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: 801-4984
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: April 30, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
(AA EAGLE)
About AMR Investments
- --------------------------------
AMR Investments is an
experienced provider of
investment advisory services to
institutional and retail
markets. We act as manager of
the American AAdvantage Funds, a
family of diversified mutual
funds, and offer customized
fixed income portfolio
management services.
Our clients include defined
benefit plans, defined
contribution plans, foundations,
endowments, corporations, and
other institutional investors.
AMR Investments is a wholly
owned subsidiary of AMR
Corporation, the parent company
of American Airlines, Inc.
Incorporated in 1986, we are
directly responsible for the
investment management and
oversight of AMR Corporation's
defined benefit and defined
contribution plans, as well as
its fixed income investments.
<Table>
<Caption>
Contents
-----------------------------------------
President's Message........... 1
American AAdvantage Funds'
Performance................ 2
Market and Performance
Overviews.................. 3
American AAdvantage Schedules of
Investments
Balanced Fund.............. 22
Large Cap Value Fund....... 31
Large Cap Growth Fund...... 35
Small Cap Value Fund....... 39
Emerging Markets Fund...... 45
High Yield Bond Fund....... 51
Enhanced Income Fund....... 57
Intermediate Bond Fund..... 63
Short-Term Bond Fund....... 69
AMR Investment Services Trust
Schedules of Investments
International Equity
Portfolio............... 112
Additional Information........Inside Back
Cover
</Table>
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 April 30, 2004
(BILL QUINN PICTURE)
FELLOW SHAREHOLDERS,
I am pleased to present
you with the Semi-Annual
Report for the American
AAdvantage Funds for the
six months ended April 30,
2004. During this time,
the Dow Jones Industrial
Average posted gains of
5.43%, the S&P 500 Index
increased by 6.27%, while
the MSCI EAFE Index
returned 12.39%. The bond
market, as defined by the
Lehman Brothers Aggregate
Index, returned 1.24%
during the period despite
a slight increase in
interest rates.
Additionally, the Federal
Reserve left the Fed Funds
Rate at its 40-year low of
1%.
All of the equity
Funds posted solid
performances, as the Institutional Class of each Fund outpaced the respective
Lipper peer group for the six-month, one-year and three-year periods as of April
30, 2004. The Small Cap Value Fund continued its strong performance with returns
of 12.87%, 51.83%, 19.15% and 16.65% for the six-month, one-year, three-year,
and five-year periods, respectively. Additionally, the Emerging Markets Fund
continued to benefit from the global economic recovery with returns of 10.66%,
54.63%, and 15.67% for the six-month, one-year, and three-year periods,
respectively, as of April 30, 2004.
On the fixed-income front, the High Yield Bond, Enhanced Income,
Intermediate Bond and Short-Term Bond Funds all posted modest positive returns
for the six-month period despite a difficult market for fixed income securities.
Once again, the Institutional Class of the Short-Term Bond Fund outperformed its
Lipper peer group for the one, three, five, and ten-year periods. Our new
Enhanced Income Fund-PlanAhead Class outperformed its respective Lipper peer
group with returns of 2.24% for the six-month period and 2.57% since its
inception on July 1, 2003.
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 to 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
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUALIZED TOTAL RETURN
------------------------------------------
INCEPTION TICKER 10 YEAR/
DATE SYMBOL 1 YEAR 3 YEAR 5 YEAR SINCE INCEPTION
--------- ------ ------ ------ ------ ---------------
Balanced Fund -- Institutional 7/17/87 AADBX 22.27% 5.85% 4.50% 9.69%
Balanced Fund -- PlanAhead 8/1/94 AABPX 21.64% 5.61% 4.24% 9.39%
Balanced Fund -- AMR 8/1/94 AABNX 22.35% 6.18% 4.79% 9.97%
Lipper Balanced Funds Index 16.18% 1.62% 2.01% 8.61%
Large Cap Value Fund -- Institutional 7/17/87 AADEX 34.94% 4.50% 2.99% 10.88%
Large Cap Value Fund -- PlanAhead 8/1/94 AAGPX 34.57% 4.21% 2.71% 10.54%
Large Cap Value Fund -- AMR 8/1/94 AAGAX 35.29% 4.79% 3.26% 11.16%
Lipper Multi-Cap Value Funds Index 29.14% 2.66% 3.52% 10.99%
Large Cap Growth Fund -- Institutional 7/31/00 ALCGX 24.56% -5.79% N/A -13.36%
Large Cap Growth Fund -- AMR 7/31/00 ALFIX 24.50% -5.76% N/A -13.27%
Lipper Large-Cap Growth Funds Index 18.89% -7.30% N/A -14.23%
Small Cap Value Fund -- Institutional 12/31/98 AVFIX 51.83% 19.15% 16.65% 15.25%
Small Cap Value Fund -- PlanAhead 3/1/99 AVPAX 51.34% 18.73% 16.35% 14.95%
Small Cap Value Fund -- Service 5/1/03 AASSX 50.81% 18.59% 16.27% 14.88%
Small Cap Value Fund -- AMR 3/1/99 AASVX 52.21% 19.44% 16.98% 15.55%
Lipper Small-Cap Value Funds Index 46.70% 13.32% 13.55% 12.16%
International Equity Fund -- Institutional 8/7/91 AAIEX 43.01% 3.83% 3.63% 8.51%
International Equity Fund -- PlanAhead 8/1/94 AAIPX 42.69% 3.70% 3.44% 8.24%
International Equity Fund -- Service 5/1/03 AAISX 42.20% 3.58% 3.36% 8.20%
International Equity Fund -- AMR 8/1/94 AAIAX 43.39% 4.06% 3.88% 8.78%
Lipper International Funds Index 38.23% 1.44% 1.32% 5.34%
Emerging Markets Fund -- Institutional 7/31/00 AEMFX 54.63% 15.67% N/A 5.00%
Emerging Markets Fund -- PlanAhead 10/1/02 AAEPX 54.29% 15.48% N/A 4.87%
Emerging Markets Fund -- AMR 7/31/00 AAMRX 55.23% 15.97% N/A 5.29%
Lipper Emerging Markets Funds Index 52.89% 13.99% N/A 3.92%
High Yield Bond Fund -- Institutional 12/29/00 AYBFX 11.65% 10.79% N/A 10.84%
High Yield Bond Fund -- PlanAhead 3/1/02 AHYPX 11.16% 10.24% N/A 10.35%
High Yield Bond Fund -- Service 5/1/03 AAHSX 10.14% 9.91% N/A 10.04%
Lipper High Yield Bond Funds Index 15.21% 6.69% N/A 6.65%
Enhanced Income Fund -- PlanAhead 6/30/03 AANPX N/A N/A N/A 2.57%
Lipper Interm. Investment Grade Index N/A N/A N/A 0.57%
Intermediate Bond Fund -- Institutional 9/15/97 AAIBX 1.11% 5.74% 6.09% 6.37%
Intermediate Bond Fund -- PlanAhead 3/2/98 AAPAX 1.48% 5.70% 5.56% 5.93%
Intermediate Bond Fund -- AMR 3/1/99 AABDX 1.74% 6.18% 6.10% 6.32%
Lipper Interm. Investment Grade Index 2.42% 6.41% 6.25% 6.40%
Short-Term Bond Fund -- Institutional 12/3/87 AADFX 1.77% 4.45% 5.25% 5.44%
Short-Term Bond Fund -- PlanAhead 8/1/94 AALPX 1.51% 4.19% 4.96% 5.18%
Short-Term Bond Fund -- AMR 8/1/94 AASBX 2.16% 4.68% 5.45% 5.67%
Lipper Short Investment Grade Index 1.50% 3.77% 4.72% 5.33%
</Table>
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
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
Everything came together for the market and the economy in the fourth quarter of
2003 and continued into the first quarter of 2004. Inflation and interest rates
remained low while the dollar declined enough to strengthen America's
competitive position. U.S. equity markets responded with strong returns across
all styles and capitalization ranges. As evidence of the strength of the
recovery in profits became both visible and undeniable in the fourth calendar
quarter, stock prices accelerated to the upside. This move was abetted by the
sharp decline in the dollar, which greatly improved the competitive position of
American companies in world markets and raised the U.S. dollar value of overseas
earnings by 20% or more.
Despite the continued involvement in Iraq and global geopolitical
instability, the economy continues to grow and corporate profits remain strong,
far exceeding expectations. The resilient spending patterns of both the
government and consumer were accompanied by corporations which have finally
started to increase capital spending. This renewed confidence was echoed in the
capital markets as mergers and acquisitions activity dramatically improved, up
sharply from just a year ago.
Until recently, the weak link remained the outlook for job growth, which
had been non-existent for some time but is beginning to show signs of life.
Corporate profits continued to rebound, and powerful economic growth has helped
to remove slack in the market. The growth rate of capital spending has returned
to levels not seen since the third quarter of 1999. Lastly, a final positive
contribution to the market's performance came from investors pouring money into
equity funds after more than a year of extraordinary performance for stocks.
Since April 2003, investors have added $207 billion to equity mutual funds.
Most areas of the equity market advanced modestly during the six-month
period. The one exception was the NASDAQ Index, which fell 0.6%. Similar to
2003, value outperformed growth in the period by 3.9% as measured by the Russell
1000 style indices. More than half of the underperformance of the Growth Index
(relative to the Value Index) was due to losses in the Technology sector. Nine
of the ten S&P 500 economic sectors achieved positive returns in the period,
with less economically sensitive groups such as Consumer Staples, Energy,
Utilities, and Health Care performing the best. The worst performing sectors
were Information Technology, Financials and Consumer Discretionary stocks.
Despite strong earnings over the past year, valuations for the overall
market are still high. The P/E ratio of the S&P 500 is 22x reported earnings,
well above its long-term historical average of 15x.
While 2003 rewarded investors who held stocks of companies with no earnings
and paying no dividends, the market has begun to change course in 2004 with
companies delivering earnings and paying a dividend beginning to outperform.
Returning capital to shareholders via dividends continues to grow in
popularity. Favorable tax incentives and investor pressure have been supportive
of higher payouts. Since the implementation of the new dividend tax policy, 250
companies in the S&P 500 have initiated or increased their dividend. In the
first three months of 2004 alone, 90 companies either initiated or increased
their dividend including Citigroup, Washington Mutual, Allstate, and Wal-Mart.
The economy appears to be on the right track. Significant government
stimulus has fueled growth for three consecutive quarters including strong
fourth quarter GDP growth (+4.2%). Expectations for 2004 growth remain
optimistic, between 4% and 5%. But with improved economic prosperity comes an
increased probability that the Federal Reserve may soon need to take action to
avoid a surge in inflation.
Many equity investors associate a rising interest rate environment with
negative stock performance. History reveals that this result is not always the
case. Since 1955, there have been 11 periods in which markets achieved positive
results even when short-term rates climbed. Even in a rapidly rising interest
rate environment, such as the late 1970's, equities were profitable investments.
During 1978-1980, the stock market gained 61%, despite the dramatic rise of 6.6%
in the rate of 90-Day T-Bills. Today, the level of short-term rates is similar
to those seen in 1958 when 3-Month T-Bills yielded 0.6%. The market rose 36%
during the subsequent 14 months. While much of the period analyzed (since 1958)
has been a distinctly bull market for equities, there is historical evidence
that stocks can go up despite the headwind of a rising interest rate
environment.
3
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE BALANCED FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Balanced Fund's Institutional Class returned 7.6% for the six months
ended April 30, 2004, outperforming the 60% S&P 500 Barra Value/ 40% Lehman
Brothers Aggregate Index benchmark return of 5.2% and the Lipper Balanced Funds
Index return of 4.7%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
---------------------------------------
PERIODS ENDED 4/30/04
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional Class(1)... 7.59% 22.27% 4.50% 9.69%
PlanAhead Class(1,2)..... 7.32% 21.64% 4.24% 9.39%
AMR Class(1,2)........... 7.59% 22.35% 4.79% 9.97%
Lipper Balanced Funds
Index................... 4.74% 16.18% 2.01% 8.61%
S&P 500 Index............ 6.27% 22.88% (2.26)% 11.36%
S&P 500/Barra Value
Index................... 7.92% 27.86% (0.14)% 10.77%
Lehman Brothers Aggregate
Index................... 1.24% 1.82% 6.66% 7.34%
Balanced Composite
Index(3)................ 5.24% 16.96% 2.95% 9.74%
</Table>
* Not Annualized
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 ten-year period represents the
total returns achieved by the Institutional Class from 4/30/94 up to 8/1/94,
the inception date of the PlanAhead and AMR Classes, and the returns of the
PlanAhead and AMR Classes since inception of these Classes. Expenses of the
PlanAhead Class are higher than those of the Institutional Class. As a
result, total returns shown may be higher than they would have been had the
PlanAhead Class been in existence since 4/30/94. 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 4/30/94.
3 60% S&P 500/Barra Value, 40% LB Aggregate Index
During the six-month period, the Fund's assets on average were invested 67%
in equities (and equitized cash) and 33% in fixed-income securities, ending the
period with 68% in equities (and equitized cash) and 32% in fixed-income
securities.
The equity portion of the Fund returned 12.5%, outperforming the S&P 500
Barra Value Index ("Barra Value Index") return of 7.9%. The Fund added value
relative to the Barra Value Index mainly through stock selection, which was
positive in eight out of ten sectors, although sector allocation also was
positive. Stock selection in the Financials sector contributed most to the
Fund's excess performance. The Fund's positions in MGIC Investment Corp. (up
43.7%) and Allstate (up 17.6%) had the largest impact in this sector. Holdings
in the Energy, Industrials and Materials sectors were also a source of
significant added value. Strong performers included Valero Energy (up 37.9%) and
Occidental Petroleum (up 35.6%) in the Energy sector, Tyco (up 31.6%) in the
Industrials sector and Eastman Chemical (up 34.1%) in the Materials sector. The
Fund's Health Care sector holdings were the largest source of underperformance
relative to the Barra Value Index, due mostly to the Fund's position in Tenet
Healthcare (down 14.8%).
Equity sector allocation had a positive impact on the Fund's relative
returns during the six-month period. The Fund benefited from overweighting
Consumer Staples, the second best performing sector of the Barra Value Index and
from underweighting Financials, the second worst performing sector.
The fixed-income portion of the Fund returned 1.6% for the six-month
period, ahead of the Lehman Brothers Aggregate Index return of 1.2%. The Fund's
outperformance was due mostly to a larger than double weighting in Corporates,
the best performing sector of the Lehman Brothers Aggregate Index, and to good
issuer selection among the Financial issuers.
The sub-advisers continue to focus on the selection of attractive
securities in a volatile and changing environment.
4
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE BALANCED FUND(SM) -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS
<Table>
<Caption>
% OF
EQUITIES
--------
Bank of America Corporation 2.6%
Altria Group, Incorporated 2.5%
ConocoPhillips 2.3%
Citigroup, Incorporated 2.1%
MetLife, Incorporated 2.0%
Cendant Corporation 1.9%
Allstate Corporation 1.9%
Tyco International Limited 1.8%
Washington Mutual, Incorporated 1.8%
Boeing Company 1.6%
-----
Total 20.5%
Top Ten Equity Holdings as % of Total Net Assets 12.3%
</Table>
EQUITY SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
----------
Financials 28.7%
Industrials 15.0%
Consumer Discretionary 11.2%
Energy 9.5%
Consumer Staples 8.6%
Health Care 8.4%
Materials 6.4%
Utilities 5.5%
Information Technology 4.8%
Telecommunication Services 1.3%
Real Estate 0.6%
</Table>
FIXED-INCOME SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporates 40.6%
Mortgage-Backed 26.2%
U.S. Treasury 26.0%
Agency 6.7%
Asset-Backed 0.5%
</Table>
5
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE LARGE CAP VALUE FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Large Cap Value Fund returned 11.7% for the
six months ended April 30, 2004, well ahead of the S&P 500/Barra Value Index
("Index") return of 7.9% and the Lipper Multi-Cap Value Funds Index return of
8.5%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
---------------------------------------
PERIODS ENDED 4/30/04
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional Class(1)... 11.70% 34.94% 2.99% 10.88%
PlanAhead Class(1,2)..... 11.59% 34.57% 2.71% 10.54%
AMR Class(1,2)........... 11.90% 35.29% 3.26% 11.16%
Lipper Multi-Cap Value
Funds Index............. 8.50% 29.14% 3.52% 10.99%
S&P 500 Index............ 6.27% 22.88% (2.26)% 11.36%
S&P 500/Barra Value
Index................... 7.92% 27.86% (0.14)% 10.77%
</Table>
* Not Annualized
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 ten-year period represents the
total returns achieved by the Institutional Class from 4/30/94 up to 8/1/94,
the inception date of the PlanAhead and AMR Classes, and the returns of the
PlanAhead and AMR Classes since inception of these Classes. Expenses of the
PlanAhead Class are higher than those of the Institutional Class. As a
result, total returns shown may be higher than they would have been had the
PlanAhead Class been in existence since 4/30/94. 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 4/30/94.
The Fund produced positive absolute returns in every sector, and
outperformed the Index through strong stock selection and, to a lesser extent,
through positive sector allocation.
The Fund benefited from its stock selection in eight of the ten economic
sectors. The largest contributors were in the Financials sector, led by MGIC
Investment Corp. (up 43.7%), Allstate (up 17.6%) and Loews Corp. (up 35.7%).
Positive stock selection in Information Technology (primarily Autodesk, Computer
Associates and Motorola), Industrials (Tyco and IKON Office Solutions), Energy
(Occidental Petroleum and Valero Energy), Consumer Staples (Imperial Tobacco and
Altria Group) and Consumer Discretionary (J.C. Penney, Carnival Corp. and MGM
Grand) also added meaningful value versus the Index.
Sector weightings also added value, primarily through overweighting
Consumer Staples, the second best performing sector of the Index, and
underweighting Financials, the second worst performing sector of the Index.
Unfortunately, underweighting Energy, the best performing sector, offset some of
the value otherwise attained through sector allocation.
The sub-advisers' philosophy of investing in a broadly diversified
portfolio of companies that have attractive valuations and earnings growth
potential should allow the Fund to continue to benefit in the current economic
environment.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Altria Group, Incorporated 2.2%
Bank of America Corporation 2.1%
ConocoPhillips 2.1%
Citigroup, Incorporated 1.8%
Tyco International Limited 1.7%
Cendant Corporation 1.7%
MetLife, Incorporated 1.7%
Allstate Corporation 1.6%
Boeing Company 1.6%
Washington Mutual, Incorporated 1.4%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 28.1%
Industrials 13.9%
Consumer Discretionary 11.2%
Consumer Staples 9.9%
Health Care 8.6%
Energy 8.2%
Information Technology 6.2%
Materials 6.0%
Utilities 5.6%
Telecommunication Services 1.8%
Real Estate 0.5%
</Table>
6
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Large Cap Growth Fund returned 6.3% for the
six months ended April 30, 2004, compared to the Russell 1000(R)Growth Index
("Index") return of 4.1% and the Lipper Large-Cap Growth Funds Index return of
2.7%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 4/30/04
----------------------------------------
SINCE
6 MONTHS* 1 YEAR 3 YEARS INCEPTION
--------- ------ ------- ---------
Institutional
Class(1)............. 6.34% 24.56% (5.79)% (13.36)%
AMR Class(1)........... 6.33% 24.50% (5.76)% (13.27)%
Lipper Large-Cap Growth
Funds Index.......... 2.70% 18.89% (7.30)% (14.23)%
Russell 1000
Growth Index......... 4.14% 21.65% (5.93)% (13.68)%
</Table>
* Not Annualized
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.
As these returns indicate, it has been a positive period for growth stocks,
and the Fund participated fully in the upside movement. During the six-month
period, eight out of ten sectors in the Index posted positive returns. The Fund
added most of its value through good stock selection, although sector weighting
decisions were mildly beneficial.
From a stock selection standpoint, the largest value added sectors for the
Fund relative to the Index were Health Care followed by Consumer Staples. In
Health Care, positions in American Pharmaceutical (up 92.8%), Guidant (up
24.6%), and Aetna US Healthcare (up 56.4%) were the largest contributors. Owning
Gillette Company (up 23.1%) and Tyson Foods (up 27.2%) contributed most to the
Consumer Staples sector's strong relative performance.
On a sector basis, the Fund benefited from relative overweights in the two
best performing sectors, Telecommunications (up 29.2%) and Energy (up 25.8%) and
from underweighting Information Technology, which was the worst performing
sector (down 6.3%).
Looking forward, the Fund's sub-advisers will continue to maintain a
disciplined, long-term approach to equity investing in large capitalization
growth companies.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Pfizer, Incorporated 6.2%
General Electric Company 4.7%
Johnson & Johnson 4.5%
Microsoft Corporation 4.2%
Intel Corporation 3.5%
Proctor & Gamble Company 2.8%
Cisco Systems, Incorporated 2.4%
Guidant Corporation 2.1%
Dell, Incorporated 1.9%
Viacom, Incorporated 1.5%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Health Care 26.8%
Information Technology 22.2%
Consumer Discretionary 17.5%
Industrials 10.2%
Consumer Staples 10.1%
Financials 9.6%
Materials 1.5%
Energy 1.1%
Telecommunication Services 0.9%
Utilities 0.1%
</Table>
Russell 1000 (R) Growth Index is a service mark of the Frank Russell Company.
7
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SMALL CAP VALUE FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Small Cap Value Fund returned 12.9% for the
six months ended April 30, 2004, significantly outperforming the Russell 2000(R)
Value Index ("Index") return of 9.1% and the Lipper Small-Cap Value Funds Index
return of 10.5% for the same period.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
----------------------------------------
PERIODS ENDED 4/30/04
----------------------------------------
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEPTION
--------- ------ ------- ---------
Institutional
Class(1)............. 12.87% 51.83% 16.65% 15.25%
PlanAhead Class(1,2)... 12.72% 51.34% 16.35% 14.95%
Service Class(1,3)..... 12.54% 50.81% 16.27% 14.88%
AMR Class(1,2)......... 12.96% 52.21% 16.98% 15.55%
Lipper Small-Cap Value
Funds Index.......... 10.46% 46.70% 13.55% 12.16%
Russell 2000 Value
Index................ 9.09% 42.45% 12.92% 11.76%
</Table>
* Not Annualized
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.
3 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 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 Industrials sector had the greatest impact.
Positions in Valassis Communications (up 19.3%) and Terex Corp. (up 45.6%) were
the major contributors to the sector's positive impact on the Fund's
performance. Stock selection in the Consumer Discretionary and Financials
sectors also contributed significantly to the Fund's excess return. Holdings
such as Foot Locker (up 34.7%) and Jack In the Box (up 48.9%) in the Consumer
Discretionary sector and Allmerica Financial Corp. (up 30.5%) and LNR Property
Corp. (up 22.8%) in Financials helped to produce the positive results.
The Fund's overweighting in the Energy sector, which was the best
performing sector of the Index, and underweighting in the Information Technology
and Financials sectors, the second and third worst performing sectors of the
Index, also contributed to relative performance.
The sub-advisers' long-term approach to valuation remains unchanged and
they continue to uncover opportunities in the current volatile environment,
which should result in strong returns for the Fund.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET ASSETS
---------------
Valassis Communications, Incorporated 2.2%
Beazer Homes USA, Incorporated 1.3%
Encore Acquisition Company 1.3%
Allmerica Financial Corporation 1.3%
LNR Property Corporation 1.2%
WCI Communities, Incorporated 1.2%
MI Developments, Incorporated 1.2%
BJ's Wholesale Club, Incorporated 1.1%
Northeast Utilities 1.1%
The Warnaco Group, Incorporated 1.0%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF EQUITIES
-------------
Financials 22.5%
Consumer Discretionary 22.1%
Industrials 20.3%
Utilities 10.4%
Materials 6.5%
Energy 6.4%
Consumer Staples 4.2%
Health Care 4.0%
Information Technology 3.3%
Telecommunication Services 0.3%
</Table>
Russell 2000(R) Value Index is a service mark of the Frank Russell Company.
8
INTERNATIONAL EQUITY MARKET OVERVIEW
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
Led by the United States and China, the global economy continued to grow during
the six months ended April 30, 2004. The developed economies responded favorably
to loose monetary policy conditions and to surging commodity prices. These
events tempered concerns over deflation and have restored price stability to
most regions.
Further evidence of the global recovery was particularly evident in Canada,
the United Kingdom, Asia, Australia, and New Zealand. Commodity prices continued
to rise in the wake of increased global demand. Oil prices, for instance,
climbed to nearly forty dollars per barrel by the end of April 2004 versus an
average of thirty-one dollars in all of 2003.
Chinese imports have become an important source of external demand in the
global economy, particularly as this demand pertains to the export growth
experienced by Japan, Germany, and Korea. In a still fragile recovery, a
slowdown in the Chinese economy implies a potentially significant amount of
collateral damage to several of its trading partners. Nonetheless, China's
economy grew at a faster than expected rate of 9.7% in the first quarter. In
March, the terrorist bombing in Spain sent negative reverberations throughout
Europe and shifted French and Spanish politics to more left-leaning parties.
Terrorism has cast a dark shadow over Europe and its fragile economic recovery.
Germany's annualized CPI rate jumped in April to 1.6% from 1.1% in March.
This was the highest rate in two years, pushed up largely by oil prices. The
euro zone's current account surplus narrowed slightly in the first few months of
2004, reflecting the loss of competitiveness from the rising euro. Other euro
zone economic data points to an increase in manufacturing orders and an uplift
in the business climate. Real GDP in the UK reached a 2.6% annual rate in the
first quarter, leaving output 3% higher than a year earlier, its strongest
growth in nearly four years. As U.S. and European budget imbalances widen,
fiscal restraint remains an impediment to future growth. Further concern
regarding the U.S. massive trade imbalance, which hit a record $46 billion in
March 2004, poses increased risk to the global economy.
Central banks in countries such as Australia, Canada, and New Zealand have
embarked on a cycle of raising short-term interest rates. The U.S. Federal
Reserve may be only a few steps behind, perhaps waiting for the U.S.
presidential election. The global economy's prognosis depends, in part, on the
Chinese government's ability to achieve a soft landing and slow its domestic
economy. Despite the presence of such unpredictable risks, it is believed the
global economic climate should remain fairly stable.
9
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the International Equity Fund returned 13.4% for
the six months ended April 30, 2004. The Fund outperformed the MSCI EAFE Index
("Index") return of 12.4% and the Lipper International Funds Index return of
11.0%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
PERIODS ENDED 4/30/04
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional
Class(1)............ 13.41% 43.01% 3.63% 8.51%
PlanAhead Class(1,2).. 13.22% 42.69% 3.44% 8.24%
Service Class(1,3).... 13.13% 42.20% 3.36% 8.20%
AMR Class(1,2)........ 13.58% 43.39% 3.88% 8.78%
Lipper International
Funds Index......... 11.00% 38.23% 1.32% 5.34%
MSCI EAFE Index....... 12.39% 40.23% (0.73)% 3.88%
</Table>
* Not Annualized
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 ten-year period represents the
total returns achieved by the Institutional Class from 4/30/94 up to 8/1/94,
the inception date of the PlanAhead and AMR Classes, and the returns of the
PlanAhead and AMR Classes since inception of these Classes. Expenses of the
PlanAhead Class are higher than those of the Institutional Class. As a
result, total returns shown may be higher than they would have been had the
PlanAhead Class been in existence since 4/30/94. 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 4/30/94.
3 Fund performance for the five-year and since inception
periods represents the total returns achieved by the Institutional Class
from 4/30/94 up to 8/1/94, the returns of the PlanAhead Class from 8/1/94 up
to 5/1/03 (the inception date of the Service Class), and the returns of the
Service Class since its inception. Expenses of the Service Class are higher
than those of the Institutional and PlanAhead Classes. As a result, total
returns shown may be higher than they would have been had the Service Class
been in existence since 4/30/94.
The Fund outperformed the Index over the past six months due to strong
stock selection, while country allocation was slightly negative. In France,
significant positions in Aventis (up 43.9% and, on average, the Fund's second
largest holding during the period), Vinci (up 34.3%) and Total (up 19.0%)
contributed nearly 1% in relative performance as compared to the Index. In the
UK, the Fund added value by overweighting Reuters (up 54.3%) and Cadbury
Schweppes (up 26.3%), while Canadian holdings, Celestica and Manulife Financial
(both up over 20%), also contributed to the Fund's outperformance. Country
allocation slightly detracted value as the Fund had a 2.5% overweighting in the
Netherlands versus the Index, while the Dutch market only gained 7.7% during the
period.
Similar to country attribution, all of the value added from a sector
perspective was achieved through stock selection, as sector allocation was
slightly negative. Stock selection was particularly strong in the Health Care,
Industrials and Information Technology sectors. Within the Health Care sector,
Aventis gained almost 44%, while Industrials stocks Geberit (up 50.7%) and Sig
Holding (up 27.1%) added value for the Fund. Within the Information Technology
sector, holdings in Celestica, Canon and Dimension Data contributed to the
Fund's outperformance.
From a sector allocation perspective, the Fund detracted value by
overweighting Industrials, the third worst performing Index sector for the
period (up less than 10%), and by underweighting Utilities, the second best
performing sector (up nearly 20%).
Although economic and market conditions vary from period to period, the
Fund's primary strategy remains consistent as it focuses on investing in
undervalued companies with above-average earnings growth expectations.
10
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Aventis S.A. 2.4%
Koninklijke (Royal) Philips Electronics N.V 2.0%
GlaxoSmithKline PLC 2.0%
Vodafone Group PLC 1.8%
Total S.A. 1.7%
Unilever PLC 1.5%
Royal Bank of Scotland Group PLC 1.5%
Canon, Incorporated 1.5%
Telefonica S.A. 1.3%
ENI S.p.A 1.3%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
----------
Financials 25.7%
Industrials 15.6%
Consumer Discretionary 12.4%
Telecommunication Services 9.4%
Energy 8.4%
Health Care 7.9%
Consumer Staples 6.9%
Materials 6.6%
Information Technology 4.3%
Utilities 2.8%
</Table>
REGIONAL ALLOCATION*
(PIE CHART)
REGIONAL ALLOCATION*
<Table>
<Caption>
% OF
EQUITIES
--------
Europe 75.9%
Pacific Rim 21.2%
North America 2.6%
Central America 0.3%
* Allocations based upon gross investments in AMR
Investment Services Trust International Equity
Portfolio.
</Table>
11
EMERGING MARKETS OVERVIEW
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
During the six months ended April 30, 2004, emerging markets, as measured by the
MSCI Emerging Markets Free Index, gained 9.2%. The asset class continued to
re-rate given a recovery in global growth, improved domestic economies, rising
corporate earnings and attractive valuations. The emerging markets, however, did
not escape the six-month period without renewed volatility. After a long period
of tranquility, volatility in the emerging markets spiked during the month of
April. The asset class posted its weakest performance since September 2002,
declining 8.2% in April. It was also the region's first negative monthly
performance in over 12 months after gaining 55.8% in 2003 and another 9.6% in
the first three months of 2004.
The difficulties in emerging markets have been based primarily on exogenous
factors, though endogenous reasons exist as well. Externally, fears of future US
interest rate hikes, higher oil prices and instability in Iraq hurt all equity
markets while concerns of a Chinese economic slowdown has put significant
pressure on most commodity prices. Internal to the emerging markets, those
countries that appreciated the most in 2003 fell the most during the month of
April.
Europe, the Middle East and Africa (EMEA) led all emerging market regions,
where several countries posted strong gains. Russia was among the best performer
of the EMEA region gaining 23.3% given the positive political and economic
environment. Russia's top down growth story remains attractive due to high oil
prices, continued structural reforms, strong current account balance, high FX
reserve levels and strong liquidity. The favorable outcome of the Duma elections
held in December 2003, a new streamlined government and the eventual re-election
of President Putin in March is expected to boost reform momentum in the country.
Despite recent volatility, Turkey also performed well, returning 15.4% on signs
of an improving economy, declining interest rates and falling inflation. Egypt
was supported by increased stability and greater trade in the region. Hungary
(+27.7%), Poland (+12.4%) and the Czech Republic (+29.1%), markets that
underperformed during the first half of 2003, played catch-up in the fourth
quarter as improving economic indicators and a more optimistic outlook emerged.
Mexico (+19.4%), after under-performing in 2003, started the New Year strong
leading all major markets in Latin America. Market performance was supported by
the appreciating Peso, continued signs of Mexican economic recovery and
supportive US data. Brazil, despite underperforming in 2004, gained 6.0% given
stronger domestic economic data and supportive fiscal and monetary policy.
Brazilian market performance, however, has been hampered this year by concerns
over its political environment, rising risk aversion, and uncertainty over the
future monetary policy in Brazil and the US. Colombia outperformed all markets,
gaining 87.6%, as the country benefited from relatively attractive valuations
and an improving political and economic environment.
Asian markets also gained strongly during the six-month period, led by
Indonesia (+26.6%), Thailand (+16.2%) and South Korea (+13.8%). Strong domestic
economic growth and improving fundamentals supported solid gains in these
countries. The rapid growth of the Chinese economy resulted in the continued
expansion of China's role as an export destination for the region, further
bolstering the economies of its neighbors. China (-1.9%), however, after gaining
88% in 2003 has been a laggard this year, as investors worry that China is
poised for a hard landing.
The recent sell-off that saw stocks fall indiscriminately was not driven by
usual triggers such as political scandal, debt default or even devaluation but
by markets anticipating a change in liquidity conditions and the subsequent rise
in global risk aversion. Emerging markets valuations and fundamentals remain
attractive. However, it is expected that near-term trading will be in-line with
global risk aversion, in turn a function of U.S. rate concerns and developments
in China. Markets are significantly cheaper while stronger fiscal positions and
lower interest rates are a boost to growth prospects. In 2004, aggregate GDP
growth is expected to average above 6.0%. In addition, emerging market growth
has been both export-driven as well as consumer-led, which marks an improvement
from foreign investment-led cycles of the late 1990's.
12
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Emerging Markets Fund returned 10.7% for the
six months ended April 30, 2004. The Fund outperformed the MSCI EM Free Index
("Index") return of 9.2% and the Lipper Emerging Markets Funds Index return of
10.5%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
----------------------------------------
PERIODS ENDED 4/30/04
----------------------------------------
SINCE
6 MONTHS* 1 YEAR 3 YEARS INCEPTION
--------- ------ ------- ---------
Institutional
Class(1)............. 10.66% 54.63% 15.67% 5.00%
PlanAhead Class(1,2)... 10.57% 54.29% 15.48% 4.87%
AMR Class(1)........... 10.92% 55.23% 15.97% 5.29%
Lipper Emerging Mkt.
Funds Index.......... 10.48% 52.89% 13.99% 3.92%
MSCI EM Free Index..... 9.22% 53.17% 13.05% 3.50%
</Table>
* Not Annualized
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 six months due to a
combination of positive stock selection and country allocation. Stock selection
was particularly strong in India and South Africa. Fund holdings in non-Index
stocks such as Mahanagar Tel Nigam (up 57.2%), GAIL (up 32.3%), State Bank of
India (up 29.6%) and Tata Engineering (up 28.7%) contributed much of the
outperformance in India. In South Africa, the Fund added value by overweighting
Telkom Sa (up 41.9%), Bidvest Group (up 31.4%), Standard Bank Group Ltd (up
22.1%) and Sasol Ltd. (up 17.5%). Country allocation also contributed positively
as the Fund underweighted China (down 1.3%) and Chile (down 2.0%) and
overweighted Indonesia (up 26.8%) and Egypt (up 43.6%).
Turning to sector attribution, both stock selection and sector allocation
added value. Stock selection was particularly strong in the Telecomm Services,
Information Technology and Consumer Staples sectors. Within the Telecomm
Services sector, the Fund's positions in non-Index stocks including America
Movil (up 42.3%), Mahanagar Tel Nigam (up 57.2%) and Mobile Telesystems (up
39.3%) added value. Fund holdings in Check Point Software (up 37.9%), Samsung
SDI (up 26.3%) and Samsung Electronics (up 20.9%) contributed to positive stock
selection in Information Technology. ITC, KT&G Corporation and Tiger Brands were
among the top contributors in the Consumer Staples sector. From a sector
allocation perspective, most of the added value was attributable to
underweighting the Materials sector which was the worst sector for the period
with a gain of only 1.7%.
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.
13
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM) -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Samsung Electronics Company Limited 3.0%
Samsung SDI Company Limited 2.0%
LUKOIL Oil Company 1.8%
Anglo American PLC 1.7%
Petroleo Brasileiro S.A. 1.6%
Telefonos de Mexico S.A. de C.V. 1.5%
Korea Electric Power Corporation 1.5%
America Movil S.A. de C.V. 1.1%
Grupo Televisa, S.A. 1.0%
Sasol Limited 1.0%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
----------
Financials 17.0%
Telecommunication Services 13.3%
Information Technology 12.8%
Materials 11.6%
Consumer Discretionary 11.1%
Industrials 10.7%
Energy 9.9%
Consumer Staples 8.4%
Utilities 4.3%
Health Care 0.9%
</Table>
COUNTRY ALLOCATION
(PIE CHART)
COUNTRY ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
South Korea 17.0%
South Africa 14.2%
Other Europe, Middle East, Africa 13.3%
Taiwan 11.1%
Brazil 9.2%
Other Asia 8.6%
India 8.0%
Mexico 7.7%
China 6.4%
Malaysia 2.4%
Israel 1.4%
Other Latin America 0.7%
</Table>
14
U.S. FIXED-INCOME MARKET OVERVIEW
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
U.S. FIXED-INCOME
During the six-month period ended April 30, 2004, the fixed-income markets, as
defined by the Lehman Brothers Aggregate Index (the "Index"), produced a 1.24%
total return. According to the Index, the highest returns were in the corporate
and mortgage sectors, due primarily to their income advantages, while the
Treasury and agency sectors lagged. Within the investment grade credit universe,
the lower-rated credits produced the highest total returns as corporate
fundamentals continued to improve. Interest rates ended the period slightly
higher than the level at which they began reflecting incipient signs of economic
expansion.
<Table>
<Caption>
TOTAL RETURNS
-----------------------
PERIODS ENDED 4/30/04
-----------------------
SECTOR 6 MONTH* 12 MONTH
- ------ -------- --------
Lehman Aggregate 1.24% 1.82%
Lehman Gov/Credit 1.17% 1.80%
US Treasury 0.75% 0.51%
US Agency 1.00% 0.91%
Mortgage-Backed 1.39% 1.80%
U.S. Credit 1.59% 3.28%
Asset-Backed 1.54% 2.58%
- -----------------------------------------------------
CREDIT RATING
Aaa 0.89% 1.34%
Aa 1.01% 1.53%
A 1.23% 2.44%
Baa 2.23% 5.31%
</Table>
(source: Lehman Brothers)
* Not Annualized
Interest rates were relatively volatile due to the mixed economic data
reported throughout this period. In particular, the employment picture looked
bleak as job growth was virtually non-existent. The high level of productivity
allowed for strong profitability and increased output without the need for
additional workers. Thus, job growth appeared to be the only piece missing from
the economic recovery.
Just as investors were beginning to question the sustainability of the
recovery, the March payroll report, released in early April 2004, indicated a
308K increase in non-farm jobs. This number was substantially higher than all
economic predictions and was the first in a series of strong economic reports.
Fixed-income markets quickly took note and interest rates rose. In addition to
the strong economic data, the inflation data began to creep upwards -- albeit
from 40-year lows of around 1%. Pressure from rising commodity prices and the
recovering economy began to surface in the inflation indicators. As such, the
month of April 2004 was particularly hard on the bond market. The markets
adjusted interest rates to reflect both the rising level of inflation and the
probability that the Fed would soon end its highly accommodative monetary
policy.
(US TREASURY YIELD CURVE GRAPH)
<Table>
<Caption>
U.S. TREASURY YIELD CURVE
----------------------------------------------------
3 MOS. 6 MOS. 2 YR. 5 YRS. 10 YRS. 30 YRS.
------ ------ ----- ------ ------- -------
10/31/2003 0.95% 1.04% 1.82% 3.24% 4.29% 5.13%
4/30/2004 0.96% 1.15% 2.32% 3.62% 4.51% 5.28%
</Table>
(10 YEAR U.S. TREASURY YIELD GRAPH)
<Table>
Mar-03 3.90
Apr-03 3.95
Apr-03 3.97
Apr-03 3.96
Apr-03 3.89
May-03 3.93
May-03 3.68
May-03 3.42
May-03 3.34
May-03 3.37
Jun-03 3.35
Jun-03 3.11
Jun-03 3.37
Jun-03 3.54
Jul-03 3.65
Jul-03 3.63
Jul-03 4.00
Jul-03 4.18
Aug-03 4.39
Aug-03 4.27
Aug-03 4.53
Aug-03 4.48
Aug-03 4.47
Sep-03 4.35
Sep-03 4.25
Sep-03 4.16
Sep-03 4.00
Oct-03 4.20
Oct-03 4.27
Oct-03 4.39
Oct-03 4.23
Oct-03 4.30
Nov-03 4.44
Nov-03 4.22
Nov-03 4.16
Nov-03 4.33
Dec-03 4.23
Dec-03 4.24
Dec-03 4.14
Dec-03 4.15
Jan-04 4.38
Jan-04 4.08
Jan-04 4.03
Jan-04 4.07
Jan-04 4.13
Feb-04 4.08
Feb-04 4.04
Feb-04 4.10
Feb-04 3.97
Mar-04 3.85
Mar-04 3.78
Mar-04 3.77
Mar-04 3.83
Apr-04 4.15
Apr-04 4.19
Apr-04 4.34
Apr-04 4.46
Apr-04 4.51
</Table>
The U.S. credit sector produced the highest total returns for the six and
twelve-month periods ended April 30, 2004. Credit spreads tightened across the
credit curve reflecting the improved corporate fundamentals and investor
appetite for yield. Although the economic data was mixed, corporate spreads held
firm as corporations continued to improve their balance sheets and significantly
reduced debt issuance. During the late 90's, companies overspent on capacity
relying primarily on the bond market for financing. But as the recession set in,
balance sheet strength became a key variable for survival and capital spending
decreased dramatically. Cost cutting and productivity were driving forces in
corporate America beginning in late 2002, and bondholders became the
beneficiaries. Since then, corporate cash flows have been strong and balance
sheet repair has been a key variable in the overall economic recovery.
15
U.S. FIXED-INCOME MARKET OVERVIEW -- CONTINUED
& HIGH YIELD BOND MARKET OVERVIEW
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
(LB AGGREGATE INDEX CREDIT SPREADS GRAPH)
<Table>
<Caption>
INDEX AAA CREDIT AA CREDIT A CREDIT BAA CREDIT
----- ---------- --------- -------- ----------
1/4/02 185 82 112 178 255
1/11/02 185 77 109 178 260
1/18/02 186 77 110 176 263
1/25/02 180 77 105 168 258
2/1/02 188 75 107 179 267
2/8/02 198 76 113 193 277
2/15/02 196 73 108 189 278
2/22/02 197 72 108 192 280
3/1/02 189 70 104 184 266
3/8/02 177 70 97 168 253
3/15/02 183 72 102 175 258
3/22/02 182 74 102 174 258
3/29/02 182 73 103 175 257
4/5/02 185 81 109 176 259
4/12/02 190 89 117 180 264
4/19/02 179 71 103 172 252
4/26/02 187 66 102 160 286
5/3/02 198 70 107 168 305
5/10/02 182 70 105 163 269
5/17/02 180 63 100 158 272
5/24/02 177 61 97 155 272
5/31/02 165 59 92 141 253
6/7/02 171 61 95 147 263
6/14/02 172 62 97 149 263
6/21/02 178 61 99 156 274
6/28/02 189 62 105 160 296
7/5/02 193 64 105 162 305
7/12/02 194 64 105 166 306
7/19/02 201 64 107 171 322
7/26/02 222 65 118 186 366
8/2/02 231 74 129 201 365
8/9/02 235 72 128 211 367
8/16/02 238 71 130 214 374
8/23/02 224 69 125 199 349
8/30/02 220 68 123 199 341
9/6/02 225 70 126 204 348
9/13/02 219 69 121 197 342
9/20/02 225 71 124 205 347
9/27/02 232 72 127 211 362
10/4/02 235 79 130 216 362
10/11/02 254 85 137 240 387
10/18/02 250 80 132 242 378
10/25/02 249 79 128 247 368
11/1/02 240 80 124 237 354
11/8/02 223 74 115 214 337
11/15/02 210 71 114 196 320
11/22/02 203 71 109 195 302
11/29/02 192 67 107 185 286
12/6/02 195 69 107 189 289
12/13/02 189 65 102 183 281
12/20/02 186 65 101 180 277
12/27/02 184 63 98 175 278
1/3/03 180 63 99 174 268
1/10/03 176 62 96 171 261
1/17/03 171 59 94 163 256
1/24/03 173 61 95 164 260
1/31/03 169 59 89 161 257
2/7/03 169 58 90 161 256
2/14/03 167 54 89 158 256
2/21/03 165 54 89 157 251
2/28/03 162 53 85 155 247
3/7/03 167 57 87 163 249
3/14/03 167 56 89 167 245
3/21/03 165 55 90 168 238
3/28/03 161 53 85 161 235
4/4/03 159 53 86 159 229
4/11/03 157 52 85 155 227
4/17/03 149 51 80 146 217
4/25/03 144 48 78 139 210
5/2/03 134 47 76 130 193
5/9/03 128 42 70 125 186
5/16/03 130 43 70 126 191
5/23/03 132 44 72 128 192
5/30/03 128 42 69 125 186
6/6/03 128 43 69 127 184
6/13/03 124 41 66 120 181
6/20/03 123 41 67 120 178
6/27/03 124 41 67 120 179
7/3/03 124 40 67 122 180
7/11/03 122 41 66 118 176
7/18/03 119 42 68 116 169
7/25/03 118 42 69 114 168
8/1/03 128 55 81 124 176
8/8/03 121 45 73 116 171
8/15/03 126 48 76 121 179
8/22/03 121 48 72 115 173
8/29/03 120 48 73 115 169
9/5/03 119 49 54 93 174
9/12/03 117 47 51 91 172
9/19/03 113 46 54 88 165
9/26/03 114 45 53 88 167
10/3/03 115 48 57 89 167
10/10/03 114 44 57 90 165
10/17/03 109 44 56 85 157
10/24/03 112 47 56 86 164
10/31/03 108 45 54 83 156
11/7/03 109 47 55 84 158
11/14/03 102 41 49 78 149
11/21/03 103 41 50 80 151
11/28/03 100 39 48 79 146
12/5/03 101 40 49 80 144
12/12/03 100 39 48 81 143
12/19/03 99 39 50 80 141
12/26/03 98 38 49 79 139
1/2/04 97 39 50 79 136
1/9/04 95 38 49 78 134
1/16/04 95 38 49 78 134
1/23/04 96 40 49 79 134
1/30/04 97 40 49 79 136
2/6/04 100 41 53 82 141
2/13/04 95 36 48 77 135
2/20/04 96 35 48 79 136
2/27/04 96 37 49 78 137
3/5/04 97 38 48 78 138
3/12/04 99 38 48 78 143
3/19/04 99 39 48 79 142
3/26/04 99 39 48 79 142
4/2/04 98 40 48 80 140
4/8/04 97 40 48 80 137
4/16/04 98 40 50 80 138
4/23/04 96 41 50 80 133
4/30/04 97 40 51 80 137
</Table>
The mortgage sector of the fixed-income markets also produced relatively
attractive returns during the past six months due primarily to the relatively
short duration and additional yield. Mortgage refinancing activity increased
during the first quarter of 2004 as interest rates declined, but the strong jobs
report in April lifted rates and reduced refinancing substantially. The rise in
rates and decline in refinancing activity allowed this sector to report
attractive total returns during the period.
The Treasury and Agency sectors followed with the lowest returns during
this period. With interest rates at such low levels, investors continued to look
towards the corporate and mortgage sectors for incremental yield. In the past,
Treasury and Agencies were desirable, safe-haven investments to protect against
geopolitical and corporate instability, but with the economy on the mend,
investors continue to look elsewhere for additional yield.
As we approach mid-2004, the steep yield curve reflects the likelihood of
an economic recovery and an increase in inflation. The Fed is beginning to
indicate that its accommodative monetary policy may be replaced by a more
balanced approach, which means higher short-term rates. For long-term interest
rates, however, the outlook is less clear. While long-term interest rates are
likely to rise initially during the recovery, they can't rise too much. The
economy is very interest rate sensitive, and the Fed does not want to disrupt
consumer spending. The consumer hardly slowed down during the recession, rather
corporate spending was slashed dramatically. As such, with the consumer sector
heavily debt-laden and very interest rate sensitive, the Fed must be careful.
Ideally, the corporate recovery will pull the consumer along until he is ready
spend again. After all, a slowing of consumer spending would not be a healthy
way to begin an economic recovery.
HIGH YIELD BOND
During 2003, the high yield market benefited investors who were willing to take
risks and extend duration as interest rates were decreasing and credit spreads
were tightening.
There were five distinct factors for the excellent performance in the high
yield market in 2003 and early 2004. These included: 1) the narrowing of credit
spreads, 2) increased confidence in audited numbers and corporate management, 3)
investors seeking alternatives to 1% money market yields, 4) improving company
fundamentals and higher credit quality, and 5) asset allocation from investment
grade mandates to high yield by institutions.
Other than the already-tight credit spreads, the other four elements are
still relevant. Many institutions are currently investing in high yield bonds
because they provide a higher yield at a shorter duration. Many experts believe
high yield bonds are more defensive than investment grade securities during
improving economic conditions.
16
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE HIGH YIELD BOND FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the High Yield Bond Fund returned 4.9% for the
six months ended April 30, 2004. Although the Fund outperformed all of its
indices on a year-to-date basis through April 30, 2004, on a six-month basis,
the Fund slightly trailed. The Lipper High Current Yield Funds Index returned
5.3% while both the Citigroup High Yield Cash Pay Index and the Lehman Brothers
Corporate High Yield Index ("Lehman Index") posted a return of 5.5% for the
six-month period.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
----------------------------------------
PERIODS ENDED 4/30/04
----------------------------------------
SINCE
6 MONTHS* 1 YEAR 3 YEARS INCEPTION
--------- ------ ------- ---------
Institutional Class(1)....... 4.90% 11.65% 10.79% 10.84%
PlanAhead Class(1,2)......... 4.70% 11.16% 10.24% 10.35%
Service Class(1,3)........... 4.43% 10.14% 9.91% 10.04%
Lipper High Yield Bond Funds
Index....................... 5.28% 15.21% 6.69% 6.65%
Citigroup High Yield Cash Pay
Index....................... 5.46% 14.39% 9.88% 10.51%
Lehman Bros. Corp. High Yield
Index....................... 5.53% 15.00% 9.02% 9.68%
</Table>
* Not Annualized
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 12/29/00 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 three of the
top four best performing sectors. The Financial sector was the top sector for
the period with a return of nearly 9.5%. The Basic Industry and Utility sectors
also outperformed the Lehman Index with returns of 8.4% and 6.8%, respectively.
The Fund was also impacted by an overweighting in the Technology sector, which
lagged the Lehman Index with a return of 4.5%.
The Fund had an underweighting in Communications which underperformed the
Lehman Index with a return of 3.2%. Additionally, the Fund underweighted
Transportation which was the worst sector for the period as it gained just over
1%. The Fund was overweighted in the Consumer Cyclical and Capital Goods
sectors, which had returns of 5.3% and 5.1%, respectively.
The sub-adviser's "bottom up" investment process, with a focus on companies
with strong cash flow and fundamental credit strength, began to come back into
favor as the period came to a close. Higher-rated securities reversed course
from 2003 and outperformed the lower-rated securities in the first quarter of
2004. The sub-adviser believes that their comprehensive research approach, which
has generated outperformance for the Fund in the past, will continue to deliver
strong performance over the long term.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Horseshoe Gaming, LLC 2.5%
Qwest Services Corporation 2.4%
General Motors Corporation 1.5%
Turning Stone Casino Resort 1.4%
Regal Cinemas Corporation 1.4%
Owens-Brockway Glass Containers, Incorporated 1.3%
Hexcel Corporation 1.3%
Interline Brands, Incorporated 1.3%
Star Gas Partners, L.P. 1.3%
AMC Entertainment, Incorporated 1.2%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporate 100.0%
</Table>
17
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE ENHANCED INCOME FUND(SM)
April 30, 2004
- --------------------------------------------------------------------------------
The PlanAhead Class of the Enhanced Income Fund returned 2.2% for the six
months ended April 30, 2004. Its benchmark, a blend of 37.5% Lehman Brothers
Gov/Credit Intermediate Index, 37.5% Lehman Brothers Intermediate Aggregate
Index and 25% Merrill Lynch Convertible Bonds Index (the "Benchmark"), also
returned 2.2%. The Fund's peer group, the Lipper Intermediate Investment Grade
Index, returned 1.3% over the six months ended April 30, 2004.
<Table>
<Caption>
TOTAL RETURNS
----------------------
PERIODS ENDED 4/30/04
----------------------
SINCE
6 MONTHS* INCEPTION
--------- ---------
PlanAhead Class(1).................... 2.24% 2.57%
Lipper Intermediate Investment Grade
Index............................... 1.33% 0.57%
Enhanced Income Composite Index(2).... 2.22% 3.14%
</Table>
* Not Annualized
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.
2 37.5% Lehman Bros. Gov/Credit Intermediate Index, 37.5%
Lehman Bros. Aggregate Index, 25% Merrill Lynch Convertibles Index
The Fund's assets are allocated approximately 75% to a sub-adviser who
invests in income producing, short- and intermediate-term, investment grade
bonds. The remaining assets are managed by a sub-adviser who invests in
convertible bonds, convertible preferreds, high yield bonds and equities in an
effort to enhance the return of the overall Fund.
For the six-month period, the investment grade bond portion of the Fund
returned 1.3% before fees and expenses as compared to a 1.1% return for its
portion of the Benchmark. The sub-adviser's almost triple-weight position in
Corporates added the most relative value as Corporates was the best performing
segment of the combined Lehman Gov/Credit Intermediate Index and Lehman
Aggregate Intermediate Index. In Corporates, a double-weight position in
industrials combined with good security selection in that industry contributed
the most to relative returns. The duration of the investment grade portion of
the Fund did not play a significant role in relative total returns.
The remaining portion of the Fund managed by the Fund's other sub-adviser
returned 6.9% before fees and expenses. These results not only beat the 5.5%
return of its portion of the Benchmark but also enhanced the Fund's overall
return. This portion of the Fund benefited most from its convertible securities
due to their greater equity sensitivity over a period where stocks outperformed
bonds. Convertibles' hybrid nature means that they can behave like bonds or like
stocks (depending on the security, market conditions, and the underlying
company's stock price). The convertibles portion of the Fund was focused on
issues which were especially equity-sensitive in anticipation of the economic
recovery and companies which stood to benefit from additional business capital
spending.
The Fund's investment advisers remain focused on the Fund's investment
objective of income and capital appreciation.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
US Treasury Notes, 4.00%, Due 2/15/2014 2.4%
Prudential Insurance Company of America, 6.375%,
Due 7/23/2006 2.1%
Citibank Credit Card Master Trust 2000-A1 A1,
6.90%, Due 10/15/2007 2.1%
Honda Auto Receivables Owner Trust 2003-4 A4,
2.79%, Due 3/16/2009 2.0%
Ford Motor Credit Company, 7.375%, Due
10/28/2009 1.8%
HSBC Bank USA, Incorporated, 7.00%, Due
11/1/2006 1.6%
Wachovia Corporation, 6.40%, Due 4/1/2008 1.6%
Heller Financial, Incorporated, 6.375%, Due
3/15/2006 1.6%
Synovus Financial Corporation, 7.25%, Due
12/15/2005 1.6%
Federal National Mortgage Association, Pool
#545759, 6.50%, Due 7/1/2032 1.6%
</Table>
FIXED INCOME SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporate 62.5%
Corporate Convertibles 15.4%
Mortgage-Backed 12.6%
Asset-Backed 4.4%
Treasury 3.9%
Agency 1.2%
</Table>
EQUITY SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Consumer Discretionary 35.8%
Financials 26.3%
Industrials 14.1%
Energy 13.5%
Information Technology 10.3%
</Table>
18
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Intermediate Bond Fund returned 0.9% for the
six months ended April 30, 2004, trailing the Lehman Brothers Aggregate Index
("Index") return of 1.2% and the Lipper Intermediate Investment Grade Index
return of 1.3%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
----------------------------------------
PERIODS ENDED 4/30/04
----------------------------------------
SINCE
6 MONTHS* 1 YEAR 5 YEARS INCEPTION
--------- ------ ------- ---------
Institutional
Class(1).............. 0.93% 1.11% 6.09% 6.37%
PlanAhead Class(1,2).... 1.16% 1.48% 5.56% 5.93%
AMR Class(1,3).......... 1.43% 1.74% 6.10% 6.32%
Lipper Intermediate Inv
Grade Index........... 1.33% 2.42% 6.25% 6.40%
Lehman Bros Aggregate
Index................. 1.24% 1.82% 6.66% 6.94%
</Table>
* Not Annualized
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.
Prior to the deduction of expenses, the Fund slightly outperformed the
Index. Unfortunately, the Fund did not generate enough excess performance to
offset its expenses. 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 six-month period was 53% versus the
Index average weighting of 22%, ending the period with a 46% weighting in
Corporates versus the Index weighting of 22%. The Fund also added value by
underweighting U.S. Treasuries, which was the worst performing sector of the
Index. Finally, an overweight in A and BBB rated securities, the best performing
among the investment grade quality ranges, also helped relative performance. The
Fund's weighted average duration was neutral during the period and therefore did
not play a significant role in relative performance.
The Fund's sub-advisers remain focused on a conservative approach toward
investing in the bond market, focusing on issuer-specific opportunities.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Federal National Mortgage Assn., Pool #555880, 5.50%,
Due 11/1/2033 1.6%
U.S. Treasury Notes, 1.625%, Due 9/30/2005 1.6%
Federal Home Loan Mortgage Corp., 5.00%, Due 3/1/2018 1.6%
Government National Mortgage Assn., Pool #003515,
5.50%, Due 2/20/2034 1.5%
Federal National Mortgage Assn., Pool #758322, 5.50%,
Due 12/1/2033 1.5%
Federal National Mortgage Assn., Pool #713706, 5.50%,
Due 8/1/2033 1.5%
U.S. Treasury Notes, 4.00%, Due 2/15/2014 1.5%
U.S. Treasury Notes, 4.625%, Due 5/15/2006 1.4%
Federal National Mortgage Assn., TBA, 15 yr, 6.00% 1.2%
Federal Home Loan Mortgage Assn., Pool #C01786 5.50%,
Due 2/1/2034 1.2%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporates 47.2%
Mortgage-Backed 34.8%
Treasury 8.9%
Agency 7.6%
Asset-Backed 1.5%
</Table>
19
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM)
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Short-Term Bond Fund returned 1.0% for the
six months ended April 30, 2004, ahead of the Merrill Lynch 1-3 Year Gov/Corp
Index return of 0.8% and the Lipper Short Investment Grade Bond Funds Index
return of 0.8%.
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
---------------------------------------
PERIODS ENDED 4/30/04
---------------------------------------
6 MONTHS* 1 YEAR 5 YEARS 10 YEARS
--------- ------ ------- --------
Institutional
Class(1)............. 1.00% 1.77% 5.25% 5.44%
PlanAhead Class(1,2)... 0.76% 1.51% 4.96% 5.18%
AMR Class(1,2)......... 1.13% 2.16% 5.45% 5.67%
Lipper Short Inv. Grade
Bond Funds Index..... 0.75% 1.50% 4.72% 5.33%
Merrill Lynch 1-3 Yr
Gov./Corp. Index..... 0.78% 1.65% 5.55% 6.00%
</Table>
* Not Annualized
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 ten-year period represents the
total returns achieved by the Institutional Class from 4/30/94 up to 8/1/94,
the inception date of the PlanAhead and AMR Classes, and the returns of the
PlanAhead and AMR Classes since inception of these Classes. Expenses of the
PlanAhead Class are higher than those of the Institutional Class. As a
result, total returns shown may be higher than they would have been had the
PlanAhead Class been in existence since 4/30/94. 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 4/30/94.
By period end, short-term interest rates had begun to rise significantly,
reflecting a high probability that the Fed would steadily bring the Fed Funds
rate up to a neutral level. The highly accommodative 1.00% Fed Funds rate no
longer seemed appropriate given the improvement in the jobs markets, the
increase in inflation and the steady GDP growth. The short-term interest rate
markets were particularly sensitive to the rise in interest rates given the
steepness of the yield curve and the distance that has to be covered to reach a
neutral level of interest rates.
Despite the rise in rates during this period, the short-term fixed-income
markets produced reasonably attractive total returns. According to the Merrill
Lynch 1-3 Year Index, the Mortgage sector produced the highest total return, at
1.5%, followed by Corporates at 1.3%, and Treasuries and Agencies at 0.6% and
0.7%, respectively. The Mortgage sector benefited from its relatively low
duration in a rising interest rate environment and from a moderation in mortgage
prepayment activity. The Corporate sector returns reflected the continued
improvement in credit spreads and the general appetite for incremental yield in
the low interest rate environment. Lower-rated bonds continued to outperform
higher-rated alternatives as credit fundamentals improved and investors
maintained their appetite for risk. Treasury and Agency returns were negatively
impacted by the rise in interest rates and investors' general desire to look for
higher yields elsewhere.
The Fund's outperformance relative to its benchmarks was primarily due to
its overweight position in the Corporate sector. The best performing industries
continued to include telecommunications, cable/media, and autos - all of which
the Fund overweighted versus its benchmarks. These industries have historically
offered some of the highest yield spreads over Treasuries, and with the credit
markets relatively stable, they continued to outperform. Given the positive
fundamentals for the short-term credit environment, the Fund is expected to
maintain its Corporate overweight for the foreseeable future.
The Funds' duration was maintained at neutral during the period and did not
play a significant role in relative total returns.
20
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Prudential Insurance Company of America, 6.375%, Due
7/23/2006 3.5%
General Motors Acceptance Corporation, 6.75%, Due
1/15/2006 3.4%
Chemical Master Credit Card Trust 1996-2 A, 5.98%,
Due 9/15/2008 3.4%
Hertz Corporation, 4.70%, Due 10/2/2006 3.2%
Wachovia Corporation, 6.40%, Due 4/1/2008 2.9%
Heller Financial, Incorporated, 6.375%, Due
3/15/2006 2.9%
Synovus Financial Corporation, 7.25%, Due 12/15/2005 2.9%
MetLife, Incorporated, 3.911%, Due 5/15/2005 2.7%
FleetBoston Financial Corporation, 3.85%, Due
2/15/2008 2.7%
American Express Credit Account Master Trust 2000-1
A, 7.20%, Due 9/17/2007 2.7%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporate 78.2%
Asset-Backed 14.0%
Mortgage-Backed 7.8%
</Table>
21
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 7.78%
U.S. TREASURY NOTES - 3.04%
3.25%, Due 5/31/2004........... $ 5,000 $ 5,009
1.625%, Due 9/30/2005*......... 3,500 3,486
4.625%, Due 5/15/2006*......... 4,300 4,493
2.625%, Due 5/15/2008*......... 895 872
3.00%, Due 7/15/2012*.......... 915 989
4.375%, Due 8/15/2012*......... 2,000 2,004
4.00%, Due 2/15/2014*.......... 2,355 2,262
--------
TOTAL U.S. TREASURY
NOTES.................... 19,115
--------
U.S. TREASURY BILLS - 3.64%
Discount Note, Due
9/23/2004*................... 23,000 22,903
--------
TOTAL U.S. TREASURY
BILLS.................... 22,903
--------
U.S. TREASURY BONDS - 1.10%
7.50%, Due 11/15/2016*......... 1,055 1,312
9.125%, Due 5/15/2018*......... 1,000 1,415
6.875%, Due 8/15/2025*......... 1,280 1,527
6.25%, Due 5/15/2030*.......... 900 1,011
5.375%, Due 2/15/2031*......... 1,660 1,682
--------
TOTAL U.S. TREASURY
BONDS.................... 6,947
--------
TOTAL U.S. TREASURY
OBLIGATIONS.............. 48,965
--------
U.S. AGENCY OBLIGATIONS - 2.20%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 0.96%
3.25%, Due 11/15/2004.......... 4,500 4,547
5.125%, Due 10/15/2008*........ 500 527
5.875%, Due 3/21/2011.......... 415 441
4.875%, Due 11/15/2013......... 500 495
--------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION..... 6,010
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.24%
1.875%, Due 12/15/2004......... 3,890 3,903
5.125%, Due 1/2/2014*.......... 515 507
7.25%, Due 5/15/2030*.......... 900 1,076
6.00%, Due 12/11/2033.......... 2,250 2,299
--------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION..... 7,785
--------
TOTAL U.S. AGENCY
OBLIGATIONS.............. 13,795
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 8.13%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 2.31%
Pool #G10084, 6.50%, Due
3/1/2008..................... 812 858
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Pool #G11202, 6.00%, Due
11/1/2016.................... $ 269 $ 281
Pool #E90777, 5.50%, Due
8/1/2017..................... 154 159
Pool #E96536, 5.00%, Due
3/1/2018..................... 1,580 1,592
Pool #E01386, 5.00%, Due
6/1/2018..................... 510 514
Pool #E97381, 5.50%, Due
6/1/2018..................... 317 325
Pool #B12563, 5.00%, Due
2/1/2019..................... 722 728
Pool #E01602, 4.50%, Due
3/1/2019..................... 1,489 1,468
Pool #C26472, 6.50%, Due
5/1/2029..................... 229 239
Pool #C27089, 6.50%, Due
6/1/2029..................... 39 41
Pool #C00835, 6.50%, Due
7/1/2029..................... 627 653
Pool #C01444, 6.00%, Due
1/1/2033..................... 269 275
Pool #C01598, 5.00%, Due
8/1/2033..................... 1,692 1,642
Pool #A12149, 6.00%, Due
8/1/2033..................... 934 956
Pool #A15436, 5.50%, Due
11/1/2033.................... 891 890
Pool #A15173, 6.00%, Due
11/1/2033.................... 1,089 1,114
Pool #A15374, 6.50%, Due
11/1/2033.................... 144 150
Pool #A16690, 6.00%, Due
12/1/2033.................... 701 717
Pool #C01786, 5.50%, Due
2/1/2034..................... 1,961 1,960
--------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION..... 14,562
--------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 3.40%
Pool #313522, 7.00%, Due
5/1/2012..................... 835 891
Pool #323309, 6.00%, Due
9/1/2013..................... 308 322
Pool #488099, 5.50%, Due
2/1/2014..................... 542 558
Pool #323789, 6.00%, Due
6/1/2014..................... 440 460
Pool #535846, 6.00%, Due
4/1/2016..................... 303 317
Pool #648511, 6.00%, Due
6/1/2017..................... 1,192 1,243
Pool #254545, 5.00%, Due
12/1/2017.................... 2,001 2,017
Pool #555549, 5.00%, Due
6/1/2018..................... 810 816
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
22
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Pool #254865, 4.50%, Due
9/1/2018..................... $ 1,322 $ 1,303
Pool #100292, 10.00%, Due
9/1/2018..................... 269 302
Pool #761337, 5.00%, Due
4/1/2019..................... 420 423
Pool #581864, 6.50%, Due
7/1/2031..................... 209 217
Pool #705607, 6.00%, Due
6/1/2033..................... 526 539
Pool #713999, 5.50%, Due
7/1/2033..................... 910 909
Pool #713706, 5.50%, Due
8/1/2033..................... 759 757
Pool #730570, 6.00%, Due
8/1/2033..................... 308 316
Pool #727223, 5.50%, Due
9/1/2033..................... 1,529 1,527
Pool #740238, 6.00%, Due
9/1/2033..................... 208 213
Pool #741901, 5.50%, Due
10/1/2033.................... 544 543
Pool #749219, 5.50%, Due
10/1/2033.................... 987 986
Pool #555880, 5.50%, Due
11/1/2033.................... 2,566 2,562
Pool #758322, 5.50%, Due
12/1/2033.................... 2,067 2,064
Pool #725238, 5.00%, Due
3/1/2034..................... 1,479 1,434
Pool #765304, 5.50%, Due
3/1/2034..................... 701 700
--------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION..... 21,419
--------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 2.42%
Pool #780030, 7.00%, Due
6/15/2024.................... 280 299
Pool #780400, 7.00%, Due
12/15/2025................... 259 276
Pool #781200, 8.00%, Due
12/15/2025................... 302 332
Pool #780615, 6.50%, Due
8/15/2027.................... 471 493
Pool #780651, 7.00%, Due
10/15/2027................... 549 586
Pool #780680, 6.50%, Due
11/15/2027................... 532 557
Pool #780747, 6.50%, Due
3/15/2028.................... 475 497
Pool #780788, 6.50%, Due
4/15/2028.................... 516 539
Pool #780842, 8.50%, Due
8/20/2028.................... 320 351
Pool #780936, 7.50%, Due
12/15/2028................... 581 625
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Pool #781035, 6.50%, Due
5/15/2029.................... $ 461 $ 482
Pool #002754, 6.50%, Due
5/20/2029.................... 326 340
Pool #781273, 6.00%, Due
4/15/2031.................... 644 662
Pool #781288, 6.50%, Due
5/15/2031.................... 881 920
Pool #555732, 6.50%, Due
3/15/2032.................... 407 425
Pool #781564, 6.00%, Due
2/15/2033.................... 1,501 1,539
Pool #616094, 6.00%, Due
11/15/2033................... 529 543
Pool #781690, 6.00%, Due
12/15/2033................... 1,646 1,687
Pool #003515, 5.50%, Due
2/20/2034.................... 3,273 3,274
Pool #003517, 6.00%, Due
2/20/2034.................... 774 793
--------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION..... 15,220
--------
TOTAL U.S. AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 51,201
--------
ASSET-BACKED SECURITIES - 0.17%
Master Asset Securitization
Trust, 5.75%, Due
10/25/2017................... 1,024 1,044
--------
TOTAL ASSET-BACKED
SECURITIES............... 1,044
--------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 0.39%
Banc American Commercial
Mortgage 2003-2 A3,
4.342%, Due 3/11/2041........ 445 443
General Electric Commercial
Mortgage Corporation 2003-C2
A2,
4.17%, Due 7/10/2037......... 430 429
J P Morgan Chase Commercial
Mortgage 2003-CB7 A3,
4.449%, Due 1/12/2038........ 680 670
Morgan Stanley Dean Witter &
Company 2003-T11 A2,
4.34%, Due 6/13/2041......... 400 399
Wachovia Bank Commercial
Mortgage Trust 2003-C5 A2,
3.989%, Due 6/15/2035........ 570 527
--------
TOTAL NON-AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 2,468
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
23
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
CORPORATE BONDS - 13.21%
BANKS - 1.50%
Banco Popular North America
Inc,
4.25%, Due 4/1/2008.......... $ 300 $ 303
Bank of America Corporation,
6.25%, Due 4/1/2008.......... 420 456
Bank One Corporation,
4.90%, Due 4/30/2015*........ 300 286
Branch Banking and Trust
Company,
4.875%, Due 1/15/2013*....... 800 786
Capital One,
6.70%, Due 5/15/2008......... 450 489
5.75%, Due 9/15/2010......... 210 218
Citigroup, Incorporated,
6.50%, Due 1/18/2011......... 400 442
Credit Suisse First Boston,
6.50%, Due 5/1/2008.......... 500 543
First Tennessee Bank, NA,
5.75%, Due 12/1/2008......... 475 506
Fleet Norstar Financial Group,
Incorporated,
8.625%, Due 1/15/2007........ 400 456
John Hancock Global Funding,
3.75%, Due 9/30/2008, 144A
(Note A)..................... 500 495
ING Bank, NV,
5.125%, Due 5/1/2015, 144A
(Note A)..................... 300 294
Inter-American Development
Bank,
5.375%, Due 11/18/2008....... 1,280 1,369
J P Morgan Chase & Company,
6.75%, Due 3/15/2008......... 650 715
PNC Funding Corporation,
7.50%, Due 11/1/2009......... 525 605
Synovus Financial Corporation,
4.875%, Due 2/15/2013........ 300 294
US Bank, NA,
5.70%, Due 12/15/2008........ 675 722
Washington Mutual Financial
Corporation,
6.875%, Due 5/15/2011........ 425 485
--------
TOTAL BANKS................ 9,464
--------
FINANCE - 5.44%
Aegon, NV,
8.00%, Due 8/15/2006......... 300 334
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
American General Finance
Corporation,
5.375%, Due 9/1/2009......... $ 285 $ 300
Assurant, Incorporated,
5.625%, Due 2/15/2014, 144A
(Note A)..................... 315 316
Bear Stearns Companies,
Incorporated,
3.00%, Due 3/30/2006......... 500 503
2.875%, Due 7/2/2008......... 300 287
Boeing Capital Corporation,
5.40%, Due 11/30/2009........ 650 681
Capital One Bank,
5.125%, Due 2/15/2014*....... 450 430
Caterpillar Financial Services
Corporation,
2.625%, Due 1/30/2007........ 625 617
Cendant Corporation,
6.875%, Due 8/15/2006........ 750 813
Countrywide Home Loan,
Incorporated,
3.50%, Due 12/19/2005........ 800 812
3.25%, Due 5/21/2008......... 510 495
Ford Motor Credit Company,
6.50%, Due 1/25/2007......... 375 398
7.375%, Due 10/28/2009....... 1,600 1,730
General Electric Capital
Corporation,
3.25%, Due 6/15/2009......... 630 606
General Motors Acceptance
Corporation,
6.125%, Due 8/28/2007........ 320 338
7.25%, Due 3/2/2011.......... 1,000 1,075
Goldman Sachs Group,
Incorporated,
4.75%, Due 7/15/2013......... 650 618
Household Finance Corporation,
6.375%, Due 11/27/2012....... 280 302
4.75%, Due 7/15/2013......... 400 382
International Lease Finance
Corporation,
3.30%, Due 1/23/2008......... 415 406
6.375%, Due 3/15/2009........ 725 789
Liberty Mutual Corporation,
7.875%, Due 10/15/2026, 144A
(Note A)..................... 1,500 1,627
Lincoln National Corporation,
4.75%, Due 2/15/2014......... 700 669
MBNA Credit Card Master Trust,
2.65%, Due 11/15/2010........ 820 785
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
24
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Merrill Lynch & Company,
Incorporated,
3.00%, Due 4/30/2007......... $ 1,040 $ 1,031
6.56%, Due 12/16/2007........ 800 887
Monumental Global Funding,
3.85%, Due 3/3/2008, 144A
(Note A)..................... 800 803
Morgan Stanley Dean Witter &
Company,
6.10%, Due 4/15/2006......... 450 480
4.75%, Due 4/1/2014.......... 560 523
PHH Corporation,
6.00%, Due 3/1/2008.......... 300 321
Prudential Financial,
Incorporated,
3.75%, Due 5/1/2008.......... 185 184
4.50%, Due 7/15/2013......... 325 306
SLM Corporation,
2.00%, Due 3/15/2005......... 11,000 11,043
3.95%, Due 8/15/2008......... 420 420
4.00%, Due 1/15/2009......... 1,000 994
5.125%, Due 8/27/2012........ 800 803
Sprint Capital Corporation,
6.125%, Due 11/15/2008....... 195 209
8.375%, Due 3/15/2012........ 175 205
Verizon Global Funding
Corporation,
4.375%, Due 6/1/2013*........ 400 372
Washington Mutual,
Incorporated,
4.625%, Due 4/1/2014......... 350 324
--------
TOTAL FINANCE.............. 34,218
--------
FOREIGN - 0.09%
Quebec Province,
4.875%, Due 5/5/2014......... 335 331
United Mexican States,
7.50%, Due 4/8/2033.......... 240 238
--------
TOTAL FOREIGN.............. 569
--------
INDUSTRIAL - 5.36%
Anheuser Busch Companies,
Incorporated,
6.50%, Due 1/1/2028.......... 722 762
AT&T Broadband Corporation,
8.375%, Due 3/15/2013........ 748 892
AT&T Wireless Services,
Incorporated,
7.35%, Due 3/1/2006.......... 855 925
8.125%, Due 5/1/2012......... 900 1,050
8.75%, Due 3/1/2031.......... 265 323
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Atlantic Richfield Company,
9.125%, Due 3/1/2011......... $ 425 $ 534
Baxter International,
Incorporated,
5.25%, Due 5/1/2007.......... 455 478
Bemis, Incorporated,
6.70%, Due 7/1/2005.......... 1,000 1,051
BHP Finance (USA) Limited,
4.80%, Due 4/15/2013......... 300 296
Bunge Limited Financial
Corporation,
7.80%, Due 10/15/2012........ 400 462
Cargill, Incorporated,
6.25%, Due 5/1/2006, 144A
(Note A)..................... 1,000 1,066
Carnival Corporation,
3.75%, Due 11/15/2007........ 515 513
Cendant Corporation,
6.25%, Due 1/15/2008......... 350 378
Clear Channel Communications,
4.40%, Due 5/15/2011......... 520 500
Comcast Cable Communications,
7.625%, Due 2/15/2008........ 200 222
6.75%, Due 1/30/2011......... 255 279
Conagra Foods, Incorporated,
7.125%, Due 10/1/2026........ 410 457
7.00%, Due 10/1/2028......... 600 648
ConocoPhillips,
3.625%, Due 10/15/2007....... 425 428
Continental Cablevision,
Incorporated,
8.30%, Due 5/15/2006......... 270 297
DaimlerChrysler North America,
4.75%, Due 1/15/2008......... 720 730
7.75%, Due 1/18/2011*........ 1,000 1,123
6.50%, Due 11/15/2013........ 350 361
John Deere Capital Corporation,
3.75%, Due 1/13/2009......... 520 512
Dell Computer Corporation,
6.55%, Due 4/15/2008......... 400 439
Deutsche Telekom International,
8.50%, Due 6/15/2010......... 280 331
The Walt Disney Company,
5.375%, Due 6/1/2007......... 235 247
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
25
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
EOG Resources, Incorporated,
4.75%, Due 3/15/2014, 144A
(Note A)..................... $ 350 $ 337
EOP Operating Limited
Partnership,
4.75%, Due 3/15/2014......... 350 326
France Telecom SA,
8.75%, Due 3/1/2011.......... 550 650
General Motors Corporation,
8.375%, Due 7/15/2033........ 375 406
Harley Davidson, Incorporated,
2.69%, Due 4/15/2011......... 610 607
Hershey Foods Corporation,
6.95%, Due 3/1/2007*......... 1,000 1,107
Hertz Corporation,
4.70%, Due 10/2/2006......... 650 658
Hewlett Packard Company,
5.75%, Due 12/15/2006........ 470 501
International Business Machines
Corporation,
4.875%, Due 10/1/2006........ 505 529
4.75%, Due 11/29/2012........ 400 395
Lockheed Martin Corporation,
7.20%, Due 5/1/2036.......... 600 696
Martin Marietta Material,
Incorporated,
6.90%, Due 8/15/2007......... 200 221
Norfolk Southern Corporation,
7.05%, Due 5/1/2037.......... 270 289
Northrop Grumman Corporation,
7.125%, Due 2/15/2011........ 905 1,018
Occidental Petroleum
Corporation,
6.75%, Due 1/15/2012......... 400 446
Pepsi Bottling Group,
Incorporated,
7.00%, Due 3/1/2029.......... 425 474
Pulte Homes, Incorporated,
5.25%, Due 1/15/2014......... 275 263
Reed Elsevier Capital,
Incorporated,
6.125%, Due 8/1/2006......... 615 662
Sara Lee Corporation,
6.00%, Due 1/15/2008......... 1,200 1,294
Simon Property Group,
7.625%, Due 5/15/2005, 144A
(Note A)..................... 750 788
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Sprint Capital Corporation,
8.75%, Due 3/15/2032......... $ 275 $ 328
Target Corporation,
7.00%, Due 7/15/2031......... 450 501
Time Warner, Incorporated,
7.625%, Due 4/15/2031........ 250 274
Unilever Capital Corporation,
7.125%, Due 11/1/2010........ 2,000 2,289
Univision Communications,
Incorporated,
3.875%, Due 10/15/2008....... 365 359
Verizon Communications,
Incorporated,
6.36%, Due 4/15/2006......... 550 587
Verizon Virginia,
4.625%, Due 3/15/2013........ 600 568
Verizon Wireless Capital,
5.375%, Due 12/15/2006....... 420 443
Viacom, Incorporated,
5.625%, Due 8/15/2012........ 495 515
Wal-Mart Stores, Incorporated,
7.55%, Due 2/15/2030......... 450 540
Weyerhaeuser Company,
5.95%, Due 11/1/2008......... 340 363
--------
TOTAL INDUSTRIAL........... 33,738
--------
PHARMACEUTICAL - 0.30%
Bristol Myers Squibb Company,
4.00%, Due 8/15/2008, 144A
(Note A)..................... 465 466
Schering Plough Corporation,
6.50%, Due 12/1/2033......... 610 619
Wyeth Corporation,
6.70%, Due 3/15/2011......... 450 497
5.50%, Due 2/1/2014.......... 325 324
--------
TOTAL PHARMACEUTICAL....... 1,906
--------
TRANSPORTATION - 0.42%
CNF Transportation,
Incorporated,
8.875%, Due 5/1/2010......... 1,850 2,166
Union Pacific Corporation,
6.50%, Due 4/15/2012......... 450 492
--------
TOTAL TRANSPORTATION....... 2,658
--------
UTILITY - 0.10%
AEP Texas Central Company,
6.65%, Due 2/15/2033......... 120 123
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
26
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Appalachian Power Company,
5.95%, Due 5/15/2033......... $ 120 $ 112
Consolidated Natural Gas
Company,
6.875%, Due 10/15/2026....... 360 389
--------
TOTAL UTILITY.............. 624
--------
TOTAL CORPORATE BONDS...... 83,177
--------
</Table>
<Table>
<Caption>
SHARES
-----------
COMMON STOCK - 59.99%
CONSUMER DISCRETIONARY - 6.74%
AUTO COMPONENTS - 0.10%
Delphi Corporation............. 63,200 645
--------
TOTAL AUTO COMPONENTS...... 645
--------
HOTELS, RESTAURANTS & LEISURE - 2.35%
Brinker International,
Incorporated+................ 67,100 2,581
Carnival Corporation........... 85,900 3,665
McDonald's Corporation......... 79,200 2,157
MGM Mirage, Incorporated+*..... 68,300 3,129
Wendy's International,
Incorporated................. 31,000 1,209
Yum Brands, Incorporated+...... 52,400 2,033
--------
TOTAL HOTELS, RESTAURANTS &
LEISURE.................. 14,774
--------
HOUSEHOLD DURABLES - 1.28%
Centex Corporation............. 93,800 4,498
Fortune Brands, Incorporated... 18,100 1,380
Konnklijke Philips Electronics
NV........................... 82,431 2,210
--------
TOTAL HOUSEHOLD DURABLES... 8,088
--------
LEISURE EQUIPMENT & PRODUCTS - 0.52%
Eastman Kodak Company.......... 82,000 2,115
Mattel, Incorporated........... 67,600 1,146
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS................. 3,261
--------
MULTILINE RETAIL - 2.09%
Federated Department Stores,
Incorporated................. 57,500 2,818
May Department Stores
Company...................... 48,200 1,485
J.C. Penney Company,
Incorporated................. 56,500 1,913
Sears, Roebuck, & Company...... 138,800 5,559
Target Corporation............. 31,100 1,349
--------
TOTAL MULTILINE RETAIL..... 13,124
--------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
TEXTILES & APPAREL - 0.40%
Jones Apparel Group,
Incorporated................. 36,300 $ 1,329
Liz Claiborne, Incorporated.... 33,000 1,158
--------
TOTAL TEXTILES & APPAREL... 2,487
--------
TOTAL CONSUMER
DISCRETIONARY............ 42,379
--------
CONSUMER STAPLES - 5.18%
FOOD PRODUCTS - 2.10%
Albertson's, Incorporated*..... 80,000 1,869
Conagra, Incorporated.......... 134,900 3,897
Dean Foods Company+............ 35,000 1,175
General Mills, Incorporated.... 25,700 1,253
Kraft Foods, Incorporated...... 84,800 2,791
Sara Lee Company............... 95,474 2,204
--------
TOTAL FOOD PRODUCTS........ 13,189
--------
TOBACCO - 3.08%
Altria Group, Incorporated..... 168,600 9,337
Gallaher Group plc, ADR........ 47,400 2,270
Imperial Tobacco Group plc,
ADR.......................... 94,800 4,237
UST, Incorporated.............. 94,500 3,516
--------
TOTAL TOBACCO.............. 19,360
--------
TOTAL CONSUMER STAPLES..... 32,549
--------
ENERGY - 5.71%
ENERGY EQUIPMENT & SERVICES - 0.57%
Duke Energy Corporation........ 169,900 3,578
--------
TOTAL ENERGY EQUIPMENT &
SERVICES................. 3,578
--------
OIL & GAS - 5.14%
BP plc, ADR.................... 80,380 4,252
ChevronTexaco Corporation...... 43,814 4,009
ConocoPhillips................. 122,688 8,748
Devon Energy Corporation....... 37,100 2,271
El Paso Corporation............ 35,500 249
Equitable Resources,
Incorporated................. 28,600 1,344
Kerr-McGee Corporation......... 26,800 1,311
Occidental Petroleum
Corporation.................. 112,400 5,305
Royal Dutch Petroleum
Company*..................... 26,500 1,289
Valero Energy Corporation...... 56,300 3,590
--------
TOTAL OIL & GAS............ 32,368
--------
TOTAL ENERGY............... 35,946
--------
FINANCIALS - 17.21%
BANKS - 6.11%
Bank of America Corporation.... 119,909 9,651
Bank One Corporation........... 57,700 2,849
Comerica, Incorporated......... 25,100 1,296
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
27
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Federal Home Loan Mortgage
Corporation.................. 45,500 $ 2,657
Keycorp Limited................ 110,600 3,285
PNC Financial Services Group,
Incorporated................. 64,178 3,408
UnionBanCal Corporation........ 11,300 604
U.S. Bancorp, Incorporated..... 90,860 2,330
Wachovia Corporation........... 53,500 2,448
Washington Mutual,
Incorporated................. 171,700 6,763
Wells Fargo & Company.......... 56,600 3,196
--------
TOTAL BANKS................ 38,487
--------
DIVERSIFIED FINANCIALS - 4.91%
American Express Company....... 27,000 1,322
Bear Stearns Companies,
Incorporated................. 22,300 1,787
CIT Group, Incorporated........ 55,000 1,890
Citigroup, Incorporated........ 165,842 7,975
Federal National Mortgage
Association.................. 30,800 2,117
Goldman Sachs Group,
Incorporated................. 9,000 869
J P Morgan Chase & Company..... 138,550 5,209
Merrill Lynch & Company,
Incorporated................. 36,600 1,985
Morgan Stanley Dean Witter &
Company...................... 37,800 1,943
Principal Financial Group...... 94,400 3,332
SLM Corporation................ 64,900 2,486
--------
TOTAL DIVERSIFIED
FINANCIALS............... 30,915
--------
INSURANCE - 6.19%
Ace Limited.................... 58,000 2,543
Allstate Corporation........... 153,800 7,059
American International Group,
Incorporated................. 13,000 931
Anthem, Incorporated+*......... 14,700 1,302
AON Corporation................ 31,600 823
Assurant, Incorporated+........ 53,900 1,313
Conseco, Incorporated+......... 63,000 1,257
Hartford Financial Services
Group, Incorporated.......... 29,900 1,826
Loews Corporation.............. 26,000 1,508
MetLife, Incorporated.......... 219,180 7,562
MGIC Investments Corporation... 42,600 3,136
Prudential Financial,
Incorporated................. 90,900 3,994
The St. Paul Travelers
Companies, Incorporated...... 81,200 3,302
XL Capital Limited............. 31,800 2,428
--------
TOTAL INSURANCE............ 38,984
--------
TOTAL FINANCIALS........... 108,386
--------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
HEALTH CARE - 5.05%
HEALTH CARE EQUIPMENT & SUPPLIES - 0.44%
Baxter International,
Incorporated................. 87,600 $ 2,773
--------
TOTAL HEALTH CARE EQUIPMENT
& SUPPLIES............... 2,773
--------
HEALTH CARE PROVIDERS & SERVICES - 2.05%
Aetna, Incorporated............ 50,700 4,195
Cigna Corporation.............. 23,700 1,529
HCA, Incorporated.............. 67,300 2,734
Health Net, Incorporated+...... 47,200 1,201
Tenet Healthcare Corporation+.. 168,300 1,979
Wellpoint Health Networks,
Incorporated+................ 11,600 1,296
--------
TOTAL HEALTH CARE PROVIDERS
& SERVICES............... 12,934
--------
PHARMACEUTICALS - 2.56%
Bristol-Myers Squibb Company... 193,700 4,862
McKesson Corporation........... 40,900 1,344
Merck & Company,
Incorporated................. 89,100 4,187
Pfizer, Incorporated........... 44,400 1,588
Schering Plough Corporation.... 164,000 2,744
Wyeth Corporation.............. 35,800 1,363
--------
TOTAL PHARMACEUTICALS...... 16,088
--------
TOTAL HEALTH CARE.......... 31,795
--------
INDUSTRIALS - 8.99%
AEROSPACE & DEFENSE - 3.13%
Boeing Company................. 143,900 6,143
Honeywell International,
Incorporated................. 77,500 2,680
Lockheed Martin Corporation.... 55,200 2,633
Raytheon Company............... 89,300 2,881
Textron, Incorporated.......... 57,000 3,145
United Technologies
Corporation.................. 26,000 2,243
--------
TOTAL AEROSPACE &
DEFENSE.................. 19,725
--------
COMMERCIAL SERVICES & SUPPLIES - 1.71%
Cendant Corporation............ 305,200 7,227
First Data Corporation......... 15,804 717
Waste Management,
Incorporated................. 99,907 2,837
--------
TOTAL COMMERCIAL SERVICES &
SUPPLIES................. 10,781
--------
ELECTRICAL EQUIPMENT - 0.76%
Emerson Electrical Company..... 79,100 4,763
--------
TOTAL ELECTRICAL
EQUIPMENT................ 4,763
--------
ENERGY - 0.56%
Devon Energy Corporation,
2.75%, Due 8/1/2006.......... 420 418
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
28
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Dominion Resources,
Incorporated,
5.00%, Due 3/15/2013......... 210 $ 204
Enterprise Products Partners
LP,
7.50%, Due 2/1/2011.......... 230 257
Kerr-McGee Corporation,
5.875%, Due 9/15/2006........ 520 550
Marathon Oil Corporation,
5.375%, Due 6/1/2007......... 260 274
MidAmerican Energy Holdings
Company,
3.50%, Due 5/15/2008......... 395 385
5.875%, Due 10/1/2012........ 305 315
Public Service Enterprise
Group, Incorporated,
6.95%, Due 6/1/2012.......... 380 420
Union Oil Company of
California,
7.90%, Due 4/18/2008......... 100 112
Xcel Energy, Incorporated,
7.00%, Due 12/1/2010......... 500 560
--------
TOTAL ENERGY............... 3,495
--------
INDUSTRIAL CONGLOMERATES - 1.08%
Tyco International Limited..... 246,701 6,772
--------
TOTAL INDUSTRIAL
CONGLOMERATES............ 6,772
--------
MACHINERY - 0.72%
Caterpillar, Incorporated...... 29,300 2,277
ITT Industries, Incorporated... 28,400 2,252
--------
TOTAL MACHINERY............ 4,529
--------
TRANSPORTATION - 1.03%
Burlington Northern Santa Fe
Corporation.................. 76,500 2,502
CSX Corporation................ 129,600 3,986
--------
TOTAL TRANSPORTATION....... 6,488
--------
TOTAL INDUSTRIALS.......... 56,553
--------
INFORMATION TECHNOLOGY - 2.86%
COMPUTERS & PERIPHERALS - 0.99%
Hewlett Packard Company........ 142,800 2,813
International Business Machines
Corporation.................. 38,900 3,430
--------
TOTAL COMPUTERS &
PERIPHERALS.............. 6,243
--------
IT CONSULTING & SERVICES - 1.20%
Computer Sciences
Corporation+................. 56,500 2,311
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Electronic Data Systems
Corporation.................. 287,700 $ 5,262
--------
TOTAL IT CONSULTING &
SERVICES................. 7,573
--------
Computer Associates
International,
Incorporated................. 158,000 4,236
--------
TOTAL SOFTWARE............. 4,236
--------
TOTAL INFORMATION
TECHNOLOGY............... 18,052
--------
MATERIALS - 3.86%
CHEMICALS - 2.05%
Air Products & Chemicals,
Incorporated................. 32,000 1,594
Crompton Corporation........... 121,113 753
E. I. du Pont de Nemours &
Company...................... 29,400 1,263
Eastman Chemical Company....... 30,000 1,277
Hercules, Incorporated +....... 128,400 1,427
Imperial Chemical Industries
plc, ADR..................... 108,300 1,682
Lyondell Chemical Company*..... 165,700 2,709
PPG Industries, Incorporated... 37,600 2,230
--------
TOTAL CHEMICALS............ 12,935
--------
METALS & MINING - 0.38%
Alcoa, Incorporated............ 77,496 2,383
--------
TOTAL METALS & MINING...... 2,383
--------
PAPER & FOREST PRODUCTS - 1.43%
Eagle Materials,
Incorporated................. 1,830 120
Eagle Materials, Incorporated,
Class B+*.................... 6,154 393
International Paper Company.... 53,300 2,149
Kimberly Clark Corporation..... 22,000 1,440
Sappi Limited, ADR............. 213,000 2,901
UPM Kymmene Corporation,
ADR*......................... 62,900 1,156
Weyerhaeuser Company........... 13,800 817
--------
TOTAL PAPER & FOREST
PRODUCTS................. 8,976
--------
TOTAL MATERIALS............ 24,294
--------
REAL ESTATE INVESTMENT TRUSTS - 0.33%
Equity Office Properties
Trust........................ 82,500 2,077
--------
TOTAL REAL ESTATE
INVESTMENT TRUSTS........ 2,077
--------
TELECOMMUNICATION SERVICES - 0.77%
DIVERSIFIED TELECOMMUNICATION - 0.61%
SBC Communications,
Incorporated................. 31,300 779
Verizon Communications,
Incorporated................. 80,428 3,035
--------
TOTAL DIVERSIFIED
TELECOMMUNICATION........ 3,814
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
29
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
WIRELESS TELECOMMUNICATION - 0.16%
Alltel Corporation............. 19,700 $ 992
--------
TOTAL WIRELESS
TELECOMMUNICATION........ 992
--------
TOTAL TELECOMMUNICATION
SERVICES................. 4,806
--------
UTILITIES - 3.29%
ELECTRIC UTILITIES - 3.29%
American Electric Power
Company, Incorporated........ 185,400 5,644
Centerpoint Energy,
Incorporated*................ 132,600 1,431
Dominion Resources,
Incorporated................. 30,200 1,927
DTE Energy Company............. 16,400 640
Entergy Corporation............ 69,400 3,789
FirstEnergy Corporation........ 86,000 3,363
General Electric Company....... 36,700 1,099
Reliant Resources,
Incorporated+*............... 243,356 2,022
Teco Energy, Incorporated*..... 64,300 818
--------
TOTAL ELECTRIC UTILITIES... 20,733
--------
TOTAL UTILITIES............ 20,733
--------
TOTAL COMMON STOCK......... 377,570
--------
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
SHORT-TERM INVESTMENTS - 18.26%
UNITED STATES TREASURY BILLS - 0.69%
1.84%, Due 6/10/2004 (Note
B)........................... $ 4,325 $ 4,321
--------
TOTAL UNITED STATES
TREASURY BILLS........... 4,321
--------
</Table>
<Table>
<Caption>
SHARES
-----------
OTHER SHORT-TERM INVESTMENTS - 17.57%
American AAdvantage Money
Market Select Fund (Note C).. 81,471,783 81,472
AMR Investments Enhanced Cash
Business Trust (Note C)...... 29,141,843 29,142
--------
TOTAL OTHER SHORT-TERM
INVESTMENTS.............. 110,614
--------
TOTAL SHORT-TERM
INVESTMENTS.............. 114,935
--------
TOTAL INVESTMENTS - 110.13%
(COST $619,008).............. 693,155
--------
LIABILITIES, NET OF OTHER
ASSETS - (10.13%)............ (63,770)
--------
TOTAL NET ASSETS - 100%........ $629,385
========
</Table>
- ---------------
(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 $6,192 or 0.99% of net assets.
(B) At April 30, 2004, security held as collateral for open futures contracts.
(C) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of this security is on loan at April 30, 2004. See Note 4.
+ - non-income producing
See accompanying notes
- --------------------------------------------------------------------------------
30
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
COMMON STOCK - 93.35%
CONSUMER DISCRETIONARY - 10.42%
AUTO COMPONENTS - 0.16%
Delphi Corporation.............. 107,100 $ 1,092
--------
TOTAL AUTO COMPONENTS....... 1,092
--------
HOTELS, RESTAURANTS & LEISURE - 3.40%
Brinker International,
Incorporated+*................ 108,000 4,154
Carnival Corporation............ 109,100 4,655
Mattel, Incorporated............ 106,000 1,798
McDonald's Corporation.......... 124,600 3,393
MGM Mirage, Incorporated+....... 107,500 4,924
Wendy's International,
Incorporated.................. 48,400 1,888
Yum Brands, Incorporated+....... 82,400 3,196
--------
TOTAL HOTELS, RESTAURANTS &
LEISURE................... 24,008
--------
HOUSEHOLD DURABLES - 1.96%
Centex Corporation.............. 147,600 7,077
Fortune Brands, Incorporated.... 27,100 2,066
Konnklijke Philips Electronics
NV............................ 110,666 2,967
Matsushita Electric Industrial
Company Limited, ADR.......... 115,000 1,700
--------
TOTAL HOUSEHOLD DURABLES.... 13,810
--------
LEISURE EQUIPMENT & PRODUCTS - 0.44%
Eastman Kodak Company........... 119,500 3,082
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS.................. 3,082
--------
MEDIA - 0.54%
Clear Channel Communications,
Incorporated.................. 40,000 1,660
Liberty Media Corporation+...... 200,000 2,188
--------
TOTAL MEDIA................. 3,848
--------
MULTILINE RETAIL - 3.17%
Federated Department Stores,
Incorporated.................. 77,900 3,817
May Department Stores Company... 70,100 2,159
J.C. Penney Company,
Incorporated.................. 173,900 5,888
Sears, Roebuck, & Company....... 218,400 8,747
Target Corporation.............. 41,700 1,809
--------
TOTAL MULTILINE RETAIL...... 22,420
--------
TEXTILES & APPAREL - 0.75%
Jones Apparel Group,
Incorporated.................. 58,800 2,152
Liz Claiborne, Incorporated..... 52,000 1,825
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Polo Ralph Lauren Corporation... 39,000 $ 1,350
--------
TOTAL TEXTILES & APPAREL.... 5,327
--------
TOTAL CONSUMER
DISCRETIONARY............. 73,587
--------
CONSUMER STAPLES - 9.24%
FOOD & DRUG RETAILING - 0.45%
Albertson's, Incorporated *..... 135,600 3,168
--------
TOTAL FOOD & DRUG
RETAILING................. 3,168
--------
FOOD PRODUCTS - 3.44%
Archer-Daniels-Midland Company.. 131,000 2,300
Conagra, Incorporated........... 210,700 6,087
Dean Foods Company+............. 55,500 1,864
General Mills, Incorporated..... 39,500 1,926
Kellogg Company................. 53,000 2,274
Kraft Foods, Incorporated....... 133,400 4,390
Performance Food Group
Company+*..................... 61,000 2,143
Sara Lee Company................ 144,828 3,343
--------
TOTAL FOOD PRODUCTS......... 24,327
--------
HOUSEHOLD PRODUCTS - 0.62%
Kimberly Clark Corporation...... 66,600 4,359
--------
TOTAL HOUSEHOLD PRODUCTS.... 4,359
--------
TOBACCO - 4.73%
Altria Group, Incorporated...... 285,500 15,811
Gallaher Group plc, ADR......... 79,800 3,822
Imperial Tobacco Group plc,
ADR........................... 183,500 8,203
UST, Incorporated............... 150,400 5,596
--------
TOTAL TOBACCO............... 33,432
--------
TOTAL CONSUMER STAPLES...... 65,286
--------
ENERGY - 7.68%
ENERGY EQUIPMENT & SERVICES - 0.55%
General Electric Company........ 56,200 1,683
Weatherford International
Limited+...................... 51,000 2,218
--------
TOTAL ENERGY EQUIPMENT &
SERVICES.................. 3,901
--------
OIL & GAS - 7.13%
BP plc, ADR..................... 106,036 5,609
ChevronTexaco Corporation....... 69,181 6,330
ConocoPhillips.................. 209,322 14,925
Devon Energy Corporation........ 56,800 3,476
Equitable Resources,
Incorporated.................. 36,100 1,696
Kerr-McGee Corporation.......... 39,600 1,938
Occidental Petroleum
Corporation................... 185,300 8,747
Royal Dutch Petroleum
Company*...................... 40,700 1,980
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
31
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS - CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Valero Energy Corporation....... 88,500 $ 5,643
--------
TOTAL OIL & GAS............. 50,344
--------
TOTAL ENERGY................ 54,245
--------
FINANCIALS - 26.25%
BANKS - 8.68%
Bank of America Corporation..... 186,621 15,021
Bank One Corporation............ 90,800 4,483
Comerica, Incorporated.......... 39,500 2,039
Keycorp Limited................. 165,400 4,912
Mitsubishi Tokyo Financial
Group, Incorporated, ADR...... 237,000 2,109
PNC Financial Services Group,
Incorporated.................. 101,827 5,407
TCF Financial Corporation....... 26,000 1,288
UnionBanCal Corporation......... 17,800 951
U. S. Bancorp, Incorporated..... 141,060 3,617
Wachovia Corporation............ 82,100 3,756
Washington Mutual,
Incorporated.................. 252,500 9,946
Wells Fargo & Company........... 138,500 7,820
--------
TOTAL BANKS................. 61,349
--------
DIVERSIFIED FINANCIALS - 8.11%
American Express Company........ 36,500 1,787
Bear Stearns Companies,
Incorporated.................. 33,000 2,645
Charles Schwab Corporation...... 193,000 1,986
CIT Group, Incorporated......... 85,500 2,939
Citigroup, Incorporated......... 262,838 12,640
Federal Home Loan Mortgage
Corporation................... 71,600 4,181
Federal National Mortgage
Association................... 44,000 3,024
Goldman Sachs Group,
Incorporated.................. 19,000 1,833
Ing Groep NV, ADR*.............. 110,417 2,344
J P Morgan Chase & Company...... 228,042 8,574
Merrill Lynch & Company,
Incorporated.................. 58,800 3,189
Morgan Stanley Dean Witter &
Company....................... 58,700 3,016
Principal Financial Group,
Incorporated.................. 148,500 5,242
SLM Corporation................. 101,600 3,892
--------
TOTAL DIVERSIFIED
FINANCIALS................ 57,292
--------
INSURANCE - 9.46%
Ace Limited..................... 88,900 3,897
Allstate Corporation............ 249,328 11,444
American International Group,
Incorporated.................. 23,000 1,648
Anthem, Incorporated+*.......... 23,100 2,046
AON Corporation................. 57,200 1,491
Assurant, Incorporated+......... 84,700 2,063
Chubb Corporation............... 34,000 2,346
Cincinnati Financial
Corporation................... 33,600 1,377
Conseco, Incorporated+.......... 99,100 1,977
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Hartford Financial Services
Group, Incorporated........... 47,100 $ 2,877
Loews Corporation............... 52,000 3,018
MetLife, Incorporated........... 341,600 11,786
MGIC Investments Corporation.... 68,000 5,006
Prudential Financial,
Incorporated.................. 153,800 6,758
The St. Paul Travelers
Companies, Incorporated....... 126,300 5,137
XL Capital Limited.............. 51,900 3,962
--------
TOTAL INSURANCE............. 66,833
--------
TOTAL FINANCIALS............ 185,474
--------
HEALTH CARE - 7.97%
HEALTH CARE EQUIPMENT & SUPPLIES - 1.38%
Alcon, Incorporated............. 36,000 2,673
C. R. Bard, Incorporated........ 26,000 2,763
Baxter International,
Incorporated.................. 137,100 4,339
--------
TOTAL HEALTH CARE EQUIPMENT
& SUPPLIES................ 9,775
--------
HEALTH CARE PROVIDERS & SERVICES - 2.93%
Aetna, Incorporated............. 85,600 7,083
Cigna Corporation............... 35,500 2,290
HCA, Incorporated............... 105,900 4,303
Health Net, Incorporated+....... 74,300 1,890
Tenet Healthcare Corporation+... 264,800 3,114
Wellpoint Health Networks,
Incorporated+................. 18,200 2,033
--------
TOTAL HEALTH CARE PROVIDERS
& SERVICES................ 20,713
--------
PHARMACEUTICALS - 3.66%
Astrazeneca plc, ADR............ 48,000 2,297
Bristol-Myers Squibb Company.... 262,900 6,599
McKesson Corporation............ 62,600 2,057
Merck & Company, Incorporated... 136,400 6,411
Pfizer, Incorporated............ 57,300 2,049
Schering Plough Corporation..... 260,100 4,351
Wyeth Corporation............... 55,100 2,098
--------
TOTAL PHARMACEUTICALS....... 25,862
--------
TOTAL HEALTH CARE........... 56,350
--------
INDUSTRIALS - 13.01%
AEROSPACE & DEFENSE - 3.58%
Boeing Company.................. 267,600 11,424
L3 Communications Holding
Corporation+.................. 40,000 2,471
Lockheed Martin Corporation..... 86,800 4,140
Raytheon Company................ 144,900 4,674
United Technologies
Corporation................... 30,100 2,596
--------
TOTAL AEROSPACE & DEFENSE... 25,305
--------
COMMERCIAL SERVICES & SUPPLIES - 2.47%
Cendant Corporation............. 501,900 11,885
First Data Corporation.......... 24,564 1,115
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
32
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS - CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Waste Management, Incorporated.. 157,165 $ 4,463
--------
TOTAL COMMERCIAL SERVICES &
SUPPLIES.................. 17,463
--------
ELECTRICAL EQUIPMENT - 1.34%
Emerson Electrical Company...... 123,400 7,431
Molex, Incorporated............. 78,000 2,009
--------
TOTAL ELECTRICAL
EQUIPMENT................. 9,440
--------
INDUSTRIAL CONGLOMERATES - 3.18%
3M Company...................... 15,000 1,297
Honeywell International,
Incorporated.................. 118,500 4,098
Textron, Incorporated........... 88,200 4,867
Tyco International Limited...... 446,300 12,251
--------
TOTAL INDUSTRIAL
CONGLOMERATES............. 22,513
--------
MACHINERY - 1.00%
Caterpillar, Incorporated....... 44,800 3,482
ITT Industries, Incorporated.... 45,200 3,584
--------
TOTAL MACHINERY............. 7,066
--------
TRANSPORTATION - 1.44%
Burlington Northern Santa Fe
Corporation................... 119,300 3,901
CSX Corporation................. 203,400 6,257
--------
TOTAL TRANSPORTATION........ 10,158
--------
TOTAL INDUSTRIALS........... 91,945
--------
INFORMATION TECHNOLOGY - 5.81%
COMMUNICATIONS EQUIPMENT - 0.59%
Lucent Technologies,
Incorporated+*................ 550,000 1,853
Motorola, Incorporated.......... 128,000 2,336
--------
TOTAL COMMUNICATIONS
EQUIPMENT................. 4,189
--------
COMPUTERS & PERIPHERALS - 2.16%
Apple Computer, Incorporated+... 98,000 2,521
Hewlett Packard Company......... 207,100 4,080
International Business Machines
Corporation................... 72,200 6,366
NCR Corporation+................ 51,000 2,279
--------
TOTAL COMPUTERS &
PERIPHERALS............... 15,246
--------
IT CONSULTING & SERVICES - 1.60%
Computer Sciences Corporation+.. 74,700 3,056
Electronic Data Systems
Corporation*.................. 452,600 8,278
--------
TOTAL IT CONSULTING &
SERVICES.................. 11,334
--------
SOFTWARE - 1.46%
Autodesk, Incorporated.......... 110,000 3,685
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Computer Associates
International, Incorporated... 248,500 $ 6,662
--------
TOTAL SOFTWARE.............. 10,347
--------
TOTAL INFORMATION
TECHNOLOGY................ 41,116
--------
MATERIALS - 5.58%
CHEMICALS - 3.08%
Air Products & Chemicals,
Incorporated.................. 86,600 4,313
Crompton Corporation............ 203,808 1,268
Cytec Industries,
Incorporated.................. 60,000 2,359
E. I. du Pont de Nemours &
Company....................... 45,000 1,933
Hercules, Incorporated+......... 173,400 1,926
Imperial Chemical Industries
plc, ADR...................... 156,900 2,437
Lyondell Chemical
Company*...................... 230,900 3,775
PPG Industries, Incorporated.... 62,700 3,719
--------
TOTAL CHEMICALS............. 21,730
--------
METALS & MINING - 0.50%
Alcoa, Incorporated............. 115,368 3,548
--------
TOTAL METALS & MINING....... 3,548
--------
PAPER & FOREST PRODUCTS - 2.00%
Eagle Materials, Incorporated... 2,756 181
Eagle Materials, Incorporated,
Class B+...................... 9,268 592
International Paper Company..... 83,400 3,363
Sappi Limited, ADR*............. 277,000 3,773
UPM Kymmene Corporation, ADR*... 91,100 1,674
Weyerhaeuser Company............ 77,100 4,564
--------
TOTAL PAPER & FOREST
PRODUCTS.................. 14,147
--------
TOTAL MATERIALS............. 39,425
--------
REAL ESTATE INVESTMENT TRUSTS - 0.48%
Equity Office Properties
Trust......................... 133,800 3,367
--------
TOTAL REAL ESTATE INVESTMENT
TRUSTS.................... 3,367
--------
TELECOMMUNICATION SERVICES - 1.70%
DIVERSIFIED TELECOMMUNICATION - 1.14%
SBC Communications,
Incorporated.................. 120,800 3,008
Verizon Communications,
Incorporated.................. 133,746 5,047
--------
TOTAL DIVERSIFIED
TELECOMMUNICATION......... 8,055
--------
WIRELESS TELECOMMUNICATION - 0.56%
Alltel Corporation.............. 31,000 1,561
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
33
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS - CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Vodafone Group plc, ADR......... 97,000 $ 2,380
--------
TOTAL WIRELESS
TELECOMMUNICATION......... 3,941
--------
TOTAL TELECOMMUNICATION
SERVICES.................. 11,996
--------
UTILITIES - 5.21%
ELECTRIC UTILITIES - 4.44%
American Electric Power Company,
Incorporated.................. 285,000 8,675
Centerpoint Energy,
Incorporated*................. 211,500 2,282
Dominion Resources,
Incorporated.................. 51,200 3,267
DTE Energy Company.............. 27,700 1,081
Entergy Corporation............. 112,700 6,153
FirstEnergy Corporation......... 145,900 5,705
Reliant Resources,
Incorporated+*................ 384,247 3,193
Teco Energy, Incorporated*...... 77,500 987
--------
TOTAL ELECTRIC UTILITIES.... 31,343
--------
MULTI-UTILITIES - 0.77%
Duke Energy Corporation*........ 259,400 5,464
--------
TOTAL MULTI-UTILITIES....... 5,464
--------
TOTAL UTILITIES............. 36,807
--------
TOTAL COMMON STOCK.......... 659,598
--------
</Table>
<Table>
<Caption>
PAR
AMOUNT AMOUNT
----------- ---------
(DOLLARS IN THOUSANDS)
SHORT-TERM INVESTMENTS - 11.01%
U.S. TREASURY BILLS - 0.53%
0.93%, Due 6/10/2004 (Note A)... $ 3,730 $ 3,726
--------
TOTAL U.S. TREASURY BILLS... 3,726
--------
</Table>
<Table>
<Caption>
SHARES
----------
OTHER SHORT-TERM INVESTMENTS - 10.48%
American AAdvantage Money Market
Select Fund (Note B).......... 66,026,464 66,026
AMR Investments Enhanced Cash
Business Trust (Note B)....... 8,024,136 8,024
--------
TOTAL OTHER SHORT-TERM
INVESTMENTS............... 74,050
--------
TOTAL SHORT-TERM
INVESTMENTS............... 77,776
--------
TOTAL INVESTMENTS - 104.36%
(COST $614,077)............... 737,374
--------
LIABILITIES, NET OF OTHER
ASSETS - (4.36%).............. (30,836)
--------
TOTAL NET ASSETS - 100%......... $706,538
========
</Table>
- ---------------
(A) At April 30, 2004, security held as collateral for open futures contracts.
(B) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of this security is on loan at April 30, 2004. See Note 4
+ - non-income producing
See accompanying notes
- --------------------------------------------------------------------------------
34
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
COMMON STOCK - 98.94%
CONSUMER DISCRETIONARY - 17.39%
AUTO COMPONENTS - 0.14%
Autoliv, Incorporated............ 800 $ 34
Johnson Controls, Incorporated... 200 11
Lear Corporation................. 600 36
--------
TOTAL AUTO COMPONENTS........ 81
--------
AUTOMOBILES - 1.25%
Ford Motor Company............... 3,600 55
General Motors Corporation....... 11,000 522
Harley Davidson, Incorporated.... 2,400 135
--------
TOTAL AUTOMOBILES............ 712
--------
HOTELS, RESTAURANTS & LEISURE - 1.02%
GTECH Holdings Corporation....... 5,100 311
McDonald's Corporation........... 5,500 150
Yum Brands, Incorporated+........ 3,100 120
--------
TOTAL HOTELS, RESTAURANTS &
LEISURE.................... 581
--------
INTERNET & CATALOG RETAIL - 1.42%
Amazon.com, Incorporated+........ 12,100 526
Ebay, Incorporated+.............. 3,600 287
--------
TOTAL INTERNET & CATALOG
RETAIL..................... 813
--------
LEISURE EQUIPMENT & PRODUCTS - 0.25%
Hasbro, Incorporated............. 5,900 112
Mattel, Incorporated............. 1,500 25
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS................... 137
--------
HOUSEHOLD DURABLES - 0.38%
Centex Corporation............... 3,100 148
D R Horton, Incorporated......... 900 26
KB Home.......................... 100 7
Lennar Corporation............... 200 9
Pulte Homes, Incorporated........ 500 25
--------
TOTAL HOUSEHOLD DURABLES..... 215
--------
MEDIA - 4.34%
Comcast Corporation+............. 4,900 147
Cox Radio, Incorporated+......... 3,100 64
The Walt Disney Company.......... 6,890 159
Echostar Communications
Corporation+................... 1,900 63
Fox Entertainment Group,
Incorporated+.................. 11,300 315
Gannett Company, Incorporated.... 1,700 147
Harman International Industries,
Incorporated................... 6,000 455
Liberty Media Corporation+....... 4,900 54
The E. W. Scripps Company........ 1,900 201
Time Warner, Incorporated+....... 1,600 27
Viacom, Incorporated............. 22,000 850
--------
TOTAL MEDIA.................. 2,482
--------
MULTILINE RETAIL - 3.24%
Family Dollar Stores,
Incorporated................... 500 16
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
Federated Department Stores,
Incorporated................... 11,200 $ 549
Kohl's Corporation+.............. 4,800 201
Target Corporation............... 5,900 256
Wal-Mart Stores, Incorporated.... 14,600 832
--------
TOTAL MULTILINE RETAIL....... 1,854
--------
SPECIALTY RETAIL - 3.91%
Abercrombie and Fitch Company+... 3,200 101
Bed Bath & Beyond,
Incorporated+.................. 3,300 122
Best Buy Company, Incorporated... 6,600 358
Gap Inc.......................... 8,800 194
Home Depot, Incorporated......... 21,900 771
Lowe's Companies, Incorporated... 5,200 271
Radioshack Corporation........... 6,500 200
Ross Stores, Incorporated........ 2,300 70
Saks, Incorporated+.............. 7,500 108
TJX Companies, Incorporated...... 1,600 39
--------
TOTAL SPECIALTY RETAIL....... 2,234
--------
TEXTILES & APPAREL - 1.44%
Coach, Incorporated+............. 10,800 460
Jones Apparel Group,
Incorporated................... 3,600 132
Nike, Incorporated............... 3,200 230
--------
TOTAL TEXTILES & APPAREL....... 822
--------
TOTAL CONSUMER
DISCRETIONARY.............. 9,931
--------
CONSUMER STAPLES - 9.99%
BEVERAGES - 1.45%
Anheuser Busch Companies,
Incorporated................... 400 20
Coca-Cola Company................ 15,000 759
Pepsico, Incorporated............ 900 49
--------
TOTAL BEVERAGES.............. 828
--------
FOOD & DRUG RETAILING - 1.17%
CVS Corporation.................. 1,800 70
Longs Drug Stores Corporation.... 1,400 27
Sysco Corporation................ 14,400 551
Walgreen Company................. 600 21
--------
TOTAL FOOD & DRUG
RETAILING.................. 669
--------
FOOD PRODUCTS - 1.52%
Archer-Daniels-Midland Company... 19,600 344
Tyson Foods, Incorporated........ 28,100 527
--------
TOTAL FOOD PRODUCTS.......... 871
--------
HOUSEHOLD PRODUCTS - 2.83%
Colgate Palmolive Company........ 400 23
Procter & Gamble Company......... 15,100 1,597
--------
TOTAL HOUSEHOLD PRODUCTS..... 1,620
--------
PERSONAL PRODUCTS - 1.42%
Gillette Company................. 19,800 810
--------
TOTAL PERSONAL PRODUCTS...... 810
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
35
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
TOBACCO - 1.6%
Altria Group, Incorporated....... 6,400 $ 354
R.J. Reynolds Tobacco Holdings,
Incorporated................... 8,600 557
--------
TOTAL TOBACCO................ 911
--------
TOTAL CONSUMER STAPLES....... 5,709
--------
ENERGY - 1.06%
ENERGY EQUIPMENT & SERVICES - 0.54%
Baker Hughes, Incorporated....... 1,700 62
Cooper Cameron Corporation+...... 2,700 131
Pride International,
Incorporated+.................. 5,100 86
Rowan Companies, Incorporated+... 1,300 29
--------
TOTAL ENERGY EQUIPMENT &
SERVICES................... 308
--------
OIL & GAS - 0.52%
ConocoPhillips................... 1,100 78
Sunoco, Incorporated............. 3,400 214
Unocal Corporation............... 100 4
--------
TOTAL OIL & GAS.............. 296
--------
TOTAL ENERGY................. 604
--------
FINANCIALS - 9.46%
BANKS - 1.16%
Bank of New York, Incorporated... 1,100 32
Greenpoint Financial
Corporation.................... 1,400 55
Hudson City Bancorp,
Incorporated................... 3,200 108
Washington Mutual, Incorporated.. 1,600 63
Wells Fargo and Company.......... 7,200 407
--------
TOTAL BANKS.................. 665
--------
DIVERSIFIED FINANCIALS - 5.51%
AmeriCredit Corporation+*........ 6,800 110
Capital One Financial
Corporation.................... 1,000 66
Charles Schwab Corporation....... 7,500 77
CIT Group, Incorporated.......... 13,300 457
Citigroup, Incorporated.......... 6,800 327
Countrywide Financial
Corporation.................... 2,800 166
Doral Financial Corporation...... 8,200 269
E*Trade Group, Incorporated+..... 3,400 39
Federal Home Loan Mortgage
Corporation.................... 2,600 152
Federal National Mortgage
Corporation.................... 3,600 247
Friedman Billings Ramsey Group... 1,200 22
Indymac Bancorp, Incorporated.... 900 29
MBNA Corporation................. 18,200 444
Moody's Corporation.............. 8,700 561
Morgan Stanley Dean Witter &
Company........................ 2,700 139
Nuveen Investments,
Incorporated................... 1,800 46
--------
TOTAL DIVERSIFIED
FINANCIALS................. 3,151
--------
INSURANCE - 2.48%
Allstate Corporation............. 3,700 169
Ambac Financial Group,
Incorporated................... 6,100 420
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
Fidelity National Financial,
Incorporated................... 3,200 $ 117
Hartford Financial Services
Group, Incorporated............ 800 49
Principal Financial Group........ 4,500 158
The Progressive Corporation...... 1,000 88
Protective Life Corporation...... 100 4
Prudential Financial,
Incorporated................... 6,100 268
The St Paul Travelers Companies,
Incorporated................... 400 16
Wellpoint Health Networks,
Incorporated+.................. 1,100 123
--------
TOTAL INSURANCE.............. 1,412
--------
REAL ESTATE - 0.31%
CarrAmerica Realty Corporation... 1,000 29
LNR Property Corporation......... 3,000 151
--------
TOTAL REAL ESTATE............ 180
--------
TOTAL FINANCIALS............. 5,408
--------
HEALTH CARE - 26.5%
BIOTECHNOLOGY - 4.13%
Amgen, Incorporated+............. 8,800 495
Biogen Idec, Incorporated+....... 4,900 289
Genentech, Incorporated+......... 5,900 725
Gilead Sciences, Incorporated+... 12,100 736
Human Genome Sciences,
Incorporated+.................. 3,800 46
MedImmune, Incorporated+......... 3,000 73
--------
TOTAL BIOTECHNOLOGY............ 2,364
--------
HEALTH CARE EQUIPMENT & SUPPLIES - 4.12%
Boston Scientific Corporation+... 12,400 511
Guidant Corporation.............. 19,300 1,216
Zimmer Holdings, Incorporated+... 7,900 631
--------
TOTAL HEALTH CARE EQUIPMENT &
SUPPLIES................... 2,358
--------
HEALTH CARE PROVIDERS & SERVICES - 3.35%
Aetna, Incorporated.............. 2,600 215
Anthem, Incorporated+............ 4,000 354
Becton Dickinson and Company..... 4,300 217
Cardinal Health, Incorporated.... 500 37
HCA, Incorporated................ 2,100 85
IMS Health, Incorporated......... 19,800 500
St. Jude Medical,
Incorporated+.................. 1,200 92
UnitedHealth Group,
Incorporated................... 6,800 418
--------
TOTAL HEALTH CARE PROVIDERS &
SERVICES................... 1,918
--------
PHARMACEUTICALS - 14.90%
Allergan, Incorporated........... 6,500 572
American Pharmaceutical Partners,
Incorporated+*................. 2,700 114
Eli Lilly & Company.............. 7,700 568
Endo Pharmaceuticals Holdings,
Incorporated+.................. 7,000 167
Forest Laboratories,
Incorporated+.................. 6,400 413
Johnson & Johnson................ 47,900 2,588
King Pharmaceuticals,
Incorporated+.................. 1,500 26
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
36
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
Medco Health Solutions,
Incorporated+.................. 277 $ 10
Pfizer, Incorporated............. 99,160 3,546
Sepracor, Incorporated+*......... 3,500 167
Wyeth Corporation................ 9,100 347
--------
TOTAL PHARMACEUTICALS........ 8,518
--------
TOTAL HEALTH CARE............ 15,158
--------
INDUSTRIALS - 10.05%
AEROSPACE & DEFENSE - 0.90%
Lockheed Martin Corporation...... 6,100 291
Northrop Grumman Corporation..... 100 10
Raytheon Company................. 500 16
United Technologies Corporation.. 2,300 198
--------
TOTAL AEROSPACE & DEFENSE.... 515
--------
COMMERCIAL SERVICES & SUPPLIES - 2.49%
Cendant Corporation.............. 8,500 201
First Data Corporation........... 8,500 386
ITT Educational Services,
Incorporated+.................. 1,100 44
United Parcel Service,
Incorporated................... 11,300 793
--------
TOTAL COMMERCIAL SERVICES &
SUPPLIES................... 1,424
--------
ELECTRICAL EQUIPMENT - 0.33%
Energizer Holdings,
Incorporated+.................. 4,400 191
--------
TOTAL ELECTRICAL EQUIPMENT... 191
--------
INDUSTRIAL CONGLOMERATES - 6.14%
3M Company....................... 4,900 424
General Electric Company......... 90,500 2,710
Tyco International Limited....... 13,800 379
--------
TOTAL INDUSTRIAL
CONGLOMERATES.............. 3,513
--------
MACHINERY - 0.04%
Eaton Corporation................ 200 12
SPX Corporation+................. 100 4
--------
TOTAL MACHINERY.............. 16
--------
TRANSPORTATION - 0.15%
Overseas Shipholding Group,
Incorporated................... 2,600 85
--------
TOTAL TRANSPORTATION......... 85
--------
TOTAL INDUSTRIALS............ 5,744
--------
INFORMATION TECHNOLOGY - 21.95%
COMMUNICATIONS EQUIPMENT - 4.31%
Cisco Systems, Incorporated+..... 65,300 1,363
Juniper Networks,
Incorporated+*................. 8,000 175
Motorola, Incorporated........... 37,800 690
Qualcomm, Incorporated........... 3,800 237
--------
TOTAL COMMUNICATIONS
EQUIPMENT.................. 2,465
--------
COMPUTERS & PERIPHERALS - 3.01%
Dell, Incorporated+.............. 31,200 1,083
Hewlett Packard Company.......... 800 16
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
International Business Machines
Corporation.................... 1,900 $ 167
Lexmark International,
Incorporated+.................. 2,800 253
NCR Corporation+................. 2,400 107
Storage Technology Corporation+.. 3,600 95
--------
TOTAL COMPUTERS &
PERIPHERALS.................. 1,721
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.82%
Agilent Technologies,
Incorporated+.................. 11,000 297
Intersil Corporation............. 5,300 105
Sanmina-Sci Corporation+......... 6,600 66
--------
TOTAL ELECTRONIC EQUIPMENT &
INSTRUMENTS................ 468
--------
INTERNET SOFTWARE & SERVICES - 1.26%
Cadence Design Systems,
Incorporated+.................. 6,400 82
Electronic Arts, Incorporated+... 3,300 167
Mercury Interactive
Corporation+................... 3,900 166
Symantec Corporation+............ 6,800 306
--------
TOTAL INTERNET SOFTWARE &
SERVICES................... 721
--------
IT CONSULTING & SERVICES - 0.56%
Computer Sciences Corporation+... 3,500 143
SunGard Data Systems,
Incorporated+.................. 6,800 177
--------
TOTAL IT CONSULTING &
SERVICES................... 320
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 5.91%
Altera Corporation+.............. 10,300 206
Analog Devices, Incorporated..... 10,700 456
Intel Corporation................ 77,300 1,989
Linear Technology Corporation.... 1,300 46
Microchip Technology,
Incorporated................... 400 11
Micron Technology,
Incorporated+.................. 500 7
National Semiconductor
Corporation+................... 3,600 147
Novellus Systems,
Incorporated+.................. 9,500 275
QLogic Corporation+.............. 1,100 30
Texas Instruments,
Incorporated................... 300 8
Xilinx, Incorporated............. 6,100 205
--------
TOTAL SEMICONDUCTOR EQUIPMENT
& PRODUCTS................. 3,380
--------
SOFTWARE - 6.08%
BMC Software, Incorporated+...... 20,300 351
Microsoft Corporation............ 93,500 2,428
Oracle Corporation+.............. 44,100 495
Take-Two Interactive Software,
Incorporated+.................. 2,100 61
VERITAS Software Corporation+.... 5,300 142
--------
TOTAL SOFTWARE............... 3,477
--------
TOTAL INFORMATION
TECHNOLOGY................. 12,552
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
37
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
MATERIALS - 1.51%
CHEMICALS - 0.97%
Dow Chemical Company............. 100 $ 4
Monsanto Company................. 14,300 495
Praxair, Incorporated............ 1,500 55
--------
TOTAL CHEMICALS.............. 554
--------
METALS & MINING - 0.54%
Alcoa, Incorporated.............. 1,700 52
Freeport-McMoRan Copper & Gold,
Incorporated................... 1,600 49
Louisiana-Pacific Corporation+... 4,100 97
United States Steel
Corporation.................... 4,000 114
--------
TOTAL METALS & MINING........ 312
--------
TOTAL MATERIALS.............. 866
--------
TELECOMMUNICATION SERVICES - 0.93%
DIVERSIFIED TELECOMMUNICATION - 0.40%
Panamsat Corporation+*........... 2,300 53
Telephone and Data Systems,
Incorporated................... 1,100 73
Verizon Communications,
Incorporated................... 2,700 102
--------
TOTAL DIVERSIFIED
TELECOMMUNICATION.......... 228
--------
WIRELESS TELECOMMUNICATION SERVICE - 0.53%
AT&T Wireless Services,
Incorporated+.................. 5,100 70
Nextel Communications,
Incorporated+.................. 6,700 160
United States Cellular
Corporation+................... 2,100 72
--------
TOTAL WIRELESS
TELECOMMUNICATION SERVICE.... 302
--------
TOTAL TELECOMMUNICATION
SERVICES................... 530
--------
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
UTILITIES - 0.10%
ELECTRIC UTILITIES - 0.05%
PG&E Corporation+................ 700 $ 19
Pinnacle West Capital
Corporation.................... 300 12
--------
TOTAL ELECTRIC UTILITIES..... 31
--------
GAS UTILITIES - 0.05%
Kinder Morgan, Incorporated...... 500 30
--------
TOTAL GAS UTILITIES.......... 30
--------
TOTAL UTILITIES.............. 61
--------
TOTAL COMMON STOCK............... 56,563
--------
SHORT-TERM INVESTMENTS - 2.45%
American AAdvantage Money Market
Select Fund (Note A)........... 1,277,171 1,277
AMR Investments Enhanced Cash
Business Trust (Note A)........ 25,000 25
iShares Russell 1000 Growth Index
Fund*.......................... 2,110 98
--------
TOTAL SHORT-TERM
INVESTMENTS................ 1,400
--------
TOTAL INVESTMENTS - 101.39% (COST
$52,402)....................... 57,963
--------
LIABILITIES, NET OF OTHER
ASSETS - (1.39%)............... (791)
--------
TOTAL NET ASSETS - 100%.......... $ 57,172
========
</Table>
- ---------------
(A) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of this security is on loan at April 30, 2004. See Note 4.
+ - non-income producing
See accompanying notes
- --------------------------------------------------------------------------------
38
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
COMMON STOCK - 89.55%
CONSUMER DISCRETIONARY - 19.79%
AUTO COMPONENTS - 2.13%
Aftermarket Technology
Corporation+*............... 8,870 $ 134
American Axle & Manufacturing
Holdings, Incorporated...... 26,200 1,008
Arvinmeritor, Incorporated.... 174,900 3,619
Bandag, Incorporated.......... 3,600 141
Borg-Warner Automotive,
Incorporated................ 28,000 2,294
Cooper Tire & Rubber
Company..................... 22,000 471
Dana Corporation.............. 116,000 2,339
Group 1 Automotive,
Incorporated+............... 38,200 1,320
Hayes Lemmerz International,
Incorporated+............... 196,400 2,834
Sonic Automotive,
Incorporated*............... 51,000 1,270
Superior Industries
International,
Incorporated*............... 37,300 1,271
--------
TOTAL AUTO COMPONENTS..... 16,701
--------
HOTELS RESTAURANTS & LEISURE - 3.73%
Aztar Corporation+............ 27,900 723
Bally Total Fitness Holdings
Corporation+*............... 22,500 93
Bob Evans Farms,
Incorporated................ 42,500 1,303
California Pizza Kitchen,
Incorporated+*.............. 88,100 1,851
CEC Entertainment,
Incorporated+............... 15,900 543
Isle of Capri Casinos,
Incorporated+*.............. 92,700 1,947
Jack in the Box,
Incorporated+*.............. 288,800 7,821
Kerzner International
Limited+*................... 173,600 7,421
Lone Star Steakhouse & Saloon,
Incorporated*............... 4,700 145
Magna Entertainment
Corporation+*............... 291,200 1,506
Mandalay Resort Group*........ 72,100 4,142
Papa John's International,
Incorporated+*.............. 33,500 1,120
Ryan's Family Steak Houses,
Incorporated+............... 35,150 638
--------
TOTAL HOTELS RESTAURANTS &
LEISURE................. 29,253
--------
HOUSEHOLD DURABLES - 4.35%
American Greetings
Corporation+................ 60,800 1,246
Beazer Homes USA,
Incorporated*............... 107,000 10,534
Furniture Brands
International,
Incorporated................ 149,300 4,201
La-Z-Boy, Incorporated........ 75,500 1,574
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Libbey, Incorporated.......... 11,300 $ 296
M.D.C. Holdings,
Incorporated................ 5,518 341
Maytag Corporation............ 187,300 5,226
Standard Pacific
Corporation................. 9,800 494
The Toro Company.............. 14,600 849
WCI Communities,
Incorporated+*.............. 385,200 9,364
--------
TOTAL HOUSEHOLD
DURABLES................ 34,125
--------
INTERNET & CATALOG RETAIL - 0.11%
School Specialty,
Incorporated+*.............. 25,018 891
--------
TOTAL INTERNET & CATALOG
RETAIL.................. 891
--------
LEISURE EQUIPMENT & PRODUCTS - 1.17%
The Boyds Collection
Limited+*................... 19,700 54
Brunswick Corporation......... 147,800 6,076
Callaway Golf Company......... 20,200 343
Hutchinson Technology,
Incorporated+*.............. 38,300 942
JAKKS Pacific,
Incorporated+*.............. 18,800 326
Nautilus Group,
Incorporated*............... 43,100 693
Polaris Industries,
Incorporated*............... 17,800 764
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS................ 9,198
--------
MEDIA - 0.53%
R.H. Donnelley Corporation+*.. 60,700 2,749
Reader's Digest Association,
Incorporated................ 11,900 170
Regal Entertainment Group*.... 25,500 556
Scholastic Corporation+....... 23,100 655
--------
TOTAL MEDIA............... 4,130
--------
MULTILINE RETAIL - 1.36%
BJ's Wholesale Club,
Incorporated+............... 364,300 8,827
Burlington Coat Factory
Warehouse Corporation....... 69,000 1,308
ShopKo Stores,
Incorporated+*.............. 32,800 435
--------
TOTAL MULTILINE RETAIL.... 10,570
--------
SPECIALTY RETAIL - 5.08%
Abercrombie and Fitch
Company+.................... 98,900 3,110
Advance Auto Parts,
Incorporated+............... 160,200 6,913
Barnes & Noble,
Incorporated+............... 110,500 3,301
Borders Group, Incorporated... 104,600 2,507
Brookstone, Incorporated+*.... 195,450 3,888
Buckle, Incorporated*......... 16,200 443
Cato Corporation*............. 22,900 458
Foot Locker, Incorporated..... 30,100 722
Genesco, Incorporated+*....... 16,700 371
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
39
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Handleman Company............. 26,900 $ 606
Hollywood Entertainment
Corporation+................ 122,100 1,643
Hughes Supply, Incorporated... 800 45
Linens 'n Things,
Incorporated+............... 199,100 6,459
The Men's Wearhouse,
Incorporated+............... 214,000 5,455
Rent-A-Center,
Incorporated+............... 8,750 256
Stage Stores,
Incorporated+*.............. 34,587 1,358
Too, Incorporated+*........... 28,100 493
United Auto Group,
Incorporated................ 29,900 922
Zale Corporation+............. 15,600 872
--------
TOTAL SPECIALTY RETAIL.... 39,822
--------
TEXTILES & APPAREL - 1.33%
Brown Shoe Company,
Incorporated................ 4,300 157
Kellwood Company.............. 3,700 146
Phillips-Van Heusen
Corporation*................ 35,500 642
Russell Corporation*.......... 82,300 1,369
The Warnaco Group,
Incorporated+............... 424,800 8,126
--------
TOTAL TEXTILES &
APPAREL................. 10,440
--------
TOTAL CONSUMER
DISCRETIONARY........... 155,130
--------
CONSUMER STAPLES - 3.74%
BEVERAGES - 0.53%
Adolph Coors Company.......... 63,300 4,159
--------
TOTAL BEVERAGES........... 4,159
--------
FOOD & DRUG RETAILING - 0.58%
Pathmark Stores,
Incorporated+*.............. 268,100 2,292
Ruddick Corporation........... 89,600 1,828
Winn-Dixie Stores,
Incorporated+*.............. 51,500 393
--------
TOTAL FOOD & DRUG
RETAILING............... 4,513
--------
FOOD PRODUCTS - 2.09%
American Italian Pasta
Company*.................... 189,500 5,867
Chiquita Brands International,
Incorporated+............... 25,400 458
Del Monte Foods Company+...... 687,200 7,600
Sensient Technologies
Corporation................. 120,400 2,463
--------
TOTAL FOOD PRODUCTS....... 16,388
--------
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
PERSONAL PRODUCTS - 0.06%
Playtex Products,
Incorporated+*.............. 61,200 $ 453
--------
TOTAL PERSONAL PRODUCTS... 453
--------
TOBACCO - 0.48%
Dimon, Incorporated*.......... 34,500 239
Schweitzer Mauduit
International,
Incorporated................ 13,000 404
Universal Corporation......... 62,700 3,150
--------
TOTAL TOBACCO............. 3,793
--------
TOTAL CONSUMER STAPLES.... 29,306
--------
ENERGY - 5.76%
ENERGY EQUIPMENT & SERVICES - 0.63%
MDU Resources Group,
Incorporated................ 93,000 2,083
Offshore Logistics,
Incorporated+............... 34,900 766
Oil States International,
Incorporated+............... 117,000 1,584
Teco Energy, Incorporated*.... 41,100 524
--------
TOTAL ENERGY EQUIPMENT &
SERVICES................ 4,957
--------
OIL & GAS - 5.13%
Berry Petroleum Company*...... 11,400 309
Cabot Oil and Gas
Corporation*................ 7,500 268
Chesapeake Energy
Corporation*................ 422,500 5,809
Cimarex Energy Company+....... 84,800 2,340
Encore Acquisition Company+... 339,700 10,106
Forest Oil Corporation,+...... 51,100 1,342
Giant Industries,
Incorporated+............... 57,700 1,063
The Houston Exploration
Company+.................... 56,400 2,523
Newfield Exploration
Company+.................... 94,500 4,978
Plains Exploration and
Production Company LP+*..... 26,300 518
Premcor, Incorporated+........ 62,300 2,145
Stelmar Shipping Limited*..... 147,100 3,626
Stone Energy Corporation+..... 65,500 3,223
Teekay Shipping Corporation... 31,400 1,909
--------
TOTAL OIL & GAS........... 40,159
--------
TOTAL ENERGY.............. 45,116
--------
FINANCIALS - 20.16%
BANKS - 8.34%
Amcore Financial,
Incorporated................ 2,246 64
Americredit Corporation+...... 70,300 1,140
Anchor BanCorp Wisconsin,
Incorporated*............... 51,138 1,242
Bancorp South, Incorporated... 46,800 947
Bank Hawaii Corporation....... 140,400 6,138
Chemical Financial
Corporation*................ 49,069 1,681
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
40
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
City National Corporation..... 10,900 $ 672
Colonial BancGroup,
Incorporated................ 270,200 4,656
Commercial Federal
Corporation*................ 83,500 2,143
Community Bank System,
Incorporated................ 20,000 407
Community First Bankshares,
Incorporated................ 29,970 964
Corus Bankshares,
Incorporated................ 6,787 256
Cullen/Frost Bankers,
Incorporated................ 147,600 6,391
Downey Financial Corporation.. 51,900 2,504
First Citizens Bancshares,
Incorporated................ 6,800 833
First Federal Capital
Corporation................. 34,664 888
First Republic Bank*.......... 10,600 404
FirstFed Financial
Corporation+................ 13,000 525
FirstMerit Corporation........ 56,705 1,336
Frontier Financial
Corporation*................ 11,669 387
Gold Banc Corporation,
Incorporated*............... 4,550 74
Great American Financial
Resources, Incorporated*.... 73,700 1,176
Greater Bay Bancorp*.......... 75,600 2,145
Hudson United Bancorp......... 54,800 1,958
International Bancshares
Corporation*................ 12,500 666
Irwin Financial
Corporation*................ 22,900 542
MAF Bancorp, Incorporated*.... 12,200 498
NBT Bancorp, Incorporated..... 31,200 653
NetBank, Incorporated*........ 89,600 967
Old National Bankcorp*........ 15,036 359
PFF Bancorp, Incorporated..... 11,200 419
Provident Bankshares
Corporation*................ 27,720 781
Provident Financial Group,
Incorporated*............... 39,061 1,538
Republic Bancorp,
Incorporated................ 113,919 1,482
S and T Bancorp,
Incorporated*............... 9,782 278
Saxon Capital,
Incorporated+*.............. 122,800 2,671
Sky Financial Group,
Incorporated................ 88,255 2,109
Susquehanna Bancshares,
Incorporated................ 7,600 178
Tierone Corporation+*......... 25,600 555
Timberland Bancorp,
Incorporated................ 14,800 327
Trustmark Corporation......... 100,500 2,675
United Bankshares,
Incorporated................ 29,471 884
Washington Federal,
Incorporated................ 160,040 3,739
Webster Financial Corporation
of Waterbury................ 103,600 4,506
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Westcorp, Incorporated........ 14,054 $ 620
--------
TOTAL BANKS............... 65,378
--------
DIVERSIFIED FINANCIALS - 0.29%
IndyMac Bancorp,
Incorporated................ 68,300 2,197
Walter Industries,
Incorporated*............... 6,100 76
--------
TOTAL DIVERSIFIED
FINANCIALS.............. 2,273
--------
INSURANCE - 7.06%
Alfa Corporation*............. 52,551 713
Allmerica Financial
Corporation+................ 287,500 9,995
American Financial Group,
Incorporated................ 177,500 5,449
American National Insurance
Company..................... 5,700 537
AmerUs Group Company*......... 91,300 3,524
Commerce Group,
Incorporated*............... 76,100 3,512
Delphi Financial Group,
Incorporated................ 51,800 2,080
FBL Financial Group,
Incorporated*............... 68,500 1,824
First American Corporation.... 178,000 4,827
Fremont General Corporation... 63,500 1,369
Hilb Rogal & Hobbs Company.... 4,100 147
LandAmerica Financial Group,
Incorporated................ 30,500 1,257
National Western Life
Insurance Company+.......... 2,500 363
Odyssey Re Holdings
Corporation*................ 81,200 1,927
Protective Life Corporation... 157,600 5,667
Reinsurance Group of America,
Incorporated................ 139,900 5,431
StanCorp Financial Group,
Incorporated................ 13,100 810
Stewart Information Services
Corporation................. 12,900 458
Triad Guaranty,
Incorporated+............... 23,600 1,291
UICI+*........................ 113,500 1,965
United National Group
Limited+.................... 134,200 2,214
--------
TOTAL INSURANCE........... 55,360
--------
REAL ESTATE - 4.47%
Affordable Residential
Communities+................ 78,800 1,340
American Financial Realty
Trust, 144A (Note A)+....... 338,100 5,004
American Home Mortgage
Investment Corporation*..... 169,000 4,010
La Quinta Corporation+........ 693,100 4,983
LNR Property Corporation*..... 188,000 9,441
MI Developments,
Incorporated+............... 357,400 9,221
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
41
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
The St. Joe Company........... 25,900 $ 1,015
--------
TOTAL REAL ESTATE......... 35,014
--------
TOTAL FINANCIALS.......... 158,025
--------
HEALTH CARE - 3.56%
BIOTECHNOLOGY - 0.08%
Albany Molecular Research,
Incorporated+*.............. 38,100 618
--------
TOTAL BIOTECHNOLOGY....... 618
--------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.80%
Haemonetics Corporation+...... 234,600 6,623
Mine Safety Appliances
Company*.................... 22,500 610
Sola International,
Incorporated+*.............. 336,300 6,901
--------
TOTAL HEALTH CARE EQUIPMENT &
SUPPLIES................ 14,134
--------
HEALTH CARE PROVIDERS & SERVICES - 1.68%
AMN Healthcare Services,
Incorporated+*.............. 46,900 764
Apria Healthcare Group,
Incorporated+............... 36,500 1,053
Cross Country Healthcare,
Incorporated+*.............. 9,895 163
First Health Group
Corporation+................ 47,200 788
Magellan Health Services,
Incorporated+............... 138,200 4,440
MedQuist, Incorporated+....... 4,000 54
Orthodontic Centers of
America, Incorporated+*..... 26,800 192
Owens & Minor, Incorporated... 61,200 1,487
Pacificare Health Systems,
Incorporated+............... 55,600 1,988
Sunrise Assisted Living,
Incorporated+*.............. 25,600 809
Universal Health Services,
Incorporated................ 19,000 834
US Oncology, Incorporated+.... 38,859 579
--------
TOTAL HEALTH CARE PROVIDERS &
SERVICES................ 13,151
--------
TOTAL HEALTH CARE......... 27,903
--------
INDUSTRIALS - 18.15%
AEROSPACE & DEFENSE - 1.01%
FTI Consulting,
Incorporated+*.............. 11,300 186
GenCorp, Incorporated*........ 33,400 354
Precision Castparts
Corporation................. 62,000 2,791
Triumph Group, Incorporated+.. 18,200 585
United Defense Industrials,
Incorporated+............... 114,800 3,978
--------
TOTAL AEROSPACE &
DEFENSE................. 7,894
--------
AIR FREIGHT & COURIERS - 0.40%
Covenant Transportation,
Incorporated+*.............. 151,700 2,672
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
GATX Corporation.............. 20,900 $ 491
--------
TOTAL AIR FREIGHT &
COURIERS................ 3,163
--------
BUILDING PRODUCTS - 0.44%
Universal Fastener Products,
Incorporated................ 42,500 1,151
York International
Corporation................. 59,200 2,321
--------
TOTAL BUILDING PRODUCTS... 3,472
--------
COMMERCIAL SERVICES & SUPPLIES - 7.60%
BISYS Group, Incorporated+.... 62,700 909
Bowne & Company,
Incorporated................ 225,100 3,811
CSG Systems International,
Incorporated+............... 94,300 1,583
Concord Communications,
Incorporated+*.............. 152,900 1,873
Convergys Corporation+........ 180,600 2,622
Deluxe Corporation............ 113,900 4,705
John H. Harland Company*...... 69,900 2,154
Heidrick & Struggles
International,
Incorporated+*.............. 88,400 2,195
IDEX Corporation.............. 131,000 6,190
Kelly Services,
Incorporated................ 225,900 6,714
Mac Gray Corporation+......... 39,100 260
McGrath Rentcorp.............. 900 28
NCO Group, Incorporated+*..... 47,551 1,079
New England Business Service,
Incorporated................ 10,000 347
Spherion Corporation+......... 522,900 5,151
Valassis Communications,
Incorporated+............... 549,700 16,986
Western Digital
Corporation+................ 367,400 2,969
--------
TOTAL COMMERCIAL SERVICES
& SUPPLIES.............. 59,576
--------
CONSTRUCTION & ENGINEERING - 0.57%
Eagle Materials,
Incorporated*............... 2,700 177
M/I Homes, Incorporated....... 53,000 2,261
The Shaw Group,
Incorporated+*.............. 106,200 1,274
URS Corporation+*............. 28,500 736
--------
TOTAL CONSTRUCTION &
ENGINEERING............. 4,448
--------
ELECTRICAL EQUIPMENT - 1.20%
Acuity Brands, Incorporated... 15,300 374
Brady Corporation............. 139,900 5,437
Genlyte Group, Incorporated+.. 15,800 906
Rayovac Corporation+.......... 43,000 1,146
Tecumseh Products Company..... 27,300 1,061
Wesco International,
Incorporated+*.............. 31,200 446
--------
TOTAL ELECTRICAL
EQUIPMENT............... 9,370
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
42
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
INDUSTRIAL CONGLOMERATES - 0.01%
Standex International
Corporation................. 3,100 $ 83
--------
TOTAL INDUSTRIAL
CONGLOMERATES........... 83
--------
MACHINERY - 3.18%
Albany International
Corporation................. 8,052 246
Briggs and Stratton
Corporation................. 11,700 819
Flowserve Corporation+........ 253,100 5,409
Harsco Corporation............ 128,400 5,589
Kaydon Corporation*........... 186,700 5,222
Lincoln Electric Holdings,
Incorporated*............... 16,400 517
Terex Corporation+............ 190,100 6,245
Thomas Industries,
Incorporated................ 23,600 797
Watts Industries,
Incorporated................ 2,300 56
--------
TOTAL MACHINERY........... 24,900
--------
MARINE - 2.59%
Alexander & Baldwin,
Incorporated................ 211,000 6,665
Kirby Corporation+*........... 187,800 6,479
Overseas Shipholding Group,
Incorporated................ 219,000 7,177
--------
TOTAL MARINE.............. 20,321
--------
TRANSPORTATION - 1.15%
J.B. Hunt Transport Services,
Incorporated+............... 70,100 2,219
Ryder Systems, Incorporated... 16,000 589
USF Corporation............... 186,800 6,211
--------
TOTAL TRANSPORTATION...... 9,019
--------
TOTAL INDUSTRIALS......... 142,246
--------
INFORMATION TECHNOLOGY - 2.95%
COMMUNICATIONS EQUIPMENT - 0.09%
Black Box Corporation*........ 5,700 290
Memc Electronic Materials,
Incorporated+............... 51,800 413
--------
TOTAL COMMUNICATIONS
EQUIPMENT............... 703
--------
COMPUTERS & PERIPHERALS - 0.08%
Maxtor Corporation+........... 98,800 643
--------
TOTAL COMPUTERS &
PERIPHERALS............. 643
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.44%
IKON Office Solutions,
Incorporated*............... 310,100 3,451
--------
TOTAL ELECTRONIC EQUIPMENT &
INSTRUMENTS............. 3,451
--------
IT CONSULTING & SERVICES - 1.32%
Bearingpoint, Incorporated+... 382,100 3,829
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Investment Technology Group,
Incorporated+............... 39,900 $ 572
Reynolds and Reynolds
Company..................... 207,300 5,921
--------
TOTAL IT CONSULTING &
SERVICES................ 10,322
--------
SOFTWARE - 1.02%
Mentor Graphics Corporation+.. 437,400 7,256
Parametric Technology
Corporation+................ 161,100 738
--------
TOTAL SOFTWARE............ 7,994
--------
TOTAL INFORMATION
TECHNOLOGY.............. 23,113
--------
MATERIALS - 5.84%
CHEMICALS - 3.39%
Agrium, Incorporated.......... 267,500 3,328
Ashland, Incorporated......... 22,500 1,078
FMC Corporation+.............. 53,500 2,295
H.B. Fuller Company*.......... 244,100 6,688
Hercules, Incorporated+....... 48,800 542
IMC Global, Incorporated+..... 285,900 3,594
Lubrizol Corporation.......... 92,800 2,951
PolyOne Corporation+*......... 894,800 6,120
--------
TOTAL CHEMICALS........... 26,596
--------
CONSTRUCTION MATERIALS - 1.16%
Insituform Technologies,
Incorporated+*.............. 258,100 4,191
Lafarge North America,
Incorporated*............... 76,600 3,390
Lennox International,
Incorporated*............... 89,800 1,501
--------
TOTAL CONSTRUCTION
MATERIALS............... 9,082
--------
CONTAINERS & PACKAGING - 0.10%
Silgan Holdings,
Incorporated+............... 19,479 819
--------
TOTAL CONTAINERS &
PACKAGING............... 819
--------
METALS & MINING - 0.55%
Century Aluminum Company+..... 160,500 3,178
Quanex Corporation............ 18,700 763
Steel Dynamics,
Incorporated+*.............. 13,770 331
--------
TOTAL METALS & MINING..... 4,272
--------
PAPER & FOREST PRODUCTS - 0.64%
Chesapeake Corporation........ 219,400 4,983
--------
TOTAL PAPER & FOREST
PRODUCTS................ 4,983
--------
TOTAL MATERIALS........... 45,752
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
43
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
TELECOMMUNICATION SERVICES - 0.25%
Metrocall Holdings,
Incorporated+............... 28,500 $ 1,967
--------
TOTAL TELECOMMUNICATION
SERVICES................ 1,967
--------
UTILITIES - 9.35%
ELECTRIC UTILITIES - 5.50%
Alliant Corporation*.......... 167,000 4,152
Black Hills Corporation....... 81,800 2,502
Cleco Corporation*............ 101,100 1,815
DPL Inc....................... 306,700 5,404
Duquesne Light Holdings,
Incorporated*............... 116,800 2,192
Great Plains Energy,
Incorporated................ 129,900 4,054
Hawaiian Electric Industries,
Incorporated*............... 28,200 1,403
Northeast Utilities........... 452,900 8,311
NSTAR......................... 70,200 3,398
OGE Energy Corporation........ 212,100 5,101
PNM Resources, Incorporated... 30,100 878
Sierra Pacific Resources
Corporation+*............... 540,900 3,829
WPS Resources Corporation..... 2,000 92
--------
TOTAL ELECTRIC
UTILITIES............... 43,131
--------
GAS UTILITIES - 3.85%
AGL Resources, Incorporated... 134,000 3,832
Atmos Energy Corporation*..... 71,700 1,767
Energen Corporation........... 34,400 1,422
National Fuel Gas Company..... 204,500 5,008
New Jersey Resources
Corporation................. 2,000 76
Nicor, Incorporated*.......... 54,200 1,842
ONEOK, Incorporated........... 247,800 5,191
Peoples Energy Corporation*... 75,900 3,173
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Southern Union Company........ 98,900 $ 1,944
South Jersey Industries,
Incorporated*............... 10,300 425
Vectren Corporation........... 94,500 2,282
WGL Holdings, Incorporated.... 114,200 3,229
--------
TOTAL GAS UTILITIES....... 30,191
--------
TOTAL UTILITIES........... 73,322
--------
TOTAL COMMON STOCK........ 701,880
--------
<Caption>
PAR
AMOUNT
------------
SHORT-TERM INVESTMENTS - 24.51%
U. S. TREASURY BILLS - 0.66%
1.00%, Due 6/10/2004 (Note
B).......................... $ 5,200 5,195
--------
TOTAL U. S. TREASURY
BILLS................... 5,195
--------
<Caption>
SHARES
------------
OTHER SHORT-TERM INVESTMENTS - 23.85%
American AAdvantage Money
Market Select Fund (Note
C).......................... 146,814,729 146,815
AMR Investments Enhanced Cash
Business Trust (Note C)..... 40,063,323 40,063
--------
TOTAL OTHER SHORT - TERM
INVESTMENTS............. 186,878
--------
TOTAL SHORT-TERM
INVESTMENTS............. 192,073
--------
TOTAL INVESTMENTS - 114.06%
(COST $807,016)............. 893,953
--------
LIABILITIES, NET OF OTHER
ASSETS - (14.06%)........... (110,260)
--------
TOTAL NET ASSETS - 100%....... $783,693
========
</Table>
- ---------------
(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 $5,004 or 0.64% of net assets.
(B) At April 30, 2004, security held as collateral for open futures contracts.
(C) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of this security is on loan at April 30, 2004. See Note 4.
+ - non-income producing
See accompanying notes
- --------------------------------------------------------------------------------
44
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
STOCKS - 96.76%
ARGENTINA COMMON STOCK - 0.05%
Tenaris S.A., ADR................ 1,200 $ 36
-------
TOTAL ARGENTINA COMMON
STOCK...................... 36
-------
BRAZIL - 8.90%
BRAZIL PREFERRED STOCK - 3.96%
Banco Bradesco S.A.+............. 8,820 357
Banco Bradesco S.A., ADR+*....... 3,810 155
Brasil Telecom Participacoes
S.A., ADR+..................... 3,400 105
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar, ADR.................... 6,600 117
Companhia de Bebidas das
Americas, ADR.................. 19,286 362
Companhia Vale do Rio Doce,
ADR............................ 10,688 418
Companhia Paranaense de
Energia+....................... 7,000,000 17
Empresa Brasileira de Aeronautica
S.A. (Embraer), ADR+........... 9,710 251
Petroleo Brasileiro S.A., ADR.... 18,016 449
Tele Celular Sul Participacoes
S.A., ADR*..................... 7,550 111
Telecomunicacoes Brasileiras
S.A., ADR*..................... 8,360 239
Telesp Celular Participacoes
S.A., ADR+*.................... 29,200 208
Telesp - Telecommunicacoes de Sao
Paulo S.A.+.................... 10,500,000 156
-------
TOTAL BRAZIL PREFERRED
STOCK...................... 2,945
-------
BRAZIL COMMON STOCK - 4.94%
Aracruz Celulose S.A., ADR....... 3,300 103
Banco Itau Holding Financeira
S.A.+.......................... 1,676,586 133
Banco Itau Holding Financeira
S.A., ADR+..................... 12,336 489
Companhia de Saneamento Basico do
Estado de Sao Paulo+........... 5,220,000 237
Companhia de Tecidos Norte de
Minas+......................... 3,200,000 228
Companhia Energetica de Minas
Gerais+........................ 26,141,410 399
Companhia Energetica de Minas
Gerais, ADR.................... 5,000 77
Companhia Siderurgica Nacional
S.A., ADR*..................... 1,800 84
Companhia Paranaense de
Energia+....................... 24,000,000 81
Duratex S.A.+.................... 4,600,000 109
Petroleo Brasileiro S.A., ADR.... 40,802 1,179
Telemar Norte Leste S.A.+........ 3,500,000 59
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Telemig Celular Participacoes
S.A............................ 40,383,003 $ 64
Telesp Celular Participacoes
S.A.+.......................... 97,156,163 276
Votorantim Celulose e Papel S.A.,
ADR............................ 4,750 149
-------
TOTAL BRAZIL COMMON STOCK.... 3,667
-------
TOTAL BRAZIL................. 6,612
-------
CHILE COMMON STOCK - 0.47%
Banco Santander-Chile S.A., ADR.. 9 105
Grupo Enersis SA, ADR+........... 40,600 246
-------
TOTAL CHILE COMMON STOCK..... 351
-------
CHINA COMMON STOCK - 2.56%
BYD Company Limited*............. 19,000 57
China Mobile (Hong Kong)
Limited........................ 257,800 679
China Mobile (Hong Kong) Limited,
ADR*........................... 15,900 210
China Oilfield Services
Limited........................ 386,000 111
China Petroleum & Chemical
Corporation.................... 210,000 73
China Resource Power Holdings
Company Limited+............... 80,000 43
China Shipping Development
Company Limited*............... 132,000 76
China Telecom Corporation
Limited........................ 80,000 24
Chunghwa Telecom Company Limited,
ADR............................ 19,500 325
Huaneng Power International,
Incorporated*.................. 160,000 150
TPV Technology Limited........... 239,000 157
-------
TOTAL CHINA COMMON STOCK..... 1,905
-------
EGYPT COMMON STOCK - 1.18%
Commercial International Bank,
GDR, 144A (Note A)............. 42,600 153
Egyptian Company for Mobile
Services (MobiNil)+............ 16,503 234
Orascom Construction Industries
S.A.E.......................... 22,763 353
Suez Cement Company, GDR, 144A
(Note A)....................... 15,769 134
-------
TOTAL EGYPT COMMON STOCK..... 874
-------
HONG KONG COMMON STOCK - 3.63%
Asia Aluminum Holdings Limited... 1,002,000 116
AviChina Industry & Technology
Company Limited................ 396,000 46
Beijing Enterprises Holdings..... 15,000 15
China Merchants Holdings
International Company Limited.. 50,000 59
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
45
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
China Resources Enterprises
Limited*....................... 298,500 $ 346
CNOOC Limited+................... 790,000 284
Fountain Set (Holdings) Limited.. 157,000 116
The Grande Holdings Limited...... 61,000 69
Hainan Meilan Airport Company
Limited........................ 127,000 94
Hopewell Highway Infrastructure
Limited........................ 111,000 62
Kingboard Chemical Holdings
Limited........................ 44,000 83
Lianhua Supermarket Holdings
Company Limited*............... 64,000 65
Moulin International Holdings
Limited........................ 74,000 52
Norstar Founders+*............... 106,000 31
PICC Property & Casualty Company
Limited+*...................... 98,000 34
Qingling Motors Company
Limited*....................... 582,000 84
Shandong International Power
Development Company Limited.... 981,800 280
Shanghai Industrial Holdings
Limited*....................... 126,800 237
Shougang Concord Century Holdings
Limited........................ 655,000 71
Sinopec Yizheng Chemical Fibre
Company Limited*............... 850,800 155
Sinopec Zhenhai Refining Chem.... 111,000 101
Texwinca Holdings Limited........ 175,500 132
Victory City International
Holdings Limited............... 137,000 59
Wumart Stores, Incorporated+..... 32,000 49
Yanzhou Coal Mining Company
Limited........................ 58,000 54
-------
TOTAL HONG KONG COMMON
STOCK...................... 2,694
-------
HUNGARY COMMON STOCK - 1.28%
Gedeon Richter Rt................ 2,950 300
Magyar Olaj-es Gazipari
Reszvenytarsasag............... 9,865 372
Magyar Tavkozlesi Rt............. 66,900 280
-------
TOTAL HUNGARY COMMON STOCK... 952
-------
INDIA COMMON STOCK - 7.74%
ABB Limited...................... 4,200 74
Bharat Electronics Limited+...... 21,500 283
Bharat Petroleum Corporation
Limited........................ 17,233 181
CIPLA+........................... 4,750 146
Container Corporation............ 9,000 153
Doctor Reddy's Laboratories
Limited, ADR................... 2,100 41
GAIL (India) Limited............. 4,000 20
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
GAIL (India) Limited, GDR, 144A
(Note A)....................... 9,600 $ 266
GlaxoSmithKline Pharmaceutical
Limited........................ 5,500 83
Grasim Industries Limited........ 4,500 125
Hero Honda Motors Limited........ 10,000 109
Hindalco Industries Limited, GDR,
144A (Note A).................. 14,850 378
Hindustan Lever Limited.......... 99,458 316
ICICI Bank Limited+.............. 42,700 303
ICICI Bank Limited, ADR.......... 6,600 102
Ind Dev Bank India............... 63,000 84
Infosys Technologies Limited,
ADR*........................... 1,900 154
ITC Limited...................... 15,100 365
ITC Limited, GDR................. 3,050 81
Mahanagar Telephone Nigam
Limited........................ 105,000 350
Mahanagar Telephone Nigam
Limited, ADR*.................. 29,750 226
Mahindra & Mahindra Limited, GDR,
144A (Note A).................. 9,600 101
Oil and Natural Gas Corporation
Limited........................ 6,000 113
Patni Computer Systems Limited... 12,000 59
Punjab National Bank............. 16,000 135
Reliance Industries Limited...... 53,205 630
Satyam Computer Services
Limited........................ 33,100 239
Siemens India Limited............ 1,800 43
State Bank of India, GDR+........ 4,500 174
State Bank of India, GDR, 144A
(Note A)....................... 4,800 187
Steel Authority of India
Limited+....................... 76,000 60
Tata Engineering, GDR+........... 11,350 117
Tata Iron Steel.................. 7,000 56
-------
TOTAL INDIA COMMON STOCK..... 5,754
-------
INDONESIA COMMON STOCK - 3.55%
Bank Internasional Indonesia+.... 2,885,500 48
Bumi Resources Tbk............... 4,279,000 231
Hindustan Petroleum Corporation
Limited........................ 35,200 364
Indonesia Satellite
Corporation+................... 212,000 96
NIIT Limited..................... 9,232 35
PT Astra Agro Lestari Tbk........ 425,000 111
PT Astra International Tbk+...... 236,038 153
PT Bank Central Asia Tbk......... 218,000 97
PT Bank Mandiri+................. 1,037,500 170
PT Bank Rakyat Indonesia+........ 574,000 113
PT Gudang Garam Tbk.............. 142,900 238
PT Hanjaya Mandala Sampoerna
Tbk............................ 276,000 160
PT Indocement Tunggal Prakarsa
Tbk+........................... 405,500 88
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
46
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
PT Indofood Sukses Makmur Tbk.... 2,506,000 $ 214
PT Ramayana Lestari Sentosa Tbk.. 210,000 128
PT Telekomunikasi Indonesia...... 428,000 392
-------
TOTAL INDONESIA COMMON
STOCK...................... 2,638
-------
ISRAEL COMMON STOCK - 1.35%
Bank Hapoalim Limited............ 146,080 377
Check Point Software
Technologies+.................. 20,790 487
Supersol Limited................. 60,000 141
-------
TOTAL ISRAEL COMMON STOCK.... 1,005
-------
MALAYSIA COMMON STOCK - 2.34%
Commerce Asset-Holding Berhad.... 66,000 87
Gamuda Berhad.................... 214,200 316
Genting Berhad................... 66,500 289
Kuala Lumpur Kepong Berhad....... 23,000 41
Magnum Corporation Berhad........ 142,000 108
Malaysia International Shipping
Corporation Berhad............. 55,100 183
Proton Holdings Berhad+.......... 48,400 106
Resorts World Berhad............. 25,000 66
Sime Darby Berhad................ 263,500 374
SP Setia Berhad.................. 103,499 116
YTL Corporation Berhad........... 46,000 56
-------
TOTAL MALAYSIA COMMON
STOCK...................... 1,742
-------
MEXICO COMMON STOCK - 7.41%
America Movil S.A. de C.V.,
ADR............................ 23,755 803
Cemex S.A. de C.V................ 45,725 267
Cemex S.A. de C.V., ADR*......... 9,800 289
Coca-Cola Femsa, S.A. de C.V.,
ADR............................ 29,375 625
Controladora Commercial Mexicana
S.A. de C.V.+.................. 194,000 214
Desc S.A. de C.V................. 649,000 207
Grupo Continential, S.A.......... 120,850 222
Grupo Televisa, S.A., ADR........ 16,400 715
Kimberly-Clark de Mexico, S.A. de
C.V............................ 192,900 512
Organizacion Soriana S.A. de
C.V............................ 29,100 88
Telefonos de Mexico, S.A. de
C.V., ADR...................... 32,878 1,122
Wal-Mart de Mexico, S.A. de C.V.,
Series C....................... 153,321 446
-------
TOTAL MEXICO COMMON STOCK.... 5,510
-------
PHILIPPINES COMMON STOCK - 0.45%
ABS-CBN Broadcasting
Corporation+................... 135,000 58
Bank of the Philippine Islands... 205,780 178
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Manila Electric Company.......... 176,900 $ 95
-------
TOTAL PHILIPPINES COMMON
STOCK...................... 331
-------
POLAND COMMON STOCK - 1.46%
Bank Polska Kasa Opieki SA....... 600 19
Bank Przemyslowo-Handlowy SA..... 1,387 152
KGHM Polska Miedz SA+............ 26,391 183
Polski Koncern Naftowy Orlen SA.. 36,911 265
Telekomunikacja Polska SA........ 82,611 335
Telekomunikacja Polska SA, GDR,
144A (Note A).................. 33,500 135
-------
TOTAL POLAND COMMON STOCK.... 1,089
-------
RUSSIA - 5.12%
RUSSIA PREFERRED STOCK - 0.50%
JSC Surgutneftegaz, ADR.......... 1,328 57
Uralsvyazinform, ADR............. 20,100 150
VolgaTelecom, ADR................ 26,800 163
-------
TOTAL RUSSIA PREFERRED
STOCK...................... 370
-------
RUSSIA COMMON STOCK - 4.62%
JSC Surgutneftegaz, ADR*......... 18,711 608
LUKOIL Oil Company, ADR.......... 12,127 1,321
Mining and Metallurgical Company
Norilsk Nickel, ADR............ 6,549 388
Mobile Telesystems, ADR.......... 2,600 281
Mobile Telesystems, GDR, 144A
(Note A)+...................... 1,800 165
RAO Gazprom+..................... 10,900 338
RAO Gazprom, ADR................. 2,200 68
Yukos Oil Company, ADR........... 5,900 263
-------
TOTAL RUSSIA COMMON STOCK.... 3,432
-------
TOTAL RUSSIA................. 3,802
-------
SOUTH AFRICA COMMON STOCK - 13.76%
ABSA Group Limited............... 40,300 260
African Bank Investments
Limited........................ 270,600 412
African Life Assurance Company
Limited........................ 79,221 178
Anglo American plc............... 63,290 1,271
Anglo American Platinum
Corporation Limited+........... 6,400 221
AngloGold Limited................ 4,100 130
AngloGold Limited, ADR*.......... 1,100 35
Aveng Limited.................... 144,300 151
BidBEE Limited+.................. 8,885 51
Bidvest Group Limited............ 52,014 406
Edgars Consolidated Stores....... 10,900 209
Gold Fields Limited, ADR*........ 5,600 57
Harmony Gold Mining Company
Limited........................ 15,399 171
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
47
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Harmony Gold Mining Company
Limited, ADR................... 12,800 $ 141
Illovo Sugar Limited............. 90,200 101
Impala Platinum Holdings
Limited........................ 3,129 213
Imperial Holdings Limited........ 19,300 183
Iscor Limited.................... 50,500 242
Kumba Resources Limited.......... 27,800 166
Massmart Holdings Limited........ 55,500 247
Metro Cash and Carry Limited+.... 605,852 202
MTN Group Limited+............... 109,640 459
Nampak Limited................... 218,900 448
Nedcor Limited................... 97,586 662
Old Mutual....................... 295,600 507
Sanlam Limited+.................. 107,000 135
Sappi Limited.................... 47,400 639
Sasol Limited.................... 47,400 711
Shoprite Holdings Limited........ 174,320 243
Standard Bank Group Limited...... 43,840 253
Steinhoff International Holdings
Limited+....................... 403,479 502
Telkom South Africa Limited,
ADR............................ 20,000 217
Tiger Brands Limited............. 21,450 265
The Tongaat-Hulett Group
Limited........................ 22,000 143
-------
TOTAL SOUTH AFRICA COMMON
STOCK...................... 10,231
-------
SOUTH KOREA - 16.49%
SOUTH KOREA PREFERRED STOCK - 0.44%
Daishin Securities Company
Limited+....................... 5,740 40
Samsung Electronics Company
Limited+....................... 1,030 284
-------
TOTAL SOUTH KOREA PREFERRED
STOCK...................... 324
-------
SOUTH KOREA COMMON STOCK - 16.05%
Cheil Industries, Incorporated... 11,810 172
CJ Corporation................... 4,220 250
Daewoo Shipbuilding & Marine
Engineering Company Limited.... 26,860 275
Daishin Securities Company
Limited........................ 17,380 235
Handsome Corporation............. 12,610 105
Hankook Tire Company Limited..... 40,650 330
Hyundai Department Store Company
Limited........................ 10,800 292
Hyundai Mobis.................... 9,650 414
Hyundai Motor Company Limited.... 6,670 254
Industrial Bank of Korea......... 20,500 142
INI Steel Company................ 10,500 102
Kangwon Land Incorporated........ 22,791 259
Kia Motors Corporation........... 21,950 204
Kookmin Bank+.................... 10,641 397
Kookmin Bank, ADR+............... 6,800 252
Korea Electric Power
Corporation.................... 65,990 1,080
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Korea Exchange Bank+............. 8,019 $ 42
KT Corporation, ADR.............. 33,500 620
KT&G Corporation................. 6,960 178
LG Household and Health Care
Limited........................ 2,560 77
LG Investment and Securities
Company Limited................ 33,620 289
POSCO............................ 3,840 470
POSCO, ADR....................... 3,200 98
Pusan Bank....................... 12,250 71
Samsung Corporation.............. 31,960 381
Samsung Electro Mechanics Company
Limited+....................... 5,440 205
Samsung Electronics Company
Limited........................ 4,650 2,207
Samsung Fire & Marine Insurance
Company Limited................ 5,640 375
Samsung SDI Company Limited...... 11,630 1,487
Shinhan Financial Group Company
Limited........................ 8,870 155
STX Shipbuilding Company
Limited........................ 8,130 87
SK Telecom Company Limited,
ADR*........................... 1,700 34
SK Telecom Company Limited....... 1,750 298
Tong Yang Confectionery
Corporation.................... 1,550 96
-------
TOTAL SOUTH KOREA COMMON
STOCK...................... 11,933
-------
TOTAL SOUTH KOREA............ 12,257
-------
TAIWAN COMMON STOCK - 10.73%
Accton Technology Corporation+... 144,396 104
Acer, Incorporated............... 88,888 126
Asia Optical Company,
Incorporated................... 45,200 318
Asustek Computer, Incorporated... 200,125 428
Catcher Technology Company
Limited........................ 15,000 63
Cheng Shin Industries............ 34,000 40
China Development Financial
Holding Corporation+........... 362,000 198
China Motor Company.............. 71,000 112
Chinatrust Financial Holding
Company Limited................ 190,387 205
Compal Electronics,
Incorporated................... 428,000 482
CTCI Corporation................. 104,000 67
CyberLink Corporation............ 27,000 110
Delta Electronics,
Incorporated................... 262,000 324
Elan Microelectronics
Corporation.................... 107,060 99
Evergreen Marine Corporation..... 140,880 108
Faraday Technology Corporation... 15,000 34
First Financial Holding Company
Limited+....................... 232,000 170
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
48
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Formosa Petrochemical
Corporation.................... 95,000 $ 149
Fubon Financial Holding Company
Limited........................ 116,000 112
Hon Hai Precision Industry
Company Limited................ 47,100 186
Infortrend Technology,
Incorporated................... 57,640 215
Kaulin Manufacturing Company
Limited........................ 33,000 48
Largan Precision Company
Limited........................ 16,440 184
Media Tek, Incorporated.......... 31,000 296
Nan Ya Plastics Corporation...... 149,566 201
Nien Hsing Textile Company
Limited........................ 160,000 155
Novatek Microelectronics
Corporation Limited............ 38,550 152
Phoenixtec Power Company
Limited........................ 100,355 107
Polaris Securities Company
Limited........................ 263,920 148
President Chain Store
Corporation.................... 54,048 96
Quanta Computer, Incorporated.... 130,300 275
Richtek Technology Corporation+.. 8,000 34
SinoPac Holdings................. 752,736 392
Springsoft Systems Limited....... 45,000 115
Standard Foods Corporation, GDR,
144A (Note A).................. 27,272 41
Sunplus Technology Company
Limited+....................... 33,000 66
Taishin Financial Holdings
Company Limited................ 129,000 113
Taiwan Cellular Corporation...... 473,635 435
Taiwan Cement Corporation........ 449,480 193
Tsann Keun Enterprise Company
Limited........................ 42,000 58
United Microelectronics
Corporation+................... 761,529 683
United Microelectronics
Corporation, ADR+*............. 21,402 111
Waffer Technology Company
Limited........................ 47,000 127
Ya Hsin Industrial Company
Limited........................ 154,000 193
Yaego Corporation+............... 202,000 110
-------
TOTAL TAIWAN COMMON STOCK.... 7,983
-------
THAILAND COMMON STOCK - 4.34%
Advanced Info Services PCL....... 72,500 159
Asian Property Development
Company Limited+............... 446,800 50
Bangkok Bank PCL+................ 170,600 418
Banpu Company.................... 16,300 53
Big C Supercenter PCL+........... 43,000 19
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Charoen Pokphand Foods PCL+...... 948,000 $ 88
CP Seven Eleven PCL+............. 61,600 87
Delta Electronics,
Incorporated+.................. 110,000 71
Electricity Generating PCL....... 8,000 14
Italian-Thai Development PCL+.... 612,000 158
Kasikornbank PCL+................ 298,300 362
Kasikornbank PCL, NVDR+.......... 97,700 118
Krung Thai Bank PCL.............. 1,465,400 377
Lalin Property PCL+.............. 148,400 28
Land & Houses PCL................ 417,100 117
MBK Public Company Limited+...... 23,400 32
National Petrochemical Company+.. 5,500 12
PTT Exploration and Production
PCL+........................... 24,500 165
PTT Public Company Limited+...... 57,400 209
Ratchaburi Electric Generating
Company+....................... 32,700 31
Siam City Bank PCL+.............. 64,000 40
Siam Commercial Bank PCL......... 312,400 361
Siam Makro PCL+.................. 95,800 110
Sino Thai Engineering &
Construction PCL............... 274,300 100
Thai Plastic and Chemicals
PCL+........................... 7,200 35
VinyThai PCL+.................... 38,200 12
-------
TOTAL THAILAND COMMON
STOCK...................... 3,226
-------
TURKEY COMMON STOCK - 3.80%
Akbank T.A.S..................... 66,455,386 309
Akcansa Cimento A.S.............. 56,533,000 147
Arcelik A.S.+.................... 37,192,150 199
Efes Sinai Yatirim Holding
A.S.+.......................... 68,746,000 245
Enka Insaat ve Sanayi A.S........ 23,878,951 463
Hurriyet Gazetecilik ve
Matbaacilik A.S................ 96,031,600 272
Tofas Turk Otomobil Fabrikasi
A.S.+.......................... 46,918,607 106
Tupras-Turkiye Petrol
Rafinerileri A.S............... 24,994,000 159
Turkcell Iletisim Hizmetleri
A.S............................ 17,589,300 191
Turkiye Garanti Bankasi A.S.+.... 76,305,500 233
Turkiye Is Bankasi (Isbank)...... 63,167,184 226
Trakya Cam Sanayii A.S........... 45,862,315 105
Yapi ve Kredi Bankasi A.S.+...... 77,407,000 165
-------
TOTAL TURKEY COMMON STOCK.... 2,820
-------
VENEZUELA COMMON STOCK - 0.15%
Compania Anonima Nacional
Telfonos de Venezuela, ADR..... 5,609 107
-------
TOTAL VENEZUELA COMMON
STOCKS..................... 107
-------
TOTAL STOCKS................. 71,919
-------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
49
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
SHORT TERM INVESTMENTS - 7.01%
American AAdvantage Money
Market Select Fund (Note B).. 3,859,861 $ 3,860
AMR Investments Enhanced Cash
Business Trust (Note B)...... 1,350,000 1,350
-------
TOTAL SHORT TERM
INVESTMENTS................ 5,210
-------
TOTAL INVESTMENTS - 103.77% (COST
$65,409)....................... 77,129
-------
LIABILITIES, NET OF OTHER
ASSETS - (3.77%)............... (2,799)
-------
TOTAL NET ASSETS - 100%.......... $74,330
=======
</Table>
- ---------------
(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 $1,561 or 2.10% of net assets.
(B) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of this security is on loan at April 30, 2004. See Note 4.
+ - non-income producing
AMERICAN AADVANTAGE EMERGING MARKETS FUND
EMERGING MARKETS SECTOR DIVERSIFICATION
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
NET ASSETS
----------
Consumer Discretionary...................................... 10.75%
Consumer Staples............................................ 8.10%
Energy...................................................... 9.55%
Financials.................................................. 16.49%
Health Care................................................. 0.84%
Industrials................................................. 10.38%
Information Technology...................................... 12.44%
Materials................................................... 11.21%
Short-Term Investments...................................... 7.01%
Telecommunication Services.................................. 12.84%
Utilities................................................... 4.16%
Other Liabilities........................................... (3.77%)
-------
NET ASSETS............................................. 100.00%
=======
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
50
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
CORPORATE BONDS - 95.39%
CONSUMER DISCRETIONARY - 33.37%
AUTO COMPONENTS - 7.12%
Advanced Accessory Systems, LLC, 10.75%, Due 6/15/2011...... $ 1,900 $ 1,981
ArvinMeritor, Incorporated, 8.75%, Due 3/1/2012............. 1,750 1,907
Asbury Automotive Group, Incorporated,
9.00%, Due 6/15/2012...................................... 1,700 1,768
8.00%, Due 3/15/2014, 144A (Note A)....................... 1,350 1,323
Collins & Aikman Corporation, 10.75%, Due 12/31/2011*....... 2,025 2,096
Dana Corporation, 7.00%, Due 3/1/2029....................... 1,250 1,200
GenCorp, Incorporated, 9.50%, Due 8/15/2013,................ 2,850 2,978
General Motors Corporation, 7.125%, Due 7/15/2013*.......... 4,300 4,510
Navistar International Corporation, 8.00%, Due 2/1/2008..... 1,600 1,644
United Components, Incorporated, 9.375%, Due 6/15/2013...... 1,500 1,598
--------
TOTAL AUTO COMPONENTS................................... 21,005
--------
HOTELS, RESTAURANTS & LEISURE - 11.55%
AMF Bowling Worldwide Incorporated, 10.00%, Due 3/1/2010,
144A (Note A)*............................................ 1,200 1,245
Aztar Corporation,
8.875%, Due 5/15/2007..................................... 1,940 2,003
9.00%, Due 8/15/2011...................................... 1,000 1,123
Booth Creek Ski Holdings, Incorporated, 12.50%, Due
3/15/2007................................................. 2,500 2,525
Chumash Casino & Resort Enterprises, 9.00%, Due
7/15/2010*................................................ 1,250 1,387
Cinemark, Incorporated, 1.00%, Due 3/15/2014, 144A (Note
A)........................................................ 2,000 1,253
Coast Hotels and Casinos, Incorporated, 9.50%, Due
4/1/2009.................................................. 740 778
Florida Panthers Holdings, Incorporated, 9.875%, Due
4/15/2009................................................. 2,500 2,631
Horseshoe Gaming, LLC, 8.625%, Due 5/15/2009................ 7,049 7,366
Poster Financial Group, Incorporated, 8.75%, Due 12/1/2011,
144A (Note A)*............................................ 800 840
Regal Cinemas Corporation, 9.375%, Due 2/1/2012............. 3,371 3,995
River Rock Entertainment Authority, 9.75%, Due 11/10/2011,
144A (Note A)............................................. 250 266
Station Casinos, Incorporated, 6.875%, Due 3/1/2016, 144A
(Note A).................................................. 1,000 995
Town Sports International, Incorporated, 9.625%, Due
4/15/2011................................................. 800 828
Toys R Us, Incorporated, 7.375%, Due 10/15/2018............. 1,925 1,843
Turning Stone Casino Resort, 9.125%, Due 12/15/2010, 144A
(Note A).................................................. 3,710 3,998
Vicorp Restaurants, Incorporated, 10.50%, Due 4/15/2011,
144A (Note A)............................................. 1,000 990
--------
TOTAL HOTELS, RESTAURANTS & LEISURE..................... 34,066
--------
MEDIA - 6.87%
Advanstar Communications, Incorporated, 8.62%, Due
8/15/2008................................................. 1,244 1,300
AMC Entertainment, Incorporated, 9.50%, Due 2/1/2011........ 3,500 3,658
American Lawyer Media, Incorporated, 9.75%, Due
12/15/2007................................................ 2,000 1,955
Dex Media West, LLC,
9.875%, Due 11/15/2009*................................... 1,000 1,120
12.125%, Due 11/15/2012................................... 700 812
1.00%, Due 11/15/2013, 144A (Note A)...................... 1,000 610
Emmis Communications Corporation, 1.00%, Due 3/15/2011...... 2,000 2,000
Emmis Operating Company, 6.875%, Due 5/15/2012, 144A (Note
A)........................................................ 750 748
Houghton Mifflin Company, 8.25%, Due 2/1/2011............... 1,650 1,667
Nextel Communications, 9.375%, Due 11/15/2009............... 1,000 1,081
PEI Holdings, Incorporated, 11.00%, Due 3/15/2010........... 2,000 2,325
Qwest Communications International Corporation, 7.25%, Due
2/15/2011, 144A (Note A).................................. 1,250 1,159
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
51
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
SBA Communications Corporation, 1.00%, Due 12/15/2011, 144A
(Note A)*................................................. $ 2,490 $ 1,843
--------
TOTAL MEDIA............................................. 20,278
--------
RETAIL - 7.14%
AutoNation, Incorporated, 9.00%, Due 8/1/2008............... 1,580 1,801
Dollar General Corporation, 8.625%, Due 6/15/2010........... 3,180 3,617
FTD, Incorporated, 7.75% Due 2/15/2014, 144A (Note A)....... 1,400 1,386
Group 1 Automotive, Incorporated, 8.25%, Due 8/15/2013...... 1,000 1,093
NationsRent, Incorporated, 9.50%, Due 10/15/2013, 144A (Note
A)........................................................ 1,250 1,341
Pep Boys, Incorporated,
6.71%, Due 11/3/2004...................................... 1,000 1,003
7.00%, Due 6/1/2005....................................... 700 722
6.88%, Due 3/6/2006....................................... 1,000 1,033
Samsonite Corporation, 10.75%, Due 6/15/2008................ 3,000 3,120
United Rentals (North America), Incorporated, 6.50%, Due
2/15/2012, 144A (Note A).................................. 2,850 2,750
Woolworth Corporation, 8.50%, Due 1/15/2022................. 2,900 3,190
--------
TOTAL RETAIL............................................ 21,056
--------
TEXTILES & APPAREL - 0.69%
Day International Group, Incorporated, 9.50%, Due
3/15/2008................................................. 500 485
Phillips-Van Heusen Corporation,
7.25%, Due 2/15/2011, 144A (Note A)....................... 1,050 1,055
7.75%, Due 11/15/2023..................................... 500 499
--------
TOTAL TEXTILES & APPAREL................................ 2,039
--------
TOTAL CONSUMER DISCRETIONARY............................ 98,444
--------
CONSUMER STAPLES - 3.28%
Advantica Restaurant Group, Incorporated, 12.75, Due
9/30/2007................................................. 1,500 1,631
Borden, Incorporated,
9.20%, Due 3/15/2021...................................... 2,250 2,340
7.875%, Due 2/15/2023..................................... 2,400 2,268
Herbalife International, Incorporated, 11.75%, Due
7/15/2010................................................. 2,975 3,436
--------
TOTAL CONSUMER STAPLES.................................. 9,675
--------
ENERGY - 10.33%
Calpine Corporation, 8.50%, Due 7/15/2010, 144A (Note A).... 2,100 1,859
Citgo Petroleum Corporation, 11.375%, Due 2/1/2011.......... 2,000 2,310
Coastal Corporation, 6.20%, Due 5/15/2004*.................. 2,550 2,550
DPL Inc, 6.875%, Due 9/1/2011............................... 2,000 1,970
Dynegy Holdings, Incorporated, 10.125%, Due 7/15/2013, 144A
(Note A).................................................. 2,400 2,628
Energy Partners Limited, 8.75%, Due 8/1/2010................ 1,000 1,055
Ferrellgas Partners LP, 8.75%, Due 6/15/2012................ 1,500 1,642
Ferrellgas Escrow, LLC, 6.75%, Due 5/1/2014, 144A (Note
A)........................................................ 1,000 1,000
Frontier Oil Corporation, 11.75%, Due 11/15/2009............ 1,000 1,100
Massey Energy Company, 6.625%, Due 11/15/2010............... 1,500 1,507
Newfield Exploration Company, 8.375%, Due 8/15/2012......... 1,000 1,105
Paramount Resources Limited, 7.875%, Due 11/1/2010.......... 2,500 2,475
PG&E Gas Transmission, Northwest Company, 7.80%, Due
6/1/2025.................................................. 2,500 2,475
Sierra Pacific Power Company, 8.00%, Due 6/1/2008........... 1,900 2,043
Star Gas Partners, L.P., 10.25%, Due 2/15/2013.............. 3,425 3,750
Tennessee Gas Pipeline Company, 8.375%, Due 6/15/2032....... 1,000 1,025
--------
TOTAL ENERGY............................................ 30,494
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
52
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
FINANCIALS - 1.76%
DIVERSIFIED FINANCIALS - 1.28%
Dana Credit Corporation, 8.375%, Due 8/15/2007.............. $ 750 $ 823
Dollar Financial Group, Incorporated, 9.75%, Due
11/15/2011................................................ 350 376
Thornburg Mortgage, Incorporated, 8.00%, 5/15/2013.......... 2,500 2,569
--------
TOTAL DIVERSIFIED FINANCIALS............................ 3,768
--------
INSURANCE - 0.48%
Provident Companies, Incorporated, 7.00%, Due 7/15/2018..... 1,500 1,422
--------
TOTAL INSURANCE......................................... 1,422
--------
TOTAL FINANCIALS........................................ 5,190
--------
HEALTH CARE - 5.18%
BIOTECHNOLOGY - 0.66%
Healthsouth Corporation, 6.875%, 6/15/2005*................. 1,950 1,950
--------
TOTAL BIOTECHNOLOGY..................................... 1,950
--------
EQUIPMENT & SUPPLIES - 0.67%
Bausch & Lomb, Incorporated, 7.125%, Due 8/1/2028........... 1,972 1,981
--------
TOTAL EQUIPMENT & SUPPLIES.............................. 1,981
--------
HEALTHCARE PROVIDERS & SERVICES - 3.85%
Fountain View, Incorporated, 9.25%, Due 8/19/2008........... 2,567 2,541
Interactive Health, LLC, 7.25%, Due 4/1/2011, 144A (Note
A)........................................................ 1,200 1,044
National Health Investors, 7.30%, Due 7/16/2007............. 1,000 1,023
NDCHealth Corporation, 10.50%, Due 12/1/2012................ 2,300 2,565
Pacificare Health Systems, Incorporated, 10.75%, Due
6/1/2009.................................................. 1,625 1,889
Vicar Operating, Incorporated, 9.875%, Due 12/1/2009........ 1,116 1,244
US Oncology, Incorporated, 9.625%, Due 2/1/2012............. 900 1,067
--------
TOTAL HEALTHCARE PROVIDERS & SERVICES................... 11,373
--------
TOTAL HEALTH CARE....................................... 15,304
--------
INFORMATION TECHNOLOGY - 3.86%
COMMUNICATIONS EQUIPMENT - 1.42%
Corning, Incorporated,
7.00%, Due 3/15/2007...................................... 1,300 1,302
6.30%, Due 3/1/2009....................................... 1,650 1,690
6.20%, Due 3/15/2016...................................... 1,250 1,212
--------
TOTAL COMMUNICATIONS EQUIPMENT.......................... 4,204
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 2.39%
Amkor Technology, Incorporated,
9.25%, Due 2/15/2008...................................... 500 535
7.125%, Due 3/15/2011, 144A (Note A)*..................... 1,250 1,216
10.50%, Due 6/15/2011..................................... 3,100 3,262
Flextronics International Limited, 6.50%, Due 5/15/2013*.... 2,000 2,025
--------
TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS................ 7,038
--------
SOFTWARE - 0.05%
Peregrine Systems, Incorporated, 6.50%, Due 8/15/2007....... 152 147
--------
TOTAL SOFTWARE.......................................... 147
--------
TOTAL INFORMATION TECHNOLOGY............................ 11,389
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
53
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
INDUSTRIALS - 25.90%
AEROSPACE & ENGINEERING - 2.59%
Dunlop Standard Aerospace Holdings, plc,
11.875%, Due 5/15/2009.................................... $ 500 $ 529
11.875%, Due 5/15/2009, 144A (Note A)..................... 2,100 2,221
K & F Industries, Incorporated, 9.625%, Due 12/15/2010...... 2,000 2,240
Transdigm, Incorporated, 8.375%, Due 7/15/2011.............. 2,500 2,644
--------
TOTAL AEROSPACE & ENGINEERING........................... 7,634
--------
CONSTRUCTION & ENGINEERING - 4.45%
Interline Brands, Incorporated, 11.50%, Due 5/15/2011....... 3,500 3,780
KB Home, 9.50%, Due 2/15/2011............................... 1,450 1,621
K. Hovnanian Enterprises, Incorporated,
8.875%, Due 4/1/2012*..................................... 2,700 2,935
9.125%, Due 5/1/2009...................................... 2,000 2,091
Schuler Homes, Incorporated, 9.375%, Due 7/15/2009.......... 1,500 1,658
Technical Olympic USA, Incorporated, 9.00%, Due 7/1/2010.... 1,000 1,050
--------
TOTAL CONSTRUCTION & ENGINEERING........................ 13,135
--------
COMMERCIAL SERVICES & SUPPLIES - 18.12%
AGCO Corporation, 8.50%, Due 3/15/2006...................... 2,823 2,830
Alpharma, Incorporated, 8.625%, Due 5/1/2011, 144A (Note
A)........................................................ 650 683
Biovail Corporation, 7.875%, Due 4/1/2010*.................. 1,200 1,179
CHC Helicopter Corporation, 7.375%, Due 5/1/2014............ 1,250 1,266
Communications and Power Industries, 8.00%, Due 2/1/2012,
144A (Note A)............................................. 500 510
Corrections Corporation of America, 7.50%, Due 5/1/2011,
144A (Note A)............................................. 900 943
Hercules, Incorporated, 6.75%, Due 10/15/2029, 144A (Note
A)........................................................ 1,750 1,733
Hexcel Corporation, 9.75%, Due 1/15/2009.................... 3,700 3,885
IMC Global, Incorporated, 11.25%, Due 6/1/2011.............. 1,250 1,449
Iron Mountain, Incorporated, 6.625%, Due 1/1/2016........... 2,000 1,860
IPCS Escrow Company, 11.50%, Due 5/1/2012, 144A (Note A).... 1,250 1,269
ISPAT Inland, Incorporated, 9.75%, Due 4/1/2014, 144A (Note
A)........................................................ 1,000 1,020
Mothers Work, Incorporated, 11.25%, Due 8/1/2010............ 1,000 1,053
Newark Group, Incorporated, 9.75%, Due 3/15/2014, 144A (Note
A)........................................................ 2,850 2,793
Pantry, Incorporated, 7.75%, Due 2/15/2014, 144A (Note A)... 1,000 1,000
Phibro Animal Health Corporation, 13.00%, Due 12/1/2007,
144A (Note A)............................................. 1 538
J.B. Poindexter Incorporated, 8.75%, Due 3/15/2014, 144A
(Note A).................................................. 500 513
Pride International, Incorporated, 10.00%, Due 6/1/2009..... 1,850 1,952
Pride Petroleum Services, Incorporated, 9.375%, Due
5/1/2007.................................................. 1,250 1,272
Quality Distribution, LLC, 9.00%, Due 11/15/2010, 144A (Note
A)........................................................ 1,255 1,255
Russell Corporation, 9.25%, 5/1/2010........................ 1,000 1,049
Sheridan Acquisition Corporation, 10.25%, Due 8/15/2011,
144A (Note A)............................................. 750 803
Ship Financial International Limited, 8.50%, Due 12/15/2013,
144A (Note A)............................................. 1,275 1,230
Siebe plc, 7.125%, Due 1/15/2007, 144A (Note A)*............ 2,875 2,893
Superior Essex Communications, 9.00%, Due 4/15/2012, 144A
(Note A).................................................. 1,750 1,680
Terex Corporation, 7.375%, Due 1/15/2014, 144A (Note A)..... 1,000 1,043
UAP Holding Corporation, 1.00%, Due 7/15/2012, 144A (Note
A)........................................................ 2,000 1,638
UNOVA, Incorporated,
6.875%, Due 3/15/2005..................................... 2,000 2,019
7.00%, Due 3/15/2008...................................... 2,500 2,500
Unisys Corporation, 7.875%, 4/1/2008........................ 3,270 3,352
URS Corporation, 12.25%, 5/1/2009........................... 2,000 2,120
WH Holdings (Cayman Islands) Limited, 9.50%, Due 4/1/2011,
144A (Note A)............................................. 500 531
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
54
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
WII Components, Incorporated, 10.00%, Due 2/15/2012, 144A
(Note A).................................................. $ 750 $ 765
Xerox Corporation, 7.625%, Due 6/15/2013.................... 2,800 2,855
--------
TOTAL COMMERCIAL SERVICES & SUPPLIES.................... 53,481
--------
MACHINERY - 0.74%
Joy Global, Incorporated, 8.75%, Due 3/15/2012.............. 1,950 2,184
--------
TOTAL MACHINERY......................................... 2,184
--------
TOTAL INDUSTRIAL........................................ 76,434
--------
MATERIALS - 7.490%
CHEMICALS - 3.95%
Casella Waste System, Incorporated, 9.75%, Due 2/1/2013..... 2,000 2,225
FMC Corporation,
6.75%, Due 5/5/2005....................................... 2,000 2,049
7.00%, Due 5/15/2008...................................... 2,200 2,320
IMC Global, Incorporated, 11.25%, Due 6/1/2011.............. 1,600 1,856
Nalco Company, 144A (Note A)
7.75%, Due 11/15/2011..................................... 500 526
8.875%, Due 11/15/2013*................................... 1,000 1,055
Westlake Chemical Corporation, 8.75%, Due 7/15/2011......... 1,500 1,646
--------
TOTAL CHEMICALS......................................... 11,677
--------
CONTAINERS & PACKAGING - 3.04%
Crown Holdings, Incorporated, 9.50%, Due 3/1/2022........... 1,500 1,682
Owens-Brockway Glass Containers, Incorporated,
8.875%, Due 2/15/2009..................................... 3,590 3,899
8.75%, Due 11/15/2012..................................... 1,250 1,366
Silgan Holdings, Incorporated, 6.75%, Due 11/15/2013, 144A
(Note A).................................................. 2,000 2,010
--------
TOTAL CONTAINERS & PACKAGING............................ 8,957
--------
PAPER & FOREST PRODUCTS - 0.50%
Appleton Papers, Incorporated, 12.50%, Due 12/15/2008....... 1,300 1,463
--------
TOTAL PAPER & FOREST PRODUCTS........................... 1,463
--------
TOTAL MATERIALS......................................... 22,097
--------
TELECOMMUNICATION SERVICES - 4.22.%
FairPoint Communications, Incorporated, 11.875%, Due
3/1/2010.................................................. 2,065 2,416
GST Equipment Funding, Incorporated, 13.25%, Due 5/1/2007... 2,500 89
MCI, Incorporated,
5.908%, Due 5/1/2007...................................... 1,000 990
6.688%, Due 5/1/2009...................................... 1,000 950
Qwest Services Corporation, 13.50%, Due 12/15/2010, 144A
(Note A).................................................. 6,200 7,192
US West Communication, 8.875%, Due 6/1/2031................. 800 818
--------
TOTAL TELECOMMUNICATION SERVICES........................ 12,455
--------
TOTAL CORPORATE BONDS................................... 281,482
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
55
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 0.19%
Peregrine Systems, Incorporated............................. 28,000 $ 560
--------
TOTAL COMMON STOCKS..................................... 560
--------
SHORT TERM INVESTMENTS - 11.64%
American AAdvantage Money Market Select Fund (Note B)....... 8,911,954 8,912
Short-Term Investment Company Liquid Asset Fund............. 919,239 919
<Caption>
PAR
AMOUNT
-----------
Credit Suisse First Boston Tri Party Repo, 1.113%, Due
5/3/2004, (Note C)........................................ $ 8,500 8,500
Morgan Stanley Tri Party Repo, 1.113%, Due 5/3/2004, (Note
D)........................................................ 7,000 7,000
Neptune Funding Corporation, Discount Commercial Paper, Due
5/3/2004.................................................. 9,000 8,999
--------
TOTAL SHORT TERM INVESTMENTS............................ 34,330
--------
TOTAL INVESTMENTS - 107.22% (COST $305,015)................. 316,372
--------
LIABILITIES, NET OF OTHER ASSETS - (7.22%).................. (21,301)
--------
TOTAL NET ASSETS - 100%..................................... $295,071
========
</Table>
- ---------------
(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 $65,393 or 22.16% of net assets.
(B) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
(C) Collateral held at J.P. Morgan Chase consists of Ford Motor Credit Company,
6.875%, Due 2/1/2006, Market Value - $2,723 and 7.0%, Due 10/1/2013, Market
Value - $5,952
(D) Collateral held at the Bank of New York consists of Dow Chemical, 5.75%, Due
11/15/2009, Market Value- $276, HSBC USA Capital, 8.38%, Due 5/15/2027,
Market Value - $571, Schering-Plough Corporation, 6.50%, Due 12/1/2033,
Market Value -$5,798 and Science Applications, 5.50%, Due 7/1/2033, Market
Value - $685
* - All or a portion of this security is on loan April 30, 2004. See note 4.
See accompanying notes
- --------------------------------------------------------------------------------
56
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 3.62%
U.S. TREASURY NOTES - 2.58%
2.625%, Due 11/15/2006*................................... $ 200 $ 200
4.00%, Due 2/15/2014*..................................... 2,500 2,402
--------
TOTAL U.S. TREASURY NOTES............................... 2,602
--------
U.S. TREASURY BONDS - 1.04%
U.S. Treasury Bond, 8.75%, Due 8/15/2020*................... 750 1,046
--------
TOTAL U.S. TREASURY BONDS............................... 1,046
--------
TOTAL U.S. TREASURY OBLIGATIONS......................... 3,648
--------
U.S. AGENCY OBLIGATIONS - 1.08%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.52%
Federal Home Loan Mortgage Corporation, 5.125%, Due
10/15/2008*............................................... 500 527
--------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 527
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 0.56%
Federal National Mortgage Association, 6.625%, Due
11/15/2010*............................................... 500 562
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 562
--------
TOTAL U.S. AGENCY OBLIGATIONS........................... 1,089
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 11.69%
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 7.51%
Pool 254545, 5.00%, Due 12/1/2017........................... 667 672
Pool 555549, 5.00%, Due 6/1/2018............................ 810 816
Pool 254865, 4.50%, Due 9/1/2018............................ 1,322 1,303
Pool 545759, 6.50%, Due 7/1/2032............................ 1,548 1,611
Pool C01598, 5.00%, Due 8/1/2033............................ 967 938
Pool C01786, 5.50%, Due 2/1/2034............................ 1,471 1,470
Pool 725238, 5.00%, Due 3/1/2034............................ 789 765
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 7,575
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 4.18%
Pool 780454, 7.00%, Due 10/15/2026.......................... 553 590
Pool 002379, 8.00%, Due 2/20/2027........................... 334 363
Pool 781564, 6.00%, Due 2/15/2033........................... 804 824
Pool 781690, 6.00%, Due 12/15/2033.......................... 1,126 1,155
Pool 003515, 5.50%, Due 2/20/2034........................... 1,289 1,289
--------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 4,221
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 11,796
--------
ASSET-BACKED SECURITIES - 4.08%
Citibank Credit Card Master Trust I 2000-A1 A1, 6.90%, Due
10/15/2007................................................ 2,000 2,133
Honda Auto Receivables Owner Trust 2003-4 A4, 2.79%, Due
3/16/2009................................................. 2,000 1,985
--------
TOTAL ASSET-BACKED SECURITIES........................... 4,118
--------
CORPORATE BONDS - 57.710%
BANKS - 8.6%
Banco Popular North America Inc,
6.125%, Due 10/15/2006.................................... 500 535
4.25%, Due 4/1/2008....................................... 300 303
Bank One Corporation, 4.90%, Due 4/30/2015*................. 300 286
Branch Banking and Trust Company, 4.875%, Due 1/15/2013..... 800 786
Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 500 543
First Tennessee Bank, NA, 5.75%, Due 12/1/2008.............. 300 320
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
57
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
FleetBoston Financial Corporation, 8.625%, Due 1/15/2007.... $ 200 $ 228
HSBC Bank USA, Incorporated, 7.00%, Due 11/1/2006........... 1,500 1,644
ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 300 294
J P Morgan Chase & Company, 6.75%, Due 8/15/2008............ 450 495
St. George Bank Limited, 7.15%, Due 10/15/2005, 144A (Note
A)........................................................ 1,510 1,609
Wachovia Corporation, 6.40%, Due 4/1/2008................... 1,500 1,630
--------
TOTAL BANKS............................................. 8,673
--------
FINANCE - 30.66%
AEGON, N.V., 8.00%, Due 8/15/2006........................... 225 250
American Honda Finance Corporation,
2.875%, Due 4/3/2006, 144A (Note A)....................... 650 654
Bear Stearns Companies, Incorporated,
3.00%, Due 3/30/2006...................................... 500 503
2.875%, Due 7/2/2008...................................... 300 287
Boeing Capital Corporation, 5.40%, Due 11/30/2009........... 700 733
Capital One Bank,
4.25%, Due 12/1/2008...................................... 1,000 991
5.125%, 2/15/2014......................................... 200 191
Cendant Corporation,
6.875%, Due 8/15/2006..................................... 1,100 1,192
3.875%, Due 11/27/2011.................................... 500 541
Countrywide Home Loan, Incorporated, 3.50%, Due
12/19/2005................................................ 1,250 1,268
Credit Suisse First Boston USA, Incorporated, 5.875%, Due
8/1/2006.................................................. 1,500 1,598
Ford Motor Credit Company, 7.375%, Due 10/28/2009........... 1,700 1,838
General Motors Acceptance Corporation,
6.75%, Due 1/15/2006...................................... 1,000 1,059
7.25%, Due 3/2/2011....................................... 1,000 1,075
Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013..... 675 642
John Hancock Global Funding,
5.625%, Due 6/27/2006..................................... 1,400 1,485
3.75%, Due 9/30/2008...................................... 1,000 990
Heller Financial, Incorporated, 6.375%, Due 3/15/2006....... 1,500 1,616
Household Finance Corporation, 4.75%, Due 7/15/2013......... 400 382
International Lease Finance Corporation, 6.375%, Due
3/15/2009................................................. 725 789
Lehman Brothers Holdings, Incorporated, 3.50%, Due
8/7/2008.................................................. 1,000 982
Lincoln National Corporation, 4.75%, Due 2/15/2014.......... 500 478
MassMutual Global Funding II, 3.80%, Due 4/15/2009, 144A
(Note A).................................................. 1,000 991
Merrill Lynch & Company, Incorporated, 6.56%, Due
12/16/2007................................................ 450 499
MetLife, Incorporated, 3.911%, Due 5/15/2005................ 1,000 1,018
Monumental Global Funding, 3.85%, Due 3/3/2008, 144A (Note
A)........................................................ 450 452
Morgan Stanley, 6.10%, Due 4/15/2006........................ 550 586
PHH Corporation, 6.00%, Due 3/1/2008........................ 300 321
Prudential Financial, Incorporated, 4.50%, Due 7/15/2013.... 375 353
Prudential Insurance Company of America, 6.375%, Due
7/23/2006, 144A (Note A).................................. 2,000 2,154
Salomon, Incorporated, 6.75%, Due 1/15/2006................. 1,000 1,071
SLM Corporation, 5.125%, Due 8/27/2012...................... 450 452
Synovus Financial Corporation,
7.25%, Due 12/15/2005..................................... 1,500 1,616
4.875%, Due 2/15/2013..................................... 300 294
Transamerica Corporation, 6.75%, Due 11/15/2006............. 1,000 1,080
Verizon Global Funding Corporation, 4.375%, Due 6/1/2013*... 200 186
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
58
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Washington Mutual, Incorporated, 4.625%, Due 4/1/2014....... $ 350 $ 324
--------
TOTAL FINANCE........................................... 30,941
--------
INDUSTRIAL - 17.41%
AmeriPath, Incorporated, 10.50%, Due 4/1/2013............... 400 410
AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 500 597
AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006... 600 649
BHP Finance (USA) Limited, 4.80%, Due 4/15/2013............. 300 296
Bunge Limited Finance Corporation, 5.35%, Due 4/15/2014,
144A (Note A)............................................. 500 487
Citadel Broadcasting Corporation, 1.875%, Due 2/15/2011,
144A (Note A)............................................. 140 133
Continental Cablevision, Incorporated, 8.30%, Due
5/15/2006................................................. 250 276
DaimlerChrysler North America,
4.75%, Due 1/15/2008...................................... 500 507
6.50%, Due 11/15/2013..................................... 350 361
Dell Computer Corporation, 6.55%, Due 4/15/2008............. 200 219
Deutsche Telekom International,
8.25%, Due 6/15/2005...................................... 175 186
3.875%, Due 7/22/2008*.................................... 500 497
Dole Food Company, Incorporated, 8.875%, Due 3/15/2011...... 400 426
EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A
(Note A).................................................. 350 337
EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 350 326
Equistar Chemicals, LP, 10.625%, Due 5/1/2011............... 400 448
First Data Corporation, 3.375%, Due 8/1/2008................ 1,000 983
France Telecom SA, 8.75%, Due 3/10/2011..................... 500 591
Freeport-McMoRan Copper & Gold, Incorporated, 10.125%, Due
2/1/2010.................................................. 400 440
Hertz Corporation, 4.70%, Due 10/2/2006..................... 900 911
International Business Machines Corporation, 4.75%, Due
11/29/2012................................................ 200 198
Jacuzzi Brands, Incorporated, 9.625%, Due 7/1/2010.......... 400 448
Legrand SA, 8.50%, Due 2/15/2025............................ 400 422
Mediacom Communications Corporation, 9.50%, Due
1/15/2013*................................................ 400 398
Nabors Industries, Incorporated, 0.00%, Due 5/15/2023....... 280 262
Northrop Grumman Corporation, 7.125%, Due 2/15/2011......... 860 967
Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 200 223
Pope & Talbot, Incorporated, 8.375%, Due 6/1/2013........... 355 367
Royal Caribbean Cruises Limited, 7.50%, Due 10/15/2027...... 400 389
Saks, Incorporated, 2.00%, Due 3/15/2024, 144A (Note A)..... 140 141
Simon Property Group, 7.625%, Due 5/15/2005, 144A (Note
A)........................................................ 1,365 1,434
Sprint Capital Corporation,
6.00%, Due 1/15/2007...................................... 1,200 1,276
8.375%, Due 3/15/2012..................................... 175 205
Union Pacific Corporation, 6.50%, Due 4/15/2012............. 350 383
Verizon Virginia, 4.625%, Due 3/15/2013..................... 1,000 947
WH Holdings (Cayman Islands) Limited, 9.50%, Due 4/1/2011,
144A (Note A)............................................. 400 425
--------
TOTAL INDUSTRIAL........................................ 17,565
--------
PHARMACEUTICAL - 0.29%
Teva Pharmaceuticals,
0.25%, Due 2/1/2024....................................... 120 122
0.50%, Due 2/1/2024....................................... 170 172
--------
TOTAL PHARMACEUTICAL.................................... 294
--------
UTILITY - 0.75%
Calpine Corporation, 8.50%, Due 2/15/2011*.................. 500 350
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
59
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Teco Energy, Incorporated, 7.50%, Due 6/15/2010............. $ 400 $ 409
--------
TOTAL UTILITY........................................... 759
--------
TOTAL CORPORATE BONDS................................... 58,232
--------
CONVERTIBLE BONDS - 14.20%
CONSUMER DISCRETIONARY - 0.98%
General Motors Corporation, 6.25%, Due 7/15/2033............ 16 491
Lear Corporation, 0.00%, Due 2/20/2022...................... 950 493
--------
TOTAL CONSUMER DISCRETIONARY............................ 984
--------
ENERGY - 0.43%
Centerpoint Energy, Incorporated, 3.75%, Due 5/15/2023, 144A
(Note A).................................................. 390 434
--------
TOTAL ENERGY............................................ 434
--------
FINANCIALS - 3.14%
American Financial Group, Incorporated, 1.486%, Due
6/2/2033.................................................. 325 141
Americredit Corporation, 1.75%, Due 11/15/2023, 144A (Note
A)........................................................ 200 223
Financial Federal Corporation, 2.00%, Due 4/15/2034, 144A
(Note A).................................................. 285 278
Franklin Resources, Incorporated, 0.00%, Due 5/11/2031...... 440 279
IOS Capital, LLC, 5.00%, Due 5/1/2007, 144A (Note A)........ 130 137
QLT, Incorporated, 3.00%, Due 9/15/2023, 144A (Note A)...... 250 437
Silicon Valley Bancshares, 0.00%, Due 6/15/2008............. 240 276
SLM Corporation, 4.00%, Due 1/15/2009....................... 1,000 994
Travelers Property Casualty Corporation, 4.50%, Due
4/15/2032................................................. 17 406
--------
TOTAL FINANCIALS........................................ 3,171
--------
HEALTH CARE - 1.20%
Health Management Association, Incorporated, 1.50%, Due
8/1/2023.................................................. 480 522
Invitrogen Corporation, 2.00%, Due 8/1/2023, 144A (Note
A)........................................................ 250 319
Watson Pharmaceuticals, Incorporated, 1.75%, Due 3/15/2023,
144A (Note A)............................................. 335 368
--------
TOTAL HEALTH CARE....................................... 1,209
--------
INDUSTRIALS - 8.45%
Agilent Technologies, Incorporated, 3.00%, Due 12/1/2021.... 510 535
Andrew Corporation, 3.25%, Due 8/15/2013, 144A (Note A)..... 425 645
Apogent Technologies, Incorporated, 2.25%, Due 10/15/2021... 530 594
Avnet, Incorporated, 2.00%, Due 3/15/2034................... 270 272
Carnival Corporation, 0.00%, Due 10/24/2021................. 715 538
EMC Corporation, 4.50%, Due 4/1/2007........................ 240 263
Fisher Scientific International, Incorporated, 3.25%, Due
3/1/2024.................................................. 160 171
GrafTech International Limited, 1.625%, Due 1/15/2024, 144A
(Note A).................................................. 210 184
Halliburton Company, 3.125%, Due 7/15/2023, 144A (Note A)... 210 229
International Game Technology, 0.00%, Due 1/29/2033......... 315 264
Juniper Networks, Incorporated, 0.00%, Due 6/15/2008, 144A
(Note A).................................................. 215 280
Kaydon Corporation, 4.00%, Due 5/23/2023, 144A (Note A)..... 230 266
Kulicke & Soffa Industries, Incorporated, 0.50%, Due
11/30/2008, 144A (Note A)................................. 300 245
Leucadia National Corporation, 7.00%, Due 8/15/2013......... 400 408
Liberty Media Corporation, 0.75%, Due 3/30/2023, 144A (Note
A)........................................................ 355 399
LSI Logic Corporation, 4.00%, Due 5/15/2010, 144A (Note
A)........................................................ 228 232
Morgan Stanley Group, Incorporated, 0.25%, Due 4/1/2009..... 560 563
Red Hat, Incorporated, 0.50%, Due 1/15/2024, 144A (Note
A)........................................................ 145 168
Schlumberger Limited, 2.125%, Due 6/1/2023*................. 280 287
STMicroelectronics NV, 0.00%, Due 7/5/2013.................. 500 494
Teradyne, Incorporated, 3.75%, Due 10/15/2006............... 240 252
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
60
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Tyco International Group S.A.,
2.75%, Due 1/15/2018, 144A (Note A)....................... $ 375 $ 491
2.75%, Due 1/15/2018...................................... 575 753
--------
TOTAL INDUSTRIALS....................................... 8,533
--------
TOTAL CONVERTIBLE BONDS................................. 14,331
--------
<Caption>
SHARES
-----------
CONVERTIBLE PREFERRED STOCK - 4.02%
CONSUMER DISCRETIONARY - 0.53%
Ford Motor Company Capital Trust II......................... 9,400 530
--------
TOTAL CONSUMER DISCRETIONARY............................ 530
--------
ENERGY - 1.01%
Amerada Hess Corporation.................................... 4,900 329
Kerr-McGee Corporation...................................... 8,500 443
New York Community Capital Trust V.......................... 3,800 251
--------
TOTAL ENERGY............................................ 1,023
--------
FINANCIALS - 1.43%
Cummins Capital Trust I*.................................... 4,000 284
Franklin Resources, Incorporated............................ 5,200 285
Prudential Financial, Incorporated*......................... 7,100 480
Washington Mutual, Incorporated............................. 7,200 395
--------
TOTAL FINANCIALS........................................ 1,444
--------
INDUSTRIALS - 1.05%
AutoDesk, Incorporated...................................... 8,800 295
Interpublic Group of Companies, Incorporated................ 3,850 221
Motorola, Incorporated...................................... 8,500 426
Phelps Dodge Corporation.................................... 840 122
--------
TOTAL INDUSTRIALS....................................... 1,064
--------
TOTAL CONVERTIBLE PREFERRED STOCK....................... 4,061
--------
COMMON STOCK - 3.49%
CONSUMER DISCRETIONARY - 2.17%
Bausch and Lomb, Incorporated............................... 10,600 666
Home Depot, Incorporated.................................... 13,600 479
McDonald's Corporation...................................... 15,500 422
Tyson Foods, Incorporated................................... 33,000 618
--------
TOTAL CONSUMER DISCRETIONARY............................ 2,185
--------
FINANCIALS - 0.54%
MBIA, Incorporated.......................................... 9,300 548
--------
TOTAL FINANCIALS........................................ 548
--------
INFORMATION TECHNOLOGY - 0.78%
Avaya, Incorporated......................................... 39,500 540
Cisco Systems, Incorporated................................. 11,700 244
--------
TOTAL INFORMATION TECHNOLOGY............................ 784
--------
TOTAL COMMON STOCK...................................... 3,517
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
61
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
SHORT-TERM INVESTMENTS - 9.63%
American AAdvantage Money Market Select Fund (Note B)....... 9,717,609 $ 9,718
--------
TOTAL SHORT-TERM INVESTMENTS............................ 9,718
--------
TOTAL INVESTMENTS - 109.52% (COST $110,019)............. 110,510
--------
LIABILITIES, NET OF OTHER ASSETS - (9.52%).............. (9,602)
--------
TOTAL NET ASSETS - 100%................................. $100,908
========
</Table>
- ---------------
(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 $14,448 or 14.32% of net assets.
(B) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of the security is on loan at April 30, 2004. See Note 4.
+ - non-income producing
See accompanying notes
- --------------------------------------------------------------------------------
62
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 8.76%
U.S. TREASURY BONDS - 3.49%
7.50%, Due 11/15/2016*...................................... $ 500 $ 622
9.125%, Due 5/15/2018*...................................... 500 707
6.875%, Due 8/15/2025*...................................... 870 1,038
6.25%, Due 5/15/2030*....................................... 600 674
5.375%, Due 2/15/2031*...................................... 1,250 1,267
--------
TOTAL U.S. TREASURY BONDS............................... 4,308
--------
U.S. TREASURY NOTES - 5.27%
1.625%, Due 9/30/2005*...................................... 2,000 1,992
4.625%, Due 5/15/2006*...................................... 1,650 1,724
2.625%, Due 5/15/2008*...................................... 65 64
3.00%, Due 7/15/2012*....................................... 853 922
4.00%, Due 2/15/2014*....................................... 1,880 1,806
--------
TOTAL U.S. TREASURY NOTES............................... 6,508
--------
TOTAL U.S. TREASURY OBLIGATIONS......................... 10,816
--------
U.S. AGENCY OBLIGATIONS - 7.43%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 6.12%
5.125%, Due 10/15/2008*..................................... 500 527
5.875%, Due 3/21/2011....................................... 380 403
5.00%, Due 3/1/2018......................................... 1,974 1,990
6.00%, Due 1/1/2033......................................... 769 787
6.00%, Due 8/1/2033......................................... 934 956
5.50%, Due 11/1/2033........................................ 871 870
6.00%, Due 11/1/2033........................................ 1,054 1,079
6.50%, Due 11/1/2033........................................ 900 938
--------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 7,550
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 1.31%
5.125%, Due 1/2/2014*....................................... 545 536
7.25%, Due 5/15/2030*....................................... 900 1,076
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 1,612
--------
TOTAL U.S. AGENCY OBLIGATIONS........................... 9,162
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 31.87%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 4.99%
Pool #G11202, 6.00%, Due 11/1/2016.......................... 409 427
Pool #B12563, 5.00%, Due 2/1/2019........................... 653 658
Pool #E01602, 4.50%, Due 3/1/2019........................... 993 979
Pool #G00738, 8.00%, Due 7/1/2027........................... 332 361
Pool #C01598, 5.00%, Due 8/1/2033........................... 1,208 1,172
Pool #A16690, 6.00%, Due 12/1/2033.......................... 1,067 1,092
Pool #C01786, 5.50%, Due 2/1/2034........................... 1,471 1,470
--------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 6,159
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.81%
Pool #488099, 5.50%, Due 2/1/2014........................... 748 771
Pool #323788, 6.50%, Due 6/1/2014........................... 112 119
Pool #323789, 6.00%, Due 6/1/2014........................... 330 345
Pool #535846, 6.00%, Due 4/1/2016........................... 809 844
Pool #545449, 6.50%, Due 2/1/2017........................... 862 914
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
63
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Pool #545823, 5.50%, Due 8/1/2017........................... $ 902 $ 927
Pool #254545, 5.00%, Due 12/1/2017.......................... 1,334 1,344
Pool #555549, 5.00%, Due 6/1/2018........................... 1,215 1,224
Pool #254865, 4.50%, Due 9/1/2018........................... 1,133 1,117
Pool #761337, 5.00%, Due 4/1/2019........................... 498 501
Pool #100293, 9.50%, Due 8/1/2029........................... 294 330
Pool #545759, 6.50%, Due 7/1/2032........................... 260 270
Pool #705607, 6.00%, Due 6/1/2033........................... 351 359
Pool #713706, 5.50%, Due 8/1/2033........................... 1,849 1,846
Pool #730570, 6.00%, Due 8/1/2033........................... 951 974
Pool #727223, 5.50%, Due 9/1/2033........................... 717 716
Pool #740238, 6.00%, Due 9/1/2033........................... 159 163
Pool #741901, 5.50%, Due 10/1/2033.......................... 680 679
Pool #749219, 5.50%, Due 10/1/2033.......................... 158 157
Pool #555880, 5.50%, Due 11/1/2033.......................... 2,016 2,013
Pool #758322, 5.50%, Due 12/1/2033.......................... 1,882 1,879
Pool #725238, 5.00%, Due 3/1/2034........................... 1,183 1,147
Pool #765304, 5.50%, Due 3/1/2034........................... 282 281
TBA, 15yr, 6.00%............................................ 1,462 1,526
TBA, 30yr, 6.50%............................................ 288 300
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 20,746
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 10.07%
Pool #780921, 7.00%, Due 11/15/2013......................... 530 569
Pool #780085, 11.50%, Due 8/15/2018......................... 213 243
Pool #780400, 7.00%, Due 12/15/2025......................... 740 791
Pool #780509, 6.50%, Due 2/15/2027.......................... 382 400
Pool #780615, 6.50%, Due 8/15/2027.......................... 757 793
Pool #780680, 6.50%, Due 11/15/2027......................... 634 664
Pool #780747, 6.50%, Due 3/15/2028.......................... 1,109 1,161
Pool #780936, 7.50%, Due 12/15/2028......................... 484 521
Pool #781273, 6.00%, Due 4/15/2031.......................... 947 974
Pool #555732, 6.50%, Due 3/15/2032.......................... 274 286
Pool #781564, 6.00%, Due 2/15/2033.......................... 1,179 1,209
Pool #616094, 6.00%, Due 11/15/2033......................... 805 826
Pool #781690, 6.00%, Due 12/15/2033......................... 866 888
Pool #003515, 5.50%, Due 2/20/2034.......................... 1,906 1,906
Pool #003517, 6.00%, Due 2/20/2034.......................... 1,176 1,205
--------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 12,436
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 39,341
--------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 2.24%
Banc American Commercial Mortgage, Incorporated 2003-2 A2,
4.342%, Due 3/11/2041..................................... 435 433
General Electric Commercial Mortgage Corporation 2003-C2 A2,
4.17%, Due 7/10/2037...................................... 515 514
J P Morgan Chase Commercial Mortgage Securities Corporation
2003-CB7 A3, 4.449%, Due 1/12/2038........................ 660 650
Morgan Stanley Dean Witter Discover & Company 2003-T11 A2,
4.34%, Due 6/13/2041...................................... 495 494
Wachovia Bank Commercial Mortgage Trust 2003-C5 A2, 3.989%,
Due 6/15/2035............................................. 730 675
--------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 2,766
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
64
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
CORPORATE OBLIGATIONS - 46.27%
FINANCIAL - 21.98%
AEGON, N.V., 8.00%, Due 8/15/2006........................... $ 300 $ 334
American General Finance Corporation, 5.375%, Due
9/1/2009.................................................. 240 253
Assurant, Incorporated, 5.625%, Due 2/15/2014, 144A (Note
A)........................................................ 290 291
Banco Popular North America Inc, 4.25%, Due 4/1/2008........ 400 403
Bank of America Corporation, 6.25%, Due 4/1/2008............ 390 424
Bank One Corporation, 4.90%, Due 4/30/2015*................. 400 381
Bear Stearns Companies, Incorporated, 2.875%, Due
7/2/2008.................................................. 400 383
BHP Finance (USA) Limited, 4.80%, Due 4/15/2013............. 400 394
Boeing Capital Corporation, 5.40%, Due 11/30/2009........... 650 681
Branch Banking & Trust Company, 4.875%, Due 1/15/2013....... 400 393
Capital One Bank,
6.70%, Due 5/15/2008...................................... 350 380
5.75%, Due 9/15/2010...................................... 235 244
5.125%, Due 2/15/2014*.................................... 350 335
Caterpillar Financial Services, 2.625%, Due 1/30/2007....... 600 592
Cendant Corporation, 6.875%, Due 8/15/2006.................. 690 747
Citigroup, Incorporated, 6.50%, Due 1/18/2011............... 465 514
Countrywide Home Loan, Incorporated,
3.50%, Due 12/19/2005..................................... 750 761
3.25%, Due 5/21/2008...................................... 565 548
Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 600 651
John Deere Capital Corporation, 3.75%, Due 1/13/2009........ 500 492
Deutsche Telekom International Finance Corporation, 8.00%,
Due 6/15/2010............................................. 350 413
First Tennessee Bank, NA, 5.75%, Due 12/1/2008.............. 475 506
Fleet Norstar Financial Group, Incorporated, 8.625%, Due
1/15/2007................................................. 400 456
Ford Motor Credit Company,
6.50%, Due 1/25/2007...................................... 380 402
7.375, Due 10/28/2009..................................... 1,200 1,297
General Electric Capital Corporation,
3.25%, Due 6/15/2009...................................... 595 572
General Motors Acceptance Corporation,
6.125%, Due 8/28/2007..................................... 320 338
7.25%, Due 3/2/2011....................................... 1,000 1,075
8.375%, Due 7/15/2033..................................... 345 373
Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013..... 675 642
John Hancock Global Funding, 3.75%, Due 9/30/2008........... 500 495
Household Finance Corporation,
6.375%, Due 11/27/2012.................................... 355 382
4.75%, Due 7/15/2013...................................... 200 191
ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 400 392
International Lease Finance Corporation,
3.30%, Due 1/23/2008...................................... 380 372
6.375%, Due 3/15/2009..................................... 550 598
Lincoln National Corporation, 4.75%, Due 2/15/2014.......... 300 286
Merrill Lynch & Company, Incorporated,
3.00%, Due 4/30/2007...................................... 955 945
6.56%, Due 12/16/2007..................................... 750 831
Monumental Global Funding, 3.85%, Due 3/3/2008, 144A (Note
A)........................................................ 750 753
JP Morgan Chase & Company, 6.75%, Due 8/15/2008............. 625 688
Morgan Stanley, 4.75%, Due 4/1/2014......................... 500 467
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
65
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
PHH Corporation, 6.00%, Due 3/1/2008........................ $ 400 $ 426
PNC Funding Corporation, 7.50%, Due 11/1/2009............... 495 570
Prudential Financial, Incorporated,
3.75%, Due 5/1/2008....................................... 300 298
4.50%, Due 7/15/2013...................................... 300 283
SLM Corporation,
3.95%, Due 8/15/2008...................................... 450 450
5.125%, Due 8/27/2012..................................... 750 752
Sprint Capital Corporation,
6.125%, Due 11/15/2008.................................... 375 401
8.375%, Due 3/15/2012..................................... 150 176
8.75%, Due 3/15/2032...................................... 225 269
Synovus Financial Corporation, 4.875%, Due 2/15/2013........ 400 392
US Bank, NA, 5.70%, Due 12/15/2008.......................... 460 502
Verizon Global Funding Corporation, 4.375%, Due 6/1/2013.... 400 372
Washington Mutual Financial Corporation,
6.875%, Due 5/15/2011..................................... 250 285
4.625%, Due 4/1/2014...................................... 300 277
--------
TOTAL FINANCIAL......................................... 27,128
--------
INDUSTRIAL - 20.61%
Anheuser Busch Companies, Incorporated, 6.50%, Due
1/1/2028.................................................. 500 527
AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 748 893
AT&T Wireless Services, Incorporated,
7.35%, Due 3/1/2006....................................... 800 866
8.125%, Due 5/1/2012...................................... 880 1,027
8.75%, Due 3/1/2031....................................... 320 390
Atlantic Richfield Company,
9.125%, Due 3/1/2011...................................... 330 415
8.50%, Due 4/1/2012....................................... 315 389
Baxter International, Incorporated, 5.25%, Due 5/1/2007..... 415 436
Bristol Myers Squibb Company, 4.00%, Due 8/15/2008, 144A
(Note A).................................................. 490 491
Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012.... 350 404
Carnival Corporation, 3.75%, Due 11/15/2007................. 505 504
Cendant Corporation, 6.25%, Due 1/15/2008................... 330 356
Clear Channel Communications, 4.40%, Due 5/15/2011.......... 715 687
Comcast Cable Communications,
7.625%, Due 2/15/2008..................................... 380 422
6.75%, Due 1/30/2011...................................... 385 422
Conagra Foods, Incorporated,
7.125%, Due 10/1/2026*.................................... 530 591
7.00%, Due 10/1/2028...................................... 400 432
ConocoPhillips, 3.625%, Due 10/15/2007...................... 575 579
Continental Cablevision, Incorporated, 8.30%, Due
5/15/2006................................................. 250 275
DaimlerChrysler North America,
4.75%, Due 1/15/2008...................................... 625 634
6.50%, Due 11/15/2013..................................... 300 309
Dell Computer Corporation, 6.55%, Due 4/15/2008............. 400 439
The Walt Disney Company, 5.375%, Due 6/1/2007............... 360 378
EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A
(Note A).................................................. 300 289
EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 300 280
France Telecom SA, 8.75%, Due 3/1/2011...................... 450 532
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
66
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Harley Davidson, Incorporated, 2.69%, Due 4/15/2011......... $ 650 $ 647
Hertz Corporation, 4.70%, Due 10/2/2006..................... 450 456
Hewlett Packard Company, 5.75%, Due 12/15/2006.............. 425 453
International Business Machines Corporation,
4.875%, Due 10/1/2006..................................... 470 493
4.75%, Due 11/29/2012..................................... 400 395
Kerr McGee Corporation, 5.875%, Due 9/15/2006............... 480 508
Lockheed Martin Corporation, 7.20%, Due 5/1/2036............ 470 545
Martin Marietta Material, Incorporated, 6.90%, Due
8/15/2007................................................. 300 331
Norfolk Southern Corporation, 7.05%, Due 5/1/2037........... 255 273
Northrop Grumman Corporation, 7.125%, Due 2/15/2011......... 500 562
Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 400 446
Pepsi Bottling Group, Incorporated, 7.00%, Due 3/1/2029..... 575 641
Pulte Homes, Incorporated, 5.25%, Due 1/15/2014............. 225 215
Reed Elsevier Capital, Incorporated, 6.125%, Due 8/1/2006... 485 522
Schering Plough Corporation, 6.50%, Due 12/1/2033........... 615 624
Simon Property Group, 7.625%, Due 5/15/2005, 144A (Note
A)........................................................ 150 158
Target Corporation, 7.00%, Due 7/15/2031.................... 550 613
Time Warner, Incorporated, 7.625%, Due 4/15/2031............ 255 279
Union Oil Company of California, 7.90%, Due 4/18/2008....... 100 112
Union Pacific Corporation, 6.50%, Due 4/15/2012............. 200 219
Univision Communications, Incorporated, 3.875%, Due
10/15/2008................................................ 390 383
Verizon Communications, Incorporated, 6.36%, Due
4/15/2006................................................. 335 358
Verizon Virginia, 4.625%, Due 3/15/2013..................... 400 379
Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 345 364
Viacom, Incorporated, 5.625%, Due 8/15/2012................. 495 515
Wal-Mart Stores, Incorporated, 7.55%, Due 2/15/2030......... 550 659
Weyerhaeuser Company, 5.95%, Due 11/1/2008.................. 380 406
Wyeth Corporation,
6.70%, Due 3/15/2011...................................... 550 608
5.50%, Due 2/1/2014....................................... 315 314
--------
TOTAL INDUSTRIAL........................................ 25,445
--------
UTILITIES - 3.24%
AEP Texas Central Company, 6.65%, Due 2/15/2033............. 155 159
Appalachian Power Company, 5.95%, Due 5/15/2033............. 230 216
Consolidated Natural Gas Company, 6.875%, Due 10/15/2026.... 390 421
Devon Energy Corporation, 2.75%, Due 8/1/2006............... 465 463
Dominion Resources, Incorporated, 5.00%, Due 3/15/2013...... 300 292
Enterprise Products Partners LP, 7.50%, Due 2/1/2011........ 260 290
Marathon Oil Corporation, 5.375%, Due 6/1/2007.............. 500 527
MidAmerican Energy Holdings Company,
3.50%, Due 5/15/2008...................................... 360 351
5.875%, Due 10/1/2012..................................... 400 413
Public Service Enterprise Group, Incorporated, 6.95%, Due
6/1/2012.................................................. 385 425
Xcel Energy, Incorporated, 7.00%, Due 12/1/2010............. 400 448
--------
TOTAL UTILITIES......................................... 4,005
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
67
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
FOREIGN - 0.44%
Quebec Province, 4.875%, Due 5/5/2014....................... $ 305 $ 301
United Mexican States, 7.50%, Due 4/8/2033.................. 240 238
--------
TOTAL FOREIGN........................................... 539
--------
TOTAL CORPORATE OBLIGATIONS............................. 57,117
--------
ASSET-BACKED SECURITIES - 1.45%
MBNA Credit Card Master Trust 2003-A7 A7, 2.65%, Due
11/15/2010................................................ 800 766
Master Asset Securitization Trust 2002-6 2A1, 5.75%, Due
10/25/2017................................................ 1,009 1,028
--------
TOTAL ASSET-BACKED SECURITIES........................... 1,794
--------
<Caption>
SHARES
-----------
SHORT-TERM INVESTMENTS - 14.57%
American AAdvantage Money Market Select Fund (Note B)....... 15,352,630 15,353
AMR Investments Enhanced Cash Business Trust (Note B)....... 2,637,652 2,638
--------
TOTAL SHORT-TERM INVESTMENTS............................ 17,991
--------
TOTAL INVESTMENTS - 112.59% (COST $139,696)................. 138,987
--------
LIABILITIES, NET OF OTHER ASSETS - (12.59%)................. (15,543)
--------
TOTAL NET ASSETS - 100%..................................... $123,444
========
</Table>
- ---------------
(A) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $2,374 or 1.92% of net assets.
(B) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of this security is on loan at April 30, 2004. See Note 4.
See accompanying notes
- --------------------------------------------------------------------------------
68
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 7.54%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.65%
Pool #E44213, 7.00%, Due 1/1/2008........................... $ 338 $ 358
Pool #G10084, 6.50%, Due 3/1/2008........................... 542 572
Pool #E00228, 6.50%, Due 7/1/2008........................... 409 435
Pool #G10791, 6.00%, Due 3/1/2013........................... 171 179
--------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 1,544
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 4.10%
Pool #050763, 7.00%, Due 7/1/2008........................... 191 203
Pool #050952, 6.50%, Due 12/1/2008.......................... 469 499
Pool #252448, 5.50%, Due 4/1/2009........................... 459 476
Pool #313430, 6.50%, Due 3/1/2012........................... 470 499
Pool #323223, 6.50%, Due 7/1/2013........................... 354 375
Pool #439957, 6.00%, Due 11/1/2013.......................... 299 313
Pool #323980, 6.00%, Due 4/1/2014........................... 749 784
Pool #545038, 6.00%, Due 9/1/2014........................... 663 694
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 3,843
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.790%
Pool #780286, 7.00%, Due 6/15/2008.......................... 530 563
Pool #351992, 6.00%, Due 12/15/2008......................... 1,060 1,120
--------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 1,683
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 7,070
--------
CORPORATE OBLIGATIONS - 75.85%
FINANCIAL - 54.21%
American Honda Finance Corporation, 2.875%, Due 4/3/2006,
144A (Note A)............................................. 1,150 1,157
Bank of America Corporation, 5.25%, Due 2/1/2007............ 2,000 2,108
Bank One Corporation, 7.625%, Due 8/1/2005.................. 2,000 2,134
Bear Stearns Companies, Incorporated, 3.00%, Due
3/30/2006................................................. 2,000 2,012
Boeing Capital Corporation, 5.65%, Due 5/15/2006............ 1,252 1,321
Capital One Bank, 6.70%, Due 5/15/2008...................... 1,100 1,194
Caterpillar Financial Services, 2.35%, Due 9/15/2006........ 2,500 2,465
Citigroup, Incorporated, 6.75%, Due 12/1/2005............... 2,000 2,138
Countrywide Funding Corporation, 3.50%, Due 12/19/2005...... 2,200 2,232
FleetBoston Financial Corporation, 3.85%, Due 2/15/2008..... 2,500 2,513
General Electric Capital Corporation, 2.75%, Due 9/25/2006
*......................................................... 1,000 1,000
General Motors Acceptance Corporation, 6.75%, Due
1/15/2006................................................. 3,000 3,177
Goldman Sachs Group, Incorporated, 7.625%, Due 8/17/2005.... 2,000 2,133
Heller Financial, Incorporated, 6.375%, Due 3/15/2006....... 2,500 2,694
Household Finance Corporation, 8.00%, Due 5/9/2005.......... 2,000 2,118
International Lease Finance Corporation, 2.95%, Due
5/23/2006................................................. 2,000 2,004
John Hancock Global Funding, 5.625%, Due 6/27/2006.......... 1,000 1,061
Merrill Lynch & Company, Incorporated, 7.00%, Due
3/15/2006................................................. 1,660 1,798
MetLife, Incorporated, 3.911%, Due 5/15/2005................ 2,500 2,544
Monumental Global Funding, 5.20%, Due 1/30/2007, 144A (Note
A)........................................................ 1,200 1,259
Prudential Insurance Company of America, 6.375%, Due
7/23/2006, 144A (Note A).................................. 3,000 3,231
Simon Property Group, Incorporated, 7.75%, Due 8/15/2004,
144A (Note A)............................................. 1,090 1,108
SLM Corporation, 2.90%, Due 7/1/2005........................ 2,000 2,021
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
69
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Synovus Financial Corporation, 7.25%, Due 12/15/2005........ $ 2,500 $ 2,694
Wachovia Corporation, 6.40%, Due 4/1/2008................... 2,500 2,717
--------
TOTAL FINANCIAL......................................... 50,833
--------
INDUSTRIAL - 21.64%
AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006... 1,400 1,515
Cendant Corporation, 6.875%, Due 8/15/2006.................. 2,140 2,319
Conagra Foods, Incorporated, 9.875%, Due 11/15/2005......... 1,000 1,104
Continental Cablevision, Incorporated, 8.30%, Due
5/15/2006................................................. 1,960 2,160
DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 1,500 1,522
Deutsche Telekom International Finance Corporation, 8.25%,
Due 6/15/2005............................................. 325 346
Hertz Corporation, 4.70%, Due 10/2/2006..................... 3,000 3,038
Kroger Company, 7.375%, Due 3/1/2005........................ 1,000 1,044
Northrop Grumman Corporation, 7.00%, Due 3/1/2006........... 2,000 2,154
Sprint Capital Corporation, 6.00%, Due 1/15/2007............ 1,800 1,913
Unilever Capital Corporation, 6.875%, Due 11/1/2005......... 1,000 1,068
Verizon Wireless Capital, 5.375%, Due 12/15/2006............ 2,000 2,110
--------
TOTAL INDUSTRIAL........................................ 20,293
--------
TOTAL CORPORATE OBLIGATIONS............................. 71,126
--------
ASSET-BACKED SECURITIES - 13.57%
American Express Credit Account Master Trust 2000-1 A,
7.20%, Due 9/17/2007...................................... 2,395 2,500
Capital Auto Receivables Asset Trust 2002-2 A4, 4.50%, Due
10/15/2007................................................ 2,000 2,051
Chase Credit Card Owner Trust 1999-3 A, 6.66%, Due
1/15/2007................................................. 2,000 2,035
Chemical Master Credit Card Trust 1996-2 A, 5.98%, Due
9/15/2008................................................. 3,000 3,161
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
--------
TOTAL ASSET-BACKED SECURITIES........................... 12,719
--------
<Caption>
SHARES
-----------
SHORT-TERM INVESTMENTS - 1.72%
American AAdvantage Money Market Select Fund (Note B)....... 1,614,633 1,615
--------
TOTAL SHORT-TERM INVESTMENTS............................ 1,615
--------
TOTAL INVESTMENTS - 98.68% (COST $92,044)................... 92,530
--------
OTHER ASSETS, NET OF LIABILITIES - 1.32%.................... 1,233
--------
TOTAL NET ASSETS - 100%..................................... $ 93,763
========
</Table>
- ---------------
(A) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period end,
the value of these securities amounted to $6,755 or 7.20% of net assets.
(B) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of this security is on loan at April 30, 2004. See Note 4.
See accompanying notes
- --------------------------------------------------------------------------------
70
(AMERICAN EAGLE LOGO)
- --------------------------------------------------------------------------------
71
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2004 (unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
LARGE CAP LARGE CAP
BALANCED VALUE GROWTH
----------- ----------- ----------
(IN THOUSANDS)
ASSETS:
Investments in unaffiliated securities, at value(A)..... $ 582,541 $ 663,324 $ 56,661
Investments in affiliated securities, at value(B)....... 110,614 74,050 1,302
Investments in Portfolio, at value...................... -- -- --
Cash.................................................... -- -- 26
Foreign currency, at value(C)........................... -- -- --
Dividends and interest receivable....................... 2,487 941 37
Receivable for investments sold......................... 2,891 3,706 992
Receivable for foreign currency sold.................... -- -- --
Receivable for fund shares sold......................... 177 651 114
Receivable for variation margin on open futures
contracts............................................. -- -- --
Other assets............................................ -- 4 --
----------- ----------- ----------
TOTAL ASSETS........................................ 698,710 742,676 59,132
----------- ----------- ----------
LIABILITIES:
Payable for investments purchased....................... 9,279 6,387 1,058
Payable upon return of securities loaned................ 57,658 27,299 789
Payable for fund shares redeemed........................ 1,421 1,446 --
Payable for variation margin on open futures
contracts............................................. 386 342 3
Dividends payable....................................... -- -- --
Management and investment advisory fees payable (Note
2).................................................... 471 557 102
Other liabilities....................................... 110 107 8
----------- ----------- ----------
TOTAL LIABILITIES................................... 69,325 36,138 1,960
----------- ----------- ----------
NET ASSETS.................................................. $ 629,385 $ 706,538 $ 57,172
=========== =========== ==========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 545,623 611,878 65,090
Undistributed net investment income..................... 3,344 1,438 24
Accumulated net realized gain (loss).................... 6,685 (29,653) (13,493)
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency................ 73,733 122,875 5,551
----------- ----------- ----------
NET ASSETS.................................................. $ 629,385 $ 706,538 $ 57,172
=========== =========== ==========
Shares outstanding (no par value):
Institutional Class..................................... 581,812 1,748,029 109
=========== =========== ==========
PlanAhead Class......................................... 1,149,021 1,937,730 N/A
=========== =========== ==========
Service Class........................................... N/A N/A N/A
=========== =========== ==========
AMR Class............................................... 45,978,616 37,993,362 9,843,493
=========== =========== ==========
Net asset value, offering and redemption price per share:
Institutional Class..................................... $ 13.64 $ 17.18 $ 5.80
=========== =========== ==========
PlanAhead Class......................................... $ 13.00 $ 16.55 N/A
=========== =========== ==========
Service Class........................................... N/A N/A N/A
=========== =========== ==========
AMR Class............................................... $ 13.19 $ 16.96 $ 5.81
=========== =========== ==========
- ---------------
(A) Cost of investments in unaffiliated securities.......... $ 508,394 $ 540,027 $ 51,100
(B) Cost of investments in affiliated securities............ $ 110,614 $ 74,050 $ 1,302
(C) Cost of Foreign currency................................ $ -- $ -- $ --
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
72
- --------------------------------------------------------------------------------
<Table>
<Caption>
SMALL CAP INTERNATIONAL EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
VALUE EQUITY MARKETS BOND INCOME BOND BOND
----------- ------------- ---------- ----------- ----------- ------------ -----------
(IN THOUSANDS)
$ 707,075 $ -- $ 71,919 $ 307,460 $ 100,792 $ 120,996 $ 90,915
186,878 -- 5,210 8,912 9,718 17,991 1,615
-- 1,462,640 -- -- -- -- --
-- -- -- 23 -- -- --
-- -- 1,086 -- -- -- --
541 -- 267 6,839 1,000 1,205 1,124
5,752 -- 803 3,521 412 837 --
-- -- 498 -- -- -- --
3,129 2,339 17 250 2 346 175
-- -- -- -- -- -- --
1 -- -- 12 -- -- --
----------- ----------- ---------- ----------- ----------- ----------- -----------
903,376 1,464,979 79,800 327,017 111,924 141,375 93,829
----------- ----------- ---------- ----------- ----------- ----------- -----------
6,372 -- 1,863 5,491 3,224 4,170 --
106,829 -- 2,427 25,441 7,574 13,707 26
3,469 1,926 931 210 100 2 3
966 -- -- -- -- -- --
-- -- -- 154 -- -- 8
1,031 226 209 608 90 27 22
1,016 108 40 42 28 25 7
----------- ----------- ---------- ----------- ----------- ----------- -----------
119,683 2,260 5,470 31,946 11,016 17,931 66
----------- ----------- ---------- ----------- ----------- ----------- -----------
$ 783,693 $ 1,462,719 $ 74,330 $ 295,071 $ 100,908 $ 123,444 $ 93,763
=========== =========== ========== =========== =========== =========== ===========
660,259 1,322,672 60,367 280,425 99,996 131,504 103,424
1,201 (11,399) 99 -- (72) -- (1,645)
39,346 (102,391) 2,171 3,289 493 (7,351) (8,502)
82,887 253,837 11,693 11,357 491 (709) 486
----------- ----------- ---------- ----------- ----------- ----------- -----------
$ 783,693 $ 1,462,719 $ 74,330 $ 295,071 $ 100,908 $ 123,444 $ 93,763
=========== =========== ========== =========== =========== =========== ===========
12,330,572 50,811,313 524,362 14,751,928 N/A 86,140 368,573
=========== =========== ========== =========== =========== =========== ===========
7,496,098 13,442,955 41,710 12,773,867 10,032,306 107,909 891,413
=========== =========== ========== =========== =========== =========== ===========
39,396 88 N/A 108 N/A N/A N/A
=========== =========== ========== =========== =========== =========== ===========
24,521,361 21,269,153 5,774,530 N/A N/A 11,952,313 8,954,103
=========== =========== ========== =========== =========== =========== ===========
$ 17.75 $ 17.10 $ 11.69 $ 10.72 N/A $ 10.36 $ 9.19
=========== =========== ========== =========== =========== =========== ===========
$ 17.48 $ 16.98 $ 11.61 $ 10.72 $ 10.06 $ 10.23 $ 9.19
=========== =========== ========== =========== =========== =========== ===========
$ 17.45 $ 16.94 N/A $ 10.72 N/A N/A N/A
=========== =========== ========== =========== =========== =========== ===========
$ 17.66 $ 17.18 $ 11.73 N/A N/A $ 10.16 $ 9.18
=========== =========== ========== =========== =========== =========== ===========
$ 620,138 N/A $ 60,199 $ 296,103 $ 100,301 $ 121,705 $ 90,429
$ 186,878 N/A $ 5,210 $ 8,912 $ 9,718 $ 17,991 $ 1,615
$ -- N/A $ 1,113 $ -- $ -- $ -- $ --
</Table>
- --------------------------------------------------------------------------------
73
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
Six Months Ended April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
LARGE CAP LARGE CAP SMALL CAP
BALANCED VALUE GROWTH VALUE
-------- --------- --------- ---------
(IN THOUSANDS)
INVESTMENT INCOME:
Interest income......................................... $ 4,009 $ 22 $ -- $ 20
Dividend income from unaffiliated securities (net of
foreign taxes)*....................................... 4,486 7,416 274 3,783
Dividend income from affiliated securities.............. 249 247 3 340
Investment income allocated from the Portfolio.......... -- -- -- --
Income derived from commission recapture................ 11 11 2 84
Income derived from securities lending, net............. 41 23 4 85
Expenses allocated from the Portfolio................... -- -- -- --
-------- ------- ------- -------
TOTAL INVESTMENT INCOME............................. 8,796 7,719 283 4,312
-------- ------- ------- -------
EXPENSES:
Management and investment advisory fees (Note 2)........ 907 1,069 170 1,666
Administrative service fees (Note 2):
Institutional Class................................... 11 34 -- 189
PlanAhead Class....................................... 19 32 -- 124
Transfer agent fees:
Institutional Class................................... 1 3 -- 18
PlanAhead Class....................................... 3 6 -- 27
Service Class......................................... -- -- -- 8
AMR Class............................................. 11 15 1 7
Fund Accounting fees.................................... 155 186 14 161
Professional fees....................................... 28 33 3 18
Registration fees and expenses.......................... 13 12 1 23
Service Fees -- PlanAhead Class (Note 2)................ 19 32 -- 124
Other expenses.......................................... 57 45 8 57
-------- ------- ------- -------
TOTAL EXPENSES...................................... 1,224 1,467 197 2,422
-------- ------- ------- -------
Less fees waived (Note 2)............................... -- -- -- 8
-------- ------- ------- -------
NET EXPENSES........................................ 1,224 1,467 197 2,414
-------- ------- ------- -------
NET INVESTMENT INCOME....................................... 7,572 6,252 86 1,898
-------- ------- ------- -------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Investments........................................... 14,323 22,303 2,308 38,393
Foreign currency transactions......................... -- -- -- --
Futures contracts..................................... 4,304 4,400 18 3,219
Net realized gain allocated from the Portfolio.......... -- -- -- --
Change in net unrealized appreciation or depreciation
of:
Investments........................................... 19,463 44,457 623 25,371
Foreign currency translations......................... -- -- -- --
Futures contracts..................................... (1,787) (1,657) (14) (4,368)
Change in net unrealized gain allocated from the
Portfolio............................................. -- -- -- --
-------- ------- ------- -------
NET GAIN (LOSS) ON INVESTMENTS...................... 36,303 69,503 2,935 62,615
-------- ------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 43,875 $75,755 $ 3,021 $64,513
======== ======= ======= =======
* Foreign taxes......................................... $ 54 $ 115 -- $ 6
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
74
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
EQUITY MARKETS BOND INCOME BOND BOND
------------- -------- ---------- -------- ------------ ----------
(IN THOUSANDS)
$ -- $ -- $11,989 $ 1,541 $ 3,042 $1,692
-- 811 -- 120 -- --
-- 11 64 12 20 7
16,080 -- -- -- -- --
-- -- -- -- -- --
-- 6 38 4 5 1
(3,310) -- -- -- -- --
-------- ------- ------- ------- ------- ------
12,770 828 12,091 1,677 3,067 1,700
-------- ------- ------- ------- ------- ------
-- 363 941 180 161 121
1,023 6 205 -- 1 4
247 1 164 127 2 9
92 -- 26 -- 3 1
37 -- 52 21 -- 1
8 -- 7 -- -- --
5 2 -- -- 3 3
-- 174 38 14 16 12
32 2 12 15 6 5
29 14 16 -- 13 13
249 1 164 127 2 9
95 8 11 18 21 11
-------- ------- ------- ------- ------- ------
1,817 571 1,636 502 228 189
-------- ------- ------- ------- ------- ------
8 -- 69 -- -- --
-------- ------- ------- ------- ------- ------
1,809 571 1,567 502 228 189
-------- ------- ------- ------- ------- ------
10,961 257 10,524 1,175 2,839 1,511
-------- ------- ------- ------- ------- ------
-- 5,529 3,320 926 1,138 266
-- 690 -- -- -- --
-- -- -- -- -- --
52,629 -- -- -- -- --
-- (71) 4 176 (2,099) (692)
-- (668) -- -- -- --
-- -- -- -- -- --
99,610 -- -- -- -- --
-------- ------- ------- ------- ------- ------
152,239 5,480 3,324 1,102 (961) (426)
-------- ------- ------- ------- ------- ------
$163,200 $ 5,737 $13,848 $ 2,277 $ 1,878 $1,085
======== ======= ======= ======= ======= ======
-- $ 189 -- -- -- --
</Table>
- --------------------------------------------------------------------------------
75
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<Table>
<Caption>
BALANCED LARGE CAP VALUE LARGE CAP GROWTH
------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2004 2003 2004 2003 2004 2003
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................ $ 7,572 $ 15,678 $ 6,252 $ 12,019 $ 86 $ 151
Net realized gain (loss) on
investments, futures contracts, and
foreign currency transactions...... 18,627 15,761 26,703 (1,324) 2,326 (823)
Change in net unrealized appreciation
or depreciation of investments,
futures contracts, and foreign
currency translations.............. 17,676 65,996 42,800 129,868 609 8,070
Change in unrealized gain (loss)
allocated from the Portfolio....... -- -- -- -- -- --
-------- -------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS..................... 43,875 97,435 75,755 140,563 3,021 7,398
-------- -------- -------- -------- ------- -------
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........ 39,279 72,230 35,834 37,911 10,459 24,357
Reinvestment of dividends and
distributions...................... 16,359 22,704 12,206 13,368 151 107
Cost of shares redeemed.............. (33,740) (96,756) (48,536) (83,291) (5,235) (10,846)
Redemption fees...................... -- -- -- -- -- --
-------- -------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS................... 21,898 (1,822) (496) (32,012) 5,375 13,618
-------- -------- -------- -------- ------- -------
NET INCREASE (DECREASE) IN NET ASSETS.... 49,411 72,893 62,826 94,895 8,245 20,909
-------- -------- -------- -------- ------- -------
NET ASSETS:
Beginning of period.................. 579,974 507,081 643,712 548,817 48,927 28,018
-------- -------- -------- -------- ------- -------
END OF PERIOD*....................... $629,385 $579,974 $706,538 $643,712 $57,172 $48,927
======== ======== ======== ======== ======= =======
* Includes undistributed net
investment income (loss) of........ $ 3,344 $ 11,918 $ 1,438 $ 7,137 $ 24 $ 89
======== ======== ======== ======== ======= =======
<Caption>
SMALL CAP VALUE
-------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2004 2003
----------- -----------
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................ $ 1,898 $ 2,317
Net realized gain (loss) on
investments, futures contracts, and
foreign currency transactions...... 41,612 14,129
Change in net unrealized appreciation
or depreciation of investments,
futures contracts, and foreign
currency translations.............. 21,003 95,651
Change in unrealized gain (loss)
allocated from the Portfolio....... -- --
-------- --------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS..................... 64,513 112,097
-------- --------
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........ 296,077 236,616
Reinvestment of dividends and
distributions...................... 16,178 8,003
Cost of shares redeemed.............. (59,687) (83,990)
Redemption fees...................... -- --
-------- --------
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS................... 252,568 160,629
-------- --------
NET INCREASE (DECREASE) IN NET ASSETS.... 299,665 264,722
-------- --------
NET ASSETS:
Beginning of period.................. 484,028 219,306
-------- --------
END OF PERIOD*....................... $783,693 $484,028
======== ========
* Includes undistributed net
investment income (loss) of........ $ 1,201 $ 1,892
======== ========
</Table>
- ---------------
(1) Commencement of Operations
See accompanying notes
- --------------------------------------------------------------------------------
76
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EQUITY EMERGING MARKETS HIGH YIELD BOND ENHANCED INCOME
------------------------- ------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED ENDED JUNE 30 TO
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2004 2003 2004 2003 2004 2003 2004 2003(1)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
$ 10,961 $ 20,084 $ 257 $ 375 $ 10,524 $ 14,294 $ 1,175 $ 685
52,629 (14,862) 6,219 1,470 3,320 5,981 926 (433)
-- -- (739) 15,857 4 13,317 176 315
99,610 290,167 -- -- -- -- -- --
---------- ---------- ------- -------- -------- -------- -------- --------
163,200 295,389 5,737 17,702 13,848 33,592 2,277 567
---------- ---------- ------- -------- -------- -------- -------- --------
(19,224) (15,830) (20) (12) (5,981) (8,012) -- --
(4,201) (2,465) (3) -- (4,543) (6,282) (1,247) (685)
(9,135) (8,401) (415) (319) -- -- -- --
-- -- -- -- (2,082) -- -- --
-- -- -- -- (1,645) -- -- --
-- -- -- -- -- -- -- --
---------- ---------- ------- -------- -------- -------- -------- --------
(32,560) (26,696) (438) (331) (14,251) (14,294) (1,247) (685)
---------- ---------- ------- -------- -------- -------- -------- --------
359,693 569,324 22,646 17,731 64,789 312,581 7,710 104,430
28,865 24,545 438 331 10,319 8,009 767 1
(279,048) (542,508) (9,600) (14,387) (66,669) (161,695) (9,671) (3,241)
9 815 -- -- -- -- -- --
---------- ---------- ------- -------- -------- -------- -------- --------
109,519 52,176 13,484 3,675 8,439 158,895 (1,194) 101,190
---------- ---------- ------- -------- -------- -------- -------- --------
240,159 320,869 18,783 21,046 8,036 178,193 (164) 101,072
---------- ---------- ------- -------- -------- -------- -------- --------
1,222,560 901,691 55,547 34,501 287,035 108,842 101,072 --
---------- ---------- ------- -------- -------- -------- -------- --------
$1,462,719 $1,222,560 $74,330 $ 55,547 $295,071 $287,035 $100,908 $101,072
========== ========== ======= ======== ======== ======== ======== ========
$ (11,399) $ 8,624 $ 99 $ 292 $ -- $ -- $ (72) $ --
========== ========== ======= ======== ======== ======== ======== ========
<Caption>
INTERMEDIATE BOND SHORT-TERM BOND
------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2004 2003 2004 2003
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
$ 2,839 $ 8,605 $ 1,511 $ 4,882
1,138 5,796 266 107
(2,099) (3,389) (692) (879)
-- -- -- --
-------- -------- -------- --------
1,878 11,012 1,085 4,110
-------- -------- -------- --------
(17) (1,957) (84) (317)
(23) (153) (166) (181)
(2,799) (6,495) (2,199) (5,040)
-- -- -- --
-- -- -- --
-- -- -- --
-------- -------- -------- --------
(2,839) (8,605) (2,449) (5,538)
-------- -------- -------- --------
13,645 65,108 10,278 31,785
2,837 6,687 2,404 5,349
(26,423) (160,564) (18,994) (36,115)
-- -- -- --
-------- -------- -------- --------
(9,941) (88,769) (6,312) 1,019
-------- -------- -------- --------
(10,902) (86,362) (7,676) (409)
-------- -------- -------- --------
134,346 220,708 101,439 101,848
-------- -------- -------- --------
$123,444 $134,346 $ 93,763 $101,439
======== ======== ======== ========
$ -- $ -- $ (1,645) $ (924)
======== ======== ======== ========
</Table>
- --------------------------------------------------------------------------------
77
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American AAdvantage Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, open-end management investment company. These
financial statements and notes to the financial statements relate to the
American AAdvantage Balanced Fund, the American AAdvantage Large Cap Value Fund,
the American AAdvantage Large Cap Growth Fund, the American AAdvantage Small Cap
Value Fund, the American AAdvantage International Equity Fund, the American
AAdvantage Emerging Markets Fund, the American AAdvantage High Yield Bond Fund,
the American AAdvantage Enhanced Income Fund, the American AAdvantage
Intermediate Bond Fund and the American AAdvantage Short-Term Bond Fund (each a
"Fund" and collectively, the "Funds"), each a series of the Trust. Each Fund,
except the Enhanced Income Fund, has multiple classes of shares.
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 April 30, 2004 the International
Fund's investment was 94.80% of the Portfolio.
Each Fund, except the Enhanced Income Fund, has multiple classes of shares
designed to meet the needs of different groups of investors. Differences between
the classes include the services offered to and the expenses borne by each
class. Investment income, net capital gains (losses) and all expenses incurred
by the Funds are allocated based on relative net assets of each class, except
for service fees and certain other fees and expenses related solely to one class
of shares.
The 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.
The following is a summary of the significant accounting policies followed
by the Funds.
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.
- --------------------------------------------------------------------------------
78
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
Securities that are primarily traded on foreign securities exchanges are
generally valued at the preceding closing values of such securities on their
respective exchanges where primarily traded. Most foreign markets close before
the Exchange. Movements in the U.S. markets after the close of foreign markets
are evaluated, and security prices may be adjusted to reflect the fair value of
the securities as of the close of the Exchange as determined in good faith in
accordance with procedures adopted by the Trust's Board of Trustees (the
"Board").
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by a pricing service and may take into account
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. In some cases, the prices of debt
securities may be determined using quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method.
Securities for which the above valuation procedures are inappropriate, or
are deemed not to reflect fair value, are valued at fair value, as determined in
good faith and pursuant to procedures approved by the Board.
Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale.
Dividend income is recorded on the ex-dividend date except certain
dividends from foreign securities which are recorded as soon as the information
is available to the Funds. Interest income is earned from settlement date,
recorded on the accrual basis, and adjusted, if necessary, for accretion of
discounts and amortization of premiums. For financial and tax reporting
purposes, realized gains and losses are determined on the basis of specific lot
identification.
The International Fund records its share of net investment income and
realized and unrealized gain (loss) in the Portfolio each day. All net
investment income and realized and unrealized gain (loss) of the Portfolio is
allocated pro rata among the International Fund and other investors in the
Portfolio at the time of such determination.
Currency Translation
All assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the 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.
- --------------------------------------------------------------------------------
79
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
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, Small Cap Value, Emerging Markets, High Yield Bond and
Enhanced Income Funds may enter into financial futures contracts as a method for
keeping assets readily convertible to cash if needed to meet shareholder
redemptions or for other needs while maintaining exposure to the stock or bond
market, as applicable.
Upon entering into a futures contract, the Fund is required to deposit with
a financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Fund dependent upon
the daily fluctuations in the value of the underlying security and are recorded
for financial reporting purposes as unrealized gains or losses by the Fund. When
entering into a closing transaction, the Fund will realize a gain or loss equal
to the difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most recent
settlement price established each day by the exchange on which they are traded.
The use of future contracts may involve risks such as 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.
Dividends to Shareholders
Dividends from net investment income of the Balanced, Large Cap Value,
Large Cap Growth, Small Cap Value, International Equity and Emerging Markets
Funds normally will be declared and paid annually. The High Yield Bond, Enhanced
Income, Intermediate Bond and Short-Term Bond Funds generally declare dividends
from net investment income daily, payable monthly. Distributions, if any, of net
realized capital gains are generally paid annually and recorded on the ex-
dividend date.
- --------------------------------------------------------------------------------
80
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
Federal Income and Excise Taxes
It is the policy of each of the Funds to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income as well as any net realized
capital gains on the sale of investments. Therefore, no federal income or excise
tax provision is required.
Dividends are determined in accordance with income tax regulations which
may treat certain transactions differently than 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 six months ended April 30,
2004 and the fiscal year ended October 31, 2003 were as follows (in thousands):
<Table>
<Caption>
BALANCED LARGE CAP VALUE LARGE-CAP GROWTH
------------------------- ------------------------- ---------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2004 2003 2004 2003 2004 2003
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class.............. $ 211 $ 105 $ 414 $ 502 $ -- $ --
Plan Ahead Class................. 354 421 344 333 -- --
AMR Class........................ 15,797 22,194 11,675 12,821 151 107
LONG-TERM CAPITAL GAIN
Institutional Class.............. -- -- -- -- -- --
Plan Ahead Class................. -- -- -- -- -- --
AMR Class........................ -- -- -- -- -- --
------- ------- ------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID..... $16,362 $22,720 $12,433 $13,656 $151 $107
------- ------- ------- ------- ---- ----
</Table>
<Table>
<Caption>
SMALL CAP VALUE INTERNATIONAL EQUITY EMERGING MARKETS
------------------------- ------------------------- ---------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2004 2003 2004 2003 2004 2003
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class.............. $ 2,878 $ 117 $19,224 $15,830 $ 20 $ 12
Plan Ahead Class................. 1,809 1,089 4,201 2,465 3 --
AMR Class........................ 9,236 5,971 9,135 8,401 415 319
Service Class.................... -- -- -- -- -- --
LONG-TERM CAPITAL GAIN
Institutional Class.............. 726 19 -- -- -- --
Plan Ahead Class................. 509 130 -- -- -- --
AMR Class........................ 2,258 678 -- -- -- --
Service Class.................... -- -- -- -- -- --
------- ------ ------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID..... $17,416 $8,004 $32,560 $26,696 $438 $331
------- ------ ------- ------- ---- ----
</Table>
- --------------------------------------------------------------------------------
81
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
HIGH-YIELD BOND ENHANCED INCOME INTERMEDIATE BOND
------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED JUNE 30 TO ENDED YEAR ENDED
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2004 2003 2004 2003 2004 2003
----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class............. $ 7,578 $ 8,012 $ -- $ -- $ 17 $1,957
PlanAhead Class................. 5,805 6,282 1,247 685 23 153
AMR Class....................... -- -- -- -- 2,799 6,495
Service Class................... -- -- -- -- -- --
LONG-TERM CAPITAL GAIN
Institutional Class............. 485 -- -- -- -- --
PlanAhead Class................. 383 -- -- -- -- --
AMR Class....................... -- -- -- -- -- --
Service Class................... -- -- -- -- -- --
------- ------- ------ ---- ------ ------
TOTAL DISTRIBUTIONS PAID..... $14,251 $14,294 $1,247 $685 $2,839 $8,605
------- ------- ------ ---- ------ ------
<Caption>
SHORT-TERM BOND
-------------------------
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, OCTOBER 31,
2004 2003
----------- -----------
(UNAUDITED)
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class............. $ 84 $ 317
PlanAhead Class................. 166 181
AMR Class....................... 2,199 5,040
Service Class................... -- --
LONG-TERM CAPITAL GAIN
Institutional Class............. -- --
PlanAhead Class................. -- --
AMR Class....................... -- --
Service Class................... -- --
------ ------
TOTAL DISTRIBUTIONS PAID..... $2,449 $5,538
------ ------
</Table>
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%.
As of April 30, 2004, the components of distributable earnings were as
follows (in thousands):
<Table>
<Caption>
BALANCED LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL EMERGING
FUND VALUE FUND GROWTH FUND VALUE FUND EQUITY FUND MARKETS FUND
-------- ---------- ------------- ---------- ------------- ------------
Cost basis of investments for
federal income tax purposes.... $626,359 $624,340 $ 54,369 $808,380 $1,566,845 $66,411
Unrealized appreciation......... 80,601 134,607 5,794 96,389 258,725 12,835
Unrealized depreciation......... (13,805) (21,573) (2,200) (10,814) (30,736) (2,117)
-------- -------- -------- -------- ---------- -------
Net unrealized appreciation/
(depreciation)................. 66,796 113,034 3,594 85,573 227,989 10,718
Undistributed ordinary income... 4,066 1,438 25 25,711 1,787 98
Undistributed long-term gain/
(loss)......................... 13,766 (18,629) (11,538) 12,138 (85,247) 3,173
-------- -------- -------- -------- ---------- -------
Distributable earnings.......... $84,628 $ 95,843 $ (7,919) $123,422 $ 144,529 $13,989
======== ======== ======== ======== ========== =======
<Caption>
ENHANCED
HIGH YIELD INCOME INTERMEDIATE SHORT-TERM
BOND FUND FUND BOND FUND BOND FUND
---------- ------------- ------------- ----------
Cost basis of investments for
federal income tax purposes.... $305,044 $110,019 $139,744 $ 93,799
Unrealized appreciation......... 12,626 2,216 1,165 395
Unrealized depreciation......... (1,298) (1,725) (1,922) (1,664)
-------- -------- -------- --------
Net unrealized appreciation/
(depreciation)................. 11,328 491 (757) (1,269)
Undistributed ordinary income... 903 765 454 667
Undistributed long-term gain/
(loss)......................... 2,414 -- (7,304) (8,508)
-------- -------- -------- --------
Distributable earnings.......... $ 14,645 $ 1,256 $ (7,607) $ (9,110)
======== ======== ======== ========
</Table>
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 accounting principles generally accepted in the
United States of America and federal income
- --------------------------------------------------------------------------------
82
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
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 April 30, 2004 (in thousands):
<Table>
<Caption>
BALANCED LARGE CAP INTERNATIONAL EMERGING INTERMEDIATE SHORT-TERM
FUND VALUE FUND EQUITY FUND MARKETS FUND BOND FUND BOND FUND
-------- ---------- ------------- ------------ ------------ ----------
Paid-in-capital....................... $ 159 $ 188 $ 467 $ (2) $ 1 $ --
Undistributed net investment income... 215 482 1,576 (12) -- 409
Accumulated net realized gain
(loss)............................... (374) (670) (2,043) 14 (1) (409)
</Table>
At April 30, 2004, capital loss carryforward positions for federal income
tax purposes were as follows (in thousands):
<Table>
<Caption>
FUND AMOUNT EXPIRES
- ---- ------- -------
Large Cap Value............................................. $19,629 2010-2011
Large Cap Growth............................................ 11,538 2008-2011
International Equity........................................ 86,247 2009-2011
Intermediate Bond........................................... 7,304 2008-2010
Short-Term Bond............................................. 8,508 2004-2012
</Table>
Net capital loss carryovers utilized for the period ended April 30, 2004
are as follows: Balanced Fund $2,278, Large Cap Value Fund $22,694, Large Cap
Growth Fund $2,138, International Equity Fund $48,965, Emerging Markets Fund
$2,733, Enhanced Income Fund $433, Intermediate Bond Fund $965, and Short-Term
Bond Fund $0.
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 accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimated.
Other
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.
- --------------------------------------------------------------------------------
83
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory, fund management and securities lending services. Investment
assets of the International Fund are invested in the Portfolio. Management Fees
paid by the Portfolio are discussed in Note 1 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report. Investment
assets of the Balanced, Large Cap Value, Large Cap Growth, Small Cap Value,
Emerging Markets, High Yield Bond, Enhanced Income and Intermediate Bond Funds
are managed by multiple investment advisers which have entered into separate
investment advisory agreements with the Manager. As compensation for performing
the duties required under the Management Agreement, the Manager receives from
the Balanced Fund, Large Cap Value Fund, Large Cap Growth Fund, Small Cap Value
Fund, Emerging Markets Fund, High Yield Bond Fund and Enhanced Income Fund an
annualized fee equal to .10% of the average daily net assets plus amounts paid
by the Manager to the investment advisors hired by the Manager to direct
investment activities of the Funds. The Manager receives an annualized fee of
..25% of the average daily net assets of the Intermediate Bond Fund and pays a
portion of their fee to an investment adviser hired by the Manager to direct
investment activities of a portion of the Fund. Management fees paid during the
six months ended April 30, 2004 were as follows (dollars in thousands):
<Table>
<Caption>
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISERS MANAGER
----------- ---------- --------------- -----------
Balanced Fund...................................... .225%-.70% $ 907 $ 599 $308
Large Cap Value Fund............................... .225%-.70% 1,069 723 346
Large Cap Growth Fund.............................. .50%-.70% 170 143 27
Small Cap Value Fund............................... .35%-.60% 1,666 1,341 325
Emerging Markets Fund.............................. .80%-1.20% 363 328 35
High Yield Bond Fund............................... 0.65% 941 793 148
Enhanced Income Fund............................... .25%-.85% 180 129 51
Intermediate Bond Fund............................. .25% 161 66 95
</Table>
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
- --------------------------------------------------------------------------------
84
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
than cash, a fee up to 25% of such loan fees. During the period, securities
lending fees paid to the Manager were as follows (in thousands):
<Table>
Balanced Fund............................................... $ 7
Large Cap Value Fund........................................ 5
Small Cap Value Fund........................................ 14
Emerging Markets Fund....................................... 1
High Yield Bond Fund........................................ 6
Enhanced Income Fund........................................ 1
Intermediate Bond Fund...................................... 1
</Table>
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 Balanced, Large Cap Value, Large Cap Growth, Small Cap Value, Emerging
Markets, High Yield Bond, Enhanced Income, Intermediate Bond and Short-Term Bond
Funds may invest in the American AAdvantage Money Market Select Fund (the
"Select Fund"). Cash collateral received by certain Funds in connection with
securities lending may be invested in the Select Fund and the AMR
- --------------------------------------------------------------------------------
85
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
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:
<Table>
<Caption>
SECURITIES LENDING
DIRECT INVESTMENT COLLATERAL INVESTED
IN FUNDS IN FUNDS TOTAL
----------------- ------------------- -------
Balanced.................................................... $24,580 $32,103 $56,683
Large Cap Value............................................. 24,266 16,159 40,426
Large Cap Growth............................................ 548 -- 548
Small Cap Value............................................. 33,515 43,919 77,434
Emerging Markets............................................ 2,056 669 2,725
High Yield Bond............................................. 6,265 -- 6,265
Enhanced Income............................................. 1,177 -- 1,177
Intermediate Bond........................................... 1,932 6,702 8,634
Short Term Bond............................................. 749 784 1,533
</Table>
A summary of the Funds' transactions in Affiliated Funds for the period
ended April 30, 2004 is set forth below (in thousands):
<Table>
<Caption>
OCTOBER 31, 2003 APRIL 30, 2004
FUND AFFILIATE SHARE/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- ---- ----------- ------------------ --------- -------- -------------------
Balanced.......................... Select Fund $45,459 $136,469 $128,991 $52,936
Large Cap Value................... Select Fund 42,022 128,761 124,030 46,752
Large Cap Growth.................. Select Fund 702 9,404 9,595 511
Small Cap Value................... Select Fund 46,819 484,743 452,391 79,172
Emerging Markets.................. Select Fund 1,414 20,229 18,888 2,755
High Yield Bond................... Select Fund 20,891 88,718 100,697 8,912
Enhanced Income................... Select Fund 4,167 25,350 27,374 2,144
Intermediate Bond................. Select Fund 3,654 38,178 37,558 4,275
Short Term Bond................... Select Fund 1,154 20,198 19,763 1,589
</Table>
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 six months ended April 30, 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 April 30, 2004, AMR Corporation and subsidiary
companies and Employee Benefit Trusts thereof owned 100% of AMR Class shares of
the Funds.
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 six months ended April 30,
- --------------------------------------------------------------------------------
86
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
2004, the Manager and Investment Adviser each waived administrative service and
management fees totaling $31,000.
The Manager reimbursed expenses of the Service Class totaling $8,133,
$8,064, and $7,250 for the Small Cap Value, International Equity and High Yield
Bond Funds, respectively during the six months ended April 30, 2004.
3. INVESTMENT TRANSACTIONS
Investment transactions for the six months ended April 30, 2004 (excluding
short-term investments) are as follows (in thousands):
<Table>
<Caption>
LARGE CAP LARGE CAP EMERGING HIGH YIELD ENHANCED INTERMEDIATE
BALANCED VALUE GROWTH SMALL CAP MKT BOND INCOME BOND SHORT-TERM
-------- --------- --------- --------- -------- ---------- -------- ------------ ----------
Purchases............ $184,149 $115,574 $33,255 $344,279 $36,031 $205,298 $42,609 $66,510 $13,681
Proceeds from
sales.............. $170,016 $119,047 $27,660 $138,974 $16,694 $188,665 $39,642 $75,624 $20,363
</Table>
The Balanced Fund had purchases and sales of U.S. Government Securities of
$17,337 and $21,151 respectively, and the Intermediate Bond Fund had purchases
and sales of U.S. Government securities of $18,332 and $16,248, respectively.
4. SECURITIES LENDING
The Balanced, Large Cap Value, Large Cap Growth, Small Cap Value, Emerging
Markets, High Yield Bond, Enhanced Income, Intermediate Bond and Short-Term Bond
Funds participate in a securities lending program under which securities are
loaned to selected institutional investors. All such loans require
collateralization with cash, securities of the U.S. Government and its agencies
or letters of credit that will generally equal at least 100% of the market value
of the loaned securities plus accrued interest. The Funds bear the risk of delay
in recovery of, or even loss of rights in, the securities loaned should the
borrower of securities fail financially. The Funds receive interest on the
collateral less any fees and rebates paid to agents and transferees of
securities. The Funds also continue to receive income on the securities loaned,
and any gain or loss in the market price of securities loaned that may occur
during the term of the loan. At April 30, 2004, the Funds had securities on loan
as follows (in thousands):
<Table>
<Caption>
MARKET VALUE OF
FUND SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL
- ---- ------------------ ------------------- ---------------
Balanced................................ $ 57,812 $1,559 $ 57,658
Large Cap Value......................... 26,262 -- 27,299
Large Cap Growth........................ 752 -- 789
Small Cap Value......................... 104,061 -- 106,829
Emerging Markets........................ 2,299 -- 2,427
High Yield Bond......................... 24,879 -- 25,441
Enhanced Income......................... 7,400 -- 7,574
Intermediate Bond....................... 13,411 -- 13,707
Short Term Bond......................... 25 -- 26
</Table>
- --------------------------------------------------------------------------------
87
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Custodian for each Fund, other than High Yield Bond, invested the cash
collateral in the Business Trust and the Select Fund. These amounts have been
included as investments in each Fund's Schedule of Investments and Statements of
Assets & Liabilities. Income earned on these investments is reported as Income
derived from securities lending in the Statements of Operations.
5. COMMISSION RECAPTURE
The Funds have established brokerage commission recapture arrangements with
certain brokers or dealers. If a Fund's investment adviser chooses to execute a
transaction through a participating broker, the broker rebates a portion of the
commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund.
6. FUTURES CONTRACTS
A summary of futures contracts at April 30, 2004 is as follows (in
thousands):
<Table>
<Caption>
UNREALIZED
MARKET APPRECIATION/
TYPE OF FUTURE EXPIRATION CONTRACTS VALUE (DEPRECIATION)
- -------------- ---------- --------- ------- --------------
BALANCED FUND:
S&P 500 Index............................................. June 2004 180 $53,369 $ (413)
LARGE CAP VALUE FUND:
Emini S&P 500 Index....................................... June 2004 171 47,286 (422)
LARGE CAP GROWTH FUND:
Emini S&P 500 Index....................................... June 2004 8 442 (10)
SMALL CAP VALUE FUND:
Russell 2000 Index........................................ June 2004 299 83,698 (4,050)
</Table>
7. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (in thousands):
Six Months Ended April 30, 2004 (Unaudited)
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
------------------- ------------------- ------------------
BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------- ------- -------- ------ --------- ------- --------
Shares sold....................................... 100 $ 1,363 354 $ 4,594 2,519 $ 33,322
Reinvestment of dividends......................... 16 211 28 351 1,225 15,797
Shares redeemed................................... (230) (3,148) (307) (4,047) (2,016) (26,545)
---- ------- ---- ------- ------ --------
Net increase (decrease) in shares outstanding..... (114) $(1,574) 75 $ 898 1,728 $ 22,574
==== ======= ==== ======= ====== ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
------------------- ------------------- ------------------
LARGE CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- -------- ------ --------- ------- --------
Shares sold....................................... 572 $ 9,832 784 $12,993 778 $ 13,009
Reinvestment of dividends......................... 12 190 21 341 717 11,675
Shares redeemed................................... (341) (5,779) (285) (4,707) (2,279) (38,050)
---- ------- ---- ------- ------ --------
Net increase (decrease) in shares outstanding..... 243 $ 4,243 520 $ 8,627 (784) $(13,366)
==== ======= ==== ======= ====== ========
</Table>
- --------------------------------------------------------------------------------
88
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS AMR CLASS
-------------------- -----------------
LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- --------------------- -------- -------- ------ -------
Shares sold...................................... -- $ -- 1,798 $10,459
Reinvestment of dividends........................ -- -- 27 151
Shares redeemed.................................. -- -- (901) (5,235)
---- ---- ----- -------
Net increase in shares outstanding............... -- $ -- 924 $ 5,375
==== ==== ===== =======
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
-------------------- ------------------ ---------------- -------------------
SMALL CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- --------- ------ -------- ------ ------ ------- --------
Shares sold................ 7,469 $132,360 4,004 $ 69,968 40 $724 5,294 $ 93,025
Reinvestment of dividends.. 143 2,425 136 2,259 -- -- 683 11,494
Shares redeemed............ (807) (14,184) (837) (14,552) (1) (9) (1,765) (30,942)
----- -------- ----- -------- -- ---- ------ --------
Net increase in shares
outstanding.............. 6,805 $120,601 3,303 $ 57,675 39 $715 4,212 $ 73,577
===== ======== ===== ======== == ==== ====== ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
INTERNATIONAL EQUITY -------------------- ------------------- ---------------- -------------------
FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- --------- ------ --------- ------ ------ ------- ---------
Shares sold............... 7,550 $127,688 8,026 $ 132,452 -- $ -- 5,762 $ 99,553
Reinvestment of
dividends............... 975 15,613 258 4,117 -- -- 568 9,135
Shares redeemed*.......... (4,438) (74,300) (6,405) (103,975) -- -- (5,829) (100,764)
------ -------- ------ --------- ---- ---- ------ ---------
Net increase in shares
outstanding............. 4,087 $ 69,001 1,879 $ 32,594 -- $ -- 501 $ 7,924
====== ======== ====== ========= ==== ==== ====== =========
</Table>
* Net of Redemption Fees
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
-------------------- ----------------- -----------------
EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------- -------- -------- ------ ------- ------- -------
Shares sold....................................... 188 $2,285 96 $1,188 1,591 $19,173
Reinvestment of dividends......................... 2 20 -- 3 37 415
Shares redeemed................................... -- (2) (101) (1,225) (686) (8,373)
--- ------ ---- ------- ----- -------
Net increase (decrease) in shares outstanding..... 190 $2,303 (5) $ (34) 942 $11,215
=== ====== ==== ======= ===== =======
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS
-------------------- ------------------ ----------------
HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- --------- ------ -------- ------- ------
Shares sold....................................... 3,432 $ 37,102 2,563 $ 27,687 -- $ --
Reinvestment of dividends......................... 643 6,930 314 3,389 -- --
Shares redeemed................................... (4,365) (47,112) (1,809) (19,557) -- --
------ -------- ------ -------- ---- ----
Net increase (decrease) in shares outstanding..... (290) $ (3,080) 1,068 $ 11,519 -- $ --
====== ======== ====== ======== ==== ====
</Table>
<Table>
<Caption>
PLANAHEAD CLASS
-----------------
ENHANCED INCOME FUND SHARES AMOUNT
- -------------------- ------ -------
Shares sold...................................... 759 $7,710
Reinvestment of dividends........................ 75 767
Shares redeemed.................................. (952) (9,671)
---- -------
Net decrease in shares outstanding............... (118) $(1,194)
==== =======
</Table>
- --------------------------------------------------------------------------------
89
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
-------------------- ---------------- -----------------
INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------- -------- -------- ------ ------ ------- -------
Shares sold....................................... 1 $ 13 5 $ 48 1,311 $13,584
Reinvestment of dividends......................... 1 16 2 23 271 2,798
Shares redeemed................................... (14) (154) (34) (355) (2,509) (25,914)
--- ----- --- ----- ------ -------
Net decrease in shares outstanding................ (12) $(125) (27) $(284) (927) $(9,532)
=== ===== === ===== ====== =======
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
-------------------- ----------------- -----------------
SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- -------- -------- ------ ------- ------- -------
Shares sold....................................... 7 $ 65 783 $7,290 314 $ 2,923
Reinvestment of dividends......................... 8 71 14 134 237 2,199
Shares redeemed................................... (48) (444) (526) (4,897) (1,470) (13,653)
--- ----- ---- ------- ------ -------
Net increase (decrease) in shares outstanding..... (33) $(308) 271 $2,527 (919) $(8,531)
=== ===== ==== ======= ====== =======
</Table>
Period Ended October 31, 2003
<Table>
<Caption>
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)
======= ======== ======= ======= ====== ========
</Table>
<Table>
<Caption>
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)
======= ======== ======= ======= ====== ========
</Table>
<Table>
<Caption>
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
======= ========= ======= =========
</Table>
<Table>
<Caption>
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
======= ========= ======= ========= ======= == ====== ========
</Table>
- --------------------------------------------------------------------------------
90
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
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)
======= ========= ======= ========= ======= ======== ====== ========
</Table>
* Net of Redemption Fees
<Table>
<Caption>
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
======= ========= ======= ======== ====== ========
</Table>
<Table>
<Caption>
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
======= ========= ======= ======== ====== ========
</Table>
<Table>
<Caption>
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
======= =========
</Table>
<Table>
<Caption>
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)
======= ========= ======= ======== ====== ========
</Table>
<Table>
<Caption>
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
======= ========= ======= =========== ====== =========
</Table>
- --------------------------------------------------------------------------------
91
AMERICAN AADVANTAGE BALANCED FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------
2004 2003 2002 2001(D E G) 2000(B) 1999
----------- ------ ------ ----------- -------- --------
(UNAUDITED)
Net asset value, beginning of period............ $12.99 $10.97 $12.07 $ 12.27 $ 13.01 $ 14.56
------ ------ ------ -------- -------- --------
Income from investment operations:
Net investment income(A C).................. 0.13 0.30 0.11 0.51 0.58 0.50
Net gains (losses) on securities (both
realized and unrealized)(C)............... 0.85 1.85 (0.69) (0.03) (0.03) (0.39)
------ ------ ------ -------- -------- --------
Total income (loss) from investment
operations.................................... 0.98 2.15 (0.58) 0.48 0.55 0.11
------ ------ ------ -------- -------- --------
Less distributions:
Dividends from net investment income........ (0.33) (0.13) (0.44) (0.68) (0.51) (0.49)
Distributions from net realized gains on
securities................................ -- -- (0.08) -- (0.78) (1.17)
------ ------ ------ -------- -------- --------
Total distributions............................. (0.33) (0.13) (0.52) (0.68) (1.29) (1.66)
------ ------ ------ -------- -------- --------
Net asset value, end of period.................. $13.64 $12.99 $10.97 $ 12.07 $ 12.27 $ 13.01
====== ====== ====== ======== ======== ========
Total return.................................... 7.59%(H) 19.77% (5.14)% 4.07% 5.13% 0.53%
====== ====== ====== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands).... $7,934 $9,041 $8,994 $157,775 $260,880 $139,519
Ratios to average net assets (annualized):
Expenses(C)............................... 0.64% 0.63% 0.62% 0.62% 0.61% 0.59%
Net investment income(C).................. 2.20% 2.74% 3.12% 3.56% 4.39% 3.55%
Portfolio turnover rate(F).................. 30%(H) 69% 84% 122% 121% 90%
</Table>
- ---------------
(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) Not annualized.
- --------------------------------------------------------------------------------
92
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
--------------------------------------------------------------------------- ------------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------------- APRIL 30, -------------------------
2004 2003 2002 2001(D E G) 2000(B) 1999 2004 2003 2002
----------- ------- ------- ----------- ------- ------- ----------- -------- --------
(UNAUDITED) (UNAUDITED)
$ 12.40 $ 10.81 $ 11.88 $ 12.08 $ 12.79 $ 14.35 $ 12.60 $ 10.98 $ 12.06
------- ------- ------- ------- ------- ------- -------- -------- --------
0.22 0.36 0.41 0.51 0.53 0.44 0.21 0.34 0.48
0.68 1.66 (0.99) (0.06) -- (0.39) 0.74 1.78 (1.01)
------- ------- ------- ------- ------- ------- -------- -------- --------
0.90 2.02 (0.58) 0.45 0.53 0.05 0.95 2.12 (0.53)
------- ------- ------- ------- ------- ------- -------- -------- --------
(0.30) (0.43) (0.41) (0.65) (0.46) (0.44) (0.36) (0.50) (0.47)
-- -- (0.08) -- (0.78) (1.17) -- -- (0.08)
------- ------- ------- ------- ------- ------- -------- -------- --------
(0.30) (0.43) (0.49) (0.65) (1.24) (1.61) (0.36) (0.50) (0.55)
------- ------- ------- ------- ------- ------- -------- -------- --------
$ 13.00 $ 12.40 $ 10.81 $ 11.88 $ 12.08 $ 12.79 $ 13.19 $ 12.60 $ 10.98
======= ======= ======= ======= ======= ======= ======== ======== ========
7.32%(H) 19.36% (5.18)% 3.84% 4.88% 0.22% 7.59%(H) 20.06% (4.71)%
======= ======= ======= ======= ======= ======= ======== ======== ========
$14,935 $13,321 $10,561 $12,176 $11,643 $22,753 $606,516 $557,612 $487,526
0.91% 0.94% 0.90% 0.84% 0.90% 0.90% 0.38% 0.38% 0.35%
1.93% 2.40% 2.83% 3.29% 4.01% 3.21% 2.47% 2.98% 3.39%
30%(H) 69% 84% 122% 121% 90% 30%(H) 69% 84%
<Caption>
AMR CLASS
---------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------
2001(D E G) 2000(B) 1999
----------- -------- --------
$ 12.27 $ 13.02 $ 14.57
-------- -------- --------
0.56 0.61 0.54
(0.05) (0.03) (0.39)
-------- -------- --------
0.51 0.58 0.15
-------- -------- --------
(0.72) (0.55) (0.53)
-- (0.78) (1.17)
-------- -------- --------
(0.72) (1.33) (1.70)
-------- -------- --------
$ 12.06 $ 12.27 $ 13.02
======== ======== ========
4.38% 5.37% 0.83%
======== ======== ========
$526,405 $525,040 $840,935
0.36% 0.35% 0.34%
3.77% 4.54% 3.81%
122% 121% 90%
</Table>
- --------------------------------------------------------------------------------
93
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------------
2004 2003 2002 2001(B G) 2000(E) 1999(D)
----------- ------- ------- --------- ------- -------
(UNAUDITED)
Net asset value, beginning of period.............. $ 15.62 $ 12.55 $ 14.51 $ 15.83 $ 18.69 $ 20.93
------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)(A C).............. 0.09 0.20 0.27 0.28 0.47 0.38
Net gains (losses) on securities (both realized
and unrealized)(C)............................ 1.74 3.16 (1.76) (0.61) 0.06 0.04
------- ------- ------- ------- ------- -------
Total income (loss) from investment operations.... 1.83 3.36 (1.49) (0.33) 0.53 0.42
------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income........... (0.27) (0.29) (0.30) (0.50) (0.34) (0.40)
Distributions from net realized gains on
securities.................................... -- -- (0.17) (0.49) (3.05) (2.26)
------- ------- ------- ------- ------- -------
Total distributions............................... (0.27) (0.29) (0.47) (0.99) (3.39) (2.66)
------- ------- ------- ------- ------- -------
Net asset value, end of period.................... $ 17.18 $ 15.62 $ 12.55 $ 14.51 $ 15.83 $ 18.69
======= ======= ======= ======= ======= =======
Total return...................................... 11.70%(H) 27.30% (10.83)% (2.21)% 4.81% 1.72%
======= ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)....... $30,024 $23,512 $23,512 $10,081 $ 7,594 $45,039
Ratios to average net assets (annualized):
Expenses(C)................................... 0.66% 0.66% 0.61% 0.64% 0.53% 0.59%
Net investment income(C)...................... 1.66% 1.88% 1.82% 1.76% 3.71% 1.94%
Portfolio turnover rate(F)..................... 18%(H) 27% 34% 60% 58% 33%
</Table>
- ---------------
(A) Class expenses per share were subtracted from net investment income per
share for the Fund before class expenses to determine net investment income
per share.
(B) On October 9, 2001, Hotchkis and Wiley Capital Management, LLC assumed
management of the Large Cap Value Fund's assets previously managed by
Merrill Lynch Investment Managers, L.P.
(C) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Large Cap Value Portfolio through February 28,
2002.
(D) Prior to March 1, 1999, the Large Cap Value Fund was known as the Growth
and Income Fund.
(E) GSB Investment Management, Inc. was removed as an investment adviser to the
Large Cap Value Fund on March 1, 2000.
(F) The American AAdvantage Large Cap Value Fund invested all of its investable
assets in its corresponding Portfolio through February 28, 2002. Portfolio
turnover rate through February 28, 2002 was that of the Portfolio.
(G) Metropolitan West Capital Management, LLC replaced Independence Investment
LLC as investment adviser to the Large Cap Value Fund on December 1, 2000.
(H) Not annualized.
- --------------------------------------------------------------------------------
94
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
--------------------------------------------------------------- -----------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, ENDED
APRIL 30, ------------------------------------------------- APRIL 30,
2004 2003 2002 2001(B G) 2000(E) 1999(D) 2004
----------- ------- ------- --------- ------- ------- -----------
(UNAUDITED) (UNAUDITED)
$ 15.05 $ 12.09 $ 14.00 $ 15.40 $ 18.41 $ 20.67 $ 15.44
------- ------- ------- -------- ------- ------- --------
0.06 0.10 0.25 0.26 0.60 0.35 0.17
1.67 3.11 (1.74) (0.62) (0.13) 0.01 1.65
------- ------- ------- -------- ------- ------- --------
1.73 3.21 (1.49) (0.36) 0.47 0.36 1.82
------- ------- ------- -------- ------- ------- --------
(0.23) (0.25) (0.25) (0.55) (0.43) (0.36) (0.30)
-- -- (0.17) (0.49) (3.05) (2.26) --
------- ------- ------- -------- ------- ------- --------
(0.23) (0.25) (0.42) (1.04) (3.48) (2.62) (0.30)
------- ------- ------- -------- ------- ------- --------
$ 16.55 $ 15.05 $ 12.09 $ 14.00 $ 15.40 $ 18.41 $ 16.96
======= ======= ======= ======== ======= ======= ========
11.59%(H) 26.99% (11.13)% (2.47)% 4.56% 1.41% 11.90%(H)
======= ======= ======= ======== ======= ======= ========
$32,068 $21,331 $15,941 $ 12,280 $11,507 $20,095 $644,446
0.94% 0.95% 0.93% 0.89% 0.84% 0.90% 0.39%
1.38% 1.57% 1.53% 1.54% 2.51% 1.62% 1.92%
18%(H) 27% 34% 60% 58% 33% 18%(H)
<Caption>
AMR CLASS
----------- -------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------
2004 2003 2002 2001(B G) 2000(E) 1999(D)
----------- -------- -------- --------- -------- ----------
(UNAUDITED)
$ 15.05 $ 12.40 $ 14.34 $ 15.75 $ 18.77 $ 21.03
------- -------- -------- -------- -------- ----------
0.06 0.29 0.31 0.34 0.65 0.49
1.67 3.06 (1.75) (0.63) (0.09) (0.02)
------- -------- -------- -------- -------- ----------
1.73 3.35 (1.44) (0.29) 0.56 0.47
------- -------- -------- -------- -------- ----------
(0.23) (0.31) (0.33) (0.63) (0.53) (0.47)
-- -- (0.17) (0.49) (3.05) (2.26)
------- -------- -------- -------- -------- ----------
(0.23) (0.31) (0.50) (1.12) (3.58) (2.73)
------- -------- -------- -------- -------- ----------
$ 16.55 $ 15.44 $ 12.40 $ 14.34 $ 15.75 $ 18.77
======= ======== ======== ======== ======== ==========
11.59%(H 27.64% (10.62)% (1.98)% 5.08% 1.97%
======= ======== ======== ======== ======== ==========
$32,068 $598,869 $511,287 $654,239 $737,111 $1,384,358
0.94% 0.39% 0.36% 0.36% 0.34% 0.34%
1.38% 2.13% 2.06% 2.09% 3.07% 2.17%
18%(H 27% 34% 60% 58% 33%
</Table>
- --------------------------------------------------------------------------------
95
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
---------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31, JULY 31 TO
APRIL 30, ---------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
----------- ------- ------- ------- -----------
(UNAUDITED)
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)................. 0.01 0.02 0.03 (0.01) --
Net gains (losses) on securities (both realized
and unrealized)(A)............................ 0.34 0.94 (1.16) (3.86) (0.46)
------ ------- ------- ------- ------
Total income (loss) from investment operations...... 0.35 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...................... $ 5.80 $ 5.47 $ 4.53 $ 5.66 $ 9.54
====== ======= ======= ======= ======
Total return........................................ 6.34%(C) 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...................................... 0.87% 0.87% 0.87% 0.99% 0.99%
Net investment income (loss).................. 0.15% 0.18% 0.06% (0.26)% --
Decrease reflected in above expense ratio due
to absorption of expenses by the
Manager(A).................................. -- -- -- 0.02% 0.29%
Portfolio turnover rate(B)...................... 51%(C) 138% 135% 85% 9%(C)
</Table>
- ---------------
(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.
- --------------------------------------------------------------------------------
96
- --------------------------------------------------------------------------------
<Table>
<Caption>
AMR CLASS
-----------------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31, JULY 31 TO
APRIL 30, --------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
----------- ------- ------- ------- -----------
(UNAUDITED)
$ 5.48 $ 4.54 $ 5.67 $ 9.55 $ 10.00
------- ------- ------- ------- -------
0.01 0.02 0.02 0.01 0.01
0.34 0.93 (1.14) (3.87) (0.46)
------- ------- ------- ------- -------
0.35 0.95 (1.12) (3.86) (0.45)
------- ------- ------- ------- -------
(0.02) (0.01) (0.01) (0.02) --
------- ------- ------- ------- -------
(0.02) (0.01) (0.01) (0.02) --
------- ------- ------- ------- -------
$ 5.81 $ 5.48 $ 4.54 $ 5.67 $ 9.55
======= ======= ======= ======= =======
6.33%(C) 21.09% (19.85)% (40.51)% (4.50)%(C)
======= ======= ======= ======= =======
$57,171 $48,926 $28,017 $23,804 $19,505
0.73% 0.68% 0.67% 0.70% 0.74%
0.32% 0.40% 0.30% 0.08% 0.25%
-- -- -- 0.02% 0.14%
51%(C) 138% 135% 85% 9%(C)
</Table>
- --------------------------------------------------------------------------------
97
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
------------------------------------------------------------------------
SIX MONTHS DECEMBER 31,
ENDED YEAR ENDED OCTOBER 31, 1998 TO
APRIL 30, ----------------------------------------- OCTOBER 31,
2004 2003(D) 2002 2001(C) 2000 1999
----------- -------- ------- ------- ------- ------------
(UNAUDITED)
Net asset value, beginning of period................... $ 16.21 $ 11.28 $ 11.69 $ 10.08 $ 9.07 $ 10.00
-------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)(A)..................... 0.04 (0.01) (0.01) 0.16 0.21 0.07
Net gains (losses) on securities (both realized and
unrealized)(A).................................... 2.02 5.24 0.47 1.81 1.01 (1.00)
-------- -------- ------- ------- ------- -------
Total income (loss) from investment operations......... 2.06 5.23 0.46 1.97 1.22 (0.93)
-------- -------- ------- ------- ------- -------
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......................... $ 17.75 $ 16.21 $ 11.28 $ 11.69 $ 10.08 $ 9.07
======== ======== ======= ======= ======= =======
Total return........................................... 12.87%(E) 47.45% 3.29% 20.16% 13.78% (9.30)%(E)
======== ======== ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)............ $218,876 $ 89,579 $21,936 $ 2,364 $ 1,955 $ 2,117
Ratios to average net assets (annualized):
Expenses(A)....................................... 0.88% 0.89% 0.82% 0.89% 0.92% 0.96%
Net investment income(loss)(A).................... 0.47% 0.60% 0.81% 1.38% 1.62% 0.84%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager(A)........ -- -- -- -- 0.06% 1.23%
Portfolio turnover rate(B).......................... 24%(E) 75% 81% 93% 63% 31%(E)
</Table>
- ---------------
(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.
- --------------------------------------------------------------------------------
98
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS SERVICE CLASS AMR CLASS
----------------------------------------------------------------- --------------------------- -----------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, MARCH 1 TO ENDED MAY 1 TO ENDED
APRIL 30, ------------------------------------- OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30,
2004 2003(D) 2002 2001(C) 2000 1999 2004 2003(D) 2004
----------- ------- ------- ------- ------- ----------- ----------- ------------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
$ 15.95 $ 11.22 $ 11.64 $ 10.08 $ 9.05 $ 9.13 $15.92 $ 11.88 $ 16.13
-------- ------- ------- ------- ------- ------- ------ --------- --------
0.04 0.05 0.06 0.15 0.08 0.02 -- -- 0.06
1.96 5.08 0.36 1.76 1.14 (0.10) 1.97 4.04 2.00
-------- ------- ------- ------- ------- ------- ------ --------- --------
2.00 5.13 0.42 1.91 1.22 (0.08) 1.97 4.04 2.06
-------- ------- ------- ------- ------- ------- ------ --------- --------
(0.03) (0.12) (0.08) (0.18) (0.02) -- -- -- (0.09)
(0.44) (0.28) (0.76) (0.17) (0.17) -- (0.44) -- (0.44)
-------- ------- ------- ------- ------- ------- ------ --------- --------
(0.47) (0.40) (0.84) (0.35) (0.19) -- (0.44) -- (0.53)
-------- ------- ------- ------- ------- ------- ------ --------- --------
$ 17.48 $ 15.95 $ 11.22 $ 11.64 $ 10.08 $ 9.05 $17.45 $ 15.92 $ 17.66
======== ======= ======= ======= ======= ======= ====== ========= ========
12.72%(E) 47.12% 2.99% 19.58% 13.76% (0.88)%(E) 12.54%(E) 34.01%(E) 12.96%(E)
======== ======= ======= ======= ======= ======= ====== ========= ========
$131,018 $66,906 $16,190 $ 1,197 $ 440 $ 74 $ 687 $ 1 $433,112
1.16% 1.16% 1.11% 1.17% 1.18% 1.28% 1.49% 1.49% 0.60%
0.18% 0.39% 0.52% 1.06% 1.71% 0.57% (0.17%) (0.05)% 0.75%
-- -- -- -- 0.06% 0.18% 13.91% 1,087.55% --
24%(E) 75% 81% 93% 63% 31%(E) 24%(E) 75%(F) 24%(E)
<Caption>
AMR CLASS
------------------------------------------------------
YEAR ENDED OCTOBER 31, MARCH 1 TO
---------------------------------------- OCTOBER 31,
2003(D) 2002 2001(C) 2000 1999
-------- -------- -------- ------- -----------
$ 11.30 $ 11.71 $ 10.10 $ 9.08 $ 9.13
-------- -------- -------- ------- -------
0.10 0.15 0.15 0.22 0.04
5.15 0.34 1.85 1.04 (0.09)
-------- -------- -------- ------- -------
5.25 0.49 2.00 1.26 (0.05)
-------- -------- -------- ------- -------
(0.14) (0.14) (0.22) (0.07) --
(0.28) (0.76) (0.17) (0.17) --
-------- -------- -------- ------- -------
(0.42) (0.90) (0.39) (0.24) --
-------- -------- -------- ------- -------
$ 16.13 $ 11.30 $ 11.71 $ 10.10 $ 9.08
======== ======== ======== ======= =======
47.93% 3.54% 20.52% 14.19% (0.55)%(E)
======== ======== ======== ======= =======
$327,542 $181,180 $137,811 $53,715 $64,662
0.61% 0.56% 0.64% 0.68% 0.70%
0.95% 1.09% 1.55% 1.89% 1.14%
-- -- -- 0.06% 0.24%
75% 81% 93% 63% 31%(E)
</Table>
- --------------------------------------------------------------------------------
99
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-----------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------------
2004 2003(F) 2002 2001(E) 2000 1999(B)
----------- -------- -------- -------- -------- --------
(UNAUDITED)
Net asset value, beginning of period.................... $ 15.46 $ 12.10 $ 13.77 $ 17.95 $ 19.36 $ 16.93
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A D).............................. 0.14 0.25 0.21 0.24 0.36 0.35
Net gains (losses) on securities (both realized and
unrealized)(D)...................................... 1.91 3.47 (1.62) (2.96) 0.18 2.92
-------- -------- -------- -------- -------- --------
Total income (loss) from investment operations.......... 2.05 3.72 (1.41) (2.72) 0.54 3.27
-------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income................. (0.41) (0.36) (0.26) (0.22) (0.31) (0.35)
Distributions from net realized gains on
securities.......................................... -- -- -- (1.24) (1.64) (0.49)
-------- -------- -------- -------- -------- --------
Total distributions..................................... (0.41) (0.36) (0.26) (1.46) (1.95) (0.84)
-------- -------- -------- -------- -------- --------
Net asset value, end of period.......................... $ 17.10 $ 15.46 $ 12.10 $ 13.77 $ 17.95 $ 19.36
======== ======== ======== ======== ======== ========
Total return............................................ 13.41%(G) 31.61% (10.51)% (16.54)% 2.36% 19.98%
======== ======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)............. $868,974 $722,333 $537,476 $519,151 $587,869 $601,923
Ratios to average net assets (annualized):
Expenses(D)......................................... 0.77% 0.79% 0.75% 0.78% 0.72% 0.64%
Net investment income(D)............................ 1.54% 1.97% 1.56% 1.54% 1.64% 2.00%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager (D)......... -- -- -- -- -- --
Portfolio turnover rate(C)........................... 17%(G) 44% 43% 36% 45% 63%
</Table>
- ---------------
(A) Class expenses per share were subtracted from net investment income per
share for the Fund before class expenses to determine net investment income
per share.
(B) Morgan Stanley Asset Management, Inc. was replaced by Lazard Asset
Management LLC and Independence Investment LLC as investment adviser to the
International Equity Fund on March 1, 1999.
(C) The American AAdvantage International Equity Fund invests all of its
investable assets in its corresponding Portfolio. Portfolio turnover rate
is that of the Portfolio.
(D) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services International Equity Portfolio.
(E) Causeway Capital Management, LLC replaced Merrill Lynch Investment
Managers, L.P. as investment adviser to the International Equity Fund on
August 31, 2001.
(F) Independence Investment LLC was removed as an investment adviser to the
International Equity Fund on October 24, 2003.
(G) Not annualized
(H) Portfolio turnover rate is for the period November 1, 2002 through October
31, 2003.
- --------------------------------------------------------------------------------
100
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS SERVICE CLASS AMR CLASS
--------------------------------------------------------------- ------------------------- -----------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, ENDED MAY 1 TO ENDED
APRIL 30, ------------------------------------------------- APRIL 30, OCTOBER 31, APRIL 30,
2004 2003(F) 2002 2001(E) 2000 1999(B) 2004 2003(F) 2004
----------- -------- ------- -------- ------- ------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
$ 15.34 $ 11.95 $ 13.58 $ 17.72 $ 19.13 $ 16.75 $ 15.31 $ 12.18 $ 15.54
-------- -------- ------- -------- ------- ------- --------- ---------- --------
0.12 0.22 0.15 0.19 0.31 0.30 0.08 0.09 0.16
1.89 3.46 (1.56) (2.92) 0.18 2.89 1.91 3.04 1.92
-------- -------- ------- -------- ------- ------- --------- ---------- --------
2.01 3.68 (1.41) (2.73) 0.49 3.19 1.99 3.13 2.08
-------- -------- ------- -------- ------- ------- --------- ---------- --------
(0.37) (0.29) (0.22) (0.17) (0.26) (0.32) (0.36) -- (0.44)
-- -- -- (1.24) (1.64) (0.49) -- -- --
-------- -------- ------- -------- ------- ------- --------- ---------- --------
(0.37) (0.29) (0.22) (1.41) (1.90) (0.81) (0.36) -- (0.44)
-------- -------- ------- -------- ------- ------- --------- ---------- --------
$ 16.98 $ 15.34 $ 11.95 $ 13.58 $ 17.72 $ 19.13 $ 16.94 $ 15.31 $ 17.18
======== ======== ======= ======== ======= ======= ========= ========== ========
13.22%(G) 31.62% (10.57)% (16.79)% 2.08% 19.68% 13.13%(G) 25.70%(G) 13.58%(G)
======== ======== ======= ======== ======= ======= ========= ========== ========
$228,292 $177,425 $99,636 $113,948 $85,680 $60,602 $ 1 $ 1 $365,452
1.04% 1.10% 1.04% 1.10% 1.01% 0.93% 1.24% 1.50% 0.51%
1.34% 1.68% 1.35% 1.22% 1.43% 1.71% 0.97% 1.33% 1.83%
-- -- -- -- -- -- 1113.02% 1,137.58%
17%(G) 44% 43% 36% 45% 63% 17%(G) 44%(H) 17%(G)
<Caption>
AMR CLASS
----------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------
2003(F) 2002 2001(E) 2000 1999(B)
-------- -------- -------- -------- --------
$ 12.18 $ 13.86 $ 18.07 $ 19.46 $ 17.01
-------- -------- -------- -------- --------
0.29 0.24 0.28 0.41 0.39
3.46 (1.62) (2.98) 0.20 2.94
-------- -------- -------- -------- --------
3.75 (1.38) (2.70) 0.61 3.33
-------- -------- -------- -------- --------
(0.39) (0.30) (0.27) (0.36) (0.39)
-- -- (1.24) (1.64) (0.49)
-------- -------- -------- -------- --------
(0.39) (0.30) (1.51) (2.00) (0.88)
-------- -------- -------- -------- --------
$ 15.54 $ 12.18 $ 13.86 $ 18.07 $ 19.46
======== ======== ======== ======== ========
31.77% (10.26)% (16.35)% 2.69% 20.27%
======== ======== ======== ======== ========
$322,801 $264,579 $301,762 $428,329 $602,593
0.52% 0.49% 0.52% 0.46% 0.39%
2.22% 1.81% 1.78% 1.92% 2.25%
-- -- -- -- --
44% 43% 36% 45% 63%
</Table>
- --------------------------------------------------------------------------------
101
AMERICAN AADVANTAGE EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31, JULY 31 TO
APRIL 30, -------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
----------- ------- ------ ------- -----------
(UNAUDITED)
Net asset value, beginning of period........................ 10.62 $ 7.20 $ 6.64 $ 8.17 $ 10.00
------- ------- ------ ------- -------
Income from investment operations:
Net investment income(A)................................ 0.02 0.04 0.09 0.11 --
Net gains (losses) on securities (both realized and
unrealized)(A)........................................ 1.11 3.43 0.56 (1.62) (1.83)
------- ------- ------ ------- -------
Total income (loss) from investment operations.............. 1.13 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) --
------- ------- ------ ------- -------
Net asset value, end of period.............................. 11.69 $ 10.62 $ 7.20 $ 6.64 $ 8.17
======= ======= ====== ======= =======
Total return................................................ 10.66%(C) 48.45% 9.80% (18.52)% (18.30)%(C)
======= ======= ====== ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ 6,131 $ 3,557 $1,769 $ 1,495 $ 1
Ratios to average net assets (annualized):
Expenses(A)........................................... 1.88% 1.76% 1.51% 1.43% 1.87%
Net investment income (loss)(A)....................... 0.44% 0.62% 1.11% 2.07% (0.47)%
Portfolio turnover rate(B).............................. 25%(C) 80% 94% 95% 23%(C)
</Table>
- ---------------
(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.
- --------------------------------------------------------------------------------
102
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
- --------------------------------------------- -------------------------------------------------------
SIX MONTHS SIX MONTHS YEAR ENDED
ENDED YEAR ENDED OCTOBER 1 TO ENDED OCTOBER 31, JULY 31 TO
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, --------------------------- OCTOBER 31,
2004 2003 2002 2004 2003 2002 2001 2000
----------- ----------- ------------ ----------- ------- ------- ------- -----------
(UNAUDITED) (UNAUDITED)
$ 10.55 $ 7.19 $ 6.86 $ 10.66 $ 7.22 $ 6.65 $ 8.18 $ 10.00
------- ------- ------ ------- ------- ------- ------- -------
0.01 0.09 -- 0.04 0.07 0.09 0.13 --
1.10 3.34 0.33 1.11 3.44 0.59 (1.63) (1.82)
------- ------- ------ ------- ------- ------- ------- -------
1.11 3.43 0.33 1.15 3.51 0.68 (1.50) (1.82)
------- ------- ------ ------- ------- ------- ------- -------
(0.05) (0.07) -- (0.08) (0.07) (0.11) (0.02) --
-- -- -- -- -- -- -- --
------- ------- ------ ------- ------- ------- ------- -------
(0.05) (0.07) -- (0.08) (0.07) (0.11) (0.03) --
------- ------- ------ ------- ------- ------- ------- -------
$ 11.61 $ 10.55 $ 7.19 $ 11.73 $ 10.66 $ 7.22 $ 6.65 $ 8.18
======= ======= ====== ======= ======= ======= ======= =======
10.57%(C) 48.07% 4.81%(C) 10.92%(C) 48.84% 10.10% (18.40)% (18.20)%(C)
======= ======= ====== ======= ======= ======= ======= =======
$ 484 $ 492 $ 1 $67,715 $51,498 $32,731 $20,660 $17,308
2.13% 2.08% 1.87% 1.60% 1.50% 1.26% 1.30% 1.60%
0.20% 0.57% (0.25)% 0.76% 0.92% 1.35% 1.76% (0.19)%
25%(C) 80% 94%(D) 25%(C) 80%(C) 94% 95% 23%(C)
</Table>
- --------------------------------------------------------------------------------
103
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------------
SIX MONTHS YEAR ENDED
ENDED OCTOBER 31, DECEMBER 29, 2000
APRIL 30, ------------------- TO OCTOBER 31,
2004 2003 2002 2001
---------- -------- -------- -----------------
(UNAUDITED)
Net asset value, beginning of period........................ $ 10.73 $ 9.63 $ 9.82 $ 10.00
-------- -------- -------- -------
Income from investment operations:
Net investment income................................... 0.39 0.78 0.80 0.71
Net gains (losses) on securities (both realized and
unrealized)........................................... 0.13 1.10 (0.19) (0.18)
-------- -------- -------- -------
Total income from investment operations..................... 0.52 1.88 0.61 0.53
-------- -------- -------- -------
Less distributions:
Dividends from net investment income.................... (0.39) (0.78) (0.80) (0.71)
Distributions from net realized gains on securities..... (0.14) -- -- --
-------- -------- -------- -------
Total distributions......................................... (0.53) (0.78) (0.80) (0.71)
-------- -------- -------- -------
Net asset value, end of period.............................. $ 10.72 $ 10.73 $ 9.63 $ 9.82
======== ======== ======== =======
Total return................................................ 4.90%(A) 20.11% 6.28% 5.33%(A)
======== ======== ======== =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $158,093 $161,380 $104,813 $53,275
Ratios to average net assets (annualized):
Expenses.............................................. 0.90% 0.90% 0.90% 0.90%
Net investment income................................. 7.29% 7.51% 8.02% 8.48%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager............... 0.07% 0.10% 0.08% 0.17%
Portfolio turnover rate................................. 67%(A) 114% 163% 145%(A)
</Table>
- ---------------
(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.
- --------------------------------------------------------------------------------
104
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS SERVICE CLASS
- ------------------------------------------- -------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED MARCH 1 TO ENDED MAY 1 TO
APRIL 30, OCTOBER 31, OCTOBER 31, APRIL 30, OCTOBER 31,
2004 2003 2002 2004 2003
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
$ 10.73 $ 9.63 $10.10 $ 10.73 $ 10.47
-------- -------- ------ --------- --------
0.37 0.75 0.50 0.35 0.29
0.13 1.10 (0.47) 0.14 0.32
-------- -------- ------ --------- --------
0.50 1.85 0.03 0.49 0.61
-------- -------- ------ --------- --------
(0.37) (0.75) (0.50) (0.36) (0.35)
(0.14) -- -- (0.14) --
-------- -------- ------ --------- --------
(0.51) (0.75) (0.50) (0.50) (0.35)
-------- -------- ------ --------- --------
$ 10.72 $ 10.73 $ 9.63 $ 10.72 $ 10.73
======== ======== ====== ========= ========
4.70%(A) 19.57% (0.26)%(A) 4.43%(A) 5.46%(A)
======== ======== ====== ========= ========
$136,977 $125,654 $4,029 $ 1 $ 1
1.27% 1.24% 1.27% 1.60% 1.71%
6.92% 7.11% 7.20% 6.52% 6.51%
-- -- -- 1275.52% 805.12%
67%(A) 114% 163%(B) 67%(A) 114%(C)
</Table>
- --------------------------------------------------------------------------------
105
AMERICAN AADVANTAGE ENHANCED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS
-------------------------
SIX MONTHS
ENDED JUNE 30 TO
APRIL 30, OCTOBER 31,
2004 2003
----------- -----------
(UNAUDITED)
Net asset value, beginning of period........................ $ 9.76 $ 10.00
-------- --------
Income from investment operations:
Net investment income................................... 0.12 0.07(B)
Net gains (losses) on securities (both realized and
unrealized)............................................ 0.10 (0.04)
-------- --------
Total income from investment operations..................... 0.22 0.03
-------- --------
Less distributions:
Dividends from net investment income.................... (0.12) (0.07)
Distributions from net realized gains on securities..... -- --
-------- --------
Total distributions......................................... (0.12) (0.07)
-------- --------
Net asset value, end of period.............................. $ 10.06 $ 9.96
======== ========
Total return................................................ 2.24%(A) 0.32%(A)
======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $100,908 $101,072
Ratios to average net assets (annualized):
Expenses.............................................. 0.98% 0.93%
Net investment income................................. 2.30% 2.20%
Portfolio turnover rate................................. 40%(A) 57%(A)
</Table>
- ---------------
(A) Not annualized.
(B) Based on average shares outstanding.
- --------------------------------------------------------------------------------
106
(AMERICAN EAGLE LOGO)
- --------------------------------------------------------------------------------
107
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -----------------------------------------------
2004 2003 2002 2001 2000 1999
----------- ------- ------- ------- ------ --------
(UNAUDITED)
Net asset value, beginning of period................ $ 10.45 $ 10.42 $ 10.51 $ 9.72 $ 9.58 $ 10.50
------- ------- ------- ------- ------ --------
Income from investment operations:
Net investment income(A)........................ 0.19 0.41 0.51 0.57 0.59 0.56
Net gains (losses) on securities (both realized
and unrealized)(A)............................ (0.09) 0.03 (0.09) 0.79 0.14 (0.63)
------- ------- ------- ------- ------ --------
Total income (loss) from investment operations...... 0.10 0.44 0.42 1.36 0.73 (0.07)
------- ------- ------- ------- ------ --------
Less distributions:
Dividends from net investment income............ (0.19) (0.41) (0.51) (0.57) (0.59) (0.56)
Distributions from net realized gains on
securities.................................... -- -- -- -- -- (0.29)
------- ------- ------- ------- ------ --------
Total distributions................................. (0.19) (0.41) (0.51) (0.57) (0.59) (0.85)
------- ------- ------- ------- ------ --------
Net asset value, end of period...................... $ 10.36 $ 10.45 $ 10.42 $ 10.51 $ 9.72 $ 9.58
======= ======= ======= ======= ====== ========
Total return........................................ 0.93%(C) 4.31% 4.21% 14.36% 7.89% (0.83)%
======= ======= ======= ======= ====== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)........ $ 893 $ 1,024 $74,919 $60,842 $ 115 $205,218
Ratios to average net assets (annualized):
Expenses(A)................................... 1.20% 0.58% 0.56% 0.54% 0.59% 0.55%
Net investment income(A)...................... 3.57% 4.02% 4.99% 5.55% 6.31% 5.62%
Decrease reflected in above expense ratio due
to absorption of expenses by the
Manager(A).................................. -- -- -- -- -- --
Portfolio turnover rate(B)...................... 53%(C) 187% 185% 164% 102% 123%
</Table>
- ---------------
(A) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services Intermediate Bond Portfolio through February
28, 2002.
(B) The American AAdvantage Intermediate Bond Fund invested all of its
investable assets in its corresponding Portfolio through February 28, 2002.
Portfolio turnover rate through February 28, 2002 was that of the
Portfolio.
(C) Not annualized.
(D) Portfolio turnover rate is for the period November 1, 1998 through October
31, 1999.
- --------------------------------------------------------------------------------
108
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLAN AHEAD CLASS AMR CLASS
--------------------------------------------------------- -------------------------------------------------------------------
SIX MONTHS SIX MONTHS MARCH 1
ENDED YEAR ENDED OCTOBER 31, ENDED YEAR ENDED OCTOBER 31, TO
APRIL 30, ------------------------------------------- APRIL 30, --------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000 1999 2004 2003 2002 2001 2000 1999
----------- ------ ------ ------- ------ ------ ----------- -------- -------- ------- ------- -----------
(UNAUDITED) (UNAUDITED)
$ 10.31 $10.27 $10.34 $ 9.57 $ 9.63 $10.55 $ 10.24 $ 10.22 $ 10.30 $ 9.53 $ 9.58 $ 9.95
------- ------ ------ ------- ------ ------ -------- -------- -------- ------- ------- -------
0.20 0.39 0.48 0.53 0.59 0.53 0.23 0.45 0.53 0.58 0.64 0.39
(0.08) 0.04 (0.07) 0.77 (0.06) (0.63) (0.08) 0.02 (0.08) 0.77 (0.05) (0.37)
------- ------ ------ ------- ------ ------ -------- -------- -------- ------- ------- -------
0.12 0.43 0.41 1.30 0.53 (0.10) 0.15 0.47 0.45 1.35 0.59 0.02
------- ------ ------ ------- ------ ------ -------- -------- -------- ------- ------- -------
(0.20) (0.39) (0.48) (0.53) (0.59) (0.53) (0.23) (0.45) (0.53) (0.58) (0.64) (0.39)
-- -- -- -- -- (0.29) -- -- -- -- -- --
------- ------ ------ ------- ------ ------ -------- -------- -------- ------- ------- -------
(0.20) (0.39) (0.48) (0.53) (0.59) (0.82) (0.23) (0.45) (0.53) (0.58) (0.64) (0.39)
------- ------ ------ ------- ------ ------ -------- -------- -------- ------- ------- -------
$ 10.23 $10.31 $10.27 $ 10.34 $ 9.57 $ 9.63 $ 10.16 $ 10.24 $ 10.22 $ 10.30 $ 9.53 $ 9.58
======= ====== ====== ======= ====== ====== ======== ======== ======== ======= ======= =======
1.16%(C) 4.25% 4.10% 13.91% 5.76% (0.98)% 1.43%(C) 4.62% 4.57% 14.58% 6.39% (0.17)%(C)
======= ====== ====== ======= ====== ====== ======== ======== ======== ======= ======= =======
$ 1,104 $1,395 $1,691 $ 300 $ 102 $1,545 $121,447 $131,927 $144,098 $95,820 $40,555 $46,655
0.89% 0.86% 0.86% 0.83% 0.87% 0.85% 0.34% 0.32% 0.30% 0.30% 0.39% 0.30%
3.88% 3.70% 4.60% 5.04% 6.07% 5.32% 4.43% 4.32% 5.23% 5.84% 6.72% 6.12%
-- -- -- 0.01% 0.02% -- -- -- -- -- -- --
53%(C) 187% 185% 164% 102% 123% 53%(C) 187% 185% 164% 102% 123%(D)
</Table>
- --------------------------------------------------------------------------------
109
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
--------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ---------------------------------------------------
2004 2003 2002 2001 2000 1999
----------- ------ ------ ------- ------ ------
(UNAUDITED)
Net asset value, beginning of period........... $ 9.32 $ 9.45 $ 9.62 $ 9.21 $ 9.30 $ 9.63
------ ------ ------ ------- ------ ------
Income from investment operations:
Net investment income(B)................... 0.13 0.37 0.42 0.57 0.62 0.53
Net gains (losses) on securities (both
realized and unrealized)(B).............. (0.03) (0.04) (0.11) 0.41 (0.10) (0.29)
------ ------ ------ ------- ------ ------
Total income from investment operations........ 0.10 0.33 0.31 0.98 0.52 0.24
------ ------ ------ ------- ------ ------
Less distributions:
Dividends from net investment income....... (0.23) (0.46) (0.48) (0.57) (0.61) (0.57)
------ ------ ------ ------- ------ ------
Total distributions............................ (0.23) (0.46) (0.48) (0.57) (0.61) (0.57)
------ ------ ------ ------- ------ ------
Net asset value, end of period................. $ 9.19 $ 9.32 $ 9.45 $ 9.62 $ 9.21 $ 9.30
====== ====== ====== ======= ====== ======
Total return................................... 1.00%(C) 3.58% 3.37% 10.98% 5.83% 2.56%
====== ====== ====== ======= ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands)... $3,388 $3,745 $8,396 $ 4,226 $3,687 $5,034
Ratios to average net assets (annualized):
Expenses(B).............................. 0.62% 0.54% 0.44% 0.51% 0.58% 0.62%
Net investment income(B)................. 2.89% 4.30% 4.47% 6.06% 6.61% 5.92%
Decrease reflected in above expense ratio
due to absorption of expenses by the
Manager(B)............................. -- -- -- -- -- --
Portfolio turnover rate(A)................. 14%(C) 81% 63% 104% 89% 115%
</Table>
- ---------------
(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.
(C) Not annualized.
- --------------------------------------------------------------------------------
110
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
- -------------------------------------------------------------------- -------------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED OCTOBER 31, ENDED YEAR ENDED OCTOBER 31,
APRIL 30, --------------------------------------------------- APRIL 30, ---------------------
2004 2003 2002 2001 2000 1999 2004 2003 2002
- ----------- ------ ------ ------- ------ ------ ----------- ------- -------
(UNAUDITED) (UNAUDITED)
$ 9.33 $ 9.45 $ 9.62 $ 9.21 $ 9.30 $ 9.64 $ 9.31 $ 9.44 $ 9.60
------- ------ ------ ------- ------ ------ ------- ------- -------
0.15 0.39 0.43 0.55 0.59 0.54 0.14 0.42 0.44
)
(0.07 (0.08) (0.14) 0.41 (0.09) (0.33) (0.03) (0.07) (0.11)
------- ------ ------ ------- ------ ------ ------- ------- -------
0.08 0.31 0.29 0.96 0.50 0.21 0.11 0.35 0.33
------- ------ ------ ------- ------ ------ ------- ------- -------
(0.22) (0.43) (0.46) (0.55) (0.59) (0.55) (0.24) (0.48) (0.49)
------- ------ ------ ------- ------ ------ ------- ------- -------
(0.22) (0.43) (0.46) (0.55) (0.59) (0.55) (0.24) (0.48) (0.49)
------- ------ ------ ------- ------ ------ ------- ------- -------
$ 9.19 $ 9.33 $ 9.45 $ 9.62 $ 9.21 $ 9.30 $ 9.18 $ 9.31 $ 9.44
======= ====== ====== ======= ====== ====== ======= ======= =======
0.76%(C) 3.38% 3.16% 10.69% 5.56% 2.21% 1.13%(C) 3.82% 3.60%
======= ====== ====== ======= ====== ====== ======= ======= =======
$ 8,196 $5,783 $3,520 $ 1,257 $ 489 $1,638 $82,179 $91,911 $89,932
0.87% 0.86% 0.73% 0.75% 0.84% 0.84% 0.34% 0.33% 0.30%
2.61% 4.00% 4.16% 5.76% 6.29% 5.75% 3.16% 4.54% 4.63%
-- -- 0.04% -- 0.10% 0.09% -- -- --
14%(C) 81% 63% 104% 89% 115% 14%(C) 81% 63%
<Caption>
AMR CLASS
- ----------- -------------------------------
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, -------------------------------
2004 2001 2000 1999
- ----------- ------- ------- -------
(UNAUDITED)
$ 9.33 $ 9.20 $ 9.29 $ 9.62
------- ------- ------- -------
0.15 0.59 0.63 0.59
)
(0.07 0.40 (0.09) (0.33)
------- ------- ------- -------
0.08 0.99 0.54 0.26
------- ------- ------- -------
(0.22) (0.59) (0.63) (0.59)
------- ------- ------- -------
(0.22) (0.59) (0.63) (0.59)
------- ------- ------- -------
$ 9.19 $ 9.60 $ 9.38 $ 9.29
======= ======= ======= =======
0.76%(C 11.07% 6.09% 2.83%
======= ======= ======= =======
$ 8,196 $81,370 $56,714 $66,767
0.87% 0.33% 0.33% 0.35%
2.61% 6.26% 6.88% 6.26%
-- -- -- --
14%(C 104% 89% 115%
</Table>
- --------------------------------------------------------------------------------
111
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
STOCKS - 94.2%
AUSTRALIA - 1.33%
AUSTRALIA PREFERRED STOCK - 0.27%
AMP Limited.................. 295,706 $ 1,232
The News Corporation+........ 345,000 2,953
----------
TOTAL AUSTRALIA PREFERRED
STOCK.................. 4,185
----------
AUSTRALIA COMMON STOCK - 1.06%
Alumina Limited*............. 842,900 3,086
Australia & New Zealand
Banking Group Limited...... 376,432 5,048
Commonwealth Bank of
Australia*................. 185,780 4,193
Iluka Resources Limited*..... 387,194 1,093
WMC Resources Limited........ 842,900 2,916
----------
TOTAL AUSTRALIA COMMON
STOCK.................. 16,336
----------
TOTAL AUSTRALIA.......... 20,521
----------
BELGIUM COMMON STOCK - 0.30%
Fortis+*..................... 211,300 4,600
----------
TOTAL BELGIUM COMMON
STOCK.................. 4,600
----------
CANADA COMMON STOCK - 2.47%
Alcan, Incorporated+......... 164,451 6,591
BCE, Incorporated+*.......... 272,770 5,472
Celestica, Incorporated+*.... 682,370 11,993
Husky Energy,
Incorporated+*............. 309,200 5,677
Manulife Financial
Corporation+*.............. 227,165 8,376
----------
TOTAL CANADA COMMON
STOCK.................. 38,109
----------
DENMARK COMMON STOCK - 0.10%
Vestas Wind Systems+......... 102,785 1,532
----------
TOTAL DENMARK COMMON
STOCK.................. 1,532
----------
FINLAND COMMON STOCK - 1.50%
KCI Konecranes Oyj*.......... 124,600 4,556
M-real Oyj................... 214,800 1,962
Stora Enso Oyj............... 349,300 4,711
UPM-Kymmene Oyj*............. 647,600 11,940
----------
TOTAL FINLAND COMMON
STOCK.................. 23,169
----------
FRANCE COMMON STOCK - 9.64%
Accor S.A.*.................. 75,410 3,175
Aventis S.A.*................ 475,203 36,201
AXA*......................... 848,964 17,881
BNP Paribas S.A.*............ 220,037 13,215
Compagnie Generale des
Etablissements Michelin*... 115,400 5,401
Credit Agricole S.A.......... 316,954 7,819
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
Lagardere S.C.A.*............ 92,300 $ 5,560
PSA Peugeot Citroen S.A.*.... 163,469 8,783
Schneider Electric S.A.*..... 90,200 6,077
Societe BIC S.A.+*........... 62,687 2,720
Suez S.A.*................... 222,580 4,461
Total S.A.*.................. 142,627 26,381
Vinci S.A.*.................. 113,230 11,022
----------
TOTAL FRANCE COMMON
STOCK.................. 148,696
----------
GERMANY - 5.82%
GERMANY PREFERRED STOCK - 0.71%
Fresenius Medical Care AG*... 169,846 8,110
Schering AG.................. 53,400 2,807
----------
TOTAL GERMANY PREFERRED
STOCK.................. 10,917
----------
GERMANY COMMON STOCK - 5.11%
BASF AG+*.................... 231,500 11,944
Bayer AG*.................... 143,300 3,905
Celesio AG*.................. 148,865 8,300
Deutsche Post AG............. 462,000 10,185
E.ON AG+*.................... 181,200 12,012
Hugo Boss AG*................ 253,350 5,618
Merck KGaA*.................. 94,000 5,035
Muenchener Rueckversicherung-
Gesellschaft AG+*.......... 98,597 10,662
Porsche AG................... 3,900 2,419
Siemens AG*.................. 72,000 5,200
Volkswagen AG*............... 81,230 3,579
----------
TOTAL GERMANY COMMON
STOCK.................. 78,859
----------
TOTAL GERMANY............ 89,776
----------
HONG KONG COMMON STOCK - 1.54%
Cheung Kong Holdings
Limited.................... 531,000 4,085
CLP Holdings Limited+........ 720,000 3,831
Henderson Land Development
Company Limited*........... 2,022,000 9,073
Hutchison Whampoa Limited.... 177,000 1,191
Swire Pacific Limited+....... 853,000 5,577
----------
TOTAL HONG KONG COMMON
STOCK.................. 23,757
----------
IRELAND COMMON STOCK - 2.57%
Allied Irish Banks plc....... 1,091,416 15,764
Bank of Ireland.............. 435,000 5,272
CRH plc...................... 545,995 11,592
Depfa Bank plc............... 46,570 6,985
----------
TOTAL IRELAND COMMON
STOCK.................. 39,613
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
112
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
ITALY COMMON STOCK - 1.83%
Eni S.p.A.*.................. 973,447 $ 19,791
Riunione Adriatica di Sicurta
S.p.A.*.................... 192,193 3,520
Snam Rete Gas S.p.A.......... 217,700 966
Telecom Italia S.p.A......... 1,240,929 3,979
----------
TOTAL ITALY COMMON
STOCK.................. 28,256
----------
JAPAN COMMON STOCK - 14.12%
Acom Company Limited......... 221,410 15,770
Canon, Incorporated*......... 426,500 22,377
DENSO Corporation............ 96,000 2,023
East Japan Railway Company... 1,547 7,906
FANUC Limited................ 119,500 7,320
Hitachi Limited+*............ 522,000 3,666
Honda Motor Company
Limited.................... 378,100 15,178
Kao Corporation.............. 153,300 3,660
Komatsu Limited.............. 764,000 4,355
Konica Corporation........... 937,840 12,986
Mitsubishi Estate Company
Limited.................... 304,000 3,595
NEC Corporation*............. 372,000 2,923
NEC Electronics
Corporation*............... 78,900 5,555
Nintendo Company Limited..... 40,700 3,843
Nippon Telegraph & Telephone
Corporation+............... 1,114 5,855
Nissan Motor Company
Limited*................... 890,300 9,915
Nomura Holdings,
Incorporated*.............. 760,000 12,341
NTT DoCoMo, Incorporated..... 4,501 8,932
Promise Company Limited...... 166,950 11,044
Rohm Company Limited......... 34,500 4,305
Sanyo Shinpan Finance Company
Limited.................... 155,100 7,561
Seiko Epson Corporation...... 110,500 4,336
Shin-Etsu Chemical Company
Limited.................... 109,300 4,417
Sompo Japan Insurance,
Incorporated............... 709,000 6,393
Sony Corporation*............ 133,300 5,158
Sumitomo Trust and Banking
Company Limited............ 558,000 3,357
Takeda Chemical Industries
Limited.................... 187,500 7,561
Takefuji Corporation*........ 161,480 10,258
Tokyo Gas Company Limited*... 1,444,000 5,352
----------
TOTAL JAPAN COMMON
STOCK.................. 217,942
----------
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
MEXICO COMMON STOCK - 0.25%
Telefonos de Mexico S.A. de
C.V., ADR.................. 111,700 $ 3,813
----------
TOTAL MEXICO COMMON
STOCK.................. 3,813
----------
NETHERLANDS COMMON STOCK - 7.08%
ABN AMRO Holding N.V......... 261,521 5,687
CNH Global NV................ 77,320 1,535
Heineken N.V.*............... 205,900 8,688
IHC Caland N.V............... 64,180 3,023
ING Groep N.V.*.............. 766,814 16,436
Koninklijke (Royal) KPN
N.V.*...................... 1,206,600 8,693
Koninklijke (Royal) Philips
Electronics N.V.*.......... 1,138,568 31,010
Royal Dutch Petroleum
Company+*.................. 324,320 15,773
TPG N.V.+*................... 394,495 8,507
Vedior N.V................... 678,134 9,852
----------
TOTAL NETHERLANDS COMMON
STOCK.................. 109,204
----------
NEW ZEALAND COMMON STOCK - 0.76%
Carter Holt Harvey Limited... 2,333,889 3,066
Telecom Corporation of New
Zealand Limited*........... 2,454,478 8,690
----------
TOTAL NEW ZEALAND COMMON
STOCK.................. 11,756
----------
NORWAY COMMON STOCK - 1.20%
Norsk Hydro ASA.............. 74,650 4,385
Statoil ASA.................. 286,600 3,582
Telenor ASA.................. 1,533,859 10,084
Yara International ASA+...... 74,650 528
----------
TOTAL NORWAY COMMON
STOCK.................. 18,579
----------
PORTUGAL COMMON STOCK - 1.12%
Portugal Telecom, SGPS,
S.A........................ 1,595,523 17,309
----------
TOTAL PORTUGAL COMMON
STOCK.................. 17,309
----------
SINGAPORE COMMON STOCK - 1.47%
Creative Technology Limited.. 659,320 6,898
Development Bank of Singapore
Group Holdings Limited..... 579,795 4,873
Oversea-Chinese Banking
Corporation Limited........ 912,650 6,490
United Overseas Bank
Limited.................... 555,000 4,469
----------
TOTAL SINGAPORE COMMON
STOCK.................. 22,730
----------
SOUTH KOREA COMMON STOCK - 0.73%
Kookmin Bank, ADR,+.......... 140,510 5,213
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
113
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
Korea Electric Power
Corporation................ 86,860 $ 1,421
LG Electronics,
Incorporated............... 76,760 4,658
----------
TOTAL SOUTH KOREA COMMON
STOCK.................. 11,292
----------
SPAIN COMMON STOCK - 4.28%
Altadis S.A.*................ 396,292 11,202
Amadeus Global Travel
Distribution*.............. 1,704,503 10,053
Antena 3 de Television,
S.A.+...................... 17,500 889
Banco Popular Espanol S.A.*.. 90,200 4,977
Enagas S.A................... 416,093 4,724
Iberdrola S.A................ 215,157 4,243
Repsol YPF S.A.+*............ 446,600 9,406
Telefonica S.A.+*............ 1,384,372 20,595
----------
TOTAL SPAIN COMMON
STOCK.................. 66,089
----------
SWEDEN COMMON STOCK - 2.43%
Atlas Copco AB*.............. 140,350 4,924
Autoliv, Incorporated+*...... 134,200 5,709
Electrolux AB*............... 193,300 3,821
Electrolux AB+............... 193,300 253
ForeningsSparbanken AB*...... 223,400 4,167
Nordea AB.................... 549,780 3,710
Securitas AB................. 267,470 3,851
Stora Enso Oyj, Series A*.... 66,662 894
Stora Enso Oyj, Series R..... 163,902 2,188
TDC A/S+..................... 99,390 3,378
Volvo AB*.................... 135,560 4,640
----------
TOTAL SWEDEN COMMON
STOCK.................. 37,535
----------
SWITZERLAND COMMON STOCK - 7.01%
Adecco SA*................... 123,210 5,507
Compagnie Financiere
Richemont AG+.............. 215,500 5,543
Credit Suisse Group+......... 533,091 18,789
Geberit AG................... 15,622 9,494
Lonza Group AG*.............. 39,370 1,901
Nestle SA+*.................. 19,800 5,009
Novartis AG.................. 179,764 8,014
SIG Holding AG............... 95,723 16,242
Swiss Reinsurance............ 199,410 13,119
Syngenta AG+................. 58,443 4,676
UBS AG*...................... 120,100 8,535
Zurich Financial Services
AG+........................ 71,758 11,345
----------
TOTAL SWITZERLAND COMMON
STOCK.................. 108,174
----------
UNITED KINGDOM COMMON STOCK - 26.65%
Abbey National plc........... 243,510 1,954
Alliance Unichem plc......... 350,810 3,711
Arriva plc................... 1,093,974 7,445
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
Aviva plc.................... 890,693 $ 8,703
BAA plc...................... 778,968 7,183
BAE Systems plc+............. 4,146,947 15,425
Barclays plc................. 1,119,800 10,098
BHP Billiton plc............. 924,279 7,384
BP plc....................... 2,188,860 18,923
Brambles Industries plc...... 700,641 2,609
British American Tobacco
Industries plc............. 517,469 7,846
BT Group plc+................ 2,371,879 7,508
Cable and Wireless plc+...... 1,452,300 3,181
Cadbury Schweppes plc........ 2,067,785 16,446
Celltech Group plc+.......... 171,700 1,280
Diageo plc................... 1,426,165 19,133
FirstGroup plc............... 1,059,787 5,046
GlaxoSmithKline plc+......... 1,466,226 30,344
Hanson plc................... 839,725 6,403
Hays plc..................... 3,181,974 6,658
HSBC Holdings plc............ 1,196,065 17,138
Imperial Tobacco Group plc... 149,440 3,310
Kesa Electricals plc......... 507,200 2,536
Kidde plc.................... 1,680,500 3,338
Kingfisher plc............... 1,530,939 7,690
Lloyds TSB Group plc......... 1,127,992 8,431
Marks & Spencer Group plc+... 434,561 2,129
National Grid Transco plc.... 482,100 3,657
Pearson plc.................. 362,610 4,231
Prudential plc............... 1,009,300 7,929
Reed Elsevier plc+........... 930,960 8,667
Rentokil Initial plc......... 2,422,430 8,076
Reuters Group plc+........... 1,441,776 9,537
Rio Tinto plc................ 228,900 5,021
Rolls-Royce plc.............. 966,500 3,968
Royal Bank of Scotland Group
plc........................ 765,758 22,990
J. Sainsbury plc............. 429,500 2,121
Shell Transport & Trading
Company plc................ 2,687,421 18,539
Shire Pharmaceuticals Group
plc+....................... 323,900 2,981
Smiths Group plc............. 978,470 12,120
Standard Chartered plc....... 158,030 2,421
TI Automotive................ 681,500 --
Unilever plc................. 2,450,294 23,117
Vodafone Group plc........... 11,714,039 28,459
Wolseley plc................. 600,335 8,799
WPP Group plc................ 296,000 2,919
Yell Group plc............... 658,960 3,710
----------
TOTAL UNITED KINGDOM
COMMON STOCK........... 411,114
----------
TOTAL STOCKS............. 1,453,566
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
114
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
------------ ----------
FRANCE CORPORATE BONDS - 0.02%
AXA, 0.00%, Due 12/21/2004... $ 12 $ 250
----------
TOTAL FRANCE CORPORATE
BONDS.................. 250
----------
<Caption>
SHARES
------------
SHORT TERM INVESTMENTS - 28.49%
American AAdvantage Money
Market Select Fund (Note
A)......................... 302,461,593 302,462
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
AMR Investments Enhanced Cash
Business Trust (Note A).... 137,086,003 $ 137,086
----------
TOTAL SHORT TERM
INVESTMENTS............ 439,548
----------
TOTAL INVESTMENTS - 122.71%
(COST $1,628,406).......... 1,893,364
----------
LIABILITIES, NET OF OTHER
ASSETS - (22.71%).......... (350,436)
----------
TOTAL NET ASSETS - 100%...... $1,542,928
==========
</Table>
- ---------------
(A) See Note 2 in the Notes to Financial Statements regarding investments in
affiliated issuers.
* - All or a portion of the security is on loan at April 30, 2004. See Note 4.
+ - non-income producing
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
INTERNATIONAL EQUITY SECTOR DIVERSIFICATION
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
NET ASSETS
----------
Consumer Discretionary...................................... 11.66%
Consumer Staples............................................ 6.52%
Energy...................................................... 7.94%
Financials.................................................. 24.25%
Health Care................................................. 7.41%
Industrials................................................. 14.73%
Information Technology...................................... 4.02%
Materials................................................... 6.24%
Short-Term Investments...................................... 28.49%
Telecommunications Services................................. 8.81%
Utilities................................................... 2.64%
Other Liabilities........................................... (22.71%)
-------
NET ASSETS............................................ 100.00%
=======
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
115
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004 (in thousands) (Unaudited)
- --------------------------------------------------------------------------------
<Table>
ASSETS:
Investments in unaffiliated securities, at value(A)..... $1,453,816
Investments in affiliated securities, at value(B)....... 439,548
Cash.................................................... 6,928
Cash denominated in foreign currency (cost $1,979)...... 1,980
Dividends and interest receivable....................... 6,015
Reclaims receivable..................................... 188
Receivable for investments sold......................... 3,385
----------
TOTAL ASSETS........................................ 1,911,860
----------
LIABILITIES:
Payable for investments purchased....................... 11,728
Payable upon return of securities loaned................ 353,597
Payable for variation margin on open futures
contracts.............................................. 833
Management and investment advisory fees payable (Note
2)..................................................... 1,428
Unrealized depreciation on foreign currency contracts... 1,133
Other liabilities....................................... 213
----------
TOTAL LIABILITIES................................... 368,932
----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $1,542,928
==========
- ---------------
(A) Cost of unaffiliated securities......................... $1,188,858
(B) Cost of affiliated securities........................... $ 439,548
</Table>
STATEMENT OF OPERATIONS
Six months ended April 30, 2004 (in thousands) (Unaudited)
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME:
Interest income......................................... $ 96
Dividend income from unaffiliated securities (net of
foreign taxes of $2,724)............................... 15,652
Dividend income from affiliated securities.............. 451
Income derived from commission recapture (Note 6)....... 177
Income derived from securities lending, net (Note 5).... 597
--------
TOTAL INVESTMENT INCOME............................. 16,973
--------
EXPENSES:
Management and investment advisory fees (Note 2)........ 2,553
Custodian fees.......................................... 858
Professional fees....................................... 89
Other expenses.......................................... (3)
--------
TOTAL EXPENSES...................................... 3,497
--------
NET INVESTMENT INCOME....................................... 13,476
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments........................................... 11,198
Foreign currency transactions......................... 36,956
Futures contracts..................................... 7,444
Change in net unrealized appreciation or depreciation
of:
Investments........................................... 113,478
Foreign currency contracts and translations........... (7,840)
Futures contracts..................................... 179
--------
NET GAIN ON INVESTMENTS............................. 161,415
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $174,891
========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
116
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, OCTOBER 31,
2004 2003
----------- -----------
(UNAUDITED)
(IN THOUSANDS)
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income................................... $ 13,476 $ 23,975
Net realized gain (loss) on investments, futures
contracts and foreign currency transactions............ 55,598 (15,701)
Change in net unrealized appreciation or depreciation of
investments, futures contracts and foreign currency
translations........................................... 105,817 306,719
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... 174,891 314,993
---------- ----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions........................................... 368,449 571,390
Withdrawals............................................. (283,347) (552,053)
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS..... 85,102 19,337
---------- ----------
NET INCREASE IN NET ASSETS.................................. 259,993 334,330
---------- ----------
NET ASSETS:
Beginning of period..................................... 1,282,935 948,605
---------- ----------
END OF PERIOD........................................... $1,542,928 $1,282,935
========== ==========
</Table>
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- -----------------------------------------------------------------------------
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, ----------------------------------------
2004 2003 2002 2001 2000 1999
----------- ------ ------- ----- ----- -----
(UNAUDITED)
TOTAL RETURN........................................... 13.56%(A) 31.97% (10.25%) N/A N/A N/A
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... 0.48% 0.49% 0.47% 0.49% 0.44% 0.37%
Net investment income.............................. 1.84% 2.26% 1.86% 1.82% 1.93% 2.27%
PORTFOLIO TURNOVER RATE................................ 17%(A) 44% 43% 36% 45% 63%
</Table>
- ---------------
(A) Not annualized.
See accompanying notes
- --------------------------------------------------------------------------------
117
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
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 that are primarily traded on foreign securities
exchanges are generally valued at the preceding closing values of such
securities on their respective exchanges where primarily traded. Most foreign
markets close before the Exchange. Movements in the U.S. markets after the close
of foreign markets are evaluated, and security prices may be adjusted to reflect
the fair value of the securities as of the close of the Exchange as determined
in good faith in accordance with procedures adopted by the Board.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by a pricing service and may take into account
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. In some cases, the prices of debt
securities may be determined using quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method.
Securities for which the above valuation procedures are inappropriate or
are deemed not to reflect fair value are valued at fair value, as determined in
good faith and pursuant to procedures approved by the Board.
- --------------------------------------------------------------------------------
118
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
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 $247,992 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. Upon entering into a futures contract, the
Portfolio is required to deposit with a financial intermediary an amount
("initial margin") equal to a certain percentage of the face value indicated in
the futures contract. Subsequent payments ("variation margin") are made or
received by the Portfolio dependent upon the daily fluctuations in the value of
the underlying security and are recorded for financial reporting purposes as
unrealized gains or losses by the Portfolio. When entering into a closing
transaction, the Portfolio will realize a gain or loss equal to the difference
between the value of the futures contract to sell and the futures contract to
buy. Futures contracts are valued at the most recent settlement price
established each day by the exchange on which they are traded.
- --------------------------------------------------------------------------------
119
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The use of futures contracts may involve risks such as 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.
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 accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimated.
Other
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):
<Table>
<Caption>
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISERS MANAGER
---------- ---------- --------------- -----------
International Equity Portfolio..................... .25%-.60% $2,553 $1,818 $735
</Table>
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
- --------------------------------------------------------------------------------
120
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
than cash, a fee up to 25% of such loan fees. During the period, the Portfolio
paid securities lending fees of $123,000 to the Manager.
Investment in Affiliated Funds
The Portfolio may invest in the American AAdvantage Money Market Select
Fund (the "Select Fund"). 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 $44,325 on the Portfolio's direct investment in
the Affiliated Funds, and $144,295 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 $434,191,417 and sales
of $429,239,067, for an ending balance of $86,682,263.
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 six months ended April 30, 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 six months ended
April 30, 2004 were $343,960 and $229,550, respectively.
- --------------------------------------------------------------------------------
121
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
4. COMMITMENTS
In order to protect itself against a decline in the value of particular
foreign currencies against the U.S. dollar, the Portfolio has entered into
forward contracts to deliver or receive foreign currency in exchange for U.S.
dollars as described below. The Portfolio bears the market risk that arises from
changes in foreign exchange rates, and accordingly, the unrealized gain (loss)
on these contracts is reflected in the accompanying financial statements. The
Portfolio also bears the credit risk if the counterparty fails to perform under
the contract. At April 30, 2004, the Portfolio had outstanding forward foreign
currency contracts as follows:
<Table>
<Caption>
SETTLEMENT MARKET UNREALIZED
CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS)
- -------------------- ---------- ------- -----------
(AMOUNTS IN THOUSANDS)
2,500 Australian Dollar........................................... 6/17/04 $ 1,793 $ 59
2,900 Canadian Dollar............................................. 6/17/04 2,112 34
4,600 Euro Currency............................................... 6/17/04 5,502 22
3,500 Pound Sterling.............................................. 6/17/04 6,183 110
5,000 Swedish Krona............................................... 6/17/04 654 (2)
3,000 Swiss Franc................................................. 6/17/04 2,314 16
------- ----
Total contracts to deliver (Receivable amount $18,797)............. $18,558 $239
======= ====
</Table>
<Table>
<Caption>
SETTLEMENT MARKET UNREALIZED
CONTRACTS TO RECEIVE DATE VALUE GAIN/(LOSS)
- -------------------- ---------- ------- -----------
(AMOUNTS IN THOUSANDS)
7,000 Australian Dollar........................................ 6/17/04 $ 5,019 $ (72)
8,500 Canadian Dollar.......................................... 6/17/04 6,191 (180)
24,000 Euro Currency............................................ 6/17/04 28,705 (671)
2,000,000 Japanese Yen............................................. 6/17/04 18,149 51
15,000 Pound Sterling........................................... 6/17/04 26,497 (320)
15,000 Swedish Krona............................................ 6/17/04 1,961 (22)
11,000 Swiss Franc.............................................. 6/17/04 8,484 (158)
------- -------
Total contracts to receive (Payable amount $96,378)................. $95,006 $(1,372)
======= =======
</Table>
The Portfolio may purchase securities with delivery or payment to occur at
a later date. At the time the Portfolio enters into a commitment to purchase a
security, the transaction is recorded and the value of the security is reflected
in the net asset value. The value of the security may vary with market
fluctuations. No interest accrues to the Portfolio until payment takes place.
5. SECURITIES LENDING
The Portfolio participates in a securities lending program under which
securities are loaned to selected institutional investors. All such loans
require collateralization with cash, securities of the U.S. Government and its
agencies or letters of credit that will generally equal at least 100% of the
market value of the loaned securities plus accrued interest. The Portfolio may
bear the risk of delay in recovery of, or even loss of rights in, the securities
loaned should the borrower of securities fail financially. The Portfolio
receives the interest on the collateral less any fees and rebates paid to agents
and transferees of securities. The Portfolio also continues to receive income on
the securities
- --------------------------------------------------------------------------------
122
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
April 30, 2004 (Unaudited)
- --------------------------------------------------------------------------------
loaned, and any gain or loss in the market price of securities loaned that may
occur during the term of the loan will be for the account of the Portfolio.
At April 30, 2004, securities with a market value of approximately
$335,323,000 were loaned by the Portfolio. Cash collateral held by the custodian
for the Portfolio in an investment in the Affiliated Funds totaled $352,865,000.
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 April 30,
2004 is as follows:
<Table>
<Caption>
UNREALIZED
MARKET APPRECIATION/
TYPE OF FUTURE EXPIRATION CONTRACTS VALUE (DEPRECIATION)
- -------------- ---------- --------- ----------- --------------
France CAC 40 Index..................................... June 2004 225 $ 9,746,290 $ 211,478
Germany DAX Index....................................... June 2004 58 6,914,512 115,200
UK FTSE 100 Index....................................... June 2004 321 25,584,754 179,792
Hang Seng Index......................................... May 2004 21 1,589,175 (35,469)
Italy MIB 30 Index...................................... June 2004 23 3,815,862 120,529
Tokyo FE TOPIX Index.................................... June 2004 215 23,028,397 706,538
Spain IBEX 35 Index..................................... May 2004 38 3,670,622 (156,187)
Sweden OMX Index........................................ May 2004 264 2,359,860 (96,523)
Canada S&PCDA 60 Index.................................. June 2004 91 6,029,391 (254,502)
Australia SPI Index..................................... June 2004 81 4,957,722 (52,432)
Netherlands 200 AEX Index............................... May 2004 60 4,889,463 (78,056)
----------- ---------
$92,586,049 $ 660,368
=========== =========
</Table>
- --------------------------------------------------------------------------------
123
TRUSTEES AND OFFICERS OF THE TRUST
AND THE AMR INVESTMENT SERVICES TRUST
(Unaudited)
- --------------------------------------------------------------------------------
The Trustees and officers of the Trust and AMR Trust are listed below,
together with their principal occupations during the past five years. Unless
otherwise indicated, the address of each person listed below is 4151 Amon Carter
Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-five
funds in the fund complex that includes the AMR Trust, the American AAdvantage
Funds, the American AAdvantage Mileage Funds, and the American AAdvantage Select
Funds. The Trust's Statement of Additional Information contains additional
information about the Trustees and is available without charge by calling
1-800-658-5811.
<Table>
<Caption>
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ----------------- -------------------------------------------
INTERESTED TRUSTEES
TERM
------------------
Lifetime of Trust
until removal,
resignation or
retirement*
William F. Quinn** (56) Trustee since 1987 President, AMR Investment Services, Inc. (1986-Present);
and President Chairman (1989-2003) and Director (1979-1986, 2003-Present),
since 1986 American Airlines Federal Credit Union; Director, Crescent
Real Estate Equities, Inc. (1994-Present); Director,
Pritchard, Hubble & Herr, LLC (investment adviser)
(2001-Present); Member, Southern Methodist University Cox
School of Business Advisory Board (1999-2002); Advisory
Director, Southern Methodist University Endowment Fund
(1996-Present); Chairman, Committee for the Investment of
Employee Benefits Defined Benefit Sub-Committee
(1982-Present); Director, United Way of Tarrant County
(1988-2000, 2004-Present); Member, New York Stock Exchange
Pension Manager Committee (1997-1998, 2000-2002); Trustee,
American AAdvantage Mileage Funds (1995-Present); Trustee,
American AAdvantage Select Funds (1999-Present).
Alan D. Feld** (67) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm)
(1960-Present); Director, Clear Channel Communications
(1984-Present); Trustee, CenterPoint Properties
(1994-Present); Trustee, American AAdvantage Mileage Funds
(1996-Present); Trustee, American AAdvantage Select Funds
(1999-Present).
NON-INTERESTED TRUSTEES
TERM
------------------
Lifetime of Trust
until removal,
resignation or
retirement*
Stephen D. O'Sullivan (68) Trustee since 1987 Consultant (1994-Present); Trustee, American AAdvantage
Mileage Funds (1995-Present); Trustee, American AAdvantage
Select Funds (1999-Present).
</Table>
- --------------------------------------------------------------------------------
124
TRUSTEES AND OFFICERS OF THE TRUST
AND THE AMR INVESTMENT SERVICES TRUST -- CONTINUED
(Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH THE TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ----------------- -------------------------------------------
NON-INTERESTED TRUSTEES (CONT.)
R. Gerald Turner (58) 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 (48) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private
100 Crescent Court equity firm) (1998-Present); Trustee, The Hockaday School
Suite 1740 (1997-Present); Director, Starwood Hotels and Resorts
Dallas, Texas 75201 (2001-Present); Member, Council on Foreign Relations
(1995-Present); Director, Just For the Kids (1995-2001);
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
Nancy A. Eckl (41) VP since 1990 Vice President, Trust Investments, AMR Investment Services,
Inc. (1990-Present).
Michael W. Fields (50) VP since 1989 Vice President, Fixed Income Investments, AMR Investment
Services, Inc. (1988-Present).
Barry Y. Greenberg (40) VP since 1995 and Vice President, Legal and Compliance, AMR Investment
Secretary since Services, Inc. (1995-Present); Director, Pritchard, Hubble &
2004 Herr, LLC (investment adviser) (2004-Present).
Rebecca L. Harris (37) Treasurer since Vice President, Finance, AMR Investment Services, Inc.
1995 (1995- Present).
John B. Roberson (45) VP since 1989 Vice President, Director of Sales, AMR Investment Services,
Inc. (1991-Present); Director, Pritchard, Hubble & Herr, LLC
(investment adviser) (2001-Present).
</Table>
- ---------------
* 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, as
defined by the 1940 Act. Mr. Quinn is President of the Manager. Mr. Feld's
law firm of Akin, Gump, Strauss, Hauer & Feld, LLP has provided legal
services within the past two years to one or more of the Trust's investment
advisers.
- --------------------------------------------------------------------------------
125
(AMERICAN EAGLE LOGO)
(AMERICAN EAGLE LOGO)
(AMERICAN EAGLE LOGO)
(AMERICAN AADVANTAGE FUNDS LOGO)
- --------------------------------------------------------------------------------
TO OBTAIN MORE INFORMATION ABOUT THE FUNDS:
<Table>
(KEYBOARD GRAPHIC) (MOUSE GRAPHIC)
BY E-MAIL: ON THE INTERNET:
american-aadvantage.funds@AA.com Visit our website at www.aafunds.com
</Table>
- --------------------------------------------------------------------------------
<Table>
(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
</Table>
FUND SERVICE PROVIDERS:
<Table>
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
</Table>
This report is prepared for shareholders of the American AAdvantage Funds and
may be distributed to others only if preceded or accompanied by a current
prospectus.
- --------------------------------------------------------------------------------
American Airlines, Inc. is not responsible for investments made in the American
AAdvantage Funds. American AAdvantage Funds is a registered service mark of AMR
Corporation. American AAdvantage Balanced Fund, American AAdvantage Large Cap
Value Fund, American AAdvantage Large Cap Growth Fund, American AAdvantage Small
Cap Value Fund, American AAdvantage International Equity Fund, American
AAdvantage Emerging Markets Fund, American AAdvantage High Yield Bond Fund,
American AAdvantage Enhanced Income Fund, American AAdvantage Intermediate Bond
Fund and American AAdvantage Short-Term Bond Fund are service marks of AMR
Investment Services, Inc.
[BACK COVER]
SAR 04/04
531108
ITEM 2. CODE OF ETHICS.
The Trust did not amend the code of ethics that applies to its principal
executive and financial officers (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.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PUCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 9. 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 10. CONTROLS AND PROCEDURES.
Based upon an evaluation within 90 days of the filing date of this report,
the principal executive and financial officers concluded that the disclosure
controls and procedures of the Trust are effective. There were no changes in
the Trust's internal control over financial reporting during the Trust's last
fiscal half-year that materially affected, or were reasonably likely to
materially affect, the Trust's internal control over financial reporting.
ITEM 11. EXHIBITS.
(a)(1) Not Applicable.
(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: July 9, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: July 9, 2004
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: July 9, 2004