UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4984
AMERICAN AADVANTAGE FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
WILLIAM F. QUINN, PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant's telephone number, including area code: (817) 967-3509
Date of fiscal year end: October 31, 2004
Date of reporting period: October 31, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
[AMERICAN AADVANTAGE FUNDS LOGO]
- ---------------------------------------o---------------------------------------
ANNUAL REPORT
October 31, 2004
[GLOBE GRAPHIC]
[EAGLE GRAPHIC]
EQUITY FUNDS
Balanced Fund
Large Cap Value Fund
Large Cap Growth Fund
Mid-Cap Value Fund
Small Cap Value Fund
International Equity Fund
Emerging Markets Fund
BOND FUNDS
High Yield Bond Fund
Enhanced Income Fund
Intermediate Bond Fund
Short-Term Bond Fund
MANAGED BY AMR INVESTMENT(R)
(AA EAGLE WATERMARK)
About AMR Investments
- --------------------------------
AMR Investments is an
experienced provider of
investment advisory services to
institutional and retail
markets. We act as manager of
the American AAdvantage Funds, a
family of diversified mutual
funds, and offer customized
fixed income portfolio
management services.
Our clients include defined
benefit plans, defined
contribution plans, foundations,
endowments, corporations, and
other institutional investors.
AMR Investments is a wholly
owned subsidiary of AMR
Corporation, the parent company
of American Airlines, Inc.
Incorporated in 1986, we are
directly responsible for the
investment management and
oversight of AMR Corporation's
defined benefit and defined
contribution plans, as well as
its fixed income investments.
<Table>
<Caption>
Contents
-----------------------------------------------
President's Message........... 1
American AAdvantage Funds'
Performance ............... 2
Market and Performance
Overviews.................. 3-36
American AAdvantage Schedules of Investments
Balanced Fund.............. 38
Large Cap Value Fund....... 46
Large Cap Growth Fund...... 50
Mid-Cap Value Fund......... 54
Small Cap Value Fund....... 56
Emerging Markets Fund...... 64
High Yield Bond Fund....... 71
Enhanced Income Fund....... 79
Intermediate Bond Fund..... 85
Short-Term Bond Fund....... 91
AMR Investment Services Trust
Schedules of Investments
International Equity
Portfolio............... 141
Additional Information........Inside Back Cover
</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 October 31, 2004
(BILL QUINN PICTURE)
FELLOW SHAREHOLDERS,
Enclosed please find the
Annual Report for the
American AAdvantage Funds
for the fiscal year ended
October 31, 2004. During
this time, the Dow Jones
Industrial Average posted
gains of 4.45%, the S&P
500 Index increased by
9.42%, while the MSCI EAFE
Index returned 18.84%. As
of October 31, 2004 the
10-Year Treasury interest
rate was 4.03%,
contributing to a 5.53%
total return for the bond
market, as defined by the
Lehman Brothers Aggregate
Index. Additionally, the
Federal Reserve raised the
Fed Funds Rate to 2.0%
from its 40-year low of 1%
and is expected to
continue increasing rates for the near term.
All of the American AAdvantage equity funds posted strong performances for
the fiscal year. The Small Cap Value Fund-Institutional Class continued to
outperform its Lipper benchmark with returns of 19.86%, 22.22%, and 20.07% for
the one-year, three-year, and five-year time periods, respectively.
Additionally, the Large Cap Value Fund-Institutional Class continued its
long-term record of success with returns of 18.59%, 10.42%, 6.65%, and 11.02%
for the one-year, three-year, five-year, and ten-year time periods,
respectively, as of October 31, 2004.
The American AAdvantage fixed income funds, which include the High Yield
Bond, Enhanced Income, Intermediate Bond and Short-Term Bond Funds, all posted
gains for the twelve-month period. Once again, the Institutional Class of the
Short-Term Bond Fund outperformed its Lipper benchmark for the one, three, five,
and ten-year time periods.
Please review the enclosed market overviews, portfolio listings and
detailed financial data. As always, we welcome the opportunity to serve your
financial needs. To obtain further details about the American AAdvantage Funds
family or access your account information, please visit our web site at
www.aafunds.com. Thank you for your continued confidence in the American
AAdvantage Funds.
Sincerely,
/s/ WILLIAM F. QUINN
William F. Quinn
President, American AAdvantage Funds
Performance shown is historical and may not be indicative of future returns.
Investment returns and principal value will vary, and shares may be worth more
or less at redemption than at original purchase. Performance shown is as of date
indicated and may differ from current performance. To obtain more current
performance information, please visit www.aafunds.com or call 1-800-967-9009.
1
AMERICAN AADVANTAGE FUNDS
- --------------------------------------------------------------------------------
<Table>
<Caption>
AVERAGE ANNUALIZED TOTAL RETURN AS OF
OCTOBER 31, 2004
------------------------------------------
INCEPTION TICKER 10 YEAR/
DATE SYMBOL 1 YEAR 3 YEAR 5 YEAR SINCE INCEP.
--------- ------ ------ ------ ------ ---------------
Balanced Fund -- Institutional 7/17/87 AADBX 12.87% 8.64% 7.01% 9.89%
Balanced Fund -- PlanAhead 8/1/94 AABPX 12.44% 8.37% 6.75% 9.59%
Balanced Fund -- AMR 8/1/94 AABNX 13.13% 8.98% 7.32% 10.20%
Lipper Balanced Funds Index 8.20% 5.12% 2.72% 8.73%
Large Cap Value Fund -- Institutional 7/17/87 AADEX 18.59% 10.42% 6.65% 11.02%
Large Cap Value Fund -- PlanAhead 8/1/94 AAGPX 18.26% 10.10% 6.36% 10.68%
Large Cap Value Fund -- AMR 8/1/94 AAGAX 18.89% 10.69% 6.91% 11.30%
Lipper Multi-Cap Value Funds Index 12.93% 8.36% 5.54% 10.93%
Large Cap Growth Fund -- Institutional 7/31/00 ALCGX 6.71% 1.14% N/A -11.81%
Large Cap Growth Fund -- AMR 7/31/00 ALFIX 6.88% 1.23% N/A -11.70%
Lipper Large-Cap Growth Funds Index 2.63% -0.35% N/A -12.68%
Mid-Cap Value Fund -- Institutional 6/30/04 AMDIX N/A N/A N/A 2.70%
Lipper Mid-Cap Value Funds Index N/A N/A N/A 0.58%
Small Cap Value Fund -- Institutional 12/31/98 AVFIX 19.86% 22.22% 20.07% 15.03%
Small Cap Value Fund -- PlanAhead 3/1/99 AVPAX 19.56% 21.91% 19.77% 14.74%
Small Cap Value Fund -- Service 5/1/03 AASSX 19.24% 21.72% 19.66% 14.65%
Small Cap Value Fund -- AMR 3/1/99 AASVX 20.12% 22.53% 20.42% 15.34%
Lipper Small-Cap Value Funds Index 17.12% 17.18% 15.50% 12.18%
International Equity Fund -- Institutional 8/7/91 AAIEX 22.49% 13.00% 4.27% 8.79%
International Equity Fund -- PlanAhead 8/1/94 AAIPX 22.16% 12.87% 4.08% 8.52%
International Equity Fund -- Service 5/1/03 AAISX 21.88% 12.68% 3.98% 8.46%
International Equity Fund -- AMR 8/1/94 AAIAX 22.84% 13.25% 4.53% 9.07%
Lipper International Funds Index 16.56% 9.79% 0.77% 5.45%
Emerging Markets Fund -- Institutional 7/31/00 AEMFX 19.65% 24.94% N/A 6.34%
Emerging Markets Fund -- PlanAhead 10/1/02 AAEPX 19.33% 24.66% N/A 6.17%
Emerging Markets Fund -- AMR 7/31/00 AAMRX 20.00% 25.28% N/A 6.61%
Lipper Emerging Markets Funds Index 21.58% 24.56% N/A 5.81%
High Yield Bond Fund -- Institutional 12/29/00 AYBFX 10.19% 12.05% N/A 10.78%
High Yield Bond Fund -- PlanAhead 3/1/02 AHYPX 9.94% 11.47% N/A 10.34%
High Yield Bond Fund -- Service 5/1/03 AAHSX 9.41% 11.05% N/A 10.01%
Lipper High Current Yield Funds Index 11.11% 10.79% N/A 7.26%
Enhanced Income Fund -- PlanAhead 6/30/03 AANPX 4.70% N/A N/A 3.76%
Lipper Interm. Investment Grade Index 5.20% N/A N/A 3.28%
Intermediate Bond Fund -- Institutional 9/15/97 AAIBX 4.90% 4.47% 7.07% 6.49%
Intermediate Bond Fund -- PlanAhead 3/2/98 AAPAX 4.86% 4.40% 6.51% 6.03%
Intermediate Bond Fund -- AMR 3/1/99 AABDX 5.38% 4.85% 7.04% 6.43%
Lipper Interm. Investment Grade Index 5.20% 5.16% 7.17% 6.49%
Short-Term Bond Fund -- Institutional 12/3/87 AADFX 2.21% 3.05% 5.15% 5.44%
Short-Term Bond Fund -- PlanAhead 8/1/94 AALPX 1.84% 2.79% 4.88% 5.17%
Short-Term Bond Fund -- AMR 8/1/94 AASBX 2.39% 3.27% 5.35% 5.66%
Lipper Short Investment Grade Index 2.10% 2.65% 4.74% 5.33%
</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
- --------------------------------------------------------------------------------
Toward the end of 2003, the U.S. equity markets rallied, posting particularly
strong results. In the fourth quarter of 2003, all major indices posted double
digit returns, the best such returns since the three year market decline began
in 2000.
In the first quarter of 2004, the equity market rose modestly, although
performance was muted due, in part, to residual doubts about the strength and
persistence of the economic rebound as well as potential geopolitical concerns
raised by the Madrid terrorist bombings in March. In the U.S., one key worry was
employment, as there were no signs that the economy was creating jobs in a
meaningful way, leading to fears of a "jobless" economic recovery. However,
healthy job creation was reported during the months of March and April 2004.
Volatility came back slightly in the second calendar quarter of 2004, but
was still low. U.S. equity markets were up 1.3% in the quarter, after rising
2.2% in the first quarter. Although returns were muted, this was the fifth
consecutive positive quarter for equity markets in the U.S. Fears seemed to
shift from concern about the sustainability of the recovery to concern that the
economy might be overheating. Indeed, a U.S. rate hike - which was by no means a
foregone conclusion when the quarter began - ended up closing out the quarter
with a Federal Reserve announcement on June 30. With crude oil up as much as 20%
during the quarter (compared to the end of first quarter 2004), worries about
energy prices may also have helped keep equity growth in check.
During the summer, additional concerns surfaced around the sustainability
of the economic recovery amidst high oil prices, rising interest rates, slowing
corporate profits, and no clear winner in the upcoming Presidential election.
Equity markets slumped in the third quarter of 2004, with most U.S. indices
either flat or down for the period. Over the quarter, value indices fared better
than their growth counterparts, while the S&P 500 Index edged out the Russell
2000 Index for the second quarter in a row. Large caps outpaced small caps in
most sectors, particularly in the Technology sector.
Towards the end of October, the markets began to pick up steam once again
as oil prices fell significantly and investors looked forward to closure on the
outcome of the Presidential election. Major U.S. Indices posted positive returns
for the month. The S&P 500 Index gained 1.53%, while the Russell 1000 Growth
Index was up 1.56%. Small-cap stocks outperformed large caps, with the Russell
2000 Index returning 1.97% for the period.
3
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE BALANCED FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Balanced Fund's Institutional Class returned 12.87% for the twelve
months ended October 31, 2004, outperforming the 60% S&P 500 Barra Value/40%
Lehman Brothers Aggregate Index benchmark return of 10.83% and the Lipper
Balanced Funds Index return of 8.20%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/94 THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER S&P 500 / BALANCED
INSTITUTIONAL BALANCED S&P 500 BARRA VALUE LEHMAN BROS COMPOSITE
CLASS FUNDS INDEX INDEX INDEX AGG INDEX INDEX
------------- ----------- ------- ----------- ----------- ---------
10/94 10000.00 10000.00 10000.00 10000.00 10000.00 10000.00
10/95 11939.00 11759.00 12644.00 12302.00 11565.00 12010.00
10/96 13904.00 13464.00 15690.00 15330.00 12239.00 14032.00
10/97 16691.00 16191.00 20728.00 19882.00 13331.00 17009.00
10/98 18199.00 17933.00 25286.00 22217.00 14573.00 18965.00
10/99 18296.00 20187.00 31777.00 26440.00 14651.00 21144.00
10/00 19234.00 21784.00 33712.00 28999.00 15720.00 23049.00
10/01 20017.00 19877.00 25318.00 23658.00 18009.00 21643.00
10/02 18988.00 18363.00 21492.00 19924.00 19070.00 20132.00
10/03 22742.00 21339.00 25963.00 24870.00 20006.00 23537.00
10/04 25669.00 23089.00 28408.00 28466.00 21112.00 26086.00
</Table>
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
--------------------------- VALUE OF
PERIODS ENDED 10/31/04 $10,000
--------------------------- 10/31/94-
1 YEAR 5 YEARS 10 YEARS 10/31/04
------ ------- -------- ---------
Institutional Class(1).... 12.87% 7.01% 9.89% $25,669
PlanAhead Class(1)........ 12.44% 6.75% 9.59% $24,979
AMR Class(1).............. 13.13% 7.32% 10.20% $26,417
Lipper Balanced Funds
Index.................... 8.20% 2.72% 8.73% $23,089
S&P 500 Index............. 9.42% (2.22)% 11.01% $28,408
S&P 500/Barra Value
Index.................... 14.46% 1.49% 11.03% $28,466
Lehman Bros. Aggregate
Index.................... 5.53% 7.58% 7.76% $21,112
Balanced Composite
Index(2)................. 10.83% 4.29% 10.06% $26,086
</Table>
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
2. 60% S&P 500/Barra Value, 40% LB Aggregate Index
During the twelve-month period, the Fund's assets on average were invested
67% in equities (including equitized cash) and 33% in fixed-income securities,
ending the period with 66% in equities/ equitized cash and 34% in fixed-income
securities.
The equity portion of the Fund returned 20.1%, outperforming the S&P
500/Barra Value Index ("Barra Value Index") return of 14.5%. The Fund added
value relative to the Barra Value Index through stock selection, which was
positive in eight out of ten sectors. The effect of the Fund's equity sector
allocation was neutral. Stock selection in the Financials sector contributed
most to the Fund's excess performance. The Fund's positions in Bank of America
Corp. (up 23.1%), Allstate Corp. (up 24.7%) and MetLife, Inc. (up 23.0%) had the
largest impact in this sector. Holdings in the Energy, Industrials, Consumer
Discretionary and Consumer Staples sectors were also a source of significant
added value. Strong performers included Valero Energy Corp. in the Energy
sector, Tyco International Ltd. in the Industrials sector, Carnival Corp., MGM
Mirage, Inc. and J.C. Penney Company, Inc. in the Consumer Discretionary sector
and Imperial Tobacco Group plc in the Consumer Staples sector. The Fund's Health
Care sector holdings detracted from performance relative to the Barra Value
Index, due mostly to the Fund's positions in Merck & Company, Inc. and Tenet
Healthcare Corp.
Equity sector allocation had no net impact on the Fund's relative returns
during the twelve-month period. The Fund benefited from underweighting
Financials and Information Technology, two of the worst performing sectors of
the Barra Value Index, but those relative gains were offset by underweighting
Energy which was the best performing sector of the Barra Value Index.
The fixed-income portion of the Fund returned 5.8% for the twelve-month
period, ahead of the Lehman Brothers Aggregate Index return of 5.5%. The Fund's
outperformance was due mostly to a large overweight in Corporates, the best
performing sector of the Lehman Brothers Aggregate Index. Good security
selection in Treasuries also added value.
4
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE BALANCED FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The sub-advisers continue to focus on the selection of attractive
securities in a volatile and changing environment.
TOP TEN EQUITY HOLDINGS
<Table>
<Caption>
% OF
EQUITIES
--------
Bank of America Corporation 3.1%
ConocoPhillips 2.6%
Citigroup, Incorporated 2.3%
Altria Group, Incorporated 2.3%
MetLife, Incorporated 2.0%
J P Morgan Chase & Company 2.0%
Allstate Corporation 1.8%
Tyco International Limited 1.8%
Washington Mutual, Incorporated 1.7%
Occidental Petroleum Corporation 1.6%
-----
Total 21.2%
Top Ten Equity Holdings as % of Total Net Assets 12.5%
</Table>
EQUITY SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 30.7%
Industrials 13.9%
Consumer Discretionary 10.3%
Energy 10.0%
Consumer Staples 9.1%
Health Care 7.0%
Utilities 6.1%
Materials 6.1%
Information Technology 5.2%
Telecommunication Services 1.6%
</Table>
FIXED-INCOME SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporates 33.3%
U.S. Treasury 27.5%
Mortgage-Backed 25.6%
Agency 12.5%
Asset-Backed 1.1%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The subsequent examples are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
5
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE BALANCED FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,049.12 $3.15
Hypothetical $1,000.00 $1,022.06 $3.11
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,047.69 $4.86
Hypothetical $1,000.00 $1,020.39 $4.80
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,051.55 $1.89
Hypothetical $1,000.00 $1,023.30 $1.86
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.31%, 0.47%, 0.18%, for the Institutional,
PlanAhead, and AMR Classes, respectively, multiplied by the average account
value over the period, multiplied by the number derived by dividing the
number of days in the most recent fiscal half-year (184) by days in the year
(366) to reflect the half-year period.
6
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE LARGE CAP VALUE FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Large Cap Value Fund returned 18.59% for the
twelve months ended October 31, 2004, well ahead of the S&P 500/Barra Value
Index ("Index") return of 14.46% and the Lipper Multi-Cap Value Funds Index
return of 12.93%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/94 THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER MULTI-CAP S&P 500/BARRA
INSTITUTIONAL CLASS VALUE FUNDS INDEX S&P 500 INDEX VALUE INDEX
------------------- ----------------- ------------- -------------
10/94 10000.00 10000.00 10000.00 10000.00
10/95 12069.00 12010.00 12644.00 12302.00
10/96 14890.00 14478.00 15690.00 15330.00
10/97 19066.00 18716.00 20728.00 19882.00
10/98 20263.00 19616.00 25286.00 22217.00
10/99 20612.00 21556.00 31777.00 26440.00
10/00 21603.00 23681.00 33712.00 28999.00
10/01 21126.00 22182.00 25318.00 23658.00
10/02 18838.00 19636.00 21492.00 19924.00
10/03 23981.00 24993.00 25963.00 24870.00
10/04 28439.00 28224.00 28408.00 28466.00
</Table>
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
--------------------------- VALUE OF
PERIODS ENDED 10/31/04 $10,000
--------------------------- 10/31/94-
1 YEAR 5 YEARS 10 YEARS 10/31/04
------ ------- -------- ---------
Institutional Class(1).... 18.59% 6.65% 11.02% $28,439
PlanAhead Class(1)........ 18.26% 6.36% 10.68% $27,575
AMR Class(1).............. 18.89% 6.91% 11.30% $29,172
Lipper Multi-Cap Value
Funds Index.............. 12.93% 5.54% 10.93% $28,224
S&P 500 Index............. 9.42% -2.22% 11.01% $28,408
S&P 500/Barra Value
Index.................... 14.46% 1.49% 11.03% $28,466
</Table>
1 Performance shown is historical and may not be indicative of
future returns. Investment returns and principal value will vary, and shares
may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
The Fund produced positive returns in every sector, and outperformed the
Index in every sector except Health Care and Telecommunication Services. The
Fund outperformed the Index mostly through strong stock selection, as sector
allocation detracted slightly from performance.
The Fund benefited from its stock selection in eight of the ten economic
sectors. The largest contributors were in the Information Technology and
Financials sectors. The companies with most impact in the Information Technology
sector were Apple Computer, Inc. (up 129.5%), Autodesk, Inc. (up 175.0% during
the period it was held by the Fund) and NCR Corp. (up 56.8%). In the Financials
sector, Bank of America Corp. (up 23.1%), Allstate Corp. (up 24.7%) and MetLife,
Inc. (up 23.0%) were the largest contributors. Positive stock selection in
Energy (primarily Valero Energy Corp. and Occidental Petroleum Corp.),
Industrials (Tyco International Ltd. and Boeing Co.), Consumer Staples (Imperial
Tobacco Group plc and UST, Inc.), and Consumer Discretionary (J.C. Penney
Company, Inc., Carnival Corp. and MGM Mirage, Inc.), also added meaningful value
versus the Index.
Sector weightings detracted a minimal amount, as an underweight position in
Energy and Telecommunication Services, which were the first and fourth best
performing sectors of the Index, respectively, and an overweight position in
Health Care, which was one of the worst performing sectors of the Index, more
than offset the value otherwise attained through sector allocation.
The sub-advisers continue to implement their philosophy of investing in a
broadly diversified portfolio of companies which they believe have attractive
valuations and above average earnings growth potential. This approach should
allow the Fund to continue to benefit in the current economic environment and
longer-term.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
----------
ConocoPhillips 2.4%
Bank of America Corporation 2.3%
JP Morgan Chase & Company 2.0%
Altria Group, Incorporated 2.0%
Tyco International Limited 1.9%
Citigroup, Incorporated 1.7%
MetLife, Incorporated 1.6%
Boeing Company 1.6%
Allstate Corporation 1.5%
Electronic Data Systems Corporation 1.3%
</Table>
7
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE LARGE CAP VALUE FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 28.8%
Industrials 12.9%
Consumer Discretionary 10.8%
Consumer Staples 9.7%
Energy 9.4%
Information Technology 7.6%
Health Care 6.9%
Materials 6.2%
Utilities 5.5%
Telecommunication Services 2.2%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The subsequent examples are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,061.74 $3.40
Hypothetical $1,000.00 $1,021.84 $3.33
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,059.82 $4.88
Hypothetical $1,000.00 $1,020.40 $4.79
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,062.50 $1.96
Hypothetical $1,000.00 $1,023.24 $1.92
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.33%, 0.47%, 0.19%, for the Institutional,
PlanAhead, and AMR Classes, respectively, multiplied by the average account
value over the period, multiplied by the number derived by dividing the
number of days in the most recent fiscal half-year (184) by days in the year
(366) to reflect the half-year period.
8
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Large Cap Growth Fund returned 6.71% for the
twelve months ended October 31, 2004, compared to the Russell 1000 Growth Index
("Index") return of 3.38% and the Lipper Large-Cap Growth Funds Index return of
2.63%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER LARGE-CAP RUSSELL 1000 GROWTH
INSTITUTIONAL CLASS GROWTH FUNDS INDEX INDEX
------------------- ------------------ -------------------
7/00 10000.00 10000.00 10000.00
10/00 9540.00 9505.00 9407.00
10/01 5665.00 5678.00 5649.00
10/02 4534.00 4620.00 4541.00
10/03 5493.00 5476.00 5531.00
10/04 5862.00 5620.00 5718.00
</Table>
* Inception of Fund
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
------------------------
PERIODS ENDED 10/31/04 VALUE OF
------------------------ $10,000
SINCE 7/31/04-
1 YEAR 3 YEAR INCEP. 10/31/04
------ ------ ------ --------
Institutional Class(1)..... 6.71% 1.14% (11.81)% $5,862
AMR Class(1)............... 6.88% 1.23% (11.70)% $5,893
Lipper Large-Cap Growth
Funds Index............... 2.63% (0.35)% (12.68)% $5,620
Russell 1000 Growth Index.. 3.38% 0.41% (12.32)% $5,718
</Table>
Russell 1000 (R) Growth Index is a service mark of the Frank Russell Company.
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
During the Fund's fiscal year, nine out of ten sectors in the Russell 1000
Growth Index ("Index") posted positive returns. The Fund added value almost
exclusively through good stock selection, although sector weighting decisions
were mildly beneficial.
From a stock selection standpoint, the Fund added value in eight sectors.
The largest value added sectors for the Fund relative to the Index were
Financials and Consumer Staples. Positions in Moody's Corp. (up 35.1%) and
Freddie Mac (up 20.9%) contributed most to the Financial sector's outstanding
relative performance. In Consumer Staples, positions in Reynolds American, Inc.,
Gillette Company and Kraft Foods, Inc. were the largest contributors relative to
the Index.
Looking forward, the Fund's sub-advisers will continue to maintain a
disciplined, long-term approach to equity investing in larger stocks with above
average growth potential.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
----------
Pfizer, Incorporated 5.1%
Johnson & Johnson 4.6%
Microsoft Corporation 4.0%
Qualcomm, Incorporated 2.5%
Procter & Gamble Company 2.5%
International Business Machines Corporation 2.1%
Intel Corporation 2.1%
Gillette Company 1.8%
Viacom, Incorporated 1.8%
Cisco Systems, Incorporated 1.7%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Information Technology 26.1%
Health Care 23.5%
Consumer Discretionary 17.7%
Financials 12.4%
Consumer Staples 8.8%
Industrials 7.7%
Telecommunication Services 1.5%
Materials 0.8%
Energy 0.8%
Utilities 0.7%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The subsequent examples are intended to help you
understand the ongoing cost (in dollars) of investing in the
9
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
Fund and to compare these costs with the ongoing costs of investing in other
mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
Institutional Class that invest in the Fund through an IRA may be subject to a
custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the Institutional Class that invest in the Fund through an IRA may be subject
to a custodial IRA fee of $12 that is typically deducted each December. If your
account was subject to a custodial IRA fee during the period, your costs would
have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,003.45 $4.03
Hypothetical $1,000.00 $1,021.12 $4.06
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,005.16 $3.48
Hypothetical $1,000.00 $1,021.66 $3.51
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.40%, 0.35%, for the Institutional and AMR
Classes, respectively, multiplied by the average account value over the
period, multiplied by the number derived by dividing the number of days in
the most recent fiscal half-year (184) by days in the year (366) to reflect
the half-year period.
10
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE MID-CAP VALUE FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Mid-Cap Value Fund returned 2.70% for the
four-month period from its inception on June 30 through October 31, 2004. The
Fund trailed the Russell Mid-Cap Value Index ("Index") return of 4.09% but was
well ahead of the Lipper Mid-Cap Value Funds Index return of 0.58%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 6/30/04* THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER MID-CAP VALUE RUSSELL MIDCAP VALUE
INSTITUTIONAL CLASS FUNDS INDEX INDEX
------------------- -------------------- --------------------
6/04 10000.00 10000.00 10000.00
10/04 10270.00 10058.00 10409.00
</Table>
* Inception of Fund
<Table>
<Caption>
TOTAL RETURNS
PERIODS ENDED VALUE OF
10/31/04 $10,000
--------------------- 6/30/04-
3 MOS. SINCE INCEP. 10/31/04
------ ------------ --------
Institutional Class(1)... 4.26% 2.70% $ 10,270
Lipper Mid-Cap Value
Funds Index............ 4.65% 0.58% $ 10,058
Russell Midcap Value
Index.................. 6.99% 4.09% $ 10,409
</Table>
1 Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
During July, the first month of the period, the Fund's -1.5% return
exceeded the -2.7% return of the Index. The Fund benefited from having a large
cash position at inception and in the early days of its existence during a month
when the equity markets were down across the board. However, the Fund lost its
initial advantage during the last three months of the period, returning 4.3%
versus the Index return of 7.0%. The Fund trailed the Index due to stock
selection and sector allocation.
The Fund's investments in the Financials sector detracted most from
performance, due to a large position in AON Corp. (down 22.2% during the last
three months of the period). The Consumer Discretionary and Utilities sectors
also hurt the Fund's performance. In the Consumer Discretionary sector,
Rent-A-Center, Inc., Brinker International, Inc., Whirlpool Corp. and Weight
Watchers International, Inc. had the largest impact, while CenterPoint Energy,
Inc., Wisconsin Energy Corp. and Xcel Energy, Inc. were responsible for most of
the underperformance in the Utilities sector. The Fund's holdings in the
Consumer Staples sector added value relative to the Index, with Loews
Corp. - Carolina Group (up 16.0%) accounting for most of the excess performance
in the sector.
Sector weightings also detracted from performance from the end of July
through the end of October. An overweight position in the Health Care and
Consumer Staples sectors, the two worst performing sectors of the Index, was
responsible for most of the underperformance attributable to sector allocation.
The sub-advisers' philosophy of investing in undervalued companies that
exhibit improving profitability and earnings growth potential should allow the
Fund to benefit longer-term.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Loews Corporation 2.2%
XL Capital Limited 1.6%
Lear Corporation 1.5%
Wellchoice, Incorporated 1.5%
Kerr-McGee Corporation 1.5%
R.H. Donnelley Corporation 1.5%
Wisconsin Energy Corporation 1.5%
Willis Group Holdings Limited 1.4%
BearingPoint, Incorporated 1.4%
American Power Conversion Corporation 1.4%
</Table>
11
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE MID-CAP VALUE FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 29.7%
Consumer Discretionary 18.8%
Industrials 16.4%
Utilities 9.0%
Health Care 7.1%
Consumer Staples 5.8%
Materials 5.5%
Information Technology 4.1%
Energy 3.6%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The subsequent examples are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the inception
of the Fund and held for the entire period from June 30, 2004 through October
31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders that
invest in the Fund through an IRA may be subject to a custodial IRA fee of $12
that is typically deducted each December. If your account was subject to a
custodial IRA fee during the period, your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
that invest in the Fund through an IRA may be subject to a custodial IRA fee of
$12 that is typically deducted each December. If your account was subject to a
custodial IRA fee during the period, your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING PERIOD*
VALUE VALUE 6/30/04-
6/30/04** 10/31/04 10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,027.00 $3.87
Hypothetical $1,000.00 $1,013.12 $3.85
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio
for the four-month period of 0.84%, for the Institutional Class,
respectively, multiplied by the average account value over the period,
multiplied by the number derived by dividing the number of days in the
four-month period (124) by days in the year (366) to reflect the four-month
period.
** Commencement of operations, June 30, 2004.
12
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SMALL CAP VALUE FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Small Cap Value Fund returned 19.86% for the
twelve months ended October 31, 2004, outperforming the Russell 2000 Value Index
("Index") return of 17.99% and the Lipper Small-Cap Value Funds Index return of
17.12% for the same period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 12/31/98* THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER SMALL-CAP VALUE RUSSELL 2000 VALUE
INSTITUTIONAL CLASS FUNDS INDEX INDEX
------------------- ---------------------- ------------------
12/98 10000.00 10000.00 10000.00
10/99 9070.00 9513.00 9508.00
10/00 10320.00 11261.00 11153.00
10/01 12400.00 12151.00 12129.00
10/02 12808.00 11799.00 11822.00
10/03 18886.00 16693.00 16584.00
10/04 22637.00 19551.00 19567.00
</Table>
* Inception of Institutional Class of Fund
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
---------------------------
PERIODS ENDED 10/31/04 VALUE OF
--------------------------- $10,000
SINCE 12/31/98-
1 YEAR 5 YEARS INCEP. 10/31/04
------ ------- -------- ---------
Institutional Class(1).... 19.86% 20.07% 15.03% $22,637
PlanAhead Class(1,2)...... 19.56% 19.77% 14.74% $22,302
AMR Class(1,2)............ 20.12% 20.42% 15.34% $22,991
Service Class(1,3)........ 19.24% 19.66% 14.65% $22,200
Lipper Small-Cap Value
Funds Index.............. 17.12% 15.50% 12.18% $19,551
Russell 2000 Value Index.. 17.99% 15.53% 12.20% $19,567
</Table>
* Russell 2000 (R) Value Index is a service mark of the Frank Russell
Company.
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
2. Fund performance for the since inception period represents
the total returns achieved by the Institutional Class from 12/31/98 up to
3/1/99, the inception date of the PlanAhead and AMR Classes, and the returns
of the PlanAhead and AMR Classes since inception of these Classes. Expenses
of the PlanAhead Class are higher than those of the Institutional Class. As
a result, total returns shown may be higher than they would have been had
the PlanAhead Class been in existence since 12/31/98. Expenses of the AMR
Class are lower than those of the Institutional Class. As a result, total
returns shown may be lower than they would have been had the AMR Class been
in existence since 12/31/98.
Fund performance for the five-year and since inception periods represents
the total returns achieved by the Institutional Class from 12/31/98 up to
3/1/99, the returns of the PlanAhead Class from 3/1/99 up to 5/1/03 (the
inception date of the Service Class), and the returns of the Service Class
since its inception. Expenses of the Service Class are higher than those of
the Institutional and PlanAhead Classes. As a result, total returns shown
may be higher than they would have been had the Service Class been in
existence since 12/31/98.
The Fund generated positive returns in every sector except Consumer Staples
and Information Technology and outperformed the Index in seven out of ten
sectors during the period. Both stock selection and sector allocation added to
the Fund's relative performance.
Stock selection in the Consumer Discretionary and Industrials sectors had
the greatest impact. Positions in Jack in the Box, Inc. (up 83.5%), Mandalay
Resort Group (up 76.7%), Foot Locker, Inc. (up 33.4%) and Brunswick Corp. (up
60.8%) were the major contributors to the Consumer Discretionary sector's
positive impact on the Fund's performance. Holdings such as Valassis
Communications, Inc., Terex Corp. and Brady Corp. in the Industrials sector
contributed significantly. The Consumer Staples sector detracted from
performance, mostly due to a large position in American Italian Pasta Co., but
not enough to offset the superior performance in other sectors.
The Fund's underweighting in the Information Technology sector, which was
the second worst performing sector of the Index, and overweighting of the
top-performing Energy sector, contributed significantly to the Fund's excess
performance relative to the Index. However, underweighting the Financials sector
and overweighting the Consumer Discretionary sector erased some of that
advantage.
The sub-advisers continue to focus on stock selection, uncovering
investment opportunities in the current economic environment.
13
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SMALL CAP VALUE FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Valassis Communications, Incorporated 1.5%
Encore Acquisition Company 1.1%
Kerzner International Limited 0.9%
Del Monte Foods Company 0.8%
Beazer Homes USA, Incorporated 0.8%
Reinsurance Group of America, Incorporated 0.8%
NSTAR 0.8%
Kirby Corporation 0.8%
WCI Communities, Incorporated 0.8%
Bank Hawaii Corporation 0.8%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Consumer Discretionary 21.1%
Financials 20.9%
Industrials 18.3%
Utilities 9.4%
Materials 7.4%
Information Technology 7.2%
Health Care 5.9%
Energy 5.4%
Consumer Staples 4.0%
Telecommunication Services 0.4%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, distribution (12b-1) fees, and other Fund expenses. The subsequent
examples are intended to help you understand the ongoing cost (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
14
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SMALL CAP VALUE FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,061.97 $4.62
Hypothetical $1,000.00 $1,020.65 $4.53
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,060.64 $5.90
Hypothetical $1,000.00 $1,019.41 $5.78
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,063.42 $3.11
Hypothetical $1,000.00 $1,022.13 $3.04
(5% return before expenses)
SERVICE CLASS
Actual $1,000.00 $1,059.60 $7.11
Hypothetical $1,000.00 $1,018.23 $6.97
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.45%, 0.57%, 0.30%, 0.69%, for the
Institutional, PlanAhead, AMR, and Service Classes, respectively, multiplied
by the average account value over the period, multiplied by the number
derived by dividing the number of days in the most recent fiscal half-year
(184) by days in the year (366) to reflect the half-year period.
15
INTERNATIONAL EQUITY MARKET OVERVIEW
- --------------------------------------------------------------------------------
Despite concerns about the outlook for corporate earnings growth and the rise in
oil prices and interest rates, the global economy continued to grow rapidly
during the fiscal year ended October 31, 2004.
Continued economic strength reflected strong consumer and business confidence in
China, the U.S., Japan and Europe. Although the 12-nation euro zone lagged other
regions in the current recovery, the European Central Bank forecasted a growth
rate between 1.6% and 2.2% for 2004. This compares to GDP growth of only 0.5% in
2003. In Japan, the economy has been emerging from a decade-long deflationary
period. During the fiscal year, Japan's consumer and business confidence reached
their highest levels since 1991. However, second quarter 2004 GDP growth was
only 1.3% annualized, significantly below the 7.0% annualized average of the
preceding two quarters. Japan continues to struggle with falling prices in the
absence of a stronger response by its central bank. Despite relatively higher
growth rates in the U.S., the dollar continued to depreciate and reached an all
time low vs. the euro, and an 11-year low vs. the pound sterling. The dollar's
decline bolstered U.S. corporate profits and aided the Fed's deflation battle.
By making imports more expensive, the weak dollar should ameliorate the current
U.S. account deficit (which by year end reached approximately 6% of GDP).
By late spring, despite preemptive actions by its authorities to engineer a soft
landing, markets feared a potentially sharp downturn in the Chinese credit
cycle. Chinese imports have become an important source of external demand in the
global economy. A slowdown in the Chinese economy implies a potentially
significant amount of collateral damage to several of its trading partners. Euro
zone economies continued to show few signs of vitality. The rise in the euro vs.
the U.S. dollar since its low in July 2001 has depressed revenue growth of many
European multinational companies. However, the seemingly insatiable Chinese
demand for industrial equipment, especially German capital goods, has soothed
some of the pain from the euro's appreciation. In recognition of this precarious
regional economic recovery, the European Central Bank pursued a course of
neutral monetary policy. The Japanese trade surplus reached new highs as
Japanese firms continued to benefit from the Asian trade boom. Nonetheless,
excess capacity shows no sign of abating and private credit demand remains
dormant in Japan.
On June 30th, the U.S. Federal Reserve Bank raised interest rates for the first
time in four years to 1.25%. The Fed appeared ready to continue tightening until
real short-term interest rates reach 0% (roughly 2% nominal). The Fed raised
rates by a quarter point at each subsequent FOMC meeting, reaching 1.75% by the
end of the fiscal year. Overnight lending rates remained 0% in Japan, while the
European Central Bank made no adjustment with interest rates unchanged at a
six-decade low of 2%. Central banks in the UK and Australia already reached an
end to their tightening cycle and have achieved the desired effect of cooling
their respective economies without creating havoc in the property sector.
Consumer spending remained buoyant in the U.S. and some parts of Europe such as
the UK and France, but did not revive in Germany. Industrial production and
business confidence are improving in all euro regions excluding Germany. In an
effort to keep their currencies from appreciating, Asian central banks
(particularly the Bank of Japan) have acted to support domestic growth by
intervening in the currency markets. Meanwhile, China's economy continued to
grow, with no obvious signs of cooling, benefiting from the indomitable U.S.
consumption. U.S. unemployment continued to accommodate a gradual recovery by
remaining low. American housing, meanwhile, posted strong results from both
existing and new home sales.
Oil prices soared to a new high in October, touching $55 per barrel (West Texas
Intermediate), an 85% increase over the past year. The Canadian dollar has
benefited more from high energy and natural resource prices than any other
currency. This boom has encouraged the Bank of Canada to raise interest rates
twice in recent months to 2.5%. Soaring energy costs add a sizable cost burden
to manufacturing and transportation throughout oil importing nations. The
European Central Bank has continued to hold interest rates steady at 2.0% (a six
decade low) as a result of both escalating energy costs and rising unemployment
impacting the euro region's sluggish recovery. China's GDP growth slowed
modestly from 9.6% annualized to 9.1%; meanwhile consumer prices rose 5.2%. In
late October, in an effort to cool its economy, the Chinese central bank jolted
global markets by announcing a surprise 27 basis point interest rate hike -- its
first in nine years. It is possible that this is the beginning of a fundamental
change in China, and the start of a shift towards a more market-based approach
to monetary and economic policy. Rising global interest rates along with high
input prices (both energy and raw materials) indicate that global growth is
likely to moderate in the next 12 months.
16
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the International Equity Fund returned 22.49%
for the twelve months ended October 31, 2004. The Fund outperformed the MSCI
EAFE Index (the "Index") return of 18.84% and the Lipper International Funds
Index return of 16.56%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/94 THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER INTERNATIONAL
INSTITUTIONAL CLASS FUNDS INDEX MSCI EAFE INDEX
------------------- -------------------- ---------------
10/94 10000.00 10000.00 10000.00
10/95 10790.00 9953.00 9963.00
10/96 12653.00 11209.00 11006.00
10/97 15068.00 12708.00 11516.00
10/98 15699.00 13297.00 12627.00
10/99 18836.00 16361.00 15535.00
10/00 19280.00 16926.00 15084.00
10/01 16091.00 12846.00 11324.00
10/02 14400.00 11527.00 9828.00
10/03 18952.00 14586.00 12486.00
10/04 23214.00 17002.00 14838.00
</Table>
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
--------------------------- VALUE OF
PERIODS ENDED 10/31/04 $10,000
--------------------------- 10/31/94-
1 YEAR 5 YEARS 10 YEARS 10/31/04
------ ------- -------- ---------
Institutional Class(1).... 22.49% 4.27% 8.79% $23,214
PlanAhead Class(1)........ 22.16% 4.08% 8.52% $22,648
AMR Class(1).............. 22.84% 4.53% 9.07% $23,830
Service Class(1,2)........ 21.88% 3.98% 8.46% $22,537
Lipper Int'l. Funds
Index.................... 16.56% 0.77% 5.45% $17,002
MSCI EAFE Index........... 18.84% (0.92)% 4.02% $14,838
</Table>
1. Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
2. Fund performance for the five-year and ten-year periods
represents the total returns achieved by the PlanAhead Class from 10/31/94
up to 5/1/03, the inception date of the Service Class, and the returns of
the Service Class since its inception. Expenses of the Service Class are
higher than those of the PlanAhead Class. As a result, total returns shown
may be higher than they would have been had the Service Class been in
existence since 10/31/94.
The Fund outperformed the Index over the past fiscal year primarily due to
strong stock selection, although country allocation was also positive. In
France, significant positions in Aventis (up 59.5% during the period it was held
by the Fund), Vinci (up 68.6%) and Total (up 37.5%) contributed over 1% in
relative performance as compared to the Index. In the United Kingdom, the Fund
added value by owning BAE Systems (up 46.5%) and Reuters Group (up 60.4%), while
German holdings, Celesio and E.ON (both up over 65%), also contributed to the
Fund's outperformance. Country allocation added value primarily due to the
Fund's nearly 9% underweighting in Japan versus the Index as the Japanese market
gained only 8.9% during the period.
Similar to country attribution, most of the value added from a sector
perspective was due to stock selection although sector allocation was also
positive. Stock selection was particularly strong in the Health Care,
Industrials and Information Technology sectors. Within the Health Care sector,
Aventis and Celesio contributed over 1% in relative performance as compared to
the Index. Industrial companies SIG Holding (up 39.6%), Geberit (up 61.0%),
Vinci (up 68.6%) and BAE Systems (up 46.5%) also contributed in excess of 1%
relative to the Index. Within the Information Technology sector, Amadeus Global
Travel Distribution gained 27.1% during the time it was held by the Fund.
From a sector allocation perspective, the Fund added value by
underweighting Information Technology, which was the worst sector for the period
(and only sector with a negative return) as it dropped by just over 1%.
Although economic and market conditions vary from period to period, the
Fund's primary strategy remains consistent as it focuses on investing in
undervalued companies with above-average earnings growth expectations.
17
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Sanofi-Synthelabo 2.1%
Vodafone Group plc 2.1%
GlaxoSmithKline plc 2.1%
Total S.A. 1.7%
Royal Bank of Scotland Group plc 1.6%
Koninklijke (Royal) Philips Electronics N.V. 1.6%
Diageo plc 1.4%
Telefonica S.A. 1.3%
Royal Dutch Petroleum Company 1.3%
Unilever plc 1.2%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 25.6%
Industrials 13.3%
Consumer Discretionary 11.6%
Telecommunication Services 10.0%
Health Care 8.4%
Energy 8.0%
Materials 8.0%
Consumer Staples 7.8%
Utilities 4.2%
Information Technology 3.1%
</Table>
REGIONAL ALLOCATION*
(PIE CHART)
<Table>
<Caption>
EUROPE PACIFIC RIM NORTH AMERICA CENTRAL AMERICA
- ------ ----------- ------------- ---------------
77.9 19.40 2.50 0.20
</Table>
* Allocation based upon gross investments in AMR Investment
Services International Equity Portfolio.
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, such as redemption fees, and (2) ongoing costs, including management
fees, administrative service fees, distribution (12b-1) fees, and other Fund
expenses. The subsequent examples are intended to help you understand the
ongoing cost (in dollars) of investing in the Fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA
18
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund, such as redemption fees. Similarly, the expense examples for other funds
do not reflect any transaction costs charged by those funds, such as sales
charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical"
lines of the table are useful in comparing ongoing costs only and will not help
you determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,080.12 $3.92
Hypothetical $1,000.00 $1,021.37 $3.81
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,078.92 $5.25
Hypothetical $1,000.00 $1,020.09 $5.10
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,081.49 $2.49
Hypothetical $1,000.00 $1,022.74 $2.42
(5% return before expenses)
SERVICE CLASS
Actual $1,000.00 $1,077.33 $6.61
Hypothetical $1,000.00 $1,018.77 $6.43
(5% return before expenses)
</Table>
* Expense amounts are inclusive of the Fund's proportionate
share of expenses of the AMR Investment Services Trust International Equity
Portfolio. Expenses are equal to the Fund's annualized expense ratios for
the six-month period of 0.38%, 0.50%, 0.24%, 0.64%, for the Institutional,
PlanAhead, AMR, and Service Classes, respectively, multiplied by the average
account value over the period, multiplied by the number derived by dividing
the number of days in the most recent fiscal half-year (184) by days in the
year (366) to reflect the half-year period.
19
EMERGING MARKETS OVERVIEW
- --------------------------------------------------------------------------------
Global emerging markets had strong returns with the MSCI EM Index gaining over
19% during the twelve months ended October 31, 2004, though not without
volatility. Latin America and Europe, Middle East and Africa (EMEA) were the
star regions, returning 37% and 33% respectively. Brazil gained 41% and Mexico
rose 37%. In EMEA, Russia and South Africa each gained 32% and 33% respectively,
while Turkey gained 44%. Asia lagged gaining only 7%. Indonesia gained 43%,
China and South Korea each rose 10%, while Taiwan fell 7%.
In Africa and the Middle East, geopolitical turmoil and climbing oil prices
made for an interesting investing backdrop. South Africa experienced a strong
Rand, in addition to exceptional performance by the many materials producers
there.
Asia was a very active region in the last year. Chinese authorities
announced plans during the first quarter of 2004 to reign in capital spending by
lowering the allowable debt value for future cement, steel, and construction
projects in an attempt to orchestrate a "soft landing." Asia was the hardest hit
by the news, as investors moved quickly to ward off market weakness caused by a
possible slowdown in trade activity. More recently, the People's Bank of China
surprised capital markets by raising interest rates for the first time in nine
years, triggering more uncertainty in the pacific rim. Despite worries that a
second quarter election upset in India would hamper the privatization movement
from which the country has benefited in recent years, the newly-elected Congress
party has been more liberal than anticipated regarding business matters. Steel
producers experienced record demand, resulting from the torrid Chinese
infrastructure expansion that seemingly culminated in the last twelve months.
The emerging markets successfully outperformed both the U.S. market, as
defined by the S&P 500 Index, and developed international markets, as defined by
the MSCI EAFE Index, over the year ended October 31, 2004. Emerging markets
outperformed the U.S. market by 10%, and the EAFE Index by less than 1%. On a 5
year basis, emerging markets outperformed the U.S. market by 8% annualized and
the EAFE Index by 7% annualized. Despite the success of the emerging markets
asset class, earnings have kept pace such that the asset class was trading at a
35% discount to the S&P 500 on a 12-month forward price-to-earnings basis as of
October 31st. Additionally, the emerging markets are second only to the U.S. as
far as corporate profitability as defined by return on earnings.
20
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Emerging Markets Fund returned 19.65% for
the twelve months ended October 31, 2004. The Fund outperformed the MSCI
Emerging Markets Index ("Index") return of 19.02%, but underperformed the Lipper
Emerging Markets Funds Index return of 21.58%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/31/00* THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
MSCI EMG MKTS FREE LIPPER EMG MKT FUNDS
INSTITUTIONAL CLASS INDEX INDEX
------------------- ------------------ --------------------
7/00 10000.00 10000.00 10000.00
10/00 8170.00 8499.00 8455.00
10/01 6657.00 6488.00 6578.00
10/02 7309.00 7023.00 7047.00
10/03 10851.00 10417.00 10456.00
10/04 12983.00 12398.00 12713.00
</Table>
* Inception of Institutional Class of Fund
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
---------------------------
PERIODS ENDED 10/31/04 VALUE OF
--------------------------- $10,000
SINCE 7/31/00-
1 YEAR 3 YEARS INCEP. 10/31/04
------ ------- -------- ---------
Institutional Class(1).... 19.65% 24.94% 6.34% $12,983
PlanAhead Class(1,2)...... 19.33% 24.66% 6.17% $12,897
AMR Class(1) 20.00%... 25.28% 6.61% $13,126
Lipper Emg Mkt Funds
Index.................... 21.58% 24.56% 5.81% $12,713
MSCI Emg Mkts Index....... 19.02% 24.09% 5.19% $12,398
</Table>
1. Performance shown is historical and may not be indicative of
future returns. Investment returns and principal value will vary, and shares
may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
2 Fund performance represents the total returns achieved by the
Institutional Class from 7/31/00 up to 10/1/02, the inception date of the
PlanAhead Class, and the returns of the PlanAhead Class since its inception.
Expenses of the PlanAhead Class are higher than those of the Institutional
Class. Therefore, total returns shown may be higher than they would have
been had the PlanAhead Class been in existence since 7/31/00.
The Fund outperformed the Index over the past twelve months due mostly to
country allocation, although stock selection added value as well. From a country
allocation perspective, overweighting Egypt (the second best market in the Index
during the period, up 117.3%) and Brazil (up 40.4%) added value. Also the Fund
benefited from underweighting China (up 11.1%) and Israel (the third worst
market for the period up 6.1%), as both markets underperformed the Index. Stock
selection was particularly strong in South Africa, Russia, India and Israel.
Significant positions in African Bank Investments (up over 130%) and Bidvest
Group (up nearly 90%) added value in South Africa, while Russian stocks LUKOIL
(up nearly 60%) and non-Index stock Mobile Telesystems (up over 90%)
outperformed. While a number of stocks helped in India, Check Point Software
stood out in Israel as it gained 33.1%.
Turning to sector attribution, both stock selection and sector allocation
added value. Stock selection was particularly strong in the Telecomm Services
and Health Care sectors. Within the Telecomm Services sector, the Fund's
positions in non-Index stocks America Movil (up 85.7%) and Mobile Telesystems
(up 91.3%) added value, while several stocks in the Health Care sector added
value. From a sector allocation perspective, most of the added value was
attributable to underweighting the two worst performing sectors, Information
Technology and Health Care, which fell 5.5% and 3.7%, respectively.
Despite the strong performance of the emerging markets asset class, the
Fund's basic philosophy remains focused on investing in undervalued companies
with above-average earnings growth expectations.
21
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Samsung Electronics Company Limited 2.3%
Petroleo Brasileiro S.A., ADR 1.7%
LUKOIL Oil Company, ADR 1.6%
Samsung SDI Company Limited 1.4%
Korea Electric Power Corporation 1.3%
America Movil S.A. de C.V., ADR 1.2%
Telefonos de Mexico, S.A. de C.V., ADR 1.2%
United Microelectronics Corporation 1.1%
Anglo American plc 1.1%
Nedcor Limited 1.1%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Financials 18.4%
Telecommunication Services 14.2%
Information Technology 12.6%
Consumer Discretionary 11.6%
Materials 10.8%
Energy 9.9%
Industrials 8.8%
Consumer Staples 7.5%
Utilities 4.6%
Health Care 1.6%
</Table>
COUNTRY ALLOCATION
(PIE CHART)
<Table>
South Korea 16.1
South Africa 15
Other Europe, Middle East, Africa 12
Taiwan 11.5
Brazil 10.8
India 8.3
Mexico 8.1
Other Asia 7.1
China 6.6
Malaysia 2.7
Israel 1.2
Other Latin America 0.6
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, such as redemption fees, and (2) ongoing costs, including management
fees, administrative service fees, and other Fund expenses. The subsequent
examples are intended to help you understand the ongoing cost (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is
22
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE EMERGING MARKETS FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
typically deducted each December. If your account was subject to a custodial IRA
fee during the period, your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund, such as redemption fees. Similarly, the expense examples for other funds
do not reflect any transaction costs charged by those funds, such as sales
charges (loads), redemption fees or exchange fees. Therefore, the "Hypothetical"
lines of the table are useful in comparing ongoing costs only and will not help
you determine the relative total costs of owning different funds. If you were
subject to any transaction costs during the period, your costs would have been
higher.
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,081.27 $ 9.59
Hypothetical $1,000.00 $1,015.92 $ 9.29
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,079.24 $11.24
Hypothetical $1,000.00 $1,014.32 $10.89
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,081.84 $ 8.27
Hypothetical $1,000.00 $1,017.19 $ 8.01
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.926%, 1.08%, 0.79%, for the Institutional,
PlanAhead, and AMR, Classes, respectively, multiplied by the average account
value over the period, multiplied by the number derived by dividing the
number of days in the most recent fiscal half-year (184) by days in the year
(366) to reflect the half-year period.
23
DOMESTIC BOND MARKET OVERVIEW
- --------------------------------------------------------------------------------
HIGH YIELD
The high yield market continued along its upward trend over the twelve months
ended October 31, 2004, with the Lehman U.S. Corporate High Yield Index
returning 12.32%. While fiscal 2004 generated very nice returns, this was
clearly a long way from the nearly 34% of the prior fiscal year. In 2003 and
2004, taking risk and extending duration were the two most successful portfolio
strategies.
With fundamental credit analysis again becoming an important factor and
yield spread compression in effect, this provided a marked contrast to 2003 and
2004, when a "rising tide lifted all boats". Starting in the first quarter of
2004, the market shifted back to valuing fundamental results.
The size of the high yield market appears to be stabilizing after a decade
of continuous growth. Even though 2004 has had record new debt issuance, the
market has not increased in size because the new issue proceeds have been used
primarily for refinancing existing securities and not for capital growth.
Entering fiscal 2005, the high yield market is experiencing very few
defaults, more upgrades than downgrades and very strong demand balanced with
modest supply. The underlying strength in the U.S. economy should have a
positive effect on earnings and stability of corporate balance sheets.
INVESTMENT GRADE
For the twelve-month period ended October 31, 2004, the investment grade
fixed-income markets, as defined by the Lehman Brothers Aggregate Index (the
"Index"), produced a 5.53% total return. The individual sectors within the Index
generally performed well with the U.S. Corporate sector continuing to produce
the highest total return at 6.59%. Asset-backed securities produced the lowest
return at 4.13%. The Treasury curve flattened during the period with short-term
rates rising in response to the Fed's interest rate hikes, and longer-term rates
declining. The U.S. Corporate markets improved during the period with credit
spreads tightening in response to improved economic growth and strong corporate
profitability. Within the credit spectrum, triple-B rated securities continued
to perform well producing a 7.83% return during the period.
<Table>
<Caption>
TOTAL RETURNS
-----------------------
PERIODS ENDED 10/31/04
-----------------------
SECTOR 6 MONTH* 12 MONTH
- ------ -------- --------
Lehman Aggregate 4.23% 5.53%
Lehman Gov/Credit 4.35% 5.57%
U.S. Treasury 4.18% 4.97%
U.S. Agency 3.49% 4.53%
Mortgage-Backed 4.12% 5.57%
Commercial MBS 4.40% 5.56%
U.S. Corporate 4.92% 6.59%
Asset-Backed 2.55% 4.13%
- -----------------------------------------------------
CREDIT RATING
Aaa 3.58% 4.49%
Aa 4.10% 5.15%
A 4.90% 6.18%
Baa 5.49% 7.83%
</Table>
(source: Lehman Brothers)
With the Federal Reserve Bank embarking on a measured pace of interest rate
increases, beginning June 30, 2004, the short end of the yield curve moved up
accordingly. The employment recovery has been choppy and inflation was still low
by historical standards, but the Fed made it clear that a 1.00% Fed Funds rate
was too low for the economic environment. The Fed Funds rate ended the period at
1.75% with many investors expecting further increases in the near future.
Despite rising short-term rates, the 2-year Treasury produced an attractive
1.82% total return during the period. While short-term interest rates were
watching the Fed, longer-term rates were watching inflation. The core inflation
indicators, which reached a bottom in mid-2003, rebounded somewhat during the
period but were still comfortably below 2.00%. Yet, with prices surging in many
of the commodity sectors, markets were skeptical about longer-term interest
rates. Companies are paying higher prices for raw materials, but they are not
able to pass higher prices through to the consumer. With mild inflation at the
consumer level, investors in longer term Treasuries found interest rates
attractive, which sent yields down slightly.
24
BOND MARKET OVERVIEW
- --------------------------------------------------------------------------------
(US TREASURY YIELD CURVE GRAPH)
<Table>
<Caption>
0.95 1.89
---- ----
1.03 2.12
1.16 2.19
1.29 2.26
1.43 2.33
1.56 2.41
1.69 2.48
2 Yr. 1.82 2.55
1.94 2.61
2.06 2.67
2.17 2.73
2.29 2.79
2.41 2.85
2.53 2.92
2.65 2.98
2.77 3.04
2.89 3.10
3.00 3.16
3.12 3.22
5 Yr. 3.24 3.28
3.29 3.32
3.35 3.36
3.40 3.39
3.45 3.43
3.50 3.47
3.56 3.50
3.61 3.54
3.66 3.58
3.71 3.62
3.77 3.65
3.82 3.69
3.87 3.73
3.93 3.76
3.98 3.80
4.03 3.84
4.08 3.87
4.14 3.91
4.19 3.95
4.24 3.99
10 Yr. 4.29 4.02
4.30 4.03
4.31 4.04
4.32 4.05
4.33 4.06
4.35 4.07
4.36 4.08
4.37 4.09
4.38 4.10
4.39 4.11
4.40 4.12
4.41 4.13
4.42 4.14
4.43 4.15
4.44 4.16
4.45 4.17
4.46 4.18
4.47 4.19
4.48 4.20
4.49 4.20
4.50 4.21
4.51 4.22
4.52 4.23
4.53 4.24
4.54 4.25
4.55 4.26
4.57 4.27
4.58 4.28
4.59 4.29
4.60 4.30
4.61 4.31
4.62 4.32
4.63 4.33
4.64 4.34
4.65 4.35
4.66 4.36
4.67 4.37
4.68 4.38
4.69 4.39
4.70 4.40
4.71 4.41
4.72 4.42
4.73 4.43
4.74 4.43
4.75 4.44
4.76 4.45
4.77 4.46
4.79 4.47
4.80 4.48
4.81 4.49
4.82 4.50
4.83 4.51
4.84 4.52
4.85 4.53
4.86 4.54
4.87 4.55
4.88 4.56
4.89 4.57
4.90 4.58
4.91 4.59
4.92 4.60
4.93 4.61
4.94 4.62
4.95 4.63
4.96 4.64
4.97 4.65
4.98 4.65
4.99 4.66
5.01 4.67
5.02 4.68
5.03 4.69
5.04 4.70
5.05 4.71
5.06 4.72
5.07 4.73
5.08 4.74
5.09 4.75
5.10 4.76
5.11 4.77
5.12 4.78
30 Yr. 5.13 4.79
</Table>
The U.S. Corporate sector continued to produce strong total returns during
the period as credit spreads tightened reflecting improved corporate
fundamentals and investor appetite for yield. Economic data was showing signs of
strength, geopolitical concerns were abating, elections were near, and corporate
spreads were still attractive. Companies continued to improve their balance
sheets and have significantly reduced debt issuance as compared to prior years.
Cash flows have been strong and balance sheet repair has been a key variable to
the overall economic recovery.
The industries that benefited from this environment were the consumer
cyclical and commodity related industries, which perform well in periods of
sustained consumer spending and rising basic commodity prices. On the other
hand, the industries that paid the higher prices did not fare so well, including
transportation and capital goods manufacturers.
(LB AGGREGATE INDEX CREDIT SPREADS GRAPH)
<Table>
<Caption>
INDEX AAA CREDIT AA CREDIT A CREDIT BAA CREDIT
----- ---------- --------- -------- ----------
Jan-03 180.00 63.00 99.00 174.00 268.00
176.00 62.00 96.00 171.00 261.00
171.00 59.00 94.00 163.00 256.00
173.00 61.00 95.00 164.00 260.00
169.00 59.00 89.00 161.00 257.00
169.00 58.00 90.00 161.00 256.00
167.00 54.00 89.00 158.00 256.00
165.00 54.00 89.00 157.00 251.00
162.00 53.00 85.00 155.00 247.00
167.00 57.00 87.00 163.00 249.00
167.00 56.00 89.00 167.00 245.00
165.00 55.00 90.00 168.00 238.00
161.00 53.00 85.00 161.00 235.00
Apr-03 159.00 53.00 86.00 159.00 229.00
157.00 52.00 85.00 155.00 227.00
149.00 51.00 80.00 146.00 217.00
144.00 48.00 78.00 139.00 210.00
134.00 47.00 76.00 130.00 193.00
128.00 42.00 70.00 125.00 186.00
130.00 43.00 70.00 126.00 191.00
132.00 44.00 72.00 128.00 192.00
128.00 42.00 69.00 125.00 186.00
128.00 43.00 69.00 127.00 184.00
124.00 41.00 66.00 120.00 181.00
123.00 41.00 67.00 120.00 178.00
124.00 41.00 67.00 120.00 179.00
Jul-03 124.00 40.00 67.00 122.00 180.00
122.00 41.00 66.00 118.00 176.00
119.00 42.00 68.00 116.00 169.00
118.00 42.00 69.00 114.00 168.00
128.00 55.00 81.00 124.00 176.00
121.00 45.00 73.00 116.00 171.00
126.00 48.00 76.00 121.00 179.00
121.00 48.00 72.00 115.00 173.00
120.00 48.00 73.00 115.00 169.00
119.00 49.00 54.00 93.00 174.00
117.00 47.00 51.00 91.00 172.00
113.00 46.00 54.00 88.00 165.00
114.00 45.00 53.00 88.00 167.00
Oct-03 115.00 48.00 57.00 89.00 167.00
114.00 44.00 57.00 90.00 165.00
109.00 44.00 56.00 85.00 157.00
112.00 47.00 56.00 86.00 164.00
108.00 45.00 54.00 83.00 156.00
109.00 47.00 55.00 84.00 158.00
102.00 41.00 49.00 78.00 149.00
103.00 41.00 50.00 80.00 151.00
100.00 39.00 48.00 79.00 146.00
101.00 40.00 49.00 80.00 144.00
100.00 39.00 48.00 81.00 143.00
99.00 39.00 50.00 80.00 141.00
98.00 38.00 49.00 79.00 139.00
Jan-04 97.00 39.00 50.00 79.00 136.00
95.00 38.00 49.00 78.00 134.00
95.00 38.00 49.00 78.00 134.00
96.00 40.00 49.00 79.00 134.00
97.00 40.00 49.00 79.00 136.00
100.00 41.00 53.00 82.00 141.00
95.00 36.00 48.00 77.00 135.00
96.00 35.00 48.00 79.00 136.00
96.00 37.00 49.00 78.00 137.00
97.00 38.00 48.00 78.00 138.00
99.00 38.00 48.00 78.00 143.00
99.00 39.00 48.00 79.00 142.00
99.00 39.00 48.00 79.00 142.00
Apr-04 98.00 40.00 48.00 80.00 140.00
97.00 40.00 48.00 80.00 137.00
98.00 40.00 50.00 80.00 138.00
96.00 41.00 50.00 80.00 133.00
97.00 40.00 51.00 80.00 137.00
103.00 45.00 55.00 86.00 144.00
103.00 42.00 53.00 85.00 147.00
103.00 42.00 53.00 86.00 145.00
102.00 40.00 54.00 85.00 144.00
103.00 41.00 56.00 85.00 145.00
102.00 42.00 56.00 86.00 144.00
102.00 42.00 56.00 86.00 143.00
101.00 41.00 55.00 85.00 141.00
Jul-04 103.00 42.00 57.00 87.00 145.00
103.00 42.00 56.00 87.00 145.00
102.00 41.00 56.00 87.00 142.00
101.00 42.00 56.00 86.00 141.00
99.00 41.00 54.00 85.00 137.00
101.00 42.00 54.00 87.00 141.00
99.00 38.00 52.00 84.00 140.00
99.00 39.00 53.00 85.00 138.00
97.00 38.00 53.00 83.00 136.00
96.00 38.00 53.00 82.00 134.00
96.00 39.00 52.00 82.00 135.00
94.00 40.00 51.00 81.00 132.00
94.00 38.00 51.00 79.00 132.00
Oct-04 94.00 40.00 54.00 80.00 131.00
93.00 40.00 53.00 79.00 130.00
93.00 39.00 52.00 79.00 131.00
95.00 39.00 52.00 78.00 135.00
93.00 38.00 51.00 77.00 131.00
89.00 37.00 48.00 75.00 127.00
</Table>
The Mortgage sector of the Index also produced a relatively attractive
return of 5.57%, during the period, reflecting lower prepayment rates and higher
yields to maturity. Although the government agency, Fannie Mae, was the subject
of criticism during the period due to its accounting practices, its mortgage and
agency bonds performed well despite the headlines.
Overall, the fixed-income markets performed well during this period in an
improving economy and a rising Fed Funds rate. In the past, this type of
environment did not bode well for the bond market; however, given the mildness
of the recovery and the comfortable level of inflation, fixed-income investors
were rewarded for their participation.
25
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE HIGH YIELD BOND FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the High Yield Bond Fund returned 10.19% for the
twelve months ended October 31, 2004. Despite its strong absolute return, the
Fund trailed the Lipper High Current Yield Bond Funds Index return of 11.11%,
the Lehman Brothers Corporate High Yield Index return of 12.32% and the Lehman
Brothers corporate High Yield Index ("Lehman Index") return of 12.32%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 12/29/00* THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LEHMAN BROS CORP HIGH LIPPER HIGH CURRENT
INSTITUTIONAL CLASS YIELD INDEX YIELD FUNDS INDEX
------------------- --------------------- -------------------
12/00 10000.00 10000.00 10000.00
10/01 10533.00 10199.00 9618.00
10/02 11194.00 9640.00 9045.00
10/03 13446.00 12896.00 11783.00
10/04 14816.00 14484.00 13092.00
</Table>
* Inception of Institutional Class of Fund
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
-------------------------
PERIODS ENDED 10/31/04 VALUE OF
------------------------- $10,000
SINCE 7/31/00-
1 YEAR 3 YEARS INCEP. 10/31/04
------ ------- ------ --------
Institutional Class(1).... 10.19% 12.05% 10.78% $14,816
PlanAhead Class(1,2)...... 9.94% 11.47% 10.34% $14,590
Service Class(1,3)........ 9.41% 11.05% 10.01% $14,422
Lehman Bros. High Yield
Index................... 12.32% 12.40% 10.15% $14,484
Lipper High Current Yield
Funds Index............. 11.11% 10.79% 7.26% $13,092
</Table>
1 Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
2 Fund performance for the three-year and since inception
periods represents the total returns achieved by the Institutional Class
from 12/29/00 up to 3/1/02, the inception date of the PlanAhead Class, and
the returns of the PlanAhead Class since its inception. Expenses of the
PlanAhead Class are higher than those of the Institutional Class. As a
result, total returns shown may be higher than they would have been had the
PlanAhead Class been in existence since 12/29/00.
3 Fund performance for the three-year and since inception
periods represents the total returns achieved by the Institutional Class
from 12/29/00 up to 3/1/02, the returns of the PlanAhead Class from 3/1/02
up to 5/1/03 (the inception date of the Service Class), and the returns of
the Service Class since its inception. Expenses of the Service Class are
higher than those of the Institutional and PlanAhead Classes. As a result,
total returns shown may be higher than they would have been had the Service
Class been in existence since 12/29/00.
The Fund, relative to the Lehman Index, was underweighted in the three best
performing sectors. The Basic Industry sector was the top sector for the period
with a return of 16.7%. The Utility and Financial sectors also outperformed the
Lehman Index with returns of 16.3% and 15.6%, respectively. While the
underweighting in Financials averaged only 1% during the past twelve months, the
underweightings to Basic Industry and Utilities averaged 4.2% and 9.3%,
respectively. An overweighting in the Technology sector also impacted the Fund,
as Technology lagged the Lehman Index with a return of 9.8%.
On a positive note, the Fund had a 2% underweighting in Transportation
which was by far the worst sector in the Lehman Index over the past twelve
months with a return of only 0.7%. Additionally, the Fund underweighted
Communications by an average of over 8% and the sector underperformed the Lehman
Index by over 2%.
Despite underperforming the Index for the twelve-month time period, the
Fund's sub-adviser continues to focus on fundamental research and downside
protection to identify and invest in companies with strong cash flows. The
sub-adviser believes that as the market increases its credit discrimination,
their research-intensive investment process will again result in enhanced
performance.
26
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE HIGH YIELD BOND FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Echostar DBS Corporation, 6.625%,
Due 10/1/2014 1.8%
Qwest Services Corporation, 13.50%,
Due 12/15/2010 1.6%
Freescale Semiconductor, Incorporated, 7.125%,
7/15/2014 1.1%
Turning Stone Casino Resort, 9.125%,
Due 12/15/2010 1.0%
Hexcel Corporation, 9.75%, Due 1/15/2009 1.0%
Kabel Deutschland GMBH, 10.625%,
Due 7/1/2014 1.0%
United Rentals North America, Incorporated,
6.50%, Due 2/15/2012 0.9%
Interline Brands, Incorporated, 11.50%,
Due 5/15/2011 1.0%
Biovail Corporation, 7.875%, Due 4/1/2010 0.9%
Owens-Brockway Glass Containers, Incorporated,
8.875%, Due 2/15/2009 0.9%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporate 100.0%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, distribution (12b-1) fees, and other Fund expenses. The subsequent
examples are intended to help you understand the ongoing cost (in dollars) of
investing in the Fund and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
27
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE HIGH YIELD BOND FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,050.49 $4.51
Hypothetical $1,000.00 $1,020.73 $4.45
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,050.04 $5.87
Hypothetical $1,000.00 $1,019.41 $5.78
(5% return before expenses)
SERVICE CLASS
Actual $1,000.00 $1,047.63 $7.99
Hypothetical $1,000.00 $1,017.33 $7.87
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.44%, 0.57%, 0.78%, for the Institutional,
PlanAhead, and Service Classes, respectively, multiplied by the average
account value over the period, multiplied by the number derived by dividing
the number of days in the most recent fiscal half-year (184) by days in the
year (366) to reflect the half-year period.
28
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE ENHANCED INCOME FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The PlanAhead Class of the Enhanced Income Fund returned 4.70% for the
twelve months ended October 31, 2004. Its benchmark, a blend of 75% Lehman
Brothers Gov/Credit Intermediate Index and 25% Merrill Lynch All U.S.
Convertibles Index ("Benchmark"), returned 5.29%. The Fund's peer group, the
Lipper Intermediate Investment Grade Index, returned 5.20% over the period.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 7/1/03* THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER INTERMEDIATE ENHANCED INCOME
PLANAHEAD CLASS INVESTMENT GRADE INDEX COMPOSITE INDEX
--------------- ---------------------- ---------------
7/03 10000.00 10000.00 10000.00
10/03 10032.00 9924.00 10073.00
10/04 10504.00 10440.00 10564.00
</Table>
* Inception of fund
<Table>
<Caption>
ANNUALIZED TOTAL
RETURNS PERIODS
ENDED 10/31/04 VALUE OF
------------------- $10,000
SINCE 7/01/03-
1 YEAR INCEPTION 10/31/04
------ --------- --------
PlanAhead Class(1)........... 4.70% 3.76% $10,504
Lipper Intermediate
Investment Grade Index..... 5.20% 3.28% $10,440
Enhanced Income Composite
Index*..................... 4.87% 4.20% $10,564
</Table>
1 Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance shown in the table
above does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
* 75% Lehman Bros. Gov/Credit Intermediate Index, 25%
Merrill Lynch All U.S. Convertibles Index
The Fund's assets have been allocated approximately 75% to AMR Investment
Services, Inc. (the "Manager") which invests primarily in income producing,
short- and intermediate-term, investment grade bonds and 25% to a sub-adviser
who invests in securities including convertible bonds, convertible preferreds,
high yield bonds and equities in order to try to enhance the return of the
overall Fund.
For the twelve-month period, the investment grade bond portion of the Fund
returned 4.6% compared before expenses to a 4.3% return for its portion of the
Benchmark. The Manager's underweight position in Treasuries (the worst
performing segment of the Lehman Gov/Credit Intermediate Index) and approximate
double-weight position in Corporates (the best performing segment) added
relative value. The duration of the Manager's portion of the Fund was generally
neutral versus the Index and did not play a significant role in relative total
returns.
The remaining portion of the Fund managed by the Fund's sub-adviser
returned 8.7% before expenses. These results not only beat the 8.1% return of
its portion of the Benchmark but also enhanced the Fund's overall return. This
portion of the Fund benefited most from owning equity securities as well as
corporate bonds.
The Fund's investment advisers remain focused on the Fund's investment
objectives of generating income and capital appreciation.
TOP TEN HOLDINGS
<Table>
<Caption>
% OF NET
ASSETS
----------
U.S. Treasury Notes, 4.75%, Due 5/15/2014 3.9%
U.S. Treasury Notes, 4.00%, Due 2/15/2014 2.9%
U.S. Treasury Notes, 5.00%, Due 8/15/2011 2.7%
Prudential Insurance Company of America, 6.375%,
Due 7/23/2006 2.0%
Household Finance Corporation, 5.75%, Due
1/30/2007 1.8%
Wachovia Corporation, 6.40%, Due 4/1/2008 1.6%
Credit Suisse First Boston USA, Incorporated,
5.875%, Due 8/1/2006 1.5%
Heller Financial, Incorporated, 6.375%, Due
3/15/2006 1.5%
Synovus Financial Corporation, 7.25%, Due
12/15/2005 1.5%
St. George Bank Limited, 7.15%, Due 10/15/2005 1.5%
</Table>
29
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE ENHANCED INCOME FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
FIXED-INCOME SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporate 59.4%
U.S. Treasury 13.7%
Corporate Convertibles 12.9%
Mortgage-Backed 11.7%
U.S. Agency 1.2%
Asset-Backed 1.1%
</Table>
EQUITY SECTOR ALLOCATION
<Table>
<Caption>
% OF
EQUITIES
--------
Consumer Discretionary 38.5%
Industrials 23.9%
Financials 22.7%
Energy 10.4%
Telecommunication Services 4.5%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The subsequent examples are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period and held for the entire period from May 1, 2004 through October
31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders that
invest in the Fund through an IRA may be subject to a custodial IRA fee of $12
that is typically deducted each December. If your account was subject to a
custodial IRA fee during the period, your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
that invest in the Fund through an IRA may be subject to a custodial IRA fee of
$12 that is typically deducted each December. If your account was subject to a
custodial IRA fee during the period, your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
PLANAHEAD CLASS
Actual $1,000.00 $1,024.05 $5.17
Hypothetical $1,000.00 $1,020.03 $5.16
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratio
for the six-month period of 0.51% for the PlanAhead Class, multiplied by the
average account value over the period, multiplied by the number derived by
dividing the number of days in the most recent fiscal half-year (184) by
days in the year (366) to reflect the half-year period.
30
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Intermediate Bond Fund returned 4.90% for
the twelve months ended October 31, 2004, trailing the Lehman Brothers Aggregate
Index ("Index") return of 5.53% and the Lipper Intermediate Investment Grade
Index return of 5.20%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 9/15/97* THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER INTERMEDIATE LEHMAN BROS.
INSTITUTIONAL CLASS INVESTMENT GRADE INDEX AGGREGATE INDEX
------------------- ---------------------- ---------------
9/97 10000.00 10000.00 10000.00
10/97 10241.00 10211.00 10295.00
10/98 11215.00 11045.00 11254.00
10/99 11123.00 11074.00 11314.00
10/00 12001.00 11775.00 12140.00
10/01 13724.00 13462.00 13908.00
10/02 14302.00 13952.00 14727.00
10/03 14918.00 14884.00 15450.00
10/04 15649.00 15658.00 16304.00
</Table>
* Inception of Institutional Class of Fund
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
-------------------------
PERIODS ENDED 10/31/04 VALUE OF
------------------------- $10,000
SINCE 9/15/97-
1 YEAR 5 YEARS INCEP. 10/31/04
------ ------- ------ ---------
Institutional
Class(1)............. 4.90% 7.07% 6.49% $15,649
PlanAhead Class(1,2)... 4.86% 6.51% 6.03% $15,183
AMR Class(1,3)......... 5.38% 7.04% 6.43% $15,596
Lipper Intermediate Inv
Grade Index.......... 5.20% 7.17% 6.49% $15,658
Lehman Bros. Agg.
Index(4)............. 5.53% 7.58% 7.06% $16,304
</Table>
1 Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
2 Fund performance for the since inception period represents
the total returns achieved by the Institutional Class from 9/15/97 up to
3/2/98, the inception date of the PlanAhead Class, and the returns of the
PlanAhead Class since its inception. Expenses of the PlanAhead Class are
higher than those of the Institutional Class. As a result, total returns
shown may be higher than they would have been had the PlanAhead Class been
in existence since 9/15/97.
3 Fund performance for the since inception period represents
the total returns achieved by the Institutional Class from 9/15/97 up to
3/1/99, the inception date of the AMR Class, and the returns of the AMR
Class since its inception. Expenses of the AMR Class are lower than those of
the Institutional Class. As a result, total returns shown may be lower than
they would have been had the AMR Class been in existence since 9/15/97.
4 Since inception return is from 8/31/97.
The Fund outperformed the Index on a gross-of-fees basis. After the
deduction of expenses, the Fund slightly underperformed the Index. The Fund
added value relative to the Index from its large overweighting in Corporates,
the best performing sector of the Index. The Fund's average weighting in
Corporates during the twelve-month period was 47% versus the Index average
weighting of 22%, ending the period with a 37% weighting in Corporates versus
the Index weighting of 21%. The Fund also added value by underweighting U.S.
Treasuries and Agencies, two of the worst performing sectors of the Index. While
the Fund's security selection in Treasuries and Agencies added value, some of
that advantage was lost through selection in the Corporate and Mortgage sectors.
Overweighting A and BBB rated securities, the best performing among the
investment grade quality ranges, also helped relative performance. The Fund's
weighted average duration during the period was only slightly longer than that
of the Index and therefore did not play a significant role in relative
performance.
The Fund's investment managers remain focused on a conservative approach
toward investing in the bond market, focusing on issuer-specific opportunities.
31
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Federal Home Loan Mortgage Corporation, 6.00%, Due
12/11/2033 3.1%
Federal National Mortgage Association, Discount Note,
Due 11/15/2004 3.1%
U.S. Treasury Bonds, 5.375%, Due 2/15/2031 2.0%
U.S. Treasury Notes, 4.75%, Due 5/15/2014 1.9%
U.S. Treasury Notes, 4.00%, Due 2/15/2014 1.9%
Government National Mortgage Association, Pool #003515,
5.50%, Due 2/20/2034 1.9%
Federal National Mortgage Association, Pool #555880,
5.50%, Due 11/1/2033 1.8%
Federal National Mortgage Association, Pool #254545,
5.00%, Due 12/1/2017 1.8%
U.S. Treasury Notes, 3.875%, Due 5/15/2009 1.7%
Federal National Mortgage Association, Pool #725238,
5.00%, Due 3/1/2034 1.5%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporate 37.4%
Mortgage-Backed 37.3%
U.S. Treasury 15.4%
U.S. Agency 7.8%
Asset-Backed 2.1%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The subsequent examples are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
32
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,039.37 $1.90
Hypothetical $1,000.00 $1,023.28 $1.88
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,036.61 $4.83
Hypothetical $1,000.00 $1,020.39 $4.79
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,038.94 $1.68
Hypothetical $1,000.00 $1,023.49 $1.66
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.19%, 0.47%, 0.16%, for the Institutional,
PlanAhead, and AMR Classes, respectively, multiplied by the average account
value over the period, multiplied by the number derived by dividing the
number of days in the most recent fiscal half-year (184) by days in the year
(366) to reflect the half-year period.
33
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM)
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
The Institutional Class of the Short-Term Bond Fund returned 2.21% for the
twelve months ended October 31, 2004, ahead of the Merrill Lynch 1-3 Year
Gov/Corp Index return of 2.09% and the Lipper Short Investment Grade Bond Funds
Index return of 2.10%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
FOR THE PERIOD FROM 10/31/94 THROUGH 10/31/04
(LINE GRAPH)
<Table>
<Caption>
LIPPER SHORT INV. GRADE ML 1-3 YR. GOV./CORP.
INSTITUTIONAL CLASS BOND FUNDS INDEX INDEX
------------------- ----------------------- ---------------------
10/94 10000.00 10000.00 10000.00
10/95 10818.00 10833.00 10900.00
10/96 11370.00 11431.00 11554.00
10/97 12085.00 12182.00 12311.00
10/98 12882.00 12904.00 13245.00
10/99 13212.00 13328.00 13673.00
10/00 13983.00 14111.00 14517.00
10/01 15518.00 15537.00 16158.00
10/02 16041.00 15951.00 16941.00
10/03 16615.00 16457.00 17469.00
10/04 16982.00 16803.00 21120.00
</Table>
<Table>
<Caption>
ANNUALIZED TOTAL RETURNS
--------------------------- VALUE OF
PERIODS ENDED 10/31/04 $10,000
--------------------------- 10/31/94-
1 YEAR 5 YEARS 10 YEARS 10/31/04
------ ------- -------- ---------
Institutional
Class(1).............. 2.21% 5.15% 5.44% $16,982
PlanAhead Class(1)...... 1.84% 4.88% 5.17% $16,553
AMR Class(1)............ 2.39% 5.35%. 5.66% $17,342
Lipper Short Inv. Grade
Index................. 2.10% 4.74% 5.33% $16,803
Merrill Lynch 1-3 Yr
Gov./Corp. Index...... 2.09% 5.46% 5.96% $21,120
</Table>
1 Performance shown is historical and may not be indicative
of future returns. Investment returns and principal value will vary, and
shares may be worth more or less at redemption than at original purchase.
Performance shown is as of date indicated and may differ from current
performance. To obtain more current performance information, please visit
www.aafunds.com or call 1-800-967-9009. Fund performance in the table above
does not reflect the deduction of taxes a shareholder would pay on
distributions or the redemption of shares.
According to the Merrill Lynch 1-3 Year Index, the Mortgage sector produced
the highest total return, at 3.61%, followed by U.S. Corporate at 2.85%,
Agencies at 2.06%, and Treasuries at 1.73%. The Mortgage sector's outperformance
stems from its relatively low duration in a rising interest rate environment and
from a slowing of prepayment activity. U.S. Corporate returns reflect continued
improvement in credit spreads and investor appetite for incremental yield in the
low interest rate environment. Lower-rated bonds continued to outperform
higher-rated alternatives as credit fundamentals improved. Treasury and Agency
returns reflect the rise in interest rates and investors' general desire to look
for higher yields elsewhere.
The Fund's assets were substantially invested in the U.S. Corporate sector,
which was consistent with the Fund's total return during this period as compared
to the Index. The best performing industries were in the consumer sector, such
as autos, in which the Fund was overweighted, and basic industries (oil,
chemicals, paper, metals), in which the Fund was underweighted. The strong
performance from these industries reflected healthy consumer sentiment and
rising commodity prices. The capital goods manufacturing industry, which paid
higher commodity prices, underperformed during this period as margins were
squeezed. The Fund was underweighted in this industry. The Fund generally
maintained an overweight position in the financials, which performed in line
with the U.S. Corporate portion of the Index. The Fund also maintained an
overweight position in asset-backed securities, which performed in line with
high-quality Corporate bonds.
Throughout the period, the Fund's duration was maintained at neutral and
did not play a significant role in relative total returns. If, however, the
risks to short term interest rates were to increase in the upcoming period, a
more defensive duration posture may be justified.
34
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
<Table>
<Caption>
% OF
NET ASSETS
----------
Prudential Insurance Company of America, 6.375%,
Due 7/23/2006, 144A (Note A) 3.5%
Chemical Master Credit Card Trust 1996-2 A,
5.98%, Due 9/15/2008 3.4%
Hertz Corporation, 4.70%, Due 10/2/2006 3.3%
Met Life Global Funding I, 3.375%, Due 10/5/2007 3.3%
Wachovia Corporation, 6.40%, Due 4/1/2008 3.0%
Heller Financial, Incorporated, 6.375%, Due
3/15/2006 2.9%
Synovus Financial Corporation, 7.25%, Due
12/15/2005 2.9%
Wells Fargo Financial Auto Owner Trust, 2.67%,
Due 8/16/2010 2.8%
FleetBoston Financial Corporation, 3.85%, Due
2/15/2008 2.8%
Caterpillar Financial Services, 2.35%, Due
9/15/2006 2.7%
</Table>
SECTOR ALLOCATION
<Table>
<Caption>
% OF
FIXED INCOME
------------
Corporate 77.8%
Asset-Backed 16.0%
Mortgage-Backed 6.2%
</Table>
FUND EXPENSE EXAMPLE
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs and (2) ongoing costs, including management fees, administrative service
fees, and other Fund expenses. The subsequent examples are intended to help you
understand the ongoing cost (in dollars) of investing in the Fund and to compare
these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning
of the period in each Class and held for the entire period from May 1, 2004
through October 31, 2004.
ACTUAL EXPENSES
The "Actual" lines of the table provide information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading "Expenses Paid During Period" to estimate
the expenses you paid on your account during this period. Shareholders of the
PlanAhead and Institutional Classes that invest in the Fund through an IRA may
be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The "Hypothetical" lines of the table provide information about
hypothetical account values and hypothetical expenses based on the Fund's actual
expense ratio and an assumed 5% per year rate of return before expenses (not the
Fund's actual return). You may compare the ongoing costs of investing in the
Fund with other funds by contrasting this 5% hypothetical example and the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. Shareholders
of the PlanAhead and Institutional Classes that invest in the Fund through an
IRA may be subject to a custodial IRA fee of $12 that is typically deducted each
December. If your account was subject to a custodial IRA fee during the period,
your costs would have been $12 higher.
You should also be aware that the expenses shown in the table highlight
only your ongoing costs and do not reflect any transaction costs charged by the
Fund. Similarly, the expense examples for other funds do not reflect any
transaction costs charged by those funds, such as sales charges (loads),
redemption fees or exchange fees. Therefore, the "Hypothetical" lines of the
table are useful in comparing ongoing costs only and will not help you determine
the relative total costs of owning different funds. If you were subject to any
transaction costs during the period, your costs would have been higher.
35
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE SHORT-TERM BOND FUND(SM) -- CONTINUED
October 31, 2004 (Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
BEGINNING ENDING
ACCOUNT ACCOUNT EXPENSES PAID
VALUE VALUE DURING PERIOD*
5/1/04 10/31/04 5/1/04-10/31/04
--------- --------- ---------------
INSTITUTIONAL CLASS
Actual $1,000.00 $1,012.04 $3.13
Hypothetical $1,000.00 $1,022.02 $3.15
(5% return before expenses)
PLANAHEAD CLASS
Actual $1,000.00 $1,010.73 $4.41
Hypothetical $1,000.00 $1,020.75 $4.44
(5% return before expenses)
AMR CLASS
Actual $1,000.00 $1,012.39 $1.65
Hypothetical $1,000.00 $1,023.50 $1.66
(5% return before expenses)
</Table>
* Expenses are equal to the Fund's annualized expense ratios
for the six-month period of 0.31%, 0.44%, 0.16%, for the Institutional,
PlanAhead, and AMR Classes, respectively, multiplied by the average account
value over the period, multiplied by the number derived by dividing the
number of days in the most recent fiscal half-year (184) by days in the year
(366) to reflect the half-year period.
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of:
American AAdvantage Balanced Fund
American AAdvantage Large Cap Value Fund
American AAdvantage Large Cap Growth Fund
American AAdvantage Mid-Cap Value Fund
American AAdvantage Small Cap Value Fund
American AAdvantage International Equity Fund
American AAdvantage Emerging Markets Fund
American AAdvantage High Yield Bond Fund
American AAdvantage Enhanced Income Fund
American AAdvantage Intermediate Bond Fund
American AAdvantage Short-Term Bond Fund
We have audited the accompanying statement of assets and liabilities of the
American AAdvantage Funds, comprised of the American AAdvantage Balanced Fund,
the American AAdvantage Large Cap Value Fund, the American AAdvantage Large Cap
Growth Fund, the American AAdvantage Mid-Cap Value Fund, the American AAdvantage
Small Cap Value Fund, the American AAdvantage International Equity Fund, the
American AAdvantage Emerging Markets Fund, the American AAdvantage High Yield
Bond Fund, the American AAdvantage Enhanced Income Fund, the American AAdvantage
Intermediate Bond Fund and the American AAdvantage Short-Term Bond Fund,
(collectively, the "Funds"), including the schedules of investments, as of
October 31, 2004, and the related statements of operations, statements of
changes in net assets and financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of October 31, 2004, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective American AAdvantage Funds at October 31, 2004, the
results of their operations, the changes in their net assets and the financial
highlights for each of the periods indicated therein, in conformity with U.S.
generally accepted accounting principles.
-s- Ernst & Young
Chicago, Illinois
December 17, 2004
37
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 4.01%
U.S. TREASURY NOTES - 2.51%
4.625%, Due 5/15/2006*......... $ 3,910 $ 4,042
3.375%, Due 11/15/2008*........ 2,000 2,021
3.875%, Due 5/15/2009*......... 1,985 2,041
3.375%, Due 9/15/2009*......... 680 683
5.00%, Due 2/15/2011*.......... 1,350 1,458
5.00%, Due 8/15/2011*.......... 700 756
4.375%, Due 8/15/2012*......... 2,000 2,075
4.00%, Due 2/15/2014*.......... 1,265 1,265
4.75%, Due 5/15/2014*.......... 1,660 1,755
4.25%, Due 8/15/2014*.......... 590 600
--------
TOTAL U.S. TREASURY
NOTES.................... 16,696
--------
U.S. TREASURY BONDS - 1.50%
7.50%, Due 11/15/2016*......... 1,055 1,366
9.125%, Due 5/15/2018*......... 1,000 1,474
7.875%, Due 2/15/2021*......... 500 683
6.875%, Due 8/15/2025*......... 1,580 2,006
6.25%, Due 5/15/2030*.......... 1,850 2,225
5.375%, Due 2/15/2031*......... 2,035 2,210
--------
TOTAL U.S. TREASURY
BONDS.................... 9,964
--------
TOTAL U.S. TREASURY
OBLIGATIONS.............. 26,660
--------
U.S. AGENCY OBLIGATIONS - 4.31%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 2.10%
3.25%, Due 11/15/2004.......... 4,500 4,502
1.875%, Due 1/15/2005.......... 8,500 8,497
5.875%, Due 3/21/2011.......... 415 454
4.875%, Due 11/15/2013......... 500 517
--------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION..... 13,970
--------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 2.21%
Discount Note, Due
11/15/2004................... 4,800 4,797
1.875%, Due 12/15/2004......... 3,890 3,889
5.125%, Due 1/2/2014........... 515 529
7.25%, Due 5/15/2030*.......... 550 701
6.00%, Due 12/11/2033.......... 4,655 4,824
--------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION..... 14,740
--------
TOTAL U.S. AGENCY
OBLIGATIONS.............. 28,710
--------
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 8.18%
FEDERAL HOME LOAN MORTGAGE
CORPORATION - 2.77%
Pool #G10084, 6.50%, Due
3/1/2008..................... $ 983 $ 1,020
Pool #G11202, 6.00%, Due
11/1/2016.................... 206 217
Pool #E90777, 5.50%, Due
8/1/2017..................... 127 132
Pool #E96536, 5.00%, Due
3/1/2018..................... 1,365 1,394
Pool #E01386, 5.00%, Due
6/1/2018..................... 449 458
Pool #E97381, 5.50%, Due
6/1/2018..................... 269 278
Pool #E01492, 5.50%, Due
10/1/2018.................... 1,154 1,196
Pool #B12563, 5.00%, Due
2/1/2019..................... 688 703
Pool #E01602, 4.50%, Due
3/1/2019..................... 1,408 1,413
Pool #C26472, 6.50%, Due
5/1/2029..................... 169 178
Pool #C27089, 6.50%, Due
6/1/2029..................... 29 30
Pool #C00835, 6.50%, Due
7/1/2029..................... 473 498
Pool #G01457, 6.00%, Due
8/1/2029..................... 220 228
Pool #G01533, 6.00%, Due
3/1/2033..................... 1,056 1,095
Pool #C01598, 5.00%, Due
8/1/2033..................... 1,589 1,588
Pool #A12149, 6.00%, Due
8/1/2033..................... 840 871
Pool #A15436, 5.50%, Due
11/1/2033.................... 778 794
Pool #C01786, 5.50%, Due
2/1/2034..................... 2,362 2,409
Pool #C01796, 5.00%, Due
3/1/2034..................... 1,934 1,930
Pool #C01848, 6.00%, Due
6/1/2034..................... 1,926 1,997
--------
TOTAL FEDERAL HOME LOAN
MORTGAGE CORPORATION..... 18,429
--------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION - 3.46%
Pool #488099, 5.50%, Due
2/1/2014..................... 457 475
Pool #323789, 6.00%, Due
6/1/2014..................... 359 378
Pool #535846, 6.00%, Due
4/1/2016..................... 886 930
Pool #648511, 6.00%, Due
6/1/2017..................... 939 986
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
38
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Pool #254545, 5.00%, Due
12/1/2017.................... $ 1,749 $ 1,787
Pool #555549, 5.00%, Due
6/1/2018..................... 1,078 1,101
Pool #254865, 4.50%, Due
9/1/2018..................... 2,457 2,470
Pool #100292, 10.00%, Due
9/1/2018..................... 215 241
Pool #761337, 5.00%, Due
4/1/2019..................... 402 410
Pool #769018, 6.50%, Due
12/1/2031.................... 503 531
Pool #725706, 6.00%, Due
8/1/2032..................... 561 588
Pool #713999, 5.50%, Due
7/1/2033..................... 842 859
Pool #713706, 5.50%, Due
8/1/2033..................... 662 676
Pool #727223, 5.50%, Due
9/1/2033..................... 1,476 1,506
Pool #741901, 5.50%, Due
10/1/2033.................... 474 483
Pool #749219, 5.50%, Due
10/1/2033.................... 888 906
Pool #555880, 5.50%, Due
11/1/2033.................... 2,233 2,278
Pool #758322, 5.50%, Due
12/1/2033.................... 1,909 1,948
Pool #725238, 5.00%, Due
3/1/2034..................... 1,937 1,936
Pool #765304, 5.50%, Due
3/1/2034..................... 696 710
Pool #255225, 5.50%, Due
6/1/2034..................... 960 979
Pool #255410, 6.50%, Due
9/1/2034..................... 151 159
Pool #255413, 6.50%, Due
10/1/2034.................... 371 391
Pool #255460, 6.50%, Due
11/1/2034.................... 283 298
--------
TOTAL FEDERAL NATIONAL
MORTGAGE ASSOCIATION 23,026
--------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION - 1.95%
Pool #780085, 11.50%, Due
8/15/2018.................... 177 202
Pool #780030, 7.00%, Due
6/15/2024.................... 219 235
Pool #780400, 7.00%, Due
12/15/2025................... 198 212
Pool #781200, 8.00%, Due
12/15/2025................... 230 252
Pool #780509, 6.50%, Due
2/15/2027.................... 302 321
Pool #780615, 6.50%, Due
8/15/2027.................... 366 389
Pool #780651, 7.00%, Due
10/15/2027................... 417 446
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Pool #780680, 6.50%, Due
11/15/2027................... $ 414 $ 440
Pool #780747, 6.50%, Due
3/15/2028.................... 360 382
Pool #780788, 6.50%, Due
4/15/2028.................... 392 416
Pool #780842, 8.50%, Due
8/20/2028.................... 225 246
Pool #780936, 7.50%, Due
12/15/2028................... 441 477
Pool #781035, 6.50%, Due
5/15/2029.................... 349 370
Pool #002754, 6.50%, Due
5/20/2029.................... 239 252
Pool #781273, 6.00%, Due
4/15/2031.................... 515 538
Pool #781288, 6.50%, Due
5/15/2031.................... 654 693
Pool #781564, 6.00%, Due
2/15/2033.................... 1,161 1,210
Pool #616094, 6.00%, Due
11/15/2033................... 452 470
Pool #781690, 6.00%, Due
12/15/2033................... 1,306 1,361
Pool #003515, 5.50%, Due
2/20/2034.................... 3,079 3,149
Pool #003517, 6.00%, Due
2/20/2034.................... 875 910
--------
TOTAL GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION..... 12,971
--------
TOTAL U.S. AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 54,426
--------
ASSET-BACKED SECURITIES - 0.37%
Household Automotive Trust
2004-1 A3,
3.30%, Due 5/18/2009......... 1,300 1,297
Master Asset Securitization
Trust 2002-6 2A1, 5.75%, Due
10/25/2017................... 789 798
TXU Electric Delivery
Transition 2004-1 A2,
4.81%, Due 11/15/2012........ 350 364
--------
TOTAL ASSET-BACKED
SECURITIES............... 2,459
--------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 0.64%
Banc of America Commercial
Mortgage, Incorporated 2003-2
A3,
4.342%, Due 3/11/2041........ 445 454
Bear Stearns Commercial
Mortgage Securities,
Incorporated 2004-PWR5 A4,
4.831%, Due 7/11/2042........ 740 754
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
39
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Countrywide Home Loan,
Incorporated 2004-18 A1,
6.00%, Due 10/25/2034........ $ 901 $ 940
General Electric Capital
Commercial Mortgage
Corporation 2003-C2 A2,
4.17%, Due 7/10/2037......... 430 436
General Electric Capital
Commercial Mortgage
Corporation 2004-C3 A3,
4.865%, Due 7/10/2039........ 715 738
Morgan Stanley Dean Witter &
Company 2003-T11 A2,
4.34%, Due 6/13/2041......... 400 407
Wachovia Bank Commercial
Mortgage Trust 2003-C5 A2,
3.989%, Due 6/15/2035........ 570 549
--------
TOTAL NON-AGENCY
MORTGAGE-BACKED
OBLIGATIONS.............. 4,278
--------
CORPORATE BONDS - 11.47%
BANKS - 1.23%
Banco Popular North America
Incorporated,
4.25%, Due 4/1/2008.......... 500 512
Bank One Corporation,
5.90%, Due 11/15/2011........ 500 541
4.90%, Due 4/30/2015*........ 300 297
Capital One,
6.875%, Due 2/1/2006......... 800 840
6.70%, Due 5/15/2008......... 450 495
5.75%, Due 9/15/2010......... 210 224
5.125%, Due 2/15/2014........ 450 452
Credit Suisse First Boston,
6.50%, Due 5/1/2008.......... 750 819
Fleet Norstar Financial Group,
Incorporated,
8.625%, Due 1/15/2007........ 600 671
ING Bank, NV,
5.125%, Due 5/1/2015,
144A (Note A)................ 450 458
Inter-American Development
Bank,
5.375%, Due 11/18/2008....... 1,280 1,380
Synovus Financial Corporation,
4.875%, Due 2/15/2013........ 300 303
US Bank, NA,
5.70%, Due 12/15/2008........ 675 726
Washington Mutual Financial
Corporation,
6.875%, Due 5/15/2011........ 425 486
--------
TOTAL BANKS................ 8,204
--------
ENERGY - 0.45%
Dominion Resources,
Incorporated,
5.00%, Due 3/15/2013*........ 210 212
Kerr-McGee Corporation,
5.875%, Due 9/15/2006........ 655 686
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Marathon Oil Corporation,
5.375%, Due 6/1/2007......... $ 260 $ 274
MidAmerican Energy Holdings
Company,
3.50%, Due 5/15/2008......... 395 391
5.875%, Due 10/1/2012........ 305 326
Public Service Enterprise
Group, Incorporated,
6.95%, Due 6/1/2012.......... 380 428
Union Oil Company of
California,
7.90%, Due 4/18/2008......... 100 113
Xcel Energy, Incorporated,
7.00%, Due 12/1/2010......... 500 570
--------
TOTAL ENERGY............... 3,000
--------
FINANCE - 3.58%
Aegon, NV,
8.00%, Due 8/15/2006......... 300 327
American General Finance
Corporation, 5.375%, Due
9/1/2009..................... 285 300
Assurant, Incorporated,
5.625%, Due 2/15/2014,
144A (Note A)................ 315 325
Bear Stearns Companies,
Incorporated,
3.00%, Due 3/30/2006......... 500 502
2.875%, Due 7/2/2008......... 300 293
BHP Finance (USA) Limited,
4.80%, Due 4/15/2013......... 300 305
Boeing Capital Corporation,
5.40%, Due 11/30/2009........ 850 908
Bunge Limited Finance
Corporation,
7.80%, Due 10/15/2012........ 400 475
Caterpillar Financial Services
Corporation,
3.70%, Due 8/15/2008......... 700 704
Cendant Corporation,
6.875%, Due 8/15/2006........ 990 1,055
6.25%, Due 1/15/2008......... 350 378
Countrywide Home Loan,
Incorporated,
3.50%, Due 12/19/2005*....... 800 806
3.25%, Due 5/21/2008......... 510 501
Ford Motor Credit Company,
6.50%, Due 1/25/2007......... 375 394
7.375%, Due 10/28/2009....... 410 446
General Electric Capital
Corporation,
6.875%, Due 11/15/2010....... 535 610
General Motors Acceptance
Corporation,
6.75%, Due 1/15/2006......... 650 673
6.125%, Due 8/28/2007........ 320 334
7.25%, Due 3/2/2011.......... 410 435
Goldman Sachs Group,
Incorporated,
4.75%, Due 7/15/2013......... 400 396
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
40
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Household Finance Corporation,
5.75%, Due 1/30/2007......... $ 1,500 $ 1,585
6.375%, Due 11/27/2012....... 280 313
International Lease Finance
Corporation,
3.30%, Due 1/23/2008......... 415 411
6.375%, Due 3/15/2009........ 1,025 1,118
Liberty Mutual Corporation,
7.875%, Due 10/15/2026,
144A (Note A)................ 1,500 1,666
Lincoln National Corporation,
4.75%, Due 2/15/2014......... 200 197
MBNA Credit Card Master Trust,
2.65%, Due 11/15/2010........ 820 799
Merrill Lynch & Company,
Incorporated,
4.125%, Due 9/10/2009........ 660 664
Morgan Stanley Dean Witter &
Company,
6.10%, Due 4/15/2006......... 450 471
4.75%, Due 4/1/2014.......... 560 548
PHH Corporation,
6.00%, Due 3/1/2008.......... 500 535
Prudential Financial,
Incorporated,
3.75%, Due 5/1/2008.......... 185 185
4.50%, Due 7/15/2013......... 400 389
5.10%, Due 5/20/2014......... 290 291
SLM Corporation,
3.95%, Due 8/15/2008......... 420 426
4.00%, Due 1/15/2009......... 1,500 1,508
Sprint Capital Corporation,
6.00%, Due 1/15/2007......... 1,230 1,301
8.375%, Due 3/15/2012........ 175 215
8.75%, Due 3/15/2032......... 275 360
Verizon Global Funding
Corporation,
4.375%, Due 6/1/2013*........ 400 392
Washington Mutual,
Incorporated,
4.625%, Due 4/1/2014......... 350 337
--------
TOTAL FINANCE.............. 23,878
--------
FOREIGN - 0.19%
Ontario Province, Canada,
3.35%, 7/16/2007*............ 1,000 1,005
United Mexican States,
7.50%, Due 4/8/2033.......... 240 256
--------
TOTAL FOREIGN.............. 1,261
--------
INDUSTRIALS - 5.28%
America Movil S.A. de C.V.,
5.75%, Due 1/15/2015......... 400 399
Anheuser Busch Companies,
Incorporated,
6.50%, Due 1/1/2028.......... 872 992
AT&T Broadband Corporation,
8.375%, Due 3/15/2013........ 848 1,040
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
AT&T Wireless Services,
Incorporated,
7.35%, Due 3/1/2006.......... $ 855 $ 906
8.125%, Due 5/1/2012......... 900 1,098
8.75%, Due 3/1/2031.......... 265 356
Atlantic Richfield Company,
9.125%, Due 3/1/2011......... 425 540
Baxter International,
Incorporated,
5.25%, Due 5/1/2007.......... 455 476
Bemis, Incorporated,
6.70%, Due 7/1/2005.......... 1,000 1,026
Cargill, Incorporated,
6.25%, Due 5/1/2006,
144A (Note A)................ 1,000 1,051
Carnival Corporation,
3.75%, Due 11/15/2007........ 515 519
Comcast Cable Communications,
7.625%, Due 2/15/2008........ 200 223
Comcast Corporation,
5.50%, Due 3/15/2011......... 255 269
Conagra Foods, Incorporated,
7.125%, Due 10/1/2026........ 410 486
7.00%, Due 10/1/2028......... 600 694
ConocoPhillips,
3.625%, Due 10/15/2007....... 425 429
Continental Cablevision,
Incorporated,
8.30%, Due 5/15/2006......... 270 291
DaimlerChrysler North America,
4.75%, Due 1/15/2008......... 720 742
7.75%, Due 1/18/2011......... 1,000 1,168
6.50%, Due 11/15/2013........ 425 464
John Deere Capital Corporation,
3.375%, Due 10/1/2007........ 650 651
3.75%, Due 1/13/2009......... 520 522
Dell Computer Corporation,
6.55%, Due 4/15/2008......... 400 441
Deutsche Telekom International,
8.50%, Due 6/15/2010......... 280 337
The Walt Disney Company,
5.375%, Due 6/1/2007......... 235 246
EOG Resources, Incorporated,
4.75%, Due 3/15/2014,
144A (Note A)................ 425 423
EOP Operating Limited
Partnership,
4.75%, Due 3/15/2014......... 350 340
France Telecom SA,
8.50%, Due 3/1/2011.......... 550 661
General Motors Corporation,
8.375%, Due 7/15/2033........ 265 276
Harley Davidson, Incorporated,
2.69%, Due 4/15/2011......... 610 608
Hershey Foods Corporation,
6.95%, Due 3/1/2007.......... 1,000 1,088
Hertz Corporation,
4.70%, Due 10/2/2006......... 650 661
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
41
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Hewlett Packard Company,
5.75%, Due 12/15/2006........ $ 470 $ 496
International Business Machines
Corporation,
4.875%, Due 10/1/2006........ 505 524
Lockheed Martin Corporation,
7.20%, Due 5/1/2036.......... 600 730
Martin Marietta Material,
Incorporated,
6.90%, Due 8/15/2007......... 200 219
Met Life Global Funding I,
3.375%, Due 10/5/2007........ 650 648
Motorola, Incorporated,
4.608%, Due 11/16/2007....... 810 834
Norfolk Southern Corporation,
7.05%, Due 5/1/2037.......... 270 311
Northrop Grumman Corporation,
4.079%, Due 11/16/2006....... 850 865
7.125%, Due 2/15/2011........ 505 582
Occidental Petroleum
Corporation,
6.75%, Due 1/15/2012......... 400 457
Ocean Energy, Incorporated,
4.375%, Due 10/1/2007........ 450 461
Pepsi Bottling Group,
Incorporated,
7.00%, Due 3/1/2029.......... 650 779
Pulte Homes, Incorporated,
4.875%, Due 7/15/2009........ 300 307
5.25%, Due 1/15/2014......... 275 274
Reed Elsevier Capital,
Incorporated,
6.125%, Due 8/1/2006......... 615 646
Sara Lee Corporation,
6.00%, Due 1/15/2008......... 1,200 1,294
Simon Property Group LP,
6.375%, Due 11/15/2007....... 400 432
Time Warner, Incorporated,
7.625%, Due 4/15/2031........ 250 296
Unilever Capital Corporation,
7.125%, Due 11/1/2010........ 2,000 2,328
Univision Communications,
Incorporated,
3.875%, Due 10/15/2008....... 555 555
Verizon Communications,
Incorporated,
6.36%, Due 4/15/2006......... 550 577
Verizon Virginia,
4.625%, Due 3/15/2013........ 500 493
Verizon Wireless Capital,
5.375%, Due 12/15/2006....... 420 440
Wal-Mart Stores, Incorporated,
7.55%, Due 2/15/2030......... 650 837
Weyerhaeuser Company,
5.95%, Due 11/1/2008......... 340 368
--------
TOTAL INDUSTRIALS.......... 35,176
--------
</Table>
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
PHARMACEUTICAL - 0.10%
Schering Plough Corporation,
6.50%, Due 12/1/2033......... $ 300 $ 330
Wyeth Corporation,
5.50%, Due 2/1/2014.......... 325 333
--------
TOTAL PHARMACEUTICAL....... 663
--------
TRANSPORTATION - 0.41%
CNF Transportation,
Incorporated,
8.875%, Due 5/1/2010......... 1,850 2,227
Union Pacific Corporation,
6.50%, Due 4/15/2012......... 450 502
--------
TOTAL TRANSPORTATION....... 2,729
--------
UTILITY - 0.23%
AEP Texas Central Company,
6.65%, Due 2/15/2033......... 120 133
Appalachian Power Company,
5.95%, Due 5/15/2033......... 120 120
Consolidated Natural Gas
Company,
6.875%, Due 10/15/2026....... 360 416
Progress Energy, Incorporated,
6.75%, Due 3/1/2006.......... 490 514
Southern Company Capital
Funding, Incorporated,
5.30%, Due 2/1/2007.......... 325 344
--------
TOTAL UTILITY.............. 1,527
--------
TOTAL CORPORATE BONDS...... 76,438
--------
</Table>
<Table>
<Caption>
SHARES
-----------
COMMON STOCK - 59.05%
CONSUMER DISCRETIONARY - 6.09%
HOTELS, RESTAURANTS & LEISURE - 1.57%
Carnival Corporation*.......... 85,900 4,343
McDonald's Corporation......... 44,500 1,297
MGM Mirage, Incorporated+...... 63,500 3,416
Yum Brands, Incorporated+...... 32,200 1,401
--------
TOTAL HOTELS, RESTAURANTS &
LEISURE.................. 10,457
--------
HOUSEHOLD DURABLES - 1.54%
Centex Corporation............. 93,600 4,861
Fortune Brands, Incorporated... 18,100 1,318
Koninklijke Philips Electronics
NV........................... 116,031 2,764
Pulte Homes, Incorporated...... 24,800 1,361
--------
TOTAL HOUSEHOLD DURABLES... 10,304
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
42
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
LEISURE EQUIPMENT & PRODUCTS - 0.64%
Eastman Kodak Company*......... 76,400 $ 2,313
Mattel, Incorporated........... 110,200 1,930
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS................. 4,243
--------
MEDIA - 0.21%
Interpublic Group Companies,
Incorporated+................ 116,600 1,430
--------
TOTAL MEDIA................ 1,430
--------
MULTILINE RETAIL - 1.91%
Federated Department Stores,
Incorporated................. 50,700 2,558
May Department Stores
Company...................... 57,900 1,509
Sears, Roebuck, & Company...... 160,600 5,621
Target Corporation............. 61,200 3,061
--------
TOTAL MULTILINE RETAIL..... 12,749
--------
TEXTILES & APPAREL - 0.22%
Liz Claiborne, Incorporated.... 36,500 1,492
--------
TOTAL TEXTILES & APPAREL... 1,492
--------
TOTAL CONSUMER
DISCRETIONARY............ 40,675
--------
CONSUMER STAPLES - 5.37%
FOOD PRODUCTS - 2.46%
Albertson's, Incorporated*..... 49,800 1,136
Conagra, Incorporated.......... 134,900 3,561
Dean Foods Company+............ 86,300 2,576
General Mills, Incorporated.... 31,400 1,389
Kraft Foods, Incorporated...... 78,900 2,628
Safeway, Incorporated+......... 67,200 1,226
Sara Lee Company............... 108,274 2,521
Unilever plc, ADR*............. 39,200 1,336
--------
TOTAL FOOD PRODUCTS........ 16,373
--------
TOBACCO - 2.91%
Altria Group, Incorporated..... 184,200 8,926
Gallaher Group plc, ADR........ 42,400 2,145
Imperial Tobacco Group plc,
ADR*......................... 94,800 4,451
UST, Incorporated.............. 94,500 3,890
--------
TOTAL TOBACCO.............. 19,412
--------
TOTAL CONSUMER STAPLES..... 35,785
--------
ENERGY - 5.88%
ENERGY EQUIPMENT & SERVICES - 0.63%
Duke Energy Corporation........ 169,900 4,168
--------
TOTAL ENERGY EQUIPMENT &
SERVICES................. 4,168
--------
OIL & GAS - 5.25%
BP plc, ADR.................... 80,380 4,682
ChevronTexaco Corporation...... 87,628 4,650
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
ConocoPhillips................. 122,688 $ 10,344
Devon Energy Corporation....... 37,100 2,744
Equitable Resources,
Incorporated................. 13,300 735
Kerr-McGee Corporation......... 26,800 1,587
Occidental Petroleum
Corporation.................. 112,400 6,275
Petro-Canada................... 25,800 1,406
Valero Energy Corporation...... 58,900 2,531
--------
TOTAL OIL & GAS............ 34,954
--------
TOTAL ENERGY............... 39,122
--------
FINANCIALS - 18.14%
BANKS - 5.87%
Bank of America Corporation.... 268,218 12,014
Comerica, Incorporated......... 23,300 1,433
Federal Home Loan Mortgage
Corporation.................. 59,700 3,976
KeyCorp Limited................ 82,800 2,781
PNC Financial Services Group,
Incorporated................. 48,478 2,535
UnionBanCal Corporation........ 10,500 638
U.S. Bancorp, Incorporated..... 95,860 2,743
Wachovia Corporation+.......... 56,600 2,785
Washington Mutual,
Incorporated+................ 177,200 6,859
Wells Fargo & Company+......... 56,600 3,380
--------
TOTAL BANKS................ 39,144
--------
DIVERSIFIED FINANCIALS - 5.53%
American Express Company....... 16,200 860
Bear Stearns Companies,
Incorporated................. 22,300 2,113
CIT Group, Incorporated........ 30,800 1,244
Citigroup, Incorporated........ 202,242 8,973
Federal National Mortgage
Association.................. 30,800 2,161
Goldman Sachs Group,
Incorporated................. 18,800 1,849
MBNA Corporation............... 76,300 1,956
Merrill Lynch & Company,
Incorporated................. 36,600 1,974
J P Morgan Chase & Company..... 203,734 7,864
Morgan Stanley Dean Witter &
Company...................... 46,400 2,371
Principal Financial Group,
Incorporated................. 67,600 2,553
SLM Corporation................ 64,900 2,937
--------
TOTAL DIVERSIFIED
FINANCIALS............... 36,855
--------
INSURANCE - 6.22%
Ace Limited+................... 58,000 2,207
Allstate Corporation........... 148,700 7,151
American International Group,
Incorporated................. 29,100 1,767
Anthem, Incorporated+*......... 14,700 1,182
AON Corporation................ 31,600 645
Assurant, Incorporated......... 49,500 1,335
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
43
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Conseco, Incorporated+......... 76,600 $ 1,284
Hartford Financial Services
Group, Incorporated.......... 20,600 1,205
Loews Corporation.............. 26,000 1,557
MetLife, Incorporated.......... 207,680 7,964
MGIC Investments Corporation... 42,600 2,740
Prudential Financial,
Incorporated................. 84,500 3,927
The St. Paul Travelers
Companies, Incorporated...... 149,300 5,070
Wellpoint Health Networks,
Incorporated+................ 11,600 1,133
XL Capital Limited+............ 31,800 2,306
--------
TOTAL INSURANCE............ 41,473
--------
REAL ESTATE - 0.52%
Equity Office Properties
Trust........................ 124,000 3,487
--------
TOTAL REAL ESTATE.......... 3,487
--------
TOTAL FINANCIALS........... 120,959
--------
HEALTH CARE - 4.17%
HEALTH CARE EQUIPMENT & SUPPLIES - 0.58%
Baxter International,
Incorporated................. 124,600 3,833
--------
TOTAL HEALTH CARE EQUIPMENT
& SUPPLIES............... 3,833
--------
HEALTH CARE PROVIDERS & SERVICES - 1.58%
Aetna, Incorporated+........... 39,000 3,705
Cigna Corporation.............. 27,900 1,771
HCA, Incorporated.............. 62,600 2,299
Health Net, Incorporated+...... 50,100 1,215
Tenet Healthcare Corporation+.. 142,300 1,526
--------
TOTAL HEALTH CARE PROVIDERS
& SERVICES............... 10,516
--------
PHARMACEUTICALS - 2.01%
Bristol-Myers Squibb Company... 187,300 4,388
McKesson Corporation........... 25,800 688
Merck & Company,
Incorporated................. 81,800 2,561
Pfizer, Incorporated........... 34,500 999
Schering Plough Corporation.... 164,000 2,970
Wyeth Corporation+............. 45,000 1,784
--------
TOTAL PHARMACEUTICALS...... 13,390
--------
TOTAL HEALTH CARE.......... 27,739
--------
INDUSTRIALS - 8.23%
AEROSPACE & DEFENSE - 3.08%
Boeing Company................. 124,000 6,188
Honeywell International,
Incorporated................. 66,500 2,240
Lockheed Martin Corporation.... 56,400 3,107
Raytheon Company............... 85,900 3,134
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Textron, Incorporated.......... 53,100 $ 3,619
United Technologies
Corporation.................. 23,900 2,218
--------
TOTAL AEROSPACE &
DEFENSE.................. 20,506
--------
COMMERCIAL SERVICES & SUPPLIES - 1.31%
Cendant Corporation............ 296,600 6,107
Waste Management,
Incorporated+................ 92,907 2,646
--------
TOTAL COMMERCIAL SERVICES &
SUPPLIES................. 8,753
--------
ELECTRICAL EQUIPMENT - 0.98%
American Power Conversion
Corporation.................. 81,400 1,569
Emerson Electrical Company..... 77,000 4,932
--------
TOTAL ELECTRICAL
EQUIPMENT................ 6,501
--------
INDUSTRIAL CONGLOMERATES - 1.07%
Tyco International Limited..... 228,801 7,127
--------
TOTAL INDUSTRIAL
CONGLOMERATES............ 7,127
--------
MACHINERY - 0.70%
Caterpillar, Incorporated...... 29,300 2,360
ITT Industries, Incorporated... 28,400 2,304
--------
TOTAL MACHINERY............ 4,664
--------
TRANSPORTATION - 1.09%
Burlington Northern Santa Fe
Corporation.................. 65,600 2,743
CSX Corporation................ 124,100 4,529
--------
TOTAL TRANSPORTATION....... 7,272
--------
TOTAL INDUSTRIALS.......... 54,823
--------
INFORMATION TECHNOLOGY - 3.06%
COMPUTERS & PERIPHERALS - 1.14%
Hewlett Packard Company........ 171,400 3,198
International Business Machines
Corporation.................. 49,200 4,416
--------
TOTAL COMPUTERS &
PERIPHERALS.............. 7,614
--------
IT CONSULTING & SERVICES - 1.36%
Computer Sciences
Corporation+................. 56,500 2,806
Electronic Data Systems
Corporation*................. 294,900 6,273
--------
TOTAL IT CONSULTING &
SERVICES................. 9,079
--------
SOFTWARE - 0.56%
Computer Associates
International,
Incorporated................. 135,600 3,757
--------
TOTAL SOFTWARE............. 3,757
--------
TOTAL INFORMATION
TECHNOLOGY............... 20,450
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
44
AMERICAN AADVANTAGE BALANCED FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
MATERIALS - 3.61%
CHEMICALS - 2.07%
Air Products & Chemicals,
Incorporated................. 35,000 $ 1,861
E. I. du Pont de Nemours &
Company...................... 35,900 1,539
Eastman Chemical Company....... 30,000 1,424
Hercules, Incorporated+........ 128,400 1,834
Imperial Chemical Industries
plc, ADR..................... 108,300 1,670
Lyondell Chemical Company*..... 165,700 3,808
PPG Industries, Incorporated... 26,200 1,670
--------
TOTAL CHEMICALS............ 13,806
--------
METALS & MINING - 0.57%
Alcoa, Incorporated............ 116,796 3,796
--------
TOTAL METALS & MINING...... 3,796
--------
PAPER & FOREST PRODUCTS - 0.97%
International Paper Company.... 33,300 1,283
Sappi Limited, ADR............. 213,000 3,086
UPM Kymmene Corporation,
ADR*......................... 62,900 1,249
Weyerhaeuser Company+.......... 13,800 864
--------
TOTAL PAPER & FOREST
PRODUCTS................. 6,482
--------
TOTAL MATERIALS............ 24,084
--------
TELECOMMUNICATION SERVICES - 0.91%
DIVERSIFIED TELECOMMUNICATION - 0.82%
SBC Communications,
Incorporated................. 31,300 790
Nokia Corporation, ADR......... 100,600 1,551
Verizon Communications,
Incorporated+................ 80,428 3,145
--------
TOTAL DIVERSIFIED
TELECOMMUNICATION........ 5,486
--------
WIRELESS TELECOMMUNICATION - 0.09%
Alltel Corporation............. 11,500 632
--------
TOTAL WIRELESS
TELECOMMUNICATION........ 632
--------
TOTAL TELECOMMUNICATION
SERVICES................. 6,118
--------
UTILITIES - 3.59%
American Electric Power
Company, Incorporated*....... 182,000 5,993
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
CenterPoint Energy,
Incorporated*................ 132,600 $ 1,394
Entergy Corporation............ 63,900 4,177
FirstEnergy Corporation........ 80,000 3,306
Florida Power and Light Group,
Incorporated................. 45,000 3,101
General Electric Company....... 75,600 2,579
Public Service Enterprise
Group, Incorporated.......... 20,400 869
Reliant Resources,
Incorporated+*............... 144,956 1,490
Teco Energy, Incorporated*..... 70,600 988
--------
TOTAL UTILITIES............ 23,897
--------
TOTAL COMMON STOCK......... 393,652
--------
</Table>
<Table>
<Caption>
PAR
AMOUNT
-------
SHORT-TERM INVESTMENTS - 24.34%
UNITED STATES TREASURY BILLS - 5.45%
1.62%, Due 12/9/2004 (Note B)..... $4,325 4,318
1.62%, Due 12/9/2004*............. 13,000 12,976
1.70%, Due 11/4/2004*............. 19,000 18,997
------
TOTAL UNITED STATES TREASURY
BILLS......................... 36,291
------
</Table>
<Table>
<Caption>
SHARES
----------
OTHER SHORT-TERM INVESTMENTS - 18.89%
American AAdvantage Money Market
Select Fund (Notes C and D)... 67,547,447 67,547
AMR Investments Enhanced Cash
Business Trust (Notes C and
D)............................ 58,359,465 58,359
--------
TOTAL OTHER SHORT-TERM
INVESTMENTS............... 125,906
--------
TOTAL SHORT-TERM
INVESTMENTS............... 162,197
--------
TOTAL INVESTMENTS - 112.37%
(COST $659,806)............... 748,820
--------
LIABILITIES, NET OF OTHER
ASSETS - (12.37%)............. (82,451)
--------
TOTAL NET ASSETS - 100%......... $666,369
========
</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 $3,923 or 0.59% of net assets.
(B) At October 31, 2004, security held as collateral for open futures contracts.
(C) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(D) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan at October 31, 2004. See Note
5.
+ - Non-income producing security.
See accompanying notes
- --------------------------------------------------------------------------------
45
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
COMMON STOCK - 94.76%
CONSUMER DISCRETIONARY - 10.28%
HOTELS, RESTAURANTS & LEISURE - 2.83%
Carnival Corporation............ 134,100 $ 6,780
Interpublic Group Companies,
Incorporated+................. 196,500 2,409
Mattel, Incorporated............ 172,400 3,019
McDonald's Corporation.......... 75,100 2,189
MGM Mirage, Incorporated+....... 107,500 5,784
Yum Brands, Incorporated+....... 54,300 2,362
--------
TOTAL HOTELS, RESTAURANTS &
LEISURE................... 22,543
--------
HOUSEHOLD DURABLES - 2.41%
Centex Corporation.............. 157,900 8,201
Fortune Brands, Incorporated.... 27,100 1,973
Koninklijke Philips Electronics
NV............................ 165,266 3,937
Matsushita Electric Industrial
Company Limited, ADR.......... 191,000 2,771
Pulte Homes, Incorporated*...... 41,700 2,288
--------
TOTAL HOUSEHOLD DURABLES.... 19,170
--------
LEISURE EQUIPMENT & PRODUCTS - 0.46%
Eastman Kodak Company*.......... 120,000 3,634
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS.................. 3,634
--------
MEDIA - 1.08%
Clear Channel Communications,
Incorporated.................. 72,000 2,405
The Walt Disney Company......... 136,000 3,430
Liberty Media Corporation+...... 76,000 2,740
--------
TOTAL MEDIA................. 8,575
--------
MULTILINE RETAIL - 3.02%
Federated Department Stores,
Incorporated.................. 69,100 3,486
May Department Stores Company... 83,900 2,186
J.C. Penney Company,
Incorporated.................. 122,500 4,237
Sears, Roebuck, & Company....... 270,900 9,482
Target Corporation.............. 93,300 4,667
--------
TOTAL MULTILINE RETAIL...... 24,058
--------
TEXTILES & APPAREL - 0.48%
Liz Claiborne, Incorporated..... 52,000 2,126
Polo Ralph Lauren Corporation... 46,400 1,714
--------
TOTAL TEXTILES & APPAREL.... 3,840
--------
TOTAL CONSUMER
DISCRETIONARY............. 81,820
--------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
CONSUMER STAPLES - 9.23%
FOOD & DRUG RETAILING - 0.50%
Albertson's, Incorporated*...... 83,900 $ 1,914
Safeway, Incorporated+.......... 113,700 2,074
--------
TOTAL FOOD & DRUG
RETAILING................. 3,988
--------
FOOD PRODUCTS - 4.10%
Archer-Daniels-Midland Company.. 199,000 3,855
Conagra, Incorporated........... 210,700 5,562
Dean Foods Company+............. 135,100 4,033
General Mills, Incorporated..... 45,600 2,018
Kellogg Company................. 87,000 3,741
Kraft Foods, Incorporated....... 133,400 4,443
Performance Food Group
Company+*..................... 106,000 2,466
Sara Lee Company................ 184,128 4,287
Unilever plc, ADR*.............. 66,000 2,250
--------
TOTAL FOOD PRODUCTS......... 32,655
--------
HOUSEHOLD PRODUCTS - 0.36%
Kimberly Clark Corporation...... 48,100 2,870
--------
TOTAL HOUSEHOLD PRODUCTS.... 2,870
--------
TOBACCO - 4.27%
Altria Group, Incorporated...... 321,900 15,599
Gallaher Group plc, ADR......... 70,800 3,582
Imperial Tobacco Group plc,
ADR*.......................... 183,500 8,615
UST, Incorporated............... 150,400 6,190
--------
TOTAL TOBACCO............... 33,986
--------
TOTAL CONSUMER STAPLES...... 73,499
--------
ENERGY - 8.87%
ENERGY EQUIPMENT & SERVICES - 1.33%
American Power Conversion
Company....................... 165,000 3,181
General Electric Company........ 109,400 3,733
Weatherford International
Limited+...................... 70,900 3,705
--------
TOTAL ENERGY EQUIPMENT &
SERVICES.................. 10,619
--------
OIL & GAS - 7.54%
BP plc, ADR..................... 106,036 6,177
ChevronTexaco Corporation....... 184,862 9,809
ConocoPhillips.................. 226,722 19,115
Devon Energy Corporation........ 56,800 4,201
Equitable Resources,
Incorporated.................. 18,400 1,017
Kerr-McGee Corporation.......... 46,600 2,760
Occidental Petroleum
Corporation................... 184,900 10,323
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
46
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Petro-Canada.................... 43,500 $ 2,370
Valero Energy Corporation....... 99,300 4,267
--------
TOTAL OIL & GAS............. 60,039
--------
TOTAL ENERGY................ 70,658
--------
FINANCIALS - 27.30%
BANKS - 7.82%
Bank of America Corporation..... 400,642 17,945
Comerica, Incorporated.......... 39,500 2,430
KeyCorp Limited................. 121,900 4,095
Mitsubishi Tokyo Financial
Group, Incorporated, ADR...... 356,000 3,022
PNC Financial Services Group,
Incorporated.................. 76,027 3,976
TCF Financial Corporation....... 74,600 2,351
U.S. Bancorp, Incorporated...... 147,560 4,222
UnionBanCal Corporation......... 17,800 1,081
Wachovia Corporation+........... 77,200 3,799
Washington Mutual,
Incorporated+*................ 260,500 10,084
Wells Fargo & Company+.......... 155,500 9,286
--------
TOTAL BANKS................. 62,291
--------
DIVERSIFIED FINANCIALS - 9.34%
American Express Company........ 23,400 1,242
Bear Stearns Companies,
Incorporated.................. 33,000 3,127
Charles Schwab Corporation...... 313,000 2,864
CIT Group, Incorporated*........ 51,700 2,089
Citigroup, Incorporated......... 303,538 13,468
Federal Home Loan Mortgage
Corporation................... 100,600 6,700
Federal National Mortgage
Association................... 46,000 3,227
Goldman Sachs Group,
Incorporated.................. 26,700 2,627
ING Groep NV, ADR*.............. 161,678 4,305
MBNA Corporation................ 123,400 3,163
JP Morgan Chase & Company....... 417,898 16,131
Merrill Lynch & Company,
Incorporated.................. 61,800 3,333
Morgan Stanley Dean Witter &
Company....................... 62,900 3,214
Principal Financial Group,
Incorporated.................. 114,000 4,305
SLM Corporation................. 101,600 4,598
--------
TOTAL DIVERSIFIED
FINANCIALS................ 74,393
--------
INSURANCE - 9.46%
Ace Limited+.................... 88,900 3,384
Allstate Corporation............ 249,328 11,990
American International Group,
Incorporated.................. 102,800 6,241
Anthem, Incorporated+*.......... 23,100 1,857
AON Corporation................. 72,200 1,474
Assurant, Incorporated.......... 83,400 2,250
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Chubb Corporation............... 51,700 $ 3,729
Conseco, Incorporated+.......... 129,200 2,165
Hartford Financial Services
Group, Incorporated........... 34,700 2,029
Loews Corporation............... 38,300 2,294
MetLife, Incorporated........... 341,600 13,100
MGIC Investments Corporation.... 68,000 4,373
Prudential Financial,
Incorporated.................. 141,900 6,594
The St. Paul Travelers
Companies, Incorporated....... 243,400 8,266
Wellpoint Health Networks,
Incorporated+................. 18,200 1,778
XL Capital Limited+............. 51,900 3,763
--------
TOTAL INSURANCE............. 75,287
--------
REAL ESTATE - 0.68%
Equity Office Properties
Trust......................... 193,300 5,436
--------
TOTAL REAL ESTATE........... 5,436
--------
TOTAL FINANCIALS............ 217,407
--------
HEALTH CARE - 6.58%
HEALTH CARE EQUIPMENT & SUPPLIES - 1.47%
Alcon, Incorporated+............ 28,800 2,051
C. R. Bard, Incorporated........ 64,300 3,652
Baxter International,
Incorporated.................. 194,900 5,995
--------
TOTAL HEALTH CARE EQUIPMENT
& SUPPLIES................ 11,698
--------
HEALTH CARE PROVIDERS & SERVICES - 2.18%
Aetna, Incorporated+............ 65,800 6,251
Cigna Corporation............... 40,700 2,583
HCA, Incorporated............... 105,900 3,890
Health Net, Incorporated+....... 84,500 2,050
Tenet Healthcare Corporation+... 239,900 2,572
--------
TOTAL HEALTH CARE PROVIDERS
& SERVICES................ 17,346
--------
PHARMACEUTICALS - 2.93%
Astrazeneca plc, ADR............ 75,000 3,090
Bristol-Myers Squibb Company.... 275,700 6,460
McKesson Corporation............ 35,200 938
Merck & Company, Incorporated... 134,600 4,214
Pfizer, Incorporated............ 50,200 1,453
Schering Plough Corporation..... 260,100 4,710
Wyeth Corporation+.............. 61,300 2,431
--------
TOTAL PHARMACEUTICALS....... 23,296
--------
TOTAL HEALTH CARE........... 52,340
--------
INDUSTRIALS - 12.24%
AEROSPACE & DEFENSE - 3.80%
Boeing Company.................. 256,600 12,804
L3 Communications Holding
Corporation................... 55,400 3,653
Lockheed Martin Corporation..... 95,500 5,261
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
47
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Raytheon Company................ 151,900 $ 5,541
United Technologies
Corporation................... 32,100 2,980
--------
TOTAL AEROSPACE & DEFENSE... 30,239
--------
COMMERCIAL SERVICES & SUPPLIES - 1.86%
Cendant Corporation............. 501,900 10,334
Waste Management,
Incorporated+................. 157,165 4,476
--------
TOTAL COMMERCIAL SERVICES &
SUPPLIES.................. 14,810
--------
ELECTRICAL EQUIPMENT - 1.43%
Emerson Electrical Company...... 125,900 8,064
Molex, Incorporated............. 128,000 3,292
--------
TOTAL ELECTRICAL
EQUIPMENT................. 11,356
--------
INDUSTRIAL CONGLOMERATES - 2.88%
Honeywell International,
Incorporated.................. 82,900 2,792
Textron, Incorporated........... 72,000 4,907
Tyco International Limited...... 489,300 15,242
--------
TOTAL INDUSTRIAL
CONGLOMERATES............. 22,941
--------
MACHINERY - 0.91%
Caterpillar, Incorporated....... 44,800 3,608
ITT Industries, Incorporated.... 45,200 3,668
--------
TOTAL MACHINERY............. 7,276
--------
TRANSPORTATION - 1.36%
Burlington Northern Santa Fe
Corporation................... 89,500 3,742
CSX Corporation................. 195,200 7,125
--------
TOTAL TRANSPORTATION........ 10,867
--------
TOTAL INDUSTRIALS........... 97,489
--------
INFORMATION TECHNOLOGY - 7.15%
COMMUNICATIONS EQUIPMENT - 0.38%
Lucent Technologies,
Incorporated+*................ 857,000 3,042
--------
TOTAL COMMUNICATIONS
EQUIPMENT................. 3,042
--------
COMPUTERS & PERIPHERALS - 3.15%
Apple Computer, Incorporated+... 118,700 6,235
Hewlett Packard Company......... 239,600 4,471
International Business Machines
Corporation................... 109,700 9,846
NCR Corporation+................ 80,700 4,547
--------
TOTAL COMPUTERS &
PERIPHERALS............... 25,099
--------
IT CONSULTING & SERVICES - 1.80%
Computer Sciences Corporation+.. 74,700 3,710
Electronic Data Systems
Corporation*.................. 496,900 10,569
--------
TOTAL IT CONSULTING &
SERVICES.................. 14,279
--------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.41%
Freescale Semiconductor,
Incorporated+*................ 73,000 $ 1,134
Texas Instruments,
Incorporated.................. 87,000 2,127
--------
TOTAL SEMICONDUCTOR
EQUIPMENT & PRODUCTS...... 3,261
--------
SOFTWARE - 1.41%
Autodesk, Incorporated.......... 93,000 4,906
Computer Associates
International, Incorporated... 228,700 6,337
--------
TOTAL SOFTWARE.............. 11,243
--------
TOTAL INFORMATION
TECHNOLOGY................ 56,924
--------
MATERIALS - 5.86%
CHEMICALS - 3.21%
Air Products & Chemicals,
Incorporated.................. 112,100 5,961
Cytec Industries,
Incorporated.................. 79,700 3,707
E. I. du Pont de Nemours &
Company....................... 48,800 2,092
Hercules, Incorporated+......... 173,400 2,476
Imperial Chemical Industries
plc, ADR...................... 156,900 2,419
Lyondell Chemical Company*...... 280,900 6,455
PPG Industries, Incorporated.... 38,700 2,467
--------
TOTAL CHEMICALS............. 25,577
--------
METALS & MINING - 0.76%
Alcoa, Incorporated............. 185,668 6,034
--------
TOTAL METALS & MINING....... 6,034
--------
PAPER & FOREST PRODUCTS - 1.89%
International Paper Company..... 53,800 2,072
Sappi Limited, ADR*............. 277,000 4,014
UPM Kymmene Corporation, ADR*... 103,100 2,047
Weyerhaeuser Company+........... 109,900 6,884
--------
TOTAL PAPER & FOREST
PRODUCTS.................. 15,017
--------
TOTAL MATERIALS............. 46,628
--------
TELECOMMUNICATION SERVICES - 2.08%
DIVERSIFIED TELECOMMUNICATION - 1.18%
SBC Communications,
Incorporated.................. 161,800 4,087
Verizon Communications,
Incorporated+................. 135,746 5,308
--------
TOTAL DIVERSIFIED
TELECOMMUNICATION......... 9,395
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
48
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
WIRELESS TELECOMMUNICATION - 0.90%
Alltel Corporation.............. 19,400 $ 1,066
Nokia Corporation, ADR.......... 150,400 2,319
Vodafone Group plc, ADR+........ 146,000 3,765
--------
TOTAL WIRELESS
TELECOMMUNICATION......... 7,150
--------
TOTAL TELECOMMUNICATION
SERVICES.................. 16,545
--------
UTILITIES - 5.17%
ELECTRIC UTILITIES - 4.37%
American Electric Power Company,
Incorporated.................. 282,100 9,290
Centerpoint Energy,
Incorporated*................. 231,500 2,433
Entergy Corporation............. 103,200 6,745
FirstEnergy Corporation......... 145,900 6,030
Florida Power and Light Group,
Incorporated.................. 75,800 5,223
Public Service Enterprise Group,
Incorporated.................. 29,400 1,252
Reliant Resources,
Incorporated+................. 231,347 2,378
Teco Energy, Incorporated*...... 104,500 1,463
--------
TOTAL ELECTRIC UTILITIES.... 34,814
--------
MULTI-UTILITIES - 0.80%
Duke Energy Corporation......... 259,400 6,363
--------
TOTAL MULTI-UTILITIES....... 6,363
--------
TOTAL UTILITIES............. 41,177
--------
TOTAL COMMON STOCK.......... 754,487
--------
</Table>
<Table>
<Caption>
PAR
AMOUNT AMOUNT
----------- ---------
(DOLLARS IN THOUSANDS)
SHORT-TERM INVESTMENTS - 10.34%
U.S. TREASURY BILLS - 0.53%
1.62%, Due 12/09/2004 (Note
A)............................ $ 4,195 $ 4,188
--------
TOTAL U.S. TREASURY BILLS... 4,188
--------
</Table>
<Table>
<Caption>
SHARES
----------
OTHER SHORT-TERM INVESTMENTS - 9.81%
American AAdvantage Money Market
Select Fund (Notes B and C)... 55,682,793 55,683
AMR Investments Enhanced Cash
Business Trust (Notes B and
C)............................ 22,401,754 22,402
--------
TOTAL OTHER SHORT-TERM
INVESTMENTS............... 78,085
--------
TOTAL SHORT-TERM
INVESTMENTS............... 82,273
--------
TOTAL INVESTMENTS - 105.10%
(COST $687,450)............... 836,760
--------
LIABILITIES, NET OF OTHER
ASSETS - (5.10%).............. (40,614)
--------
TOTAL NET ASSETS - 100%......... $796,146
========
</Table>
- ---------------
(A) At October 31, 2004, security held as collateral for open futures contracts.
(B) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(C) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan at October 31, 2004. See Note 5
+ - Non-income producing security.
See accompanying notes
- --------------------------------------------------------------------------------
49
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
COMMON STOCK - 100.40%
CONSUMER DISCRETIONARY - 17.75%
AUTO COMPONENTS - 0.17%
Johnson Controls, Incorporated... 1,200 $ 69
Lear Corporation................. 500 27
--------
TOTAL AUTO COMPONENTS........ 96
--------
AUTOMOBILES - 0.62%
Ford Motor Company............... 23,700 309
Harley Davidson, Incorporated.... 600 35
--------
TOTAL AUTOMOBILES............ 344
--------
HOUSEHOLD DURABLES - 0.38%
The Black & Decker Corporation... 1,500 120
Centex Corporation............... 700 36
D R Horton, Incorporated......... 800 24
KB Home.......................... 100 8
Lennar Corporation............... 200 9
Pulte Homes, Incorporated........ 200 11
--------
TOTAL HOUSEHOLD DURABLES..... 208
--------
HOTELS, RESTAURANTS & LEISURE - 2.21%
Carnival Corporation............. 2,800 142
Choice Hotels, Incorporated...... 2,600 130
GTECH Holdings Corporation....... 5,400 128
Hilton Hotels Corporation........ 2,400 48
International Game Technology,
Incorporated................... 3,200 106
Marriott International,
Incorporated................... 2,100 114
McDonald's Corporation........... 6,500 189
Polaris Industries,
Incorporated................... 1,500 89
Starwood Hotels and Resorts...... 2,000 95
Yum Brands, Incorporated+........ 4,100 178
--------
TOTAL HOTELS, RESTAURANTS &
LEISURE.................... 1,219
--------
INTERNET & CATALOG RETAIL - 1.29%
Ebay, Incorporated+.............. 7,300 713
--------
TOTAL INTERNET & CATALOG
RETAIL..................... 713
--------
LEISURE EQUIPMENT & PRODUCTS - 0.20%
Hasbro, Incorporated............. 2,600 46
Mattel, Incorporated............. 3,700 65
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS................... 111
--------
MEDIA - 5.28%
The Walt Disney Company.......... 1,600 40
Echostar Communications
Corporation+................... 2,500 79
Fox Entertainment Group,
Incorporated+.................. 6,600 196
Gannett Company, Incorporated.... 2,400 199
Harman International Industries,
Incorporated+.................. 5,500 661
Liberty Media Corporation+....... 6,200 224
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
The E. W. Scripps Company........ 3,500 $ 167
Time Warner, Incorporated+....... 22,000 366
Viacom, Incorporated+............ 26,788 977
--------
TOTAL MEDIA.................. 2,909
--------
MULTILINE RETAIL - 2.87%
Costco Wholesale Corporation..... 800 38
Family Dollar Stores,
Incorporated................... 400 12
Kmart Holding Corporation+*...... 4,300 396
Kohl's Corporation+.............. 5,000 254
Target Corporation............... 5,000 250
Wal-Mart Stores, Incorporated+... 11,700 631
--------
TOTAL MULTILINE RETAIL....... 1,581
--------
SPECIALTY RETAIL - 4.02%
Abercrombie and Fitch Company.... 2,500 98
Avon Products, Incorporated...... 1,800 71
Barnes and Noble, Incorporated+.. 10,800 359
Bed Bath & Beyond,
Incorporated+.................. 2,800 114
Circuit City Stores,
Incorporated................... 15,400 250
Foot Locker, Incorporated........ 2,100 51
Gap Inc.......................... 1,100 22
Home Depot, Incorporated......... 15,600 641
Lowe's Companies, Incorporated... 6,800 383
Petco Animal Supplies,
Incorporated+.................. 2,600 93
TJX Companies, Incorporated...... 5,600 134
--------
TOTAL SPECIALTY RETAIL....... 2,216
--------
TEXTILES & APPAREL - 0.71%
Jones Apparel Group,
Incorporated................... 3,000 106
Nike, Incorporated............... 3,500 285
--------
TOTAL TEXTILES & APPAREL..... 391
--------
TOTAL CONSUMER
DISCRETIONARY.............. 9,788
--------
CONSUMER STAPLES - 8.89%
BEVERAGES - 2.12%
Anheuser Busch Companies,
Incorporated................... 1,400 70
Coca-Cola Company................ 19,300 785
Pepsico, Incorporated............ 6,300 312
--------
TOTAL BEVERAGES.............. 1,167
--------
FOOD & DRUG RETAILING - 1.11%
Albertson's, Incorporated........ 5,800 132
Longs Drug Stores Corporation.... 1,400 35
Pilgrims Pride Corporation....... 4,200 114
SUPERVALU, INC................... 6,100 180
Sysco Corporation................ 4,100 132
Walgreen Company+................ 500 18
--------
TOTAL FOOD & DRUG
RETAILING.................. 611
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
50
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
FOOD PRODUCTS - 1.00%
Kraft Foods, Incorporated........ 2,800 $ 93
Tyson Foods, Incorporated........ 29,200 423
Wm. Wrigley Jr. Company+......... 500 33
--------
TOTAL FOOD PRODUCTS.......... 549
--------
HOUSEHOLD PRODUCTS - 2.50%
Procter & Gamble Company......... 26,900 1,377
--------
TOTAL HOUSEHOLD PRODUCTS..... 1,377
--------
PERSONAL PRODUCTS - 1.79%
Gillette Company................. 23,800 987
--------
TOTAL PERSONAL PRODUCTS...... 987
--------
TOBACCO - 0.37%
Altria Group, Incorporated....... 4,200 204
--------
TOTAL TOBACCO................ 204
--------
TOTAL CONSUMER STAPLES....... 4,895
--------
ENERGY - 0.79%
ENERGY EQUIPMENT & SERVICES - 0.58%
Baker Hughes, Incorporated....... 2,100 90
Cooper Cameron Corporation+...... 2,300 111
Pride International,
Incorporated+.................. 4,800 89
Rowan Companies, Incorporated+... 1,100 28
--------
TOTAL ENERGY EQUIPMENT &
SERVICES................... 318
--------
OIL & GAS - 0.21%
Burlington Resources,
Incorporated................... 600 25
Unocal Corporation............... 2,200 92
--------
TOTAL OIL & GAS.............. 117
--------
TOTAL ENERGY................. 435
--------
FINANCIALS - 12.42%
BANKS - 1.77%
Bank of America Corporation...... 6,900 309
Bank of Hawaii Corporation....... 3,500 167
Bank of New York, Incorporated... 1,700 55
North Fork Bancorporation,
Incorporated................... 1,600 71
UnionBanCal Corporation.......... 2,900 176
U.S. Bancorp, Incorporated....... 1,000 29
Washington Mutual,
Incorporated+.................. 700 27
Wells Fargo & Company+........... 2,400 143
--------
TOTAL BANKS.................. 977
--------
DIVERSIFIED FINANCIALS - 5.87%
AmeriCredit Corporation+......... 5,500 107
Charles Schwab Corporation....... 13,500 124
CIT Group, Incorporated.......... 2,600 105
Citigroup, Incorporated.......... 10,300 457
Countrywide Financial
Corporation.................... 9,200 294
Doral Financial Corporation...... 2,200 92
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
Federal Home Loan Mortgage
Corporation.................... 10,500 $ 699
Federal National Mortgage
Corporation.................... 1,900 133
First Data Corporation........... 7,700 318
Moody's Corporation.............. 7,600 591
Morgan Stanley Dean Witter &
Company........................ 3,300 169
Nuveen Investments,
Incorporated................... 1,800 57
State Street Corporation......... 2,000 90
--------
TOTAL DIVERSIFIED
FINANCIALS................. 3,236
--------
INSURANCE - 4.46%
Alleghany Corporation+........... 150 43
Allstate Corporation............. 600 29
Ambac Financial Group,
Incorporated................... 8,500 664
Anthem, Incorporated+............ 3,200 257
Genworth Financial,
Incorporated................... 100 2
Hartford Financial Services
Group, Incorporated............ 2,100 123
Loews Corporation................ 8,900 533
MBIA, Incorporated............... 3,500 203
The Progressive Corporation...... 1,400 131
Prudential Financial,
Incorporated................... 7,500 349
Wellpoint Health Networks,
Incorporated+.................. 1,300 127
--------
TOTAL INSURANCE.............. 2,461
--------
REAL ESTATE - 0.32%
CarrAmerica Realty Corporation... 900 29
Equity Office Properties Trust... 1,700 48
Kimco Realty Corporation......... 600 33
Regency Centers Corporation...... 1,400 68
--------
TOTAL REAL ESTATE............ 178
--------
TOTAL FINANCIALS............. 6,852
--------
HEALTH CARE - 23.65%
BIOTECHNOLOGY - 3.71%
Amgen, Incorporated+............. 8,400 477
Biogen Idec, Incorporated+....... 11,900 692
Genentech, Incorporated+......... 14,600 665
Gilead Sciences, Incorporated+... 4,700 163
ImClone Systems, Incorporated+... 1,100 48
--------
TOTAL BIOTECHNOLOGY.......... 2,045
--------
HEALTH CARE EQUIPMENT & SUPPLIES - 3.14%
C.R. Bard, Incorporated.......... 2,700 153
Baxter International,
Incorporated................... 3,400 105
Boston Scientific Corporation+... 10,700 378
Guidant Corporation.............. 7,700 513
Zimmer Holdings, Incorporated+... 7,500 582
--------
TOTAL HEALTH CARE EQUIPMENT &
SUPPLIES................... 1,731
--------
HEALTH CARE PROVIDERS & SERVICES - 2.40%
Aetna, Incorporated+............. 3,200 304
AmerisourceBergen Corporation.... 3,400 187
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
51
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
Becton Dickinson and Company..... 1,300 $ 68
Cardinal Health, Incorporated.... 1,000 47
Covance, Incorporated+........... 800 32
HCA, Incorporated................ 600 22
St. Jude Medical,
Incorporated+.................. 1,200 92
UnitedHealth Group,
Incorporated+.................. 7,900 572
--------
TOTAL HEALTH CARE PROVIDERS &
SERVICES................... 1,324
--------
PHARMACEUTICALS - 14.40%
Allergan, Incorporated........... 1,000 72
Caremark Rx, Incorporated+....... 14,300 429
Forest Laboratories,
Incorporated+.................. 11,100 495
Hospira, Incorporated+........... 100 3
Johnson & Johnson................ 43,100 2,516
Eli Lilly & Company.............. 14,900 818
Medicis Pharmaceutical
Corporation.................... 2,000 81
Merck & Company, Incorporated.... 1,900 59
OSI Pharmaceuticals,
Incorporated+.................. 1,700 110
Pfizer, Incorporated............. 97,560 2,824
Schering Plough Corporation...... 13,700 248
Sepracor, Incorporated+*......... 3,800 175
Wyeth Corporation+............... 2,700 107
--------
TOTAL PHARMACEUTICALS........ 7,937
--------
TOTAL HEALTH CARE............ 13,037
--------
INDUSTRIALS - 7.74%
AEROSPACE & DEFENSE - 2.18%
Boeing Company................... 6,300 314
Lockheed Martin Corporation...... 4,900 270
Raytheon Company................. 11,100 405
United Technologies Corporation.. 2,300 213
--------
TOTAL AEROSPACE & DEFENSE.... 1,202
--------
COMMERCIAL SERVICES & SUPPLIES - 2.45%
Cendant Corporation.............. 25,500 525
FedEx Corporation................ 600 55
W.W. Grainger, Incorporated...... 1,000 59
Hughes Supply, Incorporated...... 6,000 170
Ryder Systems, Incorporated...... 800 40
Staples, Incorporated............ 7,800 232
United Parcel Service,
Incorporated................... 3,100 245
Waste Management, Incorporated+.. 900 26
--------
TOTAL COMMERCIAL SERVICES &
SUPPLIES................... 1,352
--------
INDUSTRIAL CONGLOMERATES - 2.34%
3M Company....................... 7,400 574
General Electric Company......... 10,400 355
Tyco International Limited....... 11,600 361
--------
TOTAL INDUSTRIAL
CONGLOMERATES.............. 1,290
--------
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
MACHINERY - 0.47%
Caterpillar, Incorporated........ 1,400 $ 113
Deere and Company................ 1,800 108
Eaton Corporation................ 600 38
--------
TOTAL MACHINERY.............. 259
--------
TRANSPORTATION - 0.30%
J.B. Hunt Transportation
Services, Incorporated......... 4,100 168
--------
TOTAL TRANSPORTATION......... 168
--------
TOTAL INDUSTRIALS............ 4,271
--------
INFORMATION TECHNOLOGY - 26.16%
COMMUNICATIONS EQUIPMENT - 6.59%
Cisco Systems, Incorporated+..... 48,800 937
Corning, Incorporated+........... 19,100 219
Juniper Networks,
Incorporated+.................. 8,500 226
Motorola, Incorporated........... 49,600 856
Qualcomm, Incorporated........... 33,400 1,396
--------
TOTAL COMMUNICATIONS
EQUIPMENT.................. 3,634
--------
COMPUTERS & PERIPHERALS - 4.60%
Dell, Incorporated+.............. 22,500 789
International Business Machines
Corporation.................... 13,200 1,185
Lexmark International,
Incorporated+.................. 1,600 133
NCR Corporation+................. 4,200 237
Storage Technology Corporation+.. 7,100 192
--------
TOTAL COMPUTERS &
PERIPHERALS................ 2,536
--------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.27%
Broadcom Corporation+............ 1,100 30
Ingram Micro, Incorporated+...... 1,500 26
Intersil Corporation............. 5,700 93
--------
TOTAL ELECTRONIC EQUIPMENT &
INSTRUMENTS................ 149
--------
INTERNET SOFTWARE & SERVICES - 1.44%
Electronic Arts, Incorporated+... 1,300 58
Mercury Interactive
Corporation+................... 1,300 56
Symantec Corporation+............ 11,700 666
Yahoo, Incorporated+............. 300 11
--------
TOTAL INTERNET SOFTWARE &
SERVICES................... 791
--------
IT CONSULTING & SERVICES - 1.37%
Acxiom Corporation............... 22,800 570
Computer Sciences Corporation+... 2,600 129
SunGard Data Systems,
Incorporated+.................. 2,100 56
--------
TOTAL IT CONSULTING &
SERVICES................... 755
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 5.10%
Altera Corporation+.............. 9,400 214
Analog Devices, Incorporated..... 11,800 475
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
52
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
Intel Corporation................ 52,500 $ 1,169
Linear Technology Corporation.... 500 19
Microchip Technology,
Incorporated................... 1,000 30
Micron Technology,
Incorporated+.................. 22,100 269
National Semiconductor
Corporation.................... 9,100 152
Novellus Systems,
Incorporated+.................. 6,400 166
Texas Instruments,
Incorporated................... 4,400 107
Xilinx, Incorporated+............ 6,900 211
--------
TOTAL SEMICONDUCTOR EQUIPMENT
& PRODUCTS................. 2,812
--------
SOFTWARE - 6.79%
Autodesk, Incorporated........... 4,300 227
BMC Software, Incorporated+...... 32,300 611
Microsoft Corporation............ 79,200 2,216
Oracle Corporation+.............. 42,000 532
Take-Two Interactive Software,
Incorporated+.................. 2,300 76
VERITAS Software Corporation+.... 3,800 83
--------
TOTAL SOFTWARE............... 3,745
--------
TOTAL INFORMATION
TECHNOLOGY................. 14,422
--------
MATERIALS - 0.82%
CHEMICALS - 0.16%
Praxair, Incorporated............ 2,100 89
--------
TOTAL CHEMICALS.............. 89
--------
METALS & MINING - 0.66%
Alcoa, Incorporated.............. 3,900 127
Newmont Mining Corporation....... 700 33
Nucor Corporation................ 1,800 76
United States Steel
Corporation.................... 3,500 128
--------
TOTAL METALS & MINING........ 364
--------
TOTAL MATERIALS.............. 453
--------
TELECOMMUNICATION SERVICES - 1.48%
DIVERSIFIED TELECOMMUNICATION - 0.03%
Verizon Communications,
Incorporated+.................. 400 16
--------
TOTAL DIVERSIFIED
TELECOMMUNICATION.......... 16
--------
</Table>
<Table>
<Caption>
SHARES VALUE
---------- ---------
(DOLLARS IN THOUSANDS)
WIRELESS TELECOMMUNICATION SERVICE - 1.45%
Nextel Communications,
Incorporated+.................. 8,800 $ 233
Sprint Corporation............... 25,200 528
Telephone and Data Systems,
Incorporated................... 500 37
--------
TOTAL WIRELESS
TELECOMMUNICATION
SERVICE.................... 798
--------
TOTAL TELECOMMUNICATION
SERVICES................... 814
--------
UTILITIES - 0.70%
NRG Energy, Incorporated+........ 12,300 341
Pinnacle West Capital
Corporation.................... 1,000 43
--------
TOTAL UTILITIES.............. 384
--------
TOTAL COMMON STOCK........... 55,351
--------
SHORT-TERM INVESTMENTS - 9.05%
American AAdvantage Money Market
Select Fund (Notes A and B).... 4,490,847 4,491
AMR Investments Enhanced Cash
Business Trust (Notes A and
B)............................. 360,717 361
iShares Russell 1000 Growth Index
Fund........................... 2,860 131
--------
TOTAL SHORT-TERM
INVESTMENTS................ 4,983
--------
TOTAL INVESTMENTS - 109.45% (COST
$56,694)....................... 60,334
--------
LIABILITIES, NET OF OTHER
ASSETS - (9.45%)............... (5,212)
--------
TOTAL NET ASSETS - 100%.......... $ 55,122
========
</Table>
- ---------------
(A) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(B) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan at October 31, 2004. See Note
5.
+ - Non-income producing security.
See accompanying notes
- --------------------------------------------------------------------------------
53
AMERICAN AADVANTAGE MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
COMMON STOCK - 78.91%
CONSUMER DISCRETIONARY - 14.85%
AUTO COMPONENTS - 4.54%
Advance Auto Parts,
Incorporated+................. 6,000 $ 235
Genuine Parts Company........... 5,900 235
Goodrich Corporation............ 9,700 299
Lear Corporation................ 7,225 390
--------
TOTAL AUTO COMPONENTS....... 1,159
--------
HOTELS RESTAURANTS & LEISURE - 2.73%
Hasbro, Incorporated............ 15,800 280
Royal Caribbean Cruises,
Limited+*..................... 5,900 275
Wendy's International,
Incorporated+................. 4,300 143
--------
TOTAL HOTELS RESTAURANTS &
LEISURE................... 698
--------
HOUSEHOLD DURABLES - 2.66%
Stanley Works................... 7,400 329
Whirlpool Corporation+.......... 5,950 350
--------
TOTAL HOUSEHOLD DURABLES.... 679
--------
LEISURE EQUIPMENT & PRODUCTS - 1.08%
Brunswick Corporation........... 5,900 277
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS.................. 277
--------
MEDIA - 1.44%
R.H. Donnelley Corporation+..... 6,850 371
--------
TOTAL MEDIA................. 371
--------
SPECIALTY RETAIL - 2.40%
Dillards, Incorporated.......... 4,250 87
Dollar General Corporation...... 17,900 344
Rent-A-Center, Incorporated+.... 7,525 181
--------
TOTAL SPECIALTY RETAIL...... 612
--------
TOTAL CONSUMER
DISCRETIONARY............. 3,796
--------
CONSUMER STAPLES - 4.60%
FOOD PRODUCTS - 2.21%
Dean Foods Company+............. 10,400 310
Del Monte Foods Company+........ 23,750 254
--------
TOTAL FOOD PRODUCTS......... 564
--------
TOBACCO - 2.39%
Universal Corporation*.......... 6,125 280
UST, Incorporated............... 8,000 329
--------
TOTAL TOBACCO............... 609
--------
TOTAL CONSUMER STAPLES...... 1,173
--------
ENERGY - 2.85%
Kerr-McGee Corporation.......... 6,300 373
Marathon Oil Corporation........ 9,300 354
--------
TOTAL ENERGY................ 727
--------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
FINANCIALS - 23.43%
BANKS - 4.27%
Comerica, Incorporated.......... 4,425 $ 272
Peoples Bank*................... 7,200 270
South Financial Group,
Incorporated.................. 9,700 291
TCF Financial Corporation....... 8,200 258
--------
TOTAL BANKS................. 1,091
--------
DIVERSIFIED FINANCIALS - 1.71%
CIT Group, Incorporated......... 6,450 260
Janus Capital Group,
Incorporated.................. 11,600 177
--------
TOTAL DIVERSIFIED
FINANCIALS................ 437
--------
INSURANCE - 15.11%
AON Corporation................. 9,950 203
Axis Capital Holdings
Limited+...................... 5,900 148
First American Corporation...... 6,200 193
IPC Holdings Limited+........... 8,475 343
Loews Corporation*.............. 20,325 550
MBIA, Incorporated.............. 5,025 291
Old Republic International
Corporation................... 10,050 235
Protective Life Corporation..... 4,225 166
Radian Group, Incorporated...... 6,900 331
Torchmark, Incorporated......... 4,450 240
Wellchoice, Incorporated+....... 9,300 388
Willis Group Holdings Limited+.. 10,100 363
XL Capital Limited+............. 5,625 408
--------
TOTAL INSURANCE............. 3,859
--------
REAL ESTATE - 2.34%
American Financial Realty
Trust......................... 22,800 335
Equity Office Properties
Trust......................... 9,300 262
--------
TOTAL REAL ESTATE........... 597
--------
TOTAL FINANCIALS............ 5,984
--------
HEALTH CARE - 5.61%
HEALTH CARE PROVIDERS & SERVICES - 3.33%
Cigna Corporation............... 3,000 190
Health Net, Incorporated+....... 14,175 344
Triad Hospitals,
Incorporated+................. 9,600 317
--------
TOTAL HEALTH CARE PROVIDERS
& SERVICES................ 851
--------
PHARMACEUTICALS - 2.28%
McKesson Corporation............ 11,275 301
Valeant Pharmaceuticals
International................. 11,700 281
--------
TOTAL PHARMACEUTICALS....... 582
--------
TOTAL HEALTH CARE........... 1,433
--------
INDUSTRIALS - 12.93%
AEROSPACE & DEFENSE - 1.10%
Precision Castparts
Corporation................... 4,700 282
--------
TOTAL AEROSPACE & DEFENSE... 282
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
54
AMERICAN AADVANTAGE MID-CAP VALUE FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
BUILDING PRODUCTS - 1.13%
York International
Corporation+.................. 9,075 $ 289
--------
TOTAL BUILDING PRODUCTS..... 289
--------
COMMERCIAL SERVICES & SUPPLIES - 5.78%
Hillenbrand Industries,
Incorporated.................. 5,200 259
MoneyGram International,
Incorporated.................. 10,625 198
Service Corporation
International+................ 25,700 170
United Stationers,
Incorporated+................... 6,425 286
Valassis Communications,
Incorporated+................. 6,975 240
Weight Watchers International,
Incorporated+*................ 9,000 323
--------
TOTAL COMMERCIAL SERVICES &
SUPPLIES.................. 1,476
--------
INDUSTRIAL CONGLOMERATES - 1.29%
Reynolds American,
Incorporated*................. 4,800 331
--------
TOTAL INDUSTRIAL
CONGLOMERATES............. 331
--------
MACHINERY - 2.05%
ITT Industries, Incorporated.... 2,600 211
Kennametal, Incorporated*....... 6,725 313
--------
TOTAL MACHINERY............. 524
--------
TRANSPORTATION - 1.58%
CNF, Incorporated............... 4,075 178
Ryder Systems, Incorporated..... 4,500 225
--------
TOTAL TRANSPORTATION........ 403
--------
TOTAL INDUSTRIALS........... 3,305
--------
INFORMATION TECHNOLOGY - 3.18%
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.40%
American Power Conversion
Corporation*.................. 18,600 359
--------
TOTAL ELECTRONIC EQUIPMENT &
INSTRUMENTS............... 359
--------
IT CONSULTING & SERVICES - 1.78%
BearingPoint, Incorporated+*.... 41,275 359
Electronic Data Systems
Corporation................... 4,500 96
--------
TOTAL IT CONSULTING &
SERVICES.................. 455
--------
TOTAL INFORMATION
TECHNOLOGY................ 814
--------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
MATERIALS - 4.35%
CHEMICALS - 3.06%
Ashland, Incorporated........... 3,350 $ 193
Cytec Industries,
Incorporated.................. 4,425 206
Eastman Chemical Company........ 3,500 166
FMC Corporation+................ 4,925 216
--------
TOTAL CHEMICALS............. 781
--------
CONSTRUCTION MATERIALS - 1.29%
Lafarge North America,
Incorporated*................. 6,725 330
--------
TOTAL CONSTRUCTION
MATERIALS................. 330
--------
TOTAL MATERIALS............. 1,111
--------
UTILITIES - 7.11%
CenterPoint Energy,
Incorporated*................. 14,900 157
Entergy Corporation............. 4,500 294
FirstEnergy Corporation......... 6,400 265
Pinnacle West Capital
Corporation................... 7,900 337
Reliant Energy, Incorporated+... 14,300 147
Wisconsin Energy Corporation+... 11,375 371
Xcel Energy, Incorporated+*..... 14,400 246
--------
TOTAL UTILITIES............. 1,817
--------
TOTAL COMMON STOCK.......... 20,160
--------
</Table>
<Table>
<Caption>
PAR
AMOUNT
----------
SHORT-TERM INVESTMENTS - 29.05%
U.S. TREASURY BILLS - 0.90%
1.62%, Due 12/9/2004 (Note B)... $ 230 230
--------
TOTAL U. S. TREASURY
BILLS..................... 230
--------
</Table>
<Table>
<Caption>
SHARES
----------
OTHER SHORT-TERM INVESTMENTS - 28.15%
American AAdvantage Money Market
Select Fund (Notes A and C)... 6,341,013 6,341
AMR Investments Enhanced Cash
Business Trust (Notes A and
C)............................ 850,131 850
--------
TOTAL OTHER SHORT-TERM
INVESTMENTS............... 7,191
--------
TOTAL SHORT-TERM
INVESTMENTS............... 7,421
--------
TOTAL INVESTMENTS - 107.96%
(COST $27,065)................ 27,581
--------
LIABILITIES, NET OF OTHER
ASSETS - (7.96%).............. (2,035)
--------
TOTAL NET ASSETS - 100%......... $ 25,546
========
</Table>
- ---------------
(A) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(B) At October 31, 2004, security held as collateral for open futures contracts.
(C) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan at October 31, 2004. See Note
5.
+ - Non-income producing security.
See accompanying notes
- --------------------------------------------------------------------------------
55
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
COMMON STOCK - 89.68%
CONSUMER DISCRETIONARY - 18.91%
AUTO COMPONENTS - 2.55%
Aftermarket Technology
Corporation+*............... 8,370 $ 120
American Axle & Manufacturing
Holdings, Incorporated...... 75,900 2,178
Arvinmeritor, Incorporated*... 312,300 5,828
Bandag, Incorporated.......... 55,900 2,557
Borg-Warner Automotive,
Incorporated................ 90,600 4,202
Cooper Tire & Rubber
Company..................... 65,800 1,282
Dana Corporation.............. 285,500 4,257
Group 1 Automotive,
Incorporated+............... 186,000 5,262
Hayes Lemmerz International,
Incorporated+*.............. 279,200 2,323
Sonic Automotive,
Incorporated*............... 161,100 3,259
Superior Industries
International,
Incorporated*............... 113,000 3,082
--------
TOTAL AUTO COMPONENTS..... 34,350
--------
HOTELS RESTAURANTS & LEISURE - 2.32%
Aztar Corporation+*........... 50,900 1,575
Blockbuster, Incorporated*.... 204,000 1,387
Bob Evans Farms,
Incorporated................ 96,600 2,303
CEC Entertainment,
Incorporated+............... 35,500 1,350
Isle of Capri Casinos,
Incorporated+*.............. 18,300 414
Jack in the Box,
Incorporated+............... 121,400 4,051
Jameson Inns, Incorporated.... 687,100 1,161
Kerzner International
Limited+*................... 232,600 11,797
Landry's Restaurants,
Incorporated*............... 29,900 810
Lodgian, Incorporated+........ 203,200 2,093
Magna Entertainment
Corporation+*............... 436,200 2,456
Papa John's International,
Incorporated+*.............. 41,600 1,343
Ryans Restaurant Group,
Incorporated+............... 35,150 492
Sunterra Corporation+*........ 4,200 45
--------
TOTAL HOTELS RESTAURANTS &
LEISURE................. 31,277
--------
HOUSEHOLD DURABLES - 4.12%
American Greetings
Corporation+*............... 222,100 5,875
Beazer Homes USA,
Incorporated*............... 101,700 11,165
Furniture Brands
International,
Incorporated*............... 389,300 8,491
Interface, Incorporated+...... 92,300 802
La-Z-Boy, Incorporated........ 221,000 2,915
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Libbey, Incorporated.......... 11,300 $ 205
Lifetime Hoan Corporation*.... 41,200 574
M.D.C. Holdings,
Incorporated................ 5,518 424
Matthews International
Corporation*................ 29,900 1,002
Maytag Corporation*........... 335,300 5,834
Modtech Holdings,
Incorporated+*.............. 75,100 569
Standard Pacific
Corporation................. 9,800 550
Stanley Furniture Company,
Incorporated*............... 27,900 1,241
The Toro Company.............. 53,500 3,651
WCI Communities,
Incorporated+*.............. 439,300 10,367
The Yankee Candle Company,
Incorporated+*.............. 63,800 1,767
--------
TOTAL HOUSEHOLD
DURABLES................ 55,432
--------
INTERNET & CATALOG RETAIL - 0.20%
School Specialty,
Incorporated+*.............. 65,118 2,665
--------
TOTAL INTERNET & CATALOG
RETAIL.................. 2,665
--------
LEISURE EQUIPMENT & PRODUCTS - 0.76%
Brunswick Corporation......... 147,800 6,935
Callaway Golf Company*........ 20,200 211
Hutchinson Technology,
Incorporated+*.............. 74,600 2,507
JAKKS Pacific,
Incorporated+*.............. 40,200 633
--------
TOTAL LEISURE EQUIPMENT &
PRODUCTS................ 10,286
--------
MEDIA - 0.51%
Courier Corporation*.......... 22,500 979
R.H. Donnelley Corporation+... 45,000 2,441
Gemstar TV-Guide
International,
Incorporated+............... 325,000 1,868
Regal Entertainment Group*.... 80,700 1,607
--------
TOTAL MEDIA............... 6,895
--------
MULTILINE RETAIL - 0.69%
BJ's Wholesale Club,
Incorporated+............... 188,500 5,472
Burlington Coat Factory
Warehouse Corporation....... 144,800 3,196
ShopKo Stores,
Incorporated+*.............. 32,800 565
--------
TOTAL MULTILINE RETAIL.... 9,233
--------
SPECIALTY RETAIL - 6.26%
Abercrombie and Fitch
Company..................... 163,700 6,414
Advance Auto Parts,
Incorporated+............... 251,400 9,835
AnnTaylor Stores
Corporation+................ 160,600 3,607
Barnes & Noble,
Incorporated+............... 156,900 5,220
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
56
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Big 5 Sporting Goods
Corporation*................ 55,100 $ 1,399
Borders Group, Incorporated... 286,100 6,520
Brookstone, Incorporated+*.... 222,450 4,262
Buckle, Incorporated*......... 16,200 418
Cache, Incorporated+.......... 64,000 1,005
Cato Corporation.............. 22,900 526
Charming Shoppes,
Incorporated+............... 473,885 3,616
Circuit City Stores,
Incorporated................ 114,000 1,853
Cost Plus, Incorporated+*..... 97,900 3,162
CSK Auto Corporation+......... 67,900 994
Genesco, Incorporated+........ 16,700 428
Handleman Company*............ 26,900 579
Hollywood Entertainment
Corporation+................ 235,643 2,290
Linens 'n Things,
Incorporated+............... 266,000 6,405
The Men's Wearhouse,
Incorporated+*.............. 314,400 9,772
Pier 1 Imports,
Incorporated................ 109,200 1,960
Regis Corporation............. 46,500 1,990
Rent-A-Center,
Incorporated+............... 18,850 452
Saks Incorporated+*........... 67,200 821
Stage Stores,
Incorporated+*.............. 51,587 1,858
Talbots, Incorporated......... 53,100 1,401
Too, Incorporated+*........... 50,200 1,105
United Auto Group,
Incorporated*............... 29,900 807
Zale Corporation+*............ 195,000 5,561
--------
TOTAL SPECIALTY RETAIL.... 84,260
--------
TEXTILES & APPAREL - 1.50%
Brown Shoe Company,
Incorporated................ 4,300 117
Kellwood Company*............. 103,800 3,266
K-Swiss, Incorporated*........ 137,700 3,443
Reebok International,
Limited..................... 29,600 1,095
Russell Corporation........... 130,400 2,255
The Warnaco Group,
Incorporated+............... 493,600 10,069
--------
TOTAL TEXTILES &
APPAREL................. 20,245
--------
TOTAL CONSUMER
DISCRETIONARY........... 254,643
--------
CONSUMER STAPLES - 3.57%
BEVERAGES - 0.31%
Adolph Coors Company*......... 63,300 4,222
--------
TOTAL BEVERAGES........... 4,222
--------
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
FOOD & DRUG RETAILING - 0.45%
Longs Drug Stores
Corporation*................ 61,300 $ 1,514
Pathmark Stores,
Incorporated+............... 360,400 1,553
Performance Food Group
Company+.................... 51,700 1,203
Ruddick Corporation........... 90,700 1,826
--------
TOTAL FOOD & DRUG
RETAILING............... 6,096
--------
FOOD PRODUCTS - 2.39%
American Italian Pasta
Company*.................... 249,300 5,061
Chiquita Brands International,
Incorporated+*.............. 214,200 3,860
Del Monte Foods Company+...... 1,053,500 11,251
Del Monte Fresh Produce
Company*.................... 45,300 1,190
Green Mountain Coffee
Roasters, Incorporated+*.... 29,000 725
The Hain Celestial Group,
Incorporated+*.............. 50,500 817
J&J Snack Foods
Corporation+*............... 20,100 889
Ralcorp Holdings,
Incorporated+*.............. 101,600 3,734
Sensient Technologies
Corporation*................ 120,400 2,615
Smithfield Foods,
Incorporated+............... 83,200 2,016
--------
TOTAL FOOD PRODUCTS....... 32,158
--------
TOBACCO - 0.42%
Schweitzer Mauduit
International,
Incorporated*............... 13,000 410
Universal Corporation*........ 114,700 5,251
--------
TOTAL TOBACCO............. 5,661
--------
TOTAL CONSUMER STAPLES.... 48,137
--------
ENERGY - 4.88%
ENERGY EQUIPMENT & SERVICES - 0.82%
Dril-Quip, Incorporated+*..... 46,200 1,035
FMC Technologies,
Incorporated+............... 104,300 3,153
Hydril Company LP+............ 39,900 1,755
MDU Resources Group,
Incorporated................ 114,800 2,945
Offshore Logistics,
Incorporated+*.............. 8,600 311
TETRA Technologies,
Incorporated+*.............. 60,000 1,796
--------
TOTAL ENERGY EQUIPMENT &
SERVICES................ 10,995
--------
OIL & GAS - 4.06%
Berry Petroleum Company*...... 2,900 111
Chesapeake Energy
Corporation*................ 456,200 7,336
Cimarex Energy Company+....... 117,400 4,212
Encore Acquisition Company+*.. 439,500 14,350
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
57
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Forest Oil Corporation+*...... 100,800 $ 3,074
Giant Industries,
Incorporated+*.............. 61,700 1,417
The Houston Exploration
Company+*................... 56,400 3,305
Newfield Exploration
Company+.................... 94,500 5,500
Plains Exploration and
Production Company LP+...... 26,300 658
Premcor, Incorporated+........ 62,300 2,432
Southwest Gas Corporation..... 5,400 132
Stelmar Shipping Limited*..... 157,100 6,064
Stone Energy Corporation+..... 119,700 4,928
Teekay Shipping Corporation*.. 23,100 1,067
--------
TOTAL OIL & GAS........... 54,586
--------
TOTAL ENERGY.............. 65,581
--------
FINANCIALS - 18.72%
BANKS - 7.00%
Alabama National
BanCorporation.............. 14,000 895
Amcore Financial,
Incorporated................ 2,246 68
Americredit Corporation+...... 70,300 1,364
Anchor BanCorp Wisconsin,
Incorporated*............... 51,138 1,327
Bancorp South,
Incorporated*............... 94,500 2,248
Bank Hawaii Corporation....... 213,100 10,176
Chemical Financial
Corporation*................ 53,018 1,979
Chittenden Corporation........ 18,125 513
City National Corporation..... 10,900 751
Colonial BancGroup,
Incorporated................ 293,200 6,348
Commercial Federal
Corporation*................ 83,500 2,322
Community Bank System,
Incorporated*............... 20,000 552
Community First Bankshares,
Incorporated................ 29,970 966
Corus Bankshares,
Incorporated................ 6,787 312
Cullen/Frost Bankers,
Incorporated................ 200,300 9,815
Downey Financial Corporation.. 23,500 1,299
First Citizens Bancshares,
Incorporated*............... 1,861 220
First Commonwealth Financial
Corporation*................ 9,700 141
First Federal Capital
Corporation*................ 34,664 1,154
First Republic Bank*.......... 34,600 1,668
FirstFed Financial
Corporation+*............... 13,000 668
Frontier Financial
Corporation*................ 11,669 449
Great American Financial
Resources, Incorporated*.... 80,800 1,269
Greater Bay Bancorp*.......... 28,800 900
Hudson United Bancorp......... 134,700 5,361
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
International Bancshares
Corporation................. 15,624 $ 578
Irwin Financial
Corporation*................ 148,500 3,702
ITLA Capital Corporation+*.... 18,100 876
MAF Bancorp, Incorporated*.... 12,200 523
NBT Bancorp, Incorporated*.... 31,200 722
NetBank, Incorporated*........ 89,600 831
Pacific Capital Bancorp*...... 41,200 1,311
PFF Bancorp, Incorporated..... 5,600 221
Provident Bancorp,
Incorporated*............... 65,400 790
Provident Bankshares
Corporation*................ 74,620 2,592
Republic Bancorp,
Incorporated*............... 134,774 2,252
S&T Bancorp, Incorporated*.... 10,511 379
Santander BanCorp*............ 30,200 843
Sky Financial Group,
Incorporated................ 210,949 5,670
Southwest Bancorp,
Incorporated................ 69,700 1,634
Sterling Bancshares,
Incorporated*............... 60,000 850
Summit Bancshares,
Incorporated*............... 21,700 738
Susquehanna Bancshares,
Incorporated*............... 12,900 321
TierOne Corporation........... 25,600 570
Timberland Bancorp,
Incorporated*............... 14,800 365
Trustmark Corporation*........ 117,823 3,715
United Bankshares,
Incorporated................ 36,971 1,356
Washington Federal,
Incorporated*............... 160,040 4,084
Webster Financial Corporation
of Waterbury................ 130,200 6,224
Westcorp, Incorporated........ 7,000 279
--------
TOTAL BANKS............... 94,191
--------
DIVERSIFIED FINANCIALS - 1.21%
Assured Guaranty Limited*..... 80,500 1,322
IndyMac Bancorp,
Incorporated................ 68,300 2,203
Knight Trading Group,
Incorporated+*.............. 722,900 7,511
Metris Companies,
Incorporated+*.............. 267,600 2,569
Raymond James Financial,
Incorporated*............... 101,400 2,647
--------
TOTAL DIVERSIFIED
FINANCIALS.............. 16,252
--------
INSURANCE - 6.92%
Alfa Corporation*............. 78,403 1,090
Allmerica Financial
Corporation+*............... 302,800 9,114
American Financial Group,
Incorporated*............... 304,100 9,001
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
58
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
American National Insurance
Company..................... 24,717 $ 2,598
AmerUs Group Company*......... 110,900 4,633
Aspen Insurance Holdings
Limited..................... 35,500 817
Commerce Group,
Incorporated*............... 76,100 3,851
Conseco, Incorporated+........ 119,400 2,001
Delphi Financial Group,
Incorporated................ 117,400 4,798
FBL Financial Group,
Incorporated*............... 130,600 3,384
First American Corporation.... 178,000 5,552
Fremont General Corporation... 31,700 682
Hilb Rogal & Hobbs Company.... 4,100 130
Horace Mann Educators
Corporation*................ 75,500 1,284
Infinity Property and Casualty
Corporation*................ 93,100 2,894
LandAmerica Financial Group,
Incorporated................ 30,500 1,493
Mercury General Corporation... 91,700 4,716
National Western Life
Insurance Company+*......... 2,500 375
Odyssey Re Holdings
Corporation*................ 243,000 5,312
Protective Life Corporation... 254,300 9,994
Reinsurance Group of America,
Incorporated................ 257,400 11,089
Scottish Re Group Limited*.... 69,700 1,568
StanCorp Financial Group,
Incorporated................ 13,100 987
Stewart Information Services
Corporation*................ 12,900 547
Triad Guaranty,
Incorporated+*.............. 23,600 1,286
UICI*......................... 56,700 1,677
United National Group
Limited+*................... 149,300 2,316
--------
TOTAL INSURANCE........... 93,189
--------
REAL ESTATE - 3.59%
Alexandria Real Estate
Equities, Incorporated*..... 24,500 1,618
American Financial Realty
Trust....................... 338,100 4,970
American Home Mortgage
Investment Corporation*..... 200,200 5,532
Boykin Lodging Company+....... 96,700 812
Capital Automotive REIT....... 55,400 1,787
Capital Lease Funding,
Incorporated................ 48,900 535
SL Green Realty Corporation... 30,800 1,688
Innkeepers USA Trust*......... 167,700 2,323
Jones Lang LaSalle,
Incorporated+............... 77,500 2,480
La Quinta Corporation+........ 350,900 2,825
LaSalle Hotel Properties*..... 48,400 1,390
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
LNR Property Corporation*..... 143,800 $ 8,993
MI Developments,
Incorporated................ 357,400 9,139
MortgageIT Holdings,
Incorporated*............... 87,400 1,276
The St. Joe Company........... 39,500 2,011
Thomas Properties Group,
Incorporated+............... 76,100 913
--------
TOTAL REAL ESTATE......... 48,292
--------
TOTAL FINANCIALS.......... 251,924
--------
HEALTH CARE - 5.31%
BIOTECHNOLOGY - 0.07%
Albany Molecular Research,
Incorporated+*.............. 38,100 328
United Therapeutics
Corporation+*............... 20,400 638
--------
TOTAL BIOTECHNOLOGY....... 966
--------
HEALTH CARE EQUIPMENT & SUPPLIES - 1.56%
CONMED Corporation+........... 6,500 182
Haemonetics Corporation+...... 285,700 9,385
Inverness Medical Innovations,
Incorporated+*.............. 35,000 724
PolyMedica Corporation*....... 61,300 2,146
Sola International,
Incorporated+*.............. 443,000 8,497
--------
TOTAL HEALTH CARE
EQUIPMENT & SUPPLIES.... 20,934
--------
HEALTH CARE PROVIDERS & SERVICES - 3.01%
Accredo Health,
Incorporated+............... 54,000 1,244
Amedisys, Incorporated+*...... 37,300 1,128
AMN Healthcare Services,
Incorporated+*.............. 46,900 553
Apria Healthcare Group,
Incorporated+............... 200,000 5,472
First Health Group
Corporation+................ 343,872 5,474
Health Net, Incorporated+..... 174,700 4,238
Hooper Holmes, Incorporated... 247,800 1,301
Humana, Incorporated+......... 127,100 2,434
Magellan Health Services,
Incorporated+*.............. 118,700 4,439
MedQuist, Incorporated+*...... 4,000 53
Orthodontic Centers of
America, Incorporated+*..... 26,800 111
Owens & Minor, Incorporated*.. 61,200 1,603
Pacificare Health Systems,
Incorporated+............... 55,600 1,980
ResCare, Incorporated+*....... 73,000 886
Select Medical Corporation*... 63,300 1,088
Sierra Health Services,
Incorporated+*.............. 22,600 1,078
Triad Hospitals,
Incorporated+............... 31,900 1,054
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
59
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Universal Health Services,
Incorporated................ 129,200 $ 5,370
U.S. Physical Therapy,
Incorporated+*.............. 68,500 1,034
--------
TOTAL HEALTH CARE
PROVIDERS & SERVICES.... 40,540
--------
PHARMACEUTICALS - 0.67%
Discovery Partners
International,
Incorporated+............... 55,800 263
King Pharmaceuticals,
Incorporated+............... 193,100 2,107
The Medicines Company+*....... 30,800 821
Perrigo Company*.............. 42,300 769
Watson Pharmaceuticals,
Incorporated+............... 180,600 5,062
--------
TOTAL PHARMACEUTICALS..... 9,022
--------
TOTAL HEALTH CARE......... 71,462
--------
INDUSTRIALS - 16.37%
AEROSPACE & DEFENSE - 0.67%
Cubic Corporation*............ 81,200 1,786
FTI Consulting,
Incorporated+*.............. 11,300 212
Heico Corporation*............ 33,600 608
Herley Industries,
Incorporated+*.............. 49,500 870
United Defense Industrials,
Incorporated+............... 136,700 5,487
--------
TOTAL AEROSPACE &
DEFENSE................. 8,963
--------
AIR FREIGHT & COURIERS - 0.23%
Covenant Transportation,
Incorporated+............... 182,300 3,157
--------
TOTAL AIR FREIGHT &
COURIERS................ 3,157
--------
BUILDING PRODUCTS - 0.66%
Simpson Manufacturing Company,
Incorporated................ 21,800 1,401
Universal Fastener Products,
Incorporated*............... 42,500 1,559
York International
Corporation................. 186,300 5,932
--------
TOTAL BUILDING PRODUCTS... 8,892
--------
COMMERCIAL SERVICES & SUPPLIES - 6.56%
BISYS Group, Incorporated+.... 78,500 1,146
Bowne & Company,
Incorporated................ 355,100 4,414
The Brinks Company............ 127,100 4,080
CSG Systems International,
Incorporated+............... 56,700 953
Concord Communications,
Incorporated+*.............. 266,300 2,189
Convergys Corporation+........ 534,200 6,950
Deluxe Corporation............ 185,500 7,066
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
eFunds Corporation+*.......... 80,100 $ 1,577
John H. Harland Company*...... 74,000 2,385
IDEX Corporation.............. 245,000 9,041
Kelly Services,
Incorporated................ 225,900 6,080
Labor Ready, Incorporated+*... 87,500 1,256
Mac Gray Corporation+......... 39,100 285
McGrath Rentcorp*............. 35,100 1,366
NCO Group, Incorporated+*..... 50,997 1,364
Pope & Talbot, Incorporated... 236,500 3,566
Spherion Corporation+......... 643,200 4,625
Valassis Communications,
Incorporated+............... 589,600 20,270
Waste Connections,
Incorporated+............... 104,300 3,288
Western Digital
Corporation+................ 768,000 6,397
--------
TOTAL COMMERCIAL SERVICES
& SUPPLIES.............. 88,298
--------
CONSTRUCTION & ENGINEERING - 0.85%
Chicago Bridge & Iron Company
N.V.*....................... 44,000 1,362
Florida Rock Industries,
Incorporated................ 28,200 1,457
Granite Construction,
Incorporated*............... 59,300 1,440
M/I Homes, Incorporated*...... 88,600 3,810
URS Corporation+.............. 120,400 3,323
--------
TOTAL CONSTRUCTION &
ENGINEERING............. 11,392
--------
ELECTRICAL EQUIPMENT - 1.08%
Acuity Brands, Incorporated... 9,300 247
Brady Corporation............. 186,800 10,130
C&D Technologies,
Incorporated................ 92,300 1,652
Paxar Corporation+............ 38,200 842
Rayovac Corporation+*......... 43,000 1,071
Tecumseh Products Company*.... 14,900 645
--------
TOTAL ELECTRICAL
EQUIPMENT............... 14,587
--------
INDUSTRIAL CONGLOMERATES - 0.01%
Standex International
Corporation*................ 3,100 81
--------
TOTAL INDUSTRIAL
CONGLOMERATES........... 81
--------
MACHINERY - 3.61%
AGCO Corporation+*............ 207,300 4,026
Briggs and Stratton
Corporation................. 25,600 1,838
Bucyrus International,
Incorporated*............... 33,400 1,002
Circor International,
Incorporated*............... 38,200 724
Esterline Technologies
Corporation+*............... 51,700 1,634
Flowserve Corporation+........ 267,600 5,775
GSI Lumonics, Incorporated+*.. 93,200 834
Harsco Corporation............ 163,300 7,912
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
60
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Kaydon Corporation*........... 237,500 $ 7,030
Lincoln Electric Holdings,
Incorporated................ 28,100 938
Reliance Steel & Aluminum
Company*.................... 27,200 934
SPX Corporation*.............. 121,700 4,667
Terex Corporation+*........... 241,700 9,185
Thomas Industries,
Incorporated*............... 23,600 798
Trinity Industries,
Incorporated*............... 43,000 1,340
--------
TOTAL MACHINERY........... 48,637
--------
MARINE - 1.93%
Alexander & Baldwin,
Incorporated................ 260,900 9,563
Kirby Corporation+............ 250,800 10,534
Overseas Shipholding Group,
Incorporated................ 102,500 5,837
--------
TOTAL MARINE.............. 25,934
--------
TRANSPORTATION - 0.77%
Celadon Group, Incorporated+.. 45,700 889
Central Freight Lines,
Incorporated+............... 263,400 1,472
Dollar Thrifty Automotive
Group, Incorporated+*....... 57,000 1,375
J.B. Hunt Transport Services,
Incorporated................ 93,700 3,829
Laidlaw International,
Incorporated+............... 106,700 1,779
Landstar System,
Incorporated+............... 15,400 1,046
--------
TOTAL TRANSPORTATION...... 10,390
--------
TOTAL INDUSTRIALS......... 220,331
--------
INFORMATION TECHNOLOGY - 6.46%
COMMUNICATIONS EQUIPMENT - 0.76%
Anaren, Incorporated+......... 70,100 858
Digi International,
Incorporated+............... 105,900 1,450
Extreme Networks,
Incorporated+............... 162,600 951
MEMC Electronic Materials,
Incorporated+*.............. 623,400 5,860
REMEC, Incorporated+*......... 203,600 1,122
--------
TOTAL COMMUNICATIONS
EQUIPMENT............... 10,241
--------
COMPUTERS & PERIPHERALS - 0.43%
Electronics for Imaging,
Incorporated+*.............. 78,700 1,420
Emulex Corporation+*.......... 271,200 2,850
Komag, Incorporated+*......... 51,400 873
Maxtor Corporation+*.......... 231,400 685
--------
TOTAL COMPUTERS &
PERIPHERALS............. 5,828
--------
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.32%
Exar Corporation+............. 78,700 $ 1,182
IKON Office Solutions,
Incorporated*............... 491,900 5,165
Newport Corporation+*......... 104,700 1,182
Sypris Solutions,
Incorporated*............... 70,100 967
Teleflex, Incorporated........ 16,400 718
Vishay Intertechnology,
Incorporated+............... 661,600 8,554
--------
TOTAL ELECTRONIC EQUIPMENT
& INSTRUMENTS........... 17,768
--------
INTERNET SOFTWARE & SERVICES - 0.22%
United Online,
Incorporated+*.............. 314,000 2,948
--------
TOTAL INTERNET SOFTWARE &
SERVICES................ 2,948
--------
IT CONSULTING & SERVICES - 1.36%
BearingPoint, Incorporated+... 682,100 5,934
Investment Technology Group,
Incorporated+............... 60,200 927
ManTech International
Corporation+*............... 89,300 1,931
Perot Systems Corporation+*... 111,300 1,784
Reynolds and Reynolds
Company*.................... 313,200 7,708
--------
TOTAL IT CONSULTING &
SERVICES................ 18,284
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 0.62%
Actel Corporation+*........... 51,700 784
Advanced Energy Industries,
Incorporated+*.............. 85,500 843
Cabot Microelectronics
Corporation+*............... 26,200 944
Cymer, Incorporated+.......... 29,500 841
Omnivision Technologies,
Incorporated+*.............. 281,985 4,484
Zoran Corporation+............ 44,100 445
--------
TOTAL SEMICONDUCTOR
EQUIPMENT & PRODUCTS.... 8,341
--------
SOFTWARE - 1.75%
Borland Software
Corporation+*............... 123,700 1,267
Compuware Corporation+........ 865,500 5,011
EPIQ Systems, Incorporated+*.. 64,700 969
Macromedia, Incorporated+..... 54,400 1,476
Mentor Graphics
Corporation+*............... 834,200 9,710
SafeNet, Incorporated+*....... 72,800 2,230
SeaChange International,
Incorporated+*.............. 42,600 726
Sybase, Incorporated+......... 122,900 1,946
Synopsys, Incorporated+....... 11,700 190
--------
TOTAL SOFTWARE............ 23,525
--------
TOTAL INFORMATION
TECHNOLOGY.............. 86,935
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
61
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
MATERIALS - 6.62%
CHEMICALS - 3.65%
Agrium, Incorporated.......... 339,300 $ 5,629
Balchem Corporation*.......... 30,200 943
Cytec Industries,
Incorporated*............... 12,700 591
FMC Corporation+.............. 53,400 2,341
H.B. Fuller Company*.......... 326,100 8,772
Hercules, Incorporated+*...... 316,800 4,524
Lubrizol Corporation.......... 123,900 4,303
The Mosaic Company+*.......... 285,900 4,300
Octel Corporation*............ 35,200 679
PolyOne Corporation+.......... 1,195,600 9,051
RPM International,
Incorporated................ 183,300 3,232
Spartech Corporation*......... 55,400 1,396
Westlake Chemical
Corporation+*............... 147,400 3,401
--------
TOTAL CHEMICALS........... 49,162
--------
CONSTRUCTION MATERIALS - 0.94%
Insituform Technologies,
Incorporated+*.............. 418,300 8,291
Lafarge North America,
Incorporated*............... 76,600 3,753
Lennox International,
Incorporated................ 45,900 664
--------
TOTAL CONSTRUCTION
MATERIALS............... 12,708
--------
CONTAINERS & PACKAGING - 0.30%
Longview Fibre Company*....... 204,200 3,145
Silgan Holdings,
Incorporated*............... 19,479 924
--------
TOTAL CONTAINERS &
PACKAGING............... 4,069
--------
METALS & MINING - 0.94%
Arch Coal, Incorporated*...... 43,900 1,428
Century Aluminum Company+..... 214,400 4,961
Compass Minerals
International,
Incorporated................ 51,100 1,094
Massey Energy Company......... 49,100 1,322
NN, Incorporated*............. 62,000 685
Quanex Corporation*........... 18,700 948
RTI International Metals,
Incorporated+*.............. 64,000 1,282
Worthington Industries,
Incorporated*............... 49,500 983
--------
TOTAL METALS & MINING..... 12,703
--------
PAPER & FOREST PRODUCTS - 0.79%
Chesapeake Corporation........ 285,400 6,624
Potlatch Corporation.......... 86,200 4,059
--------
TOTAL PAPER & FOREST
PRODUCTS................ 10,683
--------
TOTAL MATERIALS........... 89,325
--------
</Table>
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
TELECOMMUNICATION SERVICES - 0.39%
DIVERSIFIED TELECOMMUNICATION - 0.09%
SureWest Communications*...... 25,800 $ 731
Warwick Valley Telephone
Company..................... 18,900 455
--------
TOTAL DIVERSIFIED
TELECOMMUNICATION....... 1,186
--------
WIRELESS TELECOMMUNICATION SERVICE - 0.30%
Arch Wireless,
Incorporated+*.............. 76,300 2,181
Metrocall Holdings,
Incorporated+............... 28,500 1,848
--------
TOTAL WIRELESS
TELECOMMUNICATION
SERVICE................. 4,029
--------
TOTAL TELECOMMUNICATION
SERVICES................ 5,215
--------
UTILITIES - 8.45%
ELECTRIC UTILITIES - 4.94%
Alliant Corporation........... 232,000 6,120
Black Hills Corporation....... 39,900 1,175
Cleco Corporation*............ 207,900 3,788
DPL Inc....................... 332,000 7,171
Duquesne Light Holdings,
Incorporated*............... 116,800 2,004
Great Plains Energy,
Incorporated................ 306,900 8,744
Hawaiian Electric Industries,
Incorporated*............... 56,400 1,582
IDACORP, Incorporated*........ 46,000 1,425
Northeast Utilities........... 271,800 5,254
NSTAR*........................ 219,400 10,854
OGE Energy Corporation........ 284,700 7,223
PNM Resources, Incorporated... 149,450 3,479
Sierra Pacific Resources
Corporation+*............... 251,700 2,416
WPS Resources Corporation*.... 111,900 5,315
--------
TOTAL ELECTRIC
UTILITIES............... 66,550
--------
GAS UTILITIES - 3.51%
AGL Resources, Incorporated... 258,200 8,056
Atmos Energy Corporation*..... 71,700 1,850
Energen Corporation........... 34,400 1,850
National Fuel Gas Company..... 244,600 6,854
New Jersey Resources
Corporation*................ 9,700 399
Nicor, Incorporated*.......... 54,200 2,034
ONEOK, Incorporated........... 279,800 7,504
Peoples Energy Corporation*... 75,900 3,247
Southern Union Company+*...... 301,665 6,627
South Jersey Industries,
Incorporated*............... 10,300 486
UGI Corporation............... 67,200 2,596
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
62
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ --------
(DOLLARS IN THOUSANDS)
Vectren Corporation........... 94,500 $ 2,445
WGL Holdings, Incorporated.... 114,200 3,249
--------
TOTAL GAS UTILITIES....... 47,197
--------
TOTAL UTILITIES........... 113,747
--------
TOTAL COMMON STOCK........ 1,207,300
--------
<Caption>
PAR
AMOUNT
------------
SHORT-TERM INVESTMENTS - 28.25%
U. S. TREASURY BILLS - 0.85%
1.60%, Due 12/9/2004 (Note
A).......................... $ 11,405 11,386
--------
TOTAL U. S. TREASURY
BILLS................... 11,386
--------
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
OTHER SHORT-TERM INVESTMENTS - 27.40%
American AAdvantage Money
Market Select Fund (Notes B
and C)..................... 212,988,578 $ 212,989
AMR Investments Enhanced Cash
Business Trust (Notes B and
C)......................... 155,772,876 155,773
----------
TOTAL OTHER SHORT-TERM
INVESTMENTS............ 368,762
----------
TOTAL SHORT-TERM
INVESTMENTS............ 380,148
----------
TOTAL INVESTMENTS - 117.93%
(COST $1,475,003).......... 1,587,448
----------
LIABILITIES, NET OF OTHER
ASSETS - (17.93%).......... (241,363)
----------
TOTAL NET ASSETS - 100%...... $1,346,085
==========
</Table>
- ---------------
(A) At October 31, 2004, security held as collateral for open futures contracts.
(B) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(C) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan at October 31, 2004. See Note
5.
+ - Non-income producing security.
See accompanying notes
- --------------------------------------------------------------------------------
63
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
STOCKS - 84.22%
BRAZIL - 9.05%
BRAZIL PREFERRED STOCK - 6.41%
All America Latina Logistica
S.A.+.......................... 3,000 $ 65
Banco Bradesco S.A.+............. 7,084 429
Banco Bradesco S.A., ADR*........ 3,910 238
Banco Itau Holding Financeira
S.A.+.......................... 1,572 190
Banco Itau Holding Financeira
S.A., ADR+..................... 9,636 583
Brasil Telecom Participacoes
S.A., ADR+..................... 5,100 156
Braskem S.A.+.................... 1,073,000 40
Braskem S.A., ADR+............... 1,400 51
Companhia Brasileira de
Distribuicao Grupo Pao de
Acucar, ADR+................... 2,200 52
Companhia de Bebidas das
Americas, ADR+................. 8,606 213
Companhia de Tecidos Norte de
Minas+......................... 2,264,500 216
Companhia Energetica de Minas
Gerais+........................ 19,642,810 454
Companhia Vale do Rio Doce+...... 1,876 34
Companhia Vale do Rio Doce,
ADR............................ 28,064 511
Companhia Paranaense de
Energia+....................... 46,245,300 166
Duratex S.A.+.................... 3,401,700 142
Empresa Brasileira de Aeronautica
S.A. (Embraer), ADR+........... 11,040 293
Petrol Brasileiro S.A.,+......... 865 28
Petroleo Brasileiro S.A., ADR.... 13,116 428
Telecomunicacoes Brasileiras
S.A., ADR...................... 7,660 202
Telemar Norte Leste S.A.+........ 6,400 118
Telemig Celular Participacoes
S.A.+.......................... 51,165,700 67
Telesp Celular Participacoes
S.A.+.......................... 85,748,463 203
Telesp Celular Participacoes
S.A., ADR+..................... 23,500 141
Telesp - Telecommunicacoes de Sao
Paulo S.A.+.................... 6,090,100 97
TIM Participacoes S.A., ADR+*.... 8,167 114
Usinas Siderurgicas de Minas
Gerais S.A.+................... 4,732 71
-------
TOTAL BRAZIL PREFERRED
STOCK...................... 5,302
-------
BRAZIL COMMON STOCK - 2.64%
Companhia de Saneamento Basico do
Estado de Sao Paulo+........... 5,410,000 220
Companhia de Saneamento Basico do
Estado de Sao Paulo, ADR+...... 6,000 59
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Companhia Energetica de Minas
Gerais, ADR+................... 2,900 $ 67
Companhia Paranaense de
Energia+....................... 7,000,000 21
Companhia Siderurgica Nacional
S.A., ADR...................... 10,400 153
Grendene S.A.+................... 1,000 12
Petroleo Brasileiro S.A., ADR.... 40,402 1,435
Votorantim Celulose e Papel S.A.,
ADR+........................... 6,250 216
-------
TOTAL BRAZIL COMMON STOCK.... 2,183
-------
TOTAL BRAZIL................. 7,485
-------
CHILE COMMON STOCK - 0.50%
Banco Santander-Chile S.A., ADR.. 4,800 134
Grupo Enersis SA, ADR+........... 36,400 275
-------
TOTAL CHILE COMMON STOCK..... 409
-------
CHINA COMMON STOCK - 1.93%
China Mobile (Hong Kong)
Limited+....................... 243,100 704
China Mobile (Hong Kong) Limited,
ADR............................ 6,200 90
China Oilfield Services
Limited+*...................... 242,000 71
China Petroleum & Chemical
Corporation+................... 374,000 142
China Resource Power Holdings
Company Limited+*.............. 80,000 46
China Telecom Corporation
Limited+....................... 450,600 145
Chunghwa Telecom Company Limited,
ADR*........................... 11,000 207
Tom Online, Incorporated+........ 204,000 32
TPV Technology Limited+.......... 254,000 157
-------
TOTAL CHINA COMMON STOCK..... 1,594
-------
EGYPT COMMON STOCK - 1.09%
Commercial International Bank,
GDR, 144A (Note A)............. 30,200 146
Eastern Tobacco Company+......... 6,200 140
Egyptian Company for Mobile
Services (MobiNil)+............ 16,203 300
Orascom Construction Industries
S.A.E.......................... 14,726 171
Suez Cement Company, GDR, 144A
(Note A)....................... 12,869 142
-------
TOTAL EGYPT COMMON STOCK..... 899
-------
HONG KONG COMMON STOCK - 3.63%
Asia Aluminum Holdings Limited+.. 858,000 97
Beijing Enterprises Holdings+.... 39,000 46
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
64
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Brilliance China Automotive
Holdings Limited+*............. 202,000 $ 42
China Life Insurance Company
Limited+....................... 246,000 163
China Ping'an Insurance Company
Limited+*...................... 92,000 145
China Power International
Development Limited+*.......... 79,500 31
China Resources Enterprises
Limited+*...................... 209,900 294
CNOOC Limited+................... 541,000 280
Denway Motors Limited+........... 184,800 62
Fountain Set (Holdings)
Limited+*...................... 157,000 118
The Grande Holdings Limited+..... 61,000 62
Hainan Meilan Airport Company
Limited+....................... 72,000 59
Hopewell Highway Infrastructure
Limited+....................... 142,000 94
Kingboard Chemical Holdings
Limited+*...................... 56,000 117
Lianhua Supermarket Holdings
Company Limited+............... 64,000 75
Moulin International Holdings
Limited+....................... 74,000 40
Norstar Founders+*............... 162,000 40
Qingling Motors Company
Limited+....................... 548,000 73
Sansui Electric Company
Limited+....................... 30,500 9
Shandong International Power
Development Company Limited+... 1,066,800 343
Shanghai Industrial Holdings
Limited+*...................... 150,500 285
Shougang Concord Century Holdings
Limited+....................... 375,000 36
Sinopec Yizheng Chemical Fibre
Company Limited+*.............. 666,500 139
Sinopec Zhenhai Refining Chem+... 50,000 48
Texwinca Holdings Limited+....... 70,100 63
Victory City International
Holdings Limited+.............. 137,000 54
Wumart Stores, Incorporated+..... 32,000 55
Yanzhou Coal Mining Company
Limited+*...................... 100,000 132
-------
TOTAL HONG KONG COMMON
STOCK...................... 3,002
-------
HUNGARY COMMON STOCK - 0.96%
Gedeon Richter Rt................ 2,550 301
Magyar Olaj-es Gazipari
Reszvenytarsasag............... 3,165 178
Magyar Tavkozlesi Rt............. 75,900 319
-------
TOTAL HUNGARY COMMON STOCK... 798
-------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
INDIA COMMON STOCK - 6.99%
ABB Limited+..................... 4,200 $ 70
Bharat Electronics Limited+...... 16,500 227
Bharat Petroleum Corporation
Limited+....................... 34,133 260
CIPLA+........................... 19,750 122
Container Corporation+........... 5,000 77
Doctor Reddy's Laboratories
Limited+....................... 2,700 45
Doctor Reddy's Laboratories
Limited, ADR................... 17,800 295
GAIL (India) Limited+............ 18,200 78
GAIL (India) Limited, GDR, 144A
(Note A)....................... 9,600 247
GlaxoSmithKline Pharmaceutical
Limited+....................... 6,000 89
Grasim Industries Limited+....... 4,500 107
HDFC Bank Limited+............... 8,000 73
Hero Honda Motors Limited+....... 12,500 117
Hindalco Industries Limited+..... 3,000 79
Hindalco Industries Limited, GDR,
144A (Note A).................. 14,400 372
Hindustan Lever Limited+......... 140,988 388
Housing Development Finance
Corporation Limited+........... 8,000 113
ICICI Bank Limited+.............. 43,500 287
ICICI Bank Limited, ADR.......... 4,800 76
Ind Dev Bank India+.............. 38,000 71
Infosys Technologies Limited,
ADR*........................... 3,000 199
ITC Limited+..................... 10,416 250
Mahanagar Telephone Nigam
Limited+....................... 188,500 573
Mahindra & Mahindra Limited+..... 6,000 59
National Thermal Power
Corporation Limited+........... 19,500 27
Oil and Natural Gas Corporation
Limited+....................... 17,000 295
Reliance Industries Limited+..... 55,405 647
Siemens India Limited+........... 1,800 45
State Bank of India, GDR+........ 2,300 61
State Bank of India, GDR, 144A
(Note A)....................... 11,300 299
Steel Authority of India
Limited+....................... 125,000 136
-------
TOTAL INDIA COMMON STOCK..... 5,784
-------
INDONESIA COMMON STOCK - 2.38%
Bank Central Asia+............... 436,000 115
Bank Internasional Indonesia+.... 2,885,500 51
Bumi Resources Tbk+.............. 1,660,000 132
Hindustan Petroleum Corporation
Limited+....................... 44,300 301
PT Astra Agro Lestari Tbk+....... 189,600 61
PT Bank Mandiri+................. 1,708,500 296
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
65
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
PT Bank Rakyat Indonesia+........ 519,500 $ 111
PT Gudang Garam Tbk+............. 187,700 263
PT Indocement Tunggal Prakarsa
Tbk+........................... 321,500 68
PT Indofood Sukses Makmur Tbk+... 2,506,000 186
PT Telekomunikasi Indonesia
Tbk+........................... 795,000 381
-------
TOTAL INDONESIA COMMON
STOCK...................... 1,965
-------
ISRAEL COMMON STOCK - 0.98%
Bank Hapoalim Limited+........... 57,180 155
Check Point Software
Technologies+.................. 15,090 341
Supersol Limited+................ 52,900 124
Syneron Medical Limited+*........ 3,400 65
Taro Pharmaceutical Industries
Limited+....................... 4,800 128
-------
TOTAL ISRAEL COMMON STOCK.... 813
-------
MALAYSIA COMMON STOCK - 2.29%
Commerce Asset-Holding Berhad+... 64,000 77
Gamuda Berhad+................... 235,100 309
Genting Berhad+.................. 72,600 323
Kuala Lumpur Kepong Berhad+...... 59,300 104
Magnum Corporation Berhad+....... 136,000 90
Malaysia International Shipping
Corporation Berhad+............ 19,600 70
Proton Holdings Berhad+.......... 37,100 83
Resorts World Berhad+............ 68,300 172
Sime Darby Berhad+............... 268,700 403
SP Setia Berhad+................. 85,499 85
Tenaga Nasional Berhad+.......... 43,000 126
YTL Corporation Berhad+.......... 46,000 55
-------
TOTAL MALAYSIA COMMON
STOCK...................... 1,897
-------
MEXICO COMMON STOCK - 6.83%
America Movil S.A. de C.V.,
ADR............................ 23,255 1,023
Cemex S.A. de C.V................ 33,047 191
Cemex S.A. de C.V., ADR.......... 4,433 128
Coca-Cola Femsa, S.A. de C.V.,
ADR*........................... 27,975 563
Consorcio Ara, S.A. de C.V.+..... 8,800 24
Controladora Commercial Mexicana
S.A. de C.V.+.................. 232,400 250
Desc S.A. de C.V................. 500,000 132
Fomento Economico Mexicano S.A.
de C.V., ADR................... 2,800 123
Grupo Continential, S.A.......... 120,850 188
Grupo Financiero Banorte, S.A. de
C.V............................ 11,700 55
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Grupo Televisa, S.A., ADR........ 12,400 $ 682
Kimberly-Clark de Mexico, S.A. de
C.V............................ 153,000 458
Telefonos de Mexico, S.A. de
C.V., ADR...................... 29,478 1,009
Wal-Mart de Mexico, S.A. de
C.V.+.......................... 211,421 692
Wal-Mart de Mexico, S.A. de C.V.,
ADR+........................... 4,062 133
-------
TOTAL MEXICO COMMON STOCK.... 5,651
-------
MOROCCO - 0.15%
Banque Maroc du Commerce
Exterieur...................... 2,100 124
-------
TOTAL MOROCCO................ 124
-------
PHILIPPINES COMMON STOCK - 0.39%
ABS-CBN Broadcasting
Corporation+................... 165,000 62
Bank of the Philippine
Islands+....................... 176,336 152
Manila Electric Company+......... 165,900 72
SM Prime Holdings,
Incorporated+.................. 280,000 37
-------
TOTAL PHILIPPINES COMMON
STOCK...................... 323
-------
POLAND COMMON STOCK - 1.28%
Bank Przemyslowo-Handlowy SA+.... 1,007 136
KGHM Polska Miedz SA+............ 11,794 117
Telekomunikacja Polska SA........ 120,575 584
Telekomunikacja Polska SA, GDR... 37,900 182
Telekomunikacja Polska SA, GDR,
144A (Note A).................. 8,100 39
-------
TOTAL POLAND COMMON STOCK.... 1,058
-------
RUSSIA - 4.25%
RUSSIA PREFERRED STOCK - 0.65%
JSC Surgutneftegaz, ADR.......... 1,328 70
Uralsvyazinform, ADR............. 20,100 168
Vimpel Communications, ADR+...... 1,100 125
VolgaTelecom, ADR+............... 26,800 177
-------
TOTAL RUSSIA PREFERRED
STOCK...................... 540
-------
RUSSIA COMMON STOCK - 3.60%
JSC Surgutneftegaz, ADR*......... 8,511 337
LUKOIL Oil Company, ADR.......... 10,477 1,304
Mining and Metallurgical Company
Norilsk Nickel, ADR............ 849 53
Mobile Telesystems, ADR+......... 200 29
Mobile Telesystems, GDR, 144A
(Note A)+...................... 1,800 261
RAO Gazprom+..................... 18,500 691
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
66
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
RAO Gazprom, ADR................. 2,200 $ 82
Yukos Oil Company, ADR+*......... 13,418 223
-------
TOTAL RUSSIA COMMON STOCK.... 2,980
-------
TOTAL RUSSIA................. 3,520
-------
SINGAPORE - 0.16%
Total Access Communications+*.... 41,000 133
-------
TOTAL SINGAPORE.............. 133
-------
SOUTH AFRICA COMMON STOCK - 12.60%
African Bank Investments
Limited+....................... 222,200 521
African Life Assurance Company
Limited........................ 81,421 202
Alexander Forbes Limited+........ 15,800 30
Anglo American plc+.............. 42,010 922
Anglo American Platinum
Corporation Limited+........... 2,200 85
Aveng Limited+................... 135,600 220
Avi Limited+..................... 27,700 105
Barloworld Limited+.............. 10,500 147
Bidvest Group Limited+........... 34,114 376
Edgars Consolidated Stores+...... 7,000 246
Gold Fields Limited+............. 11,700 165
Gold Fields Limited, ADR*........ 14,500 203
Harmony Gold Mining Company
Limited+....................... 14,399 169
Illovo Sugar Limited+............ 85,200 119
Impala Platinum Holdings
Limited+....................... 2,129 172
Imperial Holdings Limited+....... 11,791 177
Iscor Limited+................... 7,800 69
Kumba Resources Limited+......... 18,300 128
Massmart Holdings Limited+....... 46,200 324
Metro Cash and Carry Limited+.... 516,452 169
MTN Group Limited+............... 110,840 605
Nampak Limited+.................. 192,100 467
Nedcor Limited+.................. 84,386 922
Old Mutual....................... 225,400 477
Sanlam Limited+.................. 230,000 407
Sappi Limited+................... 53,400 771
Sasol Limited+................... 26,600 530
Shoprite Holdings Limited+....... 198,300 378
Standard Bank Group Limited+..... 35,391 312
Steinhoff International Holdings
Limited+....................... 336,479 589
Telkom South Africa Limited,
ADR+........................... 19,000 270
The Tongaat-Hulett Group
Limited+....................... 17,600 144
-------
TOTAL SOUTH AFRICA COMMON
STOCK...................... 10,421
-------
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
SOUTH KOREA - 13.61%
SOUTH KOREA PREFERRED STOCK - 0.42%
Daishin Securities Company
Limited+....................... 5,740 $ 44
Hyundai Motor Company+........... 3,200 88
Samsung Electronics Company
Limited+....................... 790 212
-------
TOTAL SOUTH KOREA PREFERRED
STOCK...................... 344
-------
SOUTH KOREA COMMON STOCK - 13.19%
Cheil Communications,
Incorporated+.................. 30 4
Cheil Industries,
Incorporated+.................. 11,810 167
CJ Corporation+.................. 3,930 218
Daishin Securities Company
Limited+....................... 5,780 68
Doosan Heavy Industries and
Construction Limited+.......... 8,100 75
Handsome Corporation+............ 12,610 108
Hankook Tire Company Limited+.... 44,540 412
Hyundai Department Store Company
Limited+....................... 3,940 114
Hyundai Development Company+..... 11,430 153
Hyundai Mobis+................... 8,220 421
Hyundai Motor Company Limited+... 7,000 339
Industrial Bank of Korea+........ 19,300 122
INI Steel Company+............... 7,450 79
Kangwon Land Incorporated+....... 29,891 334
Kia Motors Corporation+.......... 20,650 194
Kookmin Bank+.................... 9,071 303
Kookmin Bank, ADR+*.............. 6,800 229
Korea Electric Power
Corporation+................... 51,560 1,066
KT Corporation, ADR.............. 30,200 557
KT&G Corporation+................ 6,000 166
LG Construction Company+......... 2,410 49
LG Electronics, Incorporated+.... 3,200 181
LG Household and Health Care
Limited+....................... 4,890 126
LG Investment and Securities
Company Limited+............... 30,870 214
Orion Corporation+............... 1,550 124
POSCO+........................... 2,880 431
Pusan Bank+...................... 14,410 91
Samsung Corporation+............. 8,110 114
Samsung Electro Mechanics Company
Limited+....................... 17,500 375
Samsung Electronics Company
Limited+....................... 4,800 1,884
Samsung Fire & Marine Insurance
Company Limited+............... 6,120 364
Samsung SDI Company Limited+..... 12,440 1,122
Shinhan Financial Group Company
Limited+....................... 11,410 225
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
67
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
STX Shipbuilding Company
Limited+....................... 8,130 $ 121
SK Telecom Company Limited,
ADR............................ 4,800 95
SK Telecom Company Limited+...... 1,650 259
-------
TOTAL SOUTH KOREA COMMON
STOCK...................... 10,904
-------
TOTAL SOUTH KOREA............ 11,248
-------
TAIWAN COMMON STOCK - 9.70%
Accton Technology Corporation+... 144,396 59
Acer, Incorporated............... 75,518 110
Advanced Semiconductor
Engineering, Incorporated+..... 104,000 72
Asia Optical Company,
Incorporated+.................. 58,071 276
Asustek Computer, Incorporated+.. 242,237 536
Benq Corporation+................ 188,000 177
Catcher Technology Company
Limited+....................... 18,000 55
Cathay Financial Holding Company
Limited+....................... 96,000 184
Cheng Shin Industries+........... 54,216 64
China Motor Company+............. 146,000 168
Chinatrust Financial Holding
Company Limited+............... 196,827 224
Compal Electronics,
Incorporated+.................. 599,026 537
CTCI Corporation+................ 189,552 106
CyberLink Corporation+........... 30,837 77
Delta Electronics,
Incorporated+.................. 186,650 282
Elan Microelectronics
Corporation+................... 110,496 68
Evergreen Marine Corporation+.... 3,032 3
Faraday Technology Corporation+.. 16,973 23
First Financial Holding Company
Limited+....................... 313,000 252
Fubon Financial Holding Company
Limited+....................... 116,000 109
Hon Hai Precision Industry
Company Limited+............... 101,064 372
Infortrend Technology,
Incorporated+.................. 52,414 92
Kaulin Manufacturing Company
Limited+....................... 37,950 35
Largan Precision Company
Limited+....................... 14,484 85
Media Tek, Incorporated+......... 33,162 222
Mega Financial Holding
Company+....................... 287,000 191
Nien Hsing Textile Company
Limited+....................... 151,000 130
Phoenixtec Power Company
Limited+....................... 71,355 69
Polaris Securities Company
Limited+....................... 288,733 148
Quanta Computer, Incorporated+... 258,298 417
Richtek Technology Corporation+.. 13,000 21
</Table>
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Shin Kong Financial Holding
Company Limited+............... 152,000 $ 133
SinoPac Holdings+................ 733,987 417
Springsoft Systems Limited+...... 40,800 74
Sunplus Technology Company
Limited+....................... 6,200 9
Taishin Financial Holdings
Company Limited+............... 158,445 129
Taiwan Cellular Corporation+..... 301,635 301
Taiwan Cement Corporation+....... 413,586 224
Tsann Keun Enterprise Company
Limited+....................... 51,630 57
United Microelectronics
Corporation+................... 1,529,251 924
United Microelectronics
Corporation, ADR+*............. 28,577 100
Waffer Technology Company
Limited+....................... 54,050 79
Ya Hsin Industrial Company
Limited+....................... 217,288 191
Yaego Corporation+............... 655,000 217
-------
TOTAL TAIWAN COMMON STOCK.... 8,019
-------
THAILAND COMMON STOCK - 3.08%
Advanced Info Services PCL+(+)... 93,200 212
Asian Property Development
Company Limited+(+)............ 446,800 39
Bangkok Bank PCL+................ 125,400 293
Banpu Company+................... 24,500 87
Charoen Pokphand Foods PCL+(+)... 1,268,000 108
CP Seven Eleven PCL+(+).......... 87,600 115
Delta Electronics,
Incorporated+(+)............... 110,000 45
Italian-Thai Development
PCL+(+)........................ 536,300 101
Kasikornbank PCL+................ 338,800 388
Kasikornbank PCL, NVDR+.......... 18,900 22
Krung Thai Bank PCL+(+).......... 1,401,800 283
Lalin Property PCL+(+)........... 148,400 20
Land & Houses PCL+............... 445,900 109
MBK Public Company Limited+(+)... 23,400 27
PTT Public Company Limited+(+)... 46,900 194
Siam City Bank PCL+(+)........... 64,000 33
Siam Commercial Bank PCL+........ 279,000 292
Siam Makro PCL+(+)............... 92,800 101
Sino Thai Engineering &
Construction PCL+(+)........... 204,400 35
Thai Oil PCL+(+)................. 42,200 41
-------
TOTAL THAILAND COMMON
STOCK...................... 2,545
-------
TURKEY COMMON STOCK - 2.37%
Akbank T.A.S..................... 49,373,482 223
Akcansa Cimento A.S.............. 56,902,700 169
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
68
AMERICAN AADVANTAGE EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Arcelik A.S.+.................... 38,536,350 $ 234
Enka Insaat ve Sanayi A.S.+...... 7,886,451 198
Hurriyet Gazetecilik ve
Matbaacilik A.S................ 82,009,130 163
Tupras-Turkiye Petrol
Rafinerileri A.S............... 27,214,900 252
Turkcell Iletisim Hizmetleri
A.S............................ 37,239,879 229
Turkiye Garanti Bankasi A.S.+.... 81,555,450 218
Trakya Cam Sanayii A.S........... 75,184,815 188
Yapi ve Kredi Bankasi A.S.+...... 38,967,000 88
-------
TOTAL TURKEY COMMON STOCK.... 1,962
-------
TOTAL STOCKS................. 69,650
-------
<Caption>
PAR
AMOUNT
-----------
SHORT TERM INVESTMENTS - 18.13%
U. S. TREASURY BILLS - 0.87%*
1.70%, Due 12/9/2004 (Note C).... $ 720 719
-------
TOTAL U. S. TREASURY BILLS... 719
-------
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
OTHER SHORT TERM INVESTMENTS - 17.26%
American AAdvantage Money Market
Select Fund (Notes B and D).... 12,118,007 $12,118
AMR Investments Enhanced Cash
Business Trust (Notes B and
D)............................. 2,148,906 2,149
-------
TOTAL OTHER SHORT TERM
INVESTMENTS................ 14,267
-------
TOTAL SHORT TERM
INVESTMENTS................ 14,986
-------
TOTAL INVESTMENTS - 102.35% (COST
$72,492)....................... 84,636
-------
LIABILITIES, NET OF OTHER
ASSETS - (2.35%)............... (1,941)
-------
TOTAL NET ASSETS - 100%.......... $82,695
=======
</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 $1,506 or 1.82% of net assets.
(B) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(C) At October 31, 2004, security held as collateral for open futures contracts.
(D) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan at October 31, 2004. See Note
5.
+ - Non-income producing security.
( 7/8) - Valued at fair value pursuant to procedures approved by the Board of
Trustees.
See accompanying notes
- --------------------------------------------------------------------------------
69
AMERICAN AADVANTAGE EMERGING MARKETS FUND
EMERGING MARKETS SECTOR DIVERSIFICATION
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
NET ASSETS
----------
Consumer Discretionary...................................... 9.81%
Consumer Staples............................................ 6.31%
Energy...................................................... 8.32%
Financials.................................................. 15.46%
Health Care................................................. 1.31%
Industrials................................................. 7.39%
Information Technology...................................... 10.58%
Materials................................................... 9.06%
Short-Term Investments...................................... 18.11%
Telecommunication Services.................................. 11.96%
Utilities................................................... 3.98%
Liabilities, Net of Other Assets............................ (2.29%)
-------
100.00%
=======
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
70
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
CORPORATE BONDS - 90.98%
CONSUMER DISCRETIONARY - 29.16%
AUTO COMPONENTS - 4.96%
Advanced Accessory Systems, LLC, 10.75%, Due 6/15/2011...... $ 1,200 $ 1,092
ArvinMeritor, Incorporated, 8.75%, Due 3/1/2012*............ 1,750 1,951
Asbury Automotive Group, Incorporated,
9.00%, Due 6/15/2012...................................... 1,000 1,055
8.00%, Due 3/15/2014, 144A (Note A)....................... 800 780
Collins & Aikman Corporation,
10.75%, Due 12/31/2011*................................... 2,025 2,020
12.875%, Due 8/24/2012, 144A (Note A)*.................... 800 692
GenCorp, Incorporated, 9.50%, Due 8/15/2013................. 2,600 2,789
General Motors Corporation, 7.125%, Due 7/15/2013*.......... 3,300 3,424
Stanadyne Corporation, 10.00%, Due 8/15/2014, 144A (Note
A)........................................................ 1,000 1,050
Tenneco Automotive, Incorporated, 11.625%, Due
10/15/2009*............................................... 1,000 1,062
TriMas Corporation, 9.875%, Due 6/15/2012*.................. 1,750 1,794
United Components, Incorporated, 9.375%, Due 6/15/2013...... 1,500 1,627
--------
TOTAL AUTO COMPONENTS................................... 19,336
--------
HOTELS, RESTAURANTS & LEISURE - 8.43%
AMC Entertainment, Incorporated,
9.50%, Due 2/1/2011....................................... 1,700 1,755
9.875%, Due 2/1/2012*..................................... 750 802
8.625%, Due 8/15/2012, 144A (Note A)...................... 700 765
Ameristar Casinos, Incorporated, 10.75%, Due 2/15/2009...... 700 798
AMF Bowling Worldwide Incorporated, 10.00%, Due 3/1/2010,
144A (Note A)............................................. 2,450 2,622
Aztar Corporation,
9.00%, Due 8/15/2011...................................... 1,000 1,120
7.875%, Due 6/15/2014..................................... 1,625 1,763
Blockbuster, Incorporated, 9.00%, Due 9/1/2012, 144A (Note
A)........................................................ 1,100 1,128
Booth Creek Ski Holdings, Incorporated, 12.50%, Due
3/15/2007................................................. 2,500 2,506
Choctaw Resort Development Enterprise, 7.25%, Due
11/15/2019, 144A (Note A)................................. 700 715
Chumash Casino & Resort Enterprises, 9.00%, Due 7/15/2010... 1,250 1,397
Cinemark, Incorporated, 0.00%, Due 3/15/2014, 144A (Note
A)+....................................................... 2,025 1,433
Intrawest Corporation, 7.50%, Due 10/15/2013, 144A (Note
A)........................................................ 750 803
Loews Cineplex Entertainment Corporation, 9.00%, Due
8/1/2014, 144A (Note A)................................... 1,600 1,676
Penn National Gaming, Incorporated, 11.125%, Due 3/1/2008... 1,500 1,621
Poster Financial Group, Incorporated, 8.75%, Due
12/1/2011................................................. 1,860 1,948
Station Casinos, Incorporated, 6.875%, Due 3/1/2016, 144A
(Note A).................................................. 1,500 1,594
Town Sports International, Incorporated, 9.625%, Due
4/15/2011................................................. 800 844
Turning Stone Casino Resort, 9.125%, Due 12/15/2010, 144A
(Note A).................................................. 3,710 4,025
Vicorp Restaurants, Incorporated, 10.50%, Due 4/15/2011..... 1,000 1,000
Warner Music Group, 7.375%, Due 4/15/2014, 144A (Note A).... 2,500 2,569
--------
TOTAL HOTELS, RESTAURANTS & LEISURE..................... 32,884
--------
HOUSEHOLD DURABLES - 0.25%
Ainsworth Lumber Company Limited, 6.75%, Due 3/15/2014...... 1,000 960
--------
TOTAL HOUSEHOLD DURABLES................................ 960
--------
MEDIA - 6.42%
Alliance Atlantis Communications, Incorporated, 13.00%, Due
12/15/2009................................................ 2,530 2,720
American Lawyer Media, Incorporated, 9.75%, Due
12/15/2007................................................ 1,600 1,608
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
71
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Charter Communications Operations,
8.00%, Due 4/30/2012, 144A (Note A)....................... $ 500 $ 506
8.375%, Due 4/30/2014, 144A (Note A)...................... 2,200 2,219
Dex Media West, LLC,
9.875%, Due 11/15/2009.................................... 500 575
9.875%, Due 8/15/2013..................................... 500 591
0.00%, Due 11/15/2013+.................................... 1,000 760
Echostar DBS Corporation, 6.625%, Due 10/1/2014, 144A (Note
A)*....................................................... 6,750 6,902
Fisher Communications, Incorporated, 8.625%, Due 9/15/2014,
144A (Note A)............................................. 800 844
Kabel Deutschland GMBH, 10.625%, Due 7/1/2014, 144A (Note
A)........................................................ 3,650 4,088
LBI Media, Incorporated, 10.125%, Due 7/15/2012............. 1,000 1,113
PEI Holdings, Incorporated, 11.00%, Due 3/15/2010........... 1,391 1,615
XM Satellite Radio, Incorporated, 0.00%, Due 12/31/2009+.... 1,500 1,509
--------
TOTAL MEDIA............................................. 25,050
--------
RETAIL - 8.25%
CSK Auto Corporation, 7.00%, Due 1/15/2014.................. 1,545 1,514
Dollar General Corporation, 8.625%, Due 6/15/2010........... 3,180 3,633
Finlay Fine Jewelry Corporation, 8.375%, Due 6/1/2012....... 1,575 1,721
FTD, Incorporated, 7.75%, Due 2/15/2014, 144A (Note A)*..... 2,165 2,170
Group 1 Automotive, Incorporated, 8.25%, Due 8/15/2013...... 1,000 1,058
J Crew Intermediate LLC, 0.00%, 5/15/2008+*................. 1,750 1,632
NationsRent, Incorporated, 9.50%, Due 10/15/2010............ 1,250 1,381
Pep Boys, Incorporated,
6.71%, Due 11/3/2004...................................... 1,000 1,000
7.00%, Due 6/1/2005....................................... 700 711
6.88%, Due 3/6/2006....................................... 1,000 1,020
Rite Aid Corporation,
12.50%, Due 9/15/2006..................................... 750 851
8.125%, Due 5/1/2010...................................... 2,000 2,135
9.50%, Due 2/15/2011...................................... 1,210 1,340
Samsonite Corporation, 8.875%, Due 6/1/2011................. 2,000 2,130
Toys R Us, Incorporated,
7.625%, 8/1/2011*......................................... 1,950 1,960
7.375%, Due 10/15/2018.................................... 800 744
8.75%, Due 9/1/2021....................................... 500 500
United Rentals North America, Incorporated, 6.50%, Due
2/15/2012................................................. 3,600 3,564
Woolworth Corporation, 8.50%, Due 1/15/2022................. 2,900 3,103
--------
TOTAL RETAIL............................................ 32,167
--------
TEXTILES & APPAREL - 0.85%
Day International Group, Incorporated, 9.50%, Due
3/15/2008................................................. 500 509
Phillips-Van Heusen Corporation, 7.75%, Due 11/15/2023...... 2,800 2,814
--------
TOTAL TEXTILES & APPAREL................................ 3,323
--------
TOTAL CONSUMER DISCRETIONARY............................ 113,720
--------
CONSUMER STAPLES - 2.73%
Borden, Incorporated,
9.20%, Due 3/15/2021...................................... 2,250 2,081
7.875%, Due 2/15/2023..................................... 1,450 1,211
Chiquita Brands International, Incorporated,
10.56%, Due 3/15/2009..................................... 1,750 1,875
7.50%, Due 11/1/2014, 144A (Note A)....................... 750 769
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
72
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Herbalife International, Incorporated, 11.75%, Due
7/15/2010................................................. $ 2,975 $ 3,421
Pilgrims Pride Corporation, 9.625%, Due 9/15/2011........... 1,148 1,290
--------
TOTAL CONSUMER STAPLES.................................. 10,647
--------
ENERGY - 6.80%
AES Corporation, 4.50%, Due 8/15/2005*...................... 2,250 2,250
Alpha Natural Resources, LLC, 10.00%, Due 6/1/2012, 144A
(Note A).................................................. 500 555
Calpine Corporation,
8.50%, Due 7/15/2010, 144A (Note A)*...................... 2,100 1,544
9.625%, Due 10/1/2014, 144A (Note A)...................... 800 760
CITGO Petroleum Corporation, 6.00%, Due 10/15/2011, 144A
(Note A).................................................. 500 509
CMS Energy Corporation, 7.625%, Due 11/15/2004.............. 800 800
Dynegy Holdings, Incorporated, 10.125%, Due 7/15/2013, 144A
(Note A).................................................. 2,400 2,796
Energy Partners Limited, 8.75%, Due 8/1/2010................ 2,000 2,169
MarkWest Energy Partners LP, 6.875%, Due 11/1/2014, 144A
(Note A).................................................. 1,500 1,530
Massey Energy Company, 6.625%, Due 11/15/2010............... 1,500 1,564
Newfield Exploration Company, 8.375%, Due 8/15/2012......... 1,000 1,132
Paramount Resources Limited, 7.875%, Due 11/1/2010.......... 1,750 1,925
PG&E Gas Transmission, Northwest Company, 7.80%, Due
6/1/2025.................................................. 2,500 2,587
Star Gas Partners, L.P., 10.25%, Due 2/15/2013*............. 2,725 2,623
Swift Energy Company, 7.675%, Due 7/15/2011................. 500 543
Terex Corporation,
9.25%, Due 7/15/2011...................................... 1,250 1,400
7.375%, Due 1/15/2014..................................... 1,725 1,846
--------
TOTAL ENERGY............................................ 26,533
--------
FINANCIALS - 2.35%
DIVERSIFIED FINANCIALS - 2.04%
E Trade Financial Corporation, 8.00%, Due 6/15/2011, 144A
(Note A).................................................. 2,375 2,506
Refco Financial Holdings, LLC, 9.00%, Due 8/1/2012, 144A
(Note A).................................................. 2,625 2,835
Thornburg Mortgage, Incorporated, 8.00%, 5/15/2013*......... 2,500 2,625
--------
TOTAL DIVERSIFIED FINANCIALS............................ 7,966
--------
REAL ESTATE - 0.31%
Ventas Realty Limited Partnership, 6.625%, Due 10/15/2014,
144A, (Note A)............................................ 1,200 1,224
--------
TOTAL REAL ESTATE....................................... 1,224
--------
TOTAL FINANCIALS........................................ 9,190
--------
HEALTH CARE - 5.96%
BIOTECHNOLOGY - 0.92%
HealthSouth Corporation,
6.875%, 6/15/2005*........................................ 450 453
8.375%, Due 10/1/2011*.................................... 3,150 3,142
--------
TOTAL BIOTECHNOLOGY..................................... 3,595
--------
EQUIPMENT & SUPPLIES - 0.91%
Duane Reade, Incorporated, 9.75%, Due 8/1/2011, 144A (Note
A)*....................................................... 2,000 1,920
Leiner Health Products, Incorporated, 11.00%, Due 6/1/2012,
144A (Note A)............................................. 500 542
Sybron Dental Specialties, Incorporated, 8.125%, Due
6/15/2012................................................. 1,000 1,090
--------
TOTAL EQUIPMENT & SUPPLIES.............................. 3,552
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
73
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
HEALTHCARE PROVIDERS & SERVICES - 4.13%
HCA, Incorporated,
8.75%, Due 9/1/2010....................................... $ 1,000 $ 1,153
5.75%, Due 3/15/2014...................................... 1,000 970
8.36%, Due 4/15/2024...................................... 1,500 1,613
Interactive Health, LLC, 7.25%, Due 4/1/2011, 144A (Note
A)........................................................ 1,800 1,566
Jean Coutu Group PJC, Incorporated, 7.625%, Due 8/1/2012,
144A (Note A)............................................. 500 529
National Health Investors, 7.30%, Due 7/16/2007............. 1,000 1,025
NDCHealth Corporation, 10.50%, Due 12/1/2012................ 3,000 3,180
Pacificare Health Systems, Incorporated, 10.75%, Due
6/1/2009.................................................. 1,625 1,873
Quintiles Transnational Corporation, 10.00%, Due
10/1/2013................................................. 2,230 2,430
Vicar Operating, Incorporated, 9.875%, Due 12/1/2009........ 1,601 1,773
--------
TOTAL HEALTHCARE PROVIDERS & SERVICES................... 16,112
--------
TOTAL HEALTH CARE....................................... 23,259
--------
INFORMATION TECHNOLOGY - 4.41%
COMMUNICATIONS EQUIPMENT - 1.03%
Corning, Incorporated,
7.00%, Due 3/15/2007...................................... 1,300 1,300
6.30%, Due 3/1/2009....................................... 1,650 1,726
6.20%, Due 3/15/2016...................................... 1,000 1,001
--------
TOTAL COMMUNICATIONS EQUIPMENT.......................... 4,027
--------
SEMICONDUCTOR EQUIPMENT & PRODUCTS - 3.35%
AMI Semiconductor, Incorporated, 10.75%, Due 2/1/2013....... 1,331 1,561
Amkor Technology, Incorporated,
9.25%, Due 2/15/2008*..................................... 500 480
10.50%, Due 5/1/2009*..................................... 1,250 1,106
7.125%, Due 3/15/2011, 144A (Note A)*..................... 1,250 1,078
Fairchild Semiconductor Corporation, 10.50%, Due 2/1/2009... 1,790 1,915
Flextronics International Limited, 6.50%, Due 5/15/2013*.... 2,550 2,678
Freescale Semiconductor, Incorporated, 7.125%, 7/15/2014,
144A (Note A)............................................. 4,000 4,240
--------
TOTAL SEMICONDUCTOR EQUIPMENT & PRODUCTS................ 13,058
--------
SOFTWARE - 0.03%
Peregrine Systems, Incorporated, 6.50%, Due 8/15/2007+...... 131 130
--------
TOTAL SOFTWARE.......................................... 130
--------
TOTAL INFORMATION TECHNOLOGY............................ 17,215
--------
INDUSTRIALS - 26.46%
AEROSPACE & ENGINEERING - 1.64%
K & F Industries, Incorporated, 9.625%, Due 12/15/2010...... 2,500 2,900
Transdigm, Incorporated, 8.375%, Due 7/15/2011.............. 3,250 3,494
--------
TOTAL AEROSPACE & ENGINEERING........................... 6,394
--------
CONSTRUCTION & ENGINEERING - 3.79%
Beazer Homes USA, Incorporated, 8.375%, 4/15/2012........... 2,000 2,205
Interline Brands, Incorporated, 11.50%, Due 5/15/2011....... 3,500 3,885
KB Home, 7.75%, Due 2/1/2010................................ 1,000 1,090
K. Hovnanian Enterprises, Incorporated, 8.875%, Due
4/1/2012.................................................. 2,700 3,010
Schuler Homes, Incorporated, 9.375%, Due 7/15/2009.......... 1,500 1,628
Standard Pacific Corporation, 9.50%, Due 9/15/2010.......... 1,205 1,313
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
74
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Technical Olympic USA, Incorporated, 9.00%, Due 7/1/2010.... $ 1,500 $ 1,635
--------
TOTAL CONSTRUCTION & ENGINEERING........................ 14,766
--------
COMMERCIAL SERVICES & SUPPLIES - 20.03%
AirGate PCS, Incorporated, 5.85%, Due 10/15/2011, 144A (Note
A)........................................................ 1,000 1,025
Alliance Laundry Holdings, LLC, 9.625%, Due 5/1/2008........ 640 656
Allied Waste North American, Incorporated,
8.875%, Due 4/1/2008...................................... 600 636
8.50%, Due 12/1/2008...................................... 2,250 2,363
10.00%, Due 8/1/2009*..................................... 2,250 2,363
Alpharma, Incorporated, 8.625%, Due 5/1/2011, 144A (Note
A)*....................................................... 3,250 3,380
Biovail Corporation, 7.875%, Due 4/1/2010................... 3,400 3,528
Cadmus Communications Corporation, 8.375%, Due 6/15/2014.... 1,200 1,296
CHC Helicopter Corporation, 7.375%, Due 5/1/2014*........... 2,250 2,396
Columbus McKinnon Corporation, 10.00%, Due 8/1/2010......... 1,750 1,925
Communications and Power Industries, Incorporated, 8.00%,
Due 2/1/2012.............................................. 500 525
Compass Minerals Group, Incorporated, 10.00%, Due
8/15/2011................................................. 1,000 1,120
Compass Minerals International, Incorporated, 0.00%, Due
6/1/2013+................................................. 1,825 1,442
Corrections Corporation of America,
9.875%, Due 5/1/2009...................................... 500 563
7.50%, Due 5/1/2011....................................... 900 973
Da-Lite Screen Company, Incorporated, 9.50%, Due
5/15/2011................................................. 750 795
Freeport-McMoRan Copper & Gold, Incorporated, 10.125%, Due
2/1/2010.................................................. 2,000 2,245
Hexcel Corporation,
9.875%, Due 10/1/2008..................................... 250 280
9.75%, Due 1/15/2009...................................... 3,700 3,894
HMH Properties, Incorporated, 7.875%, Due 8/1/2008.......... 1,575 1,618
Ingram Micro, Incorporated, 9.875%, Due 8/15/2008........... 2,000 2,195
Invensys, plc, 9.875%, Due 3/15/2011, 144A (Note A)......... 1,250 1,306
Iron Mountain, Incorporated,
8.625%, Due 4/1/2013...................................... 500 541
6.625%, Due 1/1/2016...................................... 2,500 2,487
ISPAT Inland, Incorporated, 9.75%, Due 4/1/2014............. 1,000 1,215
Medical Device Manufacturing, Incorporated, 10.00%, Due
7/15/2012, 144A (Note A).................................. 2,000 2,140
Mothers Work, Incorporated, 11.25%, Due 8/1/2010*........... 1,000 960
Mueller Group, Incorporated, 10.00%, Due 5/1/2012........... 500 540
Newark Group, Incorporated, 9.75%, Due 3/15/2014, 144A (Note
A)........................................................ 2,850 2,964
Pantry, Incorporated, 7.75%, Due 2/15/2014, 144A (Note A)... 750 784
Phibro Animal Health Corporation, 13.00%, Due 12/1/2007,
144A (Note A)............................................. 500 545
J.B. Poindexter Incorporated, 8.75%, Due 3/15/2014, 144A
(Note A).................................................. 1,000 1,070
Polypore, Incorporated, 8.75%, Due 5/15/2012................ 875 914
Quality Distribution, LLC, 9.00%, Due 11/15/2010, 144A (Note
A)........................................................ 1,280 1,192
Russell Corporation, 9.25%, Due 5/1/2010.................... 1,475 1,586
Seagate Technology HDD Holdings, 8.00%, Due 5/15/2009....... 1,500 1,622
Sheridan Acquisition Corporation, 10.25%, Due 8/15/2011,
144A (Note A)............................................. 750 814
Sheridan Group, Incorporated, 10.25%, Due 8/15/2011, 144A
(Note A).................................................. 850 922
Siebe plc, 7.125%, Due 1/15/2007, 144A (Note A)............. 1,498 1,543
Solectron Corporation, 7.97%, Due 11/15/2006(+)............. 1,500 1,550
Superior Essex Communications, 9.00%, Due 4/15/2012......... 2,400 2,436
UAP Holding Corporation, 0.00%, Due 7/15/2012, 144A (Note
A)+....................................................... 2,000 1,530
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
75
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
UNOVA, Incorporated,
6.875%, Due 3/15/2005..................................... $ 2,500 $ 2,531
7.00%, Due 3/15/2008...................................... 2,000 2,060
Unisys Corporation, 7.875%, 4/1/2008........................ 3,270 3,356
URS Corporation, 12.25%, 5/1/2009........................... 100 107
Viasystems, Incorporated, 10.50%, Due 1/15/2011*............ 1,750 1,732
WH Holdings (Cayman Islands) Limited, 9.50%, Due 4/1/2011,
144A (Note A)............................................. 500 548
WII Components, Incorporated, 10.00%, Due 2/15/2012......... 375 352
Xerox Corporation,
6.875%, Due 8/15/2011..................................... 1,000 1,067
7.625%, Due 6/15/2013..................................... 1,800 1,980
7.20%, Due 4/1/2016....................................... 500 526
--------
TOTAL COMMERCIAL SERVICES & SUPPLIES.................... 78,138
--------
MACHINERY - 1.00%
Blount, Incorporated, 8.875%, Due 8/1/2012.................. 1,000 1,089
Case Corporation, 7.25%, Due 1/15/2016...................... 1,900 1,890
Joy Global, Incorporated, 8.75%, Due 3/15/2012.............. 801 905
--------
TOTAL MACHINERY......................................... 3,884
--------
TOTAL INDUSTRIALS....................................... 103,182
--------
MATERIALS - 7.03%
CHEMICALS - 3.51%
Casella Waste System, Incorporated, 9.75%, Due 2/1/2013..... 2,020 2,222
Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp, 0.00%, Due
10/1/2014, Series A, 144A (Note A)+....................... 2,250 1,423
Crystal US Holdings 3 LLC/Crystal US Sub 3 Corp, 0.00%, Due
10/1/2014, Series B, 144A (Note A)+*...................... 2,750 1,733
Hercules, Incorporated, 6.75%, Due 10/15/2029............... 2,000 2,040
Lyondell Chemical Company, 10.875%, Due 5/1/2009*........... 1,000 1,061
Nalco Company,
7.75%, Due 11/15/2011..................................... 500 541
8.875%, Due 11/15/2013*................................... 955 1,047
Resolution Performance Products, 8.00%, Due 12/15/2009...... 1,000 1,035
Rhodia SA, 10.25%, Due 6/1/2010*............................ 750 814
Westlake Chemical Corporation, 8.75%, Due 7/15/2011......... 1,560 1,759
--------
TOTAL CHEMICALS......................................... 13,675
--------
CONTAINERS & PACKAGING - 3.12%
Crown Holdings, Incorporated,
9.50%, Due 3/1/2011....................................... 1,500 1,710
10.875%, Due 3/1/2013..................................... 1,975 2,345
Intertape Polymer, Incorporated, 8.50%, Due 8/1/2014, 144A
(Note A).................................................. 1,000 994
Owens-Brockway Glass Containers, Incorporated,
8.875%, Due 2/15/2009..................................... 3,340 3,666
8.75%, Due 11/15/2012..................................... 1,250 1,409
Silgan Holdings, Incorporated, 6.75%, Due 11/15/2013, 144A
(Note A).................................................. 2,000 2,060
--------
TOTAL CONTAINERS & PACKAGING............................ 12,184
--------
PAPER & FOREST PRODUCTS - 0.40%
Appleton Papers, Incorporated, 8.125%, Due 6/15/2011........ 500 526
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
76
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Boise Cascade LLC, 7.125%, Due 10/15/2014, 144A (Note A).... $ 1,000 $ 1,044
--------
TOTAL PAPER & FOREST PRODUCTS........................... 1,570
--------
TOTAL MATERIALS......................................... 27,429
--------
SATELLITE - 0.55%
Intelsat Limited, 5.25%, Due 11/1/2008...................... 1,500 1,412
PanAmSat Holding Corporation, 0.00%, 11/1/2014, 144A (Note
A)+....................................................... 1,250 747
--------
TOTAL SATELLITE......................................... 2,159
--------
TELECOMMUNICATION SERVICES - 5.34%
Dobson Cellular Systems, Incorporated,
4.75%, Due 11/1/2011, 144A (Note A)....................... 650 668
8.375%, Due 11/1/2011, 144A (Note A)...................... 400 413
FairPoint Communications, Incorporated, 11.875%, Due
3/1/2010.................................................. 2,065 2,375
GST Equipment Funding, Incorporated, 13.25%, Due
5/1/2007+(+).............................................. 2,500 -
MCI, Incorporated,
5.908%, Due 5/1/2007...................................... 1,750 1,745
6.688%, Due 5/1/2009...................................... 1,000 986
Nextel Communications, 6.875%, Due 10/31/2013*.............. 3,150 3,418
Qwest Services Corporation, 144A (Note A)
13.50%, Due 12/15/2010.................................... 5,200 6,175
7.875%, Due 9/1/2011...................................... 500 532
9.125%, Due 3/15/2012..................................... 500 564
SBA Telecom, Incorporated, 0.00%, Due 12/15/2011+........... 2,490 2,098
US Unwired, Incorporated, 6.13%, Due 6/15/2010.............. 1,000 1,027
US West Communication, 8.875%, Due 6/1/2031................. 800 808
--------
TOTAL TELECOMMUNICATION SERVICES........................ 20,809
--------
OTHER CORPORATE BONDS - 0.19%
Jostens, Incorporated, 7.625%, Due 10/1/2012, 144A (Note
A)........................................................ 700 725
--------
TOTAL OTHER CORPORATE BONDS............................. 725
--------
TOTAL CORPORATE BONDS................................... 354,868
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
77
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
COMMON STOCKS - 0.13%
Peregrine Systems, Incorporated............................. 28,000 $ 501
--------
TOTAL COMMON STOCKS..................................... 501
--------
SHORT TERM INVESTMENTS - 19.25%
American AAdvantage Money Market Select Fund (Note B)....... 23,672,220 23,672
Short-Term Investment Company Liquid Asset Funds (Note F)... 3,425,989 3,426
<Caption>
PAR
AMOUNT
-----------
Credit Suisse First Boston LLC Tri Party Repo, 1.925%, Due
11/1/2004, (Notes C and F)................................ $ 15,000 15,000
Laguna ABS CDO Corp. Discount Commercial Paper, Due
11/5/2004 (Note F)........................................ 8,000 7,998
Merrill Lynch Pierce Fenner & Smith, Inc. Tri Party Repo,
1.925%, Due 11/1/2004, (Notes D and F).................... 10,000 10,000
Morgan Stanley & Co., Inc. Tri Party Repo, 1.925%, Due
11/1/2004, (Notes E and F)................................ 15,000 15,000
--------
TOTAL SHORT TERM INVESTMENTS............................ 75,096
--------
TOTAL INVESTMENTS - 110.36% (COST $416,820)................. 430,465
--------
LIABILITIES, NET OF OTHER ASSETS - (10.36%)................. (40,418)
--------
TOTAL NET ASSETS - 100%..................................... $390,047
========
</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 $98,325 or 25.21% of net assets.
(B) The Fund is affiliated by having the same investment advisor. See Note 2.
(C) Collateral held at J.P. Morgan Chase consists of Codelco, Inc., 4.75%, Due
10/15/2014, Market Value - $7,282 and National Rural Utilities, 7.25%, Due
3/01/2012, Market Value - $8,019
(D) Collateral held at the J.P. Morgan Chase consists of General Motors
Acceptance Corp, 7.75%, Due 1/19/2010, Market Value - $10,203
(E) Collateral held at the Bank of New York consists of Boeing Capital Corp.,
6.54%, Due 4/24/2006, Market Value - $3,154, Boeing Capital Corp., 4.29%,
Due 6/20/2005, Market Value - $1,011, Columbus Southern Power Company,
6.85%, Due 10/03/2005, Market Value - $1,040, Cooper Industries, Inc.,
6.38%, Due 5/08/2008, Market Value - $2,207, Everest Reinsurance Holdings
Company, 8.75%, Due 3/15/2010, Market Value - $1,359, HSBC USA Capital Trust
II, 8.38%, Due 5/15/2027, Market Value - $582, Sara Lee Corp., 6.05%, Due
4/14/2008, Market Value - $1,083 and Viacom Inc., 7.63%, Due 1/15/2016,
Market Value - $5,018.
(F) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan October 31, 2004. See note 5.
(+) - Valued at fair value pursuant to procedures approved by the Board of
Trustees.
+ - Non-income producing security.
See accompanying notes
- --------------------------------------------------------------------------------
78
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 12.41%
U.S. TREASURY NOTES - 11.35%
3.625%, Due 7/15/2009*.................................... $ 500 $ 508
5.00%, Due 2/15/2011*..................................... 1,350 1,458
5.00%, Due 8/15/2011*..................................... 2,600 2,808
4.00%, Due 2/15/2014*..................................... 3,000 3,000
4.75%, Due 5/15/2014*..................................... 3,800 4,018
--------
TOTAL U.S. TREASURY NOTES............................... 11,792
--------
U. S. TREASURY BONDS - 1.06%
8.75%, Due 8/15/2020*..................................... 750 1,097
--------
TOTAL U. S. TREASURY BONDS.............................. 1,097
--------
TOTAL U.S. TREASURY OBLIGATIONS......................... 12,889
--------
U.S. AGENCY OBLIGATIONS - 1.06%
Federal Home Loan Mortgage Corporation, 5.125%, Due
10/15/2008*............................................... 500 533
Federal National Mortgage Association, 6.625%, Due
11/15/2010................................................ 500 572
--------
TOTAL U.S. AGENCY OBLIGATIONS........................... 1,105
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 10.53%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 1.15%
Pool E01492, 5.50%, Due 10/1/2018......................... 1,154 1,196
--------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 1,196
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 5.51%
Pool 555549, 5.00%, Due 6/1/2018............................ 1,437 1,468
Pool 545759, 6.50%, Due 7/1/2032............................ 1,157 1,219
Pool C01598, 5.00%, Due 8/1/2033............................ 908 908
Pool C01786, 5.50%, Due 2/1/2034............................ 1,363 1,390
Pool 725238, 5.00%, Due 3/1/2034............................ 738 737
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 5,722
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.87%
Pool 780921, 7.00%, Due 11/15/2013.......................... 427 455
Pool 780454, 7.00%, Due 10/15/2026.......................... 418 448
Pool 002379, 8.00%, Due 2/20/2027........................... 277 301
Pool 781564, 6.00%, Due 2/15/2033........................... 622 649
Pool 781690, 6.00%, Due 12/15/2033.......................... 894 931
Pool 003515, 5.50%, Due 2/20/2034........................... 1,213 1,240
--------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 4,024
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 10,942
--------
ASSET-BACKED SECURITIES - 0.96%
Household Automotive Trust 2004-1 A3, 3.30%, 5/18/2009...... 1,000 998
--------
TOTAL ASSET-BACKED SECURITIES........................... 998
--------
CORPORATE BONDS - 53.72%
BANKS - 5.40%
Banco Popular North America Inc,
6.125%, Due 10/15/2006.................................... 500 528
4.25%, Due 4/1/2008....................................... 300 307
Bank One Corporation, 4.90%, Due 4/30/2015.................. 500 495
Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 500 546
FleetBoston Financial Corporation, 8.625%, Due 1/15/2007.... 200 223
ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 300 305
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
79
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
St. George Bank Limited, 7.15%, Due 10/15/2005, 144A (Note
A)........................................................ $ 1,510 $ 1,563
Wachovia Corporation, 6.40%, Due 4/1/2008................... 1,500 1,641
--------
TOTAL BANKS............................................. 5,608
--------
FINANCE - 28.71%
AEGON, N.V., 8.00%, Due 8/15/2006........................... 225 245
American Honda Finance Corporation, 2.875%, Due 4/3/2006,
144A (Note A)............................................. 650 651
Bear Stearns Companies, Incorporated,
3.00%, Due 3/30/2006...................................... 500 502
2.875%, Due 7/2/2008...................................... 300 293
Boeing Capital Corporation, 5.40%, Due 11/30/2009........... 700 748
Capital One Bank,
4.25%, Due 12/1/2008...................................... 1,000 1,015
5.125%, 2/15/2014......................................... 200 201
Cendant Corporation,
6.875%, Due 8/15/2006..................................... 1,100 1,172
3.875%, Due 11/27/2011.................................... 500 500
Countrywide Home Loan, Incorporated, 3.50%, Due
12/19/2005................................................ 750 755
Credit Suisse First Boston USA, Incorporated, 5.875%, Due
8/1/2006.................................................. 1,500 1,576
First Data Corporation, 3.375%, Due 8/1/2008................ 1,000 995
Ford Motor Credit Company, 7.375%, Due 10/28/2009........... 370 402
General Motors Acceptance Corporation,
6.75%, Due 1/15/2006...................................... 650 673
7.25%, Due 3/2/2011....................................... 370 393
Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013..... 350 347
John Hancock Global Funding,
5.625%, Due 6/27/2006..................................... 1,400 1,460
3.75%, Due 9/30/2008...................................... 1,000 1,006
Heller Financial, Incorporated, 6.375%, Due 3/15/2006....... 1,500 1,572
Household Finance Corporation, 5.75%, Due 1/30/2007......... 1,750 1,850
International Lease Finance Corporation, 6.375%, Due
3/15/2009................................................. 725 791
Lehman Brothers Holdings, Incorporated, 3.50%, Due
8/7/2008.................................................. 1,000 995
Lincoln National Corporation, 4.75%, Due 2/15/2014.......... 200 197
MassMutual Global Funding II, 3.80%, Due 4/15/2009, 144A
(Note A).................................................. 1,000 998
Morgan Stanley and Company, Incorporated,
6.10%, Due 4/15/2006...................................... 550 576
0.25%, Due 4/1/2009....................................... 560 514
PHH Corporation, 6.00%, Due 3/1/2008........................ 300 321
Prudential Financial, Incorporated, 4.50%, Due 7/15/2013.... 375 365
Prudential Insurance Company of America, 6.375%, Due
7/23/2006, 144A (Note A).................................. 2,000 2,126
Refco Group Limited, LLC, 9.00%, Due 8/1/2012, 144A (Note
A)........................................................ 400 432
Salomon, Incorporated, 6.75%, Due 1/15/2006................. 1,000 1,047
Simon Property Group LP, 6.375%, Due 11/15/2007............. 400 432
Synovus Financial Corporation,
7.25%, Due 12/15/2005..................................... 1,500 1,570
4.875%, Due 2/15/2013..................................... 500 505
Transamerica Corporation, 6.75%, Due 11/15/2006*............ 1,000 1,068
Verizon Global Funding Corporation, 4.375%, Due 6/1/2013.... 200 196
VW Credit Incorporated, 2.33%, Due 7/21/2005, 144A (Note
A)........................................................ 1,000 1,000
Washington Mutual, Incorporated, 4.625%, Due 4/1/2014....... 350 337
--------
TOTAL FINANCE........................................... 29,826
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
80
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
FOREIGN - 0.29%
Province of Ontario, 3.35%, Due 7/16/2007*.................. $ 300 $ 302
--------
TOTAL FOREIGN........................................... 302
--------
INDUSTRIALS - 18.63%
AmeriPath, Incorporated, 10.50%, Due 4/1/2013............... 400 392
AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 700 859
AT&T Wireless Services, Incorporated,
7.35%, Due 3/1/2006....................................... 600 636
8.125%, Due 5/1/2012...................................... 250 305
BHP Finance (USA) Limited, 4.80%, Due 4/15/2013............. 550 560
Bunge Limited Finance Corporation,
7.80%, Due 10/15/2012..................................... 200 238
5.35%, Due 4/15/2014, 144A (Note A)....................... 500 512
Continental Cablevision, Incorporated, 8.30%, Due
5/15/2006................................................. 250 269
DaimlerChrysler North America,
4.75%, Due 1/15/2008...................................... 700 721
6.50%, Due 11/15/2013..................................... 350 382
Dell Computer Corporation, 6.55%, Due 4/15/2008............. 200 220
Deutsche Telekom International,
8.25%, Due 6/15/2005...................................... 175 181
3.875%, Due 7/22/2008..................................... 500 504
Dole Food Company, Incorporated, 8.875%, Due 3/15/2011...... 400 443
DST Systems, Incorporated, 3.625%, Due 8/15/2023*........... 485 561
EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A
(Note A).................................................. 350 348
EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 350 340
Equistar Chemicals, LP, 10.625%, Due 5/1/2011............... 400 462
France Telecom SA, 8.50%, Due 3/1/2011...................... 500 600
Freeport-McMoRan Copper & Gold, Incorporated, 10.125%, Due
2/1/2010.................................................. 400 449
Hertz Corporation, 4.70%, Due 10/2/2006..................... 900 915
Jacuzzi Brands, Incorporated, 9.625%, Due 7/1/2010.......... 400 450
Keane, Incorporated, 2.00%, Due 6/15/2013................... 525 572
Kroger Company, 8.15%, 7/15/2006............................ 1,000 1,082
Legrand SA, 8.50%, Due 2/15/2025............................ 400 459
Mediacom Communications Corporation, 9.50%, Due
1/15/2013*................................................ 400 392
Nabors Industries, Incorporated, 0.00%, Due 6/15/2023+...... 280 270
Northrop Grumman Corporation,
4.079%, Due 11/16/2006.................................... 700 712
7.125%, Due 2/15/2011..................................... 510 588
Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 450 514
Pope & Talbot, Incorporated, 8.375%, Due 6/1/2013........... 355 373
Pulte Homes, Incorporated,
4.875%, Due 7/15/2009..................................... 100 102
5.25%, Due 1/15/2014...................................... 125 125
Royal Caribbean Cruises Limited,
0.00%, Due 5/18/2021+..................................... 210 157
7.50%, due 10/15/2027..................................... 400 429
Saks Incorporated, 2.00%, Due 3/15/2024, 144A (Note A)...... 490 431
Sprint Capital Corporation,
6.00%, Due 1/15/2007...................................... 1,200 1,269
8.375%, Due 3/15/2012..................................... 175 215
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
81
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Union Pacific Corporation, 6.50%, Due 4/15/2012............. $ 350 $ 391
Verizon Virginia, 4.625%, Due 3/15/2013..................... 500 493
WH Holdings (Cayman Islands) Limited, 9.50%, Due 4/1/2011,
144A (Note A)............................................. 400 438
--------
TOTAL INDUSTRIALS....................................... 19,359
--------
PHARMACEUTICAL - 0.27%
Teva Pharmaceuticals,
0.25%, Due 2/1/2024....................................... 120 116
0.50%, Due 2/1/2024....................................... 170 162
--------
TOTAL PHARMACEUTICAL.................................... 278
--------
UTILITY - 0.42%
Teco Energy, Incorporated, 7.50%, Due 6/15/2010............. 400 440
--------
TOTAL UTILITY........................................... 440
--------
TOTAL CORPORATE BONDS................................... 55,813
--------
CONVERTIBLE BONDS - 11.70%
CONSUMER DISCRETIONARY - 1.17%
Flextronics International Limited, 1.00%, 8/1/2010.......... 500 535
General Motors Corporation, 6.25%, Due 7/15/2033............ 16 433
Goodyear Tire and Rubber Company, 4.00%, Due 6/15/2034, 144A
(Note A).................................................. 225 245
--------
TOTAL CONSUMER DISCRETIONARY............................ 1,213
--------
ENERGY - 0.41%
CenterPoint Energy, Incorporated, 3.75%, Due 5/15/2023, 144A
(Note A).................................................. 390 426
--------
TOTAL ENERGY............................................ 426
--------
FINANCIALS - 3.36%
American Financial Group, Incorporated, 1.486%, Due
6/2/2033.................................................. 1,325 542
Americredit Corporation, 1.75%, Due 11/15/2023, 144A (Note
A)........................................................ 200 244
Financial Federal Corporation, 2.00%, Due 4/15/2034, 144A
(Note A).................................................. 285 293
IOS Capital, LLC, 5.00%, Due 5/1/2007, 144A (Note A)........ 130 133
QLT, Incorporated, 3.00%, Due 9/15/2023, 144A (Note A)...... 250 306
Silicon Valley Bancshares, 0.00%, Due 6/15/2008+............ 240 304
SLM Corporation, 4.00%, Due 1/15/2009....................... 1,300 1,307
Travelers Property Casualty Corporation, 4.50%, Due
4/15/2032................................................. 17 365
--------
TOTAL FINANCIALS........................................ 3,494
--------
HEALTH CARE - 0.74%
Health Management Association, Incorporated, 1.50%, Due
8/1/2023.................................................. 480 496
Invitrogen Corporation, 2.00%, Due 8/1/2023, 144A (Note
A)........................................................ 250 277
--------
TOTAL HEALTH CARE....................................... 773
--------
INDUSTRIALS - 6.02%
Andrew Corporation, 3.25%, Due 8/15/2013, 144A (Note A)..... 425 560
Anixter International, Incorporated, 0.00%, Due 7/7/2033+... 275 151
Blockbuster Incorporated, 9.00%, Due 9/1/2012, 144A (Note
A)........................................................ 200 205
Carnival Corporation, 0.00%, Due 10/24/2021+*............... 715 610
Celestica, Incorporated, 7.875%, Due 7/1/2011............... 260 278
ConocoPhillips, 3.625%, 10/15/2007.......................... 350 354
The Walt Disney Company, 2.125%, Due 4/15/2023.............. 475 508
Fisher Scientific International, Incorporated, 3.25%, Due
3/1/2024.................................................. 160 173
GrafTech International Limited, 1.625%, Due 1/15/2024, 144A
(Note A).................................................. 210 192
Halliburton Company, 3.125%, Due 7/15/2023, 144A (Note A)... 210 252
International Game Technology, 0.00%, Due 1/29/2033+........ 315 235
Juniper Networks, Incorporated, 0.00%, Due 6/15/2008, 144A
(Note A)+................................................. 215 317
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
82
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- --------
(DOLLARS IN THOUSANDS)
Kaydon Corporation, 4.00%, Due 5/23/2023, 144A (Note A)..... $ 230 $ 272
Leucadia National Corporation, 7.00%, Due 8/15/2013......... 400 408
Liberty Media Corporation, 0.75%, Due 3/30/2023, 144A (Note
A)........................................................ 355 386
Schlumberger Limited, 2.125%, Due 6/1/2023*................. 280 296
Tyco International Group S.A.,
2.75%, Due 1/15/2018...................................... 575 811
2.75%, Due 1/15/2018, 144A (Note A)....................... 175 247
--------
TOTAL INDUSTRIALS....................................... 6,255
--------
TOTAL CONVERTIBLE BONDS................................. 12,161
--------
<Caption>
SHARES
-----------
CONVERTIBLE PREFERRED STOCK - 5.54%
CONSUMER DISCRETIONARY - 0.45%
Ford Motor Company Capital Trust II......................... 9,400 470
--------
TOTAL CONSUMER DISCRETIONARY............................ 470
--------
ENERGY - 0.86%
Amerada Hess Corporation.................................... 4,900 359
Devon Energy Corporation.................................... 7,203 533
--------
TOTAL ENERGY............................................ 892
--------
FINANCIALS - 1.88%
Cummins Capital Trust I*.................................... 4,000 308
Hartford Financial Services Group, Incorporated............. 8,500 488
Prudential Financial, Incorporated.......................... 2,900 200
Safeco Corporation*......................................... 12,300 569
Washington Mutual, Incorporated............................. 7,200 385
--------
TOTAL FINANCIALS........................................ 1,950
--------
INDUSTRIALS - 1.98%
AutoDesk, Incorporated...................................... 8,800 464
The Walt Disney Company..................................... 11,000 277
Infosys Technologies Limited*............................... 6,100 405
L-3 Communications Holdings, Incorporated................... 5,000 330
Motorola, Incorporated...................................... 8,500 427
Phelps Dodge Corporation.................................... 840 155
--------
TOTAL INDUSTRIALS....................................... 2,058
--------
TELECOMMUNICATION SERVICES - 0.37%
Nokia Corporation........................................... 25,000 386
--------
TOTAL TELECOMMUNICATION SERVICES........................ 386
--------
TOTAL CONVERTIBLE PREFERRED STOCK....................... 5,756
--------
COMMON STOCK - 2.73%
CONSUMER DISCRETIONARY - 2.73%
Albertson's, Incorporated................................... 15,500 380
Bausch and Lomb, Incorporated............................... 10,600 646
Ebay, Incorporated+......................................... 5,750 561
Home Depot, Incorporated.................................... 13,600 559
Starbucks Corporation+...................................... 13,000 687
--------
TOTAL CONSUMER DISCRETIONARY............................ 2,833
--------
TOTAL COMMON STOCK...................................... 2,833
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
83
AMERICAN AADVANTAGE ENHANCED INCOME FUND
SCHEDULE OF INVESTMENTS - CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
----------- --------
(DOLLARS IN THOUSANDS)
SHORT-TERM INVESTMENTS - 16.76%
American AAdvantage Money Market Select Fund (Notes B and
C)........................................................ 5,535,517 $ 5,536
AMR Investments Enhanced Cash Business Trust (Notes B and
C)........................................................ 11,876,744 11,877
--------
TOTAL SHORT-TERM INVESTMENTS............................ 17,413
--------
TOTAL INVESTMENTS - 115.41% (COST $117,744)................. 119,910
--------
LIABILITIES, NET OF OTHER ASSETS - (15.41%)................. (16,013)
--------
TOTAL NET ASSETS - 100%..................................... $103,897
========
</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 $13,159 or 12.67% of net assets.
(B) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(C) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of the security is on loan at October 31, 2004. See Note 5.
+ - Non-income producing security.
See accompanying notes
- --------------------------------------------------------------------------------
84
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
U.S. TREASURY OBLIGATIONS - 15.12%
U.S. TREASURY BONDS - 7.01%
7.50%, Due 11/15/2016*...................................... $ 1,000 $ 1,295
9.125%, Due 5/15/2018*...................................... 700 1,031
7.875%, Due 2/15/2021*...................................... 750 1,024
6.875%, Due 8/15/2025*...................................... 370 470
6.25%, Due 5/15/2030*....................................... 950 1,142
5.375%, Due 2/15/2031*...................................... 1,770 1,922
--------
TOTAL U.S. TREASURY BONDS............................... 6,884
--------
U.S. TREASURY NOTES - 8.11%
4.625%, Due 5/15/2006*...................................... 1,335 1,380
3.375%, Due 5/15/2009*...................................... 403 405
3.875%, Due 5/15/2009*...................................... 1,590 1,635
5.00%, Due 8/15/2011*....................................... 700 756
4.00%, Due 2/15/2014*....................................... 1,835 1,835
4.75%, Due 5/15/2014*....................................... 1,805 1,909
4.25%, Due 8/15/2014*....................................... 50 51
--------
TOTAL U.S. TREASURY NOTES............................... 7,971
--------
TOTAL U.S. TREASURY OBLIGATIONS......................... 14,855
--------
U.S. AGENCY OBLIGATIONS - 7.65%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 3.70%
5.875%, Due 3/21/2011*...................................... 380 415
4.875%, Due 11/15/2013...................................... 200 207
6.00%, Due 12/11/2033....................................... 2,912 3,018
--------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 3,640
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.95%
Discount Note, Due 11/15/2004*.............................. 3,000 2,998
5.125%, Due 1/2/2014........................................ 545 560
7.25%, Due 5/15/2030*....................................... 250 319
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 3,877
--------
TOTAL U.S. AGENCY OBLIGATIONS........................... 7,517
--------
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 33.34%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 8.32%
Pool #G11202, 6.00%, Due 11/1/2016.......................... 313 329
Pool #E96536, 5.00%, Due 3/1/2018........................... 853 871
Pool #B12563, 5.00%, Due 2/1/2019........................... 622 635
Pool #E01602, 4.50%, Due 3/1/2019........................... 938 942
Pool #G00738, 8.00%, Due 7/1/2027........................... 257 280
Pool #C00647, 6.50%, Due 9/1/2028........................... 193 203
Pool #G01457, 6.00%, Due 8/1/2029........................... 628 652
Pool #C01598, 5.00%, Due 8/1/2033........................... 1,135 1,135
Pool #A12149, 6.00%, Due 8/1/2033........................... 840 871
Pool #G01533, 6.00%, Due 8/1/2033........................... 625 648
Pool #A15436, 5.50%, Due 11/1/2033.......................... 761 776
Pool #C01786, 5.50%, Due 2/1/2034........................... 818 834
--------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 8,176
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
85
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 16.26%
Pool #323309, 6.00%, Due 9/1/2013........................... $ 249 $ 261
Pool #488099, 5.50%, Due 2/1/2014........................... 631 656
Pool #323789, 6.00%, Due 6/1/2014........................... 270 283
Pool #545449, 6.50%, Due 2/1/2017........................... 679 721
Pool #648511, 6.00%, Due 6/1/2017........................... 1,153 1,210
Pool #545823, 5.50%, Due 8/1/2017........................... 750 778
Pool #254545, 5.00%, Due 12/1/2017.......................... 1,749 1,787
Pool #254865, 4.50%, Due 9/1/2018........................... 1,053 1,059
Pool #761337, 5.00%, Due 4/1/2019........................... 476 487
Pool #100293, 9.50%, Due 8/1/2029........................... 239 270
Pool #769018, 6.50%, Due 12/1/2031.......................... 383 404
Pool #713706, 5.50%, Due 8/1/2033........................... 807 823
Pool #727223, 5.50%, Due 9/1/2033........................... 692 706
Pool #741901, 5.50%, Due 10/1/2033.......................... 592 603
Pool #749219, 5.50%, Due 10/1/2033.......................... 143 145
Pool #555880, 5.50%, Due 11/1/2033.......................... 1,755 1,790
Pool #758322, 5.50%, Due 12/1/2033.......................... 869 887
Pool #725238, 5.00%, Due 3/1/2034........................... 1,476 1,475
Pool #765304, 5.50%, Due 3/1/2034........................... 280 285
Pool #255410, 6.50%, Due 9/1/2034........................... 208 219
Pool #255413, 6.50%. Due 10/1/2034.......................... 875 921
Pool #255460, 6.50%, Due 11/1/2034.......................... 190 200
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 15,970
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 8.76%
Pool #780400, 7.00%, Due 12/15/2025......................... 566 607
Pool #780615, 6.50%, Due 8/15/2027.......................... 588 625
Pool #780680, 6.50%, Due 11/15/2027......................... 493 524
Pool #780747, 6.50%, Due 3/15/2028.......................... 839 891
Pool #780936, 7.50%, Due 12/15/2028......................... 368 397
Pool #781273, 6.00%, Due 4/15/2031.......................... 758 791
Pool #781564, 6.00%, Due 2/15/2033.......................... 912 951
Pool #616094, 6.00%, Due 11/15/2033......................... 688 716
Pool #781690, 6.00%, Due 12/15/2033......................... 687 716
Pool #003515, 5.50%, Due 2/20/2034.......................... 1,793 1,834
Pool #003517, 6.00%, Due 2/20/2034.......................... 530 551
--------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 8,603
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 32,749
--------
NON-AGENCY MORTGAGE-BACKED OBLIGATIONS - 3.22%
Banc of America Commercial Mortgage, Incorporated 2003-2 A3,
4.342%, Due 3/11/2041..................................... 265 270
Bear Stearns Commercial Mortgage Securities, Incorporated
2004-PWR5 A4, 4.831%, Due 7/11/2042....................... 535 545
Countrywide Home Loan, Incorporated 2004-18 A1, 6.00%, Due
10/25/2034................................................ 733 765
General Electric Capital Commercial Mortgage Corporation
2003-C2 A2, 4.17%, Due 7/10/2037.......................... 312 316
General Electric Capital Commercial Mortgage Corporation
2004-C3 A3, 4.865%, Due 7/10/2039......................... 495 511
Morgan Stanley Dean Witter & Company 2003-T11 A2, 4.34%, Due
6/13/2041................................................. 300 305
Wachovia Bank Commercial Mortgage Trust 2003-C5 A2, 3.989%,
Due 6/15/2035............................................. 464 447
--------
TOTAL NON-AGENCY MORTGAGE-BACKED OBLIGATIONS............ 3,159
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
86
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
CORPORATE OBLIGATIONS - 36.69%
FINANCIAL - 16.13%
AEGON, N.V., 8.00%, Due 8/15/2006........................... $ 300 $ 327
American General Finance Corporation, 5.375%, Due
9/1/2009.................................................. 180 190
Assurant, Incorporated, 5.625%, Due 2/15/2014, 144A (Note
A)*....................................................... 225 232
Banco Popular North America Inc, 4.25%, Due 4/1/2008........ 200 205
Bank One Corporation,
5.90%, Due 11/15/2011..................................... 340 369
4.90%, Due 4/30/2015*..................................... 200 198
Bear Stearns Companies, Incorporated, 2.875%, Due
7/2/2008.................................................. 400 390
BHP Finance (USA) Limited, 4.80%, Due 4/15/2013............. 150 153
Boeing Capital Corporation, 5.40%, Due 11/30/2009........... 450 481
Capital One Bank,
6.70%, Due 5/15/2008...................................... 350 385
5.75%, Due 9/15/2010...................................... 180 192
5.125%, Due 2/15/2014..................................... 350 352
Caterpillar Financial Services, 3.70%, Due 8/15/2008........ 495 498
Cendant Corporation,
6.875%, Due 8/15/2006..................................... 450 479
6.25%, Due 1/15/2008...................................... 255 275
Countrywide Home Loan, Incorporated,
3.50%, Due 12/19/2005*.................................... 250 252
3.25%, Due 5/21/2008...................................... 290 285
Credit Suisse First Boston, 6.50%, Due 5/1/2008............. 350 382
John Deere Capital Corporation,
3.375%, Due 10/1/2007..................................... 350 350
3.75%, Due 1/13/2009...................................... 275 276
Deutsche Telekom International Finance Corporation, 8.50%,
Due 6/15/2010............................................. 150 181
Fleet Norstar Financial Group, Incorporated, 8.625%, Due
1/15/2007................................................. 200 224
Ford Motor Credit Company,
6.50%, Due 1/25/2007...................................... 185 194
7.375%, Due 10/28/2009.................................... 220 239
General Electric Capital Corporation, 6.875%, Due
11/15/2010................................................ 380 433
General Motors Acceptance Corporation,
6.75%, Due 1/15/2006...................................... 350 362
6.125%, Due 8/28/2007..................................... 240 250
7.25%, Due 3/2/2011....................................... 220 234
8.375%, Due 7/15/2033*.................................... 180 187
Goldman Sachs Group, Incorporated, 4.75%, Due 7/15/2013..... 250 248
Household Finance Corporation,
5.75%, Due 1/30/2007...................................... 500 528
6.375%, Due 11/27/2012.................................... 255 285
ING Bank, NV, 5.125%, Due 5/1/2015, 144A (Note A)........... 250 254
International Lease Finance Corporation,
3.30%, Due 1/23/2008...................................... 280 277
6.375%, Due 3/15/2009..................................... 250 273
Lincoln National Corporation, 4.75%, Due 2/15/2014.......... 100 98
Merrill Lynch & Company, Incorporated, 4.125%, Due
9/10/2009................................................. 475 478
MetLife Global Funding I, 3.375%, Due 10/5/2007, 144A (Note
A)........................................................ 350 349
Morgan Stanley, 4.75%, Due 4/1/2014......................... 375 367
PHH Corporation, 6.00%, Due 3/1/2008........................ 200 214
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
87
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Prudential Financial, Incorporated,
3.75%, Due 5/1/2008....................................... $ 130 $ 130
4.50%, Due 7/15/2013...................................... 225 219
5.10%, Due 9/20/2014...................................... 210 211
Simon Property Group LP, 6.375%, Due 11/15/2007............. 200 216
SLM Corporation,
3.95%, Due 8/15/2008...................................... 325 330
4.00%, Due 1/15/2009...................................... 700 704
Sprint Capital Corporation,
6.00%, Due 1/15/2007...................................... 485 513
8.375%, Due 3/15/2012..................................... 150 184
8.75%, Due 3/15/2032...................................... 225 295
Synovus Financial Corporation, 4.875%, Due 2/15/2013........ 200 202
Verizon Global Funding Corporation, 4.375%, Due 6/1/2013.... 400 392
Washington Mutual Financial Corporation,
6.875%, Due 5/15/2011..................................... 190 217
4.625%, Due 4/1/2014...................................... 300 289
--------
TOTAL FINANCIAL......................................... 15,848
--------
INDUSTRIALS - 16.99%
American Movil S.A. de C.V., 5.75%, Due 1/15/2015........... 270 269
Anheuser Busch Companies, Incorporated, 6.50%, Due
1/1/2028.................................................. 350 398
AT&T Broadband Corporation, 8.375%, Due 3/15/2013........... 448 550
AT&T Wireless Services, Incorporated,
7.35%, Due 3/1/2006....................................... 800 847
8.125%, Due 5/1/2012...................................... 390 476
8.75%, Due 3/1/2031....................................... 170 228
Atlantic Richfield Company, 8.50%, Due 4/1/2012............. 255 324
Baxter International, Incorporated, 5.25%, Due 5/1/2007*.... 315 330
Bunge Limited Finance Corporation, 7.80%, Due 10/15/2012.... 150 178
Carnival Corporation, 3.75%, Due 11/15/2007................. 380 383
Comcast Cable Communications, 7.625%, Due 2/15/2008......... 230 256
Comcast Corporation, 5.50%, Due 3/15/2011................... 160 169
Conagra Foods, Incorporated,
7.125%, Due 10/1/2026..................................... 380 451
7.00%, Due 10/1/2028...................................... 400 463
ConocoPhillips, 3.625%, Due 10/15/2007...................... 225 227
Continental Cablevision, Incorporated, 8.30%, Due
5/15/2006................................................. 250 269
DaimlerChrysler North America,
4.75%, Due 1/15/2008...................................... 345 355
6.50%, Due 11/15/2013..................................... 225 246
Dell Computer Corporation, 6.55%, Due 4/15/2008............. 400 441
The Walt Disney Company, 5.375%, Due 6/1/2007*.............. 145 152
EOG Resources, Incorporated, 4.75%, Due 3/15/2014, 144A
(Note A).................................................. 225 224
EOP Operating Limited Partnership, 4.75%, Due 3/15/2014..... 300 292
France Telecom SA, 8.50%, Due 3/1/2011...................... 450 540
Harley Davidson, Incorporated, 2.69%, Due 4/15/2011......... 365 364
Hertz Corporation, 4.70%, Due 10/2/2006..................... 450 457
Hewlett Packard Company, 5.75%, Due 12/15/2006.............. 325 343
International Business Machines Corporation, 4.875%, Due
10/1/2006................................................. 245 254
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
88
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
Kerr McGee Corporation, 5.875%, Due 9/15/2006............... $ 480 $ 503
Lockheed Martin Corporation, 7.20%, Due 5/1/2036............ 470 572
Martin Marietta Material, Incorporated, 6.90%, Due
8/15/2007................................................. 300 328
Motorola, Incorporated, 4.608%, 11/16/2007.................. 570 587
Norfolk Southern Corporation, 7.05%, Due 5/1/2037........... 155 179
Northrop Grumman Corporation,
4.079%, Due 11/16/2006.................................... 450 458
7.125%, Due 2/15/2011..................................... 250 288
Occidental Petroleum Corporation, 6.75%, Due 1/15/2012...... 150 171
Ocean Energy, Incorporated, 4.375%, Due 10/1/2007........... 315 322
Pepsi Bottling Group, Incorporated, 7.00%, Due 3/1/2029..... 350 419
Pulte Homes, Incorporated,
4.875%, Due 7/15/2009..................................... 100 102
5.25%, Due 1/15/2014...................................... 100 100
Reed Elsevier Capital, Incorporated, 6.125%, Due 8/1/2006... 485 510
Schering Plough Corporation, 6.50%, Due 12/1/2033........... 200 220
Time Warner, Incorporated, 7.625%, Due 4/15/2031............ 155 184
Union Oil Company of California, 7.90%, Due 4/18/2008....... 100 113
Union Pacific Corporation, 6.50%, Due 4/15/2012............. 200 223
Univision Communications, Incorporated, 3.875%, Due
10/15/2008................................................ 390 390
Verizon Communications, Incorporated, 6.36%, Due
4/15/2006................................................. 335 352
Verizon Wireless Capital, LLC, 5.375%, Due 12/15/2006....... 310 325
Wal-Mart Stores, Incorporated, 7.55%, Due 2/15/2030......... 350 451
Weyerhaeuser Company, 5.95%, Due 11/1/2008.................. 210 227
Wyeth Corporation, 5.50%, Due 2/1/2014...................... 180 184
--------
TOTAL INDUSTRIALS....................................... 16,694
--------
UTILITIES - 2.91%
AEP Texas Central Company, 6.65%, Due 2/15/2033............. 155 171
Appalachian Power Company, 5.95%, Due 5/15/2033............. 230 231
Consolidated Natural Gas Company, 6.875%, Due 10/15/2026.... 290 335
Dominion Resources, Incorporated, 5.00%, Due 3/15/2013*..... 150 152
Marathon Oil Corporation, 5.375%, Due 6/1/2007.............. 255 268
MidAmerican Energy Holdings Company,
3.50%, Due 5/15/2008...................................... 270 267
5.875%, Due 10/1/2012..................................... 200 214
Progress Energy, Incorporated, 6.75%, Due 3/1/2006.......... 320 336
Public Service Enterprise Group, Incorporated, 6.95%, Due
6/1/2012.................................................. 240 270
Southern Company Capital Funding, Incorporated, 5.30%, Due
2/1/2007.................................................. 220 233
TXU Electric Delivery, 4.81%, Due 11/15/2012................ 148 154
Xcel Energy, Incorporated, 7.00%, Due 12/1/2010............. 200 228
--------
TOTAL UTILITIES......................................... 2,859
--------
FOREIGN - 0.66%
Province of Ontario, 3.35%, Due 7/16/2007*.................. 500 503
United Mexican States, 7.50%, Due 4/8/2033.................. 140 149
--------
TOTAL FOREIGN........................................... 652
--------
TOTAL CORPORATE OBLIGATIONS............................. 36,053
--------
ASSET-BACKED SECURITIES - 2.07%
Household Automotive Trust 2004-1 A3, 3.30%, Due
5/18/2009................................................. 700 698
Master Asset Securitization Trust 2002-6 2A1, 5.75%, Due
10/25/2017................................................ 777 786
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
89
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
MBNA Credit Card Master Trust 2003-A7 A7, 2.65%, Due
11/15/2010................................................ $ 568 $ 553
--------
TOTAL ASSET-BACKED SECURITIES........................... 2,037
--------
<Caption>
SHARES
-----------
SHORT-TERM INVESTMENTS - 24.34%
American AAdvantage Money Market Select Fund (Notes B and
C)........................................................ 9,775,719 9,776
AMR Investments Enhanced Cash Business Trust (Notes B and
C)........................................................ 14,140,429 14,140
--------
TOTAL SHORT-TERM INVESTMENTS............................ 23,916
--------
TOTAL INVESTMENTS - 122.43% (COST $118,962)................. 120,286
--------
LIABILITIES, NET OF OTHER ASSETS - (22.43%)................. (22,041)
--------
TOTAL NET ASSETS - 100%..................................... $ 98,245
========
</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 $1,059 or 1.08% of net assets.
(B) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(C) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan at October 31, 2004. See Note
5.
See accompanying notes
- --------------------------------------------------------------------------------
90
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS - 6.02%
FEDERAL HOME LOAN MORTGAGE CORPORATION - 0.63%
Pool #E44213, 7.00%, Due 1/1/2008........................... $ 234 $ 243
Pool #E00228, 6.50%, Due 7/1/2008........................... 313 331
--------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION............ 574
--------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 3.98%
Pool #050952, 6.50%, Due 12/1/2008.......................... 368 389
Pool #252448, 5.50%, Due 4/1/2009........................... 360 377
Pool #313430, 6.50%, Due 3/1/2012........................... 372 395
Pool #313522, 7.00%, Due 5/1/2012........................... 666 707
Pool #323223, 6.50%, Due 7/1/2013........................... 281 299
Pool #439957, 6.00%, Due 11/1/2013.......................... 241 253
Pool #323980, 6.00%, Due 4/1/2014........................... 617 649
Pool #545038, 6.00%, Due 9/1/2014........................... 551 579
--------
TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION............. 3,648
--------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 1.41%
Pool #780286, 7.00%, Due 6/15/2008.......................... 395 412
Pool #351992, 6.00%, Due 12/15/2008......................... 840 877
--------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION.......... 1,289
--------
TOTAL U.S. AGENCY MORTGAGE-BACKED OBLIGATIONS........... 5,511
--------
CORPORATE OBLIGATIONS - 75.45%
FINANCIAL - 52.29%
American Honda Finance Corporation, 2.875%, Due 4/3/2006,
144A (Note A)............................................. 1,150 1,151
Bear Stearns Companies, Incorporated, 3.00%, Due
3/30/2006................................................. 2,000 2,007
Boeing Capital Corporation, 5.65%, Due 5/15/2006*........... 626 653
Capital One Bank,
6.875%, Due 2/1/2006...................................... 200 210
6.70%, Due 5/15/2008...................................... 1,100 1,209
Caterpillar Financial Services, 2.35%, Due 9/15/2006........ 2,500 2,473
Citigroup, Incorporated, 6.75%, Due 12/1/2005............... 2,000 2,087
Countrywide Funding Corporation, 3.50%, Due 12/19/2005*..... 1,200 1,209
Credit Suisse First Boston, Incorporated, 5.875%, Due
8/1/2006.................................................. 2,000 2,101
FleetBoston Financial Corporation, 3.85%, Due 2/15/2008..... 2,500 2,536
General Electric Capital Corporation, 2.75%, Due
9/25/2006*................................................ 1,000 999
General Motors Acceptance Corporation, 6.75%, Due
1/15/2006................................................. 2,350 2,432
Goldman Sachs Group, Incorporated, 7.625%, Due 8/17/2005.... 2,000 2,081
Heller Financial, Incorporated, 6.375%, Due 3/15/2006....... 2,500 2,619
Household Finance Corporation, 5.75%, Due 1/30/2007......... 2,250 2,378
International Lease Finance Corporation, 2.95%, Due
5/23/2006................................................. 2,000 1,996
John Hancock Global Funding, 5.625%, Due 6/27/2006.......... 1,000 1,043
Merrill Lynch & Company, Incorporated, 7.00%, Due
3/15/2006................................................. 1,660 1,760
Met Life Global Funding I, 3.375%, Due 10/5/2007............ 3,000 2,991
Monumental Global Funding, 5.20%, Due 1/30/2007, 144A (Note
A)........................................................ 1,200 1,261
Prudential Insurance Company of America, 6.375%, Due
7/23/2006, 144A (Note A).................................. 3,000 3,189
Simon Property Group LP, 6.375%, Due 11/15/2007............. 2,000 2,160
SLM Corporation, 2.90%, Due 7/1/2005........................ 2,000 2,005
Synovus Financial Corporation, 7.25%, Due 12/15/2005........ 2,500 2,616
Wachovia Corporation, 6.40%, Due 4/1/2008................... 2,500 2,735
--------
TOTAL FINANCIAL......................................... 47,901
--------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
91
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PAR
AMOUNT VALUE
----------- ---------
(DOLLARS IN THOUSANDS)
INDUSTRIALS - 22.94%
AT&T Wireless Services, Incorporated, 7.35%, Due 3/1/2006... $ 1,400 $ 1,483
Cendant Corporation, 6.875%, Due 8/15/2006.................. 2,140 2,280
Conagra Foods, Incorporated, 9.875%, Due 11/15/2005......... 1,000 1,066
Continental Cablevision, Incorporated, 8.30%, Due
5/15/2006................................................. 1,960 2,110
DaimlerChrysler North America, 4.75%, Due 1/15/2008......... 1,500 1,545
John Deere Capital Corporation, 3.375%, Due 10/1/2007....... 2,000 2,002
Deutsche Telekom International Finance Corporation, 8.25%,
Due 6/15/2005............................................. 325 336
Hertz Corporation, 4.70%, Due 10/2/2006..................... 3,000 3,049
Northrop Grumman Corporation, 7.00%, Due 3/1/2006........... 2,000 2,105
Sprint Capital Corporation, 6.00%, Due 1/15/2007............ 1,800 1,904
Unilever Capital Corporation, 6.875%, Due 11/1/2005......... 1,000 1,042
Verizon Wireless Capital, 5.375%, Due 12/15/2006............ 2,000 2,096
--------
TOTAL INDUSTRIALS....................................... 21,018
--------
FOREIGN - 0.22%
Province of Ontario, 3.35%, Due 7/16/2007*.................. 200 201
--------
TOTAL FOREIGN........................................... 201
--------
TOTAL CORPORATE OBLIGATIONS............................. 69,120
--------
ASSET-BACKED SECURITIES - 15.54%
Chase Manhattan Auto Owner Trust 2004-A A4, 2.83%, Due
9/15/2010................................................. 2,000 1,980
Chemical Master Credit Card Trust 1996-2 A, 5.98%, Due
9/15/2008................................................. 3,000 3,107
Citibank Credit Card Issuance Trust 2004-A4 A4, 3.20%, Due
8/24/2009................................................. 2,000 1,999
Household Automotive Trust 2004-1 A3, 3.30%, Due
5/18/2009................................................. 1,600 1,597
Nissan Auto Receivables Owner Trust 2004-A A3, 2.01%, Due
11/15/2007................................................ 1,000 990
USAA Auto Owner Trust 2004-1 A3, 2.06%, Due 4/15/2008....... 2,000 1,982
Wells Fargo Financial Auto Owner Trust 2004-A A4, 2.67%, Due
8/16/2010................................................. 2,600 2,578
--------
TOTAL ASSET-BACKED SECURITIES........................... 14,233
--------
<Caption>
SHARES
-----------
SHORT-TERM INVESTMENTS - 4.08%
American AAdvantage Money Market Select Fund (Notes B and
C)........................................................ 2,434,777 2,435
AMR Investments Enhanced Cash Business Trust (Notes B and
C)........................................................ 1,309,840 1,310
--------
TOTAL SHORT-TERM INVESTMENTS............................ 3,745
--------
TOTAL INVESTMENTS - 101.09% (COST $92,422).................. 92,609
--------
LIABILITIES, NET OF OTHER ASSETS - (1.09)%.................. (1,000)
--------
TOTAL NET ASSETS - 100%..................................... $ 91,609
========
</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 $5,601 or 6.11% of net assets.
(B) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(C) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of this security is on loan at October 31, 2004. See Note
5.
See accompanying notes
- --------------------------------------------------------------------------------
92
(AMERICAN EAGLE LOGO)
- --------------------------------------------------------------------------------
93
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
LARGE CAP LARGE CAP MID-CAP
BALANCED VALUE GROWTH VALUE
----------- ----------- ---------- ----------
(IN THOUSANDS)
ASSETS:
Investments in unaffiliated securities, at value(A D)... $ 622,914 $ 758,675 $ 55,482 $ 20,390
Investments in affiliated securities, at value(B)....... 125,906 78,085 4,852 7,191
Investments in Portfolio, at value...................... -- -- -- --
Cash.................................................... -- -- -- --
Foreign currency, at value(C)........................... -- -- -- --
Dividends and interest receivable....................... 2,679 1,181 26 15
Receivable for investments sold......................... 2,221 1,944 200 82
Receivable for foreign currency sold.................... -- -- -- --
Receivable for fund shares sold......................... 307 3,263 711 852
Receivable for tax reclaims............................. -- -- -- --
Receivable for variation margin on open futures
contracts............................................. 116 90 2 21
Deposit with broker for futures contracts............... -- -- 120 --
Other assets............................................ -- -- -- --
----------- ----------- ---------- ----------
TOTAL ASSETS........................................ 754,143 843,238 61,393 28,551
----------- ----------- ---------- ----------
LIABILITIES:
Payable for investments purchased....................... 6,340 1,360 3,940 1,571
Payable upon return of securities loaned................ 80,788 40,164 543 1,381
Payable for fund shares redeemed........................ 55 4,636 1,689 --
Payable for variation margin on open futures
contracts............................................. -- -- -- --
Dividends payable....................................... -- -- -- --
Management and investment advisory fees payable (Note
2).................................................... 479 588 91 36
Administrative service and service fees payable......... 14 31 -- 4
Unrealized depreciation on foreign currency contracts... -- -- -- --
Payable for custodian overdraft......................... -- -- -- --
Other liabilities....................................... 98 313 8 13
----------- ----------- ---------- ----------
TOTAL LIABILITIES................................... 87,774 47,092 6,271 3,005
----------- ----------- ---------- ----------
NET ASSETS.................................................. $ 666,369 $ 796,146 $ 55,122 $ 25,546
=========== =========== ========== ==========
ANALYSIS OF NET ASSETS:
Paid-in-capital......................................... 550,334 653,931 62,762 24,984
Undistributed net investment income..................... 11,527 7,615 120 43
Accumulated net realized gain (loss).................... 15,122 (15,048) (11,404) (43)
Unrealized appreciation (depreciation) of investments,
futures contracts and foreign currency................ 89,386 149,648 3,644 562
----------- ----------- ---------- ----------
NET ASSETS.................................................. $ 666,369 $ 796,146 $ 55,122 $ 25,546
=========== =========== ========== ==========
Shares outstanding (no par value):
Institutional Class..................................... 585,302 2,658,326 109 2,487,561
=========== =========== ========== ==========
PlanAhead Class......................................... 1,583,415 2,935,957 N/A N/A
=========== =========== ========== ==========
Service Class........................................... N/A N/A N/A N/A
=========== =========== ========== ==========
AMR Class............................................... 45,900,439 38,624,850 9,442,360 N/A
=========== =========== ========== ==========
Net asset value, offering and redemption price per share:
Institutional Class..................................... $ 14.31 $ 18.23 $ 5.82 $ 10.27
=========== =========== ========== ==========
PlanAhead Class......................................... $ 13.62 $ 17.54 N/A N/A
=========== =========== ========== ==========
Service Class........................................... N/A N/A N/A N/A
=========== =========== ========== ==========
AMR Class............................................... $ 13.87 $ 18.02 $ 5.84 N/A
=========== =========== ========== ==========
- ---------------
(A) Cost of investments in unaffiliated securities.......... $ 533,900 $ 609,365 $ 51,842 $ 19,874
(B) Cost of investments in affiliated securities............ $ 125,906 $ 78,085 $ 4,852 $ 7,191
(C) Cost of foreign currency................................ $ -- $ -- $ -- $ --
(D) Market value of securities on loan...................... $ 79,233 $ 39,044 $ 529 $ 1,360
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
94
- --------------------------------------------------------------------------------
<Table>
<Caption>
SMALL CAP INTERNATIONAL EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
VALUE EQUITY MARKETS BOND INCOME BOND BOND
----------- ------------- ---------- ----------- ----------- ------------ -----------
(IN THOUSANDS)
$ 1,218,686 $ -- $ 70,369 $ 406,793 $ 102,497 $ 96,370 $ 88,864
368,762 -- 14,267 23,672 17,413 23,916 3,745
-- 1,795,419 -- -- -- -- --
-- -- -- 13 -- -- --
-- -- 668 -- -- -- --
918 -- 230 7,874 1,058 929 1,034
2,748 -- 460 4,285 52 719 --
-- -- -- -- -- -- --
14,049 5,971 409 3,940 128 1,246 92
-- -- 4 -- -- -- --
-- -- 28 -- -- -- --
-- -- -- -- -- -- --
-- -- -- 7 -- -- --
----------- ----------- ---------- ----------- ----------- ----------- -----------
1,605,163 1,801,390 86,435 446,584 121,148 123,180 93,735
----------- ----------- ---------- ----------- ----------- ----------- -----------
26,594 -- 268 3,505 50 3,733 --
228,980 -- 3,191 51,458 16,970 21,149 2,061
1,539 357 8 77 69 5 37
127 -- -- -- -- -- --
-- -- -- 215 -- -- 3
1,527 -- 182 563 103 21 20
257 270 2 101 42 1 1
-- -- 61 -- -- -- --
-- -- -- 559 -- -- --
54 98 28 59 17 26 4
----------- ----------- ---------- ----------- ----------- ----------- -----------
259,078 725 3,740 56,537 17,251 24,935 2,126
----------- ----------- ---------- ----------- ----------- ----------- -----------
$ 1,346,085 $ 1,800,665 $ 82,695 $ 390,047 $ 103,897 $ 98,245 $ 91,609
=========== =========== ========== =========== =========== =========== ===========
1,162,185 1,531,848 63,644 369,500 102,214 104,732 99,142
4,276 10,797 486 -- (144) -- (1,576)
67,140 (49,388) 6,377 6,902 (339) (7,811) (5,952)
112,484 307,408 12,188 13,645 2,166 1,324 (5)
----------- ----------- ---------- ----------- ----------- ----------- -----------
$ 1,346,085 $ 1,800,665 $ 82,695 $ 390,047 $ 103,897 $ 98,245 $ 91,609
=========== =========== ========== =========== =========== =========== ===========
22,785,330 55,737,425 576,224 22,265,641 N/A 86,485 365,845
=========== =========== ========== =========== =========== =========== ===========
22,154,594 16,956,517 96,916 13,645,967 10,228,129 104,824 856,074
=========== =========== ========== =========== =========== =========== ===========
639,587 40,482 N/A 405 N/A N/A N/A
=========== =========== ========== =========== =========== =========== ===========
23,337,080 24,764,061 5,850,747 N/A N/A 9,313,001 8,873,802
=========== =========== ========== =========== =========== =========== ===========
$ 18.85 $ 18.47 $ 12.64 $ 10.86 N/A $ 10.54 $ 9.09
=========== =========== ========== =========== =========== =========== ===========
$ 18.54 $ 18.31 $ 12.53 $ 10.87 $ 10.16 $ 10.41 $ 9.09
=========== =========== ========== =========== =========== =========== ===========
$ 18.49 $ 18.24 N/A $ 10.87 N/A N/A N/A
=========== =========== ========== =========== =========== =========== ===========
$ 18.78 $ 18.58 $ 12.68 N/A N/A $ 10.33 $ 9.07
=========== =========== ========== =========== =========== =========== ===========
$ 1,106,241 N/A $ 58,225 $ 393,148 $ 100,331 $ 95,046 $ 88,677
$ 368,762 N/A $ 14,267 $ 23,672 $ 17,413 $ 23,916 $ 3,745
$ -- N/A $ 660 $ -- $ -- $ -- $ --
$ 222,942 N/A $ 3,073 $ 50,163 $ 16,671 $ 20,793 $ 2,020
</Table>
- --------------------------------------------------------------------------------
95
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF OPERATIONS
Year Ended October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
LARGE CAP LARGE CAP MID-CAP SMALL CAP
BALANCED VALUE GROWTH VALUE(1) VALUE
-------- --------- --------- -------- ---------
(IN THOUSANDS)
INVESTMENT INCOME:
Interest income.................................. $ 7,971 $ 53 $ -- $ 1 $ 68
Dividend income from unaffiliated securities (net
of foreign taxes)*............................. 8,872 14,895 554 99 10,004
Dividend income from affiliated securities....... 563 590 6 10 1,015
Investment income allocated from the Portfolio... -- -- -- -- --
Income derived from commission recapture......... 21 27 3 -- 207
Income derived from securities lending, net...... 83 42 4 1 213
Expenses allocated from the Portfolio............ -- -- -- -- --
------- -------- ------ ---- --------
TOTAL INVESTMENT INCOME...................... 17,510 15,607 567 111 11,507
------- -------- ------ ---- --------
EXPENSES:
Management and investment advisory fees (Note
2)............................................. 1,844 2,189 334 43 4,110
Administrative service fees (Note 2):
Institutional Class............................ 21 83 -- 15 543
PlanAhead Class................................ 40 80 -- -- 434
Service Class.................................. -- -- -- -- 7
Transfer agent fees:
Institutional Class............................ 1 9 -- 1 71
PlanAhead Class................................ 10 19 -- -- 59
Service Class.................................. -- -- -- -- 9
AMR Class...................................... 21 22 1 -- 10
Fund accounting fees............................. 305 377 26 3 388
Professional fees................................ 51 60 6 13 70
Registration fees and expenses................... 26 32 4 1 37
Service fees -- PlanAhead Class (Note 2)......... 40 80 -- -- 434
Service fees -- Service Class (Note 2)........... -- -- -- -- 7
Distribution fees -- Service Class (Note 2)...... -- -- -- -- 7
Other expenses................................... 102 88 12 4 150
------- -------- ------ ---- --------
TOTAL EXPENSES............................... 2,461 3,039 383 80 6,336
------- -------- ------ ---- --------
Less fees waived (Note 2)........................ -- -- -- 12 9
------- -------- ------ ---- --------
NET EXPENSES................................. 2,461 3,039 383 68 6,327
------- -------- ------ ---- --------
NET INVESTMENT INCOME................................ 15,049 12,568 184 43 5,180
------- -------- ------ ---- --------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments.................................... 22,598 35,342 4,396 15 66,297
Foreign currency transactions.................. -- -- -- -- --
Futures contracts.............................. 5,035 4,502 18 (58) 2,914
Net realized gain allocated from the Portfolio... -- -- -- -- --
Change in net unrealized appreciation or
depreciation of:
Investments.................................... 34,330 70,471 (1,297) 516 50,878
Foreign currency translations.................. -- -- -- -- --
Futures contracts.............................. (1,001) (898) (1) 46 (278)
Change in net unrealized gain allocated from the
Portfolio...................................... -- -- -- -- --
------- -------- ------ ---- --------
NET GAIN (LOSS) ON INVESTMENTS............... 60,962 109,417 3,116 519 119,811
------- -------- ------ ---- --------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS......................................... $76,011 $121,985 $3,300 $562 $124,991
======= ======== ====== ==== ========
* Foreign taxes.................................. $ 79 $ 147 $ -- $ -- $ 29
</Table>
- ---------------
(1) Commencement of Operations June 30, 2004.
See accompanying notes
- --------------------------------------------------------------------------------
96
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EMERGING HIGH YIELD ENHANCED INTERMEDIATE SHORT-TERM
EQUITY MARKETS BOND INCOME BOND BOND
------------- -------- ---------- -------- ------------ ----------
(IN THOUSANDS)
$ -- $ 3 $25,753 $3,255 $5,015 $3,164
-- 1,737 -- 255 -- --
-- 35 238 29 60 21
36,573 -- -- -- -- --
-- -- -- -- -- --
-- 13 91 11 13 1
(6,926) -- -- -- -- --
-------- -------- ------- ------ ------ ------
29,647 1,788 26,082 3,550 5,088 3,186
-------- -------- ------- ------ ------ ------
-- 647 1,874 373 295 240
2,183 14 455 -- 2 9
566 2 345 256 3 19
1 -- -- -- -- --
225 1 61 -- 2 1
79 1 78 38 1 4
9 -- 8 -- -- --
14 2 -- -- 5 4
-- 402 85 28 31 25
65 5 28 36 10 6
61 18 29 18 24 21
569 2 345 256 3 19
-- -- -- -- -- --
-- -- -- -- -- --
169 18 40 20 31 22
-------- -------- ------- ------ ------ ------
3,941 1,112 3,348 1,025 407 370
-------- -------- ------- ------ ------ ------
9 -- 80 -- -- --
-------- -------- ------- ------ ------ ------
3,932 1,112 3,268 1,025 407 370
-------- -------- ------- ------ ------ ------
25,715 676 22,814 2,525 4,681 2,816
-------- -------- ------- ------ ------ ------
-- 9,337 6,934 320 1,148 432
-- 1,028 -- -- -- --
-- 30 -- -- -- --
111,748 -- -- -- -- --
-- (449) 2,292 1,851 (67) (991)
-- 112 -- -- -- --
-- 94 -- -- -- --
153,263 -- -- -- -- --
-------- -------- ------- ------ ------ ------
265,011 10,152 9,226 2,171 1,081 (559)
-------- -------- ------- ------ ------ ------
$290,726 $ 10,828 $32,040 $4,696 $5,762 $2,257
======== ======== ======= ====== ====== ======
$ -- $ 337 $ -- $ -- $ -- $ --
</Table>
- --------------------------------------------------------------------------------
97
AMERICAN AADVANTAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
- --------------------------------------------------------------------------------
<Table>
<Caption>
BALANCED LARGE CAP VALUE LARGE CAP GROWTH MID-CAP VALUE(1)
------------------- ------------------- ----------------- ----------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, JUNE 30 TO
------------------- ------------------- ----------------- OCTOBER 31,
2004 2003 2004 2003 2004 2003 2004
-------- -------- -------- -------- ------- ------- ----------------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income........ $ 15,049 $ 15,678 $ 12,568 $ 12,019 $ 184 $ 151 $ 43
Net realized gain (loss) on
investments, futures
contracts, and foreign
currency transactions...... 27,633 15,761 39,844 (1,324) 4,414 (823) (43)
Change in net unrealized
appreciation or
depreciation of
investments, futures
contracts, and foreign
currency translations...... 33,329 65,996 69,573 129,868 (1,298) 8,070 562
Change in unrealized gain
allocated from the
Portfolio.................. -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------- -------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. 76,011 97,435 121,985 140,563 3,300 7,398 562
-------- -------- -------- -------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class........ (211) (105) (414) (502) -- -- --
PlanAhead Class............ (354) (421) (344) (333) -- -- --
AMR Class.................. (15,797) (22,194) (11,675) (12,821) (151) (107) --
Net realized gain on
investments:
Institutional Class........ -- -- -- -- -- -- --
PlanAhead Class............ -- -- -- -- -- -- --
AMR Class.................. -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------- -------
NET DISTRIBUTIONS TO
SHAREHOLDERS........... (16,362) (22,720) (12,433) (13,656) (151) (107) --
-------- -------- -------- -------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of
shares..................... 71,533 72,230 148,293 37,911 25,454 24,357 26,544
Reinvestment of dividends and
distributions.............. 16,359 22,704 12,206 13,368 151 107 --
Cost of shares redeemed...... (61,146) (96,756) (117,617) (83,291) (22,559) (10,846) (1,560)
Redemption fees.............. -- -- -- -- -- -- --
-------- -------- -------- -------- ------- ------- -------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
CAPITAL SHARE
TRANSACTIONS........... 26,746 (1,822) 42,882 (32,012) 3,046 13,618 24,984
-------- -------- -------- -------- ------- ------- -------
NET INCREASE (DECREASE) IN NET
ASSETS......................... 86,395 72,893 152,434 94,895 6,195 20,909 25,546
-------- -------- -------- -------- ------- ------- -------
NET ASSETS:
Beginning of period.......... 579,974 507,081 643,712 548,817 48,927 28,018 --
-------- -------- -------- -------- ------- ------- -------
END OF PERIOD*............... $666,369 $579,974 $796,146 $643,712 $55,122 $48,927 $25,546
======== ======== ======== ======== ======= ======= =======
* Includes undistributed net
investment income (loss)
of......................... $ 11,527 $ 11,918 $ 7,615 $ 7,137 $ 120 $ 89 $ 43
======== ======== ======== ======== ======= ======= =======
<Caption>
SMALL CAP VALUE
---------------------
YEAR ENDED
OCTOBER 31,
---------------------
2004 2003
---------- --------
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS:
Net investment income........ $ 5,180 $ 2,317
Net realized gain (loss) on
investments, futures
contracts, and foreign
currency transactions...... 69,211 14,129
Change in net unrealized
appreciation or
depreciation of
investments, futures
contracts, and foreign
currency translations...... 50,600 95,651
Change in unrealized gain
allocated from the
Portfolio.................. -- --
---------- --------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............. 124,991 112,097
---------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Institutional Class........ (522) (11)
PlanAhead Class............ (156) (371)
AMR Class.................. (1,911) (2,228)
Net realized gain on
investments:
Institutional Class........ (3,082) (125)
PlanAhead Class............ (2,162) (849)
AMR Class.................. (9,583) (4,420)
---------- --------
NET DISTRIBUTIONS TO
SHAREHOLDERS........... (17,416) (8,004)
---------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of
shares..................... 969,153 236,616
Reinvestment of dividends and
distributions.............. 16,178 8,003
Cost of shares redeemed...... (230,849) (83,990)
Redemption fees.............. -- --
---------- --------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
CAPITAL SHARE
TRANSACTIONS........... 754,482 160,629
---------- --------
NET INCREASE (DECREASE) IN NET
ASSETS......................... 862,057 264,722
---------- --------
NET ASSETS:
Beginning of period.......... 484,028 219,306
---------- --------
END OF PERIOD*............... $1,346,085 $484,028
========== ========
* Includes undistributed net
investment income (loss)
of......................... $ 4,276 $ 1,892
========== ========
</Table>
- ---------------
(1) Commencement of Operations
See accompanying notes
- --------------------------------------------------------------------------------
98
- --------------------------------------------------------------------------------
<Table>
<Caption>
INTERNATIONAL EQUITY EMERGING MARKETS HIGH YIELD BOND ENHANCED INCOME INTERMEDIATE BOND
----------------------- ------------------ ------------------- ------------------------- -------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, YEAR ENDED JUNE 30 TO OCTOBER 31,
----------------------- ------------------ ------------------- OCTOBER 31, OCTOBER 31, -------------------
2004 2003 2004 2003 2004 2003 2004 2003(1) 2004 2003
---------- ---------- ------- -------- -------- -------- ----------- ----------- -------- --------
$ 25,715 $ 20,084 $ 676 $ 375 $ 22,814 $ 14,294 $ 2,525 $ 685 $ 4,681 $ 8,605
111,748 (14,862) 10,395 1,470 6,934 5,981 320 (433) 1,148 5,796
-- -- (243) 15,857 2,292 13,317 1,851 315 (67) (3,389)
153,263 290,167 -- -- -- -- -- -- -- --
---------- ---------- ------- -------- -------- -------- -------- -------- -------- --------
290,726 295,389 10,828 17,702 32,040 33,592 4,696 567 5,762 11,012
---------- ---------- ------- -------- -------- -------- -------- -------- -------- --------
(19,224) (15,830) (20) (12) (13,226) (8,012) -- -- (36) (1,957)
(4,201) (2,465) (3) -- (9,588) (6,282) (2,672) (685) (43) (153)
(9,135) (8,401) (415) (319) -- -- -- -- (5,071) (6,495)
-- -- -- -- (2,082) -- -- -- -- --
-- -- -- -- (1,646) -- -- -- -- --
-- -- -- -- -- -- -- -- -- --
---------- ---------- ------- -------- -------- -------- -------- -------- -------- --------
(32,560) (26,696) (438) (331) (26,542) (14,294) (2,672) (685) (5,150) (8,605)
---------- ---------- ------- -------- -------- -------- -------- -------- -------- --------
670,346 569,324 43,769 17,731 214,560 312,581 21,940 104,430 31,565 65,108
28,865 24,545 438 331 21,423 8,009 2,192 1 5,146 6,687
(379,293) (542,508) (27,453) (14,387) (138,469) (161,695) (23,331) (3,241) (73,424) (160,564)
21 815 4 -- -- -- -- -- -- --
---------- ---------- ------- -------- -------- -------- -------- -------- -------- --------
319,939 52,176 16,758 3,675 97,514 158,895 801 101,190 (36,713) (88,769)
---------- ---------- ------- -------- -------- -------- -------- -------- -------- --------
578,105 320,869 27,148 21,046 103,012 178,193 2,825 101,072 (36,101) (86,362)
---------- ---------- ------- -------- -------- -------- -------- -------- -------- --------
1,222,560 901,691 55,547 34,501 287,035 108,842 101,072 -- 134,346 220,708
---------- ---------- ------- -------- -------- -------- -------- -------- -------- --------
$1,800,665 $1,222,560 $82,695 $ 55,547 $390,047 $287,035 $103,897 $101,072 $ 98,245 $134,346
========== ========== ======= ======== ======== ======== ======== ======== ======== ========
$ 10,007 $ 8,624 $ 486 $ 292 $ -- $ -- $ (144) $ -- $ -- $ --
========== ========== ======= ======== ======== ======== ======== ======== ======== ========
<Caption>
SHORT-TERM BOND
-------------------
YEAR ENDED
OCTOBER 31,
-------------------
2004 2003
-------- --------
$ 2,816 $ 4,882
432 107
(991) (879)
-- --
-------- --------
2,257 4,110
-------- --------
(162) (317)
(345) (181)
(4,192) (5,040)
-- --
-- --
-- --
-------- --------
(4,699) (5,538)
-------- --------
19,631 31,785
4,626 5,349
(31,645) (36,115)
-- --
-------- --------
(7,388) 1,019
-------- --------
(9,830) (409)
-------- --------
101,439 101,848
-------- --------
$ 91,609 $101,439
======== ========
$ (1,576) $ (924)
======== ========
</Table>
- --------------------------------------------------------------------------------
99
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American AAdvantage Funds (the "Trust") is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940 (the
"Act"), as amended, as a no load, open-end management investment company. These
financial statements and notes to the financial statements relate to the
American AAdvantage Balanced Fund, the American AAdvantage Large Cap Value Fund,
the American AAdvantage Large Cap Growth Fund, the American AAdvantage Mid-Cap
Value Fund, the American AAdvantage Small Cap Value Fund, the American
AAdvantage International Equity Fund, the American AAdvantage Emerging Markets
Fund, the American AAdvantage High Yield Bond Fund, the American AAdvantage
Enhanced Income Fund, the American AAdvantage Intermediate Bond Fund and the
American AAdvantage Short-Term Bond Fund (each a "Fund" and collectively, the
"Funds"), each a series of the Trust.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
The American AAdvantage International Equity Fund (the "International
Fund") invests all of its investable assets in the International Equity
Portfolio (the "Portfolio") of the AMR Investment Services Trust, which has the
same investment objectives as the International Fund. The Portfolio is an
open-end management investment company registered under the Act. The value of
the investment in the Portfolio reflects the International Fund's proportionate
interest in the net assets of the Portfolio. At October 31, 2004 the
International Fund's investment was 95.35% of the Portfolio.
The financial statements of the Portfolio, including Notes to Financial
Statements, are included elsewhere in this report and should be read in
conjunction with the International Fund's financial statements. The Notes to
Financial Statements of the Portfolio include a discussion of investment
valuation, security transactions and investment income, the management agreement
and securities lending.
Class Disclosure
Each Fund, except the Mid-Cap Value and Enhanced Income Fund, has multiple
classes of shares designed to meet the needs of different groups of investors.
Please note that not all Funds offer all classes. The following table sets forth
the differences amongst the classes:
<Table>
<Caption>
CLASS: OFFERED TO: SERVICE AND DISTRIBUTION FEES:
- ------ ----------- ------------------------------
INSTITUTIONAL CLASS Investors making an initial investment of $2 million Administrative Service 0.25%
Fee --
PLANAHEAD CLASS General public and investors investing through an Administrative Service 0.25%
intermediary Fee -- 0.25%
Service Fee --
SERVICE CLASS Investors investing through an intermediary Administrative Service 0.25%
Fee -- 0.25%
Service Fee -- 0.25%
Distribution Fee --
AMR CLASS Investors in the tax-exempt retirement and benefit plans of N/A
AMR Corporation and its affiliates
</Table>
- --------------------------------------------------------------------------------
100
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
Investment income, net capital gains (losses) and all expenses incurred by
the Funds are allocated based on the relative net assets of each class, except
for service fees and certain other fees and expenses related solely to one class
of shares.
Security Valuation
Equity securities that are primarily traded on domestic securities
exchanges are valued at the last quoted sales price on a designated exchange at
the close of trading on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading or, lacking any current sales, on the basis of
the last current bid price prior to the close of trading on the Exchange.
Over-the-counter equity securities are valued on the basis of the last bid price
on that date prior to the close of trading. Securities traded on NASDAQ will be
valued at the NASDAQ official closing price.
Securities traded in foreign markets are valued using prices reported by
local foreign markets. Securities for which quotations are not readily
available, or securities which may have been affected by a significant event
after the price was determined, and other assets are valued at a fair value as
determined by or under the direction of pricing committees established by the
Trust's Board of Trustees (the "Board"). The Funds' net asset values are
determined at the time of the close of the New York Stock Exchange. The pricing
committees will evaluate movements in the U.S. markets after the close of
foreign markets and may adjust security prices to reflect changes in reaction to
U.S. markets as determined by a third party model.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by a pricing service and may take into account
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. When a price is unavailable from a
pricing service or when the price provided by the pricing service is deemed not
to represent fair value, the prices of debt securities may be determined using
quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method.
Securities for which the above valuation procedures are inappropriate, or
are deemed not to reflect fair value, are valued at fair value, as determined in
good faith and pursuant to procedures approved by the Board.
Valuation of securities by the Portfolio is discussed in Note 1 of the
Portfolio's Notes to Financial Statements which are included elsewhere in this
report.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale.
Dividend income is recorded on the ex-dividend date except certain
dividends from foreign securities which are recorded as soon as the information
is available to the Funds. Interest income is earned from settlement date,
recorded on the accrual basis, and adjusted, if necessary, for accretion
- --------------------------------------------------------------------------------
101
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
of discounts and amortization of premiums. For financial and tax reporting
purposes, realized gains and losses are determined on the basis of specific lot
identification.
The International Fund records its share of net investment income and
realized and unrealized gain (loss) in the Portfolio each day. All net
investment income and realized and unrealized gain (loss) of the Portfolio is
allocated pro rata among the International Fund and other investors in the
Portfolio at the time of such determination.
Currency Translation
All assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the mean of the bid and ask prices of
such currencies against U.S. dollars as last quoted by a recognized dealer.
Income, expenses and purchases and sales of investments are translated into U.S.
dollars at the rate of exchange prevailing on the respective dates of such
transactions. The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and is reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
Forward Foreign Currency Contracts
The Emerging Markets Fund may enter into forward foreign currency contracts
to hedge the exchange rate risk on investment transactions or to hedge the value
of fund securities denominated in foreign currencies. Forward foreign currency
contracts are valued at the forward exchange rate prevailing on the day of
valuation.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Fund from a securities dealer or a bank which are subject to resale at a later
date. Repurchase agreements are fully collateralized. All collateral is held at
the Fund's custodian bank, State Street Bank and Trust Company, or at
subcustodian banks. The collateral is monitored daily by each Fund so that the
collateral's market value equals or exceeds the carrying value of the repurchase
agreement, including accrued interest.
Futures Contracts
Futures contracts are contracts to buy or sell a standard quantity of
securities at a specified price on a future date. The Balanced, Large Cap Value,
Large Cap Growth, Mid-Cap Value, Small Cap Value, Emerging Markets, High Yield
Bond and Enhanced Income Funds may enter into financial futures contracts as a
method for keeping assets readily convertible to cash if needed to meet
shareholder redemptions or for other needs while maintaining exposure to the
stock or bond market, as applicable. The primary risks associated with the use
of futures contracts are the possibility of illiquid markets or imperfect
correlation between the values of the contracts and the underlying securities,
or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Fund is required to set aside or
deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The initial margin
amount is reflected as Deposit with broker for futures contracts on the
Statement of Assets and Liabilities for the Large Cap Growth Fund. The other
Funds reflect this
- --------------------------------------------------------------------------------
102
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
amount on the Schedules of Investments as a US Treasury Bill held as collateral
for futures contracts. Payments to and from the broker, known as variation
margin, are required to be made on a daily basis as the price of the futures
contract fluctuates. Changes in initial settlement values are accounted for as
unrealized appreciation (depreciation) until the contracts are terminated, at
which time realized gains and losses are recognized. Futures contracts are
valued at the most recent settlement price established each day by the exchange
on which they are traded.
Dividends to Shareholders
Dividends from net investment income of the Balanced, Large Cap Value,
Large Cap Growth, Mid-Cap Value, Small Cap Value, International Equity and
Emerging Markets Funds normally will be declared and paid annually. The High
Yield Bond, Enhanced Income, Intermediate Bond and Short-Term Bond Funds
generally declare dividends from net investment income daily, payable monthly.
Distributions, if any, of net realized capital gains are generally paid annually
and recorded on the ex-dividend date.
Commission Recapture
The Funds have established brokerage commission recapture arrangements with
certain brokers or dealers. If a Fund's investment adviser chooses to execute a
transaction through a participating broker, the broker rebates a portion of the
commission back to the Fund. Any collateral benefit received through
participation in the commission recapture program is directed exclusively to the
Fund.
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class), gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Funds enter into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Funds' maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Funds have had no prior claims or losses
pursuant to any such agreement.
- --------------------------------------------------------------------------------
103
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory, fund management and securities lending services. Investment
assets of the International Fund are invested in the Portfolio. Management Fees
paid by the Portfolio are discussed in Note 1 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report. Investment
assets of the Balanced, Large Cap Value, Large Cap Growth, Mid-Cap Value, Small
Cap Value, Emerging Markets, High Yield Bond, Enhanced Income and Intermediate
Bond Funds are managed by multiple investment advisers which have entered into
separate investment advisory agreements with the Manager. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Balanced Fund, Large Cap Value Fund, Large Cap Growth Fund,
Mid-Cap Value Fund, Small Cap Value Fund, Emerging Markets Fund, High Yield Bond
Fund and Enhanced Income Fund an annualized fee equal to .10% of the average
daily net assets plus amounts paid by the Manager to the investment advisors
hired by the Manager to direct investment activities of the Funds. The Manager
receives an annualized fee of .25% of the average daily net assets of the
Intermediate Bond Fund and pays a portion of their fee to an investment adviser
hired by the Manager to direct investment activities of a portion of the Fund.
Management fees paid during the year ended October 31, 2004 were as follows
(dollars in thousands):
<Table>
<Caption>
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISERS MANAGER
----------- ---------- --------------- -----------
Balanced Fund...................................... .225%-.70% $1,844 $1,214 $630
Large Cap Value Fund............................... .225%-.70% 2,189 1,470 719
Large Cap Growth Fund.............................. .50%-.70% 334 280 54
Mid-Cap Value Fund................................. .40%-.90% 43 37 6
Small Cap Value Fund............................... .35%-.60% 4,110 3,315 795
Emerging Markets Fund.............................. .80%-1.20% 647 578 69
High Yield Bond Fund............................... .52% 1,874 1,554 320
Enhanced Income Fund............................... .25%-.85% 373 271 102
Intermediate Bond Fund............................. .25% 295 119 176
</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
- --------------------------------------------------------------------------------
104
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
than cash, a fee up to 25% of such loan fees. During the year ended October 31,
2004, securities lending fees paid to the Manager were as follows (in
thousands):
<Table>
Balanced Fund............................................... $13
Large Cap Value Fund........................................ 8
Small Cap Value Fund........................................ 36
Emerging Markets Fund....................................... 2
High Yield Bond Fund........................................ 16
Enhanced Income Fund........................................ 2
Intermediate Bond Fund...................................... 2
</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 Funds are permitted, pursuant to an exemptive order by the Securities
and Exchange Commission ("SEC") and approved procedures by the Board, to invest
up to 25% of its total assets in the American AAdvantage Money Market Select
Fund (the "Select Fund"), an affiliated fund. The Funds and the Select Fund have
the same investment adviser and therefore, are considered to be
- --------------------------------------------------------------------------------
105
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
affiliated. Cash collateral received by certain Funds in connection with
securities lending may be invested in the Select Fund and the AMR Investments
Enhanced Cash Business Trust (the "Business Trust") (collectively, the
"Affiliated Funds"). The Manager serves as Trustee and investment adviser to the
Affiliated Funds and receives from the Affiliated Funds an annualized fee equal
to 0.10% of the average daily net assets. During the period, fees earned by the
Manager from the Affiliated Funds were as follows:
<Table>
<Caption>
SECURITIES LENDING
DIRECT INVESTMENT COLLATERAL INVESTED
IN FUNDS IN FUNDS TOTAL
----------------- ------------------- --------
Balanced.................................................... $48,743 $ 69,563 $118,306
Large Cap Value............................................. 49,973 34,002 83,975
Large Cap Growth............................................ 1,121 -- 1,121
Mid-Cap Value............................................... 420 -- 420
Small Cap Value............................................. 82,721 115,957 198,678
Emerging Markets............................................ 4,388 1,420 5,808
High Yield Bond............................................. 19,457 -- 19,457
Enhanced Income............................................. 2,503 3,108 5,611
Intermediate Bond........................................... 5,237 14,765 20,002
Short-Term Bond............................................. 1,751 1,328 3,079
</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 year ended October 31, 2004, the cost
of air transportation was not material to any of the Funds. One non-interested
Trustee, as a retiree of American, already receives flight benefits. This
Trustee receives an annual retainer of $40,000 plus $1,250 for each Board
meeting attended. At October 31, 2004, AMR Corporation and subsidiary companies
and Employee Benefit Trusts thereof owned 100% of AMR Class shares of the Funds.
Interfund Lending Program
Pursuant to an Exemptive Order by the SEC, the Funds along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program. This program provides an
alternative credit facility allowing the Funds to borrow from, or lend money to,
other participating Funds. At October 31, 2004, the Funds had not utilized the
credit facility.
Reimbursement of Expenses
The Manager and the Investment Adviser of the High Yield Bond
Fund -- Institutional Class have each contractually agreed to waive a portion of
their fees through October 31, 2004 to the extent that total fund operating
expenses exceed 0.90%. During the year ended October 31, 2004, the Manager and
Investment Adviser each waived administrative service and management fees
totaling $36,000.
- --------------------------------------------------------------------------------
106
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
The Manager reimbursed expenses of the Service Class totaling $8,745,
$8,729, and $7,881 for the Small Cap Value, International Equity and High Yield
Bond Funds, respectively during the year ended October 31, 2004.
The Manager reimbursed expenses of the Mid-Cap Value Fund totaling $11,997
during the year ended October 31, 2004.
3. FEDERAL INCOME AND EXCISE TAXES
It is the policy of each of the Funds to comply with the requirements of
Subchapter M of the Internal Revenue Code and to distribute substantially all
net investment income as well as any net realized capital gains on the sale of
investments. Therefore, no federal income or excise tax provision is required.
Dividends are determined in accordance with income tax regulations which
may treat certain transactions differently than U.S. generally accepted
accounting principles. Accordingly, the character of distributions and
composition of net assets for tax purposes may differ from those reflected in
the accompanying financial statements.
The tax character of distributions during the years ended October 31, 2004
and October 31, 2003 were as follows (in thousands):
<Table>
<Caption>
BALANCED LARGE CAP VALUE LARGE-CAP GROWTH
------------------- ------------------- ----------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
------------------- ------------------- ----------------
2004 2003 2004 2003 2004 2003
------- ------- ------- ------- ---- ----
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class...................... $ 211 $ 105 $ 414 $ 502 $ -- $ --
PlanAhead Class.......................... 354 421 344 333 -- --
AMR Class................................ 15,797 22,194 11,675 12,821 151 107
LONG-TERM CAPITAL GAIN
Institutional Class...................... -- -- -- -- -- --
PlanAhead Class.......................... -- -- -- -- -- --
AMR Class................................ -- -- -- -- -- --
------- ------- ------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID............. $16,362 $22,720 $12,433 $13,656 $151 $107
------- ------- ------- ------- ---- ----
</Table>
<Table>
<Caption>
SMALL CAP VALUE INTERNATIONAL EQUITY EMERGING MARKETS
------------------ --------------------- ----------------
YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
------------------ --------------------- ----------------
2004 2003 2004 2003 2004 2003
------- ------ -------- -------- ---- ----
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class....................... $ 2,878 $ 117 $19,224 $15,830 $ 20 $ 12
PlanAhead Class........................... 1,809 1,089 4,201 2,465 3 --
Service Class............................. -- -- -- -- -- --
AMR Class................................. 9,236 5,971 9,135 8,401 415 319
LONG-TERM CAPITAL GAIN
Institutional Class....................... 726 19 -- -- -- --
PlanAhead Class........................... 509 130 -- -- -- --
Service Class............................. -- -- -- -- -- --
AMR Class................................. 2,258 678 -- -- -- --
------- ------ ------- ------- ---- ----
TOTAL DISTRIBUTIONS PAID.............. $17,416 $8,004 $32,560 $26,696 $438 $331
------- ------ ------- ------- ---- ----
</Table>
- --------------------------------------------------------------------------------
107
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
HIGH-YIELD BOND ENHANCED INCOME INTERMEDIATE BOND
------------------------- ------------------------- -------------------------
YEAR ENDED JUNE 30 TO YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31,
------------------------- ------------------------- -------------------------
2004 2003 2004 2003 2004 2003
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class............. $14,823 $ 8,012 $ -- $ -- $ 36 $1,957
PlanAhead Class................. 10,851 6,282 2,672 685 43 153
Service Class................... -- -- -- -- -- --
AMR Class....................... -- -- -- -- 5,071 6,495
LONG-TERM CAPITAL GAIN
Institutional Class............. 485 -- -- -- -- --
PlanAhead Class................. 383 -- -- -- -- --
Service Class................... -- -- -- -- -- --
AMR Class....................... -- -- -- -- -- --
------- ------- ------ ---- ------ ------
TOTAL DISTRIBUTIONS PAID..... $26,542 $14,294 $2,672 $685 $5,150 $8,605
------- ------- ------ ---- ------ ------
<Caption>
SHORT-TERM BOND
-------------------------
YEAR ENDED
OCTOBER 31,
-------------------------
2004 2003
----------- -----------
DISTRIBUTIONS PAID FROM:
ORDINARY INCOME
Institutional Class............. $ 162 $ 317
PlanAhead Class................. 345 181
Service Class................... -- --
AMR Class....................... 4,192 5,040
LONG-TERM CAPITAL GAIN
Institutional Class............. -- --
PlanAhead Class................. -- --
Service Class................... -- --
AMR Class....................... -- --
------ ------
TOTAL DISTRIBUTIONS PAID..... $4,699 $5,538
------ ------
</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%.
For the fiscal year ended October 31, 2004 certain dividends paid by the
Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs
and Growth Tax Relief Reconciliation Act of 2003. Complete information will be
computed and reported in conjunction with your 2004 Form 1099-DIV.
As of October 31, 2004, the components of distributable earnings were as
follows (in thousands):
<Table>
<Caption>
BALANCED LARGE CAP LARGE CAP MID-CAP SMALL CAP INTERNATIONAL
FUND VALUE FUND GROWTH FUND VALUE FUND VALUE FUND EQUITY FUND
-------- ---------- ------------- ---------- ---------- -------------
Cost basis of investments for federal income tax
purposes....................................... $667,457 $698,036 $58,255 $27,065 $1,476,084 $1,821,752
Unrealized appreciation......................... 92,403 159,929 4,417 967 145,286 313,072
Unrealized depreciation......................... (11,040) (21,205) (2,338) (451) (33,922) (30,146)
-------- -------- ------- ------- ---------- ----------
Net unrealized appreciation/(depreciation)...... 81,363 138,724 2,079 516 111,364 282,926
Undistributed ordinary income................... 14,249 7,568 119 46 39,948 20,807
Undistributed long-term gain/(loss)............. 21,235 (4,106) (9,838) -- 32,589 (33,902)
-------- -------- ------- ------- ---------- ----------
Distributable earnings.......................... $116,847 $142,186 $(7,640) $ 562 $ 183,901 $ 269,831
======== ======== ======= ======= ========== ==========
</Table>
- --------------------------------------------------------------------------------
108
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
ENHANCED
EMERGING HIGH YIELD INCOME INTERMEDIATE SHORT-TERM
MARKETS FUND BOND FUND FUND BOND FUND BOND FUND
------------ ---------- ------------- ------------- ----------
Cost basis of investments for federal income tax
purposes........................................... $73,633 $416,879 $117,744 $119,079 $ 94,299
Unrealized appreciation............................. 13,523 15,595 2,991 1,475 163
Unrealized depreciation............................. (2,520) (2,009) (825) (268) (1,853)
------- -------- -------- -------- --------
Net unrealized appreciation/(depreciation).......... 11,003 13,586 2,166 1,207 (1,690)
Undistributed ordinary income....................... 485 2,089 184 498 535
Undistributed long-term gain/(loss)................. 7,645 5,627 (340) (7,695) (5,952)
------- -------- -------- -------- --------
Distributable earnings.............................. $19,133 $ 21,302 $ 2,010 $ (5,990) $ (7,107)
======= ======== ======== ======== ========
</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 U.S. generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax
reporting have been identified and appropriately reclassified on the Statement
of Assets and Liabilities.
Accordingly, the following amounts represent current year permanent
differences that have been reclassified as of October 31, 2004 (in thousands):
<Table>
<Caption>
LARGE CAP LARGE CAP SMALL CAP INTERNATIONAL EMERGING ENHANCED
BALANCED VALUE GROWTH VALUE EQUITY MARKETS INCOME
FUND FUND FUND FUND FUND FUND FUND
-------- --------- --------- --------- ------------- -------- --------
Paid-in-capital....................... $ 22 $(1,137) $ 1 $ 12 $ (777) $ $ 223
Undistributed net investment income... 922 343 (2) (207) 9,018 (44) 3
Accumulated net realized gain
(loss)............................... (944) 794 1 195 (8,159) 44 (226)
Unrealized appreciation (depreciation)
of investments, futures contracts and
foreign currency..................... -- -- -- -- (82) -- --
<Caption>
INTERMEDIATE SHORT-TERM
BOND BOND
FUND FUND
------------ ----------
Paid-in-capital....................... $ 3 $(3,206)
Undistributed net investment income... 469 1,231
Accumulated net realized gain
(loss)............................... (472) 1,975
Unrealized appreciation (depreciation)
of investments, futures contracts and
foreign currency..................... -- --
</Table>
At October 31, 2004, capital loss carryforward positions for federal income
tax purposes were as follows (in thousands):
<Table>
<Caption>
FUND 2005 2006 2007 2008 2009 2010 2011 2012 TOTAL
- ---- ---- ---- ----- ----- ----- ------ ------ ---- ------
Large Cap Value................................... -- -- -- -- -- 2,452 1,654 -- 4,106
Large Cap Growth.................................. -- -- -- -- 1,377 7,786 674 -- 9,837
International Equity.............................. -- -- -- -- -- 10,149 23,752 -- 33,901
Enhanced Income................................... -- -- -- -- -- -- 340 -- 340
Intermediate Bond................................. -- -- -- 7,367 -- 328 -- -- 7,695
Short-Term Bond................................... 432 437 1,991 1,218 -- 913 161 800 5,953
</Table>
Net capital loss carryovers utilized for the period ended October 31, 2004
are as follows: Balanced Fund $2,273, Large Cap Value Fund $38,216, Large Cap
Growth Fund $3,838, International Equity Fund $101,281, Emerging Markets Fund
$2,733, Enhanced Income Fund $93, and Intermediate Bond Fund $574. The
Short-Term Bond Fund had $3,212 of expired capital loss carryovers.
- --------------------------------------------------------------------------------
109
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
Investment transactions for the year ended October 31, 2004 (excluding
short-term investments) are as follows (in thousands):
<Table>
<Caption>
LARGE CAP LARGE CAP MID-CAP EMERGING HIGH YIELD ENHANCED INTERMEDIATE
BALANCED VALUE GROWTH VALUE SMALL CAP MKT BOND INCOME BOND
-------- --------- --------- ------- --------- -------- ---------- -------- ------------
Purchases............ $360,133 $242,445 $74,982 $20,649 $912,684 $55,414 $499,553 $76,406 $120,123
Proceeds from
sales.............. $360,234 $190,389 $70,734 $ 1,020 $255,403 $49,179 $415,571 $72,217 $155,235
<Caption>
SHORT-TERM
----------
Purchases............ $38,405
Proceeds from
sales.............. $46,063
</Table>
The Balanced Fund had purchases and sales of U.S. Government Securities of
$132,019 and $101,405 respectively, and the Intermediate Bond Fund had purchases
and sales of U.S. Government securities of $37,599 and $25,872, respectively.
A summary of the Funds' transactions in Affiliated Funds for the period
ended October 31, 2004 is set forth below (in thousands):
<Table>
<Caption>
OCTOBER 31, 2003 OCTOBER 31, 2004
FUND AFFILIATE SHARE/MARKET VALUE PURCHASES SALES SHARES/MARKET VALUE
- ---- ----------- ------------------ ---------- ----------- -------------------
Balanced....................... Select Fund $45,459 $ 268,197 $ 268,537 $45,118
Large Cap Value................ Select Fund 42,022 318,803 323,103 37,721
Large Cap Growth............... Select Fund 702 22,258 18,652 4,309
Mid-Cap Value.................. Select Fund -- 16,388 10,578 5,810
Small Cap Value................ Select Fund 46,819 1,326,920 1,233,958 139,782
Emerging Markets............... Select Fund 1,414 52,465 42,803 11,076
High Yield Bond................ Select Fund 20,891 256,362 253,581 23,672
Enhanced Income................ Select Fund 4,167 52,916 56,641 442
Intermediate Bond.............. Select Fund 3,654 95,369 96,256 2,767
Short Term Bond................ Select Fund 1,154 41,108 40,579 1,683
</Table>
5. SECURITIES LENDING
Each Fund except the International Equity Fund may lend its securities to
qualified financial institutions, such as certain broker-dealers, to earn
additional income. The borrowers are required to secure their loans continuously
with collateral in an amount at least equal to 102% (for loans of US securities)
or 105% (for non-US securities) of the market value of the loaned securities at
the inception of each loan. Collateral is marked to market and monitored daily.
To the extent that a loan is collateralized by cash, such collateral shall be
invested by the securities lending agent (the "Agent") in short-term
instruments, money market mutual funds, and such other short-term investments,
provided the investments meet certain quality and diversification requirements.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is divided
between the Fund and the Agent and is recorded as income for the Fund. To the
extent that a loan is secured by non-cash collateral, brokers pay the Fund
negotiated lenders' fees, which are divided between the Fund and the Agent and
are recorded as securities lending income for the Fund. The Fund also continues
to receive income on the securities loaned, and any gain or loss in the market
priced of securities loaned that may occur during the term of the loan.
- --------------------------------------------------------------------------------
110
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
Risks to the Fund in securities lending transactions are that the borrower
may not provide additional collateral when required or return the securities
when due, and that the value of the short-term investments will be less than the
amount of cash collateral required to be returned to the borrower.
At October 31, 2004, the value of outstanding securities on loan and the
value of collateral was as follows (in thousands):
<Table>
<Caption>
MARKET VALUE OF
FUND SECURITIES ON LOAN NON-CASH COLLATERAL CASH COLLATERAL
- ---- ------------------ ------------------- ---------------
Balanced................................ $ 79,233 $ -- $ 80,788
Large Cap Value......................... 39,044 -- 40,164
Large Cap Growth........................ 529 -- 543
Mid-Cap Value........................... 1,360 -- 1,381
Small Cap Value......................... 222,942 209 228,980
Emerging Markets........................ 3,073 -- 3,191
High Yield Bond......................... 50,163 -- 51,458
Enhanced Income......................... 16,671 -- 16,970
Intermediate Bond....................... 20,793 -- 21,149
Short Term Bond......................... 2,020 -- 2,061
</Table>
The Custodian for each Fund, other than High Yield Bond, invested the cash
collateral in the Business Trust and the Select Fund. These amounts have been
included as investments in each Fund's Schedule of Investments and Statements of
Assets and Liabilities. Income earned on these investments is reported as Income
derived from securities lending in the Statements of Operations.
Non-Cash collateral received by the Fund may not be sold or repledged;
therefore, non-cash collateral is not included on the Fund's Schedule of
Investments or Statement of Assets and Liabilities.
6. FUTURES CONTRACTS
A summary of futures contracts at October 31, 2004 is as follows (in
thousands):
<Table>
<Caption>
MARKET UNREALIZED
TYPE OF FUTURE EXPIRATION CONTRACTS VALUE APPRECIATION
- -------------- ------------- --------- -------- ------------
BALANCED FUND:
S&P 500 Index........................................... December 2004 152 $ 42,951 $343
Emini S&P 500 Index..................................... December 2004 97 5,482 29
-------- ----
TOTAL BALANCED FUND..................................... $ 48,433 $372
======== ====
LARGE CAP VALUE FUND:
S&P 500 Index........................................... December 2004 103 $ 29,105 $306
Emini S&P 500 Index..................................... December 2004 167 9,438 32
-------- ----
TOTAL LARGE CAP VALUE FUND.............................. $ 38,543 $338
======== ====
LARGE CAP GROWTH FUND:
Emini S&P 500 Index..................................... December 2004 10 $ 565 $ 4
-------- ----
TOTAL LARGE CAP GROWTH FUND............................. $ 565 $ 4
======== ====
</Table>
- --------------------------------------------------------------------------------
111
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
MARKET UNREALIZED
TYPE OF FUTURE EXPIRATION CONTRACTS VALUE APPRECIATION
- -------------- ------------- --------- -------- ------------
MID-CAP VALUE FUND:
S&P Mid-Cap 400 Index................................... December 2004 18 $ 5,425 $ 31
Emini S&P MidCap 400 Index.............................. December 2004 11 663 15
-------- ----
TOTAL MID-CAP VALUE FUND................................ $ 6,088 $ 46
======== ====
SMALL CAP VALUE FUND:
Russell 2000............................................ December 2004 517 $151,093 $ 39
-------- ----
TOTAL SMALL CAP VALUE FUND.............................. $151,093 $ 39
======== ====
EMERGING MARKETS FUND:
S&P 500 Index........................................... December 2004 13 $ 3,673 $ 2
Emini S&P 500 Index..................................... December 2004 144 8,138 92
-------- ----
TOTAL EMERGING MARKETS FUND............................. $ 11,811 $ 94
======== ====
</Table>
7. FOREIGN CURRENCY CONTRACTS
In order to protect itself against foreign currency fluctuations, the
Emerging Markets Fund has entered into forward contracts to deliver or receive
foreign currency in exchange for U.S. dollars as described below. The Emerging
Markets Fund bears the market risk that arises from changes in foreign exchange
rates, and accordingly, the unrealized gain (loss) on these contracts is
reflected in the accompanying financial statements. The Emerging Market Fund
also bears the credit risk if the counterparty fails to perform under the
contract. At October 31, 2004, the Emerging Markets Fund had outstanding forward
foreign currency contracts as follows:
<Table>
<Caption>
SETTLEMENT UNREALIZED
CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS)
- -------------------- ---------- ------ -----------
(AMOUNTS IN THOUSANDS)
610 South African Rand.................................. 6/27/2005 $ 657 $(47)
396 South African Rand.................................. 7/22/2005 410 (14)
------ ----
TOTAL CONTRACTS TO DELIVER
(Receivable amount $1,006)............................. $1,067 $(61)
====== ====
</Table>
The Emerging Markets Fund may purchase securities with delivery or payment
to occur at a later date. At the time the Emerging Markets Fund enters into a
commitment to purchase a security, the transaction is recorded and the value of
the security is reflected in the net asset value. The value of the security may
vary with market fluctuations.
- --------------------------------------------------------------------------------
112
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
8. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each Class of
the Funds (in thousands):
Period Ended October 31, 2004
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
------------------- ------------------- ------------------
BALANCED FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------- ------- -------- ------ --------- ------- --------
Shares sold....................................... 120 $ 1,646 943 $ 12,438 4,313 $ 57,449
Reinvestment of dividends......................... 16 211 28 351 1,225 15,797
Shares redeemed................................... (246) (3,383) (461) (6,099) (3,888) (51,664)
------ ------- ------ --------- ------- --------
Net increase (decrease) in shares outstanding..... (110) $(1,526) 510 $ 6,690 1,650 $ 21,582
====== ======= ====== ========= ======= ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
------------------- ------------------- ------------------
LARGE CAP VALUE FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- -------- ------ --------- ------- --------
Shares sold...................................... 1,678 $29,357 2,166 $ 36,511 4,775 $ 82,425
Reinvestment of dividends........................ 12 190 21 341 717 11,675
Shares redeemed.................................. (537) (9,282) (669) (11,207) (5,644) (97,128)
------ ------- ------ --------- ------- --------
Net increase (decrease) in shares outstanding.... 1,153 $20,265 1,518 $ 25,645 (152) $ (3,028)
====== ======= ====== ========= ======= ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS AMR CLASS
-------------------- ------------------
LARGE CAP GROWTH FUND SHARES AMOUNT SHARES AMOUNT
- --------------------- -------- -------- ------ --------
Shares sold..................................... -- $ -- 4,375 $ 25,454
Reinvestment of dividends....................... -- -- 27 151
Shares redeemed................................. -- -- (3,880) (22,559)
------ ------ ------ --------
Net increase in shares outstanding.............. -- $ -- 522 $ 3,046
====== ====== ====== ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------
MID-CAP VALUE FUND SHARES AMOUNT
- ------------------ ------- --------
Shares sold..................................... 2,646 $26,544
Reinvestment of dividends....................... -- --
Shares redeemed................................. (158) (1,560)
------ -------
Net increase in shares outstanding.............. 2,488 $24,984
====== =======
</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............... 21,166 $380,848 23,536 $422,446 685 $12,179 8,593 $ 153,680
Reinvestment of
dividends............... 143 2,425 136 2,259 -- -- 683 11,494
Shares redeemed........... (4,049) (72,693) (2,711) (47,684) (46) (819) (6,247) (109,653)
------ -------- ------ -------- ------ ------- ------- ---------
Net increase in shares
outstanding............. 17,260 $310,580 20,961 $377,021 639 $11,360 3,029 $ 55,521
====== ======== ====== ======== ====== ======= ======= =========
</Table>
- --------------------------------------------------------------------------------
113
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS AMR CLASS
INTERNATIONAL EQUITY -------------------- ------------------- ---------------- -------------------
FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- --------- ------ --------- ------ ------ ------- ---------
Shares sold............... 15,750 $270,812 12,974 $ 218,345 43 $ 744 10,345 $ 180,445
Reinvestment of
dividends............... 975 15,613 258 4,117 -- -- 568 9,135
Shares redeemed*.......... (7,712) (131,052) (7,839) (128,653) (3) (54) (6,917) (119,513)
------ -------- ------ --------- ------ ------ ------- ---------
Net increase in shares
outstanding............. 9,013 $155,373 5,393 $ 93,809 40 $ 690 3,996 $ 70,067
====== ======== ====== ========= ====== ====== ======= =========
</Table>
* Net of Redemption Fees
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
-------------------- ----------------- -----------------
EMERGING MARKETS FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- --------------------- -------- -------- ------ ------- ------- -------
Shares sold....................................... 254 $3,097 158 $ 1,907 3,200 $38,765
Reinvestment of dividends......................... 2 20 -- 3 37 415
Shares redeemed*.................................. (15) (170) (108) (1,304) (2,219) (25,975)
------ ------ ------ ------- ------- -------
Net increase in shares outstanding................ 241 $2,947 50 $ 606 1,018 $13,205
====== ====== ====== ======= ======= =======
</Table>
* Net of Redemption Fees
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS SERVICE CLASS
-------------------- ------------------ ----------------
HIGH YIELD BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- ------- --------- ------ -------- ------- ------
Shares sold....................................... 13,551 $144,793 6,516 $ 69,764 -- $ 3
Reinvestment of dividends......................... 1,211 12,997 786 8,426 -- --
Shares redeemed................................... (7,537) (80,955) (5,361) (57,514) -- --
------ -------- ------ -------- ------- ------
Net increase in shares outstanding................ 7,225 $ 76,835 1,941 $ 20,676 -- $ 3
====== ======== ====== ======== ======= ======
</Table>
<Table>
<Caption>
PLANAHEAD CLASS
------------------
ENHANCED INCOME FUND SHARES AMOUNT
- -------------------- ------ --------
Shares sold...................................... 2,177 $ 21,940
Reinvestment of dividends........................ 217 2,192
Shares redeemed.................................. (2,316) (23,331)
------ --------
Net increase in shares outstanding............... 78 $ 801
====== ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
-------------------- ---------------- ------------------
INTERMEDIATE BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ---------------------- -------- -------- ------ ------ ------- --------
Shares sold....................................... 1 $ 13 13 $ 134 3,058 $ 31,418
Reinvestment of dividends......................... 3 33 4 42 494 5,071
Shares redeemed................................... (16) (168) (48) (491) (7,119) (72,765)
------ ------ ------ ------ ------- --------
Net decrease in shares outstanding................ (12) $ (122) (31) $ (315) (3,567) $(36,276)
====== ====== ====== ====== ======= ========
</Table>
<Table>
<Caption>
INSTITUTIONAL CLASS PLANAHEAD CLASS AMR CLASS
-------------------- ----------------- ------------------
SHORT-TERM BOND FUND SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------- -------- -------- ------ ------- ------- --------
Shares sold....................................... 31 $ 282 1,029 $ 9,534 1,071 $ 9,815
Reinvestment of dividends......................... 15 140 32 293 456 4,193
Shares redeemed................................... (82) (755) (825) (7,622) (2,527) (23,268)
------ ------ ------ ------- ------- --------
Net increase (decrease) in shares outstanding..... (36) $ (333) 236 $ 2,205 (1,000) $ (9,260)
====== ====== ====== ======= ======= ========
</Table>
- --------------------------------------------------------------------------------
114
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
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>
<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>
- --------------------------------------------------------------------------------
115
AMERICAN AADVANTAGE FUNDS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<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>
- --------------------------------------------------------------------------------
116
(AMERICAN EAGLE LOGO)
- --------------------------------------------------------------------------------
117
AMERICAN AADVANTAGE BALANCED FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
2004 2003 2002 2001(D E G) 2000(B)
------ ------ ------ ----------- --------
Net asset value, beginning of period........................ $12.99 $10.97 $12.07 $ 12.27 $ 13.01
------ ------ ------ -------- --------
Income from investment operations:
Net investment income(A C).............................. 0.29 0.31(H) 0.11 0.51 0.58
Net gains (losses) on securities (both realized and
unrealized)(C)........................................ 1.36 1.84(H) (0.69) (0.03) (0.03)
------ ------ ------ -------- --------
Total income (loss) from investment operations.............. 1.65 2.15 (0.58) 0.48 0.55
------ ------ ------ -------- --------
Less distributions:
Dividends from net investment income.................... (0.33) (0.13) (0.44) (0.68) (0.51)
Distributions from net realized gains on securities..... -- -- (0.08) -- (0.78)
------ ------ ------ -------- --------
Total distributions......................................... (0.33) (0.13) (0.52) (0.68) (1.29)
------ ------ ------ -------- --------
Net asset value, end of period.............................. $14.31 $12.99 $10.97 $ 12.07 $ 12.27
====== ====== ====== ======== ========
Total return................................................ 12.87% 19.77% (5.14)% 4.07% 5.13%
====== ====== ====== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $8,378 $9,041 $8,994 $157,775 $260,880
Ratios to average net assets (annualized):
Expenses(C)........................................... 0.63% 0.63% 0.62% 0.62% 0.61%
Net investment income(C).............................. 2.15% 2.74% 3.12% 3.56% 4.39%
Portfolio turnover rate(F).............................. 62% 69% 84% 122% 121%
</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) For the year ended October 31, 2003, the net investment income and net
gains (losses) on securities (both realized and unrealized) has been
restated from 0.30 and 1.85, respectively for Institutional Class and 0.36
and 1.66, respectively for PlanAhead Class.
- --------------------------------------------------------------------------------
118
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
------------------------------------------------------------- ----------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------------------------------------------- ----------------------------
2004 2003 2002 2001(D E G) 2000(B) 2004 2003
------- ------- ------- ----------- ------- ----------- --------
$ 12.40 $ 10.81 $ 11.88 $ 12.08 $ 12.79 $ 12.60 $ 10.98
------- ------- ------- ------- ------- -------- --------
0.27 0.28(H) 0.41 0.51 0.53 0.32 0.34
1.25 1.74(H) (0.99) (0.06) -- 1.31 1.78
------- ------- ------- ------- ------- -------- --------
1.52 2.02 (0.58) 0.45 0.53 1.63 2.12
------- ------- ------- ------- ------- -------- --------
(0.30) (0.43) (0.41) (0.65) (0.46) (0.36) (0.50)
-- -- (0.08) -- (0.78) -- --
------- ------- ------- ------- ------- -------- --------
(0.30) (0.43) (0.49) (0.65) (1.24) (0.36) (0.50)
------- ------- ------- ------- ------- -------- --------
$ 13.62 $ 12.40 $ 10.81 $ 11.88 $ 12.08 $ 13.87 $ 12.60
======= ======= ======= ======= ======= ======== ========
12.44% 19.36% (5.18)% 3.84% 4.88% 13.13% 20.06%
======= ======= ======= ======= ======= ======== ========
$21,571 $13,321 $10,561 $12,176 $11,643 $636,420 $557,612
0.93% 0.94% 0.90% 0.84% 0.90% 0.37% 0.38%
1.84% 2.40% 2.83% 3.29% 4.01% 2.40% 2.98%
62% 69% 84% 122% 121% 62% 69%
<Caption>
AMR CLASS
-------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------
2002 2001(D E G) 2000(B)
-------- ----------- --------
$ 12.06 $ 12.27 $ 13.02
-------- -------- --------
0.48 0.56 0.61
(1.01) (0.05) (0.03)
-------- -------- --------
(0.53) 0.51 0.58
-------- -------- --------
(0.47) (0.72) (0.55)
(0.08) -- (0.78)
-------- -------- --------
(0.55) (0.72) (1.33)
-------- -------- --------
$ 10.98 $ 12.06 $ 12.27
======== ======== ========
(4.71)% 4.38% 5.37%
======== ======== ========
$487,526 $526,405 $525,040
0.35% 0.36% 0.35%
3.39% 3.77% 4.54%
84% 122% 121%
</Table>
- --------------------------------------------------------------------------------
119
AMERICAN AADVANTAGE LARGE CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-----------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2004 2003 2002 2001(B D) 2000(E)
------- ------- ------- --------- -------
Net asset value, beginning of period.............. $ 15.62 $ 12.55 $ 14.51 $ 15.83 $ 18.69
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss)(A C).............. 0.26 0.25(G) 0.27 0.28 0.47
Net gains (losses) on securities (both realized
and unrealized)(C)............................ 2.62 3.11(G) (1.76) (0.61) 0.06
------- ------- ------- ------- -------
Total income (loss) from investment operations.... 2.88 3.36 (1.49) (0.33) 0.53
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income........... (0.27) (0.29) (0.30) (0.50) (0.34)
Distributions from net realized gains on
securities.................................... -- -- (0.17) (0.49) (3.05)
------- ------- ------- ------- -------
Total distributions............................... (0.27) (0.29) (0.47) (0.99) (3.39)
------- ------- ------- ------- -------
Net asset value, end of period.................... $ 18.23 $ 15.62 $ 12.55 $ 14.51 $ 15.83
======= ======= ======= ======= =======
Total return...................................... 18.59% 27.30% (10.83)% (2.21)% 4.81%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)....... $48,451 $23,512 $21,589 $10,081 $ 7,594
Ratios to average net assets (annualized):
Expenses(C)................................... 0.66% 0.66% 0.61% 0.64% 0.53%
Net investment income(C)...................... 1.49% 1.88% 1.82% 1.76% 3.71%
Portfolio turnover rate(F)..................... 29% 27% 34% 60% 58%
</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) Metropolitan West Capital Management, LLC replaced Independence Investment
LLC as investment adviser to the Large Cap Value Fund on December 1, 2000.
(E) GSB Investment Management, Inc. was removed as an investment adviser to the
Large Cap Value Fund on March 1, 2000.
(F) The American AAdvantage Large Cap Value Fund invested all of its investable
assets in its corresponding Portfolio through February 28, 2002. Portfolio
turnover rate through February 28, 2002 was that of the Portfolio.
(G) For the year ended October 31, 2003, the net investment income and net
gains (losses) on securities (both realized and unrealized) has been
restated from 0.20 and 3.16, respectively for Institutional Class and 0.10
and 3.11, respectively for PlanAhead Class.
- --------------------------------------------------------------------------------
120
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
------------------------------------------------- -----------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
------------------------------------------------- -----------------------------------------------------
2004 2003 2002 2001(B D) 2000(E) 2004 2003 2002 2001(B D) 2000(E)
------- ------- ------- --------- ------- -------- -------- -------- --------- --------
$ 15.05 $ 12.09 $ 14.00 $ 15.40 $ 18.41 $ 15.44 $ 12.40 $ 14.34 $ 15.75 $ 18.77
------- ------- ------- -------- ------- -------- -------- -------- -------- --------
0.23 0.22(G) 0.25 0.26 0.60 0.30 0.29 0.31 0.34 0.65
2.49 2.99(G) (1.74) (0.62) (0.13) 2.58 3.06 (1.75) (0.63) (0.09)
------- ------- ------- -------- ------- -------- -------- -------- -------- --------
2.72 3.21 (1.49) (0.36) 0.47 2.88 3.35 (1.44) (0.29) 0.56
------- ------- ------- -------- ------- -------- -------- -------- -------- --------
(0.23) (0.25) (0.25) (0.55) (0.43) (0.30) (0.31) (0.33) (0.63) (0.53)
-- -- (0.17) (0.49) (3.05) -- -- (0.17) (0.49) (3.05)
------- ------- ------- -------- ------- -------- -------- -------- -------- --------
(0.23) (0.25) (0.42) (1.04) (3.48) (0.30) (0.31) (0.50) (1.12) (3.58)
------- ------- ------- -------- ------- -------- -------- -------- -------- --------
$ 17.54 $ 15.05 $ 12.09 $ 14.00 $ 15.40 $ 18.02 $ 15.44 $ 12.40 $ 14.34 $ 15.75
======= ======= ======= ======== ======= ======== ======== ======== ======== ========
18.26% 26.99% (11.13)% (2.47)% 4.56% 18.89% 27.64% (10.62)% (1.98)% 5.08%
======= ======= ======= ======== ======= ======== ======== ======== ======== ========
$51,489 $21,331 $15,941 $ 12,280 $11,507 $696,206 $598,869 $511,287 $654,239 $737,111
0.94% 0.95% 0.93% 0.89% 0.84% 0.38% 0.39% 0.36% 0.36% 0.34%
1.21% 1.57% 1.53% 1.54% 2.51% 1.79% 2.13% 2.06% 2.09% 3.07%
29% 27% 34% 60% 58% 29% 27% 34% 60% 58%
</Table>
- --------------------------------------------------------------------------------
121
AMERICAN AADVANTAGE LARGE CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------
YEAR ENDED OCTOBER 31, JULY 31 TO
-------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
------ ------- ------- ------- -----------
Net asset value, beginning of period...................... $ 5.47 $ 4.53 $ 5.66 $ 9.54 $10.00
------ ------- ------- ------- ------
Income from investment operations:
Net investment income (loss)(A)....................... 0.02 0.02 0.03 (0.01) --
Net gains (losses) on securities (both realized and
unrealized)(A)...................................... 0.35 0.94 (1.16) (3.86) (0.46)
------ ------- ------- ------- ------
Total income (loss) from investment operations............ 0.37 0.96 (1.13) (3.87) (0.46)
------ ------- ------- ------- ------
Less distributions:
Dividends from net investment income.................. (0.02) (0.02) -- (0.01) --
------ ------- ------- ------- ------
Total distributions....................................... (0.02) (0.02) -- (0.01) --
------ ------- ------- ------- ------
Net asset value, end of period............................ $ 5.82 $ 5.47 $ 4.53 $ 5.66 $ 9.54
====== ======= ======= ======= ======
Total return.............................................. 6.71% 21.15% (19.96)% (40.62)% (4.60)%(C)
====== ======= ======= ======= ======
Ratios and supplemental data:
Net assets, end of period (in thousands).............. $ 1 $ 1 $ 1 $ 1 $ 1
Ratios to average net assets (annualized)(A):
Expenses............................................ 0.84% 0.87% 0.87% 0.99% 0.99%
Net investment income (loss)........................ 0.18% 0.18% 0.06% (0.26)% --
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager(A).......... 12.38% -- -- 0.02% 0.29%
Portfolio turnover rate(B)............................ 131% 138% 135% 85% 9%(C)
</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.
- --------------------------------------------------------------------------------
122
- --------------------------------------------------------------------------------
<Table>
<Caption>
AMR CLASS
-------------------------------------------------------------
YEAR ENDED OCTOBER 31, JULY 31 TO
--------------------------------------------- OCTOBER 31,
2004 2003 2002 2001 2000
------- ------- ------- ------- -----------
$ 5.48 $ 4.54 $ 5.67 $ 9.55 $ 10.00
------- ------- ------- ------- -------
0.02 0.02 0.02 0.01 0.01
0.36 0.93 (1.14) (3.87) (0.46)
------- ------- ------- ------- -------
0.38 0.95 (1.12) (3.86) (0.45)
------- ------- ------- ------- -------
(0.02) (0.01) (0.01) (0.02) --
------- ------- ------- ------- -------
(0.02) (0.01) (0.01) (0.02) --
------- ------- ------- ------- -------
$ 5.84 $ 5.48 $ 4.54 $ 5.67 $ 9.55
======= ======= ======= ======= =======
6.88% 21.09% (19.85)% (40.51)% (4.50)%(C)
======= ======= ======= ======= =======
$55,121 $48,926 $28,017 $23,804 $19,505
0.71% 0.68% 0.67% 0.70% 0.74%
0.34% 0.40% 0.30% 0.08% 0.25%
-- -- -- 0.02% 0.14%
131% 138% 135% 85% 9%(C)
</Table>
- --------------------------------------------------------------------------------
123
AMERICAN AADVANTAGE MID-CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-------------------
JUNE 30 TO
OCTOBER 31,
2004
-------------------
Net asset value, beginning of period........................ $ 10.00
-------
Income from investment operations:
Net investment income................................... 0.02(B)
Net gains on securities (both realized and
unrealized)............................................ 0.25
-------
Total income from investment operations..................... 0.27
-------
Less distributions:
Dividends from net investment income.................... --
Distributions from net realized gains on securities..... --
-------
Total distributions......................................... --
-------
Net asset value, end of period.............................. $ 10.27
=======
Total return................................................ 2.70%(A)
=======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $25,546
Ratios to average net assets (annualized):
Expenses.............................................. 1.14%
Net investment income................................. 0.73%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager................ 0.20%
Portfolio turnover rate................................. 6%(A)
</Table>
- ---------------
(A) Not annualized.
(B) Based on average shares outstanding.
- --------------------------------------------------------------------------------
124
(AMERICAN EAGLE LOGO)
- --------------------------------------------------------------------------------
125
AMERICAN AADVANTAGE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-----------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2004(G) 2003(D) 2002 2001(C) 2000
-------- -------- ------- ------- -------
Net asset value, beginning of period....................... $ 16.21 $ 11.28 $ 11.69 $ 10.08 $ 9.07
-------- -------- ------- ------- -------
Income from investment operations:
Net investment income (loss)(A)........................ 0.07 (0.01) (0.01) 0.16 0.21
Net gains on securities (both realized and
unrealized)(A)....................................... 3.09 5.24 0.47 1.81 1.01
-------- -------- ------- ------- -------
Total income from investment operations.................... 3.16 5.23 0.46 1.97 1.22
-------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income................... (0.08) (0.02) (0.11) (0.19) (0.04)
Distributions from net realized gains on securities.... (0.44) (0.28) (0.76) (0.17) (0.17)
-------- -------- ------- ------- -------
Total distributions........................................ (0.52) (0.30) (0.87) (0.36) (0.21)
-------- -------- ------- ------- -------
Net asset value, end of period............................. $ 18.85 $ 16.21 $ 11.28 $ 11.69 $ 10.08
======== ======== ======= ======= =======
Total return............................................... 19.86% 47.45% 3.29% 20.16% 13.78%
======== ======== ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)............... $429,540 $ 89,579 $21,936 $ 2,364 $ 1,955
Ratios to average net assets (annualized):
Expenses(A).......................................... 0.89% 0.89% 0.82% 0.89% 0.92%
Net investment income(loss)(A)....................... 0.57% 0.60% 0.81% 1.38% 1.62%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager(A)........... -- -- -- -- 0.06%
Portfolio turnover rate(B)............................. 35% 75% 81% 93% 63%
</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.
(G) The Boston Company was added as an investment adviser to the Small Cap
Value Fund on September 27, 2004.
- --------------------------------------------------------------------------------
126
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS SERVICE CLASS AMR CLASS
------------------------------------------------ ------------------------- ----------------------
YEAR ENDED OCTOBER 31, YEAR ENDED MAY 1 TO YEAR ENDED OCTOBER 31,
------------------------------------------------ OCTOBER 31, OCTOBER 31, ----------------------
2004(G) 2003(D) 2002 2001(C) 2000 2004(G) 2003(D) 2004(G) 2003(D)
-------- ------- ------- ------- ------- ----------- ----------- ----------- --------
$ 15.95 $ 11.22 $ 11.64 $ 10.08 $ 9.05 $ 15.92 $ 11.88 $ 16.13 $ 11.30
-------- ------- ------- ------- ------- -------- --------- -------- --------
0.08 0.05 0.06 0.15 0.08 0.01 -- 0.14 0.10
2.98 5.08 0.36 1.76 1.14 3.00 4.04 3.04 5.15
-------- ------- ------- ------- ------- -------- --------- -------- --------
3.06 5.13 0.42 1.91 1.22 3.01 4.04 3.18 5.25
-------- ------- ------- ------- ------- -------- --------- -------- --------
(0.03) (0.12) (0.08) (0.18) (0.02) -- -- (0.09) (0.14)
(0.44) (0.28) (0.76) (0.17) (0.17) (0.44) -- (0.44) (0.28)
-------- ------- ------- ------- ------- -------- --------- -------- --------
(0.47) (0.40) (0.84) (0.35) (0.19) (0.44) -- (0.53) (0.42)
-------- ------- ------- ------- ------- -------- --------- -------- --------
$ 18.54 $ 15.95 $ 11.22 $ 11.64 $ 10.08 $ 18.49 $ 15.92 $ 18.78 $ 16.13
======== ======= ======= ======= ======= ======== ========= ======== ========
19.56% 47.12% 2.99% 19.58% 13.76% 19.24% 34.01% 20.12% 47.93%
======== ======= ======= ======= ======= ======== ========= ======== ========
$466,364 $66,906 $16,190 $ 1,197 $ 440 $ 11,828 $ 1 $438,353 $327,542
1.15% 1.16% 1.11% 1.17% 1.18% 1.38% 1.49% 0.60% 0.61%
0.33% 0.39% 0.52% 1.06% 1.71% 0.17% (0.05)% 0.84% 0.95%
-- -- -- -- 0.06% 0.31% 1,087.55% -- --
35% 75% 81% 93% 63% 35% 75%(F) 35% 75%
<Caption>
AMR CLASS
------------------------------
YEAR ENDED OCTOBER 31,
------------------------------
2002 2001(C) 2000
-------- -------- --------
$ 11.71 $ 10.10 $ 9.08
-------- -------- --------
0.15 0.15 0.22
0.34 1.85 1.04
-------- -------- --------
0.49 2.00 1.26
-------- -------- --------
(0.14) (0.22) (0.07)
(0.76) (0.17) (0.17)
-------- -------- --------
(0.90) (0.39) (0.24)
-------- -------- --------
$ 11.30 $ 11.71 $ 10.10
======== ======== ========
3.54% 20.52% 14.19%
======== ======== ========
$181,180 $137,811 $ 53,715
0.56% 0.64% 0.68%
1.09% 1.55% 1.89%
-- -- 0.06%
81% 93% 63%
</Table>
- --------------------------------------------------------------------------------
127
AMERICAN AADVANTAGE INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------
2004(B) 2003(F) 2002 2001(E) 2000
---------- -------- -------- -------- --------
Net asset value, beginning of period........................ $ 15.46 $ 12.10 $ 13.77 $ 17.95 $ 19.36
---------- -------- -------- -------- --------
Income from investment operations:
Net investment income(A D).................................. 0.30 0.25 0.21 0.24 0.36
Net gains (losses) on securities (both realized and
unrealized)(D).......................................... 3.12 3.47 (1.62) (2.96) 0.18
---------- -------- -------- -------- --------
Total income (loss) from investment operations.............. 3.42 3.72 (1.41) (2.72) 0.54
---------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income..................... (0.41) (0.36) (0.26) (0.22) (0.31)
Distributions from net realized gains on securities...... -- -- -- (1.24) (1.64)
---------- -------- -------- -------- --------
Total distributions......................................... (0.41) (0.36) (0.26) (1.46) (1.95)
---------- -------- -------- -------- --------
Redemption fees added to beneficial interest................ --(I) --(I) -- -- --
---------- -------- -------- -------- --------
Net asset value, end of period.............................. $ 18.47 $ 15.46 $ 12.10 $ 13.77 $ 17.95
========== ======== ======== ======== ========
Total return................................................ 22.49% 31.61% (10.51)% (16.54)% 2.36%
========== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)................. $1,029,272 $722,333 $537,476 $519,151 $587,869
Ratios to average net assets (annualized):
Expenses(D)............................................. 0.76% 0.79% 0.75% 0.78% 0.72%
Net investment income(D)................................ 1.69% 1.97% 1.56% 1.54% 1.64%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager (D)............. -- -- -- -- --
Portfolio turnover rate(C)............................... 36% 44% 43% 36% 45%
</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) The Boston Company was added as an investment adviser to the International
Equity Fund on September 27, 2004.
(C) The American AAdvantage International Equity Fund invests all of its
investable assets in its corresponding Portfolio. Portfolio turnover rate
is that of the Portfolio.
(D) The per share amounts and ratios reflect income and expenses assuming
inclusion of the Fund's proportionate share of the income and expenses of
the AMR Investment Services International Equity Portfolio.
(E) Causeway Capital Management, LLC replaced Merrill Lynch Investment
Managers, L.P. as investment adviser to the International Equity Fund on
August 31, 2001.
(F) Independence Investment LLC was removed as an investment adviser to the
International Equity Fund on October 24, 2003.
(G) Not annualized
(H) Portfolio turnover rate is for the period November 1, 2002 through October
31, 2003.
(I) Amounts represent less than $0.01 per share.
- --------------------------------------------------------------------------------
128
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS SERVICE CLASS
-------------------------------------------------- -------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED MAY 1 TO
-------------------------------------------------- OCTOBER 31, OCTOBER 31,
2004(B) 2003(F) 2002 2001(E) 2000 2004(B) 2003(F)
-------- -------- ------- -------- ------- ----------- -----------
$ 15.34 $ 11.95 $ 13.58 $ 17.72 $ 19.13 $ 15.31 $ 12.18
-------- -------- ------- -------- ------- --------- ----------
0.26 0.22 0.15 0.19 0.31 0.30 0.09
3.08 3.46 (1.56) (2.92) 0.18 2.99 3.04
-------- -------- ------- -------- ------- --------- ----------
3.34 3.68 (1.41) (2.73) 0.49 3.29 3.13
-------- -------- ------- -------- ------- --------- ----------
(0.37) (0.29) (0.22) (0.17) (0.26) (0.36) --
-- -- -- (1.24) (1.64) -- --
-------- -------- ------- -------- ------- --------- ----------
(0.37) (0.29) (0.22) (1.41) (1.90) (0.36) --
-------- -------- ------- -------- ------- --------- ----------
--(I) --(I) -- -- -- --(I) --(I)
-------- -------- ------- -------- ------- --------- ----------
$ 18.31 $ 15.34 $ 11.95 $ 13.58 $ 17.72 $ 18.24 $ 15.31
======== ======== ======= ======== ======= ========= ==========
22.16% 31.62% (10.57)% (16.79)% 2.08% 21.88% 25.70%(G)
======== ======== ======= ======== ======= ========= ==========
$310,540 $177,425 $99,636 $113,948 $85,680 $ 739 $ 1
1.02% 1.10% 1.04% 1.10% 1.01% 1.27% 1.50%
1.46% 1.68% 1.35% 1.22% 1.43% 0.81% 1.33%
-- -- -- -- -- 4.99% 1,137.58%
36% 44% 43% 36% 45% 36% 44%(H)
<Caption>
AMR CLASS
----------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------
2004(B) 2003(F) 2002 2001(E) 2000
-------- -------- -------- -------- --------
$ 15.54 $ 12.18 $ 13.86 $ 18.07 $ 19.46
-------- -------- -------- -------- --------
0.34 0.29 0.24 0.28 0.41
3.14 3.46 (1.62) (2.98) 0.20
-------- -------- -------- -------- --------
3.48 3.75 (1.38) (2.70) 0.61
-------- -------- -------- -------- --------
(0.44) (0.39) (0.30) (0.27) (0.36)
-- -- -- (1.24) (1.64)
-------- -------- -------- -------- --------
(0.44) (0.39) (0.30) (1.51) (2.00)
-------- -------- -------- -------- --------
--(I) --(I) -- -- --
-------- -------- -------- -------- --------
$ 18.58 $ 15.54 $ 12.18 $ 13.86 $ 18.07
======== ======== ======== ======== ========
22.84% 31.77% (10.26)% (16.35)% 2.69%
======== ======== ======== ======== ========
$460,114 $322,801 $264,579 $301,762 $428,329
0.49% 0.52% 0.49% 0.52% 0.46%
1.97% 2.22% 1.81% 1.78% 1.92%
-- -- -- --
36% 44% 43% 36% 45%
</Table>
- --------------------------------------------------------------------------------
129
AMERICAN AADVANTAGE EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
--------------------------------------------------
YEAR ENDED OCTOBER 31, JULY 31 TO
------------------------------------ OCTOBER 31,
2004 2003 2002 2001 2000
------- ------- ------ ------- -----------
Net asset value, beginning of period........................ $ 10.62 $ 7.20 $ 6.64 $ 8.17 $ 10.00
------- ------- ------ ------- -------
Income from investment operations:
Net investment income(A)................................ 0.07 0.04 0.09 0.11 --
Net gains (losses) on securities (both realized and
unrealized)(A)........................................ 2.01 3.43 0.56 (1.62) (1.83)
------- ------- ------ ------- -------
Total income (loss) from investment operations.............. 2.08 3.47 0.65 (1.51) (1.83)
------- ------- ------ ------- -------
Less distributions:
Dividends from net investment income.................... (0.06) (0.05) (0.09) (0.01) --
Distributions from net realized gains on securities..... -- -- -- (0.01) --
------- ------- ------ ------- -------
Total distributions......................................... (0.06) (0.05) (0.09) (0.02) --
------- ------- ------ ------- -------
Redemption fees added to beneficial interests(E) --(E) -- -- -- --
------- ------- ------ ------- -------
Net asset value, end of period.............................. $ 12.64 $ 10.62 $ 7.20 $ 6.64 $ 8.17
======= ======= ====== ======= =======
Total return................................................ 19.65% 48.45% 9.80% (18.52)% (18.30)%(C)
======= ======= ====== ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ 7,282 $ 3,557 $1,769 $ 1,495 $ 1
Ratios to average net assets (annualized):
Expenses(A)........................................... 1.85% 1.76% 1.51% 1.43% 1.87%
Net investment income (loss)(A)....................... 0.74% 0.62% 1.11% 2.07% (0.47)%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager............... -- -- -- -- --
Portfolio turnover rate(B).............................. 76% 80% 94% 95% 23%(C)
</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.
(E) Amounts represent less than $0.01 per share.
- --------------------------------------------------------------------------------
130
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
- ------------------------------------- ---------------------------------------------------
YEAR ENDED
OCTOBER 31, OCTOBER 1 TO YEAR ENDED OCTOBER 31, JULY 31 TO
----------------- OCTOBER 31, ------------------------------------- OCTOBER 31,
2004 2003 2002 2004 2003 2002 2001 2000
------- ------- ------------ ------- ------- ------- ------- -----------
$ 10.55 $ 7.19 $ 6.86 $ 10.66 $ 7.22 $ 6.65 $ 8.18 $ 10.00
------- ------- ------ ------- ------- ------- ------- -------
0.04 0.09 -- 0.10 0.07 0.09 0.13 --
1.99 3.34 0.33 2.00 3.44 0.59 (1.63) (1.82)
------- ------- ------ ------- ------- ------- ------- -------
2.03 3.43 0.33 2.10 3.51 0.68 (1.50) (1.82)
------- ------- ------ ------- ------- ------- ------- -------
(0.05) (0.07) -- (0.08) (0.07) (0.11) (0.02) --
-- -- -- -- -- -- (0.01) --
------- ------- ------ ------- ------- ------- ------- -------
(0.05) (0.07) -- (0.08) (0.07) (0.11) (0.03) --
------- ------- ------ ------- ------- ------- ------- -------
--(E) -- -- --(E) -- -- -- --
------- ------- ------ ------- ------- ------- ------- -------
$ 12.53 $ 10.55 $ 7.19 $ 12.68 $ 10.66 $ 7.22 $ 6.65 $ 8.18
======= ======= ====== ======= ======= ======= ======= =======
19.33% 48.07% 4.81%(C) 20.00% 48.84% 10.10% (18.40)% (18.20)%(C)
======= ======= ====== ======= ======= ======= ======= =======
$ 1,214 $ 492 $ 1 $74,199 $51,498 $32,731 $20,660 $17,308
2.14% 2.08% 1.87% 1.59% 1.50% 1.26% 1.30% 1.60%
0.37% 0.57% (0.25)% 1.01% 0.92% 1.35% 1.76% (0.19)%
0.06% -- -- -- -- -- -- --
76% 80% 94%(D) 76% 80%(C) 94% 95% 23%(C)
</Table>
- --------------------------------------------------------------------------------
131
AMERICAN AADVANTAGE HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-----------------------------------------------------
YEAR ENDED OCTOBER 31, DECEMBER 29, 2000
--------------------------------- TO OCTOBER 31,
2004 2003 2002 2001
-------- -------- -------- -----------------
Net asset value, beginning of period........................ $ 10.73 $ 9.63 $ 9.82 $ 10.00
-------- -------- -------- -------
Income from investment operations:
Net investment income................................... 0.78 0.78 0.80 0.71
Net gains (losses) on securities (both realized and
unrealized)........................................... 0.27 1.10 (0.19) (0.18)
-------- -------- -------- -------
Total income from investment operations..................... 1.05 1.88 0.61 0.53
-------- -------- -------- -------
Less distributions:
Dividends from net investment income.................... (0.78) (0.78) (0.80) (0.71)
Distributions from net realized gains on securities..... (0.14) -- -- --
-------- -------- -------- -------
Total distributions......................................... (0.92) (0.78) (0.80) (0.71)
-------- -------- -------- -------
Net asset value, end of period.............................. $ 10.86 $ 10.73 $ 9.63 $ 9.82
======== ======== ======== =======
Total return................................................ 10.19% 20.11% 6.28% 5.33%(A)
======== ======== ======== =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $241,777 $161,380 $104,813 $53,275
Ratios to average net assets (annualized):
Expenses.............................................. 0.88% 0.90% 0.90% 0.90%
Net investment income................................. 7.27% 7.51% 8.02% 8.48%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager............... 0.04% 0.10% 0.08% 0.17%
Portfolio turnover rate................................. 138% 114% 163% 145%(A)
</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.
- --------------------------------------------------------------------------------
132
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS SERVICE CLASS
- ------------------------------------- -------------------------
YEAR ENDED
OCTOBER 31, MARCH 1 TO YEAR ENDED MAY 1 TO
------------------- OCTOBER 31, OCTOBER 31, OCTOBER 31,
2004 2003 2002 2004 2003
-------- -------- ----------- ----------- -----------
$ 10.73 $ 9.63 $10.10 $ 10.73 $ 10.47
-------- -------- ------ --------- --------
0.74 0.75 0.50 0.71 0.29
0.28 1.10 (0.47) 0.27 0.26
-------- -------- ------ --------- --------
1.02 1.85 0.03 0.98 0.55
-------- -------- ------ --------- --------
(0.74) (0.75) (0.50) (0.70) (0.29)
(0.14) -- -- (0.14) --
-------- -------- ------ --------- --------
(0.88) (0.75) (0.50) (0.84) (0.29)
-------- -------- ------ --------- --------
$ 10.87 $ 10.73 $ 9.63 $ 10.87 $ 10.73
======== ======== ====== ========= ========
9.94% 19.57% (0.26)%(A) 9.41% 5.46%(A)
======== ======== ====== ========= ========
$148,266 $125,654 $4,029 $ 4 $ 1
1.20% 1.24% 1.27% 1.57% 1.71%
6.95% 7.11% 7.20% 6.57% 6.51%
-- -- -- 439.24% 805.12%
138% 114% 163%(B) 138% 114%(C)
</Table>
- --------------------------------------------------------------------------------
133
AMERICAN AADVANTAGE ENHANCED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS
-------------------------
YEAR ENDED JUNE 30 TO
OCTOBER 31, OCTOBER 31,
2004 2003
----------- -----------
Net asset value, beginning of period........................ $ 9.96 $ 10.00
-------- --------
Income from investment operations:
Net investment income................................... 0.26 0.07(B)
Net gains (losses) on securities (both realized and
unrealized)............................................ 0.20 (0.04)
-------- --------
Total income from investment operations..................... 0.46 0.03
-------- --------
Less distributions:
Dividends from net investment income.................... (0.26) (0.07)
Distributions from net realized gains on securities..... -- --
-------- --------
Total distributions......................................... (0.26) (0.07)
-------- --------
Net asset value, end of period.............................. $ 10.16 $ 9.96
======== ========
Total return................................................ 4.70% 0.32%(A)
======== ========
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $103,897 $101,072
Ratios to average net assets (annualized):
Expenses.............................................. 1.00% 0.93%
Net investment income................................. 2.54% 2.20%
Portfolio turnover rate................................. 72% 57%(A)
</Table>
- ---------------
(A) Not annualized.
(B) Based on average shares outstanding.
- --------------------------------------------------------------------------------
134
(AMERICAN EAGLE LOGO)
- --------------------------------------------------------------------------------
135
AMERICAN AADVANTAGE INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
----------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------
2004 2003 2002 2001 2000
------- ------- ------- ------- ------
Net asset value, beginning of period........................ $ 10.45 $ 10.42 $ 10.51 $ 9.72 $ 9.58
------- ------- ------- ------- ------
Income from investment operations:
Net investment income(A)................................ 0.37 0.41 0.51 0.57 0.59
Net gains (losses) on securities (both realized and
unrealized)(A)........................................ 0.14 0.03 (0.09) 0.79 0.14
------- ------- ------- ------- ------
Total income from investment operations..................... 0.51 0.44 0.42 1.36 0.73
------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income.................... (0.42) (0.41) (0.51) (0.57) (0.59)
Distributions from net realized gains on securities..... -- -- -- -- --
------- ------- ------- ------- ------
Total distributions......................................... (0.42) (0.41) (0.51) (0.57) (0.59)
------- ------- ------- ------- ------
Net asset value, end of period.............................. $ 10.54 $ 10.45 $ 10.42 $ 10.51 $ 9.72
======= ======= ======= ======= ======
Total return................................................ 4.90% 4.31% 4.21% 14.36% 7.89%
======= ======= ======= ======= ======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ 912 $ 1,024 $74,919 $60,842 $ 115
Ratios to average net assets (annualized):
Expenses(A)........................................... 0.80% 0.58% 0.56% 0.54% 0.59%
Net investment income(A).............................. 3.51% 4.02% 4.99% 5.55% 6.31%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager(A)............ -- -- -- -- --
Portfolio turnover rate(B).............................. 106% 187% 185% 164% 102%
</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.
- --------------------------------------------------------------------------------
136
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLAN AHEAD CLASS AMR CLASS
-------------------------------------------- --------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
-------------------------------------------- --------------------------------------------------
2004 2003 2002 2001 2000 2004 2003 2002 2001 2000
------- ------ ------ ------- ------ -------- -------- -------- ------- -------
$ 10.31 $10.27 $10.34 $ 9.57 $ 9.63 $ 10.24 $ 10.22 $ 10.30 $ 9.53 $ 9.58
------- ------ ------ ------- ------ -------- -------- -------- ------- -------
0.35 0.39 0.48 0.53 0.59 0.40 0.45 0.53 0.58 0.64
0.14 0.04 (0.07) 0.77 (0.06) 0.14 0.02 (0.08) 0.77 (0.05)
------- ------ ------ ------- ------ -------- -------- -------- ------- -------
0.49 0.43 0.41 1.30 0.53 0.54 0.47 0.45 1.35 0.59
------- ------ ------ ------- ------ -------- -------- -------- ------- -------
(0.39) (0.39) (0.48) (0.53) (0.59) (0.45) (0.45) (0.53) (0.58) (0.64)
-- -- -- -- -- -- -- -- -- --
------- ------ ------ ------- ------ -------- -------- -------- ------- -------
(0.39) (0.39) (0.48) (0.53) (0.59) (0.45) (0.45) (0.53) (0.58) (0.64)
------- ------ ------ ------- ------ -------- -------- -------- ------- -------
$ 10.41 $10.31 $10.27 $ 10.34 $ 9.57 $ 10.33 $ 10.24 $ 10.22 $ 10.30 $ 9.53
======= ====== ====== ======= ====== ======== ======== ======== ======= =======
4.86% 4.25% 4.10% 13.91% 5.76% 5.38% 4.62% 4.57% 14.58% 6.39%
======= ====== ====== ======= ====== ======== ======== ======== ======= =======
$ 1,091 $1,395 $1,691 $ 300 $ 102 $ 96,242 $131,927 $144,098 $95,820 $40,555
0.92% 0.86% 0.86% 0.83% 0.87% 0.34% 0.32% 0.30% 0.30% 0.39%
3.39% 3.70% 4.60% 5.04% 6.07% 3.97% 4.32% 5.23% 5.84% 6.72%
0.01% -- -- 0.01% 0.02% -- -- -- -- --
106% 187% 185% 164% 102% 106% 187% 185% 164% 102%
</Table>
- --------------------------------------------------------------------------------
137
AMERICAN AADVANTAGE SHORT-TERM BOND FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
- --------------------------------------------------------------------------------
<Table>
<Caption>
INSTITUTIONAL CLASS
-----------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2004 2003 2002 2001 2000
------ ------ ------ ------- ------
Net asset value, beginning of period........................ $ 9.32 $ 9.45 $ 9.62 $ 9.21 $ 9.30
------ ------ ------ ------- ------
Income from investment operations:
Net investment income(B)................................ 0.24 0.37 0.42 0.57 0.62
Net gains (losses) on securities (both realized and
unrealized)(B)........................................ (0.03) (0.04) (0.11) 0.41 (0.10)
------ ------ ------ ------- ------
Total income from investment operations..................... 0.21 0.33 0.31 0.98 0.52
------ ------ ------ ------- ------
Less distributions:
Dividends from net investment income.................... (0.44) (0.46) (0.48) (0.57) (0.61)
------ ------ ------ ------- ------
Total distributions......................................... (0.44) (0.46) (0.48) (0.57) (0.61)
------ ------ ------ ------- ------
Net asset value, end of period.............................. $ 9.09 $ 9.32 $ 9.45 $ 9.62 $ 9.21
====== ====== ====== ======= ======
Total return................................................ 2.21% 3.58% 3.37% 10.98% 5.83%
====== ====== ====== ======= ======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $3,324 $3,745 $8,396 $ 4,226 $3,687
Ratios to average net assets (annualized):
Expenses(B)........................................... 0.62% 0.54% 0.44% 0.51% 0.58%
Net investment income(B).............................. 2.72% 4.30% 4.47% 6.06% 6.61%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager(B)............ -- -- -- -- --
Portfolio turnover rate(A).............................. 41% 81% 63% 104% 89%
</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.
- --------------------------------------------------------------------------------
138
- --------------------------------------------------------------------------------
<Table>
<Caption>
PLANAHEAD CLASS AMR CLASS
- ----------------------------------------------------- -------------------------------------------------------
YEAR ENDED OCTOBER 31, YEAR ENDED OCTOBER 31,
- ----------------------------------------------------- -------------------------------------------------------
2004 2003 2002 2001 2000 2004 2003 2002 2001 2000
- ------- ------ ------ ------- ------ ------- ------- ------- ------- -------
$ 9.33 $ 9.45 $ 9.62 $ 9.21 $ 9.30 $ 9.31 $ 9.44 $ 9.60 $ 9.20 $ 9.29
- ------- ------ ------ ------- ------ ------- ------- ------- ------- -------
0.25 0.39 0.43 0.55 0.59 0.27 0.42 0.44 0.59 0.63
)
(0.07 (0.08) (0.14) 0.41 (0.09) (0.05) (0.07) (0.11) 0.40 (0.09)
- ------- ------ ------ ------- ------ ------- ------- ------- ------- -------
0.18 0.31 0.29 0.96 0.50 0.22 0.35 0.33 0.99 0.54
- ------- ------ ------ ------- ------ ------- ------- ------- ------- -------
(0.42) (0.43) (0.46) (0.55) (0.59) (0.46) (0.48) (0.49) (0.59) (0.63)
- ------- ------ ------ ------- ------ ------- ------- ------- -------
(0.42) (0.43) (0.46) (0.55) (0.59) (0.46) (0.48) (0.49) (0.59) (0.63)
- ------- ------ ------ ------- ------ ------- ------- ------- ------- -------
$ 9.09 $ 9.33 $ 9.45 $ 9.62 $ 9.21 $ 9.07 $ 9.31 $ 9.44 $ 9.60 $ 9.38
======= ====== ====== ======= ====== ======= ======= ======= ======= =======
1.84% 3.38% 3.16% 10.69% 5.56% 2.39% 3.82% 3.60% 11.07% 6.09%
======= ====== ====== ======= ====== ======= ======= ======= ======= =======
$ 7,781 $5,783 $3,520 $ 1,257 $ 489 $80,504 $91,911 $89,932 $81,370 $56,714
0.87% 0.86% 0.73% 0.75% 0.84% 0.33% 0.33% 0.30% 0.33% 0.33%
2.44% 4.00% 4.16% 5.76% 6.29% 3.00% 4.54% 4.63% 6.26% 6.88%
-- -- 0.04% -- 0.10% -- -- -- -- --
41% 81% 63% 104% 89% 41% 81% 63% 104% 89%
</Table>
- --------------------------------------------------------------------------------
139
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
AMR Investment Services International Equity Portfolio
We have audited the accompanying statement of assets and liabilities of the
AMR Investment Services International Equity Portfolio (the "Portfolio"),
including the schedule of investments, as of October 31, 2004, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of investments owned as of October 31, 2004, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
AMR Investment Services International Equity Portfolio at October 31, 2004, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended, in conformity with U.S.
generally accepted accounting principles.
-s- Ernst & Young
Chicago, Illinois
December 17, 2004
- --------------------------------------------------------------------------------
140
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
STOCKS - 91.38%
AUSTRALIA - 1.36%
AUSTRALIA PREFERRED STOCK - 0.30%
AMP Limited+................. 555,210 $ 2,648
The News Corporation+........ 379,160 2,981
----------
TOTAL AUSTRALIA PREFERRED
STOCK.................. 5,629
----------
AUSTRALIA COMMON STOCK - 1.06%
Alumina Limited+............. 926,340 3,815
Commonwealth Bank of
Australia+................. 204,190 4,908
National Australia Bank+..... 308,420 6,529
WMC Resources Limited+....... 926,350 4,682
----------
TOTAL AUSTRALIA COMMON
STOCK.................. 19,934
----------
TOTAL AUSTRALIA.......... 25,563
----------
CANADA COMMON STOCK - 2.25%
Alcan, Incorporated*......... 176,341 8,159
BCE, Incorporated*........... 299,790 6,964
Celestica, Incorporated+*.... 741,600 10,772
Husky Energy,
Incorporated+*............. 206,270 5,420
Manulife Financial
Corporation*............... 234,865 10,969
----------
TOTAL CANADA COMMON
STOCK.................. 42,284
----------
DENMARK COMMON STOCK - 0.10%
Vestas Wind Systems+*........ 147,226 1,832
----------
TOTAL DENMARK COMMON
STOCK.................. 1,832
----------
FINLAND COMMON STOCK - 1.50%
KCI Konecranes Oyj........... 105,880 4,231
M-real Oyj*.................. 432,830 2,686
Nokia Oyj.................... 178,900 2,768
Stora Enso Oyj............... 739,600 10,591
UPM-Kymmene Oyj.............. 401,810 7,970
----------
TOTAL FINLAND COMMON
STOCK.................. 28,246
----------
FRANCE COMMON STOCK - 9.24%
Accor S.A.*.................. 82,880 3,451
AXA+*........................ 914,015 19,732
BNP Paribas S.A.+*........... 131,268 8,962
Carrefour S.A.*.............. 192,190 8,443
Compagnie Generale des
Etablissements Michelin*... 97,210 5,306
Credit Agricole S.A.+........ 407,354 11,974
France Telecom S.A.+......... 430,660 12,367
Lagardere S.C.A.*............ 84,200 5,441
Sanofi-Synthelabo*........... 546,127 40,046
Schneider Electric S.A. ..... 36,300 2,411
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
Societe BIC S.A.+*........... 54,527 $ 2,536
Suez S.A.+*.................. 244,630 5,735
Thomson S.A.*................ 109,900 2,495
Total S.A.*.................. 151,459 31,593
Vinci S.A.*.................. 112,520 13,442
----------
TOTAL FRANCE COMMON
STOCK.................. 173,934
----------
GREECE COMMON STOCK - 0.10%
Hellenic Telecommunications
Organization SA............ 116,500 1,810
----------
TOTAL GREECE COMMON
STOCK.................. 1,810
----------
GERMANY - 7.72%
GERMANY PREFERRED STOCK - 2.51%
Depfa Bank plc+.............. 541,037 8,308
Deutsche Postbank AG+........ 39,400 1,572
Deutsche Telekom+*........... 733,000 14,089
Fresenius Medical Care AG.... 118,569 6,490
Heidelberger Druck+*......... 235,032 6,770
Karstadt Quelle AG*.......... 159,800 1,818
Schering AG*................. 128,800 8,306
----------
TOTAL GERMANY PREFERRED
STOCK.................. 47,353
----------
GERMANY COMMON STOCK - 5.21%
BASF AG+..................... 254,420 15,921
Bayer AG*.................... 157,500 4,476
Celesio AG*.................. 135,245 9,836
Deutsche Post AG............. 507,760 9,955
E.ON AG+*.................... 270,060 22,042
Merck KGaA................... 88,460 4,944
Muenchener Rueckversicherung-
Gesellschaft AG+*.......... 22,397 2,198
Porsche AG+.................. 4,500 2,873
Siemens AG*.................. 118,800 8,871
Volkswagen AG*............... 382,880 17,061
----------
TOTAL GERMANY COMMON
STOCK.................. 98,177
----------
TOTAL GERMANY............ 145,530
----------
HONG KONG COMMON STOCK - 1.18%
Cheung Kong Holdings
Limited+................... 584,000 4,839
Henderson Land Development
Company Limited+*.......... 1,990,000 9,255
Hutchison Whampoa Limited+... 195,000 1,503
Swire Pacific Limited+....... 937,500 6,655
----------
TOTAL HONG KONG COMMON
STOCK.................. 22,252
----------
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
141
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
IRELAND COMMON STOCK - 2.31%
Allied Irish Banks plc....... 969,535 $ 16,966
Bank of Ireland.............. 932,700 12,831
CRH plc...................... 573,695 13,754
----------
TOTAL IRELAND COMMON
STOCK.................. 43,551
----------
ITALY COMMON STOCK - 2.70%
Enel S.p.A.+*................ 985,860 8,945
Eni S.p.A.+*................. 901,857 20,543
Finmeccanica S.p.A........... 4,065,700 3,241
Riunione Adriatica di Sicurta
S.p.A.*.................... 211,223 4,476
SanPaolo IMI S.p.A. ......... 199,600 2,539
Telecom Italia S.p.A.+*...... 1,363,949 4,556
T.E.R.N.A.+*................. 1,283,500 3,137
UniCredito Italiano
S.p.A. .................... 615,800 3,318
----------
TOTAL ITALY COMMON
STOCK.................. 50,755
----------
JAPAN COMMON STOCK - 12.35%
Acom Company Limited+........ 165,680 10,411
Aiful Corporation+........... 25,500 2,549
Alps Electric Company
Limited+................... 178,000 2,148
Canon, Incorporated+......... 267,800 13,235
Credit Saison Company
Limited+................... 87,000 2,787
DENSO Corporation+........... 105,500 2,532
East Japan Railway Company+.. 1,724 9,074
FANUC Limited+............... 140,000 8,467
Hitachi Limited+............. 574,000 3,618
Honda Motor Company
Limited+................... 296,800 14,360
Kao Corporation+............. 66,000 1,525
Komatsu Limited+............. 764,000 5,119
Konica Corporation+.......... 645,340 8,623
Kuraray Company Limited+..... 184,000 1,440
Minebea Company Limited+..... 685,000 2,913
Mitsubishi Estate Company
Limited+................... 698,000 7,381
Murata Manufacturing Company
Limited+................... 45,700 2,181
NEC Corporation+*............ 409,000 2,273
NEC Electronics
Corporation+*.............. 78,900 3,862
Nintendo Company Limited+.... 44,700 5,052
Nippon Express Company+...... 518,000 2,501
Nippon Telegraph & Telephone
Corporation+............... 1,224 5,205
Nissan Motor Company
Limited+*.................. 1,025,300 11,578
Nomura Holdings,
Incorporated+.............. 1,007,000 12,370
NTT DoCoMo, Incorporated+.... 3,675 6,494
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
Promise Company Limited+..... 172,600 $ 10,993
Seiko Epson Corporation+*.... 121,400 5,025
Sekisui House Limited+....... 222,000 2,295
Shin-Etsu Chemical Company
Limited+................... 297,200 11,318
Shiseido Company Limited+.... 108,000 1,411
Sompo Japan Insurance,
Incorporated+.............. 529,000 4,619
Sony Corporation+*........... 146,500 5,108
Sumitomo Chemical Company
Limited+................... 697,000 3,385
Sumitomo Trust and Banking
Company Limited+........... 848,000 4,952
Takeda Chemical Industries
Limited+................... 231,600 11,205
Takefuji Corporation+*....... 166,970 10,571
Tokyo Gas Company
Limited+*.................. 2,364,000 8,824
Yamanouchi Pharm+*........... 139,700 5,135
----------
TOTAL JAPAN COMMON
STOCK.................. 232,539
----------
MEXICO COMMON STOCK - 0.20%
Telefonos de Mexico S.A. de
C.V., ADR.................. 111,700 3,825
----------
TOTAL MEXICO COMMON
STOCK.................. 3,825
----------
NETHERLANDS COMMON STOCK - 6.42%
ABN AMRO Holding N.V. ....... 358,336 8,598
CNH Global N.V.+............. 50,780 866
Fortis Bank N.V.+............ 116,100 2,964
Heineken N.V.+*.............. 162,615 5,128
IHC Caland N.V. ............. 64,180 3,687
ING Groep N.V.+.............. 822,724 21,846
Koninklijke (Royal) Philips
Electronics N.V. .......... 1,248,608 29,640
Royal Dutch Petroleum
Company+*.................. 440,090 23,986
TPG N.V.+.................... 468,331 11,351
Unilever N.V.*............... 48,830 2,849
Vedior N.V. ................. 521,236 7,684
Wolters Kluwer N.V. ......... 125,100 2,288
----------
TOTAL NETHERLANDS COMMON
STOCK.................. 120,887
----------
NEW ZEALAND COMMON STOCK - 0.67%
Carter Holt Harvey
Limited+................... 1,750,417 2,576
Telecom Corporation of New
Zealand Limited+........... 2,537,881 10,025
----------
TOTAL NEW ZEALAND COMMON
STOCK.................. 12,601
----------
NORWAY COMMON STOCK - 1.29%
DnB NOR ASA*................. 382,600 3,249
Norsk Hydro ASA*............. 55,150 4,068
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
142
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
Statoil ASA+*................ 441,900 $ 6,411
Telenor ASA*................. 1,321,510 10,547
----------
TOTAL NORWAY COMMON
STOCK.................. 24,275
----------
PORTUGAL COMMON STOCK - 1.00%
Portugal Telecom, SGPS,
S.A.*...................... 1,665,443 18,819
----------
TOTAL PORTUGAL COMMON
STOCK.................. 18,819
----------
SINGAPORE COMMON STOCK - 1.59%
Creative Technology
Limited+................... 659,320 7,454
Development Bank of Singapore
Group Holdings Limited+.... 860,795 8,075
Oversea-Chinese Banking
Corporation Limited+....... 1,085,650 9,009
United Overseas Bank
Limited+................... 659,000 5,350
----------
TOTAL SINGAPORE COMMON
STOCK.................. 29,888
----------
SOUTH KOREA COMMON STOCK - 0.58%
Kookmin Bank, ADR,+*......... 140,510 4,725
Korea Electric Power
Corporation+............... 86,860 1,796
LG Electronics,
Incorporated+.............. 76,760 4,333
----------
TOTAL SOUTH KOREA COMMON
STOCK.................. 10,854
----------
SPAIN COMMON STOCK - 4.38%
Altadis S.A.*................ 472,842 17,409
Amadeus Global Travel
Distribution*.............. 1,460,356 12,016
Banco Popular Espanol S.A.*.. 99,140 5,643
Enagas S.A.+*................ 749,993 9,502
Endesa S.A.+................. 112,500 2,291
Iberdrola S.A.*.............. 236,477 5,193
Repsol YPF S.A.+*............ 267,740 5,821
Telefonica S.A.+............. 1,481,192 24,528
----------
TOTAL SPAIN COMMON
STOCK.................. 82,403
----------
SWEDEN COMMON STOCK - 2.25%
Atlas Copco AB............... 154,260 6,401
Autoliv, Incorporated+*...... 147,500 6,277
Electrolux AB................ 212,450 3,950
ForeningsSparbanken AB....... 136,170 2,869
Nordea AB+................... 604,280 5,251
Securitas AB................. 293,980 4,032
Stora Enso Oyj, Series A..... 66,662 957
Stora Enso Oyj, Series R..... 209,182 3,002
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
TDC A/S+..................... 109,240 $ 4,054
Volvo AB..................... 148,990 5,656
----------
TOTAL SWEDEN COMMON
STOCK.................. 42,449
----------
SWITZERLAND COMMON STOCK - 5.74%
Adecco SA+................... 135,420 6,539
Clariant AG+................. 172,100 2,335
Compagnie Financiere
Richemont AG+.............. 191,300 5,440
Credit Suisse Group+......... 565,978 19,413
Geberit AG................... 7,542 4,927
Lonza Group AG+.............. 111,740 5,475
Nestle SA+................... 35,500 8,422
Novartis AG+................. 253,272 12,113
SIG Holding AG+.............. 30,538 5,730
Swiss Reinsurance+........... 268,320 16,519
Syngenta AG+................. 70,009 6,697
UBS AG+...................... 64,080 4,632
Zurich Financial Services
AG+........................ 68,889 9,838
----------
TOTAL SWITZERLAND COMMON
STOCK.................. 108,080
----------
UNITED KINGDOM COMMON STOCK - 26.45%
Abbey National plc........... 583,044 6,772
Alliance Unichem plc......... 385,550 4,722
AMVESCAP plc................. 353,530 1,917
Arriva plc................... 277,374 2,291
Aviva plc.................... 920,993 9,224
BAA plc...................... 805,468 8,489
BAE Systems plc+............. 4,933,847 21,603
Barclays plc................. 1,434,500 14,025
BHP Billiton plc............. 863,049 8,779
BOC Group.................... 487,200 7,852
BP plc....................... 1,680,430 16,290
Brambles Industries plc...... 700,641 3,386
British American Tobacco
Industries plc............. 700,293 10,553
British Sky Broadcasting
Group plc.................. 281,160 2,627
BT Group plc+................ 2,452,479 8,372
Cadbury Schweppes plc........ 2,070,435 17,217
Compass Group plc............ 980,870 4,056
Diageo plc................... 2,012,665 26,946
Emap plc..................... 226,000 3,265
FirstGroup plc............... 1,095,787 5,790
GKN plc...................... 648,200 2,546
GlaxoSmithKline plc+......... 1,840,803 38,802
Hanson plc................... 922,955 6,819
HSBC Holdings plc............ 1,319,365 21,325
Imperial Tobacco Group plc... 337,840 7,897
Kesa Electricals plc......... 507,200 2,535
Kidde plc.................... 1,846,650 5,701
Kingfisher plc............... 1,672,439 9,290
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
143
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
Lloyds TSB Group plc......... 1,543,392 $ 12,225
Marks and Spencer Group
plc+....................... 396,100 2,613
National Grid Transco plc.... 529,870 4,611
Pearson plc.................. 398,540 4,380
Prudential plc............... 1,154,100 8,494
Prudential plc, Rights+...... 192,350 325
Reed Elsevier plc+........... 962,560 8,606
Rentokil Initial plc......... 3,256,460 9,276
Reuters Group plc+........... 1,384,576 9,434
Rio Tinto plc................ 192,400 5,035
Rolls-Royce plc.............. 1,062,190 5,061
Rolls-Royce Group plc, B
Shares+.................... 33,777,642 62
Royal Bank of Scotland Group
plc........................ 1,008,658 29,751
J. Sainsbury plc+............ 544,500 2,579
Shell Transport & Trading
Company plc................ 2,909,101 22,922
Shire Pharmaceuticals Group
plc........................ 355,980 3,394
Smiths Group plc*............ 550,570 7,543
Standard Chartered plc....... 173,680 3,107
TI Automotive(+)............. 681,500 --
Unilever plc................. 2,773,934 23,399
Vodafone Group plc........... 15,507,967 39,757
</Table>
<Table>
<Caption>
SHARES VALUE
------------ ----------
(DOLLARS IN THOUSANDS)
Wolseley plc................. 497,583 $ 8,605
WPP Group plc................ 296,000 2,973
Yell Group plc............... 724,190 4,871
----------
TOTAL UNITED KINGDOM
COMMON STOCK........... 498,114
----------
TOTAL STOCKS............. 1,720,491
----------
SHORT TERM INVESTMENTS - 26.90%
American AAdvantage Money
Market Select Fund (Notes A
and B)..................... 258,586,572 258,587
AMR Investments Enhanced Cash
Business Trust (Notes A and
B)......................... 248,093,891 248,094
----------
TOTAL SHORT TERM
INVESTMENTS............ 506,681
----------
TOTAL INVESTMENTS - 118.28%
(COST $1,911,193).......... 2,227,172
----------
LIABILITIES, NET OF OTHER
ASSETS - (18.28%).......... (344,171)
----------
TOTAL NET ASSETS - 100%...... $1,883,001
==========
</Table>
- ---------------
(A) The Fund/Trust is affiliated by having the same investment advisor. See Note
2.
(B) All or a portion of this security is purchased with cash collateral for
securities loaned.
* - All or a portion of the security is on loan at October 31, 2004. See Note 5.
+ - Non-income producing security.
(+) - Valued at fair value pursuant to procedures approved by the Board of
Trustees.
See accompanying notes
- --------------------------------------------------------------------------------
144
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
INTERNATIONAL EQUITY INDUSTRY DIVERSIFICATION
October 31, 2004
- --------------------------------------------------------------------------------
<Table>
<Caption>
PERCENT OF
NET ASSETS
----------
Consumer Discretionary...................................... 10.63%
Consumer Staples............................................ 7.10%
Energy...................................................... 7.28%
Financials.................................................. 23.39%
Health Care................................................. 7.70%
Industrials................................................. 12.19%
Information Technology...................................... 2.83%
Materials................................................... 7.31%
Short-Term Investments...................................... 26.92%
Telecommunications Services................................. 9.10%
Utilities................................................... 3.83%
Liabilities, Net of Other Assets............................ (18.28%)
-------
100.00%
=======
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
145
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2004 (in thousands)
- --------------------------------------------------------------------------------
<Table>
ASSETS:
Investments in unaffiliated securities, at value(A C)... $1,720,491
Investments in affiliated securities, at value(B)....... 506,681
Deposit with broker for futures contracts............... 13,764
Cash denominated in foreign currency (cost $454)........ 464
Unrealized appreciation on foreign currency contracts... 4,206
Dividends and interest receivable....................... 2,430
Reclaims receivable..................................... 136
Receivable for investments sold......................... 13,539
----------
TOTAL ASSETS........................................ 2,261,711
----------
LIABILITIES:
Payable for investments purchased....................... 534
Payable upon return of securities loaned................ 375,950
Payable for variation margin on open futures
contracts.............................................. 249
Management and investment advisory fees payable (Note
2)..................................................... 1,530
Other liabilities....................................... 447
----------
TOTAL LIABILITIES................................... 378,710
----------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS.... $1,883,001
==========
- ---------------
(A) Cost of unaffiliated securities......................... $1,404,512
(B) Cost of affiliated securities........................... $ 506,681
(C) Market value of securities on loan...................... $ 357,879
</Table>
STATEMENT OF OPERATIONS
Year ended October 31, 2004 (in thousands)
- --------------------------------------------------------------------------------
<Table>
INVESTMENT INCOME:
Interest income......................................... $ 175
Dividend income from unaffiliated securities (net of
foreign taxes of $5,861)............................... 34,987
Dividend income from affiliated securities.............. 1,206
Income derived from commission recapture (Note 6)....... 451
Income derived from securities lending, net (Note 5).... 1,621
--------
TOTAL INVESTMENT INCOME............................. 38,440
--------
EXPENSES:
Management and investment advisory fees (Note 2)........ 5,341
Custodian fees.......................................... 1,751
Professional fees....................................... 91
Other expenses.......................................... 19
--------
TOTAL EXPENSES...................................... 7,202
--------
NET INVESTMENT INCOME....................................... 31,238
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments........................................... 39,925
Foreign currency transactions......................... 67,072
Futures contracts..................................... 10,760
Change in net unrealized appreciation or depreciation
of:
Investments........................................... 114,562
Foreign currency contracts and translations........... (669)
Futures contracts..................................... 48,245
--------
NET GAIN ON INVESTMENTS............................. 279,895
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $311,133
========
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
146
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<Table>
<Caption>
YEAR ENDED
OCTOBER 31,
-----------------------
2004 2003
---------- ----------
(IN THOUSANDS)
INCREASE IN NET ASSETS:
OPERATIONS:
Net investment income................................... $ 31,238 $ 23,975
Net realized gain (loss) on investments, futures
contracts and foreign currency transactions............ 117,757 (15,701)
Change in net unrealized appreciation or depreciation of
investments, futures contracts and foreign currency
translations........................................... 162,138 306,719
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.......................................... 311,133 314,993
---------- ----------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions........................................... 676,161 571,390
Withdrawals............................................. (387,228) (552,053)
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS..... 288,933 19,337
---------- ----------
NET INCREASE IN NET ASSETS.................................. 600,066 334,330
---------- ----------
NET ASSETS:
Beginning of period..................................... 1,282,935 948,605
---------- ----------
END OF PERIOD........................................... $1,883,001 $1,282,935
========== ==========
- -------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS:
- -------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
-----------------------------------------
2004 2003 2002 2001 2000
------ ------ ------- ----- -----
TOTAL RETURN................................................ 22.85% 31.97% (10.25%) N/A N/A
RATIOS TO AVERAGE NET ASSETS:
Expenses................................................ 0.46% 0.49% 0.47% 0.49% 0.44%
Net investment income................................... 1.99% 2.26% 1.86% 1.82% 1.93%
PORTFOLIO TURNOVER RATE..................................... 36% 44% 43% 36% 45%
</Table>
See accompanying notes
- --------------------------------------------------------------------------------
147
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
October 31, 2004
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
AMR Investment Services Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no-load, open-end management
investment company which was organized as a trust under the laws of the State of
New York pursuant to a Declaration of Trust dated as of June 27, 1995 and
amended on August 11, 1995. The AMR Investment Services International Equity
Portfolio (the "Portfolio") is one of the portfolios of the Trust. The Portfolio
commenced active operations on November 1, 1995. The Declaration of Trust
permits the Board of Trustees (the "Board") to issue beneficial interests in the
Portfolio.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services.
The following is a summary of the significant accounting policies followed
by the Portfolio.
Security Valuation
Equity securities that are primarily traded on domestic securities
exchanges are valued at the last quoted sales price on a designated exchange at
the close of trading on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading or, lacking any current sales, on the basis of
the last current bid price prior to the close of trading on the Exchange.
Over-the-counter equity securities are valued on the basis of the last bid price
on that date prior to the close of trading.
Portfolio securities traded in foreign markets are valued using prices
reported by local foreign markets. Securities for which quotations are not
readily available, or securities which may have been affected by a significant
event after the price was determined, and other assets are valued at a fair
value as determined by or under the direction of pricing committees established
by the Trust's Board. The Funds' net asset values are determined at the time of
the close of the New York Stock Exchange. The pricing committees will evaluate
movements in the U.S. markets after the close of foreign markets and may adjust
security prices to reflect changes in reaction to U.S. markets as determined by
a third party model.
Debt securities (other than short-term securities) normally are valued on
the basis of prices provided by a pricing service and may take into account
appropriate factors such as institution-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data. When a price is unavailable from a
pricing service or when the price provided by the pricing service is deemed not
to represent fair value, the prices of debt securities may be determined using
quotes obtained from brokers.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation. Investment grade short-term
obligations with 60 days or less to maturity are valued using the amortized cost
method.
Securities for which the above valuation procedures are inappropriate or
are deemed not to reflect fair value are valued at fair value, as determined in
good faith and pursuant to procedures approved by the Board.
- --------------------------------------------------------------------------------
148
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale.
Dividend income is recorded on the ex-dividend date except certain
dividends from foreign securities which are recorded as soon as the information
is available to the Portfolio. Interest income is earned from settlement date,
recorded on the accrual basis, and adjusted, if necessary, for accretion of
discounts and amortization of premiums. For financial and tax reporting
purposes, realized gains and losses are determined on the basis of specific lot
identification.
There is uncertainty regarding the collectibility of tax reclaims by the
Portfolio due to its partnership status for federal income tax purposes. As
such, the Portfolio did not accrue tax reclaims totaling $1,421,368 during the
period. Upon determination of the Portfolio's entitlement to benefits under
foreign tax treaties, if any, tax reclaim income will be accrued.
Currency Translation
All assets and liabilities initially expressed in foreign currency values
are converted into U.S. dollar values at the mean of the bid and ask prices of
such currencies against U.S. dollars as last quoted by a recognized dealer.
Income, expenses and purchases and sales of investments are translated into U.S.
dollars at the rate of exchange prevailing on the respective dates of such
transactions. The effect of changes in foreign currency exchange rates on
investments is separately identified from the fluctuations arising from changes
in market values of securities held and is reported with all other foreign
currency gains and losses in the Fund's Statement of Operations.
Forward Foreign Currency Contracts
The Portfolio may enter into forward foreign currency contracts to hedge
the exchange rate risk on investment transactions or to hedge the value of
portfolio securities denominated in foreign currencies. Forward foreign currency
contracts are valued at the forward exchange rate prevailing on the day of
valuation.
Futures Contracts
The Portfolio may enter into financial futures contracts which are
contracts to buy a standard quantity of securities at a specified price on a
future date. The Portfolio may purchase or sell futures contracts and options on
futures contracts as a method for keeping assets readily convertible to cash if
needed to meet shareholder redemptions or for other needs while maintaining
exposure to the stock market. The primary risks associated with the use of
futures contracts are the possibility of illiquid markets or imperfect
correlation between the values of the contracts and the underlying securities,
or that the counterparty will fail to perform its obligations.
Upon entering into a futures contract, the Fund is required to set aside or
deposit with a broker an amount, termed the initial margin, which typically
represents 5% of the face value of the futures contract. The initial margin
amount is reflected as Deposit with broker for futures contracts on the
Statement of Assets and Liabilities. Payments to and from the broker, known as
variation margin, are required to be made on a daily basis as the price of the
futures contract fluctuates. Changes in initial settlement values are accounted
for as unrealized appreciation (depreciation) until the contracts are
- --------------------------------------------------------------------------------
149
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
terminated, at which time realized gains and losses are recognized. Futures
contracts are valued at the most recent settlement price established each day by
the exchange on which they are traded.
Federal Income and Excise Taxes
The Portfolio will be treated as a partnership for federal income tax
purposes. As such, each investor will be taxed on its share of the Portfolio's
ordinary income and capital gains. It is intended that the Portfolio's assets
will be managed in such a way that an investor in the Portfolio will be able to
satisfy the requirements of subchapter M of the Internal Revenue Code.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimated.
Other
Under the Trust's organizational documents, its officers and directors are
indemnified against certain liability arising out of the performance of their
duties to the Trust. In the normal course of business, the Portfolio enters into
contracts that provide indemnification to the other party or parties against
potential costs or liabilities. The Portfolio's maximum exposure under these
arrangements is dependent on claims that may be made in the future and,
therefore, cannot be estimated. The Portfolio has had no prior claims or losses
pursuant to any such agreement.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory, portfolio management and securities lending services.
Investment assets of the Portfolio are managed by multiple investment advisers
which have entered into separate investment advisory agreements with the
Manager. As compensation for performing the duties required under the Management
Agreement, the Manager receives from the Portfolio an annualized fee equal to
..10% of the average daily net assets plus amounts paid by the Manager to the
investment advisers hired by the Manager to direct investment activities of the
Portfolio. Management fees paid during the period were as follows (dollars in
thousands):
<Table>
<Caption>
AMOUNTS PAID TO NET AMOUNTS
MANAGEMENT MANAGEMENT INVESTMENT RETAINED BY
FEE RATE FEE ADVISERS MANAGER
---------- ---------- --------------- -----------
International Equity Portfolio..................... .25%-.60% $5,341 $3,769 $1,572
</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
- --------------------------------------------------------------------------------
150
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
than cash, a fee up to 25% of such loan fees. During the year ended October 31,
2004, the Portfolio paid securities lending fees of $247,000 to the Manager.
Investment in Affiliated Funds
The Portfolio is permitted, pursuant to an exemptive order by the
Securities and Exchange Commission ("SEC") and approved procedures by the Board,
to invest up to 25% of its total assets in the American AAdvantage Money Market
Select Fund (the "Select Fund"), an affiliated fund. The Portfolio and the
Select Fund have the same investment adviser and therefore, are considered to be
affiliated. Cash collateral received by the Portfolio in connection with
securities lending may be invested in the Select Fund and the AMR Investments
Enhanced Cash Business Trust (collectively, the "Affiliated Funds"). The Manager
serves as Trustee and investment adviser to the Affiliated Funds and receives an
annualized fee equal to 0.10% of the average daily net assets of the Affiliated
Funds. During the period, the Manager earned fees from the Affiliated Funds
totaling $100,411 on the Portfolio's direct investment in the Affiliated Funds,
and $310,232 from securities lending collateral invested in the Affiliated
Funds.
At October 31, 2003, the Portfolio had a balance in the Select Fund of
$81,729,913. During the period, the Fund had purchases of $1,004,949,679 and
sales of $955,948,979, for an ending balance of $130,730,613.
Interfund Lending Program
Pursuant to an Exemptive Order by the SEC, the Portfolio along with other
registered investment companies having management contracts with the Manager,
may participate in an interfund lending program. This program provides an
alternative credit facility allowing the Portfolio to borrow from, or lend money
to, other participating Funds. At October 31, 2004, the Portfolio had not
utilized the credit facility.
Other
Certain officers or Trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Unaffiliated Trustees and their spouses are provided
free unlimited air transportation on American. However, the Trust compensates
each Trustee with payments in an amount equal to the Trustee's income tax on the
value of this free airline travel. For the year ended October 31, 2004, the cost
of air transportation was not material to the Portfolio. One Trustee, as a
retiree of American, already receives flight benefits. This Trustee receives an
annual retainer of $40,000 plus $1,250 for each Board meeting attended.
3. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of investments,
other than short-term obligations, (in thousands), for the year ended October
31, 2004 were $801,874 and $530,109, respectively.
- --------------------------------------------------------------------------------
151
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
4. FOREIGN CURRENCY CONTRACTS
In order to protect itself against foreign currency fluctuations, the
Portfolio has entered into forward contracts to deliver or receive foreign
currency in exchange for U.S. dollars as described below. The Portfolio bears
the market risk that arises from changes in foreign exchange rates, and
accordingly, the unrealized gain (loss) on these contracts is reflected in the
accompanying financial statements. The Portfolio also bears the credit risk if
the counterparty fails to perform under the contract. At October 31, 2004, the
Portfolio had outstanding forward foreign currency contracts as follows:
<Table>
<Caption>
SETTLEMENT MARKET UNREALIZED
CONTRACTS TO DELIVER DATE VALUE GAIN/(LOSS)
- -------------------- ---------- ------- -----------
(AMOUNTS IN THOUSANDS)
2,443 Australian Dollar.......................................... 12/17/04 $ 1,822 $ (89)
2,974 Canadian Dollar............................................ 12/17/04 2,440 (109)
7,601 Euro Currency.............................................. 12/17/04 9,726 (371)
806,916 Japanese Yen............................................... 12/17/04 7,647 (356)
4,745 Pound Sterling............................................. 12/17/04 8,688 (164)
5,650 Swedish Krona.............................................. 12/17/04 799 (31)
3,044 Swiss Franc................................................ 12/17/04 2,555 (129)
------- -------
Total contracts to deliver (Receivable amount $32,427).............. $33,677 $(1,249)
======= =======
</Table>
<Table>
<Caption>
SETTLEMENT MARKET UNREALIZED
CONTRACTS TO RECEIVE DATE VALUE GAIN/(LOSS)
- -------------------- ---------- -------- -----------
(AMOUNTS IN THOUSANDS)
9,705 Australian Dollar....................................... 12/17/04 $ 7,235 $ 525
11,903 Canadian Dollar......................................... 12/17/04 9,766 542
32,502 Euro Currency........................................... 12/17/04 41,589 1,660
3,709,996 Japanese Yen............................................ 12/17/04 35,159 1,074
20,908 Pound Sterling.......................................... 12/17/04 38,283 949
25,605 Swedish Krona........................................... 12/17/04 3,620 158
13,888 Swiss Franc............................................. 12/17/04 11,655 547
-------- ------
Total contracts to receive (Payable amount $141,853)............... $147,307 $5,455
======== ======
</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.
5. SECURITIES LENDING
The Portfolio may lend its securities to qualified financial institutions,
such as certain broker-dealers, to earn additional income. The borrowers are
required to secure their loans continuously with collateral in an amount at
least equal to 102% (for loans of US securities) or 105% (for non-US securities)
of the market value of the loaned securities at the inception of each loan.
Collateral is marked to market and monitored daily. To the extent that a loan is
collateralized by cash, such collateral shall be invested by the securities
lending agent (the "Agent") in short-term instruments,
- --------------------------------------------------------------------------------
152
AMR INVESTMENT SERVICES TRUST INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
October 31, 2004
- --------------------------------------------------------------------------------
money market mutual funds, and such other short-term investments, provided the
investments meet certain quality and diversification requirements.
Income generated from the investment of cash collateral, less negotiated
rebate fees paid to participating brokers and transaction costs, is divided
between the Portfolio and the Agent and is recorded as income for the Portfolio.
To the extent that a loan is secured by non-cash collateral, brokers pay the
Portfolio negotiated lenders' fees, which are divided between the Portfolio and
the Agent and are recorded as securities lending income for the Portfolio. The
Portfolio also continues to receive income on the securities loaned, and any
gain or loss in the market prices of securities loaned that may occur during the
term of the loan.
Risks to the Portfolio in securities lending transactions are that the
borrower may not provide additional collateral when required or return the
securities when due, and that the value of the short-term investments will be
less than the amount of cash collateral required to be returned to the borrower.
At October 31, 2004, securities with a market value of approximately
$357,879,000 were loaned by the Portfolio. Cash collateral held by the custodian
for the Portfolio in an investment in the Affiliated Funds totaled $375,950,000.
6. COMMISSION RECAPTURE
The Portfolio has established brokerage commission recapture arrangements
with certain brokers or dealers. If a Portfolio investment adviser chooses to
execute a transaction through a participating broker, the broker rebates a
portion of the commission back to the Portfolio. Any collateral benefit received
through participation in the commission recapture program is directed
exclusively to the Portfolio.
7. FUTURES CONTRACTS
A summary of obligations under these financial instruments at October 31,
2004 is as follows:
<Table>
<Caption>
UNREALIZED
MARKET APPRECIATION/
TYPE OF FUTURE EXPIRATION CONTRACTS VALUE (DEPRECIATION)
- -------------- ------------- --------- ------------ --------------
France CAC 40 Index................................ December 2004 306 $ 14,446,907 $ 133,469
Germany DAX Index.................................. December 2004 83 10,495,982 29,367
UK FTSE 100 Index.................................. December 2004 458 38,925,986 195,046
Hang Seng Index.................................... November 2004 31 2,596,809 44,949
Italy MIB 30 Index................................. December 2004 34 6,225,143 144,174
Tokyo FE TOPIX Index............................... December 2004 337 34,274,404 (1,335,483)
Spain IBEX 35 Index................................ November 2004 54 5,772,420 93,926
Sweden OMX Index................................... November 2004 384 3,795,787 (88,604)
Canada S&PCDA 60 Index............................. December 2004 133 10,829,727 312,379
Australia SPI Index................................ December 2004 119 8,402,046 277,399
Netherlands 200 AEX Index.......................... November 2004 87 7,315,174 5,754
------------ -----------
$143,080,385 $ (187,624)
============ ===========
</Table>
- --------------------------------------------------------------------------------
153
SPECIAL MEETING OF SHAREHOLDERS
(Unaudited)
- --------------------------------------------------------------------------------
A special meeting of shareholders of the American AAdvantage Funds (the
"Trust") was held on August 11, 2004. The meeting related to each series of the
Trust with the exception of the Mid-Cap Value Fund (the "Funds"). The purpose of
the meeting was to consider proposals regarding: (i) re-election of the five
current Trustees and the election of three additional Trustees; (ii) changes to
certain fundamental investment policies of the Funds; and (iii) the adoption of
an amendment to the Declaration of Trust of the Trust to permit the Trustees to
amend the Declaration of Trust in the future without shareholder approval under
certain circumstances. Certain of the Funds ("Feeder Funds") currently operate
under a "master-feeder" structure, pursuant to which a Feeder Fund seeks its
investment objective by investing all of its investable assets in a
corresponding portfolio (each a "Portfolio") of the AMR Investment Services
Trust ("AMR Trust") that has an identical investment objective to the Feeder
Fund. Interestholders of the AMR Trust, principally the Feeder Funds, held a
separate meeting to elect Trustees and to vote on proposed changes to certain
fundamental investment policies of the Portfolios of the corresponding Feeder
Funds. In addition, the interestholders also voted on whether to approve a
Conversion Agreement pursuant to which the AMR Trust would convert from a New
York common trust to a Massachusetts business trust ("Conversion"). Shareholders
of each Feeder Fund were asked to provide voting instructions to the AMR Trust
meeting. The Feeder Funds cast their votes in the same proportion as the votes
cast by the Funds' shareholders at the meeting.
Proposals 1, 3, 4, and 6 were Trust-level matters and therefore required a
majority of the shareholders of the Trust to vote to achieve a quorum. Proposals
2 and 5 were Fund-level matters and therefore required a majority of the
shareholders of a Fund to vote to achieve a quorum for that Fund. A quorum of
the Trust was present for Proposals 1 and 4, and each proposal was approved by
shareholders. Except for the Money Market and Municipal Money Market Funds, a
quorum of each Fund was present for Proposals 2 and 5, and each proposal was
approved by shareholders. A quorum of the Trust was present for Proposals 3 and
6, but there were not enough votes in favor of either proposal for shareholder
approval.
Proposals 2 and 5 for the Money Market and Municipal Money Market Funds and
Proposals 3 and 6 for the Trust were adjourned to a second special meeting of
shareholders on August 24, 2004. A quorum was still not present for the Money
Market and Municipal Money Market Funds with respect to Proposals 2 and 5 at the
August 24th meeting, so those matters were adjourned to a third special meeting
of shareholders on September 17, 2004. A quorum of the Trust was present for
Proposals 3 and 6, but the votes were not recorded and the Trust adjourned these
matters to the September 17th meeting to coincide with the other Fund-level
matters.
At the September 17th meeting, a quorum was present for the Money Market
and Municipal Money Market Funds, and Proposals 2 and 5 were approved by
shareholders. In addition, a quorum of the Trust was present for Proposals 3 and
6, and each proposal was approved by shareholders.
The final voting results for each Proposal are presented on the following
page. The vote tallies for Proposals 1, 3, 4, and 6 include votes cast by
shareholders of Funds not contained in this annual report.
- --------------------------------------------------------------------------------
154
SPECIAL MEETING OF SHAREHOLDERS
(Unaudited)
- --------------------------------------------------------------------------------
(1) Elected the following Trustees to the Funds' Board of Trustees: W.
Humphrey Bogart, Brenda A. Cline, Alan D. Feld, Richard A. Massman, Stephen D.
O'Sullivan, William F. Quinn, R. Gerald Turner, and Kneeland Youngblood.
<Table>
<Caption>
TRUST
----------------------------------
FOR WITHHELD
--- --------
Bogart...................................................... 650,590,849.241 14,422,434.627
Cline....................................................... 650,579,020.453 14,434,263.415
Feld........................................................ 645,570,380.770 19,442,903.098
Massman..................................................... 650,575,979.241 14,437,304.627
O'Sullivan.................................................. 650,346,585.401 14,666,698.477
Quinn....................................................... 650,521,466.241 14,492,457.627
Turner...................................................... 647,812,023.453 17,201,260.415
Youngblood.................................................. 650,456,805.241 14,556,478.627
</Table>
(2)(a) Approved a change to the fundamental investment limitation on
investments in commodities.
<Table>
<Caption>
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE
-------------- ------------- ------------- -------------- --------------
For................... 46,401,005.640 4,906,580.331 9,627,606.188 15,744,702.754 11,938,327.591
Against............... 6,762.151 0.000 0.000 50,204.000 18,409.000
Abstain............... 9,978.758 191.336 0.000 16,154.000 2,354.608
Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
</Table>
<Table>
<Caption>
INT'L EQUITY LG CAP GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE
-------------- -------------- -------------- ------------- --------------
For................... 64,496,750.799 10,147,326.622 40,594,175.513 9,095,488.726 30,705,663.526
Against............... 534,912.899 0.000 16,236.116 61,623.240 115,155.394
Abstain............... 724,592.539 0.000 12,407.915 7,181.031 479,407.001
Broker Non-Votes*..... 11,181,562.000 0.000 479,311.000 488,166.000 8,150,355.000
</Table>
<Table>
<Caption>
MONEY MKT MUNI MONEY MKT GOV MONEY MKT
--------------- -------------- --------------
For............................................... 226,730,052.110 4,564,294.000 32,904,356.120
Against........................................... 3,074,933.700 406,295.000 195,123.000
Abstain........................................... 11,729,088.080 87,615.000 0.000
Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
</Table>
(2)(b) Approved a change to the fundamental investment limitation on
lending securities.
<Table>
<Caption>
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE
-------------- ------------- ------------- -------------- --------------
For................... 46,391,435.523 4,906,580.331 9,627,606.188 15,740,911.754 11,938,327.591
Against............... 16,332.268 0.000 0.000 49,730.000 18,409.000
Abstain............... 9,978.758 191.336 0.000 20,419.000 2,354.608
Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
</Table>
<Table>
<Caption>
LG CAP
INT'L EQUITY GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE
-------------- -------------- -------------- ------------- --------------
For.................. 64,561,233.427 10,147,326.622 40,592,880.290 9,088,150.726 30,695,938.571
Against.............. 458,679.271 0.000 18,691.183 65,299.240 296,207.349
Abstain.............. 736,343.539 0.000 11,248.071 10,843.031 308,080.001
Broker Non-Votes*.... 11,181,562.000 0.000 497,311.000 488,166.000 8,150,355.000
</Table>
<Table>
<Caption>
MONEY MKT MUNI MONEY MKT GOV MONEY MKT
--------------- -------------- --------------
For............................................... 222,577,475.230 4,564,294.000 32,865,110.120
Against........................................... 7,139,911.580 406,295.000 195,122.000
Abstain........................................... 11,816,687.080 87,615.000 39,247.000
Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
</Table>
- --------------------------------------------------------------------------------
155
SPECIAL MEETING OF SHAREHOLDERS
(Unaudited)
- --------------------------------------------------------------------------------
(2)(c) Approved the deletion of the fundamental investment limitation on
affiliated transactions.
<Table>
<Caption>
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE
-------------- ------------- ------------- -------------- --------------
For................... 46,389,698.640 4,906,231.331 9,627,606.188 15,738,813.754 11,940,787.591
Against............... 17,959.151 349.000 0.000 50,600.000 15,949.000
Abstain............... 10,088.758 191.336 0.000 21,647.000 2,354.608
Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
</Table>
<Table>
<Caption>
INT'L EQUITY LG CAP GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE
-------------- -------------- -------------- ------------- --------------
For................... 60,757,787.283 10,147,326.622 40,593,491.577 9,091,457.726 30,864,782.571
Against............... 4,246,045.415 0.000 16,421.834 65,600.240 123,570.349
Abstain............... 752,423.539 0.000 12,906.133 7,235.031 311,873.001
Broker Non-Votes*..... 11,181,562.000 0.000 479,311.000 488,166.000 8,150,355.000
</Table>
<Table>
<Caption>
MONEY MKT MUNI MONEY MKT GOV MONEY MKT
--------------- -------------- --------------
For............................................... 220,180,992.310 3,477,061.000 32,904,360.120
Against........................................... 9,573,919.500 1,493,528.000 195,119.000
Abstain........................................... 11,779,162.080 87,615.000 0.000
Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
</Table>
(2)(d) Approved a change to the fundamental investment limitation on the
issuance of senior securities.
<Table>
<Caption>
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE
-------------- ------------- ------------- -------------- --------------
For................... 46,396,294.387 4,906,231.331 9,627,606.188 15,743,825.754 11,940,787.591
Against............... 11,709.404 349.000 0.000 49,364.000 15,949.000
Abstain............... 9,742.758 191.336 0.000 17,871.000 2,354.608
Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
</Table>
<Table>
<Caption>
INT'L EQUITY LG CAP GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE
-------------- -------------- -------------- ------------- --------------
For................... 64,071,875.799 10,147,326.622 40,600,095.304 9,091,758.726 30,872,021.571
Against............... 937,834.899 0.000 10,278.325 63,599.240 119,601.349
Abstain............... 746,545.539 0.000 12,445.915 8,935.031 308,603.001
Broker Non-Votes*..... 11,181,562.000 0.000 479,311.000 488,166.000 8,150,355.000
</Table>
<Table>
<Caption>
MONEY MKT MUNI MONEY MKT GOV MONEY MKT
--------------- -------------- --------------
For............................................... 222,154,012.230 4,071,626.000 32,904,360.120
Against........................................... 7,530,585.580 894,226.000 195,119.000
Abstain........................................... 11,849,476.080 92,352.000 0.000
Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
</Table>
(2)(e) Approved a change to the fundamental investment limitation on
borrowing.
<Table>
<Caption>
BALANCED EMERGING MKTS ENHANCED INC HIGH YIELD INTERMEDIATE
-------------- ------------- ------------- -------------- --------------
For................... 46,392,054.523 4,906,580.331 9,627,606.188 15,738,741.754 11,938,327.591
Against............... 16,059.268 0.000 0.000 50,759.000 18,409.000
Abstain............... 9,632.758 191.336 0.000 21,560.000 2,354.608
Broker Non-Votes*..... 228,979.000 51,245.000 0.000 4,916,329.000 32,219.000
</Table>
<Table>
<Caption>
INT'L EQUITY LG CAP GROWTH LG CAP VALUE SHORT-TERM SM CAP VALUE
-------------- -------------- -------------- ------------- --------------
For................... 64,358,381.427 10,147,326.622 40,587,599.519 9,094,315.726 30,858,227.571
Against............... 653,473.271 0.000 23,806.954 62,742.240 133,093.349
Abstain............... 744,401.539 0.000 11,413.071 7,235.031 308,905.001
Broker Non-Votes*..... 11,181,562.000 0.000 479,311.000 488,166.000 8,150,355.000
</Table>
- --------------------------------------------------------------------------------
156
SPECIAL MEETING OF SHAREHOLDERS
(Unaudited)
- --------------------------------------------------------------------------------
<Table>
<Caption>
MONEY MKT MUNI MONEY MKT GOV MONEY MKT
--------------- -------------- --------------
For............................................... 222,583,327.230 4,071,626.000 32,904,360.120
Against........................................... 7,121,635.580 898,963.000 195,119.000
Abstain........................................... 11,829,111.080 87,615.000 0.000
Broker Non-Votes*................................. 0.000 0.000 8,934,287.000
</Table>
(2)(f) Approved a change to the fundamental investment limitation on
concentration of investments in the banking industry.
<Table>
<Caption>
MONEY MKT
---------------
For......................................................... 222,743,754.230
Against..................................................... 7,112,587.580
Abstain..................................................... 11,677,732.080
</Table>
(3) Approved an amendment to the Funds' Declaration of Trust.
<Table>
<Caption>
TRUST
---------------
For......................................................... 510,760,770.656
Against..................................................... 27,955,243.657
Abstain..................................................... 24,870,260.385
Broker Non-Votes*........................................... 36,787,359.000
</Table>
(4) Authorized the Trust, on behalf of each Fund that invests in the AMR
Investment Services Trust (the "AMR Trust"), to vote at a meeting of the AMR
Trust to elect a Board of Trustees.
<Table>
<Caption>
TRUST
-------------------------------
FOR WITHHELD
--- --------
Bogart...................................................... 440,288,258.060 8,585,009.017
Cline....................................................... 440,282,948.530 8,590,318.547
Feld........................................................ 440,288,258.060 8,585,009.017
Massman..................................................... 440,288,258.060 8,585,009.017
O'Sullivan.................................................. 440,282,948.530 8,590,318.547
Quinn....................................................... 440,288,258.060 8,585,009.017
Turner...................................................... 440,282,948.530 8,590,318.547
Youngblood.................................................. 440,288,258.060 8,585,009.017
</Table>
(5)(a) Authorized the Trust, on behalf of each Fund that invests in the AMR
Trust, to vote at a meeting of the AMR Trust to approve a change to the
fundamental investment limitation on investments in commodities with respect to
the corresponding portfolio of the AMR Trust.
<Table>
<Caption>
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT
-------------- --------------- -------------- --------------
For.............................. 64,420,325.799 226,456,630.110 4,564,294.000 32,904,356.120
Against.......................... 609,135.899 3,292,749.700 188,638.000 195,123.000
Abstain.......................... 726,794.539 11,784,694.080 305,272.000 0.000
Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
</Table>
(5)(b) Authorized the Trust, on behalf of each Fund that invests in the AMR
Trust, to vote at a meeting of the AMR Trust to approve a change to the
fundamental investment limitation on lending securities with respect to the
corresponding portfolio of the AMR Trust.
<Table>
<Caption>
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT
-------------- --------------- -------------- --------------
For.............................. 64,428,675.427 221,981,421.230 4,564,294.000 32,865,110.120
Against.......................... 562,881.271 7,550,777.580 188,638.000 195,122.000
Abstain.......................... 764,699.539 12,001,875.080 305,272.000 39,247.000
Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
</Table>
- --------------------------------------------------------------------------------
157
SPECIAL MEETING OF SHAREHOLDERS
(Unaudited)
- --------------------------------------------------------------------------------
(5)(c) Authorized the Trust, on behalf of each Fund that invests in the AMR
Trust, to vote at a meeting of the AMR Trust to approve the deletion of the
fundamental investment limitation on affiliated transactions with respect to the
corresponding portfolio of the AMR Trust.
<Table>
<Caption>
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT
-------------- --------------- -------------- --------------
For.............................. 60,670,904.283 220,151,923.310 3,477,061.000 32,904,360.120
Against.......................... 4,311,253.415 9,345,520.500 1,275,871.000 195,119.000
Abstain.......................... 774,098.539 12,036,630.080 305,272.000 0.000
Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
</Table>
(5)(d) Authorized the Trust, on behalf of each Fund that invests in the AMR
Trust, to vote at a meeting of the AMR Trust to approve a change to the
fundamental investment limitation on the issuance of senior securities with
respect to the corresponding portfolio of the AMR Trust.
<Table>
<Caption>
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT
-------------- --------------- -------------- --------------
For.............................. 63,967,544.799 222,172,054.230 4,070,791.000 32,865,114.120
Against.......................... 1,007,609.899 7,337,242.580 676,569.000 195,119.000
Abstain.......................... 781,101.539 12,024,777.080 310,844.000 39,246.000
Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
</Table>
(5)(e) Authorized the Trust, on behalf of each Fund that invests in the AMR
Trust, to vote at a meeting of the AMR Trust to approve a change to the
fundamental investment limitation on borrowing with respect to the corresponding
portfolio of the AMR Trust.
<Table>
<Caption>
INT'L EQUITY MONEY MKT MUNI MONEY MKT GOV MONEY MKT
-------------- --------------- -------------- --------------
For.............................. 64,372,774.427 222,003,125.310 4,071,626.000 32,904,360.120
Against.......................... 637,228.271 7,526,537.500 681,306.000 195,119.000
Abstain.......................... 746,253.539 12,004,411.080 305,272.000 0.000
Broker Non-Votes*................ 11,181,562.000 0.000 0.000 8,934,287.000
</Table>
(5)(f) Authorized the Trust, on behalf of the Money Market Fund, to vote at
a meeting of the AMR Trust to approve a change to the fundamental investment
limitation on concentration of investments in the banking industry with respect
to the corresponding portfolio of the AMR Trust.
<Table>
<Caption>
MONEY MKT
---------------
For......................................................... 222,335,064.310
Against..................................................... 7,345,953.500
Abstain..................................................... 11,853,056.080
</Table>
(6) Authorized the Trust, on behalf of each Fund that invests in the AMR
Trust, to vote at a meeting of the AMR Trust to approve a Conversion Agreement.
<Table>
<Caption>
TRUST
---------------
For......................................................... 312,363,071.187
Against..................................................... 20,695,326.179
Abstain..................................................... 12,389,615.881
Broker Non-Votes*........................................... 20,115,849.000
</Table>
- ---------------
* Certain broker-dealers, third party administrators and other intermediaries
who offer Fund shares to their clients vote on behalf of their clients in
favor of routine proposals (e.g., Proposals 1 and 4), while entering a
"non-vote" for all non-routine proposals. If the underlying clients do not
themselves vote the non-routine proposals, the shares remain in the broker
non-vote category and effectively count as "against" votes.
- --------------------------------------------------------------------------------
158
TRUSTEES AND OFFICERS OF THE AMERICAN AADVANTAGE FUNDS
AND THE AMR INVESTMENT SERVICES TRUST
(Unaudited)
- --------------------------------------------------------------------------------
The Trustees and officers of the American AAdvantage Funds (the "Trust")
and the AMR Investment Services Trust (the "AMR Trust") are listed below,
together with their principal occupations during the past five years. Unless
otherwise indicated, the address of each person listed below is 4151 Amon Carter
Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-seven
funds in the fund complex that includes the Trust, the AMR Trust, the American
AAdvantage Mileage Funds, and the American AAdvantage Select Funds. The Trust's
Statement of Additional Information contains additional information about the
Trustees and is available without charge by calling 1-800-658-5811.
<Table>
<Caption>
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH EACH TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ----------------- -------------------------------------------
INTERESTED TRUSTEES
TERM
------------------
Lifetime of Trust
until removal,
resignation or
retirement*
William F. Quinn** (56) Trustee and President, AMR Investment Services, Inc. (1986-Present);
President of Chairman (1989-2003) and Director (1979-Present), American
Trust since 1987 Airlines Federal Credit Union; Director, Crescent Real
and AMR Trust Estate Equities, Inc. (1994- Present); Director, Pritchard,
since 1995 Hubble & Herr, LLC (investment adviser) (2001-Present);
Advisory Director, Southern Methodist University Endowment
Fund (1996-Present); Member, Southern Methodist University
Cox School of Business Advisory Board (1999-2002); Member,
New York Stock Exchange Pension Manager Committee
(1997-1998, 2000-2002); Vice Chairman, Committee for the
Investment of Employee Benefits (2004-Present); Director,
United Way of Tarrant County (1988-2000, 2004-Present);
Trustee, American AAdvantage Mileage Funds (1995-Present);
Trustee, American AAdvantage Select Funds (1999-Present).
Alan D. Feld** (68) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm)
(1960-Present); Director, Clear Channel Communications
(1984-Present); Trustee, CenterPoint Properties
(1994-Present); Trustee, American AAdvantage Mileage Funds
(1996-Present); Trustee, American AAdvantage Select Funds
(1999-Present).
NON-INTERESTED TRUSTEES
TERM
------------------
Lifetime of Trust
until removal,
resignation or
retirement*
W. Humphrey Bogart (60) Trustee since 2004 Consultant, New River Canada Ltd. (mutual fund servicing
company) (1998-2003); Board Member, Baylor University
Medical Center Foundation (1992-Present); Trustee, American
AAdvantage Mileage Funds (2004-Present); Trustee, American
AAdvantage Select Funds (2004-Present).
</Table>
- --------------------------------------------------------------------------------
159
TRUSTEES AND OFFICERS OF THE AMERICAN AADVANTAGE FUNDS
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 EACH TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ----------------- -------------------------------------------
NON-INTERESTED TRUSTEES (CONT.)
Brenda A. Cline (44) 301 Trustee since 2004 Vice President, Chief Financial Officer, Treasurer and
Commerce Street Secretary, Kimbell Art Foundation (1993-Present); Trustee,
Suite 2240 Texas Christian University (1999-Present); Trustee, W.I.
Fort Worth, Texas 76102 Cook Foundation, Inc. (d/b/a Cook Children's Health
Foundation) (2001-Present); Trustee, American AAdvantage
Mileage Funds (2004-Present); Trustee, American AAdvantage
Select Funds (2004-Present).
Richard A. Massman (61) Trustee since 2004 Senior Vice President and General Counsel, Hunt
Consolidated, Inc. (holding company engaged in energy, real
estate, farming, ranching and venture capital activities)
(1994-Present); Trustee, American AAdvantage Mileage Funds
(2004-Present); Trustee, American AAdvantage Select Funds
(2004-Present).
Stephen D. O'Sullivan (69) Trustee of Trust Consultant (1994-Present); Trustee, American AAdvantage
since 1987 and Mileage Funds (1995-Present); Trustee, American AAdvantage
AMR Trust since Select Funds (1999-Present).
1995
R. Gerald Turner (59) Trustee since 2001 President, Southern Methodist University (1995-Present);
225 Perkins Admin. Bldg. Director, ChemFirst (1986-2002); Director, J.C. Penney
Southern Methodist Univ. Company, Inc. (1996- Present); Director, California Federal
Dallas, Texas 75275 Preferred Capital Corp. (2001- 2003); Director, Kronus
Worldwide Inc. (chemical manufacturing) (2003-Present);
Director, First Broadcasting Investment Partners, LLC
(2003-Present); Member, United Way of Dallas Board of
Directors; Member, Salvation Army of Dallas Board of
Directors; Member, Methodist Hospital Advisory Board;
Member, Knight Commission on Intercollegiate Athletics;
Trustee, American AAdvantage Mileage Funds (2001-Present);
Trustee, American AAdvantage Select Funds (2001-Present).
Kneeland Youngblood (49) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private
100 Crescent Court equity firm) (1998-Present); Trustee, The Hockaday School
Suite 1740 (1997-Present); Director, Burger King Holdings, Inc.
Dallas, Texas 75201 (2004-Present); Director, Starwood Hotels and Resorts
(2001-Present); Member, Council on Foreign Relations
(1995-Present); Director, Just For the Kids (1995-2001);
Director, L&B Realty Advisors (1998-2000); Trustee, Teachers
Retirement System of Texas (1993-1999); Director, Starwood
Financial Trust (1998-2001); Trustee, St. Mark's School of
Texas (2002-Present); Trustee, American AAdvantage Mileage
Funds (1996-Present); Trustee, American AAdvantage Select
Funds (1999-Present).
OFFICERS
TERM
------------------
One Year
Brian E. Brett (44) VP since 2004 Vice President, Director of Sales, AMR Investment Services,
Inc. (2004-Present); Regional Vice President, Neuberger
Berman, LLC (investment adviser) (1996-2004).
Nancy A. Eckl (42) VP of Trust since Vice President, Trust Investments, AMR Investment Services,
1990 and AMR Inc. (1990-Present).
Trust since 1995
</Table>
- --------------------------------------------------------------------------------
160
TRUSTEES AND OFFICERS OF THE AMERICAN AADVANTAGE FUNDS
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 EACH TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ----------------- -------------------------------------------
OFFICERS (CONT.)
Michael W. Fields (50) VP of Trust since Vice President, Fixed Income Investments, AMR Investment
1989 and AMR Services, Inc. (1988-Present).
Trust since 1995
Barry Y. Greenberg (41) VP since 1995 and Vice President, Legal, Compliance and Administration, AMR
Secretary since Investment Services, Inc. (1995-Present); Director,
2004 Pritchard, Hubble & Herr, LLC (investment adviser)
(2004-Present).
Rebecca L. Harris (38) Treasurer since Vice President, Finance, AMR Investment Services, Inc.
1995 (1995- Present).
John B. Roberson (46) VP of Trust since Vice President, Client Relations & Special Projects, AMR
1989 and AMR Investment Services, Inc. (2004-Present); Vice President,
Trust since 1995 Director of Sales, AMR Investment Services, Inc.
(1991-2004); Director, Pritchard, Hubble & Herr, LLC
(investment adviser) (2001-Present).
</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 and
AMR Trust, as defined by the 1940 Act. Mr. Quinn is President of the Manager.
Mr. Feld's law firm of Akin, Gump, Strauss, Hauer & Feld LLP ("Akin, Gump")
has provided legal services within the past two years to one or more of the
Trust's and AMR Trust's investment advisers.
- --------------------------------------------------------------------------------
161
AMERICAN AADVANTAGE FUNDS
PRIVACY POLICY
(Unaudited)
- --------------------------------------------------------------------------------
The American AAdvantage Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of
the following sources:
- information we receive from you on applications or other forms;
- information about your transactions with us or our service providers; and
- information we receive from third parties.
We do not disclose any nonpublic personal information about our customers
or former customers to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those
employees or service providers who need to know that information to provide
products or services to you. To ensure the confidentiality of your nonpublic
personal information, we maintain safeguards that comply with federal standards.
- --------------------------------------------------------------------------------
162
(AMERICAN EAGLE LOGO)
(AMERICAN EAGLE LOGO)
(AMERICAN AADVANTAGE FUNDS LOGO)
- --------------------------------------------------------------------------------
TO OBTAIN MORE INFORMATION ABOUT THE FUNDS:
<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>
- --------------------------------------------------------------------------------
<Table>
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES AVAILABILITY OF PROXY VOTING POLICY AND RECORDS
In addition to the Schedule of Investments provided in each A description of the policies and procedures that the Funds
semi-annual and annual report, each Fund files a complete use to determine how to vote proxies relating to portfolio
schedule of its portfolio holdings with the Securities and securities is available in each Fund's Statement of
Exchange Commission ("SEC") on Form N-Q as of the first and Additional Information, which may be obtained free of charge
third fiscal quarters. The Funds' Forms N-Q are available on by calling 1-800-967-9009 or by accessing the SEC's website
the SEC's website at www.sec.gov. The Forms N-Q may also be at www.sec.gov. Each Fund's proxy voting record for the most
reviewed and copied at the SEC's Public Reference Room, 450 recent year ended June 30 is filed annually with the SEC on
Fifth Street, NW, Washington, DC 20549. Information Form N-PX. The Funds' Forms N-PX are available on the SEC's
regarding the operation of the SEC's Public Reference Room website at www.sec.gov. Each Fund's proxy voting record may
may be obtained by calling 1-800-SEC-0330. A complete also be obtained by calling 1-800-967-9009.
schedule of each Fund's portfolio holdings is also available
on the Funds' website (www.aafunds.com) approximately thirty
days after the end of each fiscal quarter.
</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
Mid-Cap Value Fund, American AAdvantage Small Cap Value Fund, American
AAdvantage International Equity Fund, American AAdvantage Emerging Markets Fund,
American AAdvantage High Yield Bond Fund, American AAdvantage Enhanced Income
Fund, American AAdvantage Intermediate Bond Fund and American AAdvantage
Short-Term Bond Fund are service marks of AMR Investment Services, Inc.
[BACK COVER]
AR10/04
532730
ITEM 2. CODE OF ETHICS.
The Trust has adopted a code of ethics that applies to its principal executive
and financial officers (the "Code"). The Trust did not amend the Code nor did
it grant any waivers to the provisions of the Code during the period covered by
the shareholder report presented in Item 1. The Code is filed herewith as
Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust's Board of Trustees has determined that Stephen O'Sullivan, a member
of the Trust's audit committee, is an "audit committee financial expert" as
defined in Form N-CSR. Mr. O'Sullivan is "independent" as defined in Form
N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
<Table>
<Caption>
Audit Fees Fiscal Year Ended
- ---------- -----------------
$36,295 12/31/2002
$180,713 10/31/2003
$27,001 12/31/2003
$170,039 10/31/2004
</Table>
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$0 12/31/2002
$0 10/31/2003
$0 12/31/2003
$0 10/31/2004
</Table>
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$6,119* 12/31/2002
$39,417** 10/31/2003
$4,821*** 12/31/2003
$0 10/31/2004
</Table>
<FN>
* For review of 2001 tax returns
** For review of 2002 tax returns and professional services related to the
collectibility of tax reclaims in Switzerland
*** For review of 2002 tax returns
</FN>
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 12/31/2002
$0 10/31/2003
$0 12/31/2003
$0 10/31/2004
</Table>
(e)(1) Pursuant to its charter, the Trust's audit committee shall have the
following duties and powers pertaining to pre-approval of audit and
non-audit services provided by the Trust's principal accountant:
- to approve, prior to appointment, the engagement of auditors to
annually audit and provide their opinion on the Trust's financial
statements, and, in connection therewith, to review and evaluate
matters potentially affecting the independence and capabilities of
the auditors;
- to approve, prior to appointment, the engagement of the auditors to
provide non-audit services to the Trust, an investment adviser to
any series of the Trust or any entity controlling, controlled by,
or under common control with an investment adviser that provides
ongoing services to the Trust, if the engagement relates directly
to the operations and financial reporting of the Trust;
- to review the arrangements for and scope of the annual audit and
any special audits; and
- to review and approve the fees proposed to be charged to the Trust
by the auditors for each audit and non-audit service.
The audit committee may delegate any portion of its authority, including the
authority to grant pre-approvals of audit and permitted non-audit services,
to a subcommittee of one or more members. Any decisions of the subcommittee
to grant pre-approvals shall be presented to the full audit committee at its
next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g)
<Table>
<Caption>
Aggregate Non-Audit Fees for Services Rendered to the:
- ------------------------------------------------------
Adviser's Affiliates Providing
Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended
- ---------- ------- ------------------------------ -----------------
$6,119 $0 N/A 12/31/2002
$39,417 $0 N/A 10/31/2003
$4,821 $0 N/A 12/31/2003
$0 $0 N/A 10/31/2004
</Table>
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
The schedules of investments for each series of the Trust are included in the
shareholder report presented in Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Trust has made no material changes to the procedures by which shareholders
may recommend nominees to the Trust's Board of Trustees since the Trust last
disclosed such procedures in Schedule 14A.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded that
the disclosure controls and procedures of the Trust are effective.
(b) There were no changes in the Trust's internal control over financial
reporting during the second fiscal quarter of the period covered by
this report that has materially affected, or is reasonably likely to
materially affect, the Trust's internal control over financial
reporting.
ITEM 12. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached hereto
as EX-99.CERT.
(a)(3) Not applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American AAdvantage Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: January 6, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: January 6, 2005
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: January 6, 2005