompanying notes - -------------------------------------------------------------------------------- 38 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Pool #254545, 5.00%, Due 12/1/2017.................... $ 1,749 $ 1,787 Pool #555549, 5.00%, Due 6/1/2018..................... 1,078 1,101 Pool #254865, 4.50%, Due 9/1/2018..................... 2,457 2,470 Pool #100292, 10.00%, Due 9/1/2018..................... 215 241 Pool #761337, 5.00%, Due 4/1/2019..................... 402 410 Pool #769018, 6.50%, Due 12/1/2031.................... 503 531 Pool #725706, 6.00%, Due 8/1/2032..................... 561 588 Pool #713999, 5.50%, Due 7/1/2033..................... 842 859 Pool #713706, 5.50%, Due 8/1/2033..................... 662 676 Pool #727223, 5.50%, Due 9/1/2033..................... 1,476 1,506 Pool #741901, 5.50%, Due 10/1/2033.................... 474 483 Pool #749219, 5.50%, Due 10/1/2033.................... 888 906 Pool #555880, 5.50%, Due 11/1/2033.................... 2,233 2,278 Pool #758322, 5.50%, Due 12/1/2033.................... 1,909 1,948 Pool #725238, 5.00%, Due 3/1/2034..................... 1,937 1,936 Pool #765304, 5.50%, Due 3/1/2034..................... 696 710 Pool #255225, 5.50%, Due 6/1/2034..................... 960 979 Pool #255410, 6.50%, Due 9/1/2034..................... 151 159 Pool #255413, 6.50%, Due 10/1/2034.................... 371 391 Pool #255460, 6.50%, Due 11/1/2034.................... 283 298 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION 23,026 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.95% Pool #780085, 11.50%, Due 8/15/2018.................... 177 202 Pool #780030, 7.00%, Due 6/15/2024.................... 219 235 Pool #780400, 7.00%, Due 12/15/2025................... 198 212 Pool #781200, 8.00%, Due 12/15/2025................... 230 252 Pool #780509, 6.50%, Due 2/15/2027.................... 302 321 Pool #780615, 6.50%, Due 8/15/2027.................... 366 389 Pool #780651, 7.00%, Due 10/15/2027................... 417 446
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Pool #780680, 6.50%, Due 11/15/2027................... $ 414 $ 440 Pool #780747, 6.50%, Due 3/15/2028.................... 360 382 Pool #780788, 6.50%, Due 4/15/2028.................... 392 416 Pool #780842, 8.50%, Due 8/20/2028.................... 225 246 Pool #780936, 7.50%, Due 12/15/2028................... 441 477 Pool #781035, 6.50%, Due 5/15/2029.................... 349 370 Pool #002754, 6.50%, Due 5/20/2029.................... 239 252 Pool #781273, 6.00%, Due 4/15/2031.................... 515 538 Pool #781288, 6.50%, Due 5/15/2031.................... 654 693 Pool #781564, 6.00%, Due 2/15/2033.................... 1,161 1,210 Pool #616094, 6.00%, Due 11/15/2033................... 452 470 Pool #781690, 6.00%, Due 12/15/2033................... 1,306 1,361 Pool #003515, 5.50%, Due 2/20/2034.................... 3,079 3,149 Pool #003517, 6.00%, Due 2/20/2034.................... 875 910 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION..... 12,971 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS.............. 54,426 -------- ASSET-BACKED SECURITIES - 0.37% Household Automotive Trust 2004-1 A3, 3.30%, Due 5/18/2009......... 1,300 1,297 Master Asset Securitization Trust 2002-6 2A1, 5.75%, Due 10/25/2017................... 789 798 TXU Electric Delivery Transition 2004-1 A2, 4.81%, Due 11/15/2012........ 350 364 -------- TOTAL ASSET-BACKED SECURITIES............... 2,459 -------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 0.64% Banc of America Commercial Mortgage, Incorporated 2003-2 A3, 4.342%, Due 3/11/2041........ 445 454 Bear Stearns Commercial Mortgage Securities, Incorporated 2004-PWR5 A4, 4.831%, Due 7/11/2042........ 740 754
See accompanying notes - -------------------------------------------------------------------------------- 39 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Countrywide Home Loan, Incorporated 2004-18 A1, 6.00%, Due 10/25/2034........ $ 901 $ 940 General Electric Capital Commercial Mortgage Corporation 2003-C2 A2, 4.17%, Due 7/10/2037......... 430 436 General Electric Capital Commercial Mortgage Corporation 2004-C3 A3, 4.865%, Due 7/10/2039........ 715 738 Morgan Stanley Dean Witter & Company 2003-T11 A2, 4.34%, Due 6/13/2041......... 400 407 Wachovia Bank Commercial Mortgage Trust 2003-C5 A2, 3.989%, Due 6/15/2035........ 570 549 -------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS.............. 4,278 -------- CORPORATE BONDS - 11.47% BANKS - 1.23% Banco Popular North America Incorporated, 4.25%, Due 4/1/2008.......... 500 512 Bank One Corporation, 5.90%, Due 11/15/2011........ 500 541 4.90%, Due 4/30/2015*........ 300 297 Capital One, 6.875%, Due 2/1/2006......... 800 840 6.70%, Due 5/15/2008......... 450 495 5.75%, Due 9/15/2010......... 210 224 5.125%, Due 2/15/2014........ 450 452 Credit Suisse First Boston, 6.50%, Due 5/1/2008.......... 750 819 Fleet Norstar Financial Group, Incorporated, 8.625%, Due 1/15/2007........ 600 671 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)................ 450 458 Inter-American Development Bank, 5.375%, Due 11/18/2008....... 1,280 1,380 Synovus Financial Corporation, 4.875%, Due 2/15/2013........ 300 303 US Bank, NA, 5.70%, Due 12/15/2008........ 675 726 Washington Mutual Financial Corporation, 6.875%, Due 5/15/2011........ 425 486 -------- TOTAL BANKS................ 8,204 -------- ENERGY - 0.45% Dominion Resources, Incorporated, 5.00%, Due 3/15/2013*........ 210 212 Kerr-McGee Corporation, 5.875%, Due 9/15/2006........ 655 686
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Marathon Oil Corporation, 5.375%, Due 6/1/2007......... $ 260 $ 274 MidAmerican Energy Holdings Company, 3.50%, Due 5/15/2008......... 395 391 5.875%, Due 10/1/2012........ 305 326 Public Service Enterprise Group, Incorporated, 6.95%, Due 6/1/2012.......... 380 428 Union Oil Company of California, 7.90%, Due 4/18/2008......... 100 113 Xcel Energy, Incorporated, 7.00%, Due 12/1/2010......... 500 570 -------- TOTAL ENERGY............... 3,000 -------- FINANCE - 3.58% Aegon, NV, 8.00%, Due 8/15/2006......... 300 327 American General Finance Corporation, 5.375%, Due 9/1/2009..................... 285 300 Assurant, Incorporated, 5.625%, Due 2/15/2014, 144A (Note A)................ 315 325 Bear Stearns Companies, Incorporated, 3.00%, Due 3/30/2006......... 500 502 2.875%, Due 7/2/2008......... 300 293 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013......... 300 305 Boeing Capital Corporation, 5.40%, Due 11/30/2009........ 850 908 Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012........ 400 475 Caterpillar Financial Services Corporation, 3.70%, Due 8/15/2008......... 700 704 Cendant Corporation, 6.875%, Due 8/15/2006........ 990 1,055 6.25%, Due 1/15/2008......... 350 378 Countrywide Home Loan, Incorporated, 3.50%, Due 12/19/2005*....... 800 806 3.25%, Due 5/21/2008......... 510 501 Ford Motor Credit Company, 6.50%, Due 1/25/2007......... 375 394 7.375%, Due 10/28/2009....... 410 446 General Electric Capital Corporation, 6.875%, Due 11/15/2010....... 535 610 General Motors Acceptance Corporation, 6.75%, Due 1/15/2006......... 650 673 6.125%, Due 8/28/2007........ 320 334 7.25%, Due 3/2/2011.......... 410 435 Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013......... 400 396
See accompanying notes - -------------------------------------------------------------------------------- 40 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Household Finance Corporation, 5.75%, Due 1/30/2007......... $ 1,500 $ 1,585 6.375%, Due 11/27/2012....... 280 313 International Lease Finance Corporation, 3.30%, Due 1/23/2008......... 415 411 6.375%, Due 3/15/2009........ 1,025 1,118 Liberty Mutual Corporation, 7.875%, Due 10/15/2026, 144A (Note A)................ 1,500 1,666 Lincoln National Corporation, 4.75%, Due 2/15/2014......... 200 197 MBNA Credit Card Master Trust, 2.65%, Due 11/15/2010........ 820 799 Merrill Lynch & Company, Incorporated, 4.125%, Due 9/10/2009........ 660 664 Morgan Stanley Dean Witter & Company, 6.10%, Due 4/15/2006......... 450 471 4.75%, Due 4/1/2014.......... 560 548 PHH Corporation, 6.00%, Due 3/1/2008.......... 500 535 Prudential Financial, Incorporated, 3.75%, Due 5/1/2008.......... 185 185 4.50%, Due 7/15/2013......... 400 389 5.10%, Due 5/20/2014......... 290 291 SLM Corporation, 3.95%, Due 8/15/2008......... 420 426 4.00%, Due 1/15/2009......... 1,500 1,508 Sprint Capital Corporation, 6.00%, Due 1/15/2007......... 1,230 1,301 8.375%, Due 3/15/2012........ 175 215 8.75%, Due 3/15/2032......... 275 360 Verizon Global Funding Corporation, 4.375%, Due 6/1/2013*........ 400 392 Washington Mutual, Incorporated, 4.625%, Due 4/1/2014......... 350 337 -------- TOTAL FINANCE.............. 23,878 -------- FOREIGN - 0.19% Ontario Province, Canada, 3.35%, 7/16/2007*............ 1,000 1,005 United Mexican States, 7.50%, Due 4/8/2033.......... 240 256 -------- TOTAL FOREIGN.............. 1,261 -------- INDUSTRIALS - 5.28% America Movil S.A. de C.V., 5.75%, Due 1/15/2015......... 400 399 Anheuser Busch Companies, Incorporated, 6.50%, Due 1/1/2028.......... 872 992 AT&T Broadband Corporation, 8.375%, Due 3/15/2013........ 848 1,040
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006.......... $ 855 $ 906 8.125%, Due 5/1/2012......... 900 1,098 8.75%, Due 3/1/2031.......... 265 356 Atlantic Richfield Company, 9.125%, Due 3/1/2011......... 425 540 Baxter International, Incorporated, 5.25%, Due 5/1/2007.......... 455 476 Bemis, Incorporated, 6.70%, Due 7/1/2005.......... 1,000 1,026 Cargill, Incorporated, 6.25%, Due 5/1/2006, 144A (Note A)................ 1,000 1,051 Carnival Corporation, 3.75%, Due 11/15/2007........ 515 519 Comcast Cable Communications, 7.625%, Due 2/15/2008........ 200 223 Comcast Corporation, 5.50%, Due 3/15/2011......... 255 269 Conagra Foods, Incorporated, 7.125%, Due 10/1/2026........ 410 486 7.00%, Due 10/1/2028......... 600 694 ConocoPhillips, 3.625%, Due 10/15/2007....... 425 429 Continental Cablevision, Incorporated, 8.30%, Due 5/15/2006......... 270 291 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 720 742 7.75%, Due 1/18/2011......... 1,000 1,168 6.50%, Due 11/15/2013........ 425 464 John Deere Capital Corporation, 3.375%, Due 10/1/2007........ 650 651 3.75%, Due 1/13/2009......... 520 522 Dell Computer Corporation, 6.55%, Due 4/15/2008......... 400 441 Deutsche Telekom International, 8.50%, Due 6/15/2010......... 280 337 The Walt Disney Company, 5.375%, Due 6/1/2007......... 235 246 EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A (Note A)................ 425 423 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014......... 350 340 France Telecom SA, 8.50%, Due 3/1/2011.......... 550 661 General Motors Corporation, 8.375%, Due 7/15/2033........ 265 276 Harley Davidson, Incorporated, 2.69%, Due 4/15/2011......... 610 608 Hershey Foods Corporation, 6.95%, Due 3/1/2007.......... 1,000 1,088 Hertz Corporation, 4.70%, Due 10/2/2006......... 650 661
See accompanying notes - -------------------------------------------------------------------------------- 41 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Hewlett Packard Company, 5.75%, Due 12/15/2006........ $ 470 $ 496 International Business Machines Corporation, 4.875%, Due 10/1/2006........ 505 524 Lockheed Martin Corporation, 7.20%, Due 5/1/2036.......... 600 730 Martin Marietta Material, Incorporated, 6.90%, Due 8/15/2007......... 200 219 Met Life Global Funding I, 3.375%, Due 10/5/2007........ 650 648 Motorola, Incorporated, 4.608%, Due 11/16/2007....... 810 834 Norfolk Southern Corporation, 7.05%, Due 5/1/2037.......... 270 311 Northrop Grumman Corporation, 4.079%, Due 11/16/2006....... 850 865 7.125%, Due 2/15/2011........ 505 582 Occidental Petroleum Corporation, 6.75%, Due 1/15/2012......... 400 457 Ocean Energy, Incorporated, 4.375%, Due 10/1/2007........ 450 461 Pepsi Bottling Group, Incorporated, 7.00%, Due 3/1/2029.......... 650 779 Pulte Homes, Incorporated, 4.875%, Due 7/15/2009........ 300 307 5.25%, Due 1/15/2014......... 275 274 Reed Elsevier Capital, Incorporated, 6.125%, Due 8/1/2006......... 615 646 Sara Lee Corporation, 6.00%, Due 1/15/2008......... 1,200 1,294 Simon Property Group LP, 6.375%, Due 11/15/2007....... 400 432 Time Warner, Incorporated, 7.625%, Due 4/15/2031........ 250 296 Unilever Capital Corporation, 7.125%, Due 11/1/2010........ 2,000 2,328 Univision Communications, Incorporated, 3.875%, Due 10/15/2008....... 555 555 Verizon Communications, Incorporated, 6.36%, Due 4/15/2006......... 550 577 Verizon Virginia, 4.625%, Due 3/15/2013........ 500 493 Verizon Wireless Capital, 5.375%, Due 12/15/2006....... 420 440 Wal-Mart Stores, Incorporated, 7.55%, Due 2/15/2030......... 650 837 Weyerhaeuser Company, 5.95%, Due 11/1/2008......... 340 368 -------- TOTAL INDUSTRIALS.......... 35,176 --------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) PHARMACEUTICAL - 0.10% Schering Plough Corporation, 6.50%, Due 12/1/2033......... $ 300 $ 330 Wyeth Corporation, 5.50%, Due 2/1/2014.......... 325 333 -------- TOTAL PHARMACEUTICAL....... 663 -------- TRANSPORTATION - 0.41% CNF Transportation, Incorporated, 8.875%, Due 5/1/2010......... 1,850 2,227 Union Pacific Corporation, 6.50%, Due 4/15/2012......... 450 502 -------- TOTAL TRANSPORTATION....... 2,729 -------- UTILITY - 0.23% AEP Texas Central Company, 6.65%, Due 2/15/2033......... 120 133 Appalachian Power Company, 5.95%, Due 5/15/2033......... 120 120 Consolidated Natural Gas Company, 6.875%, Due 10/15/2026....... 360 416 Progress Energy, Incorporated, 6.75%, Due 3/1/2006.......... 490 514 Southern Company Capital Funding, Incorporated, 5.30%, Due 2/1/2007.......... 325 344 -------- TOTAL UTILITY.............. 1,527 -------- TOTAL CORPORATE BONDS...... 76,438 --------
SHARES ----------- COMMON STOCK - 59.05% CONSUMER DISCRETIONARY - 6.09% HOTELS, RESTAURANTS & LEISURE - 1.57% Carnival Corporation*.......... 85,900 4,343 McDonald's Corporation......... 44,500 1,297 MGM Mirage, Incorporated+...... 63,500 3,416 Yum Brands, Incorporated+...... 32,200 1,401 -------- TOTAL HOTELS, RESTAURANTS & LEISURE.................. 10,457 -------- HOUSEHOLD DURABLES - 1.54% Centex Corporation............. 93,600 4,861 Fortune Brands, Incorporated... 18,100 1,318 Koninklijke Philips Electronics NV........................... 116,031 2,764 Pulte Homes, Incorporated...... 24,800 1,361 -------- TOTAL HOUSEHOLD DURABLES... 10,304 --------
See accompanying notes - -------------------------------------------------------------------------------- 42 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) LEISURE EQUIPMENT & PRODUCTS - 0.64% Eastman Kodak Company*......... 76,400 $ 2,313 Mattel, Incorporated........... 110,200 1,930 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS................. 4,243 -------- MEDIA - 0.21% Interpublic Group Companies, Incorporated+................ 116,600 1,430 -------- TOTAL MEDIA................ 1,430 -------- MULTILINE RETAIL - 1.91% Federated Department Stores, Incorporated................. 50,700 2,558 May Department Stores Company...................... 57,900 1,509 Sears, Roebuck, & Company...... 160,600 5,621 Target Corporation............. 61,200 3,061 -------- TOTAL MULTILINE RETAIL..... 12,749 -------- TEXTILES & APPAREL - 0.22% Liz Claiborne, Incorporated.... 36,500 1,492 -------- TOTAL TEXTILES & APPAREL... 1,492 -------- TOTAL CONSUMER DISCRETIONARY............ 40,675 -------- CONSUMER STAPLES - 5.37% FOOD PRODUCTS - 2.46% Albertson's, Incorporated*..... 49,800 1,136 Conagra, Incorporated.......... 134,900 3,561 Dean Foods Company+............ 86,300 2,576 General Mills, Incorporated.... 31,400 1,389 Kraft Foods, Incorporated...... 78,900 2,628 Safeway, Incorporated+......... 67,200 1,226 Sara Lee Company............... 108,274 2,521 Unilever plc, ADR*............. 39,200 1,336 -------- TOTAL FOOD PRODUCTS........ 16,373 -------- TOBACCO - 2.91% Altria Group, Incorporated..... 184,200 8,926 Gallaher Group plc, ADR........ 42,400 2,145 Imperial Tobacco Group plc, ADR*......................... 94,800 4,451 UST, Incorporated.............. 94,500 3,890 -------- TOTAL TOBACCO.............. 19,412 -------- TOTAL CONSUMER STAPLES..... 35,785 -------- ENERGY - 5.88% ENERGY EQUIPMENT & SERVICES - 0.63% Duke Energy Corporation........ 169,900 4,168 -------- TOTAL ENERGY EQUIPMENT & SERVICES................. 4,168 -------- OIL & GAS - 5.25% BP plc, ADR.................... 80,380 4,682 ChevronTexaco Corporation...... 87,628 4,650
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) ConocoPhillips................. 122,688 $ 10,344 Devon Energy Corporation....... 37,100 2,744 Equitable Resources, Incorporated................. 13,300 735 Kerr-McGee Corporation......... 26,800 1,587 Occidental Petroleum Corporation.................. 112,400 6,275 Petro-Canada................... 25,800 1,406 Valero Energy Corporation...... 58,900 2,531 -------- TOTAL OIL & GAS............ 34,954 -------- TOTAL ENERGY............... 39,122 -------- FINANCIALS - 18.14% BANKS - 5.87% Bank of America Corporation.... 268,218 12,014 Comerica, Incorporated......... 23,300 1,433 Federal Home Loan Mortgage Corporation.................. 59,700 3,976 KeyCorp Limited................ 82,800 2,781 PNC Financial Services Group, Incorporated................. 48,478 2,535 UnionBanCal Corporation........ 10,500 638 U.S. Bancorp, Incorporated..... 95,860 2,743 Wachovia Corporation+.......... 56,600 2,785 Washington Mutual, Incorporated+................ 177,200 6,859 Wells Fargo & Company+......... 56,600 3,380 -------- TOTAL BANKS................ 39,144 -------- DIVERSIFIED FINANCIALS - 5.53% American Express Company....... 16,200 860 Bear Stearns Companies, Incorporated................. 22,300 2,113 CIT Group, Incorporated........ 30,800 1,244 Citigroup, Incorporated........ 202,242 8,973 Federal National Mortgage Association.................. 30,800 2,161 Goldman Sachs Group, Incorporated................. 18,800 1,849 MBNA Corporation............... 76,300 1,956 Merrill Lynch & Company, Incorporated................. 36,600 1,974 J P Morgan Chase & Company..... 203,734 7,864 Morgan Stanley Dean Witter & Company...................... 46,400 2,371 Principal Financial Group, Incorporated................. 67,600 2,553 SLM Corporation................ 64,900 2,937 -------- TOTAL DIVERSIFIED FINANCIALS............... 36,855 -------- INSURANCE - 6.22% Ace Limited+................... 58,000 2,207 Allstate Corporation........... 148,700 7,151 American International Group, Incorporated................. 29,100 1,767 Anthem, Incorporated+*......... 14,700 1,182 AON Corporation................ 31,600 645 Assurant, Incorporated......... 49,500 1,335
See accompanying notes - -------------------------------------------------------------------------------- 43 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Conseco, Incorporated+......... 76,600 $ 1,284 Hartford Financial Services Group, Incorporated.......... 20,600 1,205 Loews Corporation.............. 26,000 1,557 MetLife, Incorporated.......... 207,680 7,964 MGIC Investments Corporation... 42,600 2,740 Prudential Financial, Incorporated................. 84,500 3,927 The St. Paul Travelers Companies, Incorporated...... 149,300 5,070 Wellpoint Health Networks, Incorporated+................ 11,600 1,133 XL Capital Limited+............ 31,800 2,306 -------- TOTAL INSURANCE............ 41,473 -------- REAL ESTATE - 0.52% Equity Office Properties Trust........................ 124,000 3,487 -------- TOTAL REAL ESTATE.......... 3,487 -------- TOTAL FINANCIALS........... 120,959 -------- HEALTH CARE - 4.17% HEALTH CARE EQUIPMENT & SUPPLIES - 0.58% Baxter International, Incorporated................. 124,600 3,833 -------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES............... 3,833 -------- HEALTH CARE PROVIDERS & SERVICES - 1.58% Aetna, Incorporated+........... 39,000 3,705 Cigna Corporation.............. 27,900 1,771 HCA, Incorporated.............. 62,600 2,299 Health Net, Incorporated+...... 50,100 1,215 Tenet Healthcare Corporation+.. 142,300 1,526 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES............... 10,516 -------- PHARMACEUTICALS - 2.01% Bristol-Myers Squibb Company... 187,300 4,388 McKesson Corporation........... 25,800 688 Merck & Company, Incorporated................. 81,800 2,561 Pfizer, Incorporated........... 34,500 999 Schering Plough Corporation.... 164,000 2,970 Wyeth Corporation+............. 45,000 1,784 -------- TOTAL PHARMACEUTICALS...... 13,390 -------- TOTAL HEALTH CARE.......... 27,739 -------- INDUSTRIALS - 8.23% AEROSPACE & DEFENSE - 3.08% Boeing Company................. 124,000 6,188 Honeywell International, Incorporated................. 66,500 2,240 Lockheed Martin Corporation.... 56,400 3,107 Raytheon Company............... 85,900 3,134
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Textron, Incorporated.......... 53,100 $ 3,619 United Technologies Corporation.................. 23,900 2,218 -------- TOTAL AEROSPACE & DEFENSE.................. 20,506 -------- COMMERCIAL SERVICES & SUPPLIES - 1.31% Cendant Corporation............ 296,600 6,107 Waste Management, Incorporated+................ 92,907 2,646 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES................. 8,753 -------- ELECTRICAL EQUIPMENT - 0.98% American Power Conversion Corporation.................. 81,400 1,569 Emerson Electrical Company..... 77,000 4,932 -------- TOTAL ELECTRICAL EQUIPMENT................ 6,501 -------- INDUSTRIAL CONGLOMERATES - 1.07% Tyco International Limited..... 228,801 7,127 -------- TOTAL INDUSTRIAL CONGLOMERATES............ 7,127 -------- MACHINERY - 0.70% Caterpillar, Incorporated...... 29,300 2,360 ITT Industries, Incorporated... 28,400 2,304 -------- TOTAL MACHINERY............ 4,664 -------- TRANSPORTATION - 1.09% Burlington Northern Santa Fe Corporation.................. 65,600 2,743 CSX Corporation................ 124,100 4,529 -------- TOTAL TRANSPORTATION....... 7,272 -------- TOTAL INDUSTRIALS.......... 54,823 -------- INFORMATION TECHNOLOGY - 3.06% COMPUTERS & PERIPHERALS - 1.14% Hewlett Packard Company........ 171,400 3,198 International Business Machines Corporation.................. 49,200 4,416 -------- TOTAL COMPUTERS & PERIPHERALS.............. 7,614 -------- IT CONSULTING & SERVICES - 1.36% Computer Sciences Corporation+................. 56,500 2,806 Electronic Data Systems Corporation*................. 294,900 6,273 -------- TOTAL IT CONSULTING & SERVICES................. 9,079 -------- SOFTWARE - 0.56% Computer Associates International, Incorporated................. 135,600 3,757 -------- TOTAL SOFTWARE............. 3,757 -------- TOTAL INFORMATION TECHNOLOGY............... 20,450 --------
See accompanying notes - -------------------------------------------------------------------------------- 44 AMERICAN AADVANTAGE BALANCED FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) MATERIALS - 3.61% CHEMICALS - 2.07% Air Products & Chemicals, Incorporated................. 35,000 $ 1,861 E. I. du Pont de Nemours & Company...................... 35,900 1,539 Eastman Chemical Company....... 30,000 1,424 Hercules, Incorporated+........ 128,400 1,834 Imperial Chemical Industries plc, ADR..................... 108,300 1,670 Lyondell Chemical Company*..... 165,700 3,808 PPG Industries, Incorporated... 26,200 1,670 -------- TOTAL CHEMICALS............ 13,806 -------- METALS & MINING - 0.57% Alcoa, Incorporated............ 116,796 3,796 -------- TOTAL METALS & MINING...... 3,796 -------- PAPER & FOREST PRODUCTS - 0.97% International Paper Company.... 33,300 1,283 Sappi Limited, ADR............. 213,000 3,086 UPM Kymmene Corporation, ADR*......................... 62,900 1,249 Weyerhaeuser Company+.......... 13,800 864 -------- TOTAL PAPER & FOREST PRODUCTS................. 6,482 -------- TOTAL MATERIALS............ 24,084 -------- TELECOMMUNICATION SERVICES - 0.91% DIVERSIFIED TELECOMMUNICATION - 0.82% SBC Communications, Incorporated................. 31,300 790 Nokia Corporation, ADR......... 100,600 1,551 Verizon Communications, Incorporated+................ 80,428 3,145 -------- TOTAL DIVERSIFIED TELECOMMUNICATION........ 5,486 -------- WIRELESS TELECOMMUNICATION - 0.09% Alltel Corporation............. 11,500 632 -------- TOTAL WIRELESS TELECOMMUNICATION........ 632 -------- TOTAL TELECOMMUNICATION SERVICES................. 6,118 -------- UTILITIES - 3.59% American Electric Power Company, Incorporated*....... 182,000 5,993
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) CenterPoint Energy, Incorporated*................ 132,600 $ 1,394 Entergy Corporation............ 63,900 4,177 FirstEnergy Corporation........ 80,000 3,306 Florida Power and Light Group, Incorporated................. 45,000 3,101 General Electric Company....... 75,600 2,579 Public Service Enterprise Group, Incorporated.......... 20,400 869 Reliant Resources, Incorporated+*............... 144,956 1,490 Teco Energy, Incorporated*..... 70,600 988 -------- TOTAL UTILITIES............ 23,897 -------- TOTAL COMMON STOCK......... 393,652 --------
PAR AMOUNT ------- SHORT-TERM INVESTMENTS - 24.34% UNITED STATES TREASURY BILLS - 5.45% 1.62%, Due 12/9/2004 (Note B)..... $4,325 4,318 1.62%, Due 12/9/2004*............. 13,000 12,976 1.70%, Due 11/4/2004*............. 19,000 18,997 ------ TOTAL UNITED STATES TREASURY BILLS......................... 36,291 ------
SHARES ---------- OTHER SHORT-TERM INVESTMENTS - 18.89% American AAdvantage Money Market Select Fund (Notes C and D)... 67,547,447 67,547 AMR Investments Enhanced Cash Business Trust (Notes C and D)............................ 58,359,465 58,359 -------- TOTAL OTHER SHORT-TERM INVESTMENTS............... 125,906 -------- TOTAL SHORT-TERM INVESTMENTS............... 162,197 -------- TOTAL INVESTMENTS - 112.37% (COST $659,806)............... 748,820 -------- LIABILITIES, NET OF OTHER ASSETS - (12.37%)............. (82,451) -------- TOTAL NET ASSETS - 100%......... $666,369 ========
- --------------- (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 period end, the value of these securities amounted to $3,923 or 0.59% of net assets. (B) At October 31, 2004, security held as collateral for open futures contracts. (C) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (D) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan at October 31, 2004. See Note 5. + - Non-income producing security. See accompanying notes - -------------------------------------------------------------------------------- 45 AMERICAN AADVANTAGE LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) COMMON STOCK - 94.76% CONSUMER DISCRETIONARY - 10.28% HOTELS, RESTAURANTS & LEISURE - 2.83% Carnival Corporation............ 134,100 $ 6,780 Interpublic Group Companies, Incorporated+................. 196,500 2,409 Mattel, Incorporated............ 172,400 3,019 McDonald's Corporation.......... 75,100 2,189 MGM Mirage, Incorporated+....... 107,500 5,784 Yum Brands, Incorporated+....... 54,300 2,362 -------- TOTAL HOTELS, RESTAURANTS & LEISURE................... 22,543 -------- HOUSEHOLD DURABLES - 2.41% Centex Corporation.............. 157,900 8,201 Fortune Brands, Incorporated.... 27,100 1,973 Koninklijke Philips Electronics NV............................ 165,266 3,937 Matsushita Electric Industrial Company Limited, ADR.......... 191,000 2,771 Pulte Homes, Incorporated*...... 41,700 2,288 -------- TOTAL HOUSEHOLD DURABLES.... 19,170 -------- LEISURE EQUIPMENT & PRODUCTS - 0.46% Eastman Kodak Company*.......... 120,000 3,634 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS.................. 3,634 -------- MEDIA - 1.08% Clear Channel Communications, Incorporated.................. 72,000 2,405 The Walt Disney Company......... 136,000 3,430 Liberty Media Corporation+...... 76,000 2,740 -------- TOTAL MEDIA................. 8,575 -------- MULTILINE RETAIL - 3.02% Federated Department Stores, Incorporated.................. 69,100 3,486 May Department Stores Company... 83,900 2,186 J.C. Penney Company, Incorporated.................. 122,500 4,237 Sears, Roebuck, & Company....... 270,900 9,482 Target Corporation.............. 93,300 4,667 -------- TOTAL MULTILINE RETAIL...... 24,058 -------- TEXTILES & APPAREL - 0.48% Liz Claiborne, Incorporated..... 52,000 2,126 Polo Ralph Lauren Corporation... 46,400 1,714 -------- TOTAL TEXTILES & APPAREL.... 3,840 -------- TOTAL CONSUMER DISCRETIONARY............. 81,820 --------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) CONSUMER STAPLES - 9.23% FOOD & DRUG RETAILING - 0.50% Albertson's, Incorporated*...... 83,900 $ 1,914 Safeway, Incorporated+.......... 113,700 2,074 -------- TOTAL FOOD & DRUG RETAILING................. 3,988 -------- FOOD PRODUCTS - 4.10% Archer-Daniels-Midland Company.. 199,000 3,855 Conagra, Incorporated........... 210,700 5,562 Dean Foods Company+............. 135,100 4,033 General Mills, Incorporated..... 45,600 2,018 Kellogg Company................. 87,000 3,741 Kraft Foods, Incorporated....... 133,400 4,443 Performance Food Group Company+*..................... 106,000 2,466 Sara Lee Company................ 184,128 4,287 Unilever plc, ADR*.............. 66,000 2,250 -------- TOTAL FOOD PRODUCTS......... 32,655 -------- HOUSEHOLD PRODUCTS - 0.36% Kimberly Clark Corporation...... 48,100 2,870 -------- TOTAL HOUSEHOLD PRODUCTS.... 2,870 -------- TOBACCO - 4.27% Altria Group, Incorporated...... 321,900 15,599 Gallaher Group plc, ADR......... 70,800 3,582 Imperial Tobacco Group plc, ADR*.......................... 183,500 8,615 UST, Incorporated............... 150,400 6,190 -------- TOTAL TOBACCO............... 33,986 -------- TOTAL CONSUMER STAPLES...... 73,499 -------- ENERGY - 8.87% ENERGY EQUIPMENT & SERVICES - 1.33% American Power Conversion Company....................... 165,000 3,181 General Electric Company........ 109,400 3,733 Weatherford International Limited+...................... 70,900 3,705 -------- TOTAL ENERGY EQUIPMENT & SERVICES.................. 10,619 -------- OIL & GAS - 7.54% BP plc, ADR..................... 106,036 6,177 ChevronTexaco Corporation....... 184,862 9,809 ConocoPhillips.................. 226,722 19,115 Devon Energy Corporation........ 56,800 4,201 Equitable Resources, Incorporated.................. 18,400 1,017 Kerr-McGee Corporation.......... 46,600 2,760 Occidental Petroleum Corporation................... 184,900 10,323
See accompanying notes - -------------------------------------------------------------------------------- 46 AMERICAN AADVANTAGE LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Petro-Canada.................... 43,500 $ 2,370 Valero Energy Corporation....... 99,300 4,267 -------- TOTAL OIL & GAS............. 60,039 -------- TOTAL ENERGY................ 70,658 -------- FINANCIALS - 27.30% BANKS - 7.82% Bank of America Corporation..... 400,642 17,945 Comerica, Incorporated.......... 39,500 2,430 KeyCorp Limited................. 121,900 4,095 Mitsubishi Tokyo Financial Group, Incorporated, ADR...... 356,000 3,022 PNC Financial Services Group, Incorporated.................. 76,027 3,976 TCF Financial Corporation....... 74,600 2,351 U.S. Bancorp, Incorporated...... 147,560 4,222 UnionBanCal Corporation......... 17,800 1,081 Wachovia Corporation+........... 77,200 3,799 Washington Mutual, Incorporated+*................ 260,500 10,084 Wells Fargo & Company+.......... 155,500 9,286 -------- TOTAL BANKS................. 62,291 -------- DIVERSIFIED FINANCIALS - 9.34% American Express Company........ 23,400 1,242 Bear Stearns Companies, Incorporated.................. 33,000 3,127 Charles Schwab Corporation...... 313,000 2,864 CIT Group, Incorporated*........ 51,700 2,089 Citigroup, Incorporated......... 303,538 13,468 Federal Home Loan Mortgage Corporation................... 100,600 6,700 Federal National Mortgage Association................... 46,000 3,227 Goldman Sachs Group, Incorporated.................. 26,700 2,627 ING Groep NV, ADR*.............. 161,678 4,305 MBNA Corporation................ 123,400 3,163 JP Morgan Chase & Company....... 417,898 16,131 Merrill Lynch & Company, Incorporated.................. 61,800 3,333 Morgan Stanley Dean Witter & Company....................... 62,900 3,214 Principal Financial Group, Incorporated.................. 114,000 4,305 SLM Corporation................. 101,600 4,598 -------- TOTAL DIVERSIFIED FINANCIALS................ 74,393 -------- INSURANCE - 9.46% Ace Limited+.................... 88,900 3,384 Allstate Corporation............ 249,328 11,990 American International Group, Incorporated.................. 102,800 6,241 Anthem, Incorporated+*.......... 23,100 1,857 AON Corporation................. 72,200 1,474 Assurant, Incorporated.......... 83,400 2,250
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Chubb Corporation............... 51,700 $ 3,729 Conseco, Incorporated+.......... 129,200 2,165 Hartford Financial Services Group, Incorporated........... 34,700 2,029 Loews Corporation............... 38,300 2,294 MetLife, Incorporated........... 341,600 13,100 MGIC Investments Corporation.... 68,000 4,373 Prudential Financial, Incorporated.................. 141,900 6,594 The St. Paul Travelers Companies, Incorporated....... 243,400 8,266 Wellpoint Health Networks, Incorporated+................. 18,200 1,778 XL Capital Limited+............. 51,900 3,763 -------- TOTAL INSURANCE............. 75,287 -------- REAL ESTATE - 0.68% Equity Office Properties Trust......................... 193,300 5,436 -------- TOTAL REAL ESTATE........... 5,436 -------- TOTAL FINANCIALS............ 217,407 -------- HEALTH CARE - 6.58% HEALTH CARE EQUIPMENT & SUPPLIES - 1.47% Alcon, Incorporated+............ 28,800 2,051 C. R. Bard, Incorporated........ 64,300 3,652 Baxter International, Incorporated.................. 194,900 5,995 -------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES................ 11,698 -------- HEALTH CARE PROVIDERS & SERVICES - 2.18% Aetna, Incorporated+............ 65,800 6,251 Cigna Corporation............... 40,700 2,583 HCA, Incorporated............... 105,900 3,890 Health Net, Incorporated+....... 84,500 2,050 Tenet Healthcare Corporation+... 239,900 2,572 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES................ 17,346 -------- PHARMACEUTICALS - 2.93% Astrazeneca plc, ADR............ 75,000 3,090 Bristol-Myers Squibb Company.... 275,700 6,460 McKesson Corporation............ 35,200 938 Merck & Company, Incorporated... 134,600 4,214 Pfizer, Incorporated............ 50,200 1,453 Schering Plough Corporation..... 260,100 4,710 Wyeth Corporation+.............. 61,300 2,431 -------- TOTAL PHARMACEUTICALS....... 23,296 -------- TOTAL HEALTH CARE........... 52,340 -------- INDUSTRIALS - 12.24% AEROSPACE & DEFENSE - 3.80% Boeing Company.................. 256,600 12,804 L3 Communications Holding Corporation................... 55,400 3,653 Lockheed Martin Corporation..... 95,500 5,261
See accompanying notes - -------------------------------------------------------------------------------- 47 AMERICAN AADVANTAGE LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) Raytheon Company................ 151,900 $ 5,541 United Technologies Corporation................... 32,100 2,980 -------- TOTAL AEROSPACE & DEFENSE... 30,239 -------- COMMERCIAL SERVICES & SUPPLIES - 1.86% Cendant Corporation............. 501,900 10,334 Waste Management, Incorporated+................. 157,165 4,476 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.................. 14,810 -------- ELECTRICAL EQUIPMENT - 1.43% Emerson Electrical Company...... 125,900 8,064 Molex, Incorporated............. 128,000 3,292 -------- TOTAL ELECTRICAL EQUIPMENT................. 11,356 -------- INDUSTRIAL CONGLOMERATES - 2.88% Honeywell International, Incorporated.................. 82,900 2,792 Textron, Incorporated........... 72,000 4,907 Tyco International Limited...... 489,300 15,242 -------- TOTAL INDUSTRIAL CONGLOMERATES............. 22,941 -------- MACHINERY - 0.91% Caterpillar, Incorporated....... 44,800 3,608 ITT Industries, Incorporated.... 45,200 3,668 -------- TOTAL MACHINERY............. 7,276 -------- TRANSPORTATION - 1.36% Burlington Northern Santa Fe Corporation................... 89,500 3,742 CSX Corporation................. 195,200 7,125 -------- TOTAL TRANSPORTATION........ 10,867 -------- TOTAL INDUSTRIALS........... 97,489 -------- INFORMATION TECHNOLOGY - 7.15% COMMUNICATIONS EQUIPMENT - 0.38% Lucent Technologies, Incorporated+*................ 857,000 3,042 -------- TOTAL COMMUNICATIONS EQUIPMENT................. 3,042 -------- COMPUTERS & PERIPHERALS - 3.15% Apple Computer, Incorporated+... 118,700 6,235 Hewlett Packard Company......... 239,600 4,471 International Business Machines Corporation................... 109,700 9,846 NCR Corporation+................ 80,700 4,547 -------- TOTAL COMPUTERS & PERIPHERALS............... 25,099 -------- IT CONSULTING & SERVICES - 1.80% Computer Sciences Corporation+.. 74,700 3,710 Electronic Data Systems Corporation*.................. 496,900 10,569 -------- TOTAL IT CONSULTING & SERVICES.................. 14,279 --------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.41% Freescale Semiconductor, Incorporated+*................ 73,000 $ 1,134 Texas Instruments, Incorporated.................. 87,000 2,127 -------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS...... 3,261 -------- SOFTWARE - 1.41% Autodesk, Incorporated.......... 93,000 4,906 Computer Associates International, Incorporated... 228,700 6,337 -------- TOTAL SOFTWARE.............. 11,243 -------- TOTAL INFORMATION TECHNOLOGY................ 56,924 -------- MATERIALS - 5.86% CHEMICALS - 3.21% Air Products & Chemicals, Incorporated.................. 112,100 5,961 Cytec Industries, Incorporated.................. 79,700 3,707 E. I. du Pont de Nemours & Company....................... 48,800 2,092 Hercules, Incorporated+......... 173,400 2,476 Imperial Chemical Industries plc, ADR...................... 156,900 2,419 Lyondell Chemical Company*...... 280,900 6,455 PPG Industries, Incorporated.... 38,700 2,467 -------- TOTAL CHEMICALS............. 25,577 -------- METALS & MINING - 0.76% Alcoa, Incorporated............. 185,668 6,034 -------- TOTAL METALS & MINING....... 6,034 -------- PAPER & FOREST PRODUCTS - 1.89% International Paper Company..... 53,800 2,072 Sappi Limited, ADR*............. 277,000 4,014 UPM Kymmene Corporation, ADR*... 103,100 2,047 Weyerhaeuser Company+........... 109,900 6,884 -------- TOTAL PAPER & FOREST PRODUCTS.................. 15,017 -------- TOTAL MATERIALS............. 46,628 -------- TELECOMMUNICATION SERVICES - 2.08% DIVERSIFIED TELECOMMUNICATION - 1.18% SBC Communications, Incorporated.................. 161,800 4,087 Verizon Communications, Incorporated+................. 135,746 5,308 -------- TOTAL DIVERSIFIED TELECOMMUNICATION......... 9,395 --------
See accompanying notes - -------------------------------------------------------------------------------- 48 AMERICAN AADVANTAGE LARGE CAP VALUE FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) WIRELESS TELECOMMUNICATION - 0.90% Alltel Corporation.............. 19,400 $ 1,066 Nokia Corporation, ADR.......... 150,400 2,319 Vodafone Group plc, ADR+........ 146,000 3,765 -------- TOTAL WIRELESS TELECOMMUNICATION......... 7,150 -------- TOTAL TELECOMMUNICATION SERVICES.................. 16,545 -------- UTILITIES - 5.17% ELECTRIC UTILITIES - 4.37% American Electric Power Company, Incorporated.................. 282,100 9,290 Centerpoint Energy, Incorporated*................. 231,500 2,433 Entergy Corporation............. 103,200 6,745 FirstEnergy Corporation......... 145,900 6,030 Florida Power and Light Group, Incorporated.................. 75,800 5,223 Public Service Enterprise Group, Incorporated.................. 29,400 1,252 Reliant Resources, Incorporated+................. 231,347 2,378 Teco Energy, Incorporated*...... 104,500 1,463 -------- TOTAL ELECTRIC UTILITIES.... 34,814 -------- MULTI-UTILITIES - 0.80% Duke Energy Corporation......... 259,400 6,363 -------- TOTAL MULTI-UTILITIES....... 6,363 -------- TOTAL UTILITIES............. 41,177 -------- TOTAL COMMON STOCK.......... 754,487 --------
PAR AMOUNT AMOUNT ----------- --------- (DOLLARS IN THOUSANDS) SHORT-TERM INVESTMENTS - 10.34% U.S. TREASURY BILLS - 0.53% 1.62%, Due 12/09/2004 (Note A)............................ $ 4,195 $ 4,188 -------- TOTAL U.S. TREASURY BILLS... 4,188 --------
SHARES ---------- OTHER SHORT-TERM INVESTMENTS - 9.81% American AAdvantage Money Market Select Fund (Notes B and C)... 55,682,793 55,683 AMR Investments Enhanced Cash Business Trust (Notes B and C)............................ 22,401,754 22,402 -------- TOTAL OTHER SHORT-TERM INVESTMENTS............... 78,085 -------- TOTAL SHORT-TERM INVESTMENTS............... 82,273 -------- TOTAL INVESTMENTS - 105.10% (COST $687,450)............... 836,760 -------- LIABILITIES, NET OF OTHER ASSETS - (5.10%).............. (40,614) -------- TOTAL NET ASSETS - 100%......... $796,146 ========
- --------------- (A) At October 31, 2004, security held as collateral for open futures contracts. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan at October 31, 2004. See Note 5 + - Non-income producing security. See accompanying notes - -------------------------------------------------------------------------------- 49 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) COMMON STOCK - 100.40% CONSUMER DISCRETIONARY - 17.75% AUTO COMPONENTS - 0.17% Johnson Controls, Incorporated... 1,200 $ 69 Lear Corporation................. 500 27 -------- TOTAL AUTO COMPONENTS........ 96 -------- AUTOMOBILES - 0.62% Ford Motor Company............... 23,700 309 Harley Davidson, Incorporated.... 600 35 -------- TOTAL AUTOMOBILES............ 344 -------- HOUSEHOLD DURABLES - 0.38% The Black & Decker Corporation... 1,500 120 Centex Corporation............... 700 36 D R Horton, Incorporated......... 800 24 KB Home.......................... 100 8 Lennar Corporation............... 200 9 Pulte Homes, Incorporated........ 200 11 -------- TOTAL HOUSEHOLD DURABLES..... 208 -------- HOTELS, RESTAURANTS & LEISURE - 2.21% Carnival Corporation............. 2,800 142 Choice Hotels, Incorporated...... 2,600 130 GTECH Holdings Corporation....... 5,400 128 Hilton Hotels Corporation........ 2,400 48 International Game Technology, Incorporated................... 3,200 106 Marriott International, Incorporated................... 2,100 114 McDonald's Corporation........... 6,500 189 Polaris Industries, Incorporated................... 1,500 89 Starwood Hotels and Resorts...... 2,000 95 Yum Brands, Incorporated+........ 4,100 178 -------- TOTAL HOTELS, RESTAURANTS & LEISURE.................... 1,219 -------- INTERNET & CATALOG RETAIL - 1.29% Ebay, Incorporated+.............. 7,300 713 -------- TOTAL INTERNET & CATALOG RETAIL..................... 713 -------- LEISURE EQUIPMENT & PRODUCTS - 0.20% Hasbro, Incorporated............. 2,600 46 Mattel, Incorporated............. 3,700 65 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS................... 111 -------- MEDIA - 5.28% The Walt Disney Company.......... 1,600 40 Echostar Communications Corporation+................... 2,500 79 Fox Entertainment Group, Incorporated+.................. 6,600 196 Gannett Company, Incorporated.... 2,400 199 Harman International Industries, Incorporated+.................. 5,500 661 Liberty Media Corporation+....... 6,200 224
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) The E. W. Scripps Company........ 3,500 $ 167 Time Warner, Incorporated+....... 22,000 366 Viacom, Incorporated+............ 26,788 977 -------- TOTAL MEDIA.................. 2,909 -------- MULTILINE RETAIL - 2.87% Costco Wholesale Corporation..... 800 38 Family Dollar Stores, Incorporated................... 400 12 Kmart Holding Corporation+*...... 4,300 396 Kohl's Corporation+.............. 5,000 254 Target Corporation............... 5,000 250 Wal-Mart Stores, Incorporated+... 11,700 631 -------- TOTAL MULTILINE RETAIL....... 1,581 -------- SPECIALTY RETAIL - 4.02% Abercrombie and Fitch Company.... 2,500 98 Avon Products, Incorporated...... 1,800 71 Barnes and Noble, Incorporated+.. 10,800 359 Bed Bath & Beyond, Incorporated+.................. 2,800 114 Circuit City Stores, Incorporated................... 15,400 250 Foot Locker, Incorporated........ 2,100 51 Gap Inc.......................... 1,100 22 Home Depot, Incorporated......... 15,600 641 Lowe's Companies, Incorporated... 6,800 383 Petco Animal Supplies, Incorporated+.................. 2,600 93 TJX Companies, Incorporated...... 5,600 134 -------- TOTAL SPECIALTY RETAIL....... 2,216 -------- TEXTILES & APPAREL - 0.71% Jones Apparel Group, Incorporated................... 3,000 106 Nike, Incorporated............... 3,500 285 -------- TOTAL TEXTILES & APPAREL..... 391 -------- TOTAL CONSUMER DISCRETIONARY.............. 9,788 -------- CONSUMER STAPLES - 8.89% BEVERAGES - 2.12% Anheuser Busch Companies, Incorporated................... 1,400 70 Coca-Cola Company................ 19,300 785 Pepsico, Incorporated............ 6,300 312 -------- TOTAL BEVERAGES.............. 1,167 -------- FOOD & DRUG RETAILING - 1.11% Albertson's, Incorporated........ 5,800 132 Longs Drug Stores Corporation.... 1,400 35 Pilgrims Pride Corporation....... 4,200 114 SUPERVALU, INC................... 6,100 180 Sysco Corporation................ 4,100 132 Walgreen Company+................ 500 18 -------- TOTAL FOOD & DRUG RETAILING.................. 611 --------
See accompanying notes - -------------------------------------------------------------------------------- 50 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) FOOD PRODUCTS - 1.00% Kraft Foods, Incorporated........ 2,800 $ 93 Tyson Foods, Incorporated........ 29,200 423 Wm. Wrigley Jr. Company+......... 500 33 -------- TOTAL FOOD PRODUCTS.......... 549 -------- HOUSEHOLD PRODUCTS - 2.50% Procter & Gamble Company......... 26,900 1,377 -------- TOTAL HOUSEHOLD PRODUCTS..... 1,377 -------- PERSONAL PRODUCTS - 1.79% Gillette Company................. 23,800 987 -------- TOTAL PERSONAL PRODUCTS...... 987 -------- TOBACCO - 0.37% Altria Group, Incorporated....... 4,200 204 -------- TOTAL TOBACCO................ 204 -------- TOTAL CONSUMER STAPLES....... 4,895 -------- ENERGY - 0.79% ENERGY EQUIPMENT & SERVICES - 0.58% Baker Hughes, Incorporated....... 2,100 90 Cooper Cameron Corporation+...... 2,300 111 Pride International, Incorporated+.................. 4,800 89 Rowan Companies, Incorporated+... 1,100 28 -------- TOTAL ENERGY EQUIPMENT & SERVICES................... 318 -------- OIL & GAS - 0.21% Burlington Resources, Incorporated................... 600 25 Unocal Corporation............... 2,200 92 -------- TOTAL OIL & GAS.............. 117 -------- TOTAL ENERGY................. 435 -------- FINANCIALS - 12.42% BANKS - 1.77% Bank of America Corporation...... 6,900 309 Bank of Hawaii Corporation....... 3,500 167 Bank of New York, Incorporated... 1,700 55 North Fork Bancorporation, Incorporated................... 1,600 71 UnionBanCal Corporation.......... 2,900 176 U.S. Bancorp, Incorporated....... 1,000 29 Washington Mutual, Incorporated+.................. 700 27 Wells Fargo & Company+........... 2,400 143 -------- TOTAL BANKS.................. 977 -------- DIVERSIFIED FINANCIALS - 5.87% AmeriCredit Corporation+......... 5,500 107 Charles Schwab Corporation....... 13,500 124 CIT Group, Incorporated.......... 2,600 105 Citigroup, Incorporated.......... 10,300 457 Countrywide Financial Corporation.................... 9,200 294 Doral Financial Corporation...... 2,200 92
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) Federal Home Loan Mortgage Corporation.................... 10,500 $ 699 Federal National Mortgage Corporation.................... 1,900 133 First Data Corporation........... 7,700 318 Moody's Corporation.............. 7,600 591 Morgan Stanley Dean Witter & Company........................ 3,300 169 Nuveen Investments, Incorporated................... 1,800 57 State Street Corporation......... 2,000 90 -------- TOTAL DIVERSIFIED FINANCIALS................. 3,236 -------- INSURANCE - 4.46% Alleghany Corporation+........... 150 43 Allstate Corporation............. 600 29 Ambac Financial Group, Incorporated................... 8,500 664 Anthem, Incorporated+............ 3,200 257 Genworth Financial, Incorporated................... 100 2 Hartford Financial Services Group, Incorporated............ 2,100 123 Loews Corporation................ 8,900 533 MBIA, Incorporated............... 3,500 203 The Progressive Corporation...... 1,400 131 Prudential Financial, Incorporated................... 7,500 349 Wellpoint Health Networks, Incorporated+.................. 1,300 127 -------- TOTAL INSURANCE.............. 2,461 -------- REAL ESTATE - 0.32% CarrAmerica Realty Corporation... 900 29 Equity Office Properties Trust... 1,700 48 Kimco Realty Corporation......... 600 33 Regency Centers Corporation...... 1,400 68 -------- TOTAL REAL ESTATE............ 178 -------- TOTAL FINANCIALS............. 6,852 -------- HEALTH CARE - 23.65% BIOTECHNOLOGY - 3.71% Amgen, Incorporated+............. 8,400 477 Biogen Idec, Incorporated+....... 11,900 692 Genentech, Incorporated+......... 14,600 665 Gilead Sciences, Incorporated+... 4,700 163 ImClone Systems, Incorporated+... 1,100 48 -------- TOTAL BIOTECHNOLOGY.......... 2,045 -------- HEALTH CARE EQUIPMENT & SUPPLIES - 3.14% C.R. Bard, Incorporated.......... 2,700 153 Baxter International, Incorporated................... 3,400 105 Boston Scientific Corporation+... 10,700 378 Guidant Corporation.............. 7,700 513 Zimmer Holdings, Incorporated+... 7,500 582 -------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES................... 1,731 -------- HEALTH CARE PROVIDERS & SERVICES - 2.40% Aetna, Incorporated+............. 3,200 304 AmerisourceBergen Corporation.... 3,400 187
See accompanying notes - -------------------------------------------------------------------------------- 51 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) Becton Dickinson and Company..... 1,300 $ 68 Cardinal Health, Incorporated.... 1,000 47 Covance, Incorporated+........... 800 32 HCA, Incorporated................ 600 22 St. Jude Medical, Incorporated+.................. 1,200 92 UnitedHealth Group, Incorporated+.................. 7,900 572 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES................... 1,324 -------- PHARMACEUTICALS - 14.40% Allergan, Incorporated........... 1,000 72 Caremark Rx, Incorporated+....... 14,300 429 Forest Laboratories, Incorporated+.................. 11,100 495 Hospira, Incorporated+........... 100 3 Johnson & Johnson................ 43,100 2,516 Eli Lilly & Company.............. 14,900 818 Medicis Pharmaceutical Corporation.................... 2,000 81 Merck & Company, Incorporated.... 1,900 59 OSI Pharmaceuticals, Incorporated+.................. 1,700 110 Pfizer, Incorporated............. 97,560 2,824 Schering Plough Corporation...... 13,700 248 Sepracor, Incorporated+*......... 3,800 175 Wyeth Corporation+............... 2,700 107 -------- TOTAL PHARMACEUTICALS........ 7,937 -------- TOTAL HEALTH CARE............ 13,037 -------- INDUSTRIALS - 7.74% AEROSPACE & DEFENSE - 2.18% Boeing Company................... 6,300 314 Lockheed Martin Corporation...... 4,900 270 Raytheon Company................. 11,100 405 United Technologies Corporation.. 2,300 213 -------- TOTAL AEROSPACE & DEFENSE.... 1,202 -------- COMMERCIAL SERVICES & SUPPLIES - 2.45% Cendant Corporation.............. 25,500 525 FedEx Corporation................ 600 55 W.W. Grainger, Incorporated...... 1,000 59 Hughes Supply, Incorporated...... 6,000 170 Ryder Systems, Incorporated...... 800 40 Staples, Incorporated............ 7,800 232 United Parcel Service, Incorporated................... 3,100 245 Waste Management, Incorporated+.. 900 26 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES................... 1,352 -------- INDUSTRIAL CONGLOMERATES - 2.34% 3M Company....................... 7,400 574 General Electric Company......... 10,400 355 Tyco International Limited....... 11,600 361 -------- TOTAL INDUSTRIAL CONGLOMERATES.............. 1,290 --------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) MACHINERY - 0.47% Caterpillar, Incorporated........ 1,400 $ 113 Deere and Company................ 1,800 108 Eaton Corporation................ 600 38 -------- TOTAL MACHINERY.............. 259 -------- TRANSPORTATION - 0.30% J.B. Hunt Transportation Services, Incorporated......... 4,100 168 -------- TOTAL TRANSPORTATION......... 168 -------- TOTAL INDUSTRIALS............ 4,271 -------- INFORMATION TECHNOLOGY - 26.16% COMMUNICATIONS EQUIPMENT - 6.59% Cisco Systems, Incorporated+..... 48,800 937 Corning, Incorporated+........... 19,100 219 Juniper Networks, Incorporated+.................. 8,500 226 Motorola, Incorporated........... 49,600 856 Qualcomm, Incorporated........... 33,400 1,396 -------- TOTAL COMMUNICATIONS EQUIPMENT.................. 3,634 -------- COMPUTERS & PERIPHERALS - 4.60% Dell, Incorporated+.............. 22,500 789 International Business Machines Corporation.................... 13,200 1,185 Lexmark International, Incorporated+.................. 1,600 133 NCR Corporation+................. 4,200 237 Storage Technology Corporation+.. 7,100 192 -------- TOTAL COMPUTERS & PERIPHERALS................ 2,536 -------- ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.27% Broadcom Corporation+............ 1,100 30 Ingram Micro, Incorporated+...... 1,500 26 Intersil Corporation............. 5,700 93 -------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS................ 149 -------- INTERNET SOFTWARE & SERVICES - 1.44% Electronic Arts, Incorporated+... 1,300 58 Mercury Interactive Corporation+................... 1,300 56 Symantec Corporation+............ 11,700 666 Yahoo, Incorporated+............. 300 11 -------- TOTAL INTERNET SOFTWARE & SERVICES................... 791 -------- IT CONSULTING & SERVICES - 1.37% Acxiom Corporation............... 22,800 570 Computer Sciences Corporation+... 2,600 129 SunGard Data Systems, Incorporated+.................. 2,100 56 -------- TOTAL IT CONSULTING & SERVICES................... 755 -------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 5.10% Altera Corporation+.............. 9,400 214 Analog Devices, Incorporated..... 11,800 475
See accompanying notes - -------------------------------------------------------------------------------- 52 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) Intel Corporation................ 52,500 $ 1,169 Linear Technology Corporation.... 500 19 Microchip Technology, Incorporated................... 1,000 30 Micron Technology, Incorporated+.................. 22,100 269 National Semiconductor Corporation.................... 9,100 152 Novellus Systems, Incorporated+.................. 6,400 166 Texas Instruments, Incorporated................... 4,400 107 Xilinx, Incorporated+............ 6,900 211 -------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS................. 2,812 -------- SOFTWARE - 6.79% Autodesk, Incorporated........... 4,300 227 BMC Software, Incorporated+...... 32,300 611 Microsoft Corporation............ 79,200 2,216 Oracle Corporation+.............. 42,000 532 Take-Two Interactive Software, Incorporated+.................. 2,300 76 VERITAS Software Corporation+.... 3,800 83 -------- TOTAL SOFTWARE............... 3,745 -------- TOTAL INFORMATION TECHNOLOGY................. 14,422 -------- MATERIALS - 0.82% CHEMICALS - 0.16% Praxair, Incorporated............ 2,100 89 -------- TOTAL CHEMICALS.............. 89 -------- METALS & MINING - 0.66% Alcoa, Incorporated.............. 3,900 127 Newmont Mining Corporation....... 700 33 Nucor Corporation................ 1,800 76 United States Steel Corporation.................... 3,500 128 -------- TOTAL METALS & MINING........ 364 -------- TOTAL MATERIALS.............. 453 -------- TELECOMMUNICATION SERVICES - 1.48% DIVERSIFIED TELECOMMUNICATION - 0.03% Verizon Communications, Incorporated+.................. 400 16 -------- TOTAL DIVERSIFIED TELECOMMUNICATION.......... 16 --------
SHARES VALUE ---------- --------- (DOLLARS IN THOUSANDS) WIRELESS TELECOMMUNICATION SERVICE - 1.45% Nextel Communications, Incorporated+.................. 8,800 $ 233 Sprint Corporation............... 25,200 528 Telephone and Data Systems, Incorporated................... 500 37 -------- TOTAL WIRELESS TELECOMMUNICATION SERVICE.................... 798 -------- TOTAL TELECOMMUNICATION SERVICES................... 814 -------- UTILITIES - 0.70% NRG Energy, Incorporated+........ 12,300 341 Pinnacle West Capital Corporation.................... 1,000 43 -------- TOTAL UTILITIES.............. 384 -------- TOTAL COMMON STOCK........... 55,351 -------- SHORT-TERM INVESTMENTS - 9.05% American AAdvantage Money Market Select Fund (Notes A and B).... 4,490,847 4,491 AMR Investments Enhanced Cash Business Trust (Notes A and B)............................. 360,717 361 iShares Russell 1000 Growth Index Fund........................... 2,860 131 -------- TOTAL SHORT-TERM INVESTMENTS................ 4,983 -------- TOTAL INVESTMENTS - 109.45% (COST $56,694)....................... 60,334 -------- LIABILITIES, NET OF OTHER ASSETS - (9.45%)............... (5,212) -------- TOTAL NET ASSETS - 100%.......... $ 55,122 ========
- --------------- (A) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (B) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan at October 31, 2004. See Note 5. + - Non-income producing security. See accompanying notes - -------------------------------------------------------------------------------- 53 AMERICAN AADVANTAGE MID-CAP VALUE FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) COMMON STOCK - 78.91% CONSUMER DISCRETIONARY - 14.85% AUTO COMPONENTS - 4.54% Advance Auto Parts, Incorporated+................. 6,000 $ 235 Genuine Parts Company........... 5,900 235 Goodrich Corporation............ 9,700 299 Lear Corporation................ 7,225 390 -------- TOTAL AUTO COMPONENTS....... 1,159 -------- HOTELS RESTAURANTS & LEISURE - 2.73% Hasbro, Incorporated............ 15,800 280 Royal Caribbean Cruises, Limited+*..................... 5,900 275 Wendy's International, Incorporated+................. 4,300 143 -------- TOTAL HOTELS RESTAURANTS & LEISURE................... 698 -------- HOUSEHOLD DURABLES - 2.66% Stanley Works................... 7,400 329 Whirlpool Corporation+.......... 5,950 350 -------- TOTAL HOUSEHOLD DURABLES.... 679 -------- LEISURE EQUIPMENT & PRODUCTS - 1.08% Brunswick Corporation........... 5,900 277 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS.................. 277 -------- MEDIA - 1.44% R.H. Donnelley Corporation+..... 6,850 371 -------- TOTAL MEDIA................. 371 -------- SPECIALTY RETAIL - 2.40% Dillards, Incorporated.......... 4,250 87 Dollar General Corporation...... 17,900 344 Rent-A-Center, Incorporated+.... 7,525 181 -------- TOTAL SPECIALTY RETAIL...... 612 -------- TOTAL CONSUMER DISCRETIONARY............. 3,796 -------- CONSUMER STAPLES - 4.60% FOOD PRODUCTS - 2.21% Dean Foods Company+............. 10,400 310 Del Monte Foods Company+........ 23,750 254 -------- TOTAL FOOD PRODUCTS......... 564 -------- TOBACCO - 2.39% Universal Corporation*.......... 6,125 280 UST, Incorporated............... 8,000 329 -------- TOTAL TOBACCO............... 609 -------- TOTAL CONSUMER STAPLES...... 1,173 -------- ENERGY - 2.85% Kerr-McGee Corporation.......... 6,300 373 Marathon Oil Corporation........ 9,300 354 -------- TOTAL ENERGY................ 727 --------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) FINANCIALS - 23.43% BANKS - 4.27% Comerica, Incorporated.......... 4,425 $ 272 Peoples Bank*................... 7,200 270 South Financial Group, Incorporated.................. 9,700 291 TCF Financial Corporation....... 8,200 258 -------- TOTAL BANKS................. 1,091 -------- DIVERSIFIED FINANCIALS - 1.71% CIT Group, Incorporated......... 6,450 260 Janus Capital Group, Incorporated.................. 11,600 177 -------- TOTAL DIVERSIFIED FINANCIALS................ 437 -------- INSURANCE - 15.11% AON Corporation................. 9,950 203 Axis Capital Holdings Limited+...................... 5,900 148 First American Corporation...... 6,200 193 IPC Holdings Limited+........... 8,475 343 Loews Corporation*.............. 20,325 550 MBIA, Incorporated.............. 5,025 291 Old Republic International Corporation................... 10,050 235 Protective Life Corporation..... 4,225 166 Radian Group, Incorporated...... 6,900 331 Torchmark, Incorporated......... 4,450 240 Wellchoice, Incorporated+....... 9,300 388 Willis Group Holdings Limited+.. 10,100 363 XL Capital Limited+............. 5,625 408 -------- TOTAL INSURANCE............. 3,859 -------- REAL ESTATE - 2.34% American Financial Realty Trust......................... 22,800 335 Equity Office Properties Trust......................... 9,300 262 -------- TOTAL REAL ESTATE........... 597 -------- TOTAL FINANCIALS............ 5,984 -------- HEALTH CARE - 5.61% HEALTH CARE PROVIDERS & SERVICES - 3.33% Cigna Corporation............... 3,000 190 Health Net, Incorporated+....... 14,175 344 Triad Hospitals, Incorporated+................. 9,600 317 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES................ 851 -------- PHARMACEUTICALS - 2.28% McKesson Corporation............ 11,275 301 Valeant Pharmaceuticals International................. 11,700 281 -------- TOTAL PHARMACEUTICALS....... 582 -------- TOTAL HEALTH CARE........... 1,433 -------- INDUSTRIALS - 12.93% AEROSPACE & DEFENSE - 1.10% Precision Castparts Corporation................... 4,700 282 -------- TOTAL AEROSPACE & DEFENSE... 282 --------
See accompanying notes - -------------------------------------------------------------------------------- 54 AMERICAN AADVANTAGE MID-CAP VALUE FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) BUILDING PRODUCTS - 1.13% York International Corporation+.................. 9,075 $ 289 -------- TOTAL BUILDING PRODUCTS..... 289 -------- COMMERCIAL SERVICES & SUPPLIES - 5.78% Hillenbrand Industries, Incorporated.................. 5,200 259 MoneyGram International, Incorporated.................. 10,625 198 Service Corporation International+................ 25,700 170 United Stationers, Incorporated+................... 6,425 286 Valassis Communications, Incorporated+................. 6,975 240 Weight Watchers International, Incorporated+*................ 9,000 323 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.................. 1,476 -------- INDUSTRIAL CONGLOMERATES - 1.29% Reynolds American, Incorporated*................. 4,800 331 -------- TOTAL INDUSTRIAL CONGLOMERATES............. 331 -------- MACHINERY - 2.05% ITT Industries, Incorporated.... 2,600 211 Kennametal, Incorporated*....... 6,725 313 -------- TOTAL MACHINERY............. 524 -------- TRANSPORTATION - 1.58% CNF, Incorporated............... 4,075 178 Ryder Systems, Incorporated..... 4,500 225 -------- TOTAL TRANSPORTATION........ 403 -------- TOTAL INDUSTRIALS........... 3,305 -------- INFORMATION TECHNOLOGY - 3.18% ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.40% American Power Conversion Corporation*.................. 18,600 359 -------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS............... 359 -------- IT CONSULTING & SERVICES - 1.78% BearingPoint, Incorporated+*.... 41,275 359 Electronic Data Systems Corporation................... 4,500 96 -------- TOTAL IT CONSULTING & SERVICES.................. 455 -------- TOTAL INFORMATION TECHNOLOGY................ 814 --------
SHARES VALUE ----------- --------- (DOLLARS IN THOUSANDS) MATERIALS - 4.35% CHEMICALS - 3.06% Ashland, Incorporated........... 3,350 $ 193 Cytec Industries, Incorporated.................. 4,425 206 Eastman Chemical Company........ 3,500 166 FMC Corporation+................ 4,925 216 -------- TOTAL CHEMICALS............. 781 -------- CONSTRUCTION MATERIALS - 1.29% Lafarge North America, Incorporated*................. 6,725 330 -------- TOTAL CONSTRUCTION MATERIALS................. 330 -------- TOTAL MATERIALS............. 1,111 -------- UTILITIES - 7.11% CenterPoint Energy, Incorporated*................. 14,900 157 Entergy Corporation............. 4,500 294 FirstEnergy Corporation......... 6,400 265 Pinnacle West Capital Corporation................... 7,900 337 Reliant Energy, Incorporated+... 14,300 147 Wisconsin Energy Corporation+... 11,375 371 Xcel Energy, Incorporated+*..... 14,400 246 -------- TOTAL UTILITIES............. 1,817 -------- TOTAL COMMON STOCK.......... 20,160 --------
PAR AMOUNT ---------- SHORT-TERM INVESTMENTS - 29.05% U.S. TREASURY BILLS - 0.90% 1.62%, Due 12/9/2004 (Note B)... $ 230 230 -------- TOTAL U. S. TREASURY BILLS..................... 230 --------
SHARES ---------- OTHER SHORT-TERM INVESTMENTS - 28.15% American AAdvantage Money Market Select Fund (Notes A and C)... 6,341,013 6,341 AMR Investments Enhanced Cash Business Trust (Notes A and C)............................ 850,131 850 -------- TOTAL OTHER SHORT-TERM INVESTMENTS............... 7,191 -------- TOTAL SHORT-TERM INVESTMENTS............... 7,421 -------- TOTAL INVESTMENTS - 107.96% (COST $27,065)................ 27,581 -------- LIABILITIES, NET OF OTHER ASSETS - (7.96%).............. (2,035) -------- TOTAL NET ASSETS - 100%......... $ 25,546 ========
- --------------- (A) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (B) At October 31, 2004, security held as collateral for open futures contracts. (C) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan at October 31, 2004. See Note 5. + - Non-income producing security. See accompanying notes - -------------------------------------------------------------------------------- 55 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) COMMON STOCK - 89.68% CONSUMER DISCRETIONARY - 18.91% AUTO COMPONENTS - 2.55% Aftermarket Technology Corporation+*............... 8,370 $ 120 American Axle & Manufacturing Holdings, Incorporated...... 75,900 2,178 Arvinmeritor, Incorporated*... 312,300 5,828 Bandag, Incorporated.......... 55,900 2,557 Borg-Warner Automotive, Incorporated................ 90,600 4,202 Cooper Tire & Rubber Company..................... 65,800 1,282 Dana Corporation.............. 285,500 4,257 Group 1 Automotive, Incorporated+............... 186,000 5,262 Hayes Lemmerz International, Incorporated+*.............. 279,200 2,323 Sonic Automotive, Incorporated*............... 161,100 3,259 Superior Industries International, Incorporated*............... 113,000 3,082 -------- TOTAL AUTO COMPONENTS..... 34,350 -------- HOTELS RESTAURANTS & LEISURE - 2.32% Aztar Corporation+*........... 50,900 1,575 Blockbuster, Incorporated*.... 204,000 1,387 Bob Evans Farms, Incorporated................ 96,600 2,303 CEC Entertainment, Incorporated+............... 35,500 1,350 Isle of Capri Casinos, Incorporated+*.............. 18,300 414 Jack in the Box, Incorporated+............... 121,400 4,051 Jameson Inns, Incorporated.... 687,100 1,161 Kerzner International Limited+*................... 232,600 11,797 Landry's Restaurants, Incorporated*............... 29,900 810 Lodgian, Incorporated+........ 203,200 2,093 Magna Entertainment Corporation+*............... 436,200 2,456 Papa John's International, Incorporated+*.............. 41,600 1,343 Ryans Restaurant Group, Incorporated+............... 35,150 492 Sunterra Corporation+*........ 4,200 45 -------- TOTAL HOTELS RESTAURANTS & LEISURE................. 31,277 -------- HOUSEHOLD DURABLES - 4.12% American Greetings Corporation+*............... 222,100 5,875 Beazer Homes USA, Incorporated*............... 101,700 11,165 Furniture Brands International, Incorporated*............... 389,300 8,491 Interface, Incorporated+...... 92,300 802 La-Z-Boy, Incorporated........ 221,000 2,915
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Libbey, Incorporated.......... 11,300 $ 205 Lifetime Hoan Corporation*.... 41,200 574 M.D.C. Holdings, Incorporated................ 5,518 424 Matthews International Corporation*................ 29,900 1,002 Maytag Corporation*........... 335,300 5,834 Modtech Holdings, Incorporated+*.............. 75,100 569 Standard Pacific Corporation................. 9,800 550 Stanley Furniture Company, Incorporated*............... 27,900 1,241 The Toro Company.............. 53,500 3,651 WCI Communities, Incorporated+*.............. 439,300 10,367 The Yankee Candle Company, Incorporated+*.............. 63,800 1,767 -------- TOTAL HOUSEHOLD DURABLES................ 55,432 -------- INTERNET & CATALOG RETAIL - 0.20% School Specialty, Incorporated+*.............. 65,118 2,665 -------- TOTAL INTERNET & CATALOG RETAIL.................. 2,665 -------- LEISURE EQUIPMENT & PRODUCTS - 0.76% Brunswick Corporation......... 147,800 6,935 Callaway Golf Company*........ 20,200 211 Hutchinson Technology, Incorporated+*.............. 74,600 2,507 JAKKS Pacific, Incorporated+*.............. 40,200 633 -------- TOTAL LEISURE EQUIPMENT & PRODUCTS................ 10,286 -------- MEDIA - 0.51% Courier Corporation*.......... 22,500 979 R.H. Donnelley Corporation+... 45,000 2,441 Gemstar TV-Guide International, Incorporated+............... 325,000 1,868 Regal Entertainment Group*.... 80,700 1,607 -------- TOTAL MEDIA............... 6,895 -------- MULTILINE RETAIL - 0.69% BJ's Wholesale Club, Incorporated+............... 188,500 5,472 Burlington Coat Factory Warehouse Corporation....... 144,800 3,196 ShopKo Stores, Incorporated+*.............. 32,800 565 -------- TOTAL MULTILINE RETAIL.... 9,233 -------- SPECIALTY RETAIL - 6.26% Abercrombie and Fitch Company..................... 163,700 6,414 Advance Auto Parts, Incorporated+............... 251,400 9,835 AnnTaylor Stores Corporation+................ 160,600 3,607 Barnes & Noble, Incorporated+............... 156,900 5,220
See accompanying notes - -------------------------------------------------------------------------------- 56 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Big 5 Sporting Goods Corporation*................ 55,100 $ 1,399 Borders Group, Incorporated... 286,100 6,520 Brookstone, Incorporated+*.... 222,450 4,262 Buckle, Incorporated*......... 16,200 418 Cache, Incorporated+.......... 64,000 1,005 Cato Corporation.............. 22,900 526 Charming Shoppes, Incorporated+............... 473,885 3,616 Circuit City Stores, Incorporated................ 114,000 1,853 Cost Plus, Incorporated+*..... 97,900 3,162 CSK Auto Corporation+......... 67,900 994 Genesco, Incorporated+........ 16,700 428 Handleman Company*............ 26,900 579 Hollywood Entertainment Corporation+................ 235,643 2,290 Linens 'n Things, Incorporated+............... 266,000 6,405 The Men's Wearhouse, Incorporated+*.............. 314,400 9,772 Pier 1 Imports, Incorporated................ 109,200 1,960 Regis Corporation............. 46,500 1,990 Rent-A-Center, Incorporated+............... 18,850 452 Saks Incorporated+*........... 67,200 821 Stage Stores, Incorporated+*.............. 51,587 1,858 Talbots, Incorporated......... 53,100 1,401 Too, Incorporated+*........... 50,200 1,105 United Auto Group, Incorporated*............... 29,900 807 Zale Corporation+*............ 195,000 5,561 -------- TOTAL SPECIALTY RETAIL.... 84,260 -------- TEXTILES & APPAREL - 1.50% Brown Shoe Company, Incorporated................ 4,300 117 Kellwood Company*............. 103,800 3,266 K-Swiss, Incorporated*........ 137,700 3,443 Reebok International, Limited..................... 29,600 1,095 Russell Corporation........... 130,400 2,255 The Warnaco Group, Incorporated+............... 493,600 10,069 -------- TOTAL TEXTILES & APPAREL................. 20,245 -------- TOTAL CONSUMER DISCRETIONARY........... 254,643 -------- CONSUMER STAPLES - 3.57% BEVERAGES - 0.31% Adolph Coors Company*......... 63,300 4,222 -------- TOTAL BEVERAGES........... 4,222 --------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) FOOD & DRUG RETAILING - 0.45% Longs Drug Stores Corporation*................ 61,300 $ 1,514 Pathmark Stores, Incorporated+............... 360,400 1,553 Performance Food Group Company+.................... 51,700 1,203 Ruddick Corporation........... 90,700 1,826 -------- TOTAL FOOD & DRUG RETAILING............... 6,096 -------- FOOD PRODUCTS - 2.39% American Italian Pasta Company*.................... 249,300 5,061 Chiquita Brands International, Incorporated+*.............. 214,200 3,860 Del Monte Foods Company+...... 1,053,500 11,251 Del Monte Fresh Produce Company*.................... 45,300 1,190 Green Mountain Coffee Roasters, Incorporated+*.... 29,000 725 The Hain Celestial Group, Incorporated+*.............. 50,500 817 J&J Snack Foods Corporation+*............... 20,100 889 Ralcorp Holdings, Incorporated+*.............. 101,600 3,734 Sensient Technologies Corporation*................ 120,400 2,615 Smithfield Foods, Incorporated+............... 83,200 2,016 -------- TOTAL FOOD PRODUCTS....... 32,158 -------- TOBACCO - 0.42% Schweitzer Mauduit International, Incorporated*............... 13,000 410 Universal Corporation*........ 114,700 5,251 -------- TOTAL TOBACCO............. 5,661 -------- TOTAL CONSUMER STAPLES.... 48,137 -------- ENERGY - 4.88% ENERGY EQUIPMENT & SERVICES - 0.82% Dril-Quip, Incorporated+*..... 46,200 1,035 FMC Technologies, Incorporated+............... 104,300 3,153 Hydril Company LP+............ 39,900 1,755 MDU Resources Group, Incorporated................ 114,800 2,945 Offshore Logistics, Incorporated+*.............. 8,600 311 TETRA Technologies, Incorporated+*.............. 60,000 1,796 -------- TOTAL ENERGY EQUIPMENT & SERVICES................ 10,995 -------- OIL & GAS - 4.06% Berry Petroleum Company*...... 2,900 111 Chesapeake Energy Corporation*................ 456,200 7,336 Cimarex Energy Company+....... 117,400 4,212 Encore Acquisition Company+*.. 439,500 14,350
See accompanying notes - -------------------------------------------------------------------------------- 57 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Forest Oil Corporation+*...... 100,800 $ 3,074 Giant Industries, Incorporated+*.............. 61,700 1,417 The Houston Exploration Company+*................... 56,400 3,305 Newfield Exploration Company+.................... 94,500 5,500 Plains Exploration and Production Company LP+...... 26,300 658 Premcor, Incorporated+........ 62,300 2,432 Southwest Gas Corporation..... 5,400 132 Stelmar Shipping Limited*..... 157,100 6,064 Stone Energy Corporation+..... 119,700 4,928 Teekay Shipping Corporation*.. 23,100 1,067 -------- TOTAL OIL & GAS........... 54,586 -------- TOTAL ENERGY.............. 65,581 -------- FINANCIALS - 18.72% BANKS - 7.00% Alabama National BanCorporation.............. 14,000 895 Amcore Financial, Incorporated................ 2,246 68 Americredit Corporation+...... 70,300 1,364 Anchor BanCorp Wisconsin, Incorporated*............... 51,138 1,327 Bancorp South, Incorporated*............... 94,500 2,248 Bank Hawaii Corporation....... 213,100 10,176 Chemical Financial Corporation*................ 53,018 1,979 Chittenden Corporation........ 18,125 513 City National Corporation..... 10,900 751 Colonial BancGroup, Incorporated................ 293,200 6,348 Commercial Federal Corporation*................ 83,500 2,322 Community Bank System, Incorporated*............... 20,000 552 Community First Bankshares, Incorporated................ 29,970 966 Corus Bankshares, Incorporated................ 6,787 312 Cullen/Frost Bankers, Incorporated................ 200,300 9,815 Downey Financial Corporation.. 23,500 1,299 First Citizens Bancshares, Incorporated*............... 1,861 220 First Commonwealth Financial Corporation*................ 9,700 141 First Federal Capital Corporation*................ 34,664 1,154 First Republic Bank*.......... 34,600 1,668 FirstFed Financial Corporation+*............... 13,000 668 Frontier Financial Corporation*................ 11,669 449 Great American Financial Resources, Incorporated*.... 80,800 1,269 Greater Bay Bancorp*.......... 28,800 900 Hudson United Bancorp......... 134,700 5,361
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) International Bancshares Corporation................. 15,624 $ 578 Irwin Financial Corporation*................ 148,500 3,702 ITLA Capital Corporation+*.... 18,100 876 MAF Bancorp, Incorporated*.... 12,200 523 NBT Bancorp, Incorporated*.... 31,200 722 NetBank, Incorporated*........ 89,600 831 Pacific Capital Bancorp*...... 41,200 1,311 PFF Bancorp, Incorporated..... 5,600 221 Provident Bancorp, Incorporated*............... 65,400 790 Provident Bankshares Corporation*................ 74,620 2,592 Republic Bancorp, Incorporated*............... 134,774 2,252 S&T Bancorp, Incorporated*.... 10,511 379 Santander BanCorp*............ 30,200 843 Sky Financial Group, Incorporated................ 210,949 5,670 Southwest Bancorp, Incorporated................ 69,700 1,634 Sterling Bancshares, Incorporated*............... 60,000 850 Summit Bancshares, Incorporated*............... 21,700 738 Susquehanna Bancshares, Incorporated*............... 12,900 321 TierOne Corporation........... 25,600 570 Timberland Bancorp, Incorporated*............... 14,800 365 Trustmark Corporation*........ 117,823 3,715 United Bankshares, Incorporated................ 36,971 1,356 Washington Federal, Incorporated*............... 160,040 4,084 Webster Financial Corporation of Waterbury................ 130,200 6,224 Westcorp, Incorporated........ 7,000 279 -------- TOTAL BANKS............... 94,191 -------- DIVERSIFIED FINANCIALS - 1.21% Assured Guaranty Limited*..... 80,500 1,322 IndyMac Bancorp, Incorporated................ 68,300 2,203 Knight Trading Group, Incorporated+*.............. 722,900 7,511 Metris Companies, Incorporated+*.............. 267,600 2,569 Raymond James Financial, Incorporated*............... 101,400 2,647 -------- TOTAL DIVERSIFIED FINANCIALS.............. 16,252 -------- INSURANCE - 6.92% Alfa Corporation*............. 78,403 1,090 Allmerica Financial Corporation+*............... 302,800 9,114 American Financial Group, Incorporated*............... 304,100 9,001
See accompanying notes - -------------------------------------------------------------------------------- 58 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) American National Insurance Company..................... 24,717 $ 2,598 AmerUs Group Company*......... 110,900 4,633 Aspen Insurance Holdings Limited..................... 35,500 817 Commerce Group, Incorporated*............... 76,100 3,851 Conseco, Incorporated+........ 119,400 2,001 Delphi Financial Group, Incorporated................ 117,400 4,798 FBL Financial Group, Incorporated*............... 130,600 3,384 First American Corporation.... 178,000 5,552 Fremont General Corporation... 31,700 682 Hilb Rogal & Hobbs Company.... 4,100 130 Horace Mann Educators Corporation*................ 75,500 1,284 Infinity Property and Casualty Corporation*................ 93,100 2,894 LandAmerica Financial Group, Incorporated................ 30,500 1,493 Mercury General Corporation... 91,700 4,716 National Western Life Insurance Company+*......... 2,500 375 Odyssey Re Holdings Corporation*................ 243,000 5,312 Protective Life Corporation... 254,300 9,994 Reinsurance Group of America, Incorporated................ 257,400 11,089 Scottish Re Group Limited*.... 69,700 1,568 StanCorp Financial Group, Incorporated................ 13,100 987 Stewart Information Services Corporation*................ 12,900 547 Triad Guaranty, Incorporated+*.............. 23,600 1,286 UICI*......................... 56,700 1,677 United National Group Limited+*................... 149,300 2,316 -------- TOTAL INSURANCE........... 93,189 -------- REAL ESTATE - 3.59% Alexandria Real Estate Equities, Incorporated*..... 24,500 1,618 American Financial Realty Trust....................... 338,100 4,970 American Home Mortgage Investment Corporation*..... 200,200 5,532 Boykin Lodging Company+....... 96,700 812 Capital Automotive REIT....... 55,400 1,787 Capital Lease Funding, Incorporated................ 48,900 535 SL Green Realty Corporation... 30,800 1,688 Innkeepers USA Trust*......... 167,700 2,323 Jones Lang LaSalle, Incorporated+............... 77,500 2,480 La Quinta Corporation+........ 350,900 2,825 LaSalle Hotel Properties*..... 48,400 1,390
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) LNR Property Corporation*..... 143,800 $ 8,993 MI Developments, Incorporated................ 357,400 9,139 MortgageIT Holdings, Incorporated*............... 87,400 1,276 The St. Joe Company........... 39,500 2,011 Thomas Properties Group, Incorporated+............... 76,100 913 -------- TOTAL REAL ESTATE......... 48,292 -------- TOTAL FINANCIALS.......... 251,924 -------- HEALTH CARE - 5.31% BIOTECHNOLOGY - 0.07% Albany Molecular Research, Incorporated+*.............. 38,100 328 United Therapeutics Corporation+*............... 20,400 638 -------- TOTAL BIOTECHNOLOGY....... 966 -------- HEALTH CARE EQUIPMENT & SUPPLIES - 1.56% CONMED Corporation+........... 6,500 182 Haemonetics Corporation+...... 285,700 9,385 Inverness Medical Innovations, Incorporated+*.............. 35,000 724 PolyMedica Corporation*....... 61,300 2,146 Sola International, Incorporated+*.............. 443,000 8,497 -------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES.... 20,934 -------- HEALTH CARE PROVIDERS & SERVICES - 3.01% Accredo Health, Incorporated+............... 54,000 1,244 Amedisys, Incorporated+*...... 37,300 1,128 AMN Healthcare Services, Incorporated+*.............. 46,900 553 Apria Healthcare Group, Incorporated+............... 200,000 5,472 First Health Group Corporation+................ 343,872 5,474 Health Net, Incorporated+..... 174,700 4,238 Hooper Holmes, Incorporated... 247,800 1,301 Humana, Incorporated+......... 127,100 2,434 Magellan Health Services, Incorporated+*.............. 118,700 4,439 MedQuist, Incorporated+*...... 4,000 53 Orthodontic Centers of America, Incorporated+*..... 26,800 111 Owens & Minor, Incorporated*.. 61,200 1,603 Pacificare Health Systems, Incorporated+............... 55,600 1,980 ResCare, Incorporated+*....... 73,000 886 Select Medical Corporation*... 63,300 1,088 Sierra Health Services, Incorporated+*.............. 22,600 1,078 Triad Hospitals, Incorporated+............... 31,900 1,054
See accompanying notes - -------------------------------------------------------------------------------- 59 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Universal Health Services, Incorporated................ 129,200 $ 5,370 U.S. Physical Therapy, Incorporated+*.............. 68,500 1,034 -------- TOTAL HEALTH CARE PROVIDERS & SERVICES.... 40,540 -------- PHARMACEUTICALS - 0.67% Discovery Partners International, Incorporated+............... 55,800 263 King Pharmaceuticals, Incorporated+............... 193,100 2,107 The Medicines Company+*....... 30,800 821 Perrigo Company*.............. 42,300 769 Watson Pharmaceuticals, Incorporated+............... 180,600 5,062 -------- TOTAL PHARMACEUTICALS..... 9,022 -------- TOTAL HEALTH CARE......... 71,462 -------- INDUSTRIALS - 16.37% AEROSPACE & DEFENSE - 0.67% Cubic Corporation*............ 81,200 1,786 FTI Consulting, Incorporated+*.............. 11,300 212 Heico Corporation*............ 33,600 608 Herley Industries, Incorporated+*.............. 49,500 870 United Defense Industrials, Incorporated+............... 136,700 5,487 -------- TOTAL AEROSPACE & DEFENSE................. 8,963 -------- AIR FREIGHT & COURIERS - 0.23% Covenant Transportation, Incorporated+............... 182,300 3,157 -------- TOTAL AIR FREIGHT & COURIERS................ 3,157 -------- BUILDING PRODUCTS - 0.66% Simpson Manufacturing Company, Incorporated................ 21,800 1,401 Universal Fastener Products, Incorporated*............... 42,500 1,559 York International Corporation................. 186,300 5,932 -------- TOTAL BUILDING PRODUCTS... 8,892 -------- COMMERCIAL SERVICES & SUPPLIES - 6.56% BISYS Group, Incorporated+.... 78,500 1,146 Bowne & Company, Incorporated................ 355,100 4,414 The Brinks Company............ 127,100 4,080 CSG Systems International, Incorporated+............... 56,700 953 Concord Communications, Incorporated+*.............. 266,300 2,189 Convergys Corporation+........ 534,200 6,950 Deluxe Corporation............ 185,500 7,066
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) eFunds Corporation+*.......... 80,100 $ 1,577 John H. Harland Company*...... 74,000 2,385 IDEX Corporation.............. 245,000 9,041 Kelly Services, Incorporated................ 225,900 6,080 Labor Ready, Incorporated+*... 87,500 1,256 Mac Gray Corporation+......... 39,100 285 McGrath Rentcorp*............. 35,100 1,366 NCO Group, Incorporated+*..... 50,997 1,364 Pope & Talbot, Incorporated... 236,500 3,566 Spherion Corporation+......... 643,200 4,625 Valassis Communications, Incorporated+............... 589,600 20,270 Waste Connections, Incorporated+............... 104,300 3,288 Western Digital Corporation+................ 768,000 6,397 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.............. 88,298 -------- CONSTRUCTION & ENGINEERING - 0.85% Chicago Bridge & Iron Company N.V.*....................... 44,000 1,362 Florida Rock Industries, Incorporated................ 28,200 1,457 Granite Construction, Incorporated*............... 59,300 1,440 M/I Homes, Incorporated*...... 88,600 3,810 URS Corporation+.............. 120,400 3,323 -------- TOTAL CONSTRUCTION & ENGINEERING............. 11,392 -------- ELECTRICAL EQUIPMENT - 1.08% Acuity Brands, Incorporated... 9,300 247 Brady Corporation............. 186,800 10,130 C&D Technologies, Incorporated................ 92,300 1,652 Paxar Corporation+............ 38,200 842 Rayovac Corporation+*......... 43,000 1,071 Tecumseh Products Company*.... 14,900 645 -------- TOTAL ELECTRICAL EQUIPMENT............... 14,587 -------- INDUSTRIAL CONGLOMERATES - 0.01% Standex International Corporation*................ 3,100 81 -------- TOTAL INDUSTRIAL CONGLOMERATES........... 81 -------- MACHINERY - 3.61% AGCO Corporation+*............ 207,300 4,026 Briggs and Stratton Corporation................. 25,600 1,838 Bucyrus International, Incorporated*............... 33,400 1,002 Circor International, Incorporated*............... 38,200 724 Esterline Technologies Corporation+*............... 51,700 1,634 Flowserve Corporation+........ 267,600 5,775 GSI Lumonics, Incorporated+*.. 93,200 834 Harsco Corporation............ 163,300 7,912
See accompanying notes - -------------------------------------------------------------------------------- 60 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Kaydon Corporation*........... 237,500 $ 7,030 Lincoln Electric Holdings, Incorporated................ 28,100 938 Reliance Steel & Aluminum Company*.................... 27,200 934 SPX Corporation*.............. 121,700 4,667 Terex Corporation+*........... 241,700 9,185 Thomas Industries, Incorporated*............... 23,600 798 Trinity Industries, Incorporated*............... 43,000 1,340 -------- TOTAL MACHINERY........... 48,637 -------- MARINE - 1.93% Alexander & Baldwin, Incorporated................ 260,900 9,563 Kirby Corporation+............ 250,800 10,534 Overseas Shipholding Group, Incorporated................ 102,500 5,837 -------- TOTAL MARINE.............. 25,934 -------- TRANSPORTATION - 0.77% Celadon Group, Incorporated+.. 45,700 889 Central Freight Lines, Incorporated+............... 263,400 1,472 Dollar Thrifty Automotive Group, Incorporated+*....... 57,000 1,375 J.B. Hunt Transport Services, Incorporated................ 93,700 3,829 Laidlaw International, Incorporated+............... 106,700 1,779 Landstar System, Incorporated+............... 15,400 1,046 -------- TOTAL TRANSPORTATION...... 10,390 -------- TOTAL INDUSTRIALS......... 220,331 -------- INFORMATION TECHNOLOGY - 6.46% COMMUNICATIONS EQUIPMENT - 0.76% Anaren, Incorporated+......... 70,100 858 Digi International, Incorporated+............... 105,900 1,450 Extreme Networks, Incorporated+............... 162,600 951 MEMC Electronic Materials, Incorporated+*.............. 623,400 5,860 REMEC, Incorporated+*......... 203,600 1,122 -------- TOTAL COMMUNICATIONS EQUIPMENT............... 10,241 -------- COMPUTERS & PERIPHERALS - 0.43% Electronics for Imaging, Incorporated+*.............. 78,700 1,420 Emulex Corporation+*.......... 271,200 2,850 Komag, Incorporated+*......... 51,400 873 Maxtor Corporation+*.......... 231,400 685 -------- TOTAL COMPUTERS & PERIPHERALS............. 5,828 --------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.32% Exar Corporation+............. 78,700 $ 1,182 IKON Office Solutions, Incorporated*............... 491,900 5,165 Newport Corporation+*......... 104,700 1,182 Sypris Solutions, Incorporated*............... 70,100 967 Teleflex, Incorporated........ 16,400 718 Vishay Intertechnology, Incorporated+............... 661,600 8,554 -------- TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS........... 17,768 -------- INTERNET SOFTWARE & SERVICES - 0.22% United Online, Incorporated+*.............. 314,000 2,948 -------- TOTAL INTERNET SOFTWARE & SERVICES................ 2,948 -------- IT CONSULTING & SERVICES - 1.36% BearingPoint, Incorporated+... 682,100 5,934 Investment Technology Group, Incorporated+............... 60,200 927 ManTech International Corporation+*............... 89,300 1,931 Perot Systems Corporation+*... 111,300 1,784 Reynolds and Reynolds Company*.................... 313,200 7,708 -------- TOTAL IT CONSULTING & SERVICES................ 18,284 -------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.62% Actel Corporation+*........... 51,700 784 Advanced Energy Industries, Incorporated+*.............. 85,500 843 Cabot Microelectronics Corporation+*............... 26,200 944 Cymer, Incorporated+.......... 29,500 841 Omnivision Technologies, Incorporated+*.............. 281,985 4,484 Zoran Corporation+............ 44,100 445 -------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS.... 8,341 -------- SOFTWARE - 1.75% Borland Software Corporation+*............... 123,700 1,267 Compuware Corporation+........ 865,500 5,011 EPIQ Systems, Incorporated+*.. 64,700 969 Macromedia, Incorporated+..... 54,400 1,476 Mentor Graphics Corporation+*............... 834,200 9,710 SafeNet, Incorporated+*....... 72,800 2,230 SeaChange International, Incorporated+*.............. 42,600 726 Sybase, Incorporated+......... 122,900 1,946 Synopsys, Incorporated+....... 11,700 190 -------- TOTAL SOFTWARE............ 23,525 -------- TOTAL INFORMATION TECHNOLOGY.............. 86,935 --------
See accompanying notes - -------------------------------------------------------------------------------- 61 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) MATERIALS - 6.62% CHEMICALS - 3.65% Agrium, Incorporated.......... 339,300 $ 5,629 Balchem Corporation*.......... 30,200 943 Cytec Industries, Incorporated*............... 12,700 591 FMC Corporation+.............. 53,400 2,341 H.B. Fuller Company*.......... 326,100 8,772 Hercules, Incorporated+*...... 316,800 4,524 Lubrizol Corporation.......... 123,900 4,303 The Mosaic Company+*.......... 285,900 4,300 Octel Corporation*............ 35,200 679 PolyOne Corporation+.......... 1,195,600 9,051 RPM International, Incorporated................ 183,300 3,232 Spartech Corporation*......... 55,400 1,396 Westlake Chemical Corporation+*............... 147,400 3,401 -------- TOTAL CHEMICALS........... 49,162 -------- CONSTRUCTION MATERIALS - 0.94% Insituform Technologies, Incorporated+*.............. 418,300 8,291 Lafarge North America, Incorporated*............... 76,600 3,753 Lennox International, Incorporated................ 45,900 664 -------- TOTAL CONSTRUCTION MATERIALS............... 12,708 -------- CONTAINERS & PACKAGING - 0.30% Longview Fibre Company*....... 204,200 3,145 Silgan Holdings, Incorporated*............... 19,479 924 -------- TOTAL CONTAINERS & PACKAGING............... 4,069 -------- METALS & MINING - 0.94% Arch Coal, Incorporated*...... 43,900 1,428 Century Aluminum Company+..... 214,400 4,961 Compass Minerals International, Incorporated................ 51,100 1,094 Massey Energy Company......... 49,100 1,322 NN, Incorporated*............. 62,000 685 Quanex Corporation*........... 18,700 948 RTI International Metals, Incorporated+*.............. 64,000 1,282 Worthington Industries, Incorporated*............... 49,500 983 -------- TOTAL METALS & MINING..... 12,703 -------- PAPER & FOREST PRODUCTS - 0.79% Chesapeake Corporation........ 285,400 6,624 Potlatch Corporation.......... 86,200 4,059 -------- TOTAL PAPER & FOREST PRODUCTS................ 10,683 -------- TOTAL MATERIALS........... 89,325 --------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) TELECOMMUNICATION SERVICES - 0.39% DIVERSIFIED TELECOMMUNICATION - 0.09% SureWest Communications*...... 25,800 $ 731 Warwick Valley Telephone Company..................... 18,900 455 -------- TOTAL DIVERSIFIED TELECOMMUNICATION....... 1,186 -------- WIRELESS TELECOMMUNICATION SERVICE - 0.30% Arch Wireless, Incorporated+*.............. 76,300 2,181 Metrocall Holdings, Incorporated+............... 28,500 1,848 -------- TOTAL WIRELESS TELECOMMUNICATION SERVICE................. 4,029 -------- TOTAL TELECOMMUNICATION SERVICES................ 5,215 -------- UTILITIES - 8.45% ELECTRIC UTILITIES - 4.94% Alliant Corporation........... 232,000 6,120 Black Hills Corporation....... 39,900 1,175 Cleco Corporation*............ 207,900 3,788 DPL Inc....................... 332,000 7,171 Duquesne Light Holdings, Incorporated*............... 116,800 2,004 Great Plains Energy, Incorporated................ 306,900 8,744 Hawaiian Electric Industries, Incorporated*............... 56,400 1,582 IDACORP, Incorporated*........ 46,000 1,425 Northeast Utilities........... 271,800 5,254 NSTAR*........................ 219,400 10,854 OGE Energy Corporation........ 284,700 7,223 PNM Resources, Incorporated... 149,450 3,479 Sierra Pacific Resources Corporation+*............... 251,700 2,416 WPS Resources Corporation*.... 111,900 5,315 -------- TOTAL ELECTRIC UTILITIES............... 66,550 -------- GAS UTILITIES - 3.51% AGL Resources, Incorporated... 258,200 8,056 Atmos Energy Corporation*..... 71,700 1,850 Energen Corporation........... 34,400 1,850 National Fuel Gas Company..... 244,600 6,854 New Jersey Resources Corporation*................ 9,700 399 Nicor, Incorporated*.......... 54,200 2,034 ONEOK, Incorporated........... 279,800 7,504 Peoples Energy Corporation*... 75,900 3,247 Southern Union Company+*...... 301,665 6,627 South Jersey Industries, Incorporated*............... 10,300 486 UGI Corporation............... 67,200 2,596
See accompanying notes - -------------------------------------------------------------------------------- 62 AMERICAN AADVANTAGE SMALL CAP VALUE FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ -------- (DOLLARS IN THOUSANDS) Vectren Corporation........... 94,500 $ 2,445 WGL Holdings, Incorporated.... 114,200 3,249 -------- TOTAL GAS UTILITIES....... 47,197 -------- TOTAL UTILITIES........... 113,747 -------- TOTAL COMMON STOCK........ 1,207,300 -------- PAR AMOUNT ------------ SHORT-TERM INVESTMENTS - 28.25% U. S. TREASURY BILLS - 0.85% 1.60%, Due 12/9/2004 (Note A).......................... $ 11,405 11,386 -------- TOTAL U. S. TREASURY BILLS................... 11,386 --------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) OTHER SHORT-TERM INVESTMENTS - 27.40% American AAdvantage Money Market Select Fund (Notes B and C)..................... 212,988,578 $ 212,989 AMR Investments Enhanced Cash Business Trust (Notes B and C)......................... 155,772,876 155,773 ---------- TOTAL OTHER SHORT-TERM INVESTMENTS............ 368,762 ---------- TOTAL SHORT-TERM INVESTMENTS............ 380,148 ---------- TOTAL INVESTMENTS - 117.93% (COST $1,475,003).......... 1,587,448 ---------- LIABILITIES, NET OF OTHER ASSETS - (17.93%).......... (241,363) ---------- TOTAL NET ASSETS - 100%...... $1,346,085 ==========
- --------------- (A) At October 31, 2004, security held as collateral for open futures contracts. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan at October 31, 2004. See Note 5. + - Non-income producing security. See accompanying notes - -------------------------------------------------------------------------------- 63 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) STOCKS - 84.22% BRAZIL - 9.05% BRAZIL PREFERRED STOCK - 6.41% All America Latina Logistica S.A.+.......................... 3,000 $ 65 Banco Bradesco S.A.+............. 7,084 429 Banco Bradesco S.A., ADR*........ 3,910 238 Banco Itau Holding Financeira S.A.+.......................... 1,572 190 Banco Itau Holding Financeira S.A., ADR+..................... 9,636 583 Brasil Telecom Participacoes S.A., ADR+..................... 5,100 156 Braskem S.A.+.................... 1,073,000 40 Braskem S.A., ADR+............... 1,400 51 Companhia Brasileira de Distribuicao Grupo Pao de Acucar, ADR+................... 2,200 52 Companhia de Bebidas das Americas, ADR+................. 8,606 213 Companhia de Tecidos Norte de Minas+......................... 2,264,500 216 Companhia Energetica de Minas Gerais+........................ 19,642,810 454 Companhia Vale do Rio Doce+...... 1,876 34 Companhia Vale do Rio Doce, ADR............................ 28,064 511 Companhia Paranaense de Energia+....................... 46,245,300 166 Duratex S.A.+.................... 3,401,700 142 Empresa Brasileira de Aeronautica S.A. (Embraer), ADR+........... 11,040 293 Petrol Brasileiro S.A.,+......... 865 28 Petroleo Brasileiro S.A., ADR.... 13,116 428 Telecomunicacoes Brasileiras S.A., ADR...................... 7,660 202 Telemar Norte Leste S.A.+........ 6,400 118 Telemig Celular Participacoes S.A.+.......................... 51,165,700 67 Telesp Celular Participacoes S.A.+.......................... 85,748,463 203 Telesp Celular Participacoes S.A., ADR+..................... 23,500 141 Telesp - Telecommunicacoes de Sao Paulo S.A.+.................... 6,090,100 97 TIM Participacoes S.A., ADR+*.... 8,167 114 Usinas Siderurgicas de Minas Gerais S.A.+................... 4,732 71 ------- TOTAL BRAZIL PREFERRED STOCK...................... 5,302 ------- BRAZIL COMMON STOCK - 2.64% Companhia de Saneamento Basico do Estado de Sao Paulo+........... 5,410,000 220 Companhia de Saneamento Basico do Estado de Sao Paulo, ADR+...... 6,000 59
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Companhia Energetica de Minas Gerais, ADR+................... 2,900 $ 67 Companhia Paranaense de Energia+....................... 7,000,000 21 Companhia Siderurgica Nacional S.A., ADR...................... 10,400 153 Grendene S.A.+................... 1,000 12 Petroleo Brasileiro S.A., ADR.... 40,402 1,435 Votorantim Celulose e Papel S.A., ADR+........................... 6,250 216 ------- TOTAL BRAZIL COMMON STOCK.... 2,183 ------- TOTAL BRAZIL................. 7,485 ------- CHILE COMMON STOCK - 0.50% Banco Santander-Chile S.A., ADR.. 4,800 134 Grupo Enersis SA, ADR+........... 36,400 275 ------- TOTAL CHILE COMMON STOCK..... 409 ------- CHINA COMMON STOCK - 1.93% China Mobile (Hong Kong) Limited+....................... 243,100 704 China Mobile (Hong Kong) Limited, ADR............................ 6,200 90 China Oilfield Services Limited+*...................... 242,000 71 China Petroleum & Chemical Corporation+................... 374,000 142 China Resource Power Holdings Company Limited+*.............. 80,000 46 China Telecom Corporation Limited+....................... 450,600 145 Chunghwa Telecom Company Limited, ADR*........................... 11,000 207 Tom Online, Incorporated+........ 204,000 32 TPV Technology Limited+.......... 254,000 157 ------- TOTAL CHINA COMMON STOCK..... 1,594 ------- EGYPT COMMON STOCK - 1.09% Commercial International Bank, GDR, 144A (Note A)............. 30,200 146 Eastern Tobacco Company+......... 6,200 140 Egyptian Company for Mobile Services (MobiNil)+............ 16,203 300 Orascom Construction Industries S.A.E.......................... 14,726 171 Suez Cement Company, GDR, 144A (Note A)....................... 12,869 142 ------- TOTAL EGYPT COMMON STOCK..... 899 ------- HONG KONG COMMON STOCK - 3.63% Asia Aluminum Holdings Limited+.. 858,000 97 Beijing Enterprises Holdings+.... 39,000 46
See accompanying notes - -------------------------------------------------------------------------------- 64 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Brilliance China Automotive Holdings Limited+*............. 202,000 $ 42 China Life Insurance Company Limited+....................... 246,000 163 China Ping'an Insurance Company Limited+*...................... 92,000 145 China Power International Development Limited+*.......... 79,500 31 China Resources Enterprises Limited+*...................... 209,900 294 CNOOC Limited+................... 541,000 280 Denway Motors Limited+........... 184,800 62 Fountain Set (Holdings) Limited+*...................... 157,000 118 The Grande Holdings Limited+..... 61,000 62 Hainan Meilan Airport Company Limited+....................... 72,000 59 Hopewell Highway Infrastructure Limited+....................... 142,000 94 Kingboard Chemical Holdings Limited+*...................... 56,000 117 Lianhua Supermarket Holdings Company Limited+............... 64,000 75 Moulin International Holdings Limited+....................... 74,000 40 Norstar Founders+*............... 162,000 40 Qingling Motors Company Limited+....................... 548,000 73 Sansui Electric Company Limited+....................... 30,500 9 Shandong International Power Development Company Limited+... 1,066,800 343 Shanghai Industrial Holdings Limited+*...................... 150,500 285 Shougang Concord Century Holdings Limited+....................... 375,000 36 Sinopec Yizheng Chemical Fibre Company Limited+*.............. 666,500 139 Sinopec Zhenhai Refining Chem+... 50,000 48 Texwinca Holdings Limited+....... 70,100 63 Victory City International Holdings Limited+.............. 137,000 54 Wumart Stores, Incorporated+..... 32,000 55 Yanzhou Coal Mining Company Limited+*...................... 100,000 132 ------- TOTAL HONG KONG COMMON STOCK...................... 3,002 ------- HUNGARY COMMON STOCK - 0.96% Gedeon Richter Rt................ 2,550 301 Magyar Olaj-es Gazipari Reszvenytarsasag............... 3,165 178 Magyar Tavkozlesi Rt............. 75,900 319 ------- TOTAL HUNGARY COMMON STOCK... 798 -------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) INDIA COMMON STOCK - 6.99% ABB Limited+..................... 4,200 $ 70 Bharat Electronics Limited+...... 16,500 227 Bharat Petroleum Corporation Limited+....................... 34,133 260 CIPLA+........................... 19,750 122 Container Corporation+........... 5,000 77 Doctor Reddy's Laboratories Limited+....................... 2,700 45 Doctor Reddy's Laboratories Limited, ADR................... 17,800 295 GAIL (India) Limited+............ 18,200 78 GAIL (India) Limited, GDR, 144A (Note A)....................... 9,600 247 GlaxoSmithKline Pharmaceutical Limited+....................... 6,000 89 Grasim Industries Limited+....... 4,500 107 HDFC Bank Limited+............... 8,000 73 Hero Honda Motors Limited+....... 12,500 117 Hindalco Industries Limited+..... 3,000 79 Hindalco Industries Limited, GDR, 144A (Note A).................. 14,400 372 Hindustan Lever Limited+......... 140,988 388 Housing Development Finance Corporation Limited+........... 8,000 113 ICICI Bank Limited+.............. 43,500 287 ICICI Bank Limited, ADR.......... 4,800 76 Ind Dev Bank India+.............. 38,000 71 Infosys Technologies Limited, ADR*........................... 3,000 199 ITC Limited+..................... 10,416 250 Mahanagar Telephone Nigam Limited+....................... 188,500 573 Mahindra & Mahindra Limited+..... 6,000 59 National Thermal Power Corporation Limited+........... 19,500 27 Oil and Natural Gas Corporation Limited+....................... 17,000 295 Reliance Industries Limited+..... 55,405 647 Siemens India Limited+........... 1,800 45 State Bank of India, GDR+........ 2,300 61 State Bank of India, GDR, 144A (Note A)....................... 11,300 299 Steel Authority of India Limited+....................... 125,000 136 ------- TOTAL INDIA COMMON STOCK..... 5,784 ------- INDONESIA COMMON STOCK - 2.38% Bank Central Asia+............... 436,000 115 Bank Internasional Indonesia+.... 2,885,500 51 Bumi Resources Tbk+.............. 1,660,000 132 Hindustan Petroleum Corporation Limited+....................... 44,300 301 PT Astra Agro Lestari Tbk+....... 189,600 61 PT Bank Mandiri+................. 1,708,500 296
See accompanying notes - -------------------------------------------------------------------------------- 65 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) PT Bank Rakyat Indonesia+........ 519,500 $ 111 PT Gudang Garam Tbk+............. 187,700 263 PT Indocement Tunggal Prakarsa Tbk+........................... 321,500 68 PT Indofood Sukses Makmur Tbk+... 2,506,000 186 PT Telekomunikasi Indonesia Tbk+........................... 795,000 381 ------- TOTAL INDONESIA COMMON STOCK...................... 1,965 ------- ISRAEL COMMON STOCK - 0.98% Bank Hapoalim Limited+........... 57,180 155 Check Point Software Technologies+.................. 15,090 341 Supersol Limited+................ 52,900 124 Syneron Medical Limited+*........ 3,400 65 Taro Pharmaceutical Industries Limited+....................... 4,800 128 ------- TOTAL ISRAEL COMMON STOCK.... 813 ------- MALAYSIA COMMON STOCK - 2.29% Commerce Asset-Holding Berhad+... 64,000 77 Gamuda Berhad+................... 235,100 309 Genting Berhad+.................. 72,600 323 Kuala Lumpur Kepong Berhad+...... 59,300 104 Magnum Corporation Berhad+....... 136,000 90 Malaysia International Shipping Corporation Berhad+............ 19,600 70 Proton Holdings Berhad+.......... 37,100 83 Resorts World Berhad+............ 68,300 172 Sime Darby Berhad+............... 268,700 403 SP Setia Berhad+................. 85,499 85 Tenaga Nasional Berhad+.......... 43,000 126 YTL Corporation Berhad+.......... 46,000 55 ------- TOTAL MALAYSIA COMMON STOCK...................... 1,897 ------- MEXICO COMMON STOCK - 6.83% America Movil S.A. de C.V., ADR............................ 23,255 1,023 Cemex S.A. de C.V................ 33,047 191 Cemex S.A. de C.V., ADR.......... 4,433 128 Coca-Cola Femsa, S.A. de C.V., ADR*........................... 27,975 563 Consorcio Ara, S.A. de C.V.+..... 8,800 24 Controladora Commercial Mexicana S.A. de C.V.+.................. 232,400 250 Desc S.A. de C.V................. 500,000 132 Fomento Economico Mexicano S.A. de C.V., ADR................... 2,800 123 Grupo Continential, S.A.......... 120,850 188 Grupo Financiero Banorte, S.A. de C.V............................ 11,700 55
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Grupo Televisa, S.A., ADR........ 12,400 $ 682 Kimberly-Clark de Mexico, S.A. de C.V............................ 153,000 458 Telefonos de Mexico, S.A. de C.V., ADR...................... 29,478 1,009 Wal-Mart de Mexico, S.A. de C.V.+.......................... 211,421 692 Wal-Mart de Mexico, S.A. de C.V., ADR+........................... 4,062 133 ------- TOTAL MEXICO COMMON STOCK.... 5,651 ------- MOROCCO - 0.15% Banque Maroc du Commerce Exterieur...................... 2,100 124 ------- TOTAL MOROCCO................ 124 ------- PHILIPPINES COMMON STOCK - 0.39% ABS-CBN Broadcasting Corporation+................... 165,000 62 Bank of the Philippine Islands+....................... 176,336 152 Manila Electric Company+......... 165,900 72 SM Prime Holdings, Incorporated+.................. 280,000 37 ------- TOTAL PHILIPPINES COMMON STOCK...................... 323 ------- POLAND COMMON STOCK - 1.28% Bank Przemyslowo-Handlowy SA+.... 1,007 136 KGHM Polska Miedz SA+............ 11,794 117 Telekomunikacja Polska SA........ 120,575 584 Telekomunikacja Polska SA, GDR... 37,900 182 Telekomunikacja Polska SA, GDR, 144A (Note A).................. 8,100 39 ------- TOTAL POLAND COMMON STOCK.... 1,058 ------- RUSSIA - 4.25% RUSSIA PREFERRED STOCK - 0.65% JSC Surgutneftegaz, ADR.......... 1,328 70 Uralsvyazinform, ADR............. 20,100 168 Vimpel Communications, ADR+...... 1,100 125 VolgaTelecom, ADR+............... 26,800 177 ------- TOTAL RUSSIA PREFERRED STOCK...................... 540 ------- RUSSIA COMMON STOCK - 3.60% JSC Surgutneftegaz, ADR*......... 8,511 337 LUKOIL Oil Company, ADR.......... 10,477 1,304 Mining and Metallurgical Company Norilsk Nickel, ADR............ 849 53 Mobile Telesystems, ADR+......... 200 29 Mobile Telesystems, GDR, 144A (Note A)+...................... 1,800 261 RAO Gazprom+..................... 18,500 691
See accompanying notes - -------------------------------------------------------------------------------- 66 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) RAO Gazprom, ADR................. 2,200 $ 82 Yukos Oil Company, ADR+*......... 13,418 223 ------- TOTAL RUSSIA COMMON STOCK.... 2,980 ------- TOTAL RUSSIA................. 3,520 ------- SINGAPORE - 0.16% Total Access Communications+*.... 41,000 133 ------- TOTAL SINGAPORE.............. 133 ------- SOUTH AFRICA COMMON STOCK - 12.60% African Bank Investments Limited+....................... 222,200 521 African Life Assurance Company Limited........................ 81,421 202 Alexander Forbes Limited+........ 15,800 30 Anglo American plc+.............. 42,010 922 Anglo American Platinum Corporation Limited+........... 2,200 85 Aveng Limited+................... 135,600 220 Avi Limited+..................... 27,700 105 Barloworld Limited+.............. 10,500 147 Bidvest Group Limited+........... 34,114 376 Edgars Consolidated Stores+...... 7,000 246 Gold Fields Limited+............. 11,700 165 Gold Fields Limited, ADR*........ 14,500 203 Harmony Gold Mining Company Limited+....................... 14,399 169 Illovo Sugar Limited+............ 85,200 119 Impala Platinum Holdings Limited+....................... 2,129 172 Imperial Holdings Limited+....... 11,791 177 Iscor Limited+................... 7,800 69 Kumba Resources Limited+......... 18,300 128 Massmart Holdings Limited+....... 46,200 324 Metro Cash and Carry Limited+.... 516,452 169 MTN Group Limited+............... 110,840 605 Nampak Limited+.................. 192,100 467 Nedcor Limited+.................. 84,386 922 Old Mutual....................... 225,400 477 Sanlam Limited+.................. 230,000 407 Sappi Limited+................... 53,400 771 Sasol Limited+................... 26,600 530 Shoprite Holdings Limited+....... 198,300 378 Standard Bank Group Limited+..... 35,391 312 Steinhoff International Holdings Limited+....................... 336,479 589 Telkom South Africa Limited, ADR+........................... 19,000 270 The Tongaat-Hulett Group Limited+....................... 17,600 144 ------- TOTAL SOUTH AFRICA COMMON STOCK...................... 10,421 -------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) SOUTH KOREA - 13.61% SOUTH KOREA PREFERRED STOCK - 0.42% Daishin Securities Company Limited+....................... 5,740 $ 44 Hyundai Motor Company+........... 3,200 88 Samsung Electronics Company Limited+....................... 790 212 ------- TOTAL SOUTH KOREA PREFERRED STOCK...................... 344 ------- SOUTH KOREA COMMON STOCK - 13.19% Cheil Communications, Incorporated+.................. 30 4 Cheil Industries, Incorporated+.................. 11,810 167 CJ Corporation+.................. 3,930 218 Daishin Securities Company Limited+....................... 5,780 68 Doosan Heavy Industries and Construction Limited+.......... 8,100 75 Handsome Corporation+............ 12,610 108 Hankook Tire Company Limited+.... 44,540 412 Hyundai Department Store Company Limited+....................... 3,940 114 Hyundai Development Company+..... 11,430 153 Hyundai Mobis+................... 8,220 421 Hyundai Motor Company Limited+... 7,000 339 Industrial Bank of Korea+........ 19,300 122 INI Steel Company+............... 7,450 79 Kangwon Land Incorporated+....... 29,891 334 Kia Motors Corporation+.......... 20,650 194 Kookmin Bank+.................... 9,071 303 Kookmin Bank, ADR+*.............. 6,800 229 Korea Electric Power Corporation+................... 51,560 1,066 KT Corporation, ADR.............. 30,200 557 KT&G Corporation+................ 6,000 166 LG Construction Company+......... 2,410 49 LG Electronics, Incorporated+.... 3,200 181 LG Household and Health Care Limited+....................... 4,890 126 LG Investment and Securities Company Limited+............... 30,870 214 Orion Corporation+............... 1,550 124 POSCO+........................... 2,880 431 Pusan Bank+...................... 14,410 91 Samsung Corporation+............. 8,110 114 Samsung Electro Mechanics Company Limited+....................... 17,500 375 Samsung Electronics Company Limited+....................... 4,800 1,884 Samsung Fire & Marine Insurance Company Limited+............... 6,120 364 Samsung SDI Company Limited+..... 12,440 1,122 Shinhan Financial Group Company Limited+....................... 11,410 225
See accompanying notes - -------------------------------------------------------------------------------- 67 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) STX Shipbuilding Company Limited+....................... 8,130 $ 121 SK Telecom Company Limited, ADR............................ 4,800 95 SK Telecom Company Limited+...... 1,650 259 ------- TOTAL SOUTH KOREA COMMON STOCK...................... 10,904 ------- TOTAL SOUTH KOREA............ 11,248 ------- TAIWAN COMMON STOCK - 9.70% Accton Technology Corporation+... 144,396 59 Acer, Incorporated............... 75,518 110 Advanced Semiconductor Engineering, Incorporated+..... 104,000 72 Asia Optical Company, Incorporated+.................. 58,071 276 Asustek Computer, Incorporated+.. 242,237 536 Benq Corporation+................ 188,000 177 Catcher Technology Company Limited+....................... 18,000 55 Cathay Financial Holding Company Limited+....................... 96,000 184 Cheng Shin Industries+........... 54,216 64 China Motor Company+............. 146,000 168 Chinatrust Financial Holding Company Limited+............... 196,827 224 Compal Electronics, Incorporated+.................. 599,026 537 CTCI Corporation+................ 189,552 106 CyberLink Corporation+........... 30,837 77 Delta Electronics, Incorporated+.................. 186,650 282 Elan Microelectronics Corporation+................... 110,496 68 Evergreen Marine Corporation+.... 3,032 3 Faraday Technology Corporation+.. 16,973 23 First Financial Holding Company Limited+....................... 313,000 252 Fubon Financial Holding Company Limited+....................... 116,000 109 Hon Hai Precision Industry Company Limited+............... 101,064 372 Infortrend Technology, Incorporated+.................. 52,414 92 Kaulin Manufacturing Company Limited+....................... 37,950 35 Largan Precision Company Limited+....................... 14,484 85 Media Tek, Incorporated+......... 33,162 222 Mega Financial Holding Company+....................... 287,000 191 Nien Hsing Textile Company Limited+....................... 151,000 130 Phoenixtec Power Company Limited+....................... 71,355 69 Polaris Securities Company Limited+....................... 288,733 148 Quanta Computer, Incorporated+... 258,298 417 Richtek Technology Corporation+.. 13,000 21
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Shin Kong Financial Holding Company Limited+............... 152,000 $ 133 SinoPac Holdings+................ 733,987 417 Springsoft Systems Limited+...... 40,800 74 Sunplus Technology Company Limited+....................... 6,200 9 Taishin Financial Holdings Company Limited+............... 158,445 129 Taiwan Cellular Corporation+..... 301,635 301 Taiwan Cement Corporation+....... 413,586 224 Tsann Keun Enterprise Company Limited+....................... 51,630 57 United Microelectronics Corporation+................... 1,529,251 924 United Microelectronics Corporation, ADR+*............. 28,577 100 Waffer Technology Company Limited+....................... 54,050 79 Ya Hsin Industrial Company Limited+....................... 217,288 191 Yaego Corporation+............... 655,000 217 ------- TOTAL TAIWAN COMMON STOCK.... 8,019 ------- THAILAND COMMON STOCK - 3.08% Advanced Info Services PCL+(+)... 93,200 212 Asian Property Development Company Limited+(+)............ 446,800 39 Bangkok Bank PCL+................ 125,400 293 Banpu Company+................... 24,500 87 Charoen Pokphand Foods PCL+(+)... 1,268,000 108 CP Seven Eleven PCL+(+).......... 87,600 115 Delta Electronics, Incorporated+(+)............... 110,000 45 Italian-Thai Development PCL+(+)........................ 536,300 101 Kasikornbank PCL+................ 338,800 388 Kasikornbank PCL, NVDR+.......... 18,900 22 Krung Thai Bank PCL+(+).......... 1,401,800 283 Lalin Property PCL+(+)........... 148,400 20 Land & Houses PCL+............... 445,900 109 MBK Public Company Limited+(+)... 23,400 27 PTT Public Company Limited+(+)... 46,900 194 Siam City Bank PCL+(+)........... 64,000 33 Siam Commercial Bank PCL+........ 279,000 292 Siam Makro PCL+(+)............... 92,800 101 Sino Thai Engineering & Construction PCL+(+)........... 204,400 35 Thai Oil PCL+(+)................. 42,200 41 ------- TOTAL THAILAND COMMON STOCK...................... 2,545 ------- TURKEY COMMON STOCK - 2.37% Akbank T.A.S..................... 49,373,482 223 Akcansa Cimento A.S.............. 56,902,700 169
See accompanying notes - -------------------------------------------------------------------------------- 68 AMERICAN AADVANTAGE EMERGING MARKETS FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) Arcelik A.S.+.................... 38,536,350 $ 234 Enka Insaat ve Sanayi A.S.+...... 7,886,451 198 Hurriyet Gazetecilik ve Matbaacilik A.S................ 82,009,130 163 Tupras-Turkiye Petrol Rafinerileri A.S............... 27,214,900 252 Turkcell Iletisim Hizmetleri A.S............................ 37,239,879 229 Turkiye Garanti Bankasi A.S.+.... 81,555,450 218 Trakya Cam Sanayii A.S........... 75,184,815 188 Yapi ve Kredi Bankasi A.S.+...... 38,967,000 88 ------- TOTAL TURKEY COMMON STOCK.... 1,962 ------- TOTAL STOCKS................. 69,650 ------- PAR AMOUNT ----------- SHORT TERM INVESTMENTS - 18.13% U. S. TREASURY BILLS - 0.87%* 1.70%, Due 12/9/2004 (Note C).... $ 720 719 ------- TOTAL U. S. TREASURY BILLS... 719 ------- SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) OTHER SHORT TERM INVESTMENTS - 17.26% American AAdvantage Money Market Select Fund (Notes B and D).... 12,118,007 $12,118 AMR Investments Enhanced Cash Business Trust (Notes B and D)............................. 2,148,906 2,149 ------- TOTAL OTHER SHORT TERM INVESTMENTS................ 14,267 ------- TOTAL SHORT TERM INVESTMENTS................ 14,986 ------- TOTAL INVESTMENTS - 102.35% (COST $72,492)....................... 84,636 ------- LIABILITIES, NET OF OTHER ASSETS - (2.35%)............... (1,941) ------- TOTAL NET ASSETS - 100%.......... $82,695 =======
- --------------- (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 period end, the value of these securities amounted to $1,506 or 1.82% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) At October 31, 2004, security held as collateral for open futures contracts. (D) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan at October 31, 2004. See Note 5. + - Non-income producing security. ( 7/8) - Valued at fair value pursuant to procedures approved by the Board of Trustees. See accompanying notes - -------------------------------------------------------------------------------- 69 AMERICAN AADVANTAGE EMERGING MARKETS FUND EMERGING MARKETS SECTOR DIVERSIFICATION October 31, 2004 - --------------------------------------------------------------------------------
PERCENT OF NET ASSETS ---------- Consumer Discretionary...................................... 9.81% Consumer Staples............................................ 6.31% Energy...................................................... 8.32% Financials.................................................. 15.46% Health Care................................................. 1.31% Industrials................................................. 7.39% Information Technology...................................... 10.58% Materials................................................... 9.06% Short-Term Investments...................................... 18.11% Telecommunication Services.................................. 11.96% Utilities................................................... 3.98% Liabilities, Net of Other Assets............................ (2.29%) ------- 100.00% =======
See accompanying notes - -------------------------------------------------------------------------------- 70 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) CORPORATE BONDS - 90.98% CONSUMER DISCRETIONARY - 29.16% AUTO COMPONENTS - 4.96% Advanced Accessory Systems, LLC, 10.75%, Due 6/15/2011...... $ 1,200 $ 1,092 ArvinMeritor, Incorporated, 8.75%, Due 3/1/2012*............ 1,750 1,951 Asbury Automotive Group, Incorporated, 9.00%, Due 6/15/2012...................................... 1,000 1,055 8.00%, Due 3/15/2014, 144A (Note A)....................... 800 780 Collins & Aikman Corporation, 10.75%, Due 12/31/2011*................................... 2,025 2,020 12.875%, Due 8/24/2012, 144A (Note A)*.................... 800 692 GenCorp, Incorporated, 9.50%, Due 8/15/2013................. 2,600 2,789 General Motors Corporation, 7.125%, Due 7/15/2013*.......... 3,300 3,424 Stanadyne Corporation, 10.00%, Due 8/15/2014, 144A (Note A)........................................................ 1,000 1,050 Tenneco Automotive, Incorporated, 11.625%, Due 10/15/2009*............................................... 1,000 1,062 TriMas Corporation, 9.875%, Due 6/15/2012*.................. 1,750 1,794 United Components, Incorporated, 9.375%, Due 6/15/2013...... 1,500 1,627 -------- TOTAL AUTO COMPONENTS................................... 19,336 -------- HOTELS, RESTAURANTS & LEISURE - 8.43% AMC Entertainment, Incorporated, 9.50%, Due 2/1/2011....................................... 1,700 1,755 9.875%, Due 2/1/2012*..................................... 750 802 8.625%, Due 8/15/2012, 144A (Note A)...................... 700 765 Ameristar Casinos, Incorporated, 10.75%, Due 2/15/2009...... 700 798 AMF Bowling Worldwide Incorporated, 10.00%, Due 3/1/2010, 144A (Note A)............................................. 2,450 2,622 Aztar Corporation, 9.00%, Due 8/15/2011...................................... 1,000 1,120 7.875%, Due 6/15/2014..................................... 1,625 1,763 Blockbuster, Incorporated, 9.00%, Due 9/1/2012, 144A (Note A)........................................................ 1,100 1,128 Booth Creek Ski Holdings, Incorporated, 12.50%, Due 3/15/2007................................................. 2,500 2,506 Choctaw Resort Development Enterprise, 7.25%, Due 11/15/2019, 144A (Note A)................................. 700 715 Chumash Casino & Resort Enterprises, 9.00%, Due 7/15/2010... 1,250 1,397 Cinemark, Incorporated, 0.00%, Due 3/15/2014, 144A (Note A)+....................................................... 2,025 1,433 Intrawest Corporation, 7.50%, Due 10/15/2013, 144A (Note A)........................................................ 750 803 Loews Cineplex Entertainment Corporation, 9.00%, Due 8/1/2014, 144A (Note A)................................... 1,600 1,676 Penn National Gaming, Incorporated, 11.125%, Due 3/1/2008... 1,500 1,621 Poster Financial Group, Incorporated, 8.75%, Due 12/1/2011................................................. 1,860 1,948 Station Casinos, Incorporated, 6.875%, Due 3/1/2016, 144A (Note A).................................................. 1,500 1,594 Town Sports International, Incorporated, 9.625%, Due 4/15/2011................................................. 800 844 Turning Stone Casino Resort, 9.125%, Due 12/15/2010, 144A (Note A).................................................. 3,710 4,025 Vicorp Restaurants, Incorporated, 10.50%, Due 4/15/2011..... 1,000 1,000 Warner Music Group, 7.375%, Due 4/15/2014, 144A (Note A).... 2,500 2,569 -------- TOTAL HOTELS, RESTAURANTS & LEISURE..................... 32,884 -------- HOUSEHOLD DURABLES - 0.25% Ainsworth Lumber Company Limited, 6.75%, Due 3/15/2014...... 1,000 960 -------- TOTAL HOUSEHOLD DURABLES................................ 960 -------- MEDIA - 6.42% Alliance Atlantis Communications, Incorporated, 13.00%, Due 12/15/2009................................................ 2,530 2,720 American Lawyer Media, Incorporated, 9.75%, Due 12/15/2007................................................ 1,600 1,608
See accompanying notes - -------------------------------------------------------------------------------- 71 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Charter Communications Operations, 8.00%, Due 4/30/2012, 144A (Note A)....................... $ 500 $ 506 8.375%, Due 4/30/2014, 144A (Note A)...................... 2,200 2,219 Dex Media West, LLC, 9.875%, Due 11/15/2009.................................... 500 575 9.875%, Due 8/15/2013..................................... 500 591 0.00%, Due 11/15/2013+.................................... 1,000 760 Echostar DBS Corporation, 6.625%, Due 10/1/2014, 144A (Note A)*....................................................... 6,750 6,902 Fisher Communications, Incorporated, 8.625%, Due 9/15/2014, 144A (Note A)............................................. 800 844 Kabel Deutschland GMBH, 10.625%, Due 7/1/2014, 144A (Note A)........................................................ 3,650 4,088 LBI Media, Incorporated, 10.125%, Due 7/15/2012............. 1,000 1,113 PEI Holdings, Incorporated, 11.00%, Due 3/15/2010........... 1,391 1,615 XM Satellite Radio, Incorporated, 0.00%, Due 12/31/2009+.... 1,500 1,509 -------- TOTAL MEDIA............................................. 25,050 -------- RETAIL - 8.25% CSK Auto Corporation, 7.00%, Due 1/15/2014.................. 1,545 1,514 Dollar General Corporation, 8.625%, Due 6/15/2010........... 3,180 3,633 Finlay Fine Jewelry Corporation, 8.375%, Due 6/1/2012....... 1,575 1,721 FTD, Incorporated, 7.75%, Due 2/15/2014, 144A (Note A)*..... 2,165 2,170 Group 1 Automotive, Incorporated, 8.25%, Due 8/15/2013...... 1,000 1,058 J Crew Intermediate LLC, 0.00%, 5/15/2008+*................. 1,750 1,632 NationsRent, Incorporated, 9.50%, Due 10/15/2010............ 1,250 1,381 Pep Boys, Incorporated, 6.71%, Due 11/3/2004...................................... 1,000 1,000 7.00%, Due 6/1/2005....................................... 700 711 6.88%, Due 3/6/2006....................................... 1,000 1,020 Rite Aid Corporation, 12.50%, Due 9/15/2006..................................... 750 851 8.125%, Due 5/1/2010...................................... 2,000 2,135 9.50%, Due 2/15/2011...................................... 1,210 1,340 Samsonite Corporation, 8.875%, Due 6/1/2011................. 2,000 2,130 Toys R Us, Incorporated, 7.625%, 8/1/2011*......................................... 1,950 1,960 7.375%, Due 10/15/2018.................................... 800 744 8.75%, Due 9/1/2021....................................... 500 500 United Rentals North America, Incorporated, 6.50%, Due 2/15/2012................................................. 3,600 3,564 Woolworth Corporation, 8.50%, Due 1/15/2022................. 2,900 3,103 -------- TOTAL RETAIL............................................ 32,167 -------- TEXTILES & APPAREL - 0.85% Day International Group, Incorporated, 9.50%, Due 3/15/2008................................................. 500 509 Phillips-Van Heusen Corporation, 7.75%, Due 11/15/2023...... 2,800 2,814 -------- TOTAL TEXTILES & APPAREL................................ 3,323 -------- TOTAL CONSUMER DISCRETIONARY............................ 113,720 -------- CONSUMER STAPLES - 2.73% Borden, Incorporated, 9.20%, Due 3/15/2021...................................... 2,250 2,081 7.875%, Due 2/15/2023..................................... 1,450 1,211 Chiquita Brands International, Incorporated, 10.56%, Due 3/15/2009..................................... 1,750 1,875 7.50%, Due 11/1/2014, 144A (Note A)....................... 750 769
See accompanying notes - -------------------------------------------------------------------------------- 72 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Herbalife International, Incorporated, 11.75%, Due 7/15/2010................................................. $ 2,975 $ 3,421 Pilgrims Pride Corporation, 9.625%, Due 9/15/2011........... 1,148 1,290 -------- TOTAL CONSUMER STAPLES.................................. 10,647 -------- ENERGY - 6.80% AES Corporation, 4.50%, Due 8/15/2005*...................... 2,250 2,250 Alpha Natural Resources, LLC, 10.00%, Due 6/1/2012, 144A (Note A).................................................. 500 555 Calpine Corporation, 8.50%, Due 7/15/2010, 144A (Note A)*...................... 2,100 1,544 9.625%, Due 10/1/2014, 144A (Note A)...................... 800 760 CITGO Petroleum Corporation, 6.00%, Due 10/15/2011, 144A (Note A).................................................. 500 509 CMS Energy Corporation, 7.625%, Due 11/15/2004.............. 800 800 Dynegy Holdings, Incorporated, 10.125%, Due 7/15/2013, 144A (Note A).................................................. 2,400 2,796 Energy Partners Limited, 8.75%, Due 8/1/2010................ 2,000 2,169 MarkWest Energy Partners LP, 6.875%, Due 11/1/2014, 144A (Note A).................................................. 1,500 1,530 Massey Energy Company, 6.625%, Due 11/15/2010............... 1,500 1,564 Newfield Exploration Company, 8.375%, Due 8/15/2012......... 1,000 1,132 Paramount Resources Limited, 7.875%, Due 11/1/2010.......... 1,750 1,925 PG&E Gas Transmission, Northwest Company, 7.80%, Due 6/1/2025.................................................. 2,500 2,587 Star Gas Partners, L.P., 10.25%, Due 2/15/2013*............. 2,725 2,623 Swift Energy Company, 7.675%, Due 7/15/2011................. 500 543 Terex Corporation, 9.25%, Due 7/15/2011...................................... 1,250 1,400 7.375%, Due 1/15/2014..................................... 1,725 1,846 -------- TOTAL ENERGY............................................ 26,533 -------- FINANCIALS - 2.35% DIVERSIFIED FINANCIALS - 2.04% E Trade Financial Corporation, 8.00%, Due 6/15/2011, 144A (Note A).................................................. 2,375 2,506 Refco Financial Holdings, LLC, 9.00%, Due 8/1/2012, 144A (Note A).................................................. 2,625 2,835 Thornburg Mortgage, Incorporated, 8.00%, 5/15/2013*......... 2,500 2,625 -------- TOTAL DIVERSIFIED FINANCIALS............................ 7,966 -------- REAL ESTATE - 0.31% Ventas Realty Limited Partnership, 6.625%, Due 10/15/2014, 144A, (Note A)............................................ 1,200 1,224 -------- TOTAL REAL ESTATE....................................... 1,224 -------- TOTAL FINANCIALS........................................ 9,190 -------- HEALTH CARE - 5.96% BIOTECHNOLOGY - 0.92% HealthSouth Corporation, 6.875%, 6/15/2005*........................................ 450 453 8.375%, Due 10/1/2011*.................................... 3,150 3,142 -------- TOTAL BIOTECHNOLOGY..................................... 3,595 -------- EQUIPMENT & SUPPLIES - 0.91% Duane Reade, Incorporated, 9.75%, Due 8/1/2011, 144A (Note A)*....................................................... 2,000 1,920 Leiner Health Products, Incorporated, 11.00%, Due 6/1/2012, 144A (Note A)............................................. 500 542 Sybron Dental Specialties, Incorporated, 8.125%, Due 6/15/2012................................................. 1,000 1,090 -------- TOTAL EQUIPMENT & SUPPLIES.............................. 3,552 --------
See accompanying notes - -------------------------------------------------------------------------------- 73 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) HEALTHCARE PROVIDERS & SERVICES - 4.13% HCA, Incorporated, 8.75%, Due 9/1/2010....................................... $ 1,000 $ 1,153 5.75%, Due 3/15/2014...................................... 1,000 970 8.36%, Due 4/15/2024...................................... 1,500 1,613 Interactive Health, LLC, 7.25%, Due 4/1/2011, 144A (Note A)........................................................ 1,800 1,566 Jean Coutu Group PJC, Incorporated, 7.625%, Due 8/1/2012, 144A (Note A)............................................. 500 529 National Health Investors, 7.30%, Due 7/16/2007............. 1,000 1,025 NDCHealth Corporation, 10.50%, Due 12/1/2012................ 3,000 3,180 Pacificare Health Systems, Incorporated, 10.75%, Due 6/1/2009.................................................. 1,625 1,873 Quintiles Transnational Corporation, 10.00%, Due 10/1/2013................................................. 2,230 2,430 Vicar Operating, Incorporated, 9.875%, Due 12/1/2009........ 1,601 1,773 -------- TOTAL HEALTHCARE PROVIDERS & SERVICES................... 16,112 -------- TOTAL HEALTH CARE....................................... 23,259 -------- INFORMATION TECHNOLOGY - 4.41% COMMUNICATIONS EQUIPMENT - 1.03% Corning, Incorporated, 7.00%, Due 3/15/2007...................................... 1,300 1,300 6.30%, Due 3/1/2009....................................... 1,650 1,726 6.20%, Due 3/15/2016...................................... 1,000 1,001 -------- TOTAL COMMUNICATIONS EQUIPMENT.......................... 4,027 -------- SEMICONDUCTOR EQUIPMENT & PRODUCTS - 3.35% AMI Semiconductor, Incorporated, 10.75%, Due 2/1/2013....... 1,331 1,561 Amkor Technology, Incorporated, 9.25%, Due 2/15/2008*..................................... 500 480 10.50%, Due 5/1/2009*..................................... 1,250 1,106 7.125%, Due 3/15/2011, 144A (Note A)*..................... 1,250 1,078 Fairchild Semiconductor Corporation, 10.50%, Due 2/1/2009... 1,790 1,915 Flextronics International Limited, 6.50%, Due 5/15/2013*.... 2,550 2,678 Freescale Semiconductor, Incorporated, 7.125%, 7/15/2014, 144A (Note A)............................................. 4,000 4,240 -------- TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS................ 13,058 -------- SOFTWARE - 0.03% Peregrine Systems, Incorporated, 6.50%, Due 8/15/2007+...... 131 130 -------- TOTAL SOFTWARE.......................................... 130 -------- TOTAL INFORMATION TECHNOLOGY............................ 17,215 -------- INDUSTRIALS - 26.46% AEROSPACE & ENGINEERING - 1.64% K & F Industries, Incorporated, 9.625%, Due 12/15/2010...... 2,500 2,900 Transdigm, Incorporated, 8.375%, Due 7/15/2011.............. 3,250 3,494 -------- TOTAL AEROSPACE & ENGINEERING........................... 6,394 -------- CONSTRUCTION & ENGINEERING - 3.79% Beazer Homes USA, Incorporated, 8.375%, 4/15/2012........... 2,000 2,205 Interline Brands, Incorporated, 11.50%, Due 5/15/2011....... 3,500 3,885 KB Home, 7.75%, Due 2/1/2010................................ 1,000 1,090 K. Hovnanian Enterprises, Incorporated, 8.875%, Due 4/1/2012.................................................. 2,700 3,010 Schuler Homes, Incorporated, 9.375%, Due 7/15/2009.......... 1,500 1,628 Standard Pacific Corporation, 9.50%, Due 9/15/2010.......... 1,205 1,313
See accompanying notes - -------------------------------------------------------------------------------- 74 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Technical Olympic USA, Incorporated, 9.00%, Due 7/1/2010.... $ 1,500 $ 1,635 -------- TOTAL CONSTRUCTION & ENGINEERING........................ 14,766 -------- COMMERCIAL SERVICES & SUPPLIES - 20.03% AirGate PCS, Incorporated, 5.85%, Due 10/15/2011, 144A (Note A)........................................................ 1,000 1,025 Alliance Laundry Holdings, LLC, 9.625%, Due 5/1/2008........ 640 656 Allied Waste North American, Incorporated, 8.875%, Due 4/1/2008...................................... 600 636 8.50%, Due 12/1/2008...................................... 2,250 2,363 10.00%, Due 8/1/2009*..................................... 2,250 2,363 Alpharma, Incorporated, 8.625%, Due 5/1/2011, 144A (Note A)*....................................................... 3,250 3,380 Biovail Corporation, 7.875%, Due 4/1/2010................... 3,400 3,528 Cadmus Communications Corporation, 8.375%, Due 6/15/2014.... 1,200 1,296 CHC Helicopter Corporation, 7.375%, Due 5/1/2014*........... 2,250 2,396 Columbus McKinnon Corporation, 10.00%, Due 8/1/2010......... 1,750 1,925 Communications and Power Industries, Incorporated, 8.00%, Due 2/1/2012.............................................. 500 525 Compass Minerals Group, Incorporated, 10.00%, Due 8/15/2011................................................. 1,000 1,120 Compass Minerals International, Incorporated, 0.00%, Due 6/1/2013+................................................. 1,825 1,442 Corrections Corporation of America, 9.875%, Due 5/1/2009...................................... 500 563 7.50%, Due 5/1/2011....................................... 900 973 Da-Lite Screen Company, Incorporated, 9.50%, Due 5/15/2011................................................. 750 795 Freeport-McMoRan Copper & Gold, Incorporated, 10.125%, Due 2/1/2010.................................................. 2,000 2,245 Hexcel Corporation, 9.875%, Due 10/1/2008..................................... 250 280 9.75%, Due 1/15/2009...................................... 3,700 3,894 HMH Properties, Incorporated, 7.875%, Due 8/1/2008.......... 1,575 1,618 Ingram Micro, Incorporated, 9.875%, Due 8/15/2008........... 2,000 2,195 Invensys, plc, 9.875%, Due 3/15/2011, 144A (Note A)......... 1,250 1,306 Iron Mountain, Incorporated, 8.625%, Due 4/1/2013...................................... 500 541 6.625%, Due 1/1/2016...................................... 2,500 2,487 ISPAT Inland, Incorporated, 9.75%, Due 4/1/2014............. 1,000 1,215 Medical Device Manufacturing, Incorporated, 10.00%, Due 7/15/2012, 144A (Note A).................................. 2,000 2,140 Mothers Work, Incorporated, 11.25%, Due 8/1/2010*........... 1,000 960 Mueller Group, Incorporated, 10.00%, Due 5/1/2012........... 500 540 Newark Group, Incorporated, 9.75%, Due 3/15/2014, 144A (Note A)........................................................ 2,850 2,964 Pantry, Incorporated, 7.75%, Due 2/15/2014, 144A (Note A)... 750 784 Phibro Animal Health Corporation, 13.00%, Due 12/1/2007, 144A (Note A)............................................. 500 545 J.B. Poindexter Incorporated, 8.75%, Due 3/15/2014, 144A (Note A).................................................. 1,000 1,070 Polypore, Incorporated, 8.75%, Due 5/15/2012................ 875 914 Quality Distribution, LLC, 9.00%, Due 11/15/2010, 144A (Note A)........................................................ 1,280 1,192 Russell Corporation, 9.25%, Due 5/1/2010.................... 1,475 1,586 Seagate Technology HDD Holdings, 8.00%, Due 5/15/2009....... 1,500 1,622 Sheridan Acquisition Corporation, 10.25%, Due 8/15/2011, 144A (Note A)............................................. 750 814 Sheridan Group, Incorporated, 10.25%, Due 8/15/2011, 144A (Note A).................................................. 850 922 Siebe plc, 7.125%, Due 1/15/2007, 144A (Note A)............. 1,498 1,543 Solectron Corporation, 7.97%, Due 11/15/2006(+)............. 1,500 1,550 Superior Essex Communications, 9.00%, Due 4/15/2012......... 2,400 2,436 UAP Holding Corporation, 0.00%, Due 7/15/2012, 144A (Note A)+....................................................... 2,000 1,530
See accompanying notes - -------------------------------------------------------------------------------- 75 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) UNOVA, Incorporated, 6.875%, Due 3/15/2005..................................... $ 2,500 $ 2,531 7.00%, Due 3/15/2008...................................... 2,000 2,060 Unisys Corporation, 7.875%, 4/1/2008........................ 3,270 3,356 URS Corporation, 12.25%, 5/1/2009........................... 100 107 Viasystems, Incorporated, 10.50%, Due 1/15/2011*............ 1,750 1,732 WH Holdings (Cayman Islands) Limited, 9.50%, Due 4/1/2011, 144A (Note A)............................................. 500 548 WII Components, Incorporated, 10.00%, Due 2/15/2012......... 375 352 Xerox Corporation, 6.875%, Due 8/15/2011..................................... 1,000 1,067 7.625%, Due 6/15/2013..................................... 1,800 1,980 7.20%, Due 4/1/2016....................................... 500 526 -------- TOTAL COMMERCIAL SERVICES & SUPPLIES.................... 78,138 -------- MACHINERY - 1.00% Blount, Incorporated, 8.875%, Due 8/1/2012.................. 1,000 1,089 Case Corporation, 7.25%, Due 1/15/2016...................... 1,900 1,890 Joy Global, Incorporated, 8.75%, Due 3/15/2012.............. 801 905 -------- TOTAL MACHINERY......................................... 3,884 -------- TOTAL INDUSTRIALS....................................... 103,182 -------- MATERIALS - 7.03% CHEMICALS - 3.51% Casella Waste System, Incorporated, 9.75%, Due 2/1/2013..... 2,020 2,222 Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp, 0.00%, Due 10/1/2014, Series A, 144A (Note A)+....................... 2,250 1,423 Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp, 0.00%, Due 10/1/2014, Series B, 144A (Note A)+*...................... 2,750 1,733 Hercules, Incorporated, 6.75%, Due 10/15/2029............... 2,000 2,040 Lyondell Chemical Company, 10.875%, Due 5/1/2009*........... 1,000 1,061 Nalco Company, 7.75%, Due 11/15/2011..................................... 500 541 8.875%, Due 11/15/2013*................................... 955 1,047 Resolution Performance Products, 8.00%, Due 12/15/2009...... 1,000 1,035 Rhodia SA, 10.25%, Due 6/1/2010*............................ 750 814 Westlake Chemical Corporation, 8.75%, Due 7/15/2011......... 1,560 1,759 -------- TOTAL CHEMICALS......................................... 13,675 -------- CONTAINERS & PACKAGING - 3.12% Crown Holdings, Incorporated, 9.50%, Due 3/1/2011....................................... 1,500 1,710 10.875%, Due 3/1/2013..................................... 1,975 2,345 Intertape Polymer, Incorporated, 8.50%, Due 8/1/2014, 144A (Note A).................................................. 1,000 994 Owens-Brockway Glass Containers, Incorporated, 8.875%, Due 2/15/2009..................................... 3,340 3,666 8.75%, Due 11/15/2012..................................... 1,250 1,409 Silgan Holdings, Incorporated, 6.75%, Due 11/15/2013, 144A (Note A).................................................. 2,000 2,060 -------- TOTAL CONTAINERS & PACKAGING............................ 12,184 -------- PAPER & FOREST PRODUCTS - 0.40% Appleton Papers, Incorporated, 8.125%, Due 6/15/2011........ 500 526
See accompanying notes - -------------------------------------------------------------------------------- 76 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Boise Cascade LLC, 7.125%, Due 10/15/2014, 144A (Note A).... $ 1,000 $ 1,044 -------- TOTAL PAPER & FOREST PRODUCTS........................... 1,570 -------- TOTAL MATERIALS......................................... 27,429 -------- SATELLITE - 0.55% Intelsat Limited, 5.25%, Due 11/1/2008...................... 1,500 1,412 PanAmSat Holding Corporation, 0.00%, 11/1/2014, 144A (Note A)+....................................................... 1,250 747 -------- TOTAL SATELLITE......................................... 2,159 -------- TELECOMMUNICATION SERVICES - 5.34% Dobson Cellular Systems, Incorporated, 4.75%, Due 11/1/2011, 144A (Note A)....................... 650 668 8.375%, Due 11/1/2011, 144A (Note A)...................... 400 413 FairPoint Communications, Incorporated, 11.875%, Due 3/1/2010.................................................. 2,065 2,375 GST Equipment Funding, Incorporated, 13.25%, Due 5/1/2007+(+).............................................. 2,500 - MCI, Incorporated, 5.908%, Due 5/1/2007...................................... 1,750 1,745 6.688%, Due 5/1/2009...................................... 1,000 986 Nextel Communications, 6.875%, Due 10/31/2013*.............. 3,150 3,418 Qwest Services Corporation, 144A (Note A) 13.50%, Due 12/15/2010.................................... 5,200 6,175 7.875%, Due 9/1/2011...................................... 500 532 9.125%, Due 3/15/2012..................................... 500 564 SBA Telecom, Incorporated, 0.00%, Due 12/15/2011+........... 2,490 2,098 US Unwired, Incorporated, 6.13%, Due 6/15/2010.............. 1,000 1,027 US West Communication, 8.875%, Due 6/1/2031................. 800 808 -------- TOTAL TELECOMMUNICATION SERVICES........................ 20,809 -------- OTHER CORPORATE BONDS - 0.19% Jostens, Incorporated, 7.625%, Due 10/1/2012, 144A (Note A)........................................................ 700 725 -------- TOTAL OTHER CORPORATE BONDS............................. 725 -------- TOTAL CORPORATE BONDS................................... 354,868 --------
See accompanying notes - -------------------------------------------------------------------------------- 77 AMERICAN AADVANTAGE HIGH YIELD BOND FUND SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) COMMON STOCKS - 0.13% Peregrine Systems, Incorporated............................. 28,000 $ 501 -------- TOTAL COMMON STOCKS..................................... 501 -------- SHORT TERM INVESTMENTS - 19.25% American AAdvantage Money Market Select Fund (Note B)....... 23,672,220 23,672 Short-Term Investment Company Liquid Asset Funds (Note F)... 3,425,989 3,426 PAR AMOUNT ----------- Credit Suisse First Boston LLC Tri Party Repo, 1.925%, Due 11/1/2004, (Notes C and F)................................ $ 15,000 15,000 Laguna ABS CDO Corp. Discount Commercial Paper, Due 11/5/2004 (Note F)........................................ 8,000 7,998 Merrill Lynch Pierce Fenner & Smith, Inc. Tri Party Repo, 1.925%, Due 11/1/2004, (Notes D and F).................... 10,000 10,000 Morgan Stanley & Co., Inc. Tri Party Repo, 1.925%, Due 11/1/2004, (Notes E and F)................................ 15,000 15,000 -------- TOTAL SHORT TERM INVESTMENTS............................ 75,096 -------- TOTAL INVESTMENTS - 110.36% (COST $416,820)................. 430,465 -------- LIABILITIES, NET OF OTHER ASSETS - (10.36%)................. (40,418) -------- TOTAL NET ASSETS - 100%..................................... $390,047 ========
- --------------- (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 $98,325 or 25.21% of net assets. (B) The Fund is affiliated by having the same investment advisor. See Note 2. (C) Collateral held at J.P. Morgan Chase consists of Codelco, Inc., 4.75%, Due 10/15/2014, Market Value - $7,282 and National Rural Utilities, 7.25%, Due 3/01/2012, Market Value - $8,019 (D) Collateral held at the J.P. Morgan Chase consists of General Motors Acceptance Corp, 7.75%, Due 1/19/2010, Market Value - $10,203 (E) Collateral held at the Bank of New York consists of Boeing Capital Corp., 6.54%, Due 4/24/2006, Market Value - $3,154, Boeing Capital Corp., 4.29%, Due 6/20/2005, Market Value - $1,011, Columbus Southern Power Company, 6.85%, Due 10/03/2005, Market Value - $1,040, Cooper Industries, Inc., 6.38%, Due 5/08/2008, Market Value - $2,207, Everest Reinsurance Holdings Company, 8.75%, Due 3/15/2010, Market Value - $1,359, HSBC USA Capital Trust II, 8.38%, Due 5/15/2027, Market Value - $582, Sara Lee Corp., 6.05%, Due 4/14/2008, Market Value - $1,083 and Viacom Inc., 7.63%, Due 1/15/2016, Market Value - $5,018. (F) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan October 31, 2004. See note 5. (+) - Valued at fair value pursuant to procedures approved by the Board of Trustees. + - Non-income producing security. See accompanying notes - -------------------------------------------------------------------------------- 78 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 12.41% U.S. TREASURY NOTES - 11.35% 3.625%, Due 7/15/2009*.................................... $ 500 $ 508 5.00%, Due 2/15/2011*..................................... 1,350 1,458 5.00%, Due 8/15/2011*..................................... 2,600 2,808 4.00%, Due 2/15/2014*..................................... 3,000 3,000 4.75%, Due 5/15/2014*..................................... 3,800 4,018 -------- TOTAL U.S. TREASURY NOTES............................... 11,792 -------- U. S. TREASURY BONDS - 1.06% 8.75%, Due 8/15/2020*..................................... 750 1,097 -------- TOTAL U. S. TREASURY BONDS.............................. 1,097 -------- TOTAL U.S. TREASURY OBLIGATIONS......................... 12,889 -------- U.S. AGENCY OBLIGATIONS - 1.06% Federal Home Loan Mortgage Corporation, 5.125%, Due 10/15/2008*............................................... 500 533 Federal National Mortgage Association, 6.625%, Due 11/15/2010................................................ 500 572 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 1,105 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 10.53% FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.15% Pool E01492, 5.50%, Due 10/1/2018......................... 1,154 1,196 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 1,196 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.51% Pool 555549, 5.00%, Due 6/1/2018............................ 1,437 1,468 Pool 545759, 6.50%, Due 7/1/2032............................ 1,157 1,219 Pool C01598, 5.00%, Due 8/1/2033............................ 908 908 Pool C01786, 5.50%, Due 2/1/2034............................ 1,363 1,390 Pool 725238, 5.00%, Due 3/1/2034............................ 738 737 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 5,722 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.87% Pool 780921, 7.00%, Due 11/15/2013.......................... 427 455 Pool 780454, 7.00%, Due 10/15/2026.......................... 418 448 Pool 002379, 8.00%, Due 2/20/2027........................... 277 301 Pool 781564, 6.00%, Due 2/15/2033........................... 622 649 Pool 781690, 6.00%, Due 12/15/2033.......................... 894 931 Pool 003515, 5.50%, Due 2/20/2034........................... 1,213 1,240 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 4,024 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 10,942 -------- ASSET-BACKED SECURITIES - 0.96% Household Automotive Trust 2004-1 A3, 3.30%, 5/18/2009...... 1,000 998 -------- TOTAL ASSET-BACKED SECURITIES........................... 998 -------- CORPORATE BONDS - 53.72% BANKS - 5.40% Banco Popular North America Inc, 6.125%, Due 10/15/2006.................................... 500 528 4.25%, Due 4/1/2008....................................... 300 307 Bank One Corporation, 4.90%, Due 4/30/2015.................. 500 495 Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 500 546 FleetBoston Financial Corporation, 8.625%, Due 1/15/2007.... 200 223 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 300 305
See accompanying notes - -------------------------------------------------------------------------------- 79 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) St. George Bank Limited, 7.15%, Due 10/15/2005, 144A (Note A)........................................................ $ 1,510 $ 1,563 Wachovia Corporation, 6.40%, Due 4/1/2008................... 1,500 1,641 -------- TOTAL BANKS............................................. 5,608 -------- FINANCE - 28.71% AEGON, N.V., 8.00%, Due 8/15/2006........................... 225 245 American Honda Finance Corporation, 2.875%, Due 4/3/2006, 144A (Note A)............................................. 650 651 Bear Stearns Companies, Incorporated, 3.00%, Due 3/30/2006...................................... 500 502 2.875%, Due 7/2/2008...................................... 300 293 Boeing Capital Corporation, 5.40%, Due 11/30/2009........... 700 748 Capital One Bank, 4.25%, Due 12/1/2008...................................... 1,000 1,015 5.125%, 2/15/2014......................................... 200 201 Cendant Corporation, 6.875%, Due 8/15/2006..................................... 1,100 1,172 3.875%, Due 11/27/2011.................................... 500 500 Countrywide Home Loan, Incorporated, 3.50%, Due 12/19/2005................................................ 750 755 Credit Suisse First Boston USA, Incorporated, 5.875%, Due 8/1/2006.................................................. 1,500 1,576 First Data Corporation, 3.375%, Due 8/1/2008................ 1,000 995 Ford Motor Credit Company, 7.375%, Due 10/28/2009........... 370 402 General Motors Acceptance Corporation, 6.75%, Due 1/15/2006...................................... 650 673 7.25%, Due 3/2/2011....................................... 370 393 Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013..... 350 347 John Hancock Global Funding, 5.625%, Due 6/27/2006..................................... 1,400 1,460 3.75%, Due 9/30/2008...................................... 1,000 1,006 Heller Financial, Incorporated, 6.375%, Due 3/15/2006....... 1,500 1,572 Household Finance Corporation, 5.75%, Due 1/30/2007......... 1,750 1,850 International Lease Finance Corporation, 6.375%, Due 3/15/2009................................................. 725 791 Lehman Brothers Holdings, Incorporated, 3.50%, Due 8/7/2008.................................................. 1,000 995 Lincoln National Corporation, 4.75%, Due 2/15/2014.......... 200 197 MassMutual Global Funding II, 3.80%, Due 4/15/2009, 144A (Note A).................................................. 1,000 998 Morgan Stanley and Company, Incorporated, 6.10%, Due 4/15/2006...................................... 550 576 0.25%, Due 4/1/2009....................................... 560 514 PHH Corporation, 6.00%, Due 3/1/2008........................ 300 321 Prudential Financial, Incorporated, 4.50%, Due 7/15/2013.... 375 365 Prudential Insurance Company of America, 6.375%, Due 7/23/2006, 144A (Note A).................................. 2,000 2,126 Refco Group Limited, LLC, 9.00%, Due 8/1/2012, 144A (Note A)........................................................ 400 432 Salomon, Incorporated, 6.75%, Due 1/15/2006................. 1,000 1,047 Simon Property Group LP, 6.375%, Due 11/15/2007............. 400 432 Synovus Financial Corporation, 7.25%, Due 12/15/2005..................................... 1,500 1,570 4.875%, Due 2/15/2013..................................... 500 505 Transamerica Corporation, 6.75%, Due 11/15/2006*............ 1,000 1,068 Verizon Global Funding Corporation, 4.375%, Due 6/1/2013.... 200 196 VW Credit Incorporated, 2.33%, Due 7/21/2005, 144A (Note A)........................................................ 1,000 1,000 Washington Mutual, Incorporated, 4.625%, Due 4/1/2014....... 350 337 -------- TOTAL FINANCE........................................... 29,826 --------
See accompanying notes - -------------------------------------------------------------------------------- 80 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) FOREIGN - 0.29% Province of Ontario, 3.35%, Due 7/16/2007*.................. $ 300 $ 302 -------- TOTAL FOREIGN........................................... 302 -------- INDUSTRIALS - 18.63% AmeriPath, Incorporated, 10.50%, Due 4/1/2013............... 400 392 AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 700 859 AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006....................................... 600 636 8.125%, Due 5/1/2012...................................... 250 305 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013............. 550 560 Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012..................................... 200 238 5.35%, Due 4/15/2014, 144A (Note A)....................... 500 512 Continental Cablevision, Incorporated, 8.30%, Due 5/15/2006................................................. 250 269 DaimlerChrysler North America, 4.75%, Due 1/15/2008...................................... 700 721 6.50%, Due 11/15/2013..................................... 350 382 Dell Computer Corporation, 6.55%, Due 4/15/2008............. 200 220 Deutsche Telekom International, 8.25%, Due 6/15/2005...................................... 175 181 3.875%, Due 7/22/2008..................................... 500 504 Dole Food Company, Incorporated, 8.875%, Due 3/15/2011...... 400 443 DST Systems, Incorporated, 3.625%, Due 8/15/2023*........... 485 561 EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A (Note A).................................................. 350 348 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 350 340 Equistar Chemicals, LP, 10.625%, Due 5/1/2011............... 400 462 France Telecom SA, 8.50%, Due 3/1/2011...................... 500 600 Freeport-McMoRan Copper & Gold, Incorporated, 10.125%, Due 2/1/2010.................................................. 400 449 Hertz Corporation, 4.70%, Due 10/2/2006..................... 900 915 Jacuzzi Brands, Incorporated, 9.625%, Due 7/1/2010.......... 400 450 Keane, Incorporated, 2.00%, Due 6/15/2013................... 525 572 Kroger Company, 8.15%, 7/15/2006............................ 1,000 1,082 Legrand SA, 8.50%, Due 2/15/2025............................ 400 459 Mediacom Communications Corporation, 9.50%, Due 1/15/2013*................................................ 400 392 Nabors Industries, Incorporated, 0.00%, Due 6/15/2023+...... 280 270 Northrop Grumman Corporation, 4.079%, Due 11/16/2006.................................... 700 712 7.125%, Due 2/15/2011..................................... 510 588 Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 450 514 Pope & Talbot, Incorporated, 8.375%, Due 6/1/2013........... 355 373 Pulte Homes, Incorporated, 4.875%, Due 7/15/2009..................................... 100 102 5.25%, Due 1/15/2014...................................... 125 125 Royal Caribbean Cruises Limited, 0.00%, Due 5/18/2021+..................................... 210 157 7.50%, due 10/15/2027..................................... 400 429 Saks Incorporated, 2.00%, Due 3/15/2024, 144A (Note A)...... 490 431 Sprint Capital Corporation, 6.00%, Due 1/15/2007...................................... 1,200 1,269 8.375%, Due 3/15/2012..................................... 175 215
See accompanying notes - -------------------------------------------------------------------------------- 81 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Union Pacific Corporation, 6.50%, Due 4/15/2012............. $ 350 $ 391 Verizon Virginia, 4.625%, Due 3/15/2013..................... 500 493 WH Holdings (Cayman Islands) Limited, 9.50%, Due 4/1/2011, 144A (Note A)............................................. 400 438 -------- TOTAL INDUSTRIALS....................................... 19,359 -------- PHARMACEUTICAL - 0.27% Teva Pharmaceuticals, 0.25%, Due 2/1/2024....................................... 120 116 0.50%, Due 2/1/2024....................................... 170 162 -------- TOTAL PHARMACEUTICAL.................................... 278 -------- UTILITY - 0.42% Teco Energy, Incorporated, 7.50%, Due 6/15/2010............. 400 440 -------- TOTAL UTILITY........................................... 440 -------- TOTAL CORPORATE BONDS................................... 55,813 -------- CONVERTIBLE BONDS - 11.70% CONSUMER DISCRETIONARY - 1.17% Flextronics International Limited, 1.00%, 8/1/2010.......... 500 535 General Motors Corporation, 6.25%, Due 7/15/2033............ 16 433 Goodyear Tire and Rubber Company, 4.00%, Due 6/15/2034, 144A (Note A).................................................. 225 245 -------- TOTAL CONSUMER DISCRETIONARY............................ 1,213 -------- ENERGY - 0.41% CenterPoint Energy, Incorporated, 3.75%, Due 5/15/2023, 144A (Note A).................................................. 390 426 -------- TOTAL ENERGY............................................ 426 -------- FINANCIALS - 3.36% American Financial Group, Incorporated, 1.486%, Due 6/2/2033.................................................. 1,325 542 Americredit Corporation, 1.75%, Due 11/15/2023, 144A (Note A)........................................................ 200 244 Financial Federal Corporation, 2.00%, Due 4/15/2034, 144A (Note A).................................................. 285 293 IOS Capital, LLC, 5.00%, Due 5/1/2007, 144A (Note A)........ 130 133 QLT, Incorporated, 3.00%, Due 9/15/2023, 144A (Note A)...... 250 306 Silicon Valley Bancshares, 0.00%, Due 6/15/2008+............ 240 304 SLM Corporation, 4.00%, Due 1/15/2009....................... 1,300 1,307 Travelers Property Casualty Corporation, 4.50%, Due 4/15/2032................................................. 17 365 -------- TOTAL FINANCIALS........................................ 3,494 -------- HEALTH CARE - 0.74% Health Management Association, Incorporated, 1.50%, Due 8/1/2023.................................................. 480 496 Invitrogen Corporation, 2.00%, Due 8/1/2023, 144A (Note A)........................................................ 250 277 -------- TOTAL HEALTH CARE....................................... 773 -------- INDUSTRIALS - 6.02% Andrew Corporation, 3.25%, Due 8/15/2013, 144A (Note A)..... 425 560 Anixter International, Incorporated, 0.00%, Due 7/7/2033+... 275 151 Blockbuster Incorporated, 9.00%, Due 9/1/2012, 144A (Note A)........................................................ 200 205 Carnival Corporation, 0.00%, Due 10/24/2021+*............... 715 610 Celestica, Incorporated, 7.875%, Due 7/1/2011............... 260 278 ConocoPhillips, 3.625%, 10/15/2007.......................... 350 354 The Walt Disney Company, 2.125%, Due 4/15/2023.............. 475 508 Fisher Scientific International, Incorporated, 3.25%, Due 3/1/2024.................................................. 160 173 GrafTech International Limited, 1.625%, Due 1/15/2024, 144A (Note A).................................................. 210 192 Halliburton Company, 3.125%, Due 7/15/2023, 144A (Note A)... 210 252 International Game Technology, 0.00%, Due 1/29/2033+........ 315 235 Juniper Networks, Incorporated, 0.00%, Due 6/15/2008, 144A (Note A)+................................................. 215 317
See accompanying notes - -------------------------------------------------------------------------------- 82 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- -------- (DOLLARS IN THOUSANDS) Kaydon Corporation, 4.00%, Due 5/23/2023, 144A (Note A)..... $ 230 $ 272 Leucadia National Corporation, 7.00%, Due 8/15/2013......... 400 408 Liberty Media Corporation, 0.75%, Due 3/30/2023, 144A (Note A)........................................................ 355 386 Schlumberger Limited, 2.125%, Due 6/1/2023*................. 280 296 Tyco International Group S.A., 2.75%, Due 1/15/2018...................................... 575 811 2.75%, Due 1/15/2018, 144A (Note A)....................... 175 247 -------- TOTAL INDUSTRIALS....................................... 6,255 -------- TOTAL CONVERTIBLE BONDS................................. 12,161 -------- SHARES ----------- CONVERTIBLE PREFERRED STOCK - 5.54% CONSUMER DISCRETIONARY - 0.45% Ford Motor Company Capital Trust II......................... 9,400 470 -------- TOTAL CONSUMER DISCRETIONARY............................ 470 -------- ENERGY - 0.86% Amerada Hess Corporation.................................... 4,900 359 Devon Energy Corporation.................................... 7,203 533 -------- TOTAL ENERGY............................................ 892 -------- FINANCIALS - 1.88% Cummins Capital Trust I*.................................... 4,000 308 Hartford Financial Services Group, Incorporated............. 8,500 488 Prudential Financial, Incorporated.......................... 2,900 200 Safeco Corporation*......................................... 12,300 569 Washington Mutual, Incorporated............................. 7,200 385 -------- TOTAL FINANCIALS........................................ 1,950 -------- INDUSTRIALS - 1.98% AutoDesk, Incorporated...................................... 8,800 464 The Walt Disney Company..................................... 11,000 277 Infosys Technologies Limited*............................... 6,100 405 L-3 Communications Holdings, Incorporated................... 5,000 330 Motorola, Incorporated...................................... 8,500 427 Phelps Dodge Corporation.................................... 840 155 -------- TOTAL INDUSTRIALS....................................... 2,058 -------- TELECOMMUNICATION SERVICES - 0.37% Nokia Corporation........................................... 25,000 386 -------- TOTAL TELECOMMUNICATION SERVICES........................ 386 -------- TOTAL CONVERTIBLE PREFERRED STOCK....................... 5,756 -------- COMMON STOCK - 2.73% CONSUMER DISCRETIONARY - 2.73% Albertson's, Incorporated................................... 15,500 380 Bausch and Lomb, Incorporated............................... 10,600 646 Ebay, Incorporated+......................................... 5,750 561 Home Depot, Incorporated.................................... 13,600 559 Starbucks Corporation+...................................... 13,000 687 -------- TOTAL CONSUMER DISCRETIONARY............................ 2,833 -------- TOTAL COMMON STOCK...................................... 2,833 --------
See accompanying notes - -------------------------------------------------------------------------------- 83 AMERICAN AADVANTAGE ENHANCED INCOME FUND SCHEDULE OF INVESTMENTS - CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ----------- -------- (DOLLARS IN THOUSANDS) SHORT-TERM INVESTMENTS - 16.76% American AAdvantage Money Market Select Fund (Notes B and C)........................................................ 5,535,517 $ 5,536 AMR Investments Enhanced Cash Business Trust (Notes B and C)........................................................ 11,876,744 11,877 -------- TOTAL SHORT-TERM INVESTMENTS............................ 17,413 -------- TOTAL INVESTMENTS - 115.41% (COST $117,744)................. 119,910 -------- LIABILITIES, NET OF OTHER ASSETS - (15.41%)................. (16,013) -------- TOTAL NET ASSETS - 100%..................................... $103,897 ========
- --------------- (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 the securities amounted to $13,159 or 12.67% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of the security is on loan at October 31, 2004. See Note 5. + - Non-income producing security. See accompanying notes - -------------------------------------------------------------------------------- 84 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) U.S. TREASURY OBLIGATIONS - 15.12% U.S. TREASURY BONDS - 7.01% 7.50%, Due 11/15/2016*...................................... $ 1,000 $ 1,295 9.125%, Due 5/15/2018*...................................... 700 1,031 7.875%, Due 2/15/2021*...................................... 750 1,024 6.875%, Due 8/15/2025*...................................... 370 470 6.25%, Due 5/15/2030*....................................... 950 1,142 5.375%, Due 2/15/2031*...................................... 1,770 1,922 -------- TOTAL U.S. TREASURY BONDS............................... 6,884 -------- U.S. TREASURY NOTES - 8.11% 4.625%, Due 5/15/2006*...................................... 1,335 1,380 3.375%, Due 5/15/2009*...................................... 403 405 3.875%, Due 5/15/2009*...................................... 1,590 1,635 5.00%, Due 8/15/2011*....................................... 700 756 4.00%, Due 2/15/2014*....................................... 1,835 1,835 4.75%, Due 5/15/2014*....................................... 1,805 1,909 4.25%, Due 8/15/2014*....................................... 50 51 -------- TOTAL U.S. TREASURY NOTES............................... 7,971 -------- TOTAL U.S. TREASURY OBLIGATIONS......................... 14,855 -------- U.S. AGENCY OBLIGATIONS - 7.65% FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.70% 5.875%, Due 3/21/2011*...................................... 380 415 4.875%, Due 11/15/2013...................................... 200 207 6.00%, Due 12/11/2033....................................... 2,912 3,018 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 3,640 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.95% Discount Note, Due 11/15/2004*.............................. 3,000 2,998 5.125%, Due 1/2/2014........................................ 545 560 7.25%, Due 5/15/2030*....................................... 250 319 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 3,877 -------- TOTAL U.S. AGENCY OBLIGATIONS........................... 7,517 -------- U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 33.34% FEDERAL HOME LOAN MORTGAGE CORPORATION - 8.32% Pool #G11202, 6.00%, Due 11/1/2016.......................... 313 329 Pool #E96536, 5.00%, Due 3/1/2018........................... 853 871 Pool #B12563, 5.00%, Due 2/1/2019........................... 622 635 Pool #E01602, 4.50%, Due 3/1/2019........................... 938 942 Pool #G00738, 8.00%, Due 7/1/2027........................... 257 280 Pool #C00647, 6.50%, Due 9/1/2028........................... 193 203 Pool #G01457, 6.00%, Due 8/1/2029........................... 628 652 Pool #C01598, 5.00%, Due 8/1/2033........................... 1,135 1,135 Pool #A12149, 6.00%, Due 8/1/2033........................... 840 871 Pool #G01533, 6.00%, Due 8/1/2033........................... 625 648 Pool #A15436, 5.50%, Due 11/1/2033.......................... 761 776 Pool #C01786, 5.50%, Due 2/1/2034........................... 818 834 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 8,176 --------
See accompanying notes - -------------------------------------------------------------------------------- 85 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.26% Pool #323309, 6.00%, Due 9/1/2013........................... $ 249 $ 261 Pool #488099, 5.50%, Due 2/1/2014........................... 631 656 Pool #323789, 6.00%, Due 6/1/2014........................... 270 283 Pool #545449, 6.50%, Due 2/1/2017........................... 679 721 Pool #648511, 6.00%, Due 6/1/2017........................... 1,153 1,210 Pool #545823, 5.50%, Due 8/1/2017........................... 750 778 Pool #254545, 5.00%, Due 12/1/2017.......................... 1,749 1,787 Pool #254865, 4.50%, Due 9/1/2018........................... 1,053 1,059 Pool #761337, 5.00%, Due 4/1/2019........................... 476 487 Pool #100293, 9.50%, Due 8/1/2029........................... 239 270 Pool #769018, 6.50%, Due 12/1/2031.......................... 383 404 Pool #713706, 5.50%, Due 8/1/2033........................... 807 823 Pool #727223, 5.50%, Due 9/1/2033........................... 692 706 Pool #741901, 5.50%, Due 10/1/2033.......................... 592 603 Pool #749219, 5.50%, Due 10/1/2033.......................... 143 145 Pool #555880, 5.50%, Due 11/1/2033.......................... 1,755 1,790 Pool #758322, 5.50%, Due 12/1/2033.......................... 869 887 Pool #725238, 5.00%, Due 3/1/2034........................... 1,476 1,475 Pool #765304, 5.50%, Due 3/1/2034........................... 280 285 Pool #255410, 6.50%, Due 9/1/2034........................... 208 219 Pool #255413, 6.50%. Due 10/1/2034.......................... 875 921 Pool #255460, 6.50%, Due 11/1/2034.......................... 190 200 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 15,970 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 8.76% Pool #780400, 7.00%, Due 12/15/2025......................... 566 607 Pool #780615, 6.50%, Due 8/15/2027.......................... 588 625 Pool #780680, 6.50%, Due 11/15/2027......................... 493 524 Pool #780747, 6.50%, Due 3/15/2028.......................... 839 891 Pool #780936, 7.50%, Due 12/15/2028......................... 368 397 Pool #781273, 6.00%, Due 4/15/2031.......................... 758 791 Pool #781564, 6.00%, Due 2/15/2033.......................... 912 951 Pool #616094, 6.00%, Due 11/15/2033......................... 688 716 Pool #781690, 6.00%, Due 12/15/2033......................... 687 716 Pool #003515, 5.50%, Due 2/20/2034.......................... 1,793 1,834 Pool #003517, 6.00%, Due 2/20/2034.......................... 530 551 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 8,603 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 32,749 -------- NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 3.22% Banc of America Commercial Mortgage, Incorporated 2003-2 A3, 4.342%, Due 3/11/2041..................................... 265 270 Bear Stearns Commercial Mortgage Securities, Incorporated 2004-PWR5 A4, 4.831%, Due 7/11/2042....................... 535 545 Countrywide Home Loan, Incorporated 2004-18 A1, 6.00%, Due 10/25/2034................................................ 733 765 General Electric Capital Commercial Mortgage Corporation 2003-C2 A2, 4.17%, Due 7/10/2037.......................... 312 316 General Electric Capital Commercial Mortgage Corporation 2004-C3 A3, 4.865%, Due 7/10/2039......................... 495 511 Morgan Stanley Dean Witter & Company 2003-T11 A2, 4.34%, Due 6/13/2041................................................. 300 305 Wachovia Bank Commercial Mortgage Trust 2003-C5 A2, 3.989%, Due 6/15/2035............................................. 464 447 -------- TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 3,159 --------
See accompanying notes - -------------------------------------------------------------------------------- 86 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) CORPORATE OBLIGATIONS - 36.69% FINANCIAL - 16.13% AEGON, N.V., 8.00%, Due 8/15/2006........................... $ 300 $ 327 American General Finance Corporation, 5.375%, Due 9/1/2009.................................................. 180 190 Assurant, Incorporated, 5.625%, Due 2/15/2014, 144A (Note A)*....................................................... 225 232 Banco Popular North America Inc, 4.25%, Due 4/1/2008........ 200 205 Bank One Corporation, 5.90%, Due 11/15/2011..................................... 340 369 4.90%, Due 4/30/2015*..................................... 200 198 Bear Stearns Companies, Incorporated, 2.875%, Due 7/2/2008.................................................. 400 390 BHP Finance (USA) Limited, 4.80%, Due 4/15/2013............. 150 153 Boeing Capital Corporation, 5.40%, Due 11/30/2009........... 450 481 Capital One Bank, 6.70%, Due 5/15/2008...................................... 350 385 5.75%, Due 9/15/2010...................................... 180 192 5.125%, Due 2/15/2014..................................... 350 352 Caterpillar Financial Services, 3.70%, Due 8/15/2008........ 495 498 Cendant Corporation, 6.875%, Due 8/15/2006..................................... 450 479 6.25%, Due 1/15/2008...................................... 255 275 Countrywide Home Loan, Incorporated, 3.50%, Due 12/19/2005*.................................... 250 252 3.25%, Due 5/21/2008...................................... 290 285 Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 350 382 John Deere Capital Corporation, 3.375%, Due 10/1/2007..................................... 350 350 3.75%, Due 1/13/2009...................................... 275 276 Deutsche Telekom International Finance Corporation, 8.50%, Due 6/15/2010............................................. 150 181 Fleet Norstar Financial Group, Incorporated, 8.625%, Due 1/15/2007................................................. 200 224 Ford Motor Credit Company, 6.50%, Due 1/25/2007...................................... 185 194 7.375%, Due 10/28/2009.................................... 220 239 General Electric Capital Corporation, 6.875%, Due 11/15/2010................................................ 380 433 General Motors Acceptance Corporation, 6.75%, Due 1/15/2006...................................... 350 362 6.125%, Due 8/28/2007..................................... 240 250 7.25%, Due 3/2/2011....................................... 220 234 8.375%, Due 7/15/2033*.................................... 180 187 Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013..... 250 248 Household Finance Corporation, 5.75%, Due 1/30/2007...................................... 500 528 6.375%, Due 11/27/2012.................................... 255 285 ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 250 254 International Lease Finance Corporation, 3.30%, Due 1/23/2008...................................... 280 277 6.375%, Due 3/15/2009..................................... 250 273 Lincoln National Corporation, 4.75%, Due 2/15/2014.......... 100 98 Merrill Lynch & Company, Incorporated, 4.125%, Due 9/10/2009................................................. 475 478 MetLife Global Funding I, 3.375%, Due 10/5/2007, 144A (Note A)........................................................ 350 349 Morgan Stanley, 4.75%, Due 4/1/2014......................... 375 367 PHH Corporation, 6.00%, Due 3/1/2008........................ 200 214
See accompanying notes - -------------------------------------------------------------------------------- 87 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Prudential Financial, Incorporated, 3.75%, Due 5/1/2008....................................... $ 130 $ 130 4.50%, Due 7/15/2013...................................... 225 219 5.10%, Due 9/20/2014...................................... 210 211 Simon Property Group LP, 6.375%, Due 11/15/2007............. 200 216 SLM Corporation, 3.95%, Due 8/15/2008...................................... 325 330 4.00%, Due 1/15/2009...................................... 700 704 Sprint Capital Corporation, 6.00%, Due 1/15/2007...................................... 485 513 8.375%, Due 3/15/2012..................................... 150 184 8.75%, Due 3/15/2032...................................... 225 295 Synovus Financial Corporation, 4.875%, Due 2/15/2013........ 200 202 Verizon Global Funding Corporation, 4.375%, Due 6/1/2013.... 400 392 Washington Mutual Financial Corporation, 6.875%, Due 5/15/2011..................................... 190 217 4.625%, Due 4/1/2014...................................... 300 289 -------- TOTAL FINANCIAL......................................... 15,848 -------- INDUSTRIALS - 16.99% American Movil S.A. de C.V., 5.75%, Due 1/15/2015........... 270 269 Anheuser Busch Companies, Incorporated, 6.50%, Due 1/1/2028.................................................. 350 398 AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 448 550 AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006....................................... 800 847 8.125%, Due 5/1/2012...................................... 390 476 8.75%, Due 3/1/2031....................................... 170 228 Atlantic Richfield Company, 8.50%, Due 4/1/2012............. 255 324 Baxter International, Incorporated, 5.25%, Due 5/1/2007*.... 315 330 Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012.... 150 178 Carnival Corporation, 3.75%, Due 11/15/2007................. 380 383 Comcast Cable Communications, 7.625%, Due 2/15/2008......... 230 256 Comcast Corporation, 5.50%, Due 3/15/2011................... 160 169 Conagra Foods, Incorporated, 7.125%, Due 10/1/2026..................................... 380 451 7.00%, Due 10/1/2028...................................... 400 463 ConocoPhillips, 3.625%, Due 10/15/2007...................... 225 227 Continental Cablevision, Incorporated, 8.30%, Due 5/15/2006................................................. 250 269 DaimlerChrysler North America, 4.75%, Due 1/15/2008...................................... 345 355 6.50%, Due 11/15/2013..................................... 225 246 Dell Computer Corporation, 6.55%, Due 4/15/2008............. 400 441 The Walt Disney Company, 5.375%, Due 6/1/2007*.............. 145 152 EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A (Note A).................................................. 225 224 EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 300 292 France Telecom SA, 8.50%, Due 3/1/2011...................... 450 540 Harley Davidson, Incorporated, 2.69%, Due 4/15/2011......... 365 364 Hertz Corporation, 4.70%, Due 10/2/2006..................... 450 457 Hewlett Packard Company, 5.75%, Due 12/15/2006.............. 325 343 International Business Machines Corporation, 4.875%, Due 10/1/2006................................................. 245 254
See accompanying notes - -------------------------------------------------------------------------------- 88 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) Kerr McGee Corporation, 5.875%, Due 9/15/2006............... $ 480 $ 503 Lockheed Martin Corporation, 7.20%, Due 5/1/2036............ 470 572 Martin Marietta Material, Incorporated, 6.90%, Due 8/15/2007................................................. 300 328 Motorola, Incorporated, 4.608%, 11/16/2007.................. 570 587 Norfolk Southern Corporation, 7.05%, Due 5/1/2037........... 155 179 Northrop Grumman Corporation, 4.079%, Due 11/16/2006.................................... 450 458 7.125%, Due 2/15/2011..................................... 250 288 Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 150 171 Ocean Energy, Incorporated, 4.375%, Due 10/1/2007........... 315 322 Pepsi Bottling Group, Incorporated, 7.00%, Due 3/1/2029..... 350 419 Pulte Homes, Incorporated, 4.875%, Due 7/15/2009..................................... 100 102 5.25%, Due 1/15/2014...................................... 100 100 Reed Elsevier Capital, Incorporated, 6.125%, Due 8/1/2006... 485 510 Schering Plough Corporation, 6.50%, Due 12/1/2033........... 200 220 Time Warner, Incorporated, 7.625%, Due 4/15/2031............ 155 184 Union Oil Company of California, 7.90%, Due 4/18/2008....... 100 113 Union Pacific Corporation, 6.50%, Due 4/15/2012............. 200 223 Univision Communications, Incorporated, 3.875%, Due 10/15/2008................................................ 390 390 Verizon Communications, Incorporated, 6.36%, Due 4/15/2006................................................. 335 352 Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 310 325 Wal-Mart Stores, Incorporated, 7.55%, Due 2/15/2030......... 350 451 Weyerhaeuser Company, 5.95%, Due 11/1/2008.................. 210 227 Wyeth Corporation, 5.50%, Due 2/1/2014...................... 180 184 -------- TOTAL INDUSTRIALS....................................... 16,694 -------- UTILITIES - 2.91% AEP Texas Central Company, 6.65%, Due 2/15/2033............. 155 171 Appalachian Power Company, 5.95%, Due 5/15/2033............. 230 231 Consolidated Natural Gas Company, 6.875%, Due 10/15/2026.... 290 335 Dominion Resources, Incorporated, 5.00%, Due 3/15/2013*..... 150 152 Marathon Oil Corporation, 5.375%, Due 6/1/2007.............. 255 268 MidAmerican Energy Holdings Company, 3.50%, Due 5/15/2008...................................... 270 267 5.875%, Due 10/1/2012..................................... 200 214 Progress Energy, Incorporated, 6.75%, Due 3/1/2006.......... 320 336 Public Service Enterprise Group, Incorporated, 6.95%, Due 6/1/2012.................................................. 240 270 Southern Company Capital Funding, Incorporated, 5.30%, Due 2/1/2007.................................................. 220 233 TXU Electric Delivery, 4.81%, Due 11/15/2012................ 148 154 Xcel Energy, Incorporated, 7.00%, Due 12/1/2010............. 200 228 -------- TOTAL UTILITIES......................................... 2,859 -------- FOREIGN - 0.66% Province of Ontario, 3.35%, Due 7/16/2007*.................. 500 503 United Mexican States, 7.50%, Due 4/8/2033.................. 140 149 -------- TOTAL FOREIGN........................................... 652 -------- TOTAL CORPORATE OBLIGATIONS............................. 36,053 -------- ASSET-BACKED SECURITIES - 2.07% Household Automotive Trust 2004-1 A3, 3.30%, Due 5/18/2009................................................. 700 698 Master Asset Securitization Trust 2002-6 2A1, 5.75%, Due 10/25/2017................................................ 777 786
See accompanying notes - -------------------------------------------------------------------------------- 89 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) MBNA Credit Card Master Trust 2003-A7 A7, 2.65%, Due 11/15/2010................................................ $ 568 $ 553 -------- TOTAL ASSET-BACKED SECURITIES........................... 2,037 -------- SHARES ----------- SHORT-TERM INVESTMENTS - 24.34% American AAdvantage Money Market Select Fund (Notes B and C)........................................................ 9,775,719 9,776 AMR Investments Enhanced Cash Business Trust (Notes B and C)........................................................ 14,140,429 14,140 -------- TOTAL SHORT-TERM INVESTMENTS............................ 23,916 -------- TOTAL INVESTMENTS - 122.43% (COST $118,962)................. 120,286 -------- LIABILITIES, NET OF OTHER ASSETS - (22.43%)................. (22,041) -------- TOTAL NET ASSETS - 100%..................................... $ 98,245 ========
- --------------- (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 $1,059 or 1.08% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan at October 31, 2004. See Note 5. See accompanying notes - -------------------------------------------------------------------------------- 90 AMERICAN AADVANTAGE SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 6.02% FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.63% Pool #E44213, 7.00%, Due 1/1/2008........................... $ 234 $ 243 Pool #E00228, 6.50%, Due 7/1/2008........................... 313 331 -------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 574 -------- FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.98% Pool #050952, 6.50%, Due 12/1/2008.......................... 368 389 Pool #252448, 5.50%, Due 4/1/2009........................... 360 377 Pool #313430, 6.50%, Due 3/1/2012........................... 372 395 Pool #313522, 7.00%, Due 5/1/2012........................... 666 707 Pool #323223, 6.50%, Due 7/1/2013........................... 281 299 Pool #439957, 6.00%, Due 11/1/2013.......................... 241 253 Pool #323980, 6.00%, Due 4/1/2014........................... 617 649 Pool #545038, 6.00%, Due 9/1/2014........................... 551 579 -------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 3,648 -------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.41% Pool #780286, 7.00%, Due 6/15/2008.......................... 395 412 Pool #351992, 6.00%, Due 12/15/2008......................... 840 877 -------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 1,289 -------- TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 5,511 -------- CORPORATE OBLIGATIONS - 75.45% FINANCIAL - 52.29% American Honda Finance Corporation, 2.875%, Due 4/3/2006, 144A (Note A)............................................. 1,150 1,151 Bear Stearns Companies, Incorporated, 3.00%, Due 3/30/2006................................................. 2,000 2,007 Boeing Capital Corporation, 5.65%, Due 5/15/2006*........... 626 653 Capital One Bank, 6.875%, Due 2/1/2006...................................... 200 210 6.70%, Due 5/15/2008...................................... 1,100 1,209 Caterpillar Financial Services, 2.35%, Due 9/15/2006........ 2,500 2,473 Citigroup, Incorporated, 6.75%, Due 12/1/2005............... 2,000 2,087 Countrywide Funding Corporation, 3.50%, Due 12/19/2005*..... 1,200 1,209 Credit Suisse First Boston, Incorporated, 5.875%, Due 8/1/2006.................................................. 2,000 2,101 FleetBoston Financial Corporation, 3.85%, Due 2/15/2008..... 2,500 2,536 General Electric Capital Corporation, 2.75%, Due 9/25/2006*................................................ 1,000 999 General Motors Acceptance Corporation, 6.75%, Due 1/15/2006................................................. 2,350 2,432 Goldman Sachs Group, Incorporated, 7.625%, Due 8/17/2005.... 2,000 2,081 Heller Financial, Incorporated, 6.375%, Due 3/15/2006....... 2,500 2,619 Household Finance Corporation, 5.75%, Due 1/30/2007......... 2,250 2,378 International Lease Finance Corporation, 2.95%, Due 5/23/2006................................................. 2,000 1,996 John Hancock Global Funding, 5.625%, Due 6/27/2006.......... 1,000 1,043 Merrill Lynch & Company, Incorporated, 7.00%, Due 3/15/2006................................................. 1,660 1,760 Met Life Global Funding I, 3.375%, Due 10/5/2007............ 3,000 2,991 Monumental Global Funding, 5.20%, Due 1/30/2007, 144A (Note A)........................................................ 1,200 1,261 Prudential Insurance Company of America, 6.375%, Due 7/23/2006, 144A (Note A).................................. 3,000 3,189 Simon Property Group LP, 6.375%, Due 11/15/2007............. 2,000 2,160 SLM Corporation, 2.90%, Due 7/1/2005........................ 2,000 2,005 Synovus Financial Corporation, 7.25%, Due 12/15/2005........ 2,500 2,616 Wachovia Corporation, 6.40%, Due 4/1/2008................... 2,500 2,735 -------- TOTAL FINANCIAL......................................... 47,901 --------
See accompanying notes - -------------------------------------------------------------------------------- 91 AMERICAN AADVANTAGE SHORT-TERM BOND FUND SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
PAR AMOUNT VALUE ----------- --------- (DOLLARS IN THOUSANDS) INDUSTRIALS - 22.94% AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006... $ 1,400 $ 1,483 Cendant Corporation, 6.875%, Due 8/15/2006.................. 2,140 2,280 Conagra Foods, Incorporated, 9.875%, Due 11/15/2005......... 1,000 1,066 Continental Cablevision, Incorporated, 8.30%, Due 5/15/2006................................................. 1,960 2,110 DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 1,500 1,545 John Deere Capital Corporation, 3.375%, Due 10/1/2007....... 2,000 2,002 Deutsche Telekom International Finance Corporation, 8.25%, Due 6/15/2005............................................. 325 336 Hertz Corporation, 4.70%, Due 10/2/2006..................... 3,000 3,049 Northrop Grumman Corporation, 7.00%, Due 3/1/2006........... 2,000 2,105 Sprint Capital Corporation, 6.00%, Due 1/15/2007............ 1,800 1,904 Unilever Capital Corporation, 6.875%, Due 11/1/2005......... 1,000 1,042 Verizon Wireless Capital, 5.375%, Due 12/15/2006............ 2,000 2,096 -------- TOTAL INDUSTRIALS....................................... 21,018 -------- FOREIGN - 0.22% Province of Ontario, 3.35%, Due 7/16/2007*.................. 200 201 -------- TOTAL FOREIGN........................................... 201 -------- TOTAL CORPORATE OBLIGATIONS............................. 69,120 -------- ASSET-BACKED SECURITIES - 15.54% Chase Manhattan Auto Owner Trust 2004-A A4, 2.83%, Due 9/15/2010................................................. 2,000 1,980 Chemical Master Credit Card Trust 1996-2 A, 5.98%, Due 9/15/2008................................................. 3,000 3,107 Citibank Credit Card Issuance Trust 2004-A4 A4, 3.20%, Due 8/24/2009................................................. 2,000 1,999 Household Automotive Trust 2004-1 A3, 3.30%, Due 5/18/2009................................................. 1,600 1,597 Nissan Auto Receivables Owner Trust 2004-A A3, 2.01%, Due 11/15/2007................................................ 1,000 990 USAA Auto Owner Trust 2004-1 A3, 2.06%, Due 4/15/2008....... 2,000 1,982 Wells Fargo Financial Auto Owner Trust 2004-A A4, 2.67%, Due 8/16/2010................................................. 2,600 2,578 -------- TOTAL ASSET-BACKED SECURITIES........................... 14,233 -------- SHARES ----------- SHORT-TERM INVESTMENTS - 4.08% American AAdvantage Money Market Select Fund (Notes B and C)........................................................ 2,434,777 2,435 AMR Investments Enhanced Cash Business Trust (Notes B and C)........................................................ 1,309,840 1,310 -------- TOTAL SHORT-TERM INVESTMENTS............................ 3,745 -------- TOTAL INVESTMENTS - 101.09% (COST $92,422).................. 92,609 -------- LIABILITIES, NET OF OTHER ASSETS - (1.09)%.................. (1,000) -------- TOTAL NET ASSETS - 100%..................................... $ 91,609 ========
- --------------- (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 $5,601 or 6.11% of net assets. (B) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (C) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of this security is on loan at October 31, 2004. See Note 5. See accompanying notes - -------------------------------------------------------------------------------- 92 (AMERICAN EAGLE LOGO) - -------------------------------------------------------------------------------- 93 AMERICAN AADVANTAGE FUNDS STATEMENTS OF ASSETS AND LIABILITIES October 31, 2004 - --------------------------------------------------------------------------------
LARGE CAP LARGE CAP MID-CAP BALANCED VALUE GROWTH VALUE ----------- ----------- ---------- ---------- (IN THOUSANDS) ASSETS: Investments in unaffiliated securities, at value(A D)... $ 622,914 $ 758,675 $ 55,482 $ 20,390 Investments in affiliated securities, at value(B)....... 125,906 78,085 4,852 7,191 Investments in Portfolio, at value...................... -- -- -- -- Cash.................................................... -- -- -- -- Foreign currency, at value(C)........................... -- -- -- -- Dividends and interest receivable....................... 2,679 1,181 26 15 Receivable for investments sold......................... 2,221 1,944 200 82 Receivable for foreign currency sold.................... -- -- -- -- Receivable for fund shares sold......................... 307 3,263 711 852 Receivable for tax reclaims............................. -- -- -- -- Receivable for variation margin on open futures contracts............................................. 116 90 2 21 Deposit with broker for futures contracts............... -- -- 120 -- Other assets............................................ -- -- -- -- ----------- ----------- ---------- ---------- TOTAL ASSETS........................................ 754,143 843,238 61,393 28,551 ----------- ----------- ---------- ---------- LIABILITIES: Payable for investments purchased....................... 6,340 1,360 3,940 1,571 Payable upon return of securities loaned................ 80,788 40,164 543 1,381 Payable for fund shares redeemed........................ 55 4,636 1,689 -- Payable for variation margin on open futures contracts............................................. -- -- -- -- Dividends payable....................................... -- -- -- -- Management and investment advisory fees payable (Note 2).................................................... 479 588 91 36 Administrative service and service fees payable......... 14 31 -- 4 Unrealized depreciation on foreign currency contracts... -- -- -- -- Payable for custodian overdraft......................... -- -- -- -- Other liabilities....................................... 98 313 8 13 ----------- ----------- ---------- ---------- TOTAL LIABILITIES................................... 87,774 47,092 6,271 3,005 ----------- ----------- ---------- ---------- NET ASSETS.................................................. $ 666,369 $ 796,146 $ 55,122 $ 25,546 =========== =========== ========== ========== ANALYSIS OF NET ASSETS: Paid-in-capital......................................... 550,334 653,931 62,762 24,984 Undistributed net investment income..................... 11,527 7,615 120 43 Accumulated net realized gain (loss).................... 15,122 (15,048) (11,404) (43) Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency................ 89,386 149,648 3,644 562 ----------- ----------- ---------- ---------- NET ASSETS.................................................. $ 666,369 $ 796,146 $ 55,122 $ 25,546 =========== =========== ========== ========== Shares outstanding (no par value): Institutional Class..................................... 585,302 2,658,326 109 2,487,561 =========== =========== ========== ========== PlanAhead Class......................................... 1,583,415 2,935,957 N/A N/A =========== =========== ========== ========== Service Class........................................... N/A N/A N/A N/A =========== =========== ========== ========== AMR Class............................................... 45,900,439 38,624,850 9,442,360 N/A =========== =========== ========== ========== Net asset value, offering and redemption price per share: Institutional Class..................................... $ 14.31 $ 18.23 $ 5.82 $ 10.27 =========== =========== ========== ========== PlanAhead Class......................................... $ 13.62 $ 17.54 N/A N/A =========== =========== ========== ========== Service Class........................................... N/A N/A N/A N/A =========== =========== ========== ========== AMR Class............................................... $ 13.87 $ 18.02 $ 5.84 N/A =========== =========== ========== ========== - --------------- (A) Cost of investments in unaffiliated securities.......... $ 533,900 $ 609,365 $ 51,842 $ 19,874 (B) Cost of investments in affiliated securities............ $ 125,906 $ 78,085 $ 4,852 $ 7,191 (C) Cost of foreign currency................................ $ -- $ -- $ -- $ -- (D) Market value of securities on loan...................... $ 79,233 $ 39,044 $ 529 $ 1,360
See accompanying notes - -------------------------------------------------------------------------------- 94 - --------------------------------------------------------------------------------
SMALL CAP INTERNATIONAL EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM VALUE EQUITY MARKETS BOND INCOME BOND BOND ----------- ------------- ---------- ----------- ----------- ------------ ----------- (IN THOUSANDS) $ 1,218,686 $ -- $ 70,369 $ 406,793 $ 102,497 $ 96,370 $ 88,864 368,762 -- 14,267 23,672 17,413 23,916 3,745 -- 1,795,419 -- -- -- -- -- -- -- -- 13 -- -- -- -- -- 668 -- -- -- -- 918 -- 230 7,874 1,058 929 1,034 2,748 -- 460 4,285 52 719 -- -- -- -- -- -- -- -- 14,049 5,971 409 3,940 128 1,246 92 -- -- 4 -- -- -- -- -- -- 28 -- -- -- -- -- -- -- -- -- -- -- -- -- -- 7 -- -- -- ----------- ----------- ---------- ----------- ----------- ----------- ----------- 1,605,163 1,801,390 86,435 446,584 121,148 123,180 93,735 ----------- ----------- ---------- ----------- ----------- ----------- ----------- 26,594 -- 268 3,505 50 3,733 -- 228,980 -- 3,191 51,458 16,970 21,149 2,061 1,539 357 8 77 69 5 37 127 -- -- -- -- -- -- -- -- -- 215 -- -- 3 1,527 -- 182 563 103 21 20 257 270 2 101 42 1 1 -- -- 61 -- -- -- -- -- -- -- 559 -- -- -- 54 98 28 59 17 26 4 ----------- ----------- ---------- ----------- ----------- ----------- ----------- 259,078 725 3,740 56,537 17,251 24,935 2,126 ----------- ----------- ---------- ----------- ----------- ----------- ----------- $ 1,346,085 $ 1,800,665 $ 82,695 $ 390,047 $ 103,897 $ 98,245 $ 91,609 =========== =========== ========== =========== =========== =========== =========== 1,162,185 1,531,848 63,644 369,500 102,214 104,732 99,142 4,276 10,797 486 -- (144) -- (1,576) 67,140 (49,388) 6,377 6,902 (339) (7,811) (5,952) 112,484 307,408 12,188 13,645 2,166 1,324 (5) ----------- ----------- ---------- ----------- ----------- ----------- ----------- $ 1,346,085 $ 1,800,665 $ 82,695 $ 390,047 $ 103,897 $ 98,245 $ 91,609 =========== =========== ========== =========== =========== =========== =========== 22,785,330 55,737,425 576,224 22,265,641 N/A 86,485 365,845 =========== =========== ========== =========== =========== =========== =========== 22,154,594 16,956,517 96,916 13,645,967 10,228,129 104,824 856,074 =========== =========== ========== =========== =========== =========== =========== 639,587 40,482 N/A 405 N/A N/A N/A =========== =========== ========== =========== =========== =========== =========== 23,337,080 24,764,061 5,850,747 N/A N/A 9,313,001 8,873,802 =========== =========== ========== =========== =========== =========== =========== $ 18.85 $ 18.47 $ 12.64 $ 10.86 N/A $ 10.54 $ 9.09 =========== =========== ========== =========== =========== =========== =========== $ 18.54 $ 18.31 $ 12.53 $ 10.87 $ 10.16 $ 10.41 $ 9.09 =========== =========== ========== =========== =========== =========== =========== $ 18.49 $ 18.24 N/A $ 10.87 N/A N/A N/A =========== =========== ========== =========== =========== =========== =========== $ 18.78 $ 18.58 $ 12.68 N/A N/A $ 10.33 $ 9.07 =========== =========== ========== =========== =========== =========== =========== $ 1,106,241 N/A $ 58,225 $ 393,148 $ 100,331 $ 95,046 $ 88,677 $ 368,762 N/A $ 14,267 $ 23,672 $ 17,413 $ 23,916 $ 3,745 $ -- N/A $ 660 $ -- $ -- $ -- $ -- $ 222,942 N/A $ 3,073 $ 50,163 $ 16,671 $ 20,793 $ 2,020
- -------------------------------------------------------------------------------- 95 AMERICAN AADVANTAGE FUNDS STATEMENTS OF OPERATIONS Year Ended October 31, 2004 - --------------------------------------------------------------------------------
LARGE CAP LARGE CAP MID-CAP SMALL CAP BALANCED VALUE GROWTH VALUE(1) VALUE -------- --------- --------- -------- --------- (IN THOUSANDS) INVESTMENT INCOME: Interest income.................................. $ 7,971 $ 53 $ -- $ 1 $ 68 Dividend income from unaffiliated securities (net of foreign taxes)*............................. 8,872 14,895 554 99 10,004 Dividend income from affiliated securities....... 563 590 6 10 1,015 Investment income allocated from the Portfolio... -- -- -- -- -- Income derived from commission recapture......... 21 27 3 -- 207 Income derived from securities lending, net...... 83 42 4 1 213 Expenses allocated from the Portfolio............ -- -- -- -- -- ------- -------- ------ ---- -------- TOTAL INVESTMENT INCOME...................... 17,510 15,607 567 111 11,507 ------- -------- ------ ---- -------- EXPENSES: Management and investment advisory fees (Note 2)............................................. 1,844 2,189 334 43 4,110 Administrative service fees (Note 2): Institutional Class............................ 21 83 -- 15 543 PlanAhead Class................................ 40 80 -- -- 434 Service Class.................................. -- -- -- -- 7 Transfer agent fees: Institutional Class............................ 1 9 -- 1 71 PlanAhead Class................................ 10 19 -- -- 59 Service Class.................................. -- -- -- -- 9 AMR Class...................................... 21 22 1 -- 10 Fund accounting fees............................. 305 377 26 3 388 Professional fees................................ 51 60 6 13 70 Registration fees and expenses................... 26 32 4 1 37 Service fees -- PlanAhead Class (Note 2)......... 40 80 -- -- 434 Service fees -- Service Class (Note 2)........... -- -- -- -- 7 Distribution fees -- Service Class (Note 2)...... -- -- -- -- 7 Other expenses................................... 102 88 12 4 150 ------- -------- ------ ---- -------- TOTAL EXPENSES............................... 2,461 3,039 383 80 6,336 ------- -------- ------ ---- -------- Less fees waived (Note 2)........................ -- -- -- 12 9 ------- -------- ------ ---- -------- NET EXPENSES................................. 2,461 3,039 383 68 6,327 ------- -------- ------ ---- -------- NET INVESTMENT INCOME................................ 15,049 12,568 184 43 5,180 ------- -------- ------ ---- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on: Investments.................................... 22,598 35,342 4,396 15 66,297 Foreign currency transactions.................. -- -- -- -- -- Futures contracts.............................. 5,035 4,502 18 (58) 2,914 Net realized gain allocated from the Portfolio... -- -- -- -- -- Change in net unrealized appreciation or depreciation of: Investments.................................... 34,330 70,471 (1,297) 516 50,878 Foreign currency translations.................. -- -- -- -- -- Futures contracts.............................. (1,001) (898) (1) 46 (278) Change in net unrealized gain allocated from the Portfolio...................................... -- -- -- -- -- ------- -------- ------ ---- -------- NET GAIN (LOSS) ON INVESTMENTS............... 60,962 109,417 3,116 519 119,811 ------- -------- ------ ---- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......................................... $76,011 $121,985 $3,300 $562 $124,991 ======= ======== ====== ==== ======== * Foreign taxes.................................. $ 79 $ 147 $ -- $ -- $ 29
- --------------- (1) Commencement of Operations June 30, 2004. See accompanying notes - -------------------------------------------------------------------------------- 96 - --------------------------------------------------------------------------------
INTERNATIONAL EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM EQUITY MARKETS BOND INCOME BOND BOND ------------- -------- ---------- -------- ------------ ---------- (IN THOUSANDS) $ -- $ 3 $25,753 $3,255 $5,015 $3,164 -- 1,737 -- 255 -- -- -- 35 238 29 60 21 36,573 -- -- -- -- -- -- -- -- -- -- -- -- 13 91 11 13 1 (6,926) -- -- -- -- -- -------- -------- ------- ------ ------ ------ 29,647 1,788 26,082 3,550 5,088 3,186 -------- -------- ------- ------ ------ ------ -- 647 1,874 373 295 240 2,183 14 455 -- 2 9 566 2 345 256 3 19 1 -- -- -- -- -- 225 1 61 -- 2 1 79 1 78 38 1 4 9 -- 8 -- -- -- 14 2 -- -- 5 4 -- 402 85 28 31 25 65 5 28 36 10 6 61 18 29 18 24 21 569 2 345 256 3 19 -- -- -- -- -- -- -- -- -- -- -- -- 169 18 40 20 31 22 -------- -------- ------- ------ ------ ------ 3,941 1,112 3,348 1,025 407 370 -------- -------- ------- ------ ------ ------ 9 -- 80 -- -- -- -------- -------- ------- ------ ------ ------ 3,932 1,112 3,268 1,025 407 370 -------- -------- ------- ------ ------ ------ 25,715 676 22,814 2,525 4,681 2,816 -------- -------- ------- ------ ------ ------ -- 9,337 6,934 320 1,148 432 -- 1,028 -- -- -- -- -- 30 -- -- -- -- 111,748 -- -- -- -- -- -- (449) 2,292 1,851 (67) (991) -- 112 -- -- -- -- -- 94 -- -- -- -- 153,263 -- -- -- -- -- -------- -------- ------- ------ ------ ------ 265,011 10,152 9,226 2,171 1,081 (559) -------- -------- ------- ------ ------ ------ $290,726 $ 10,828 $32,040 $4,696 $5,762 $2,257 ======== ======== ======= ====== ====== ====== $ -- $ 337 $ -- $ -- $ -- $ --
- -------------------------------------------------------------------------------- 97 AMERICAN AADVANTAGE FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS) - --------------------------------------------------------------------------------
BALANCED LARGE CAP VALUE LARGE CAP GROWTH MID-CAP VALUE(1) ------------------- ------------------- ----------------- ---------------- YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, JUNE 30 TO ------------------- ------------------- ----------------- OCTOBER 31, 2004 2003 2004 2003 2004 2003 2004 -------- -------- -------- -------- ------- ------- ---------------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income........ $ 15,049 $ 15,678 $ 12,568 $ 12,019 $ 184 $ 151 $ 43 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions...... 27,633 15,761 39,844 (1,324) 4,414 (823) (43) Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations...... 33,329 65,996 69,573 129,868 (1,298) 8,070 562 Change in unrealized gain allocated from the Portfolio.................. -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. 76,011 97,435 121,985 140,563 3,300 7,398 562 -------- -------- -------- -------- ------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class........ (211) (105) (414) (502) -- -- -- PlanAhead Class............ (354) (421) (344) (333) -- -- -- AMR Class.................. (15,797) (22,194) (11,675) (12,821) (151) (107) -- Net realized gain on investments: Institutional Class........ -- -- -- -- -- -- -- PlanAhead Class............ -- -- -- -- -- -- -- AMR Class.................. -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------- NET DISTRIBUTIONS TO SHAREHOLDERS........... (16,362) (22,720) (12,433) (13,656) (151) (107) -- -------- -------- -------- -------- ------- ------- ------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares..................... 71,533 72,230 148,293 37,911 25,454 24,357 26,544 Reinvestment of dividends and distributions.............. 16,359 22,704 12,206 13,368 151 107 -- Cost of shares redeemed...... (61,146) (96,756) (117,617) (83,291) (22,559) (10,846) (1,560) Redemption fees.............. -- -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS........... 26,746 (1,822) 42,882 (32,012) 3,046 13,618 24,984 -------- -------- -------- -------- ------- ------- ------- NET INCREASE (DECREASE) IN NET ASSETS......................... 86,395 72,893 152,434 94,895 6,195 20,909 25,546 -------- -------- -------- -------- ------- ------- ------- NET ASSETS: Beginning of period.......... 579,974 507,081 643,712 548,817 48,927 28,018 -- -------- -------- -------- -------- ------- ------- ------- END OF PERIOD*............... $666,369 $579,974 $796,146 $643,712 $55,122 $48,927 $25,546 ======== ======== ======== ======== ======= ======= ======= * Includes undistributed net investment income (loss) of......................... $ 11,527 $ 11,918 $ 7,615 $ 7,137 $ 120 $ 89 $ 43 ======== ======== ======== ======== ======= ======= ======= SMALL CAP VALUE --------------------- YEAR ENDED OCTOBER 31, --------------------- 2004 2003 ---------- -------- INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income........ $ 5,180 $ 2,317 Net realized gain (loss) on investments, futures contracts, and foreign currency transactions...... 69,211 14,129 Change in net unrealized appreciation or depreciation of investments, futures contracts, and foreign currency translations...... 50,600 95,651 Change in unrealized gain allocated from the Portfolio.................. -- -- ---------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............. 124,991 112,097 ---------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional Class........ (522) (11) PlanAhead Class............ (156) (371) AMR Class.................. (1,911) (2,228) Net realized gain on investments: Institutional Class........ (3,082) (125) PlanAhead Class............ (2,162) (849) AMR Class.................. (9,583) (4,420) ---------- -------- NET DISTRIBUTIONS TO SHAREHOLDERS........... (17,416) (8,004) ---------- -------- CAPITAL SHARE TRANSACTIONS: Proceeds from sales of shares..................... 969,153 236,616 Reinvestment of dividends and distributions.............. 16,178 8,003 Cost of shares redeemed...... (230,849) (83,990) Redemption fees.............. -- -- ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS........... 754,482 160,629 ---------- -------- NET INCREASE (DECREASE) IN NET ASSETS......................... 862,057 264,722 ---------- -------- NET ASSETS: Beginning of period.......... 484,028 219,306 ---------- -------- END OF PERIOD*............... $1,346,085 $484,028 ========== ======== * Includes undistributed net investment income (loss) of......................... $ 4,276 $ 1,892 ========== ========
- --------------- (1) Commencement of Operations See accompanying notes - -------------------------------------------------------------------------------- 98 - --------------------------------------------------------------------------------
INTERNATIONAL EQUITY EMERGING MARKETS HIGH YIELD BOND ENHANCED INCOME INTERMEDIATE BOND ----------------------- ------------------ ------------------- ------------------------- ------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, YEAR ENDED JUNE 30 TO OCTOBER 31, ----------------------- ------------------ ------------------- OCTOBER 31, OCTOBER 31, ------------------- 2004 2003 2004 2003 2004 2003 2004 2003(1) 2004 2003 ---------- ---------- ------- -------- -------- -------- ----------- ----------- -------- -------- $ 25,715 $ 20,084 $ 676 $ 375 $ 22,814 $ 14,294 $ 2,525 $ 685 $ 4,681 $ 8,605 111,748 (14,862) 10,395 1,470 6,934 5,981 320 (433) 1,148 5,796 -- -- (243) 15,857 2,292 13,317 1,851 315 (67) (3,389) 153,263 290,167 -- -- -- -- -- -- -- -- ---------- ---------- ------- -------- -------- -------- -------- -------- -------- -------- 290,726 295,389 10,828 17,702 32,040 33,592 4,696 567 5,762 11,012 ---------- ---------- ------- -------- -------- -------- -------- -------- -------- -------- (19,224) (15,830) (20) (12) (13,226) (8,012) -- -- (36) (1,957) (4,201) (2,465) (3) -- (9,588) (6,282) (2,672) (685) (43) (153) (9,135) (8,401) (415) (319) -- -- -- -- (5,071) (6,495) -- -- -- -- (2,082) -- -- -- -- -- -- -- -- -- (1,646) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- ---------- ---------- ------- -------- -------- -------- -------- -------- -------- -------- (32,560) (26,696) (438) (331) (26,542) (14,294) (2,672) (685) (5,150) (8,605) ---------- ---------- ------- -------- -------- -------- -------- -------- -------- -------- 670,346 569,324 43,769 17,731 214,560 312,581 21,940 104,430 31,565 65,108 28,865 24,545 438 331 21,423 8,009 2,192 1 5,146 6,687 (379,293) (542,508) (27,453) (14,387) (138,469) (161,695) (23,331) (3,241) (73,424) (160,564) 21 815 4 -- -- -- -- -- -- -- ---------- ---------- ------- -------- -------- -------- -------- -------- -------- -------- 319,939 52,176 16,758 3,675 97,514 158,895 801 101,190 (36,713) (88,769) ---------- ---------- ------- -------- -------- -------- -------- -------- -------- -------- 578,105 320,869 27,148 21,046 103,012 178,193 2,825 101,072 (36,101) (86,362) ---------- ---------- ------- -------- -------- -------- -------- -------- -------- -------- 1,222,560 901,691 55,547 34,501 287,035 108,842 101,072 -- 134,346 220,708 ---------- ---------- ------- -------- -------- -------- -------- -------- -------- -------- $1,800,665 $1,222,560 $82,695 $ 55,547 $390,047 $287,035 $103,897 $101,072 $ 98,245 $134,346 ========== ========== ======= ======== ======== ======== ======== ======== ======== ======== $ 10,007 $ 8,624 $ 486 $ 292 $ -- $ -- $ (144) $ -- $ -- $ -- ========== ========== ======= ======== ======== ======== ======== ======== ======== ======== SHORT-TERM BOND ------------------- YEAR ENDED OCTOBER 31, ------------------- 2004 2003 -------- -------- $ 2,816 $ 4,882 432 107 (991) (879) -- -- -------- -------- 2,257 4,110 -------- -------- (162) (317) (345) (181) (4,192) (5,040) -- -- -- -- -- -- -------- -------- (4,699) (5,538) -------- -------- 19,631 31,785 4,626 5,349 (31,645) (36,115) -- -- -------- -------- (7,388) 1,019 -------- -------- (9,830) (409) -------- -------- 101,439 101,848 -------- -------- $ 91,609 $101,439 ======== ======== $ (1,576) $ (924) ======== ========
- -------------------------------------------------------------------------------- 99 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS October 31, 2004 - -------------------------------------------------------------------------------- 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 Mid-Cap Value 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. 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, 2004 the International Fund's investment was 95.35% 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 include a discussion of investment valuation, security transactions and investment income, the management agreement and securities lending. Class Disclosure Each Fund, except the Mid-Cap Value and Enhanced Income Fund, has multiple classes of shares designed to meet the needs of different groups of investors. Please note that not all Funds offer all classes. The following table sets forth the differences amongst the classes:
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES: - ------ ----------- ------------------------------ INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service 0.25% Fee -- PLANAHEAD CLASS General public and investors investing through an Administrative Service 0.25% intermediary Fee -- 0.25% Service Fee -- SERVICE CLASS Investors investing through an intermediary Administrative Service 0.25% Fee -- 0.25% Service Fee -- 0.25% Distribution Fee -- AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A AMR Corporation and its affiliates
- -------------------------------------------------------------------------------- 100 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- Investment income, net capital gains (losses) and all expenses incurred by the Funds are allocated based on the relative net assets of each class, except for service fees and certain other fees and expenses related solely to one class of shares. 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. 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. Securities traded in foreign markets are valued using prices reported by local foreign markets. Securities for which quotations are not readily available, or securities which may have been affected by a significant event after the price was determined, and other assets are valued at a fair value as determined by or under the direction of pricing committees established by the Trust's Board of Trustees (the "Board"). The Funds' net asset values are determined at the time of the close of the New York Stock Exchange. The pricing committees will evaluate movements in the U.S. markets after the close of foreign markets and may adjust security prices to reflect changes in reaction to U.S. markets as determined by a third party model. 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. When a price is unavailable from a pricing service or when the price provided by the pricing service is deemed not to represent fair value, 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. 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 - -------------------------------------------------------------------------------- 101 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- 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 mean of the bid and ask prices 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 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. 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 equals or exceeds the carrying value of the repurchase agreement, including accrued interest. 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, Mid-Cap Value, 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. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations. Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents 5% of the face value of the futures contract. The initial margin amount is reflected as Deposit with broker for futures contracts on the Statement of Assets and Liabilities for the Large Cap Growth Fund. The other Funds reflect this - -------------------------------------------------------------------------------- 102 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- amount on the Schedules of Investments as a US Treasury Bill held as collateral for futures contracts. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are terminated, at which time realized gains and losses are recognized. 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, Mid-Cap Value, 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 are generally paid annually and recorded on the ex-dividend date. 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. Allocation of Income, Expenses, Gains and Losses Income, expenses (other than those attributable to a specific class), gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets represented by such class. Operating expenses directly attributable to a specific class are charged against the operations of that class. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Funds enter into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Funds' maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Funds have had no prior claims or losses pursuant to any such agreement. - -------------------------------------------------------------------------------- 103 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- 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, Mid-Cap Value, 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, Mid-Cap Value 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, 2004 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% $1,844 $1,214 $630 Large Cap Value Fund............................... .225%-.70% 2,189 1,470 719 Large Cap Growth Fund.............................. .50%-.70% 334 280 54 Mid-Cap Value Fund................................. .40%-.90% 43 37 6 Small Cap Value Fund............................... .35%-.60% 4,110 3,315 795 Emerging Markets Fund.............................. .80%-1.20% 647 578 69 High Yield Bond Fund............................... .52% 1,874 1,554 320 Enhanced Income Fund............................... .25%-.85% 373 271 102 Intermediate Bond Fund............................. .25% 295 119 176
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. 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 - -------------------------------------------------------------------------------- 104 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- than cash, a fee up to 25% of such loan fees. During the year ended October 31, 2004, securities lending fees paid to the Manager were as follows (in thousands): Balanced Fund............................................... $13 Large Cap Value Fund........................................ 8 Small Cap Value Fund........................................ 36 Emerging Markets Fund....................................... 2 High Yield Bond Fund........................................ 16 Enhanced Income Fund........................................ 2 Intermediate Bond Fund...................................... 2
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. Investment in Affiliated Funds The Funds are permitted, pursuant to an exemptive order by the Securities and Exchange Commission ("SEC") and approved procedures by the Board, to invest up to 25% of its total assets in the American AAdvantage Money Market Select Fund (the "Select Fund"), an affiliated fund. The Funds and the Select Fund have the same investment adviser and therefore, are considered to be - -------------------------------------------------------------------------------- 105 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- affiliated. Cash collateral received by certain Funds in connection with securities lending may be invested in the Select Fund and the AMR Investments Enhanced Cash Business Trust (the "Business Trust") (collectively, the "Affiliated Funds"). The Manager serves as Trustee and investment adviser to the Affiliated Funds and receives from the Affiliated Funds an annualized fee equal to 0.10% of the average daily net assets. During the period, fees earned by the Manager from the Affiliated Funds were as follows:
SECURITIES LENDING DIRECT INVESTMENT COLLATERAL INVESTED IN FUNDS IN FUNDS TOTAL ----------------- ------------------- -------- Balanced.................................................... $48,743 $ 69,563 $118,306 Large Cap Value............................................. 49,973 34,002 83,975 Large Cap Growth............................................ 1,121 -- 1,121 Mid-Cap Value............................................... 420 -- 420 Small Cap Value............................................. 82,721 115,957 198,678 Emerging Markets............................................ 4,388 1,420 5,808 High Yield Bond............................................. 19,457 -- 19,457 Enhanced Income............................................. 2,503 3,108 5,611 Intermediate Bond........................................... 5,237 14,765 20,002 Short-Term Bond............................................. 1,751 1,328 3,079
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, 2004, the cost of air transportation was not material to any of the Funds. One non-interested 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, 2004, AMR Corporation and subsidiary companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of the Funds. Interfund Lending Program Pursuant to an Exemptive Order by the SEC, the Funds along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Funds to borrow from, or lend money to, other participating Funds. At October 31, 2004, the Funds had not utilized the credit facility. Reimbursement of Expenses The Manager and the Investment Adviser of the High Yield Bond Fund -- Institutional Class have each contractually agreed to waive a portion of their fees through October 31, 2004 to the extent that total fund operating expenses exceed 0.90%. During the year ended October 31, 2004, the Manager and Investment Adviser each waived administrative service and management fees totaling $36,000. - -------------------------------------------------------------------------------- 106 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- The Manager reimbursed expenses of the Service Class totaling $8,745, $8,729, and $7,881 for the Small Cap Value, International Equity and High Yield Bond Funds, respectively during the year ended October 31, 2004. The Manager reimbursed expenses of the Mid-Cap Value Fund totaling $11,997 during the year ended October 31, 2004. 3. FEDERAL INCOME AND EXCISE TAXES It is the policy of each of the Funds to comply with the requirements of Subchapter M of the Internal Revenue Code 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. Dividends are determined in accordance with income tax regulations which may treat certain transactions differently than U.S. generally accepted accounting principles. Accordingly, the character of 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 years ended October 31, 2004 and October 31, 2003 were as follows (in thousands):
BALANCED LARGE CAP VALUE LARGE-CAP GROWTH ------------------- ------------------- ---------------- YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------- ------------------- ---------------- 2004 2003 2004 2003 2004 2003 ------- ------- ------- ------- ---- ---- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class...................... $ 211 $ 105 $ 414 $ 502 $ -- $ -- PlanAhead Class.......................... 354 421 344 333 -- -- AMR Class................................ 15,797 22,194 11,675 12,821 151 107 LONG-TERM CAPITAL GAIN Institutional Class...................... -- -- -- -- -- -- PlanAhead Class.......................... -- -- -- -- -- -- AMR Class................................ -- -- -- -- -- -- ------- ------- ------- ------- ---- ---- TOTAL DISTRIBUTIONS PAID............. $16,362 $22,720 $12,433 $13,656 $151 $107 ------- ------- ------- ------- ---- ----
SMALL CAP VALUE INTERNATIONAL EQUITY EMERGING MARKETS ------------------ --------------------- ---------------- YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------ --------------------- ---------------- 2004 2003 2004 2003 2004 2003 ------- ------ -------- -------- ---- ---- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class....................... $ 2,878 $ 117 $19,224 $15,830 $ 20 $ 12 PlanAhead Class........................... 1,809 1,089 4,201 2,465 3 -- Service Class............................. -- -- -- -- -- -- AMR Class................................. 9,236 5,971 9,135 8,401 415 319 LONG-TERM CAPITAL GAIN Institutional Class....................... 726 19 -- -- -- -- PlanAhead Class........................... 509 130 -- -- -- -- Service Class............................. -- -- -- -- -- -- AMR Class................................. 2,258 678 -- -- -- -- ------- ------ ------- ------- ---- ---- TOTAL DISTRIBUTIONS PAID.............. $17,416 $8,004 $32,560 $26,696 $438 $331 ------- ------ ------- ------- ---- ----
- -------------------------------------------------------------------------------- 107 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
HIGH-YIELD BOND ENHANCED INCOME INTERMEDIATE BOND ------------------------- ------------------------- ------------------------- YEAR ENDED JUNE 30 TO YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------------- ------------------------- ------------------------- 2004 2003 2004 2003 2004 2003 ----------- ----------- ----------- ----------- ----------- ----------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class............. $14,823 $ 8,012 $ -- $ -- $ 36 $1,957 PlanAhead Class................. 10,851 6,282 2,672 685 43 153 Service Class................... -- -- -- -- -- -- AMR Class....................... -- -- -- -- 5,071 6,495 LONG-TERM CAPITAL GAIN Institutional Class............. 485 -- -- -- -- -- PlanAhead Class................. 383 -- -- -- -- -- Service Class................... -- -- -- -- -- -- AMR Class....................... -- -- -- -- -- -- ------- ------- ------ ---- ------ ------ TOTAL DISTRIBUTIONS PAID..... $26,542 $14,294 $2,672 $685 $5,150 $8,605 ------- ------- ------ ---- ------ ------ SHORT-TERM BOND ------------------------- YEAR ENDED OCTOBER 31, ------------------------- 2004 2003 ----------- ----------- DISTRIBUTIONS PAID FROM: ORDINARY INCOME Institutional Class............. $ 162 $ 317 PlanAhead Class................. 345 181 Service Class................... -- -- AMR Class....................... 4,192 5,040 LONG-TERM CAPITAL GAIN Institutional Class............. -- -- PlanAhead Class................. -- -- Service Class................... -- -- AMR Class....................... -- -- ------ ------ TOTAL DISTRIBUTIONS PAID..... $4,699 $5,538 ------ ------
For corporate shareholders in the Funds, the percentage of ordinary dividend income distributed for the year ended December 31, 2003, which is designated as qualifying for the dividends-received deduction, is as follows (unaudited): Balanced Fund 41.0%, Large Cap Value Fund 84.0%, Large Cap Growth Fund 96.0%, Small Cap Value Fund 74.0% and Enhanced Income Fund 8.0%. For shareholders in the Funds, the percentage of dividend income distributed for the year ended December 31, 2003, which is designated as qualified dividend income under the Jobs and Growth Tax Relief Act of 2003, is as follows (unaudited): Balanced Fund 46.43%, Large Cap Value Fund 100.0%, Large Cap Growth Fund 100.0%, Small Cap Value Fund 18.13%, International Equity Fund 58.98%, Emerging Markets Fund 100.00% and Enhanced Income Fund 3.08%. For the fiscal year ended October 31, 2004 certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Complete information will be computed and reported in conjunction with your 2004 Form 1099-DIV. As of October 31, 2004, the components of distributable earnings were as follows (in thousands):
BALANCED LARGE CAP LARGE CAP MID-CAP SMALL CAP INTERNATIONAL FUND VALUE FUND GROWTH FUND VALUE FUND VALUE FUND EQUITY FUND -------- ---------- ------------- ---------- ---------- ------------- Cost basis of investments for federal income tax purposes....................................... $667,457 $698,036 $58,255 $27,065 $1,476,084 $1,821,752 Unrealized appreciation......................... 92,403 159,929 4,417 967 145,286 313,072 Unrealized depreciation......................... (11,040) (21,205) (2,338) (451) (33,922) (30,146) -------- -------- ------- ------- ---------- ---------- Net unrealized appreciation/(depreciation)...... 81,363 138,724 2,079 516 111,364 282,926 Undistributed ordinary income................... 14,249 7,568 119 46 39,948 20,807 Undistributed long-term gain/(loss)............. 21,235 (4,106) (9,838) -- 32,589 (33,902) -------- -------- ------- ------- ---------- ---------- Distributable earnings.......................... $116,847 $142,186 $(7,640) $ 562 $ 183,901 $ 269,831 ======== ======== ======= ======= ========== ==========
- -------------------------------------------------------------------------------- 108 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
ENHANCED EMERGING HIGH YIELD INCOME INTERMEDIATE SHORT-TERM MARKETS FUND BOND FUND FUND BOND FUND BOND FUND ------------ ---------- ------------- ------------- ---------- Cost basis of investments for federal income tax purposes........................................... $73,633 $416,879 $117,744 $119,079 $ 94,299 Unrealized appreciation............................. 13,523 15,595 2,991 1,475 163 Unrealized depreciation............................. (2,520) (2,009) (825) (268) (1,853) ------- -------- -------- -------- -------- Net unrealized appreciation/(depreciation).......... 11,003 13,586 2,166 1,207 (1,690) Undistributed ordinary income....................... 485 2,089 184 498 535 Undistributed long-term gain/(loss)................. 7,645 5,627 (340) (7,695) (5,952) ------- -------- -------- -------- -------- Distributable earnings.............................. $19,133 $ 21,302 $ 2,010 $ (5,990) $ (7,107) ======= ======== ======== ======== ========
Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. The temporary differences between financial reporting and tax-basis reporting of unrealized appreciation/(depreciation) are attributable primarily to the tax deferral of losses from wash sales, the realization for tax purposes of unrealized gains/(losses) on certain derivative instruments, book amortization for premiums, and the realization for tax purposes of unrealized gains/(losses) on investments in passive foreign investment companies. Due to inherent differences in the recognition of income, expenses and realized gains/losses under U.S. generally accepted accounting principles and federal income tax purposes, permanent differences between book and tax reporting have been identified and appropriately reclassified on the Statement of Assets and Liabilities. Accordingly, the following amounts represent current year permanent differences that have been reclassified as of October 31, 2004 (in thousands):
LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL EMERGING ENHANCED BALANCED VALUE GROWTH VALUE EQUITY MARKETS INCOME FUND FUND FUND FUND FUND FUND FUND -------- --------- --------- --------- ------------- -------- -------- Paid-in-capital....................... $ 22 $(1,137) $ 1 $ 12 $ (777) $ $ 223 Undistributed net investment income... 922 343 (2) (207) 9,018 (44) 3 Accumulated net realized gain (loss)............................... (944) 794 1 195 (8,159) 44 (226) Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency..................... -- -- -- -- (82) -- -- INTERMEDIATE SHORT-TERM BOND BOND FUND FUND ------------ ---------- Paid-in-capital....................... $ 3 $(3,206) Undistributed net investment income... 469 1,231 Accumulated net realized gain (loss)............................... (472) 1,975 Unrealized appreciation (depreciation) of investments, futures contracts and foreign currency..................... -- --
At October 31, 2004, capital loss carryforward positions for federal income tax purposes were as follows (in thousands):
FUND 2005 2006 2007 2008 2009 2010 2011 2012 TOTAL - ---- ---- ---- ----- ----- ----- ------ ------ ---- ------ Large Cap Value................................... -- -- -- -- -- 2,452 1,654 -- 4,106 Large Cap Growth.................................. -- -- -- -- 1,377 7,786 674 -- 9,837 International Equity.............................. -- -- -- -- -- 10,149 23,752 -- 33,901 Enhanced Income................................... -- -- -- -- -- -- 340 -- 340 Intermediate Bond................................. -- -- -- 7,367 -- 328 -- -- 7,695 Short-Term Bond................................... 432 437 1,991 1,218 -- 913 161 800 5,953
Net capital loss carryovers utilized for the period ended October 31, 2004 are as follows: Balanced Fund $2,273, Large Cap Value Fund $38,216, Large Cap Growth Fund $3,838, International Equity Fund $101,281, Emerging Markets Fund $2,733, Enhanced Income Fund $93, and Intermediate Bond Fund $574. The Short-Term Bond Fund had $3,212 of expired capital loss carryovers. - -------------------------------------------------------------------------------- 109 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- 4. INVESTMENT TRANSACTIONS Investment transactions for the year ended October 31, 2004 (excluding short-term investments) are as follows (in thousands):
LARGE CAP LARGE CAP MID-CAP EMERGING HIGH YIELD ENHANCED INTERMEDIATE BALANCED VALUE GROWTH VALUE SMALL CAP MKT BOND INCOME BOND -------- --------- --------- ------- --------- -------- ---------- -------- ------------ Purchases............ $360,133 $242,445 $74,982 $20,649 $912,684 $55,414 $499,553 $76,406 $120,123 Proceeds from sales.............. $360,234 $190,389 $70,734 $ 1,020 $255,403 $49,179 $415,571 $72,217 $155,235 SHORT-TERM ---------- Purchases............ $38,405 Proceeds from sales.............. $46,063
The Balanced Fund had purchases and sales of U.S. Government Securities of $132,019 and $101,405 respectively, and the Intermediate Bond Fund had purchases and sales of U.S. Government securities of $37,599 and $25,872, respectively. A summary of the Funds' transactions in Affiliated Funds for the period ended October 31, 2004 is set forth below (in thousands):
OCTOBER 31, 2003 OCTOBER 31, 2004 FUND AFFILIATE SHARE/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE - ---- ----------- ------------------ ---------- ----------- ------------------- Balanced....................... Select Fund $45,459 $ 268,197 $ 268,537 $45,118 Large Cap Value................ Select Fund 42,022 318,803 323,103 37,721 Large Cap Growth............... Select Fund 702 22,258 18,652 4,309 Mid-Cap Value.................. Select Fund -- 16,388 10,578 5,810 Small Cap Value................ Select Fund 46,819 1,326,920 1,233,958 139,782 Emerging Markets............... Select Fund 1,414 52,465 42,803 11,076 High Yield Bond................ Select Fund 20,891 256,362 253,581 23,672 Enhanced Income................ Select Fund 4,167 52,916 56,641 442 Intermediate Bond.............. Select Fund 3,654 95,369 96,256 2,767 Short Term Bond................ Select Fund 1,154 41,108 40,579 1,683
5. SECURITIES LENDING Each Fund except the International Equity Fund may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to 102% (for loans of US securities) or 105% (for non-US securities) of the market value of the loaned securities at the inception of each loan. Collateral is marked to market and monitored daily. To the extent that a loan is collateralized by cash, such collateral shall be invested by the securities lending agent (the "Agent") in short-term instruments, money market mutual funds, and such other short-term investments, provided the investments meet certain quality and diversification requirements. Income generated from the investment of cash collateral, less negotiated rebate fees paid to participating brokers and transaction costs, is divided between the Fund and the Agent and is recorded as income for the Fund. To the extent that a loan is secured by non-cash collateral, brokers pay the Fund negotiated lenders' fees, which are divided between the Fund and the Agent and are recorded as securities lending income for the Fund. The Fund also continues to receive income on the securities loaned, and any gain or loss in the market priced of securities loaned that may occur during the term of the loan. - -------------------------------------------------------------------------------- 110 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- Risks to the Fund in securities lending transactions are that the borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower. At October 31, 2004, the value of outstanding securities on loan and the value of collateral was as follows (in thousands):
MARKET VALUE OF FUND SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL - ---- ------------------ ------------------- --------------- Balanced................................ $ 79,233 $ -- $ 80,788 Large Cap Value......................... 39,044 -- 40,164 Large Cap Growth........................ 529 -- 543 Mid-Cap Value........................... 1,360 -- 1,381 Small Cap Value......................... 222,942 209 228,980 Emerging Markets........................ 3,073 -- 3,191 High Yield Bond......................... 50,163 -- 51,458 Enhanced Income......................... 16,671 -- 16,970 Intermediate Bond....................... 20,793 -- 21,149 Short Term Bond......................... 2,020 -- 2,061
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 and Liabilities. Income earned on these investments is reported as Income derived from securities lending in the Statements of Operations. Non-Cash collateral received by the Fund may not be sold or repledged; therefore, non-cash collateral is not included on the Fund's Schedule of Investments or Statement of Assets and Liabilities. 6. FUTURES CONTRACTS A summary of futures contracts at October 31, 2004 is as follows (in thousands):
MARKET UNREALIZED TYPE OF FUTURE EXPIRATION CONTRACTS VALUE APPRECIATION - -------------- ------------- --------- -------- ------------ BALANCED FUND: S&P 500 Index........................................... December 2004 152 $ 42,951 $343 Emini S&P 500 Index..................................... December 2004 97 5,482 29 -------- ---- TOTAL BALANCED FUND..................................... $ 48,433 $372 ======== ==== LARGE CAP VALUE FUND: S&P 500 Index........................................... December 2004 103 $ 29,105 $306 Emini S&P 500 Index..................................... December 2004 167 9,438 32 -------- ---- TOTAL LARGE CAP VALUE FUND.............................. $ 38,543 $338 ======== ==== LARGE CAP GROWTH FUND: Emini S&P 500 Index..................................... December 2004 10 $ 565 $ 4 -------- ---- TOTAL LARGE CAP GROWTH FUND............................. $ 565 $ 4 ======== ====
- -------------------------------------------------------------------------------- 111 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
MARKET UNREALIZED TYPE OF FUTURE EXPIRATION CONTRACTS VALUE APPRECIATION - -------------- ------------- --------- -------- ------------ MID-CAP VALUE FUND: S&P Mid-Cap 400 Index................................... December 2004 18 $ 5,425 $ 31 Emini S&P MidCap 400 Index.............................. December 2004 11 663 15 -------- ---- TOTAL MID-CAP VALUE FUND................................ $ 6,088 $ 46 ======== ==== SMALL CAP VALUE FUND: Russell 2000............................................ December 2004 517 $151,093 $ 39 -------- ---- TOTAL SMALL CAP VALUE FUND.............................. $151,093 $ 39 ======== ==== EMERGING MARKETS FUND: S&P 500 Index........................................... December 2004 13 $ 3,673 $ 2 Emini S&P 500 Index..................................... December 2004 144 8,138 92 -------- ---- TOTAL EMERGING MARKETS FUND............................. $ 11,811 $ 94 ======== ====
7. FOREIGN CURRENCY CONTRACTS In order to protect itself against foreign currency fluctuations, the Emerging Markets Fund has entered into forward contracts to deliver or receive foreign currency in exchange for U.S. dollars as described below. The Emerging Markets Fund 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 Emerging Market Fund also bears the credit risk if the counterparty fails to perform under the contract. At October 31, 2004, the Emerging Markets Fund had outstanding forward foreign currency contracts as follows:
SETTLEMENT UNREALIZED CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS) - -------------------- ---------- ------ ----------- (AMOUNTS IN THOUSANDS) 610 South African Rand.................................. 6/27/2005 $ 657 $(47) 396 South African Rand.................................. 7/22/2005 410 (14) ------ ---- TOTAL CONTRACTS TO DELIVER (Receivable amount $1,006)............................. $1,067 $(61) ====== ====
The Emerging Markets Fund may purchase securities with delivery or payment to occur at a later date. At the time the Emerging Markets Fund 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. - -------------------------------------------------------------------------------- 112 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- 8. CAPITAL SHARE TRANSACTIONS The tables below summarize the activity in capital shares for each Class of the Funds (in thousands): Period Ended October 31, 2004
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS ------------------- ------------------- ------------------ BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ------------- ------- -------- ------ --------- ------- -------- Shares sold....................................... 120 $ 1,646 943 $ 12,438 4,313 $ 57,449 Reinvestment of dividends......................... 16 211 28 351 1,225 15,797 Shares redeemed................................... (246) (3,383) (461) (6,099) (3,888) (51,664) ------ ------- ------ --------- ------- -------- Net increase (decrease) in shares outstanding..... (110) $(1,526) 510 $ 6,690 1,650 $ 21,582 ====== ======= ====== ========= ======= ========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS ------------------- ------------------- ------------------ LARGE CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- -------- ------ --------- ------- -------- Shares sold...................................... 1,678 $29,357 2,166 $ 36,511 4,775 $ 82,425 Reinvestment of dividends........................ 12 190 21 341 717 11,675 Shares redeemed.................................. (537) (9,282) (669) (11,207) (5,644) (97,128) ------ ------- ------ --------- ------- -------- Net increase (decrease) in shares outstanding.... 1,153 $20,265 1,518 $ 25,645 (152) $ (3,028) ====== ======= ====== ========= ======= ========
INSTITUTIONAL CLASS AMR CLASS -------------------- ------------------ LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT - --------------------- -------- -------- ------ -------- Shares sold..................................... -- $ -- 4,375 $ 25,454 Reinvestment of dividends....................... -- -- 27 151 Shares redeemed................................. -- -- (3,880) (22,559) ------ ------ ------ -------- Net increase in shares outstanding.............. -- $ -- 522 $ 3,046 ====== ====== ====== ========
INSTITUTIONAL CLASS ------------------- MID-CAP VALUE FUND SHARES AMOUNT - ------------------ ------- -------- Shares sold..................................... 2,646 $26,544 Reinvestment of dividends....................... -- -- Shares redeemed................................. (158) (1,560) ------ ------- Net increase in shares outstanding.............. 2,488 $24,984 ====== =======
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS -------------------- ------------------ ----------------- -------------------- SMALL CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------ -------- ------ ------- ------- --------- Shares sold............... 21,166 $380,848 23,536 $422,446 685 $12,179 8,593 $ 153,680 Reinvestment of dividends............... 143 2,425 136 2,259 -- -- 683 11,494 Shares redeemed........... (4,049) (72,693) (2,711) (47,684) (46) (819) (6,247) (109,653) ------ -------- ------ -------- ------ ------- ------- --------- Net increase in shares outstanding............. 17,260 $310,580 20,961 $377,021 639 $11,360 3,029 $ 55,521 ====== ======== ====== ======== ====== ======= ======= =========
- -------------------------------------------------------------------------------- 113 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS INTERNATIONAL EQUITY -------------------- ------------------- ---------------- ------------------- FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------ --------- ------ ------ ------- --------- Shares sold............... 15,750 $270,812 12,974 $ 218,345 43 $ 744 10,345 $ 180,445 Reinvestment of dividends............... 975 15,613 258 4,117 -- -- 568 9,135 Shares redeemed*.......... (7,712) (131,052) (7,839) (128,653) (3) (54) (6,917) (119,513) ------ -------- ------ --------- ------ ------ ------- --------- Net increase in shares outstanding............. 9,013 $155,373 5,393 $ 93,809 40 $ 690 3,996 $ 70,067 ====== ======== ====== ========= ====== ====== ======= =========
* Net of Redemption Fees
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ----------------- ----------------- EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - --------------------- -------- -------- ------ ------- ------- ------- Shares sold....................................... 254 $3,097 158 $ 1,907 3,200 $38,765 Reinvestment of dividends......................... 2 20 -- 3 37 415 Shares redeemed*.................................. (15) (170) (108) (1,304) (2,219) (25,975) ------ ------ ------ ------- ------- ------- Net increase in shares outstanding................ 241 $2,947 50 $ 606 1,018 $13,205 ====== ====== ====== ======= ======= =======
* Net of Redemption Fees
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS -------------------- ------------------ ---------------- HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- ------- --------- ------ -------- ------- ------ Shares sold....................................... 13,551 $144,793 6,516 $ 69,764 -- $ 3 Reinvestment of dividends......................... 1,211 12,997 786 8,426 -- -- Shares redeemed................................... (7,537) (80,955) (5,361) (57,514) -- -- ------ -------- ------ -------- ------- ------ Net increase in shares outstanding................ 7,225 $ 76,835 1,941 $ 20,676 -- $ 3 ====== ======== ====== ======== ======= ======
PLANAHEAD CLASS ------------------ ENHANCED INCOME FUND SHARES AMOUNT - -------------------- ------ -------- Shares sold...................................... 2,177 $ 21,940 Reinvestment of dividends........................ 217 2,192 Shares redeemed.................................. (2,316) (23,331) ------ -------- Net increase in shares outstanding............... 78 $ 801 ====== ========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ---------------- ------------------ INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - ---------------------- -------- -------- ------ ------ ------- -------- Shares sold....................................... 1 $ 13 13 $ 134 3,058 $ 31,418 Reinvestment of dividends......................... 3 33 4 42 494 5,071 Shares redeemed................................... (16) (168) (48) (491) (7,119) (72,765) ------ ------ ------ ------ ------- -------- Net decrease in shares outstanding................ (12) $ (122) (31) $ (315) (3,567) $(36,276) ====== ====== ====== ====== ======= ========
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS -------------------- ----------------- ------------------ SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT - -------------------- -------- -------- ------ ------- ------- -------- Shares sold....................................... 31 $ 282 1,029 $ 9,534 1,071 $ 9,815 Reinvestment of dividends......................... 15 140 32 293 456 4,193 Shares redeemed................................... (82) (755) (825) (7,622) (2,527) (23,268) ------ ------ ------ ------- ------- -------- Net increase (decrease) in shares outstanding..... (36) $ (333) 236 $ 2,205 (1,000) $ (9,260) ====== ====== ====== ======= ======= ========
- -------------------------------------------------------------------------------- 114 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- 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 ======= ========= ======= =========
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 ======= ========= ======= ======== ======= ========
- -------------------------------------------------------------------------------- 115 AMERICAN AADVANTAGE FUNDS NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
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) ======= ========= ======= ======== ======= ========
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 ======= ========= ======= =========== ======= =========
- -------------------------------------------------------------------------------- 116 (AMERICAN EAGLE LOGO) - -------------------------------------------------------------------------------- 117 AMERICAN AADVANTAGE BALANCED FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------------------ YEAR ENDED OCTOBER 31, ------------------------------------------------------ 2004 2003 2002 2001(D E G) 2000(B) ------ ------ ------ ----------- -------- Net asset value, beginning of period........................ $12.99 $10.97 $12.07 $ 12.27 $ 13.01 ------ ------ ------ -------- -------- Income from investment operations: Net investment income(A C).............................. 0.29 0.31(H) 0.11 0.51 0.58 Net gains (losses) on securities (both realized and unrealized)(C)........................................ 1.36 1.84(H) (0.69) (0.03) (0.03) ------ ------ ------ -------- -------- Total income (loss) from investment operations.............. 1.65 2.15 (0.58) 0.48 0.55 ------ ------ ------ -------- -------- Less distributions: Dividends from net investment income.................... (0.33) (0.13) (0.44) (0.68) (0.51) Distributions from net realized gains on securities..... -- -- (0.08) -- (0.78) ------ ------ ------ -------- -------- Total distributions......................................... (0.33) (0.13) (0.52) (0.68) (1.29) ------ ------ ------ -------- -------- Net asset value, end of period.............................. $14.31 $12.99 $10.97 $ 12.07 $ 12.27 ====== ====== ====== ======== ======== Total return................................................ 12.87% 19.77% (5.14)% 4.07% 5.13% ====== ====== ====== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $8,378 $9,041 $8,994 $157,775 $260,880 Ratios to average net assets (annualized): Expenses(C)........................................... 0.63% 0.63% 0.62% 0.62% 0.61% Net investment income(C).............................. 2.15% 2.74% 3.12% 3.56% 4.39% Portfolio turnover rate(F).............................. 62% 69% 84% 122% 121%
- --------------- (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. (H) For the year ended October 31, 2003, the net investment income and net gains (losses) on securities (both realized and unrealized) has been restated from 0.30 and 1.85, respectively for Institutional Class and 0.36 and 1.66, respectively for PlanAhead Class. - -------------------------------------------------------------------------------- 118 - --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS ------------------------------------------------------------- ---------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, ------------------------------------------------------------- ---------------------------- 2004 2003 2002 2001(D E G) 2000(B) 2004 2003 ------- ------- ------- ----------- ------- ----------- -------- $ 12.40 $ 10.81 $ 11.88 $ 12.08 $ 12.79 $ 12.60 $ 10.98 ------- ------- ------- ------- ------- -------- -------- 0.27 0.28(H) 0.41 0.51 0.53 0.32 0.34 1.25 1.74(H) (0.99) (0.06) -- 1.31 1.78 ------- ------- ------- ------- ------- -------- -------- 1.52 2.02 (0.58) 0.45 0.53 1.63 2.12 ------- ------- ------- ------- ------- -------- -------- (0.30) (0.43) (0.41) (0.65) (0.46) (0.36) (0.50) -- -- (0.08) -- (0.78) -- -- ------- ------- ------- ------- ------- -------- -------- (0.30) (0.43) (0.49) (0.65) (1.24) (0.36) (0.50) ------- ------- ------- ------- ------- -------- -------- $ 13.62 $ 12.40 $ 10.81 $ 11.88 $ 12.08 $ 13.87 $ 12.60 ======= ======= ======= ======= ======= ======== ======== 12.44% 19.36% (5.18)% 3.84% 4.88% 13.13% 20.06% ======= ======= ======= ======= ======= ======== ======== $21,571 $13,321 $10,561 $12,176 $11,643 $636,420 $557,612 0.93% 0.94% 0.90% 0.84% 0.90% 0.37% 0.38% 1.84% 2.40% 2.83% 3.29% 4.01% 2.40% 2.98% 62% 69% 84% 122% 121% 62% 69% AMR CLASS ------------------------------------- YEAR ENDED OCTOBER 31, ------------------------------------- 2002 2001(D E G) 2000(B) -------- ----------- -------- $ 12.06 $ 12.27 $ 13.02 -------- -------- -------- 0.48 0.56 0.61 (1.01) (0.05) (0.03) -------- -------- -------- (0.53) 0.51 0.58 -------- -------- -------- (0.47) (0.72) (0.55) (0.08) -- (0.78) -------- -------- -------- (0.55) (0.72) (1.33) -------- -------- -------- $ 10.98 $ 12.06 $ 12.27 ======== ======== ======== (4.71)% 4.38% 5.37% ======== ======== ======== $487,526 $526,405 $525,040 0.35% 0.36% 0.35% 3.39% 3.77% 4.54% 84% 122% 121%
- -------------------------------------------------------------------------------- 119 AMERICAN AADVANTAGE LARGE CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ----------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------- 2004 2003 2002 2001(B D) 2000(E) ------- ------- ------- --------- ------- Net asset value, beginning of period.............. $ 15.62 $ 12.55 $ 14.51 $ 15.83 $ 18.69 ------- ------- ------- ------- ------- Income from investment operations: Net investment income (loss)(A C).............. 0.26 0.25(G) 0.27 0.28 0.47 Net gains (losses) on securities (both realized and unrealized)(C)............................ 2.62 3.11(G) (1.76) (0.61) 0.06 ------- ------- ------- ------- ------- Total income (loss) from investment operations.... 2.88 3.36 (1.49) (0.33) 0.53 ------- ------- ------- ------- ------- Less distributions: Dividends from net investment income........... (0.27) (0.29) (0.30) (0.50) (0.34) Distributions from net realized gains on securities.................................... -- -- (0.17) (0.49) (3.05) ------- ------- ------- ------- ------- Total distributions............................... (0.27) (0.29) (0.47) (0.99) (3.39) ------- ------- ------- ------- ------- Net asset value, end of period.................... $ 18.23 $ 15.62 $ 12.55 $ 14.51 $ 15.83 ======= ======= ======= ======= ======= Total return...................................... 18.59% 27.30% (10.83)% (2.21)% 4.81% ======= ======= ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)....... $48,451 $23,512 $21,589 $10,081 $ 7,594 Ratios to average net assets (annualized): Expenses(C)................................... 0.66% 0.66% 0.61% 0.64% 0.53% Net investment income(C)...................... 1.49% 1.88% 1.82% 1.76% 3.71% Portfolio turnover rate(F)..................... 29% 27% 34% 60% 58%
- --------------- (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) Metropolitan West Capital Management, LLC replaced Independence Investment LLC as investment adviser to the Large Cap Value Fund on December 1, 2000. (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) For the year ended October 31, 2003, the net investment income and net gains (losses) on securities (both realized and unrealized) has been restated from 0.20 and 3.16, respectively for Institutional Class and 0.10 and 3.11, respectively for PlanAhead Class. - -------------------------------------------------------------------------------- 120 - --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS ------------------------------------------------- ----------------------------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, ------------------------------------------------- ----------------------------------------------------- 2004 2003 2002 2001(B D) 2000(E) 2004 2003 2002 2001(B D) 2000(E) ------- ------- ------- --------- ------- -------- -------- -------- --------- -------- $ 15.05 $ 12.09 $ 14.00 $ 15.40 $ 18.41 $ 15.44 $ 12.40 $ 14.34 $ 15.75 $ 18.77 ------- ------- ------- -------- ------- -------- -------- -------- -------- -------- 0.23 0.22(G) 0.25 0.26 0.60 0.30 0.29 0.31 0.34 0.65 2.49 2.99(G) (1.74) (0.62) (0.13) 2.58 3.06 (1.75) (0.63) (0.09) ------- ------- ------- -------- ------- -------- -------- -------- -------- -------- 2.72 3.21 (1.49) (0.36) 0.47 2.88 3.35 (1.44) (0.29) 0.56 ------- ------- ------- -------- ------- -------- -------- -------- -------- -------- (0.23) (0.25) (0.25) (0.55) (0.43) (0.30) (0.31) (0.33) (0.63) (0.53) -- -- (0.17) (0.49) (3.05) -- -- (0.17) (0.49) (3.05) ------- ------- ------- -------- ------- -------- -------- -------- -------- -------- (0.23) (0.25) (0.42) (1.04) (3.48) (0.30) (0.31) (0.50) (1.12) (3.58) ------- ------- ------- -------- ------- -------- -------- -------- -------- -------- $ 17.54 $ 15.05 $ 12.09 $ 14.00 $ 15.40 $ 18.02 $ 15.44 $ 12.40 $ 14.34 $ 15.75 ======= ======= ======= ======== ======= ======== ======== ======== ======== ======== 18.26% 26.99% (11.13)% (2.47)% 4.56% 18.89% 27.64% (10.62)% (1.98)% 5.08% ======= ======= ======= ======== ======= ======== ======== ======== ======== ======== $51,489 $21,331 $15,941 $ 12,280 $11,507 $696,206 $598,869 $511,287 $654,239 $737,111 0.94% 0.95% 0.93% 0.89% 0.84% 0.38% 0.39% 0.36% 0.36% 0.34% 1.21% 1.57% 1.53% 1.54% 2.51% 1.79% 2.13% 2.06% 2.09% 3.07% 29% 27% 34% 60% 58% 29% 27% 34% 60% 58%
- -------------------------------------------------------------------------------- 121 AMERICAN AADVANTAGE LARGE CAP GROWTH FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------------- YEAR ENDED OCTOBER 31, JULY 31 TO -------------------------------------- OCTOBER 31, 2004 2003 2002 2001 2000 ------ ------- ------- ------- ----------- Net asset value, beginning of period...................... $ 5.47 $ 4.53 $ 5.66 $ 9.54 $10.00 ------ ------- ------- ------- ------ Income from investment operations: Net investment income (loss)(A)....................... 0.02 0.02 0.03 (0.01) -- Net gains (losses) on securities (both realized and unrealized)(A)...................................... 0.35 0.94 (1.16) (3.86) (0.46) ------ ------- ------- ------- ------ Total income (loss) from investment operations............ 0.37 0.96 (1.13) (3.87) (0.46) ------ ------- ------- ------- ------ Less distributions: Dividends from net investment income.................. (0.02) (0.02) -- (0.01) -- ------ ------- ------- ------- ------ Total distributions....................................... (0.02) (0.02) -- (0.01) -- ------ ------- ------- ------- ------ Net asset value, end of period............................ $ 5.82 $ 5.47 $ 4.53 $ 5.66 $ 9.54 ====== ======= ======= ======= ====== Total return.............................................. 6.71% 21.15% (19.96)% (40.62)% (4.60)%(C) ====== ======= ======= ======= ====== Ratios and supplemental data: Net assets, end of period (in thousands).............. $ 1 $ 1 $ 1 $ 1 $ 1 Ratios to average net assets (annualized)(A): Expenses............................................ 0.84% 0.87% 0.87% 0.99% 0.99% Net investment income (loss)........................ 0.18% 0.18% 0.06% (0.26)% -- Decrease reflected in above expense ratio due to absorption of expenses by the Manager(A).......... 12.38% -- -- 0.02% 0.29% Portfolio turnover rate(B)............................ 131% 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. - -------------------------------------------------------------------------------- 122 - --------------------------------------------------------------------------------
AMR CLASS ------------------------------------------------------------- YEAR ENDED OCTOBER 31, JULY 31 TO --------------------------------------------- OCTOBER 31, 2004 2003 2002 2001 2000 ------- ------- ------- ------- ----------- $ 5.48 $ 4.54 $ 5.67 $ 9.55 $ 10.00 ------- ------- ------- ------- ------- 0.02 0.02 0.02 0.01 0.01 0.36 0.93 (1.14) (3.87) (0.46) ------- ------- ------- ------- ------- 0.38 0.95 (1.12) (3.86) (0.45) ------- ------- ------- ------- ------- (0.02) (0.01) (0.01) (0.02) -- ------- ------- ------- ------- ------- (0.02) (0.01) (0.01) (0.02) -- ------- ------- ------- ------- ------- $ 5.84 $ 5.48 $ 4.54 $ 5.67 $ 9.55 ======= ======= ======= ======= ======= 6.88% 21.09% (19.85)% (40.51)% (4.50)%(C) ======= ======= ======= ======= ======= $55,121 $48,926 $28,017 $23,804 $19,505 0.71% 0.68% 0.67% 0.70% 0.74% 0.34% 0.40% 0.30% 0.08% 0.25% -- -- -- 0.02% 0.14% 131% 138% 135% 85% 9%(C)
- -------------------------------------------------------------------------------- 123 AMERICAN AADVANTAGE MID-CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------- JUNE 30 TO OCTOBER 31, 2004 ------------------- Net asset value, beginning of period........................ $ 10.00 ------- Income from investment operations: Net investment income................................... 0.02(B) Net gains on securities (both realized and unrealized)............................................ 0.25 ------- Total income from investment operations..................... 0.27 ------- Less distributions: Dividends from net investment income.................... -- Distributions from net realized gains on securities..... -- ------- Total distributions......................................... -- ------- Net asset value, end of period.............................. $ 10.27 ======= Total return................................................ 2.70%(A) ======= Ratios and supplemental data: Net assets, end of period (in thousands)................ $25,546 Ratios to average net assets (annualized): Expenses.............................................. 1.14% Net investment income................................. 0.73% Decrease reflected in above expense ratio due to absorption of expenses by the Manager................ 0.20% Portfolio turnover rate................................. 6%(A)
- --------------- (A) Not annualized. (B) Based on average shares outstanding. - -------------------------------------------------------------------------------- 124 (AMERICAN EAGLE LOGO) - -------------------------------------------------------------------------------- 125 AMERICAN AADVANTAGE SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ----------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------- 2004(G) 2003(D) 2002 2001(C) 2000 -------- -------- ------- ------- ------- Net asset value, beginning of period....................... $ 16.21 $ 11.28 $ 11.69 $ 10.08 $ 9.07 -------- -------- ------- ------- ------- Income from investment operations: Net investment income (loss)(A)........................ 0.07 (0.01) (0.01) 0.16 0.21 Net gains on securities (both realized and unrealized)(A)....................................... 3.09 5.24 0.47 1.81 1.01 -------- -------- ------- ------- ------- Total income from investment operations.................... 3.16 5.23 0.46 1.97 1.22 -------- -------- ------- ------- ------- Less distributions: Dividends from net investment income................... (0.08) (0.02) (0.11) (0.19) (0.04) Distributions from net realized gains on securities.... (0.44) (0.28) (0.76) (0.17) (0.17) -------- -------- ------- ------- ------- Total distributions........................................ (0.52) (0.30) (0.87) (0.36) (0.21) -------- -------- ------- ------- ------- Net asset value, end of period............................. $ 18.85 $ 16.21 $ 11.28 $ 11.69 $ 10.08 ======== ======== ======= ======= ======= Total return............................................... 19.86% 47.45% 3.29% 20.16% 13.78% ======== ======== ======= ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)............... $429,540 $ 89,579 $21,936 $ 2,364 $ 1,955 Ratios to average net assets (annualized): Expenses(A).......................................... 0.89% 0.89% 0.82% 0.89% 0.92% Net investment income(loss)(A)....................... 0.57% 0.60% 0.81% 1.38% 1.62% Decrease reflected in above expense ratio due to absorption of expenses by the Manager(A)........... -- -- -- -- 0.06% Portfolio turnover rate(B)............................. 35% 75% 81% 93% 63%
- --------------- (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. (G) The Boston Company was added as an investment adviser to the Small Cap Value Fund on September 27, 2004. - -------------------------------------------------------------------------------- 126 - --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS AMR CLASS ------------------------------------------------ ------------------------- ---------------------- YEAR ENDED OCTOBER 31, YEAR ENDED MAY 1 TO YEAR ENDED OCTOBER 31, ------------------------------------------------ OCTOBER 31, OCTOBER 31, ---------------------- 2004(G) 2003(D) 2002 2001(C) 2000 2004(G) 2003(D) 2004(G) 2003(D) -------- ------- ------- ------- ------- ----------- ----------- ----------- -------- $ 15.95 $ 11.22 $ 11.64 $ 10.08 $ 9.05 $ 15.92 $ 11.88 $ 16.13 $ 11.30 -------- ------- ------- ------- ------- -------- --------- -------- -------- 0.08 0.05 0.06 0.15 0.08 0.01 -- 0.14 0.10 2.98 5.08 0.36 1.76 1.14 3.00 4.04 3.04 5.15 -------- ------- ------- ------- ------- -------- --------- -------- -------- 3.06 5.13 0.42 1.91 1.22 3.01 4.04 3.18 5.25 -------- ------- ------- ------- ------- -------- --------- -------- -------- (0.03) (0.12) (0.08) (0.18) (0.02) -- -- (0.09) (0.14) (0.44) (0.28) (0.76) (0.17) (0.17) (0.44) -- (0.44) (0.28) -------- ------- ------- ------- ------- -------- --------- -------- -------- (0.47) (0.40) (0.84) (0.35) (0.19) (0.44) -- (0.53) (0.42) -------- ------- ------- ------- ------- -------- --------- -------- -------- $ 18.54 $ 15.95 $ 11.22 $ 11.64 $ 10.08 $ 18.49 $ 15.92 $ 18.78 $ 16.13 ======== ======= ======= ======= ======= ======== ========= ======== ======== 19.56% 47.12% 2.99% 19.58% 13.76% 19.24% 34.01% 20.12% 47.93% ======== ======= ======= ======= ======= ======== ========= ======== ======== $466,364 $66,906 $16,190 $ 1,197 $ 440 $ 11,828 $ 1 $438,353 $327,542 1.15% 1.16% 1.11% 1.17% 1.18% 1.38% 1.49% 0.60% 0.61% 0.33% 0.39% 0.52% 1.06% 1.71% 0.17% (0.05)% 0.84% 0.95% -- -- -- -- 0.06% 0.31% 1,087.55% -- -- 35% 75% 81% 93% 63% 35% 75%(F) 35% 75% AMR CLASS ------------------------------ YEAR ENDED OCTOBER 31, ------------------------------ 2002 2001(C) 2000 -------- -------- -------- $ 11.71 $ 10.10 $ 9.08 -------- -------- -------- 0.15 0.15 0.22 0.34 1.85 1.04 -------- -------- -------- 0.49 2.00 1.26 -------- -------- -------- (0.14) (0.22) (0.07) (0.76) (0.17) (0.17) -------- -------- -------- (0.90) (0.39) (0.24) -------- -------- -------- $ 11.30 $ 11.71 $ 10.10 ======== ======== ======== 3.54% 20.52% 14.19% ======== ======== ======== $181,180 $137,811 $ 53,715 0.56% 0.64% 0.68% 1.09% 1.55% 1.89% -- -- 0.06% 81% 93% 63%
- -------------------------------------------------------------------------------- 127 AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------------------- 2004(B) 2003(F) 2002 2001(E) 2000 ---------- -------- -------- -------- -------- Net asset value, beginning of period........................ $ 15.46 $ 12.10 $ 13.77 $ 17.95 $ 19.36 ---------- -------- -------- -------- -------- Income from investment operations: Net investment income(A D).................................. 0.30 0.25 0.21 0.24 0.36 Net gains (losses) on securities (both realized and unrealized)(D).......................................... 3.12 3.47 (1.62) (2.96) 0.18 ---------- -------- -------- -------- -------- Total income (loss) from investment operations.............. 3.42 3.72 (1.41) (2.72) 0.54 ---------- -------- -------- -------- -------- Less distributions: Dividends from net investment income..................... (0.41) (0.36) (0.26) (0.22) (0.31) Distributions from net realized gains on securities...... -- -- -- (1.24) (1.64) ---------- -------- -------- -------- -------- Total distributions......................................... (0.41) (0.36) (0.26) (1.46) (1.95) ---------- -------- -------- -------- -------- Redemption fees added to beneficial interest................ --(I) --(I) -- -- -- ---------- -------- -------- -------- -------- Net asset value, end of period.............................. $ 18.47 $ 15.46 $ 12.10 $ 13.77 $ 17.95 ========== ======== ======== ======== ======== Total return................................................ 22.49% 31.61% (10.51)% (16.54)% 2.36% ========== ======== ======== ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................. $1,029,272 $722,333 $537,476 $519,151 $587,869 Ratios to average net assets (annualized): Expenses(D)............................................. 0.76% 0.79% 0.75% 0.78% 0.72% Net investment income(D)................................ 1.69% 1.97% 1.56% 1.54% 1.64% Decrease reflected in above expense ratio due to absorption of expenses by the Manager (D)............. -- -- -- -- -- Portfolio turnover rate(C)............................... 36% 44% 43% 36% 45%
- --------------- (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) The Boston Company was added as an investment adviser to the International Equity Fund on September 27, 2004. (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. (I) Amounts represent less than $0.01 per share. - -------------------------------------------------------------------------------- 128 - --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS -------------------------------------------------- ------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED MAY 1 TO -------------------------------------------------- OCTOBER 31, OCTOBER 31, 2004(B) 2003(F) 2002 2001(E) 2000 2004(B) 2003(F) -------- -------- ------- -------- ------- ----------- ----------- $ 15.34 $ 11.95 $ 13.58 $ 17.72 $ 19.13 $ 15.31 $ 12.18 -------- -------- ------- -------- ------- --------- ---------- 0.26 0.22 0.15 0.19 0.31 0.30 0.09 3.08 3.46 (1.56) (2.92) 0.18 2.99 3.04 -------- -------- ------- -------- ------- --------- ---------- 3.34 3.68 (1.41) (2.73) 0.49 3.29 3.13 -------- -------- ------- -------- ------- --------- ---------- (0.37) (0.29) (0.22) (0.17) (0.26) (0.36) -- -- -- -- (1.24) (1.64) -- -- -------- -------- ------- -------- ------- --------- ---------- (0.37) (0.29) (0.22) (1.41) (1.90) (0.36) -- -------- -------- ------- -------- ------- --------- ---------- --(I) --(I) -- -- -- --(I) --(I) -------- -------- ------- -------- ------- --------- ---------- $ 18.31 $ 15.34 $ 11.95 $ 13.58 $ 17.72 $ 18.24 $ 15.31 ======== ======== ======= ======== ======= ========= ========== 22.16% 31.62% (10.57)% (16.79)% 2.08% 21.88% 25.70%(G) ======== ======== ======= ======== ======= ========= ========== $310,540 $177,425 $99,636 $113,948 $85,680 $ 739 $ 1 1.02% 1.10% 1.04% 1.10% 1.01% 1.27% 1.50% 1.46% 1.68% 1.35% 1.22% 1.43% 0.81% 1.33% -- -- -- -- -- 4.99% 1,137.58% 36% 44% 43% 36% 45% 36% 44%(H) AMR CLASS ---------------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------------- 2004(B) 2003(F) 2002 2001(E) 2000 -------- -------- -------- -------- -------- $ 15.54 $ 12.18 $ 13.86 $ 18.07 $ 19.46 -------- -------- -------- -------- -------- 0.34 0.29 0.24 0.28 0.41 3.14 3.46 (1.62) (2.98) 0.20 -------- -------- -------- -------- -------- 3.48 3.75 (1.38) (2.70) 0.61 -------- -------- -------- -------- -------- (0.44) (0.39) (0.30) (0.27) (0.36) -- -- -- (1.24) (1.64) -------- -------- -------- -------- -------- (0.44) (0.39) (0.30) (1.51) (2.00) -------- -------- -------- -------- -------- --(I) --(I) -- -- -- -------- -------- -------- -------- -------- $ 18.58 $ 15.54 $ 12.18 $ 13.86 $ 18.07 ======== ======== ======== ======== ======== 22.84% 31.77% (10.26)% (16.35)% 2.69% ======== ======== ======== ======== ======== $460,114 $322,801 $264,579 $301,762 $428,329 0.49% 0.52% 0.49% 0.52% 0.46% 1.97% 2.22% 1.81% 1.78% 1.92% -- -- -- -- 36% 44% 43% 36% 45%
- -------------------------------------------------------------------------------- 129 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, 2004 2003 2002 2001 2000 ------- ------- ------ ------- ----------- Net asset value, beginning of period........................ $ 10.62 $ 7.20 $ 6.64 $ 8.17 $ 10.00 ------- ------- ------ ------- ------- Income from investment operations: Net investment income(A)................................ 0.07 0.04 0.09 0.11 -- Net gains (losses) on securities (both realized and unrealized)(A)........................................ 2.01 3.43 0.56 (1.62) (1.83) ------- ------- ------ ------- ------- Total income (loss) from investment operations.............. 2.08 3.47 0.65 (1.51) (1.83) ------- ------- ------ ------- ------- Less distributions: Dividends from net investment income.................... (0.06) (0.05) (0.09) (0.01) -- Distributions from net realized gains on securities..... -- -- -- (0.01) -- ------- ------- ------ ------- ------- Total distributions......................................... (0.06) (0.05) (0.09) (0.02) -- ------- ------- ------ ------- ------- Redemption fees added to beneficial interests(E) --(E) -- -- -- -- ------- ------- ------ ------- ------- Net asset value, end of period.............................. $ 12.64 $ 10.62 $ 7.20 $ 6.64 $ 8.17 ======= ======= ====== ======= ======= Total return................................................ 19.65% 48.45% 9.80% (18.52)% (18.30)%(C) ======= ======= ====== ======= ======= Ratios and supplemental data: Net assets, end of period (in thousands)................ $ 7,282 $ 3,557 $1,769 $ 1,495 $ 1 Ratios to average net assets (annualized): Expenses(A)........................................... 1.85% 1.76% 1.51% 1.43% 1.87% Net investment income (loss)(A)....................... 0.74% 0.62% 1.11% 2.07% (0.47)% Decrease reflected in above expense ratio due to absorption of expenses by the Manager............... -- -- -- -- -- Portfolio turnover rate(B).............................. 76% 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. (E) Amounts represent less than $0.01 per share. - -------------------------------------------------------------------------------- 130 - --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS - ------------------------------------- --------------------------------------------------- YEAR ENDED OCTOBER 31, OCTOBER 1 TO YEAR ENDED OCTOBER 31, JULY 31 TO ----------------- OCTOBER 31, ------------------------------------- OCTOBER 31, 2004 2003 2002 2004 2003 2002 2001 2000 ------- ------- ------------ ------- ------- ------- ------- ----------- $ 10.55 $ 7.19 $ 6.86 $ 10.66 $ 7.22 $ 6.65 $ 8.18 $ 10.00 ------- ------- ------ ------- ------- ------- ------- ------- 0.04 0.09 -- 0.10 0.07 0.09 0.13 -- 1.99 3.34 0.33 2.00 3.44 0.59 (1.63) (1.82) ------- ------- ------ ------- ------- ------- ------- ------- 2.03 3.43 0.33 2.10 3.51 0.68 (1.50) (1.82) ------- ------- ------ ------- ------- ------- ------- ------- (0.05) (0.07) -- (0.08) (0.07) (0.11) (0.02) -- -- -- -- -- -- -- (0.01) -- ------- ------- ------ ------- ------- ------- ------- ------- (0.05) (0.07) -- (0.08) (0.07) (0.11) (0.03) -- ------- ------- ------ ------- ------- ------- ------- ------- --(E) -- -- --(E) -- -- -- -- ------- ------- ------ ------- ------- ------- ------- ------- $ 12.53 $ 10.55 $ 7.19 $ 12.68 $ 10.66 $ 7.22 $ 6.65 $ 8.18 ======= ======= ====== ======= ======= ======= ======= ======= 19.33% 48.07% 4.81%(C) 20.00% 48.84% 10.10% (18.40)% (18.20)%(C) ======= ======= ====== ======= ======= ======= ======= ======= $ 1,214 $ 492 $ 1 $74,199 $51,498 $32,731 $20,660 $17,308 2.14% 2.08% 1.87% 1.59% 1.50% 1.26% 1.30% 1.60% 0.37% 0.57% (0.25)% 1.01% 0.92% 1.35% 1.76% (0.19)% 0.06% -- -- -- -- -- -- -- 76% 80% 94%(D) 76% 80%(C) 94% 95% 23%(C)
- -------------------------------------------------------------------------------- 131 AMERICAN AADVANTAGE HIGH YIELD BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ----------------------------------------------------- YEAR ENDED OCTOBER 31, DECEMBER 29, 2000 --------------------------------- TO OCTOBER 31, 2004 2003 2002 2001 -------- -------- -------- ----------------- Net asset value, beginning of period........................ $ 10.73 $ 9.63 $ 9.82 $ 10.00 -------- -------- -------- ------- Income from investment operations: Net investment income................................... 0.78 0.78 0.80 0.71 Net gains (losses) on securities (both realized and unrealized)........................................... 0.27 1.10 (0.19) (0.18) -------- -------- -------- ------- Total income from investment operations..................... 1.05 1.88 0.61 0.53 -------- -------- -------- ------- Less distributions: Dividends from net investment income.................... (0.78) (0.78) (0.80) (0.71) Distributions from net realized gains on securities..... (0.14) -- -- -- -------- -------- -------- ------- Total distributions......................................... (0.92) (0.78) (0.80) (0.71) -------- -------- -------- ------- Net asset value, end of period.............................. $ 10.86 $ 10.73 $ 9.63 $ 9.82 ======== ======== ======== ======= Total return................................................ 10.19% 20.11% 6.28% 5.33%(A) ======== ======== ======== ======= Ratios and supplemental data: Net assets, end of period (in thousands)................ $241,777 $161,380 $104,813 $53,275 Ratios to average net assets (annualized): Expenses.............................................. 0.88% 0.90% 0.90% 0.90% Net investment income................................. 7.27% 7.51% 8.02% 8.48% Decrease reflected in above expense ratio due to absorption of expenses by the Manager............... 0.04% 0.10% 0.08% 0.17% Portfolio turnover rate................................. 138% 114% 163% 145%(A)
- --------------- (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. - -------------------------------------------------------------------------------- 132 - --------------------------------------------------------------------------------
PLANAHEAD CLASS SERVICE CLASS - ------------------------------------- ------------------------- YEAR ENDED OCTOBER 31, MARCH 1 TO YEAR ENDED MAY 1 TO ------------------- OCTOBER 31, OCTOBER 31, OCTOBER 31, 2004 2003 2002 2004 2003 -------- -------- ----------- ----------- ----------- $ 10.73 $ 9.63 $10.10 $ 10.73 $ 10.47 -------- -------- ------ --------- -------- 0.74 0.75 0.50 0.71 0.29 0.28 1.10 (0.47) 0.27 0.26 -------- -------- ------ --------- -------- 1.02 1.85 0.03 0.98 0.55 -------- -------- ------ --------- -------- (0.74) (0.75) (0.50) (0.70) (0.29) (0.14) -- -- (0.14) -- -------- -------- ------ --------- -------- (0.88) (0.75) (0.50) (0.84) (0.29) -------- -------- ------ --------- -------- $ 10.87 $ 10.73 $ 9.63 $ 10.87 $ 10.73 ======== ======== ====== ========= ======== 9.94% 19.57% (0.26)%(A) 9.41% 5.46%(A) ======== ======== ====== ========= ======== $148,266 $125,654 $4,029 $ 4 $ 1 1.20% 1.24% 1.27% 1.57% 1.71% 6.95% 7.11% 7.20% 6.57% 6.51% -- -- -- 439.24% 805.12% 138% 114% 163%(B) 138% 114%(C)
- -------------------------------------------------------------------------------- 133 AMERICAN AADVANTAGE ENHANCED INCOME FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
PLANAHEAD CLASS ------------------------- YEAR ENDED JUNE 30 TO OCTOBER 31, OCTOBER 31, 2004 2003 ----------- ----------- Net asset value, beginning of period........................ $ 9.96 $ 10.00 -------- -------- Income from investment operations: Net investment income................................... 0.26 0.07(B) Net gains (losses) on securities (both realized and unrealized)............................................ 0.20 (0.04) -------- -------- Total income from investment operations..................... 0.46 0.03 -------- -------- Less distributions: Dividends from net investment income.................... (0.26) (0.07) Distributions from net realized gains on securities..... -- -- -------- -------- Total distributions......................................... (0.26) (0.07) -------- -------- Net asset value, end of period.............................. $ 10.16 $ 9.96 ======== ======== Total return................................................ 4.70% 0.32%(A) ======== ======== Ratios and supplemental data: Net assets, end of period (in thousands)................ $103,897 $101,072 Ratios to average net assets (annualized): Expenses.............................................. 1.00% 0.93% Net investment income................................. 2.54% 2.20% Portfolio turnover rate................................. 72% 57%(A)
- --------------- (A) Not annualized. (B) Based on average shares outstanding. - -------------------------------------------------------------------------------- 134 (AMERICAN EAGLE LOGO) - -------------------------------------------------------------------------------- 135 AMERICAN AADVANTAGE INTERMEDIATE BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ---------------------------------------------- YEAR ENDED OCTOBER 31, ---------------------------------------------- 2004 2003 2002 2001 2000 ------- ------- ------- ------- ------ Net asset value, beginning of period........................ $ 10.45 $ 10.42 $ 10.51 $ 9.72 $ 9.58 ------- ------- ------- ------- ------ Income from investment operations: Net investment income(A)................................ 0.37 0.41 0.51 0.57 0.59 Net gains (losses) on securities (both realized and unrealized)(A)........................................ 0.14 0.03 (0.09) 0.79 0.14 ------- ------- ------- ------- ------ Total income from investment operations..................... 0.51 0.44 0.42 1.36 0.73 ------- ------- ------- ------- ------ Less distributions: Dividends from net investment income.................... (0.42) (0.41) (0.51) (0.57) (0.59) Distributions from net realized gains on securities..... -- -- -- -- -- ------- ------- ------- ------- ------ Total distributions......................................... (0.42) (0.41) (0.51) (0.57) (0.59) ------- ------- ------- ------- ------ Net asset value, end of period.............................. $ 10.54 $ 10.45 $ 10.42 $ 10.51 $ 9.72 ======= ======= ======= ======= ====== Total return................................................ 4.90% 4.31% 4.21% 14.36% 7.89% ======= ======= ======= ======= ====== Ratios and supplemental data: Net assets, end of period (in thousands)................ $ 912 $ 1,024 $74,919 $60,842 $ 115 Ratios to average net assets (annualized): Expenses(A)........................................... 0.80% 0.58% 0.56% 0.54% 0.59% Net investment income(A).............................. 3.51% 4.02% 4.99% 5.55% 6.31% Decrease reflected in above expense ratio due to absorption of expenses by the Manager(A)............ -- -- -- -- -- Portfolio turnover rate(B).............................. 106% 187% 185% 164% 102%
- --------------- (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. - -------------------------------------------------------------------------------- 136 - --------------------------------------------------------------------------------
PLAN AHEAD CLASS AMR CLASS -------------------------------------------- -------------------------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, -------------------------------------------- -------------------------------------------------- 2004 2003 2002 2001 2000 2004 2003 2002 2001 2000 ------- ------ ------ ------- ------ -------- -------- -------- ------- ------- $ 10.31 $10.27 $10.34 $ 9.57 $ 9.63 $ 10.24 $ 10.22 $ 10.30 $ 9.53 $ 9.58 ------- ------ ------ ------- ------ -------- -------- -------- ------- ------- 0.35 0.39 0.48 0.53 0.59 0.40 0.45 0.53 0.58 0.64 0.14 0.04 (0.07) 0.77 (0.06) 0.14 0.02 (0.08) 0.77 (0.05) ------- ------ ------ ------- ------ -------- -------- -------- ------- ------- 0.49 0.43 0.41 1.30 0.53 0.54 0.47 0.45 1.35 0.59 ------- ------ ------ ------- ------ -------- -------- -------- ------- ------- (0.39) (0.39) (0.48) (0.53) (0.59) (0.45) (0.45) (0.53) (0.58) (0.64) -- -- -- -- -- -- -- -- -- -- ------- ------ ------ ------- ------ -------- -------- -------- ------- ------- (0.39) (0.39) (0.48) (0.53) (0.59) (0.45) (0.45) (0.53) (0.58) (0.64) ------- ------ ------ ------- ------ -------- -------- -------- ------- ------- $ 10.41 $10.31 $10.27 $ 10.34 $ 9.57 $ 10.33 $ 10.24 $ 10.22 $ 10.30 $ 9.53 ======= ====== ====== ======= ====== ======== ======== ======== ======= ======= 4.86% 4.25% 4.10% 13.91% 5.76% 5.38% 4.62% 4.57% 14.58% 6.39% ======= ====== ====== ======= ====== ======== ======== ======== ======= ======= $ 1,091 $1,395 $1,691 $ 300 $ 102 $ 96,242 $131,927 $144,098 $95,820 $40,555 0.92% 0.86% 0.86% 0.83% 0.87% 0.34% 0.32% 0.30% 0.30% 0.39% 3.39% 3.70% 4.60% 5.04% 6.07% 3.97% 4.32% 5.23% 5.84% 6.72% 0.01% -- -- 0.01% 0.02% -- -- -- -- -- 106% 187% 185% 164% 102% 106% 187% 185% 164% 102%
- -------------------------------------------------------------------------------- 137 AMERICAN AADVANTAGE SHORT-TERM BOND FUND FINANCIAL HIGHLIGHTS (For a share outstanding throughout the period) - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ----------------------------------------------------- YEAR ENDED OCTOBER 31, ----------------------------------------------------- 2004 2003 2002 2001 2000 ------ ------ ------ ------- ------ Net asset value, beginning of period........................ $ 9.32 $ 9.45 $ 9.62 $ 9.21 $ 9.30 ------ ------ ------ ------- ------ Income from investment operations: Net investment income(B)................................ 0.24 0.37 0.42 0.57 0.62 Net gains (losses) on securities (both realized and unrealized)(B)........................................ (0.03) (0.04) (0.11) 0.41 (0.10) ------ ------ ------ ------- ------ Total income from investment operations..................... 0.21 0.33 0.31 0.98 0.52 ------ ------ ------ ------- ------ Less distributions: Dividends from net investment income.................... (0.44) (0.46) (0.48) (0.57) (0.61) ------ ------ ------ ------- ------ Total distributions......................................... (0.44) (0.46) (0.48) (0.57) (0.61) ------ ------ ------ ------- ------ Net asset value, end of period.............................. $ 9.09 $ 9.32 $ 9.45 $ 9.62 $ 9.21 ====== ====== ====== ======= ====== Total return................................................ 2.21% 3.58% 3.37% 10.98% 5.83% ====== ====== ====== ======= ====== Ratios and supplemental data: Net assets, end of period (in thousands)................ $3,324 $3,745 $8,396 $ 4,226 $3,687 Ratios to average net assets (annualized): Expenses(B)........................................... 0.62% 0.54% 0.44% 0.51% 0.58% Net investment income(B).............................. 2.72% 4.30% 4.47% 6.06% 6.61% Decrease reflected in above expense ratio due to absorption of expenses by the Manager(B)............ -- -- -- -- -- Portfolio turnover rate(A).............................. 41% 81% 63% 104% 89%
- --------------- (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. - -------------------------------------------------------------------------------- 138 - --------------------------------------------------------------------------------
PLANAHEAD CLASS AMR CLASS - ----------------------------------------------------- ------------------------------------------------------- YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31, - ----------------------------------------------------- ------------------------------------------------------- 2004 2003 2002 2001 2000 2004 2003 2002 2001 2000 - ------- ------ ------ ------- ------ ------- ------- ------- ------- ------- $ 9.33 $ 9.45 $ 9.62 $ 9.21 $ 9.30 $ 9.31 $ 9.44 $ 9.60 $ 9.20 $ 9.29 - ------- ------ ------ ------- ------ ------- ------- ------- ------- ------- 0.25 0.39 0.43 0.55 0.59 0.27 0.42 0.44 0.59 0.63 ) (0.07 (0.08) (0.14) 0.41 (0.09) (0.05) (0.07) (0.11) 0.40 (0.09) - ------- ------ ------ ------- ------ ------- ------- ------- ------- ------- 0.18 0.31 0.29 0.96 0.50 0.22 0.35 0.33 0.99 0.54 - ------- ------ ------ ------- ------ ------- ------- ------- ------- ------- (0.42) (0.43) (0.46) (0.55) (0.59) (0.46) (0.48) (0.49) (0.59) (0.63) - ------- ------ ------ ------- ------ ------- ------- ------- ------- (0.42) (0.43) (0.46) (0.55) (0.59) (0.46) (0.48) (0.49) (0.59) (0.63) - ------- ------ ------ ------- ------ ------- ------- ------- ------- ------- $ 9.09 $ 9.33 $ 9.45 $ 9.62 $ 9.21 $ 9.07 $ 9.31 $ 9.44 $ 9.60 $ 9.38 ======= ====== ====== ======= ====== ======= ======= ======= ======= ======= 1.84% 3.38% 3.16% 10.69% 5.56% 2.39% 3.82% 3.60% 11.07% 6.09% ======= ====== ====== ======= ====== ======= ======= ======= ======= ======= $ 7,781 $5,783 $3,520 $ 1,257 $ 489 $80,504 $91,911 $89,932 $81,370 $56,714 0.87% 0.86% 0.73% 0.75% 0.84% 0.33% 0.33% 0.30% 0.33% 0.33% 2.44% 4.00% 4.16% 5.76% 6.29% 3.00% 4.54% 4.63% 6.26% 6.88% -- -- 0.04% -- 0.10% -- -- -- -- -- 41% 81% 63% 104% 89% 41% 81% 63% 104% 89%
- -------------------------------------------------------------------------------- 139 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees of AMR Investment Services International Equity Portfolio We have audited the accompanying statement of assets and liabilities of the AMR Investment Services International Equity Portfolio (the "Portfolio"), including the schedule of investments, as of October 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period 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 the standards of the Public Company Accounting Oversight Board (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. Our procedures included confirmation of investments owned as of October 31, 2004, by correspondence with the custodian and brokers or by 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 audit provides 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, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. -s- Ernst & Young Chicago, Illinois December 17, 2004 - -------------------------------------------------------------------------------- 140 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) STOCKS - 91.38% AUSTRALIA - 1.36% AUSTRALIA PREFERRED STOCK - 0.30% AMP Limited+................. 555,210 $ 2,648 The News Corporation+........ 379,160 2,981 ---------- TOTAL AUSTRALIA PREFERRED STOCK.................. 5,629 ---------- AUSTRALIA COMMON STOCK - 1.06% Alumina Limited+............. 926,340 3,815 Commonwealth Bank of Australia+................. 204,190 4,908 National Australia Bank+..... 308,420 6,529 WMC Resources Limited+....... 926,350 4,682 ---------- TOTAL AUSTRALIA COMMON STOCK.................. 19,934 ---------- TOTAL AUSTRALIA.......... 25,563 ---------- CANADA COMMON STOCK - 2.25% Alcan, Incorporated*......... 176,341 8,159 BCE, Incorporated*........... 299,790 6,964 Celestica, Incorporated+*.... 741,600 10,772 Husky Energy, Incorporated+*............. 206,270 5,420 Manulife Financial Corporation*............... 234,865 10,969 ---------- TOTAL CANADA COMMON STOCK.................. 42,284 ---------- DENMARK COMMON STOCK - 0.10% Vestas Wind Systems+*........ 147,226 1,832 ---------- TOTAL DENMARK COMMON STOCK.................. 1,832 ---------- FINLAND COMMON STOCK - 1.50% KCI Konecranes Oyj........... 105,880 4,231 M-real Oyj*.................. 432,830 2,686 Nokia Oyj.................... 178,900 2,768 Stora Enso Oyj............... 739,600 10,591 UPM-Kymmene Oyj.............. 401,810 7,970 ---------- TOTAL FINLAND COMMON STOCK.................. 28,246 ---------- FRANCE COMMON STOCK - 9.24% Accor S.A.*.................. 82,880 3,451 AXA+*........................ 914,015 19,732 BNP Paribas S.A.+*........... 131,268 8,962 Carrefour S.A.*.............. 192,190 8,443 Compagnie Generale des Etablissements Michelin*... 97,210 5,306 Credit Agricole S.A.+........ 407,354 11,974 France Telecom S.A.+......... 430,660 12,367 Lagardere S.C.A.*............ 84,200 5,441 Sanofi-Synthelabo*........... 546,127 40,046 Schneider Electric S.A. ..... 36,300 2,411
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Societe BIC S.A.+*........... 54,527 $ 2,536 Suez S.A.+*.................. 244,630 5,735 Thomson S.A.*................ 109,900 2,495 Total S.A.*.................. 151,459 31,593 Vinci S.A.*.................. 112,520 13,442 ---------- TOTAL FRANCE COMMON STOCK.................. 173,934 ---------- GREECE COMMON STOCK - 0.10% Hellenic Telecommunications Organization SA............ 116,500 1,810 ---------- TOTAL GREECE COMMON STOCK.................. 1,810 ---------- GERMANY - 7.72% GERMANY PREFERRED STOCK - 2.51% Depfa Bank plc+.............. 541,037 8,308 Deutsche Postbank AG+........ 39,400 1,572 Deutsche Telekom+*........... 733,000 14,089 Fresenius Medical Care AG.... 118,569 6,490 Heidelberger Druck+*......... 235,032 6,770 Karstadt Quelle AG*.......... 159,800 1,818 Schering AG*................. 128,800 8,306 ---------- TOTAL GERMANY PREFERRED STOCK.................. 47,353 ---------- GERMANY COMMON STOCK - 5.21% BASF AG+..................... 254,420 15,921 Bayer AG*.................... 157,500 4,476 Celesio AG*.................. 135,245 9,836 Deutsche Post AG............. 507,760 9,955 E.ON AG+*.................... 270,060 22,042 Merck KGaA................... 88,460 4,944 Muenchener Rueckversicherung- Gesellschaft AG+*.......... 22,397 2,198 Porsche AG+.................. 4,500 2,873 Siemens AG*.................. 118,800 8,871 Volkswagen AG*............... 382,880 17,061 ---------- TOTAL GERMANY COMMON STOCK.................. 98,177 ---------- TOTAL GERMANY............ 145,530 ---------- HONG KONG COMMON STOCK - 1.18% Cheung Kong Holdings Limited+................... 584,000 4,839 Henderson Land Development Company Limited+*.......... 1,990,000 9,255 Hutchison Whampoa Limited+... 195,000 1,503 Swire Pacific Limited+....... 937,500 6,655 ---------- TOTAL HONG KONG COMMON STOCK.................. 22,252 ----------
See accompanying notes - -------------------------------------------------------------------------------- 141 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) IRELAND COMMON STOCK - 2.31% Allied Irish Banks plc....... 969,535 $ 16,966 Bank of Ireland.............. 932,700 12,831 CRH plc...................... 573,695 13,754 ---------- TOTAL IRELAND COMMON STOCK.................. 43,551 ---------- ITALY COMMON STOCK - 2.70% Enel S.p.A.+*................ 985,860 8,945 Eni S.p.A.+*................. 901,857 20,543 Finmeccanica S.p.A........... 4,065,700 3,241 Riunione Adriatica di Sicurta S.p.A.*.................... 211,223 4,476 SanPaolo IMI S.p.A. ......... 199,600 2,539 Telecom Italia S.p.A.+*...... 1,363,949 4,556 T.E.R.N.A.+*................. 1,283,500 3,137 UniCredito Italiano S.p.A. .................... 615,800 3,318 ---------- TOTAL ITALY COMMON STOCK.................. 50,755 ---------- JAPAN COMMON STOCK - 12.35% Acom Company Limited+........ 165,680 10,411 Aiful Corporation+........... 25,500 2,549 Alps Electric Company Limited+................... 178,000 2,148 Canon, Incorporated+......... 267,800 13,235 Credit Saison Company Limited+................... 87,000 2,787 DENSO Corporation+........... 105,500 2,532 East Japan Railway Company+.. 1,724 9,074 FANUC Limited+............... 140,000 8,467 Hitachi Limited+............. 574,000 3,618 Honda Motor Company Limited+................... 296,800 14,360 Kao Corporation+............. 66,000 1,525 Komatsu Limited+............. 764,000 5,119 Konica Corporation+.......... 645,340 8,623 Kuraray Company Limited+..... 184,000 1,440 Minebea Company Limited+..... 685,000 2,913 Mitsubishi Estate Company Limited+................... 698,000 7,381 Murata Manufacturing Company Limited+................... 45,700 2,181 NEC Corporation+*............ 409,000 2,273 NEC Electronics Corporation+*.............. 78,900 3,862 Nintendo Company Limited+.... 44,700 5,052 Nippon Express Company+...... 518,000 2,501 Nippon Telegraph & Telephone Corporation+............... 1,224 5,205 Nissan Motor Company Limited+*.................. 1,025,300 11,578 Nomura Holdings, Incorporated+.............. 1,007,000 12,370 NTT DoCoMo, Incorporated+.... 3,675 6,494
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Promise Company Limited+..... 172,600 $ 10,993 Seiko Epson Corporation+*.... 121,400 5,025 Sekisui House Limited+....... 222,000 2,295 Shin-Etsu Chemical Company Limited+................... 297,200 11,318 Shiseido Company Limited+.... 108,000 1,411 Sompo Japan Insurance, Incorporated+.............. 529,000 4,619 Sony Corporation+*........... 146,500 5,108 Sumitomo Chemical Company Limited+................... 697,000 3,385 Sumitomo Trust and Banking Company Limited+........... 848,000 4,952 Takeda Chemical Industries Limited+................... 231,600 11,205 Takefuji Corporation+*....... 166,970 10,571 Tokyo Gas Company Limited+*.................. 2,364,000 8,824 Yamanouchi Pharm+*........... 139,700 5,135 ---------- TOTAL JAPAN COMMON STOCK.................. 232,539 ---------- MEXICO COMMON STOCK - 0.20% Telefonos de Mexico S.A. de C.V., ADR.................. 111,700 3,825 ---------- TOTAL MEXICO COMMON STOCK.................. 3,825 ---------- NETHERLANDS COMMON STOCK - 6.42% ABN AMRO Holding N.V. ....... 358,336 8,598 CNH Global N.V.+............. 50,780 866 Fortis Bank N.V.+............ 116,100 2,964 Heineken N.V.+*.............. 162,615 5,128 IHC Caland N.V. ............. 64,180 3,687 ING Groep N.V.+.............. 822,724 21,846 Koninklijke (Royal) Philips Electronics N.V. .......... 1,248,608 29,640 Royal Dutch Petroleum Company+*.................. 440,090 23,986 TPG N.V.+.................... 468,331 11,351 Unilever N.V.*............... 48,830 2,849 Vedior N.V. ................. 521,236 7,684 Wolters Kluwer N.V. ......... 125,100 2,288 ---------- TOTAL NETHERLANDS COMMON STOCK.................. 120,887 ---------- NEW ZEALAND COMMON STOCK - 0.67% Carter Holt Harvey Limited+................... 1,750,417 2,576 Telecom Corporation of New Zealand Limited+........... 2,537,881 10,025 ---------- TOTAL NEW ZEALAND COMMON STOCK.................. 12,601 ---------- NORWAY COMMON STOCK - 1.29% DnB NOR ASA*................. 382,600 3,249 Norsk Hydro ASA*............. 55,150 4,068
See accompanying notes - -------------------------------------------------------------------------------- 142 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Statoil ASA+*................ 441,900 $ 6,411 Telenor ASA*................. 1,321,510 10,547 ---------- TOTAL NORWAY COMMON STOCK.................. 24,275 ---------- PORTUGAL COMMON STOCK - 1.00% Portugal Telecom, SGPS, S.A.*...................... 1,665,443 18,819 ---------- TOTAL PORTUGAL COMMON STOCK.................. 18,819 ---------- SINGAPORE COMMON STOCK - 1.59% Creative Technology Limited+................... 659,320 7,454 Development Bank of Singapore Group Holdings Limited+.... 860,795 8,075 Oversea-Chinese Banking Corporation Limited+....... 1,085,650 9,009 United Overseas Bank Limited+................... 659,000 5,350 ---------- TOTAL SINGAPORE COMMON STOCK.................. 29,888 ---------- SOUTH KOREA COMMON STOCK - 0.58% Kookmin Bank, ADR,+*......... 140,510 4,725 Korea Electric Power Corporation+............... 86,860 1,796 LG Electronics, Incorporated+.............. 76,760 4,333 ---------- TOTAL SOUTH KOREA COMMON STOCK.................. 10,854 ---------- SPAIN COMMON STOCK - 4.38% Altadis S.A.*................ 472,842 17,409 Amadeus Global Travel Distribution*.............. 1,460,356 12,016 Banco Popular Espanol S.A.*.. 99,140 5,643 Enagas S.A.+*................ 749,993 9,502 Endesa S.A.+................. 112,500 2,291 Iberdrola S.A.*.............. 236,477 5,193 Repsol YPF S.A.+*............ 267,740 5,821 Telefonica S.A.+............. 1,481,192 24,528 ---------- TOTAL SPAIN COMMON STOCK.................. 82,403 ---------- SWEDEN COMMON STOCK - 2.25% Atlas Copco AB............... 154,260 6,401 Autoliv, Incorporated+*...... 147,500 6,277 Electrolux AB................ 212,450 3,950 ForeningsSparbanken AB....... 136,170 2,869 Nordea AB+................... 604,280 5,251 Securitas AB................. 293,980 4,032 Stora Enso Oyj, Series A..... 66,662 957 Stora Enso Oyj, Series R..... 209,182 3,002
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) TDC A/S+..................... 109,240 $ 4,054 Volvo AB..................... 148,990 5,656 ---------- TOTAL SWEDEN COMMON STOCK.................. 42,449 ---------- SWITZERLAND COMMON STOCK - 5.74% Adecco SA+................... 135,420 6,539 Clariant AG+................. 172,100 2,335 Compagnie Financiere Richemont AG+.............. 191,300 5,440 Credit Suisse Group+......... 565,978 19,413 Geberit AG................... 7,542 4,927 Lonza Group AG+.............. 111,740 5,475 Nestle SA+................... 35,500 8,422 Novartis AG+................. 253,272 12,113 SIG Holding AG+.............. 30,538 5,730 Swiss Reinsurance+........... 268,320 16,519 Syngenta AG+................. 70,009 6,697 UBS AG+...................... 64,080 4,632 Zurich Financial Services AG+........................ 68,889 9,838 ---------- TOTAL SWITZERLAND COMMON STOCK.................. 108,080 ---------- UNITED KINGDOM COMMON STOCK - 26.45% Abbey National plc........... 583,044 6,772 Alliance Unichem plc......... 385,550 4,722 AMVESCAP plc................. 353,530 1,917 Arriva plc................... 277,374 2,291 Aviva plc.................... 920,993 9,224 BAA plc...................... 805,468 8,489 BAE Systems plc+............. 4,933,847 21,603 Barclays plc................. 1,434,500 14,025 BHP Billiton plc............. 863,049 8,779 BOC Group.................... 487,200 7,852 BP plc....................... 1,680,430 16,290 Brambles Industries plc...... 700,641 3,386 British American Tobacco Industries plc............. 700,293 10,553 British Sky Broadcasting Group plc.................. 281,160 2,627 BT Group plc+................ 2,452,479 8,372 Cadbury Schweppes plc........ 2,070,435 17,217 Compass Group plc............ 980,870 4,056 Diageo plc................... 2,012,665 26,946 Emap plc..................... 226,000 3,265 FirstGroup plc............... 1,095,787 5,790 GKN plc...................... 648,200 2,546 GlaxoSmithKline plc+......... 1,840,803 38,802 Hanson plc................... 922,955 6,819 HSBC Holdings plc............ 1,319,365 21,325 Imperial Tobacco Group plc... 337,840 7,897 Kesa Electricals plc......... 507,200 2,535 Kidde plc.................... 1,846,650 5,701 Kingfisher plc............... 1,672,439 9,290
See accompanying notes - -------------------------------------------------------------------------------- 143 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO SCHEDULE OF INVESTMENTS -- CONTINUED October 31, 2004 - --------------------------------------------------------------------------------
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Lloyds TSB Group plc......... 1,543,392 $ 12,225 Marks and Spencer Group plc+....................... 396,100 2,613 National Grid Transco plc.... 529,870 4,611 Pearson plc.................. 398,540 4,380 Prudential plc............... 1,154,100 8,494 Prudential plc, Rights+...... 192,350 325 Reed Elsevier plc+........... 962,560 8,606 Rentokil Initial plc......... 3,256,460 9,276 Reuters Group plc+........... 1,384,576 9,434 Rio Tinto plc................ 192,400 5,035 Rolls-Royce plc.............. 1,062,190 5,061 Rolls-Royce Group plc, B Shares+.................... 33,777,642 62 Royal Bank of Scotland Group plc........................ 1,008,658 29,751 J. Sainsbury plc+............ 544,500 2,579 Shell Transport & Trading Company plc................ 2,909,101 22,922 Shire Pharmaceuticals Group plc........................ 355,980 3,394 Smiths Group plc*............ 550,570 7,543 Standard Chartered plc....... 173,680 3,107 TI Automotive(+)............. 681,500 -- Unilever plc................. 2,773,934 23,399 Vodafone Group plc........... 15,507,967 39,757
SHARES VALUE ------------ ---------- (DOLLARS IN THOUSANDS) Wolseley plc................. 497,583 $ 8,605 WPP Group plc................ 296,000 2,973 Yell Group plc............... 724,190 4,871 ---------- TOTAL UNITED KINGDOM COMMON STOCK........... 498,114 ---------- TOTAL STOCKS............. 1,720,491 ---------- SHORT TERM INVESTMENTS - 26.90% American AAdvantage Money Market Select Fund (Notes A and B)..................... 258,586,572 258,587 AMR Investments Enhanced Cash Business Trust (Notes A and B)......................... 248,093,891 248,094 ---------- TOTAL SHORT TERM INVESTMENTS............ 506,681 ---------- TOTAL INVESTMENTS - 118.28% (COST $1,911,193).......... 2,227,172 ---------- LIABILITIES, NET OF OTHER ASSETS - (18.28%).......... (344,171) ---------- TOTAL NET ASSETS - 100%...... $1,883,001 ==========
- --------------- (A) The Fund/Trust is affiliated by having the same investment advisor. See Note 2. (B) All or a portion of this security is purchased with cash collateral for securities loaned. * - All or a portion of the security is on loan at October 31, 2004. See Note 5. + - Non-income producing security. (+) - Valued at fair value pursuant to procedures approved by the Board of Trustees. See accompanying notes - -------------------------------------------------------------------------------- 144 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO INTERNATIONAL EQUITY INDUSTRY DIVERSIFICATION October 31, 2004 - --------------------------------------------------------------------------------
PERCENT OF NET ASSETS ---------- Consumer Discretionary...................................... 10.63% Consumer Staples............................................ 7.10% Energy...................................................... 7.28% Financials.................................................. 23.39% Health Care................................................. 7.70% Industrials................................................. 12.19% Information Technology...................................... 2.83% Materials................................................... 7.31% Short-Term Investments...................................... 26.92% Telecommunications Services................................. 9.10% Utilities................................................... 3.83% Liabilities, Net of Other Assets............................ (18.28%) ------- 100.00% =======
See accompanying notes - -------------------------------------------------------------------------------- 145 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES October 31, 2004 (in thousands) - -------------------------------------------------------------------------------- ASSETS: Investments in unaffiliated securities, at value(A C)... $1,720,491 Investments in affiliated securities, at value(B)....... 506,681 Deposit with broker for futures contracts............... 13,764 Cash denominated in foreign currency (cost $454)........ 464 Unrealized appreciation on foreign currency contracts... 4,206 Dividends and interest receivable....................... 2,430 Reclaims receivable..................................... 136 Receivable for investments sold......................... 13,539 ---------- TOTAL ASSETS........................................ 2,261,711 ---------- LIABILITIES: Payable for investments purchased....................... 534 Payable upon return of securities loaned................ 375,950 Payable for variation margin on open futures contracts.............................................. 249 Management and investment advisory fees payable (Note 2)..................................................... 1,530 Other liabilities....................................... 447 ---------- TOTAL LIABILITIES................................... 378,710 ---------- NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $1,883,001 ========== - --------------- (A) Cost of unaffiliated securities......................... $1,404,512 (B) Cost of affiliated securities........................... $ 506,681 (C) Market value of securities on loan...................... $ 357,879
STATEMENT OF OPERATIONS Year ended October 31, 2004 (in thousands) - -------------------------------------------------------------------------------- INVESTMENT INCOME: Interest income......................................... $ 175 Dividend income from unaffiliated securities (net of foreign taxes of $5,861)............................... 34,987 Dividend income from affiliated securities.............. 1,206 Income derived from commission recapture (Note 6)....... 451 Income derived from securities lending, net (Note 5).... 1,621 -------- TOTAL INVESTMENT INCOME............................. 38,440 -------- EXPENSES: Management and investment advisory fees (Note 2)........ 5,341 Custodian fees.......................................... 1,751 Professional fees....................................... 91 Other expenses.......................................... 19 -------- TOTAL EXPENSES...................................... 7,202 -------- NET INVESTMENT INCOME....................................... 31,238 -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on: Investments........................................... 39,925 Foreign currency transactions......................... 67,072 Futures contracts..................................... 10,760 Change in net unrealized appreciation or depreciation of: Investments........................................... 114,562 Foreign currency contracts and translations........... (669) Futures contracts..................................... 48,245 -------- NET GAIN ON INVESTMENTS............................. 279,895 -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $311,133 ========
See accompanying notes - -------------------------------------------------------------------------------- 146 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, ----------------------- 2004 2003 ---------- ---------- (IN THOUSANDS) INCREASE IN NET ASSETS: OPERATIONS: Net investment income................................... $ 31,238 $ 23,975 Net realized gain (loss) on investments, futures contracts and foreign currency transactions............ 117,757 (15,701) Change in net unrealized appreciation or depreciation of investments, futures contracts and foreign currency translations........................................... 162,138 306,719 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.......................................... 311,133 314,993 ---------- ---------- TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS: Contributions........................................... 676,161 571,390 Withdrawals............................................. (387,228) (552,053) ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS..... 288,933 19,337 ---------- ---------- NET INCREASE IN NET ASSETS.................................. 600,066 334,330 ---------- ---------- NET ASSETS: Beginning of period..................................... 1,282,935 948,605 ---------- ---------- END OF PERIOD........................................... $1,883,001 $1,282,935 ========== ========== - ------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS: - -------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, ----------------------------------------- 2004 2003 2002 2001 2000 ------ ------ ------- ----- ----- TOTAL RETURN................................................ 22.85% 31.97% (10.25%) N/A N/A RATIOS TO AVERAGE NET ASSETS: Expenses................................................ 0.46% 0.49% 0.47% 0.49% 0.44% Net investment income................................... 1.99% 2.26% 1.86% 1.82% 1.93% PORTFOLIO TURNOVER RATE..................................... 36% 44% 43% 36% 45%
See accompanying notes - -------------------------------------------------------------------------------- 147 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS October 31, 2004 - -------------------------------------------------------------------------------- 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. Over-the-counter equity securities are valued on the basis of the last bid price on that date prior to the close of trading. Portfolio securities traded in foreign markets are valued using prices reported by local foreign markets. Securities for which quotations are not readily available, or securities which may have been affected by a significant event after the price was determined, and other assets are valued at a fair value as determined by or under the direction of pricing committees established by the Trust's Board. The Funds' net asset values are determined at the time of the close of the New York Stock Exchange. The pricing committees will evaluate movements in the U.S. markets after the close of foreign markets and may adjust security prices to reflect changes in reaction to U.S. markets as determined by a third party model. 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. When a price is unavailable from a pricing service or when the price provided by the pricing service is deemed not to represent fair value, 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. - -------------------------------------------------------------------------------- 148 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- 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. 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 $1,421,368 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 mean of the bid and ask prices 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. The primary risks associated with the use of futures contracts are the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations. Upon entering into a futures contract, the Fund is required to set aside or deposit with a broker an amount, termed the initial margin, which typically represents 5% of the face value of the futures contract. The initial margin amount is reflected as Deposit with broker for futures contracts on the Statement of Assets and Liabilities. Payments to and from the broker, known as variation margin, are required to be made on a daily basis as the price of the futures contract fluctuates. Changes in initial settlement values are accounted for as unrealized appreciation (depreciation) until the contracts are - -------------------------------------------------------------------------------- 149 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- terminated, at which time realized gains and losses are recognized. 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. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. Other Under the Trust's organizational documents, its officers and directors are indemnified against certain liability arising out of the performance of their duties to the Trust. In the normal course of business, the Portfolio enters into contracts that provide indemnification to the other party or parties against potential costs or liabilities. The Portfolio's maximum exposure under these arrangements is dependent on claims that may be made in the future and, therefore, cannot be estimated. The Portfolio has had no prior claims or losses pursuant to any such agreement. 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 advisers 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 ADVISERS MANAGER ---------- ---------- --------------- ----------- International Equity Portfolio..................... .25%-.60% $5,341 $3,769 $1,572
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 - -------------------------------------------------------------------------------- 150 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- than cash, a fee up to 25% of such loan fees. During the year ended October 31, 2004, the Portfolio paid securities lending fees of $247,000 to the Manager. Investment in Affiliated Funds The Portfolio is permitted, pursuant to an exemptive order by the Securities and Exchange Commission ("SEC") and approved procedures by the Board, to invest up to 25% of its total assets in the American AAdvantage Money Market Select Fund (the "Select Fund"), an affiliated fund. The Portfolio and the Select Fund have the same investment adviser and therefore, are considered to be affiliated. Cash collateral received by the Portfolio in connection with securities lending may be invested in the Select Fund and the AMR Investments Enhanced Cash Business Trust (collectively, the "Affiliated Funds"). The Manager serves as Trustee and investment adviser to the Affiliated Funds and receives an annualized fee equal to 0.10% of the average daily net assets of the Affiliated Funds. During the period, the Manager earned fees from the Affiliated Funds totaling $100,411 on the Portfolio's direct investment in the Affiliated Funds, and $310,232 from securities lending collateral invested in the Affiliated Funds. At October 31, 2003, the Portfolio had a balance in the Select Fund of $81,729,913. During the period, the Fund had purchases of $1,004,949,679 and sales of $955,948,979, for an ending balance of $130,730,613. Interfund Lending Program Pursuant to an Exemptive Order by the SEC, the Portfolio along with other registered investment companies having management contracts with the Manager, may participate in an interfund lending program. This program provides an alternative credit facility allowing the Portfolio to borrow from, or lend money to, other participating Funds. At October 31, 2004, the Portfolio had not utilized the credit facility. 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, 2004, 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, 2004 were $801,874 and $530,109, respectively. - -------------------------------------------------------------------------------- 151 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- 4. FOREIGN CURRENCY CONTRACTS In order to protect itself against foreign currency fluctuations, 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, 2004, the Portfolio had outstanding forward foreign currency contracts as follows:
SETTLEMENT MARKET UNREALIZED CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS) - -------------------- ---------- ------- ----------- (AMOUNTS IN THOUSANDS) 2,443 Australian Dollar.......................................... 12/17/04 $ 1,822 $ (89) 2,974 Canadian Dollar............................................ 12/17/04 2,440 (109) 7,601 Euro Currency.............................................. 12/17/04 9,726 (371) 806,916 Japanese Yen............................................... 12/17/04 7,647 (356) 4,745 Pound Sterling............................................. 12/17/04 8,688 (164) 5,650 Swedish Krona.............................................. 12/17/04 799 (31) 3,044 Swiss Franc................................................ 12/17/04 2,555 (129) ------- ------- Total contracts to deliver (Receivable amount $32,427).............. $33,677 $(1,249) ======= =======
SETTLEMENT MARKET UNREALIZED CONTRACTS TO RECEIVE DATE VALUE GAIN/(LOSS) - -------------------- ---------- -------- ----------- (AMOUNTS IN THOUSANDS) 9,705 Australian Dollar....................................... 12/17/04 $ 7,235 $ 525 11,903 Canadian Dollar......................................... 12/17/04 9,766 542 32,502 Euro Currency........................................... 12/17/04 41,589 1,660 3,709,996 Japanese Yen............................................ 12/17/04 35,159 1,074 20,908 Pound Sterling.......................................... 12/17/04 38,283 949 25,605 Swedish Krona........................................... 12/17/04 3,620 158 13,888 Swiss Franc............................................. 12/17/04 11,655 547 -------- ------ Total contracts to receive (Payable amount $141,853)............... $147,307 $5,455 ======== ======
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. 5. SECURITIES LENDING The Portfolio may lend its securities to qualified financial institutions, such as certain broker-dealers, to earn additional income. The borrowers are required to secure their loans continuously with collateral in an amount at least equal to 102% (for loans of US securities) or 105% (for non-US securities) of the market value of the loaned securities at the inception of each loan. Collateral is marked to market and monitored daily. To the extent that a loan is collateralized by cash, such collateral shall be invested by the securities lending agent (the "Agent") in short-term instruments, - -------------------------------------------------------------------------------- 152 AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO NOTES TO FINANCIAL STATEMENTS -- CONTINUED October 31, 2004 - -------------------------------------------------------------------------------- money market mutual funds, and such other short-term investments, provided the investments meet certain quality and diversification requirements. Income generated from the investment of cash collateral, less negotiated rebate fees paid to participating brokers and transaction costs, is divided between the Portfolio and the Agent and is recorded as income for the Portfolio. To the extent that a loan is secured by non-cash collateral, brokers pay the Portfolio negotiated lenders' fees, which are divided between the Portfolio and the Agent and are recorded as securities lending income for the Portfolio. The Portfolio also continues to receive income on the securities loaned, and any gain or loss in the market prices of securities loaned that may occur during the term of the loan. Risks to the Portfolio in securities lending transactions are that the borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral required to be returned to the borrower. At October 31, 2004, securities with a market value of approximately $357,879,000 were loaned by the Portfolio. Cash collateral held by the custodian for the Portfolio in an investment in the Affiliated Funds totaled $375,950,000. 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, 2004 is as follows:
UNREALIZED MARKET APPRECIATION/ TYPE OF FUTURE EXPIRATION CONTRACTS VALUE (DEPRECIATION) - -------------- ------------- --------- ------------ -------------- France CAC 40 Index................................ December 2004 306 $ 14,446,907 $ 133,469 Germany DAX Index.................................. December 2004 83 10,495,982 29,367 UK FTSE 100 Index.................................. December 2004 458 38,925,986 195,046 Hang Seng Index.................................... November 2004 31 2,596,809 44,949 Italy MIB 30 Index................................. December 2004 34 6,225,143 144,174 Tokyo FE TOPIX Index............................... December 2004 337 34,274,404 (1,335,483) Spain IBEX 35 Index................................ November 2004 54 5,772,420 93,926 Sweden OMX Index................................... November 2004 384 3,795,787 (88,604) Canada S&PCDA 60 Index............................. December 2004 133 10,829,727 312,379 Australia SPI Index................................ December 2004 119 8,402,046 277,399 Netherlands 200 AEX Index.......................... November 2004 87 7,315,174 5,754 ------------ ----------- $143,080,385 $ (187,624) ============ ===========
- -------------------------------------------------------------------------------- 153 SPECIAL MEETING OF SHAREHOLDERS (Unaudited) - -------------------------------------------------------------------------------- A special meeting of shareholders of the American AAdvantage Funds (the "Trust") was held on August 11, 2004. The meeting related to each series of the Trust with the exception of the Mid-Cap Value Fund (the "Funds"). The purpose of the meeting was to consider proposals regarding: (i) re-election of the five current Trustees and the election of three additional Trustees; (ii) changes to certain fundamental investment policies of the Funds; and (iii) the adoption of an amendment to the Declaration of Trust of the Trust to permit the Trustees to amend the Declaration of Trust in the future without shareholder approval under certain circumstances. Certain of the Funds ("Feeder Funds") currently operate under a "master-feeder" structure, pursuant to which a Feeder Fund seeks its investment objective by investing all of its investable assets in a corresponding portfolio (each a "Portfolio") of the AMR Investment Services Trust ("AMR Trust") that has an identical investment objective to the Feeder Fund. Interestholders of the AMR Trust, principally the Feeder Funds, held a separate meeting to elect Trustees and to vote on proposed changes to certain fundamental investment policies of the Portfolios of the corresponding Feeder Funds. In addition, the interestholders also voted on whether to approve a Conversion Agreement pursuant to which the AMR Trust would convert from a New York common trust to a Massachusetts business trust ("Conversion"). Shareholders of each Feeder Fund were asked to provide voting instructions to the AMR Trust meeting. The Feeder Funds cast their votes in the same proportion as the votes cast by the Funds' shareholders at the meeting. Proposals 1, 3, 4, and 6 were Trust-level matters and therefore required a majority of the shareholders of the Trust to vote to achieve a quorum. Proposals 2 and 5 were Fund-level matters and therefore required a majority of the shareholders of a Fund to vote to achieve a quorum for that Fund. A quorum of the Trust was present for Proposals 1 and 4, and each proposal was approved by shareholders. Except for the Money Market and Municipal Money Market Funds, a quorum of each Fund was present for Proposals 2 and 5, and each proposal was approved by shareholders. A quorum of the Trust was present for Proposals 3 and 6, but there were not enough votes in favor of either proposal for shareholder approval. Proposals 2 and 5 for the Money Market and Municipal Money Market Funds and Proposals 3 and 6 for the Trust were adjourned to a second special meeting of shareholders on August 24, 2004. A quorum was still not present for the Money Market and Municipal Money Market Funds with respect to Proposals 2 and 5 at the August 24th meeting, so those matters were adjourned to a third special meeting of shareholders on September 17, 2004. A quorum of the Trust was present for Proposals 3 and 6, but the votes were not recorded and the Trust adjourned these matters to the September 17th meeting to coincide with the other Fund-level matters. At the September 17th meeting, a quorum was present for the Money Market and Municipal Money Market Funds, and Proposals 2 and 5 were approved by shareholders. In addition, a quorum of the Trust was present for Proposals 3 and 6, and each proposal was approved by shareholders. The final voting results for each Proposal are presented on the following page. The vote tallies for Proposals 1, 3, 4, and 6 include votes cast by shareholders of Funds not contained in this annual report. - -------------------------------------------------------------------------------- 154 SPECIAL MEETING OF SHAREHOLDERS (Unaudited) - -------------------------------------------------------------------------------- (1) Elected the following Trustees to the Funds' Board of Trustees: W. Humphrey Bogart, Brenda A. Cline, Alan D. Feld, Richard A. Massman, Stephen D. O'Sullivan, William F. Quinn, R. Gerald Turner, and Kneeland Youngblood.
TRUST ---------------------------------- FOR WITHHELD --- -------- Bogart...................................................... 650,590,849.241 14,422,434.627 Cline....................................................... 650,579,020.453 14,434,263.415 Feld........................................................ 645,570,380.770 19,442,903.098 Massman..................................................... 650,575,979.241 14,437,304.627 O'Sullivan.................................................. 650,346,585.401 14,666,698.477 Quinn....................................................... 650,521,466.241 14,492,457.627 Turner...................................................... 647,812,023.453 17,201,260.415 Youngblood.................................................. 650,456,805.241 14,556,478.627
(2)(a) Approved a change to the fundamental investment limitation on investments in commodities.
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE -------------- ------------- ------------- -------------- -------------- For................... 46,401,005.640 4,906,580.331 9,627,606.188 15,744,702.754 11,938,327.591 Against............... 6,762.151 0.000 0.000 50,204.000 18,409.000 Abstain............... 9,978.758 191.336 0.000 16,154.000 2,354.608 Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
INT'L EQUITY LG CAP GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE -------------- -------------- -------------- ------------- -------------- For................... 64,496,750.799 10,147,326.622 40,594,175.513 9,095,488.726 30,705,663.526 Against............... 534,912.899 0.000 16,236.116 61,623.240 115,155.394 Abstain............... 724,592.539 0.000 12,407.915 7,181.031 479,407.001 Broker Non-Votes*..... 11,181,562.000 0.000 479,311.000 488,166.000 8,150,355.000
MONEY MKT MUNI MONEY MKT GOV MONEY MKT --------------- -------------- -------------- For............................................... 226,730,052.110 4,564,294.000 32,904,356.120 Against........................................... 3,074,933.700 406,295.000 195,123.000 Abstain........................................... 11,729,088.080 87,615.000 0.000 Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
(2)(b) Approved a change to the fundamental investment limitation on lending securities.
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE -------------- ------------- ------------- -------------- -------------- For................... 46,391,435.523 4,906,580.331 9,627,606.188 15,740,911.754 11,938,327.591 Against............... 16,332.268 0.000 0.000 49,730.000 18,409.000 Abstain............... 9,978.758 191.336 0.000 20,419.000 2,354.608 Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
LG CAP INT'L EQUITY GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE -------------- -------------- -------------- ------------- -------------- For.................. 64,561,233.427 10,147,326.622 40,592,880.290 9,088,150.726 30,695,938.571 Against.............. 458,679.271 0.000 18,691.183 65,299.240 296,207.349 Abstain.............. 736,343.539 0.000 11,248.071 10,843.031 308,080.001 Broker Non-Votes*.... 11,181,562.000 0.000 497,311.000 488,166.000 8,150,355.000
MONEY MKT MUNI MONEY MKT GOV MONEY MKT --------------- -------------- -------------- For............................................... 222,577,475.230 4,564,294.000 32,865,110.120 Against........................................... 7,139,911.580 406,295.000 195,122.000 Abstain........................................... 11,816,687.080 87,615.000 39,247.000 Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
- -------------------------------------------------------------------------------- 155 SPECIAL MEETING OF SHAREHOLDERS (Unaudited) - -------------------------------------------------------------------------------- (2)(c) Approved the deletion of the fundamental investment limitation on affiliated transactions.
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE -------------- ------------- ------------- -------------- -------------- For................... 46,389,698.640 4,906,231.331 9,627,606.188 15,738,813.754 11,940,787.591 Against............... 17,959.151 349.000 0.000 50,600.000 15,949.000 Abstain............... 10,088.758 191.336 0.000 21,647.000 2,354.608 Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
INT'L EQUITY LG CAP GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE -------------- -------------- -------------- ------------- -------------- For................... 60,757,787.283 10,147,326.622 40,593,491.577 9,091,457.726 30,864,782.571 Against............... 4,246,045.415 0.000 16,421.834 65,600.240 123,570.349 Abstain............... 752,423.539 0.000 12,906.133 7,235.031 311,873.001 Broker Non-Votes*..... 11,181,562.000 0.000 479,311.000 488,166.000 8,150,355.000
MONEY MKT MUNI MONEY MKT GOV MONEY MKT --------------- -------------- -------------- For............................................... 220,180,992.310 3,477,061.000 32,904,360.120 Against........................................... 9,573,919.500 1,493,528.000 195,119.000 Abstain........................................... 11,779,162.080 87,615.000 0.000 Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
(2)(d) Approved a change to the fundamental investment limitation on the issuance of senior securities.
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE -------------- ------------- ------------- -------------- -------------- For................... 46,396,294.387 4,906,231.331 9,627,606.188 15,743,825.754 11,940,787.591 Against............... 11,709.404 349.000 0.000 49,364.000 15,949.000 Abstain............... 9,742.758 191.336 0.000 17,871.000 2,354.608 Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
INT'L EQUITY LG CAP GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE -------------- -------------- -------------- ------------- -------------- For................... 64,071,875.799 10,147,326.622 40,600,095.304 9,091,758.726 30,872,021.571 Against............... 937,834.899 0.000 10,278.325 63,599.240 119,601.349 Abstain............... 746,545.539 0.000 12,445.915 8,935.031 308,603.001 Broker Non-Votes*..... 11,181,562.000 0.000 479,311.000 488,166.000 8,150,355.000
MONEY MKT MUNI MONEY MKT GOV MONEY MKT --------------- -------------- -------------- For............................................... 222,154,012.230 4,071,626.000 32,904,360.120 Against........................................... 7,530,585.580 894,226.000 195,119.000 Abstain........................................... 11,849,476.080 92,352.000 0.000 Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
(2)(e) Approved a change to the fundamental investment limitation on borrowing.
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE -------------- ------------- ------------- -------------- -------------- For................... 46,392,054.523 4,906,580.331 9,627,606.188 15,738,741.754 11,938,327.591 Against............... 16,059.268 0.000 0.000 50,759.000 18,409.000 Abstain............... 9,632.758 191.336 0.000 21,560.000 2,354.608 Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
INT'L EQUITY LG CAP GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE -------------- -------------- -------------- ------------- -------------- For................... 64,358,381.427 10,147,326.622 40,587,599.519 9,094,315.726 30,858,227.571 Against............... 653,473.271 0.000 23,806.954 62,742.240 133,093.349 Abstain............... 744,401.539 0.000 11,413.071 7,235.031 308,905.001 Broker Non-Votes*..... 11,181,562.000 0.000 479,311.000 488,166.000 8,150,355.000
- -------------------------------------------------------------------------------- 156 SPECIAL MEETING OF SHAREHOLDERS (Unaudited) - --------------------------------------------------------------------------------
MONEY MKT MUNI MONEY MKT GOV MONEY MKT --------------- -------------- -------------- For............................................... 222,583,327.230 4,071,626.000 32,904,360.120 Against........................................... 7,121,635.580 898,963.000 195,119.000 Abstain........................................... 11,829,111.080 87,615.000 0.000 Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
(2)(f) Approved a change to the fundamental investment limitation on concentration of investments in the banking industry.
MONEY MKT --------------- For......................................................... 222,743,754.230 Against..................................................... 7,112,587.580 Abstain..................................................... 11,677,732.080
(3) Approved an amendment to the Funds' Declaration of Trust.
TRUST --------------- For......................................................... 510,760,770.656 Against..................................................... 27,955,243.657 Abstain..................................................... 24,870,260.385 Broker Non-Votes*........................................... 36,787,359.000
(4) Authorized the Trust, on behalf of each Fund that invests in the AMR Investment Services Trust (the "AMR Trust"), to vote at a meeting of the AMR Trust to elect a Board of Trustees.
TRUST ------------------------------- FOR WITHHELD --- -------- Bogart...................................................... 440,288,258.060 8,585,009.017 Cline....................................................... 440,282,948.530 8,590,318.547 Feld........................................................ 440,288,258.060 8,585,009.017 Massman..................................................... 440,288,258.060 8,585,009.017 O'Sullivan.................................................. 440,282,948.530 8,590,318.547 Quinn....................................................... 440,288,258.060 8,585,009.017 Turner...................................................... 440,282,948.530 8,590,318.547 Youngblood.................................................. 440,288,258.060 8,585,009.017
(5)(a) Authorized the Trust, on behalf of each Fund that invests in the AMR Trust, to vote at a meeting of the AMR Trust to approve a change to the fundamental investment limitation on investments in commodities with respect to the corresponding portfolio of the AMR Trust.
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT -------------- --------------- -------------- -------------- For.............................. 64,420,325.799 226,456,630.110 4,564,294.000 32,904,356.120 Against.......................... 609,135.899 3,292,749.700 188,638.000 195,123.000 Abstain.......................... 726,794.539 11,784,694.080 305,272.000 0.000 Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
(5)(b) Authorized the Trust, on behalf of each Fund that invests in the AMR Trust, to vote at a meeting of the AMR Trust to approve a change to the fundamental investment limitation on lending securities with respect to the corresponding portfolio of the AMR Trust.
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT -------------- --------------- -------------- -------------- For.............................. 64,428,675.427 221,981,421.230 4,564,294.000 32,865,110.120 Against.......................... 562,881.271 7,550,777.580 188,638.000 195,122.000 Abstain.......................... 764,699.539 12,001,875.080 305,272.000 39,247.000 Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
- -------------------------------------------------------------------------------- 157 SPECIAL MEETING OF SHAREHOLDERS (Unaudited) - -------------------------------------------------------------------------------- (5)(c) Authorized the Trust, on behalf of each Fund that invests in the AMR Trust, to vote at a meeting of the AMR Trust to approve the deletion of the fundamental investment limitation on affiliated transactions with respect to the corresponding portfolio of the AMR Trust.
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT -------------- --------------- -------------- -------------- For.............................. 60,670,904.283 220,151,923.310 3,477,061.000 32,904,360.120 Against.......................... 4,311,253.415 9,345,520.500 1,275,871.000 195,119.000 Abstain.......................... 774,098.539 12,036,630.080 305,272.000 0.000 Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
(5)(d) Authorized the Trust, on behalf of each Fund that invests in the AMR Trust, to vote at a meeting of the AMR Trust to approve a change to the fundamental investment limitation on the issuance of senior securities with respect to the corresponding portfolio of the AMR Trust.
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT -------------- --------------- -------------- -------------- For.............................. 63,967,544.799 222,172,054.230 4,070,791.000 32,865,114.120 Against.......................... 1,007,609.899 7,337,242.580 676,569.000 195,119.000 Abstain.......................... 781,101.539 12,024,777.080 310,844.000 39,246.000 Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
(5)(e) Authorized the Trust, on behalf of each Fund that invests in the AMR Trust, to vote at a meeting of the AMR Trust to approve a change to the fundamental investment limitation on borrowing with respect to the corresponding portfolio of the AMR Trust.
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT -------------- --------------- -------------- -------------- For.............................. 64,372,774.427 222,003,125.310 4,071,626.000 32,904,360.120 Against.......................... 637,228.271 7,526,537.500 681,306.000 195,119.000 Abstain.......................... 746,253.539 12,004,411.080 305,272.000 0.000 Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
(5)(f) Authorized the Trust, on behalf of the Money Market Fund, to vote at a meeting of the AMR Trust to approve a change to the fundamental investment limitation on concentration of investments in the banking industry with respect to the corresponding portfolio of the AMR Trust.
MONEY MKT --------------- For......................................................... 222,335,064.310 Against..................................................... 7,345,953.500 Abstain..................................................... 11,853,056.080
(6) Authorized the Trust, on behalf of each Fund that invests in the AMR Trust, to vote at a meeting of the AMR Trust to approve a Conversion Agreement.
TRUST --------------- For......................................................... 312,363,071.187 Against..................................................... 20,695,326.179 Abstain..................................................... 12,389,615.881 Broker Non-Votes*........................................... 20,115,849.000
- --------------- * Certain broker-dealers, third party administrators and other intermediaries who offer Fund shares to their clients vote on behalf of their clients in favor of routine proposals (e.g., Proposals 1 and 4), while entering a "non-vote" for all non-routine proposals. If the underlying clients do not themselves vote the non-routine proposals, the shares remain in the broker non-vote category and effectively count as "against" votes. - -------------------------------------------------------------------------------- 158 TRUSTEES AND OFFICERS OF THE AMERICAN AADVANTAGE FUNDS AND THE AMR INVESTMENT SERVICES TRUST (Unaudited) - -------------------------------------------------------------------------------- The Trustees and officers of the American AAdvantage Funds (the "Trust") and the AMR Investment Services Trust (the "AMR Trust") are listed below, together with their principal occupations during the past five years. Unless otherwise indicated, the address of each person listed below is 4151 Amon Carter Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-seven funds in the fund complex that includes the Trust, the AMR Trust, 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 EACH TRUST AND CURRENT DIRECTORSHIPS - --------------------- ----------------- ------------------------------------------- INTERESTED TRUSTEES TERM ------------------ Lifetime of Trust until removal, resignation or retirement* William F. Quinn** (56) Trustee and President, AMR Investment Services, Inc. (1986-Present); President of Chairman (1989-2003) and Director (1979-Present), American Trust since 1987 Airlines Federal Credit Union; Director, Crescent Real and AMR Trust Estate Equities, Inc. (1994- Present); Director, Pritchard, since 1995 Hubble & Herr, LLC (investment adviser) (2001-Present); Advisory Director, Southern Methodist University Endowment Fund (1996-Present); Member, Southern Methodist University Cox School of Business Advisory Board (1999-2002); Member, New York Stock Exchange Pension Manager Committee (1997-1998, 2000-2002); Vice Chairman, Committee for the Investment of Employee Benefits (2004-Present); Director, United Way of Tarrant County (1988-2000, 2004-Present); Trustee, American AAdvantage Mileage Funds (1995-Present); Trustee, American AAdvantage Select Funds (1999-Present). Alan D. Feld** (68) 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* W. Humphrey Bogart (60) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing company) (1998-2003); Board Member, Baylor University Medical Center Foundation (1992-Present); Trustee, American AAdvantage Mileage Funds (2004-Present); Trustee, American AAdvantage Select Funds (2004-Present).
- -------------------------------------------------------------------------------- 159 TRUSTEES AND OFFICERS OF THE AMERICAN AADVANTAGE FUNDS 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 EACH TRUST AND CURRENT DIRECTORSHIPS - --------------------- ----------------- ------------------------------------------- NON-INTERESTED TRUSTEES (CONT.) Brenda A. Cline (44) 301 Trustee since 2004 Vice President, Chief Financial Officer, Treasurer and Commerce Street Secretary, Kimbell Art Foundation (1993-Present); Trustee, Suite 2240 Texas Christian University (1999-Present); Trustee, W.I. Fort Worth, Texas 76102 Cook Foundation, Inc. (d/b/a Cook Children's Health Foundation) (2001-Present); Trustee, American AAdvantage Mileage Funds (2004-Present); Trustee, American AAdvantage Select Funds (2004-Present). Richard A. Massman (61) Trustee since 2004 Senior Vice President and General Counsel, Hunt Consolidated, Inc. (holding company engaged in energy, real estate, farming, ranching and venture capital activities) (1994-Present); Trustee, American AAdvantage Mileage Funds (2004-Present); Trustee, American AAdvantage Select Funds (2004-Present). Stephen D. O'Sullivan (69) Trustee of Trust Consultant (1994-Present); Trustee, American AAdvantage since 1987 and Mileage Funds (1995-Present); Trustee, American AAdvantage AMR Trust since Select Funds (1999-Present). 1995 R. Gerald Turner (59) Trustee since 2001 President, Southern Methodist University (1995-Present); 225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney Southern Methodist Univ. Company, Inc. (1996- Present); Director, California Federal Dallas, Texas 75275 Preferred Capital Corp. (2001- 2003); Director, Kronus Worldwide Inc. (chemical manufacturing) (2003-Present); Director, First Broadcasting Investment Partners, LLC (2003-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; Trustee, American AAdvantage Mileage Funds (2001-Present); Trustee, American AAdvantage Select Funds (2001-Present). Kneeland Youngblood (49) 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, Burger King Holdings, Inc. Dallas, Texas 75201 (2004-Present); Director, Starwood Hotels and Resorts (2001-Present); Member, Council on Foreign Relations (1995-Present); Director, Just For the Kids (1995-2001); Director, L&B Realty Advisors (1998-2000); Trustee, Teachers Retirement System of Texas (1993-1999); Director, Starwood Financial Trust (1998-2001); Trustee, St. Mark's School of Texas (2002-Present); Trustee, American AAdvantage Mileage Funds (1996-Present); Trustee, American AAdvantage Select Funds (1999-Present). OFFICERS TERM ------------------ One Year Brian E. Brett (44) VP since 2004 Vice President, Director of Sales, AMR Investment Services, Inc. (2004-Present); Regional Vice President, Neuberger Berman, LLC (investment adviser) (1996-2004). Nancy A. Eckl (42) VP of Trust since Vice President, Trust Investments, AMR Investment Services, 1990 and AMR Inc. (1990-Present). Trust since 1995
- -------------------------------------------------------------------------------- 160 TRUSTEES AND OFFICERS OF THE AMERICAN AADVANTAGE FUNDS 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 EACH TRUST AND CURRENT DIRECTORSHIPS - --------------------- ----------------- ------------------------------------------- OFFICERS (CONT.) Michael W. Fields (50) VP of Trust since Vice President, Fixed Income Investments, AMR Investment 1989 and AMR Services, Inc. (1988-Present). Trust since 1995 Barry Y. Greenberg (41) VP since 1995 and Vice President, Legal, Compliance and Administration, AMR Secretary since Investment Services, Inc. (1995-Present); Director, 2004 Pritchard, Hubble & Herr, LLC (investment adviser) (2004-Present). Rebecca L. Harris (38) Treasurer since Vice President, Finance, AMR Investment Services, Inc. 1995 (1995- Present). John B. Roberson (46) VP of Trust since Vice President, Client Relations & Special Projects, AMR 1989 and AMR Investment Services, Inc. (2004-Present); Vice President, Trust since 1995 Director of Sales, AMR Investment Services, Inc. (1991-2004); Director, Pritchard, Hubble & Herr, LLC (investment adviser) (2001-Present).
- --------------- * 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 Messrs. Quinn and O'Sullivan. ** Messrs. Quinn and Feld are deemed to be "interested persons" of the Trust and AMR 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 ("Akin, Gump") has provided legal services within the past two years to one or more of the Trust's and AMR Trust's investment advisers. - -------------------------------------------------------------------------------- 161 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. - -------------------------------------------------------------------------------- 162 (AMERICAN EAGLE LOGO) (AMERICAN EAGLE LOGO) (AMERICAN AADVANTAGE FUNDS LOGO) - -------------------------------------------------------------------------------- TO OBTAIN MORE INFORMATION ABOUT THE FUNDS: (KEYBOARD GRAPHIC) (MOUSE GRAPHIC) BY E-MAIL: ON THE INTERNET: american-aadvantage.funds@AA.com Visit our website at www.aafunds.com
- -------------------------------------------------------------------------------- (TELEPHONE GRAPHIC) (MAILBOX GRAPHIC) BY TELEPHONE: BY MAIL: Institutional Class American AAdvantage Funds Call (800) 658-5811 4151 Amon Carter Blvd., MD 2450 AMR Class(SM) Fort Worth, TX 76155 Call (800) 345-2345 PlanAhead Class(R) and Service Class Call (800) 388-3344
- -------------------------------------------------------------------------------- AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS In addition to the Schedule of Investments provided in each A description of the policies and procedures that the Funds semi-annual and annual report, each Fund files a complete use to determine how to vote proxies relating to portfolio schedule of its portfolio holdings with the Securities and securities is available in each Fund's Statement of Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge third fiscal quarters. The Funds' Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. Each Fund's proxy voting record for the most reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Funds' Forms N-PX are available on the SEC's regarding the operation of the SEC's Public Reference Room website at www.sec.gov. Each Fund's proxy voting record may may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009. schedule of each Fund's portfolio holdings is also available on the Funds' website (www.aafunds.com) approximately thirty days after the end of each fiscal quarter.
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 Mid-Cap Value 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] AR10/04 532730 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. (a)
Audit Fees Fiscal Year Ended - ---------- ----------------- $36,295 12/31/2002 $180,713 10/31/2003 $27,001 12/31/2003 $170,039 10/31/2004
(b)
Audit-Related Fees Fiscal Year Ended - ------------------ ----------------- $0 12/31/2002 $0 10/31/2003 $0 12/31/2003 $0 10/31/2004
(c)
Tax Fees Fiscal Year Ended - -------- ----------------- $6,119* 12/31/2002 $39,417** 10/31/2003 $4,821*** 12/31/2003 $0 10/31/2004
* For review of 2001 tax returns ** For review of 2002 tax returns and professional services related to the collectibility of tax reclaims in Switzerland *** For review of 2002 tax returns (d)
All Other Fees Fiscal Year Ended - -------------- ----------------- $0 12/31/2002 $0 10/31/2003 $0 12/31/2003 $0 10/31/2004
(e)(1) Pursuant to its charter, the Trust's audit committee shall have the following duties and powers pertaining to pre-approval of audit and non-audit services provided by the Trust's principal accountant: - to approve, prior to appointment, the engagement of auditors to annually audit and provide their opinion on the Trust's financial statements, and, in connection therewith, to review and evaluate matters potentially affecting the independence and capabilities of the auditors; - to approve, prior to appointment, the engagement of the auditors to provide non-audit services to the Trust, an investment adviser to any series of the Trust or any entity controlling, controlled by, or under common control with an investment adviser that provides ongoing services to the Trust, if the engagement relates directly to the operations and financial reporting of the Trust; - to review the arrangements for and scope of the annual audit and any special audits; and - to review and approve the fees proposed to be charged to the Trust by the auditors for each audit and non-audit service. The audit committee may delegate any portion of its authority, including the authority to grant pre-approvals of audit and permitted non-audit services, to a subcommittee of one or more members. Any decisions of the subcommittee to grant pre-approvals shall be presented to the full audit committee at its next regularly scheduled meeting. (e)(2) None of the fees disclosed in paragraphs (b) through (d) above were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Not applicable. (g)
Aggregate Non-Audit Fees for Services Rendered to the: - ------------------------------------------------------ Adviser's Affiliates Providing Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended - ---------- ------- ------------------------------ ----------------- $6,119 $0 N/A 12/31/2002 $39,417 $0 N/A 10/31/2003 $4,821 $0 N/A 12/31/2003 $0 $0 N/A 10/31/2004
(h) Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. The schedules of investments for each series of the Trust are included in the shareholder report presented in Item 1. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Trust has made no material changes to the procedures by which shareholders may recommend nominees to the Trust's Board of Trustees since the Trust last disclosed such procedures in Schedule 14A. ITEM 11. CONTROLS AND PROCEDURES. (a) 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. (b) There were no changes in the Trust's internal control over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Trust's internal control over financial reporting. ITEM 12. 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. (a)(3) Not applicable. (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, 2005 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, 2005 By /s/ Rebecca L. Harris --------------------- Rebecca L. Harris Treasurer Date: January 6, 2005 EX-99.CODE ETH 2 ex99code.txt OFFICER CODE OF ETHICS For period ended 10/31/2004 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 3 ex99cert.txt CERTIFICATIONS For period ended 10/31/2004 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 second fiscal quarter of the period covered by this report 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, 2005 /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 second fiscal quarter of the period covered by this report 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, 2005 /s/ William F. Quinn ----------------- -------------------- William F. Quinn President American AAdvantage Funds EX-99.906 CERT 4 ex906cert.txt SOX906 CERTIFICATIONS For period ended 10/31/2004 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, 2004 (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, 2005 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-----