As filed with the Securities and Exchange Commission on December 14, 2001
1933 Act Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [ ] Post-Effective Amendment No.______
AMERICAN AADVANTAGE FUNDS
(Exact name of registrant as specified in charter)
4333 Amon Carter Boulevard, MD 5645
Fort Worth, Texas 76155
(Address of principal executive offices)
Registrant's telephone number, including area code: (817) 967-3509
WILLIAM F. QUINN, PRESIDENT
4333 Amon Carter Boulevard, MD 5645
Fort Worth, Texas 76155
(Name and address of agent for service)
Copies to:
ROBERT J. ZUTZ, ESQ.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., 2nd Floor
Washington D.C. 20036
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: as soon as practicable after this
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on the 30th day after
filing pursuant to Rule 488.
Title of securities being registered: PlanAhead Class shares.
No filing fee is due because the Registrant is relying on Section 24(f) of the
Investment Company Act of 1940, as amended, pursuant to which it has previously
registered an indefinite number of securities.
Registrant has adopted a master-feeder operating structure. This Registration
Statement includes signature pages for the AMR Investment Services Trust, the
master trust, State Street Equity 500 Index Portfolio, the master trust for the
S&P 500 Index Fund, and the American AAdvantage Funds, the feeder trust.
AMERICAN AADVANTAGE FUNDS
CONTENTS OF REGISTRATION STATEMENT ON FORM N-14
This Registration Statement consists of the following papers and
documents:
Cover Sheet
Contents of Registration Statement on Form N-14
Letter to Shareholders
Notice of Special Meeting of Shareholders
Part A - Combined Proxy Statement and Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Pages
Exhibits
AMERICAN AADVANTAGE MILEAGE FUNDS
Balanced Mileage Fund
Large Cap Value Mileage Fund
Small Cap Value Mileage Fund
International Equity Mileage Fund
S&P 500 Index Mileage Fund
Intermediate Bond Mileage Fund
Short-Term Bond Mileage Fund
4333 Amon Carter Boulevard, MD 5645
Fort Worth, TX 76155
January __, 2002
Dear Shareholder:
You are being asked to approve a reorganization of the above-referenced
funds (the "Mileage Funds"), each of which is a separate series of the American
AAdvantage Mileage Funds (the "Mileage Trust"), into the PlanAhead Class shares
of each corresponding series (the "AAdvantage Funds") within the American
AAdvantage Funds. As a shareholder of one or more Mileage Funds, please review
the enclosed Combined Proxy Statement and Prospectus and vote your shares. THE
BOARD OF TRUSTEES OF THE MILEAGE FUNDS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE PROPOSAL.
Each Mileage Fund is a "feeder" fund in a "master-feeder" structure. As
such, the assets of your Mileage Fund are invested in a "master" fund that has
the same investment objective as that Mileage Fund and purchases securities for
investment. In particular, each Mileage Fund invests in a corresponding series
of the AMR Investment Services Trust, except that the S&P 500 Index Mileage Fund
invests in the State Street Equity 500 Index Portfolio. Each AAdvantage Fund is
also a "feeder" fund that invests in these same "master" funds. As a result,
each Mileage Fund and its corresponding AAdvantage Fund ultimately invest in the
same portfolio of securities.
You are being asked to approve an Agreement and Plan of Reorganization
and Termination ("Plan") between each Mileage Fund and its corresponding
AAdvantage Fund. If the Plan is approved with respect to your Mileage Fund, you
will become a PlanAhead Class shareholder of the corresponding AAdvantage Fund
that has identical investment objectives and policies as your current Mileage
Fund, and that invests in the same "master" fund. You will receive PlanAhead
Class shares with a net asset value equal to your Mileage Fund shares. The
reorganization would look like this:
[FLOW CHART - depicts master-feeder structure in relation to the reorganization]
Each reorganization will be tax-free. The costs of each Reorganization
will be divided between the Mileage Funds and the AAdvantage Funds. If the Plan
is not approved by any Mileage Fund, that Mileage Fund will cease operations and
be liquidated.
As a shareholder of a Mileage Fund, you will no longer accrue frequent
flyer miles under the American Airlines AAdvantage(R) program if the Plan is
approved with respect to a Mileage Fund. However, all AAdvantage miles earned
prior to the reorganization will remain in your AAdvantage account until you
redeem them (subject to the rules of the AAdvantage program). [If the Plan is
approved with respect to a Mileage Fund, In addition, after the reorganization,
we anticipate that the expenses associated with your investment will remain the
same or decline due to economies of scale associated with becoming a shareholder
of an AAdvantage Fund, each of which has a much larger asset base than its
corresponding Mileage Fund. The enclosed Combined Proxy Statement and Prospectus
explains the proposed reorganization in greater detail.
YOUR VOTE IS IMPORTANT TO US. We urge you to vote by telephone,
Internet, or by completing and returning the enclosed proxy card(s) promptly. A
postage-paid return envelope is enclosed, if you choose to mail your card(s).
Your prompt response will help eliminate the cost of further proxy
solicitations. Should you have any questions regarding the proposal, please do
not hesitate to contact us.
Sincerely yours,
William F. Quinn
President
American AAdvantage Funds
American AAdvantage Mileage Funds
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AMERICAN AADVANTAGE MILEAGE FUNDS
Balanced Mileage Fund
Large Cap Value Mileage Fund
Small Cap Value Mileage Fund
International Equity Mileage Fund
S&P 500 Index Mileage Fund
Intermediate Bond Mileage Fund
Short-Term Bond Mileage Fund
4333 Amon Carter Boulevard MD 5645
Fort Worth, TX 76155
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 13, 2002
-----------------------
To the Shareholders:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders
("Meeting") of each of the above-listed funds ("Mileage Funds"), each a series
of the American AAdvantage Mileage Funds ("Mileage Trust"), will be held on
Wednesday, February 13, 2002, at 1:00 p.m. Central Time, at the offices of AMR
Investment Services, Inc., 4333 Amon Carter Boulevard, Fort Worth, Texas 76155,
Room 6E1D-36, for the purposes set forth below.
1. To approve or disapprove the Agreement and Plan of Reorganization
and Termination between the Mileage Trust, on behalf of the
Mileage Funds, and the American AAdvantage Funds, on behalf of
its Balanced Fund, Large Cap Value Fund, Small Cap Value Fund,
International Equity Fund, S&P 500 Index Fund, Intermediate Bond
Fund, and Short-Term Bond Fund.
2. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
You will be entitled to vote at the Meeting and any adjournments
thereof if you owned shares of a Mileage Fund at the close of business on
December 31, 2001. If you owned shares of more than one Mileage Fund, you may
receive more than one proxy card. Please be certain to vote each proxy card you
receive. If you attend the Meeting, you may vote your shares in person. You may
revoke your proxy at any time before it is exercised 1) by the subsequent
execution and submission of a revised proxy, 2) by giving written notice of
revocation to the Mileage Trust at any time before the proxy is exercised or 3)
by voting in person at the Meeting.
By Order of the Board of Trustees,
Robert J. Zutz
Secretary
January __, 2002
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
Whether or not you plan to attend the meeting, we ask that you please
promptly vote by following the instructions on the enclosed proxy card(s). If
you sign, date and return the proxy card(s) but give no voting instructions,
your shares will be voted "FOR" the proposal noticed above. In order to avoid
additional expense to the Mileage Funds for further solicitation, management
requests your cooperation in voting promptly. As an alternative to mailing your
paper proxy card(s) to us to vote, you may vote by telephone or via the
Internet. To vote in this manner, please refer to the enclosed proxy card(s) for
the toll-free telephone number and the Internet address. Unless proxies are
signed by the appropriate persons, they will not be voted.
If we do not receive your vote promptly, we may contact you.
- --------------------------------------------------------------------------------
-2-
PROXY STATEMENT FOR
AMERICAN AADVANTAGE MILEAGE FUNDS
Balanced Mileage Fund
Large Cap Value Mileage Fund
Small Cap Value Mileage Fund
International Equity Mileage Fund
S&P 500 Index Mileage Fund
Intermediate Bond Mileage Fund
Short-Term Bond Mileage Fund
(collectively, "Mileage Funds")
PROSPECTUS FOR
AMERICAN AADVANTAGE FUNDS
Balanced Fund
Large Cap Value Fund
Small Cap Value Fund
International Equity Fund
S&P 500 Index Fund
Intermediate Bond Fund
Short-Term Bond Fund
(collectively, "AAdvantage Funds")
4333 Amon Carter Boulevard, MD 5645
Fort Worth, TX 76155
800-388-3344
-----------------------
COMBINED PROXY STATEMENT AND PROSPECTUS
JANUARY __, 2002
This Combined Proxy Statement and Prospectus ("Proxy Statement")
describes the proposed Agreement and Plan of Reorganization and Termination
("Plan") pursuant to which you would receive PlanAhead Class shares of a
corresponding AAdvantage Fund in exchange for the Mileage Fund shares you
currently own. Because the Mileage Funds and AAdvantage Funds operate under a
master-feeder structure, in which each pair of funds invests in the same
corresponding master fund, the nature and structure of your investment would
remain the same. The Mileage Funds and the AAdvantage Funds are collectively
referred to herein as the "Funds."
Shareholders of each Mileage Fund will vote separately on whether to
approve the Plan on behalf of that Mileage Fund. For each Mileage Fund where the
Plan is approved, its corresponding AAdvantage Fund will acquire the assets and
assume the liabilities of that Mileage Fund in exchange for that AAdvantage
Fund's PlanAhead Class shares, which that Mileage Fund then will distribute PRO
RATA to its shareholders in complete liquidation thereof (each such series of
transactions between a Mileage Fund and its corresponding AAdvantage Fund are
referred to as a "Reorganization"). Under the Plan, each shareholder of a
Mileage Fund would become the owner of AAdvantage Fund PlanAhead Class shares
having a total net asset value equal to the shareholder's holdings in that
Mileage Fund on the day the Reorganization is consummated.
This Proxy Statement constitutes a proxy statement for each Mileage
Fund for the meeting of its shareholders and the AAdvantage Funds' Prospectus
for its PlanAhead Class shares that have been registered with the Securities and
Exchange Commission ("SEC") and are to be issued in connection with each
Reorganization. It sets forth information that a Mileage Fund shareholder should
know before voting on the Plan. This Proxy Statement should be read carefully
and retained for future reference. A Statement of Additional Information ("SAI")
dated January __, 2002, is incorporated herein by this reference. The SAI is
available without charge by contacting the Mileage Funds at the telephone number
or address listed above.
A copy of the current prospectus of the Mileage Funds, dated March 1,
2001 and supplemented August 29, 2001, October 9, 2001, October 17, 2001,
October 31, 2001, and November 26, 2001, and a copy of the current prospectus of
the PlanAhead Class shares of the AAdvantage Funds, also dated March 1, 2001 and
supplemented August 29, 2001, October 9, 2001, and October 17, 2001, are
incorporated by this reference into (and are legally a part of) this Proxy
Statement. The SAI of the Mileage Funds, dated March 1, 2001 and supplemented
August 29, 2001 and September 6, 2001, and the SAI of the AAdvantage Funds, also
dated March 1, 2001 and supplemented July 18, 2001, August 29, 2001, and
September 6, 2001, are on file with the SEC and are also incorporated by this
reference into this Proxy Statement. The Annual Reports to Shareholders of the
Mileage Funds and of the AAdvantage Funds, both dated October 31, 2001, are on
file with the SEC and are incorporated by this reference into this Proxy
Statement. The Semi-Annual and Annual Reports to Shareholders of the S&P 500
Index Mileage Fund, dated June 30, 2001 and December 31, 2000, respectively, and
the AAdvantage S&P 500 Index Fund, dated June 30, 2001 and December 31, 2000,
respectively, also are on file with the SEC and are incorporated by this
reference into this Proxy Statement. These documents are available without
charge by calling or writing the Funds at the telephone number and address
listed above. The SEC maintains a website at http://www.sec.gov that contains
these documents and other information about the Funds.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROXY STATEMENT IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-2-
TABLE OF CONTENTS
PROPOSAL: To Approve or Disapprove the Agreement and Plan of Reorganization and
Termination
SUMMARY
About the Proposed Reorganizations
Comparative Fee Table
Expense Example
COMPARISON OF THE FUNDS
Overview
Comparison of Investment Objectives, Strategies and Risks
Investment Advisory Services
Purchasing, Redeeming and Exchanging Shares
Dividends and Other Distributions
Taxes
American Airlines AAdvantage Miles
Performance
INFORMATION ABOUT THE REORGANIZATIONS
Terms of the Reorganizations
Reasons for the Reorganizations
Description of the Securities to be Issued
Federal Income Tax Considerations
Required Vote
CAPITALIZATION
LEGAL MATTERS
INFORMATION FILED WITH SECURITIES AND EXCHANGE COMMISSION
EXPERTS
OTHER INFORMATION
VOTING INFORMATION
APPENDIX A: Form of Agreement and Plan of Reorganization and Termination
APPENDIX B: Management's Discussion and Analysis of Performance
APPENDIX C: Five Percent Shareholders and Control Persons
APPENDIX D: Financial Highlights
-3-
PROPOSAL: TO APPROVE OR DISAPPROVE THE AGREEMENT AND PLAN OF
REORGANIZATION AND TERMINATION.
SUMMARY
The following is a summary of certain information relating to the
proposed Reorganization between each Mileage Fund and its corresponding
AAdvantage Fund. As discussed more fully below, the Board of Trustees of the
Mileage Funds ("Mileage Trust Board" or "Board") believes that the
Reorganization will benefit each Mileage Fund's shareholders.
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Proxy Statement, the SAI
dated January __, 2002, the prospectus and SAI of the Mileage Funds dated March
1, 2001, as supplemented, the prospectus and SAI of the PlanAhead Class of the
AAdvantage Funds, also dated March 1, 2001, as supplemented, the most recent
Annual Reports to Shareholders of the Mileage Funds and of the PlanAhead Class
of the AAdvantage Funds both dated October 31, 2001, the most recent Semi-Annual
and Annual Reports to Shareholders of the S&P 500 Index Mileage Fund, dated June
30, 2001 and December 31, 2000, respectively, the most recent Semi-Annual and
Annual Reports to Shareholders of the AAdvantage S&P 500 Index Fund, dated June
30, 2001 and December 31, 2000, respectively, and the Plan, the form of which is
attached to this Proxy Statement as Appendix A. The prospectus for the PlanAhead
Class of the AAdvantage Funds is also provided with this Proxy Statement.
ABOUT THE PROPOSED REORGANIZATIONS
The Board considered and approved the proposed Plan at a meeting held
on November 16, 2001, subject to shareholder approval. The Plan provides that
each AAdvantage Fund will acquire all of the assets, and will assume all of the
liabilities, of its corresponding Mileage Fund in exchange solely for PlanAhead
Class shares of that AAdvantage Fund at their net asset value ("NAV"). Each
Mileage Fund then will distribute those PlanAhead Class shares to its
shareholders. As a result, each Mileage Fund shareholder will receive PRO RATA
full and fractional PlanAhead Class shares of the corresponding AAdvantage Fund.
Each shareholder will receive shares in an aggregate value equal to the NAV of
his or her Mileage Fund shares as of the date the Reorganization is consummated.
The proposed Reorganizations will occur as of the close of business of March 1,
2002, or another date agreed to by the Funds ("Closing Date"). Following each
Reorganization, the participating Mileage Fund will be liquidated as soon as is
reasonably practicable. For each Mileage Fund whose shareholders do not approve
the Plan, that Mileage Fund will no longer conduct operations and will be
liquidated as soon as practicable. Costs of the Reorganizations will be divided
between the Mileage Funds and the AAdvantage Funds.
The Mileage Funds will receive an opinion of Kirkpatrick & Lockhart LLP
to the effect that each Reorganization will constitute a tax-free reorganization
within the meaning of section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended ("Code"). Accordingly, neither a Mileage Fund nor any of its
shareholders will recognize any gain or loss for federal income tax purposes as
a direct result of a Reorganization. If a Mileage Fund sells portfolio holdings
prior to the Closing Date, it may recognize net gains or losses. Any such net
recognized gains would increase the amount of any distribution made to
shareholders of that Mileage Fund prior to the Closing Date.
For the reasons set forth below under "Reasons for the Reorganization,"
the Board (including the Trustees who are not "interested persons" ("Independent
Trustees") as that term is defined in the Investment Company Act of 1940, as
amended ("1940 Act"), of the Funds) has determined that the Reorganizations are
in the best interests of the Mileage Funds, that the terms of the Plan are fair
and reasonable and that the interests of the Mileage Funds' shareholders will
not be diluted as a result of the Reorganization. The Board of Trustees of the
AAdvantage Funds ("AAdvantage Trust Board") (including the Independent Trustees)
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has made similar determinations regarding the AAdvantage Funds. ACCORDINGLY, THE
MILEAGE TRUST BOARD RECOMMENDS APPROVAL OF THE PLAN.
COMPARATIVE FEE TABLE
The Mileage Funds, like all mutual funds, incur certain expenses in
their operations and, as a shareholder of the Mileage Funds, you pay these
expenses indirectly. The AAdvantage Funds also incur expenses in their
operations. Such expenses include management fees, as well as the cost of
maintaining accounts, administration, providing shareholder liaison services and
distribution services, and other activities.
The tables below compare: (1) annual operating expenses for the Mileage
Funds for the fiscal year ended October 31, 2001; (2) annual operating expenses
for the PlanAhead Class shares of those corresponding AAdvantage Funds for the
fiscal year ended October 31, 2001; and (3) estimated PRO FORMA expenses for the
PlanAhead Class shares of those AAdvantage Funds assuming the proposed
Reorganization is approved and effected. These expenses reflect the expenses of
the corresponding "master" portfolio of the AMR Investment Services Trust ("AMR
Trust") for the applicable Mileage Fund and AAdvantage Fund. The tables for the
S&P 500 Index Mileage Fund and the AAdvantage S&P 500 Index Fund ("S&P 500 Index
Funds") compare annual operating expenses for the fiscal year ended December 31,
2000. These expenses also reflect the expenses of the State Street Equity 500
Index Portfolio, the "master" fund for the S&P 500 Index Funds. It is
anticipated that the annual operating expenses for the fiscal year ended
December 31, 2001 will be substantially the same as the expenses reflected in
the tables for the S&P 500 Index Funds.
The tables indicate that, assuming approval of the proposed
Reorganization, the combined Total Annual Fund Operating Expenses of the
AAdvantage Funds are expected to be less than those of each Mileage Fund.
AADVANTAGE
MILEAGE BALANCED FUND - COMBINED
BALANCED PLANAHEAD BALANCED FUND
FUND CLASS PRO FORMA
Management Fee 0.29% 0.29% 0.29%
Distribution (12b-1) Fee 0.25 0.00 0.00
Other Expenses 1.50 0.55 0.55
---- ---- ----
Total Annual Fund
Operating Expenses 2.04 0.84 0.84
---- ---- ----
Fee Waiver and/or Expense
Reimbursement* 0.80 0.00 0.00
---- ---- ----
Net Expenses 1.24 0.84 0.84
==== ==== ====
* THE MANAGER HAS CONTRACTUALLY AGREED TO WAIVE DISTRIBUTION FEES AND
TO REIMBURSE THE MILEAGE FUND FOR OTHER EXPENSES THROUGH FEBRUARY 28, 2002 TO
THE EXTENT THAT TOTAL ANNUAL FUND OPERATING EXPENSES EXCEED 1.25%.
-5-
AADVANTAGE COMBINED
MILEAGE LARGE CAP LARGE CAP
LARGE CAP VALUE FUND - VALUE FUND
VALUE FUND PLANAHEAD CLASS PRO FORMA
Management Fee 0.30% 0.30% 0.30%
Distribution (12b-1) Fee 0.25 0.00 0.00
Other Expenses 1.43 0.59 0.59
---- ---- ----
Total Annual Fund
Operating Expenses 1.98 0.89 0.89
---- ---- ----
Fee Waiver and/or Expense
Reimbursement* 0.73 0.00 0.00
---- ---- ----
Net Expenses 1.25 0.89 0.89
==== ==== ====
* THE MANAGER HAS CONTRACTUALLY AGREED TO WAIVE DISTRIBUTION FEES
THROUGH FEBRUARY 28, 2002 TO THE EXTENT THAT TOTAL ANNUAL FUND OPERATING
EXPENSES EXCEED 1.25%.
AADVANTAGE COMBINED
MILEAGE SMALL CAP SMALL CAP
SMALL CAP VALUE FUND - VALUE FUND
VALUE FUND PLANAHEAD CLASS PRO FORMA
Management Fee 0.58% 0.58% 0.58%
Distribution (12b-1) Fee 0.25 0.00 0.00
Other Expenses 1.59 0.59 0.59
---- ---- ----
Total Annual Fund
Operating Expenses 2.42 1.17 1.17
---- ---- ----
Fee Waiver and/or Expense
Reimbursement* 0.93 0.00 0.00
---- ---- ----
Net Expenses 1.49 1.17 1.17
==== ==== ====
* THE MANAGER HAS CONTRACTUALLY AGREED TO WAIVE DISTRIBUTION FEES AND
TO REIMBURSE THE MILEAGE FUND FOR OTHER EXPENSES THROUGH FEBRUARY 28, 2002 TO
THE EXTENT THAT TOTAL ANNUAL FUND OPERATING EXPENSES EXCEED 1.49%.
-6-
AADVANTAGE COMBINED
MILEAGE INTERNATIONAL INTERNATIONAL
INTERNATIONAL EQUITY FUND - EQUITY FUND
EQUITY FUND PLANAHEAD CLASS PRO FORMA
Management Fee 0.36% 0.36% 0.36%
Distribution (12b-1) Fee 0.25 0.00 0.00
Other Expenses 1.76 0.74 0.74
---- ---- ----
Total Annual Fund
Operating Expenses 2.37 1.10 1.10
---- ---- ----
Fee Waiver and/or Expense
Reimbursement 0.87 0.00 0.00
---- ---- ----
Net Expenses 1.50 1.10 1.10
==== ==== ====
AADVANTAGE COMBINED
MILEAGE S&P 500 INDEX S&P 500 INDEX
S&P 500 INDEX FUND- FUND
FUND PLANAHEAD CLASS PRO FORMA
Management Fee 0.045% 0.045% 0.045%
Distribution (12b-1) Fee 0.250 0.000 0.000
Other Expenses 0.955 0.655 0.655
----- ----- -----
Total Annual Fund
Operating Expenses 1.250 0.70 0.70
----- ---- ----
Fee Waiver and/or Expense
Reimbursement* 0.700 0.15 0.15
----- ---- ----
Net Expenses 0.550 0.55 0.55
===== ==== ====
* THE MANAGER HAS CONTRACTUALLY AGREED TO WAIVE DISTRIBUTION FEES AND
TO REIMBURSE THE FUNDS FOR OTHER EXPENSES THROUGH FEBRUARY 28, 2002 FOR THE
MILEAGE FUND AND DECEMBER 31, 2002 FOR THE AADVANTAGE FUND TO THE EXTENT THAT
TOTAL ANNUAL FUND OPERATING EXPENSES EXCEED 0.55%.
AADVANTAGE COMBINED
MILEAGE INTERMEDIATE INTERMEDIATE
INTERMEDIATE BOND FUND - BOND FUND
BOND FUND PLANAHEAD CLASS PRO FORMA
Management Fee 0.25% 0.25% 0.25%
Distribution (12b-1) Fee 0.25 0.00 0.00
Other Expenses 5.05 0.59 0.59
---- ---- ----
Total Annual Fund
Operating Expenses 5.55 0.84 0.84
---- ---- ----
Fee Waiver and/or Expense
Reimbursement* 2.35 0.00 0.00
---- ---- ----
Net Expenses 0.89 0.89 0.89
==== ==== ====
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* THE MANAGER HAS CONTRACTUALLY AGREED TO WAIVE DISTRIBUTION FEES AND
TO REIMBURSE THE MILEAGE FUND FOR OTHER EXPENSES THROUGH FEBRUARY 28, 2002 TO
THE EXTENT THAT TOTAL ANNUAL FUND OPERATING EXPENSES EXCEED 0.89%.
AADVANTAGE COMBINED
MILEAGE SHORT-TERM SHORT-TERM
SHORT-TERM BOND FUND - BOND FUND
BOND FUND PLANAHEAD CLASS PRO FORMA
Management Fee 0.25% 0.25% 0.25%
Distribution (12b-1) Fee 0.25 0.00 0.00
Other Expenses 2.08 0.50 0.50
---- ---- ----
Total Annual Fund
Operating Expenses 2.58 0.75 0.75
---- ---- ----
Fee Waiver and/or Expense
Reimbursement* 1.73 0.00 0.00
---- ---- ----
Net Expenses 0.85 0.75 0.75
==== ==== ====
* THE MANAGER HAS CONTRACTUALLY AGREED TO WAIVE DISTRIBUTION FEES AND
TO REIMBURSE THE MILEAGE FUND FOR OTHER EXPENSES THROUGH FEBRUARY 28, 2002 TO
THE EXTENT THAT TOTAL ANNUAL FUND OPERATING EXPENSES EXCEED 0.85%.
EXPENSE EXAMPLE
The Examples below are intended to help you compare the costs of
investing in the Mileage Funds whose shares you currently own with the cost of
investing in the PlanAhead Class of the corresponding AAdvantage Funds, both
before and after each Reorganization, if approved. The Example assumes that you
invest $10,000 in each Fund for the time periods indicated and then redeem all
of your shares at the end of those periods. The example also assumes that your
investments each have a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual returns and cost may be higher or
lower, based on these assumptions, your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Balanced Mileage Fund...................................
AAdvantage Balanced Fund - PlanAhead Class..............
PRO FORMA Balanced Fund.................................
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Large Cap Value Mileage Fund............................
AAdvantage Large Cap Value - PlanAhead Class...........
PRO FORMA Large Cap Value...............................
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Small Cap Value Mileage Fund............................
AAdvantage Small Cap Value - PlanAhead Class............
PRO FORMA Small Cap Value Fund..........................
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
International Equity Mileage Fund.......................
AAdvantage International Equity Fund -
PlanAhead Class....................................
PRO FORMA International Equity Fund.....................
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
S&P 500 Index Mileage Fund..............................
AAdvantage S&P 500 Index Fund -
PlanAhead Class....................................
PRO FORMA S&P 500 Index Fund............................
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Intermediate Bond Mileage Fund..........................
AAdvantage Intermediate Bond -
PlanAhead Class....................................
PRO FORMA Intermediate Bond.............................
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Short-Term Bond Mileage Fund............................
AAdvantage Short-Term Bond Fund -
PlanAhead Class....................................
PRO FORMA Short-Term Bond Fund..........................
COMPARISON OF THE FUNDS
OVERVIEW
Each Fund operates as a feeder fund under a master-feeder structure. As
a result, each Mileage Fund and its corresponding AAdvantage Fund have identical
investment objectives and strategies, policies and overall risk characteristics,
and are managed in an identical manner. The Funds also are subject to identical
policies and procedures regarding purchasing and redeeming shares, dividends and
distributions, and tax treatment.
In addition, your rights as a shareholder of a Mileage Fund will remain
the same except relating to the American Airlines AAdvantage frequent flyer
program. Currently, shareholders of the Mileage Funds receive AAdvantage mileage
awards in connection with their investment. Shareholders of the AAdvantage Funds
do not receive AAdvantage mileage awards in connection with their investment. If
the proposed Reorganization is approved and consummated for your Mileage Fund,
then you will no longer be able to participate in the program and accrue miles.
However, even if such Reorganization is approved, you will be able to retain any
AAdvantage miles that you have accrued as of the Closing Date.
-9-
COMPARISON OF INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
As illustrated below, each Mileage Fund and its corresponding
AAdvantage Fund have identical investment objectives, strategies, and risk
characteristics. An explanation of the risk characteristics is included at the
end of the summary.
BALANCED MILEAGE FUND
AADVANTAGE BALANCED FUND
INVESTMENT OBJECTIVE: Income and capital appreciation.
INVESTMENT STRATEGIES: Invests all of their investable assets in the
Balanced Portfolio of the AMR Trust.
Ordinarily, between 50% and 65% of the Funds'
total assets are invested in equity securities
and between 35% and 50% of the Funds' total
assets are invested in debt securities. The
Funds' equity investments may include common
stocks, preferred stocks, securities
convertible into common stocks, and U.S.
dollar-denominated American Depositary
Receipts.
RISKS: Market Risk
Value Stocks Risks
Interest Rate Risk
Credit Risk
Prepayment Risk
LARGE CAP VALUE MILEAGE FUND
AADVANTAGE LARGE CAP VALUE FUND
INVESTMENT OBJECTIVE: Long-term capital appreciation and current
income.
INVESTMENT STRATEGIES: Invests all of their investable assets in the
Large Cap Value Portfolio of the AMR Trust.
Ordinarily, at least 65% of the total assets of
these Funds are invested in equity securities
of U.S. companies with market capitalizations
of $5 billion or more at the time of
investment. The Funds' investments may include
common stocks, preferred stocks, securities
convertible into U.S. common stocks, and U.S.
dollar-denominated American Depositary
Receipts.
RISKS: Market Risk
Value Stocks Risk
-10-
SMALL CAP VALUE MILEAGE FUND
AADVANTAGE SMALL CAP VALUE FUND
INVESTMENT OBJECTIVE: Long-term capital appreciation and current
income.
INVESTMENT STRATEGIES: Invests all of their investable assets in the
Small Cap Value Portfolio of the AMR Trust.
Ordinarily, at least 80% of the total assets of
the Funds are invested in equity securities of
U.S. companies with market capitalizations of
$2 billion or less at the time of investment.
The Funds' investments may include common
stocks, preferred stocks, securities
convertible into common stocks, and U.S.
dollar-denominated American Depositary
Receipts.
RISKS: Market Risk
Small Capitalization Companies Risk
Value Stocks Risk
INTERNATIONAL EQUITY MILEAGE FUND
AADVANTAGE INTERNATIONAL EQUITY FUND
INVESTMENT OBJECTIVE: Long-term capital appreciation.
INVESTMENT STRATEGIES: Invests all of their investable assets in the
International Equity Portfolio of the AMR
Trust. Ordinarily, at least 80% of the Funds'
total assets are invested in common stocks and
securities convertible into common stocks of
issuers based in at least three different
countries located outside the United States.
The Funds may invest in countries comprising
the Morgan Stanley Capital International Europe
Australasia Far East Index ("EAFE Index"). The
EAFE Index is comprised of equity securities of
companies from various industrial sectors whose
primary trading markets are located outside the
United States. Companies included in the EAFE
Index are selected from among the larger
capitalization companies in these markets.
RISKS: Market Risk
Foreign Investing Risk
Derivatives Risk
-11-
S&P 500 INDEX MILEAGE FUND
AADVANTAGE S&P 500 INDEX FUND
INVESTMENT OBJECTIVE: To replicate as closely as possible, before
expenses, the performance of the Standard &
Poor's 500 Composite Stock Price Index.
INVESTMENT STRATEGIES: Invests all of their investable assets in the
State Street Equity 500 Index Portfolio. The
Funds use a passive management strategy
designed to track the performance of the S&P
500 Index. The S&P 500 Index is a well-known
stock market index that includes common stocks
of 500 companies from several industrial
sectors representing a significant portion of
the market value of all stocks publicly traded
in the United States.
RISKS: Market Risk
Tracking Error Risk
Derivatives Risk
INTERMEDIATE BOND MILEAGE FUND
AADVANTAGE INTERMEDIATE BOND FUND
INVESTMENT OBJECTIVE: Income and capital appreciation.
INVESTMENT STRATEGIES: Invests all of their investable assets in the
Intermediate Bond Portfolio of the AMR Trust.
The Funds invest in obligations of the U.S.
Government, its agencies and instrumentalities;
corporate debt securities, such as commercial
paper, master demand notes, loan participation
interests, medium-term notes and funding
agreements; mortgage-backed securities;
asset-backed securities; and Yankeedollar and
Eurodollar bank certificates of deposit, time
deposits, bankers' acceptances and other notes.
The Funds seek capital appreciation by
investing in corporate issues whose relative
value is expected to increase over time.
Under normal circumstances, the Funds seek to
maintain a duration of three to seven years.
Duration is a measure of price sensitivity
relative to changes in interest rates.
Portfolios with longer durations are typically
more sensitive to changes in interest rates.
RISKS: Interest Rate Risk
Credit Risk
Prepayment Risk
-12-
SHORT-TERM BOND MILEAGE FUND
AADVANTAGE SHORT-TERM BOND FUND
INVESTMENT OBJECTIVE: Income and capital appreciation.
INVESTMENT STRATEGIES: Invests all of their investable assets in the
Short-Term Bond Portfolio of the AMR Trust. The
Funds invest in obligations of the U.S.
Government, its agencies and instrumentalities;
corporate debt securities, such as commercial
paper, master demand notes, loan participation
interests, medium-term notes and funding
agreements; mortgage-backed securities;
asset-backed securities; and Yankeedollar and
Eurodollar bank certificates of deposit, time
deposits, bankers' acceptances and other notes.
The Funds seek capital appreciation by
investing in corporate issues whose relative
value is expected to increase over time.
Under normal circumstances, the Funds seek to
maintain a duration of one to three years.
Duration is a measure of price sensitivity
relative to changes in interest rates.
Portfolios with longer durations are typically
more sensitive to changes in interest rates.
RISKS: Interest Rate Risk
Credit Risk
Prepayment Risk
DEFENSIVE STRATEGIES
Under adverse market conditions, each Fund may, for temporary defensive
purposes, invest up to 100% of its assets in cash or cash equivalents, including
investment grade short-term debt obligations. To the extent that a Fund invokes
this strategy, its ability to achieve its investment objective may be affected
adversely.
EXPLANATION OF RISK FACTORS
The principal risks to which the Funds are subject, as referenced
above, include:
INTEREST RATE RISK-- The Funds are subject to the risk that the market
value of the bonds they hold will decline due to rising interest rates. When
interest rates go down, bond prices generally go up. The price of a bond is also
affected by its maturity. Bonds with longer maturities generally have greater
sensitivity to changes in interest rates.
FOREIGN INVESTING RISK - Overseas investing carries potential risks not
associated with domestic investments. Such risks include, but are not limited
to: (1) currency exchange rate fluctuations; (2) political and financial
instability; (3) less liquidity and greater volatility of foreign investments;
(4) lack of uniform accounting, auditing and financial reporting; (5) less
government regulation and supervision of foreign stock exchanges, brokers and
listed companies; (6) increased price volatility; (7) delays in transaction
settlement in some foreign markets; and (8) adverse impact of the euro
conversion on the business or financial condition of companies in which a Fund
may be invested.
-13-
CREDIT RISK - The Funds are subject to the risk that the issuer of a
bond will fail to make timely payment of interest or principal. A decline in an
issuer's credit rating can cause its price to go down. This risk is somewhat
minimized by the Fund's policy of only investing in bonds that are considered
investment grade at the time of purchase.
PREPAYMENT RISK - Some Funds' investments in asset-backed and
mortgage-backed securities are subject to the risk that the principal amount of
the underlying collateral may be repaid prior to the bond's maturity date. If
this occurs, no additional interest will be paid on the investment and such Fund
may have to invest at a lower rate.
MARKET RISK - Since some Funds invest a substantial portion of their
assets in stocks, they are subject to stock market risk. Market risk involves
the possibility that the value of a Fund's investments in stocks will decline
due to drops in the stock market. In general, the value of a Fund will move in
the same direction as the overall stock market, which will vary from day to day
in response to the activities of individual companies and general market and
economic conditions.
VALUE STOCKS RISK - Value stocks are subject to the risk that their
intrinsic value may never be realized by the market or that their prices may go
down. While the Funds' investments in value stocks may limit their downside risk
over time, the Funds may produce more modest gains than riskier stock funds as a
trade-off for this potentially lower risk.
SMALL CAPITALIZATION COMPANIES RISK - Investing in the securities of
small capitalization companies involves greater risk and the possibility of
greater price volatility than investing in larger capitalization and more
established companies, since smaller companies may have limited operating
history, product lines, and financial resources, and the securities of these
companies may lack sufficient market liquidity.
TRACKING ERROR RISK - For the S&P 500 Index Funds, the Funds' return
may not match the return of the Index for a number of reasons. For example, a
Fund may incur a number of operating expenses not applicable to the Index, and
incurs costs in buying and selling securities. A Fund may not be fully invested
at times, either as a result of cash flows into a Fund or reserves of cash held
by a Fund to meet redemptions. The return on the sample of stocks purchased by a
Fund, or futures or other derivative positions taken by a Fund, to replicate the
performance of the Index may not correlate precisely with the return on the
Index.
DERIVATIVES RISK - The Funds may use derivatives, such as futures
contracts, foreign currency forward contracts and options on futures as a hedge
against foreign currency fluctuations. There can be no assurance that any
strategy used will succeed. If one of the investment advisers incorrectly
forecasts currency exchange rates in utilizing a derivatives strategy for a
Fund, that Fund could lose money. Gains or losses from positions in derivative
instruments may be much greater than the derivative's cost.
AN INVESTMENT IN A MILEAGE FUND OR ITS CORRESPONDING AADVANTAGE FUND IS
NOT GUARANTEED AND AN INVESTOR MAY LOSE MONEY BY INVESTING IN A FUND. AN
INVESTMENT IN A FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
-14-
INVESTMENT ADVISORY SERVICES
AMR Investment Services, Inc. (the "Manager") serves as the Manager for
each Mileage Fund and AAdvantage Fund. The Manager also serves as the Manager
for each corresponding fund of the "master" AMR Trust. SSgA Funds Management,
Inc., an affiliate of State Street Bank and Trust Company and wholly owned
subsidiary of State Street Corporation, serves as the investment adviser for the
State Street Equity 500 Index Portfolio, the "master" fund in which the S&P 500
Index Funds invests all of their investable assets.
The Manager provides and oversees the provision of all administrative,
investment advisory and portfolio management services to the Funds. The Manager
also develops the investment programs for each Fund, selects and changes
investment advisers (subject to requisite approval), allocates assets among
investment advisers, monitors the investment advisers' investment programs and
results, coordinates the investment activities of the investment advisers to
ensure compliance with regulatory restrictions, oversees each Fund's securities
lending activities and actions taken by the securities lending agent, and with
the exception of the International Equity and S&P 500 Index Funds, invests the
portion of Fund assets which the investment advisers determine should be
allocated to high quality short-term debt obligations.
The Manager, located at 4333 Amon Carter Boulevard, MD 5645, Fort
Worth, Texas 76155, is a wholly owned subsidiary of AMR Corporation, the parent
company of American Airlines, Inc. The Manager was organized in 1986 to provide
investment management, advisory, administrative and asset management consulting
services. As of November 30, 2001, the Manager had approximately $___ billion of
assets under management, including approximately $__ billion under active
management and $__ billion as named fiduciary or financial adviser. Of the
total, approximately $__ billion of assets are related to AMR Corporation.
The Manager recommends investment advisers to the Boards to manage the
Funds' investments and monitors and reviews the performance of those
sub-advisers. The Funds received an exemptive order from the SEC to permit the
Boards to select and replace investment advisers and to amend the sub-advisory
contracts between the Manager and the investment advisers without obtaining
shareholder approval.
PURCHASING, REDEEMING AND EXCHANGING SHARES
Each Mileage Fund and the PlanAhead Class of its corresponding
AAdvantage Fund have identical policies and procedures regarding the purchase
and redemption of Fund shares. In particular, no sales charges are assessed on
the purchase or sale of Fund shares. Shares of the Funds are offered and
purchase orders accepted until 4:00 p.m. Eastern Time, or the close of the
Exchange (whichever comes first), on each day on which the Exchange is open for
trading. If a purchase order is received in good order prior to the applicable
Fund's deadline, the purchase price will be the NAV per share next determined on
that day. If a purchase order is received in good order after the applicable
deadline, the purchase price will be the NAV of the following day that the Fund
is open for business.
Shares of any Fund may be redeemed by telephone, by pre-authorized
automatic redemption, via the Funds' web site, or by mail on any day that a Fund
is open for business. The redemption price will be the NAV next determined after
a redemption order is received in good order.
Shares of an AAdvantage Fund may be exchanged for PlanAhead Class
shares of another AAdvantage Fund provided that, among other things, such shares
-15-
have been held for at least 15 days. Similarly, shares of a Mileage Fund may be
exchanged for shares of another Mileage Fund provided that, among other things,
such shares have been held for at least 15 days.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Mileage Fund and its corresponding AAdvantage Fund have identical
policies and procedures regarding dividends and other distributions. The Funds
distribute most or all of their net earnings in the form of dividends from net
investment income and distributions of realized net capital gains and gains from
certain foreign currency transactions. Unless instructed otherwise,
distributions are reinvested in additional Fund shares. Monthly distributions
are paid to shareholders on the first business day of the following month. Each
Balanced, Large Cap Value, Small Cap Value and International Equity Fund pays
dividends annually. Each Intermediate Bond and Short-Term Bond Fund pays
dividends monthly. The S&P 500 Index Funds pay dividends each April, July,
October, and December. There is no contemplated change in the dividend policy
for the AAdvantage Funds as a result of each Reorganization.
On or before the Closing Date, each Mileage Fund will declare as a
distribution substantially all of its undistributed net investment income, net
capital gains, net short-term capital gains, and net gains from foreign currency
transactions, if any, to continue to maintain its tax status as a "regulated
investment company" under the Code.
TAXES
Each Mileage Fund and its corresponding AAdvantage Fund are treated
similarly for tax purposes. Any dividends and distributions of net realized
gains are taxable events. Shareholders may realize a taxable gain or loss when
selling or exchanging shares. That gain or loss may be treated as a short-term
or long-term capital gain, depending on how long the sold or exchanged shares
were held.
Some foreign countries may impose taxes on dividends paid to, and gains
realized by, each International Equity Fund's master fund. The Fund may treat
these taxes as a deduction or, under certain conditions, "flow the tax through"
to its shareholders. In the latter event, the shareholders may either deduct the
taxes or use them to calculate a credit against their federal income tax.
The foregoing is only a brief summary of some of the important income
tax considerations that may affect Fund shareholders. Shareholders should
consult their tax advisers regarding specific questions as to the effect of
federal, state or local income taxes on an investment in a Fund.
AMERICAN AIRLINES AADVANTAGE MILES
As a shareholder of a Mileage Fund, you may accrue American Airlines
AAdvantage miles based on your average daily account balance. Miles are posted
at an annual rate of one mile per $10 maintained in a Mileage Fund. Shareholders
of the AAdvantage Funds do not receive AAdvantage mileage awards in connection
with their investment. Accordingly, if the Plan is approved with respect to a
Mileage Fund, you will no longer accrue frequent flyer miles under the
-16-
AAdvantage program. However, all AAdvantage miles earned prior to the
Reorganization will remain in your AAdvantage account until you redeem them
(subject to the rules of the AAdvantage program).
PERFORMANCE
Management's discussion and analysis of performance for the Funds,
included in the most recent annual reports to shareholders of the Funds, is
provided in Appendix B. Financial highlights, including performance information,
about the Funds is provided in Appendix D.
ADDITIONAL INFORMATION ABOUT THE MILEAGE FUNDS AND THE PLANAHEAD CLASS
OF THE AADVANTAGE FUNDS ARE INCLUDED IN THE CURRENT PROSPECTUSES FOR THE MILEAGE
FUNDS AND THE PLANAHEAD CLASS OF THE AADVANTAGE FUNDS.
INFORMATION ABOUT THE REORGANIZATIONS
TERMS OF THE REORGANIZATIONS
The Plan provides that on or about the Closing Date (presently expected
to be on or about March 1, 2002) each AAdvantage Fund will acquire all the
assets of its corresponding Mileage Fund in exchange solely for PlanAhead Class
shares of that AAdvantage Fund and that AAdvantage Fund's assumption of all of
that Mileage Fund's liabilities. Each Mileage Fund will then distribute those
shares to its shareholders. Shareholders of each Mileage Fund will become
shareholders of the PlanAhead Class of the corresponding AAdvantage Fund as of
5:00 p.m. (Eastern time) on the Closing Date.
Immediately after each Reorganization, each former shareholder of a
Mileage Fund will own shares of the PlanAhead Class of the corresponding
AAdvantage Fund equal in NAV to the aggregate NAV of that shareholder's shares
of the Mileage Fund immediately prior to the Reorganization. The NAV per share
of an AAdvantage Fund will not change as a result of a Reorganization. Thus, a
Reorganization will not result in a dilution of the interest of any shareholder
in any AAdvantage Fund. Each Mileage Fund will be liquidated after its
Reorganization.
The consummation of each proposed Reorganization is subject to a number
of conditions set forth in the Plan, including the receipt of an opinion in form
and substance satisfactory to the Mileage Trust and the AAdvantage Trust, as
described under the caption "Federal Income Tax Considerations" below. The Plan
may be terminated prior to the Closing Date by a Mileage Fund and the
Reorganization involving it abandoned, at any time before or after approval by
the shareholders of the participating Mileage Fund if a Fund believes that
consummation of the Reorganization would not be in the best interests of its
shareholders. In addition, the Plan may be amended in any mutually agreeable
manner, except that no amendment may be made subsequent to the Special Meeting
of Shareholders ("Meeting") that would have a material adverse effect on the
interests of a Mileage Fund's shareholders. For each Mileage Fund whose
shareholders do not approve the Reorganization, that Mileage Fund will be
liquidated as soon as practicable after the Closing Date.
Each Mileage Fund and its corresponding AAdvantage Fund will bear
equally the expenses related to their Reorganization. Those expenses will likely
include legal fees; transfer taxes (if any); fees of banks and transfer agents;
and the costs of preparing, printing, copying, and mailing proxy solicitation
materials to the Mileage Funds' shareholders and the costs of holding the
Meeting.
The foregoing brief summary of the Plan is qualified in its entirety by
the terms and provisions of the Plan, the form of which is attached hereto as
Appendix A and incorporated herein by this reference.
-17-
REASONS FOR THE REORGANIZATIONS
At a meeting on November 16, 2001, the Mileage Trust Board and the
AAdvantage Trust Board (collectively, "Boards"), including in each case a
majority of their Independent Trustees, approved the proposed Reorganizations
subject to the approval of the shareholders of each Mileage Fund. As part of its
consideration, the Boards examined a number of factors with respect to the
Reorganizations, including the following: (1) the relative past growth or
decline in assets and performance of the Mileage Funds and the AAdvantage Funds;
(2) the future prospects for growth and performance of these Funds; (3) the
compatibility of their investment objectives, policies and shareholder services;
(4) the current expense ratios of the Mileage Funds and the likely effect of the
Reorganizations on the expense ratios of the AAdvantage Funds; (5) the
alternatives to Reorganizations (such as liquidating the Mileage Funds or
reorganizing the Mileage Funds with different funds); (6) the costs of the
Reorganizations and who will bear those costs; (7) the potential benefit to the
Funds' affiliates, including the Manager; (8) the tax status and consequences of
the Reorganizations; (9) whether any cost savings could be achieved by combining
the Funds; (10) the Manager's assessment that the proposed Reorganizations will
be beneficial to the shareholders of the Funds and will not dilute such
interests; and (11) the terms of the proposed Plan.
In particular, the Mileage Trust Board considered, among other things,
that Mileage Fund shareholders would remain invested in the same portfolio of
securities as they currently invest and that the assets would be managed exactly
in the same manner. Mileage Fund shareholders also would realize a decrease in
the overall expense ratio related to their investments due to the economies of
scale created by the Reorganizations and the reduced operating costs to the
AAdvantage Funds. The overall expense ratio of AAdvantage Fund shareholders
would not increase as a result of the Reorganizations and there would be no
dilution of such interest in the AAdvantage Funds. AAdvantage Fund shareholders
would now hold, as a result of the Reorganizations, shares of a Fund with a
larger pool of assets.
The Mileage Trust Board also considered that Mileage Fund shareholders
would no longer be permitted to accrue American AAdvantage miles in connection
with their investments. However, the Manager assured the Board that Mileage Fund
shareholders would be able to retain those miles they have already accrued
through the program (subject to the rules and regulations of the AAdvantage
program).
On the basis of the information provided to it and its evaluation of
that information, the Boards, including a majority of their Independent
Trustees, determined that each Reorganization would be in the best interests of
its respective Funds, that the terms of the Reorganization are fair and
reasonable, and that the interests of its respective Funds' shareholders would
not be diluted as a result of the Reorganizations. THEREFORE, THOSE BOARDS
UNANIMOUSLY APPROVED EACH REORGANIZATION AND THE MILEAGE TRUST BOARD RECOMMENDED
THE APPROVAL OF THE PLAN BY THE SHAREHOLDERS OF EACH MILEAGE FUND AT THE
MEETING.
DESCRIPTION OF SECURITIES TO BE ISSUED
Each of the AAdvantage Trust and the Mileage Trust (collectively,
"Trusts") was formed as a Massachusetts business trust and is registered under
the 1940 Act, as an open-end management investment company. The operations of
each Trust are governed by its Trust Instrument, By-Laws and Massachusetts law.
The AAdvantage Trust is authorized to issue an unlimited number of
PlanAhead Class shares of beneficial interest for each AAdvantage Fund.
PlanAhead Class Shares of the AAdvantage Funds to be issued to shareholders of
the Mileage Funds under the Plan will be fully paid and non-assessable when
issued, transferable without restrictions and will have no preemptive or
conversion rights. Each class of an AAdvantage Fund is entitled to participate
equally in its dividends and other distributions, except that dividends shall
-18-
appropriately reflect expenses allocated to a particular class, where
applicable. Each share of an AAdvantage Fund entitles its holder to one vote per
full share and fractional votes for fractional shares held.
Each AAdvantage Fund is a feeder fund in a master-feeder structure.
Under a master-feeder structure, a "feeder" fund invests all of its investable
assets in a "master" fund with the same investment objective. The "master" fund
purchases securities for investment. Each Fund can withdraw its investment in
its corresponding master fund at any time if the Board determines that it is in
the best interest of the Fund and its shareholders to do so. A change in a
master fund's fundamental objective, policies and restrictions, which is not
approved by the shareholders of its corresponding Fund could require that Fund
to redeem its interest in the master fund. Any such redemption could result in a
distribution in kind of portfolio securities (as opposed to a cash distribution)
by the master fund. Should such a distribution occur, that Fund could incur
brokerage fees or other transaction costs in converting such securities to cash.
In addition, a distribution in kind could result in a less diversified portfolio
of investments for that Fund and could affect adversely the liquidity of the
Fund. If a Fund withdraws its investment in its corresponding portfolio, the
Fund's assets will be invested according to the investment policies and
restrictions described in this Proxy Statement. After the Reorganizations, each
AAdvantage Fund, except for the International Equity Fund and the S&P 500 Index
Fund, will no longer operate in a master-feeder because such funds will be the
only funds investing in the corresponding series of the AMR Trust.
Shareholders of the AAdvantage Funds do not receive American Airlines
AAdvantage miles in connection with their investments. Thus, once the
Reorganization is effective, Mileage Fund shareholders no longer will accrue
additional AAdvantage miles. Mileage Fund shareholders, however, will be
permitted to carry forward all AAdvantage miles they have accrued to date
through their accounts (subject to the rules and regulations of the AAdvantage
program).
Reference is hereby made to the prospectus of the PlanAhead Class of
the AAdvantage Funds provided herewith for additional information about the
PlanAhead Class shares of the AAdvantage Funds.
FEDERAL INCOME TAX CONSIDERATIONS
Each Reorganization is intended to be a tax-free reorganization within
the meaning of section 368(a)(1)(C) of the Code. The Mileage Trust, on behalf of
the Mileage Funds, and the AAdvantage Trust, on behalf of the AAdvantage Funds,
will receive an opinion of Kirkpatrick & Lockhart LLP, counsel to the Trusts,
substantially to the following effect:
(1) An AAdvantage Fund's acquisition of the assets of its
corresponding Mileage Fund in exchange solely for PlanAhead
Class shares of that AAdvantage Fund and that AAdvantage
Fund's assumption of that Mileage Fund's liabilities, followed
by that Mileage Fund's distribution of those shares PRO RATA
to its shareholders constructively in exchange for their
Mileage Fund shares, will qualify as a reorganization within
the meaning of section 368(a)(1)(C) of the Code, and each Fund
will be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
(2) A Mileage Fund will recognize no gain or loss on the transfer
of its assets to its corresponding AAdvantage Fund in exchange
solely for PlanAhead Class shares of that AAdvantage Fund and
that AAdvantage Fund's assumption of that Mileage Fund's
liabilities or on the subsequent distribution of those shares
to that Mileage Fund's shareholders in constructive exchange
for their Mileage Fund shares;
-19-
(3) An AAdvantage Fund will recognize no gain or loss on their
receipt of the assets of its corresponding Mileage Fund in
exchange solely for that AAdvantage Fund's PlanAhead Class
shares and their assumption of that Mileage Fund's
liabilities;
(4) An AAdvantage Fund's basis in the assets it receives from its
corresponding Mileage Fund will be the same as that Mileage
Fund's basis therein immediately before their Reorganization,
and that AAdvantage Fund's holding period for the assets will
include that Mileage Fund's holding period therefor;
(5) A Mileage Fund shareholder will recognize no gain or loss on
the constructive exchange of all of his or her Mileage Fund
shares solely for AAdvantage Fund shares pursuant to a
Reorganization; and
(6) A Mileage Fund shareholder's aggregate basis in the AAdvantage
Fund shares it receives in a Reorganization will be the same
as the aggregate basis in its Mileage Fund shares
constructively surrendered in exchange for those AAdvantage
Fund shares, and his/her holding period for those AAdvantage
Fund shares will include his/her holding period for those
Mileage Fund shares, provided the shareholder holds them as
capital assets on the Closing Date.
The opinion may state that no opinion is expressed as to the effect of any
Reorganization on any Fund or any shareholder with respect to any asset as to
which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Utilization by the AAdvantage Funds after the Reorganizations of any
pre-Reorganization capital losses realized by the Mileage Funds could be subject
to limitation in future years under the Code.
You should consult your tax adviser regarding the effect, if any, of
the Reorganizations in light of your individual circumstances. Because the
foregoing discussion only relates to the federal income tax consequences of the
Reorganizations, you also should consult your tax adviser as to state and local
tax consequences to you, if any, of the Reorganizations.
REQUIRED VOTE
The proposal to approve the Reorganization involving a Mileage Fund
requires the affirmative vote of the lesser of (1) 67% or more of the shares of
that Mileage Fund present at the Meeting, if more than 50% of the outstanding
shares are represented at the Meeting in person or by proxy, or (2) more than
50% of the outstanding shares of that Mileage Fund entitled to vote at the
Meeting. IF THE SHAREHOLDERS OF A MILEAGE FUND DO NOT APPROVE THE REORGANIZATION
INVOLVING THAT FUND, IT WILL BE LIQUIDATED.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSAL.
----------------------------
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CAPITALIZATION
The following table shows the capitalization of each Mileage Fund and
each AAdvantage Fund as of October 31, 2001, and the PRO FORMA capitalization as
of the same date, giving effect to the Reorganization:
BALANCED BALANCED PRO FORMA
MILEAGE FUND AADVANTAGE FUND BALANCED FUND
------------ --------------- -------------
Net Assets
Shares Outstanding
Net Asset Value Per
Share
LARGE CAP VALUE LARGE CAP VALUE PRO FORMA
MILEAGE FUND AADVANTAGE FUND LARGE CAP VALUE FUND
------------ --------------- --------------------
Net Assets
Shares Outstanding
Net Asset Value Per
Share
SMALL CAP VALUE SMALL CAP VALUE PRO FORMA
MILEAGE FUND AADVANTAGE FUND SMALL CAP VALUE FUND
------------ --------------- --------------------
Net Assets
Shares Outstanding
Net Asset Value Per
Share
PRO FORMA
INTERNATIONAL EQUITY INTERNATIONAL EQUITY INTERNATIONAL
MILEAGE FUND AADVANTAGE FUND EQUITY FUND
------------ --------------- -----------
Net Assets
Shares Outstanding
Net Asset Value Per
Share
-21-
PRO FORMA
S&P 500 INDEX S&P 500 INDEX S&P 500 INDEX
MILEAGE FUND AADVANTAGE FUND FUND
------------ --------------- ----
Net Assets
Shares Outstanding
Net Asset Value Per
Share
PRO FORMA
INTERMEDIATE BOND INTERMEDIATE BOND INTERMEDIATE
MILEAGE FUND AADVANTAGE FUND BOND FUND
------------ --------------- ---------
Net Assets
Shares Outstanding
Net Asset Value Per
Share
PRO FORMA
SHORT-TERM BOND SHORT-TERM BOND SHORT-TERM
MILEAGE FUND AADVANTAGE FUND BOND FUND
------------ --------------- ---------
Net Assets
Shares Outstanding
Net Asset Value Per
Share
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the Funds as
part of the Reorganizations, as well as certain legal matters concerning the tax
consequences of the Reorganizations, will be passed upon by Kirkpatrick &
Lockhart LLP, 1800 Massachusetts Avenue, NW, Second Floor, Washington, DC
20036-1800.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
The Mileage Funds and the AAdvantage Funds are each subject to the
information requirements of the Securities Exchange Act of 1934, as amended, and
the 1940 Act and, in accordance therewith, each files reports and other
information with the SEC. Reports, proxy statements, registration statements and
other information may be inspected without charge and copied at the Public
Reference Room maintained by the SEC at 450 Fifth Street, N.W., Washington, DC
20549. Information on the operation of the Public Reference Room may be obtained
by calling the SEC at 1-202-942-8090. The SEC maintains an Internet website at
http://www.sec.gov that contains information regarding the Trusts and other
registrants that file electronically with the SEC. Copies of such material may
also be obtained, after paying a duplicating fee, from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
-22-
Exchange Commission, Washington, DC, 20549, or by electronic request at the
following e-mail address: publicinfo@sec.gov.
EXPERTS
The audited financial statements of the Mileage Funds are incorporated
by reference in the SAI. The financial statements have been audited by Ernst &
Young LLP, independent accountants, whose report thereon is also included in the
Mileage Funds' Annual Report to Shareholders for the fiscal year ended October
31, 2001, and the Annual Report to Shareholders of the S&P 500 Index Mileage
Fund for the fiscal year ended December 31, 2000. The financial statements
audited by Ernst & Young LLP have been incorporated by reference in the SAI in
reliance on its report given on its authority as experts in auditing and
accounting.
The audited financial statements of the AAdvantage Funds are
incorporated by reference in the SAI. The financial statements have been audited
by Ernst & Young LLP, independent auditors, whose report thereon is also
included in the AAdvantage Funds' Annual Report to Shareholders for the fiscal
year ended October 31, 2001, and the Annual Report to Shareholders of the S&P
500 Index Fund for the fiscal year ended December 31, 2000. The financial
statements audited by Ernst & Young LLP have been incorporated by reference in
the SAI in reliance on its report given on its authority as experts in auditing
and accounting.
OTHER INFORMATION
SHAREHOLDER PROPOSALS. As a general matter, the Mileage Funds and the
AAdvantage Funds do not hold regular annual or other meetings of shareholders.
Any shareholder who wishes to submit proposals to be considered at a special
meeting of a Mileage Fund's shareholders should send such proposals to AMR
Investment Services, Inc., 4333 Amon Carter Boulevard, MD 5645, Fort Worth,
Texas 76155. Proposals must be received a reasonable period of time prior to any
meeting to be included in the proxy materials. Moreover, inclusion of such
proposals is subject to limitations under the federal securities laws. Persons
named as proxies for any subsequent shareholders' meeting will vote in their
discretion with respect to proposals submitted on an untimely basis.
OTHER BUSINESS. Management knows of no other business to be presented
to the Meeting other than the matters set forth in this Proxy Statement, but
should any other matter requiring a vote of the Mileage Funds' shareholders
arise, the proxies will vote thereon according to their best judgment in the
interests of the Mileage Funds.
VOTING INSTRUCTIONS
For each Mileage Fund, the presence, in person or by proxy, of a
majority of the shares of the Fund outstanding and entitled to vote will
constitute a quorum for the transaction of business at the Meeting. In the
absence of a quorum or in the event that a quorum is present at the Meeting, but
votes sufficient to approve the proposals are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares represented at the Meeting in person or by proxy.
The persons named as proxies will vote those proxies that they are entitled to
vote "FOR" the proposals in favor of such an adjournment and will vote those
proxies required to be voted "AGAINST" the proposals against such adjournment. A
shareholder vote may be taken on one or more of the proposals in this Proxy
Statement prior to any such adjournment if sufficient votes have been received
and it is otherwise appropriate.
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Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present at the Meeting for quorum purposes but will not be voted for
or against any adjournment or proposal. Accordingly, abstentions and broker
non-votes effectively will be votes against the proposals because the proposals
require the affirmative vote of a specified majority of each Fund's outstanding
shares.
All properly executed and unrevoked proxies received in time for the
Meeting will be voted as instructed by shareholders. Approval of each proposal
requires the affirmative vote of the lesser of (1) 67% or more of the shares of
each Mileage Fund present at the Meeting, if more than 50% of the outstanding
shares are represented at the Meeting in person or by proxy, or (2) more than
50% of the outstanding shares entitled to vote at the Meeting. If you execute
your proxy but give no voting instructions, your shares that are represented by
proxies will be voted "FOR" the Reorganization and "FOR" or "AGAINST" any other
business that may properly arise at the Meeting, in the proxies' discretion. Any
person giving a proxy has the power to revoke it at any time prior to its
exercise by executing a superseding proxy or by submitting a written notice of
revocation to the Secretary of the Mileage Trust ("Secretary"). To be effective,
such revocation must be received by the Secretary prior to the Meeting and must
indicate your name and account number. In addition, although mere attendance at
the Meeting will not revoke a proxy, a shareholder present at the Meeting may
withdraw his or her proxy by voting in person.
Shareholders of record of the Mileage Funds as of the close of business
on December 31, 2001 ("Record Date"), are entitled to vote at the Meeting.
Information as to the number of outstanding shares for each Mileage Fund as of
the record date is set forth below:
-------------------------------------- ----------------------------------
MILEAGE FUND TOTAL NUMBER OF SHARES
OUTSTANDING AS OF DECEMBER 31,
2001
-------------------------------------- ----------------------------------
Balanced Mileage Fund
-------------------------------------- ----------------------------------
Large Cap Value Mileage Fund
-------------------------------------- ----------------------------------
Small Cap Value Mileage Fund
-------------------------------------- ----------------------------------
International Equity Mileage Fund
-------------------------------------- ----------------------------------
S&P 500 Index Mileage Fund
-------------------------------------- ----------------------------------
Intermediate Bond Mileage Fund
-------------------------------------- ----------------------------------
Short-Term Bond Mileage Fund
-------------------------------------- ----------------------------------
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Shareholders are entitled to one vote for each full share held and a
fractional vote for each fractional share held. Except as set forth in Appendix
C, as of the Record Date, the Manager of the Mileage Funds does not know of any
person who owns beneficially or of record 5% or more of any class of shares of
the Mileage Funds. As of that same date, the Trustees and officers of the
Mileage Funds, as a group, owned less than 1% of any class of the Mileage Funds'
outstanding shares.
By Order of the Board of Trustees,
Robert J. Zutz
Secretary
January __, 2002
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APPENDIX A
FORM OF
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
----------------------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of ________, 2002, between American AAdvantage Funds ("AAdvantage
Trust"), on behalf of each segregated portfolio of assets ("series") thereof
listed on Schedule A to this Agreement ("Schedule A") (each, an "Acquiring
Fund"), and American AAdvantage Mileage Funds ("Mileage Trust"), on behalf of
each series thereof listed on Schedule A (each, a "Target"). (Each Acquiring
Fund and Target is sometimes referred to herein individually as a "Fund" and
collectively as the "Funds"; and AAdvantage Trust and Mileage Trust are
sometimes referred to herein individually as an "Investment Company" and
collectively as the "Investment Companies.") All agreements, representations,
actions, and obligations described herein made or to be taken or undertaken by a
Fund are made and shall be taken or undertaken by AAdvantage Trust on behalf of
each Acquiring Fund and by Mileage Trust on behalf of each Target.
The Investment Companies, each of which is a Massachusetts business trust,
wish to effect seven separate reorganizations, each described in section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"), and
intend this Agreement to be, and adopt it as, a "plan of reorganization" within
the meaning of the regulations under section 368 of the Code ("Regulations").
Each reorganization will involve the transfer of a Target's assets to the
Acquiring Fund listed on Schedule A opposite its name (each, a "corresponding
Acquiring Fund") in exchange solely for voting shares of beneficial interest in
that Acquiring Fund and that Acquiring Fund's assumption of that Target's
liabilities, followed by the constructive distribution of those shares pro rata
to the holders of shares of beneficial interest in that Target in exchange
therefor, all on the terms and conditions set forth herein. (All such
transactions involving each Target and its corresponding Acquiring Fund are
referred to herein as a "Reorganization.") For convenience, the balance of this
Agreement refers only to a single Reorganization, one Target, and one Acquiring
Fund, but the terms and conditions hereof shall apply separately to each
Reorganization. The consummation of one Reorganization shall not be contingent
on the consummation of any other Reorganization.
Target has a single class of shares ("Target Shares"). Acquiring Fund's
shares are divided into multiple classes, including PlanAhead Class shares. Only
Acquiring Fund's PlanAhead Class shares ("Acquiring Fund Shares"), which are
substantially similar to the Target Shares, are involved in the Reorganization.
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) Acquiring Fund Shares determined
by dividing the net value of Target (computed as set forth in
paragraph 2.1) by the net asset value ("NAV") of an Acquiring Fund
Share (computed as set forth in paragraph 2.2), and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
These transactions shall take place at the Closing (as defined in paragraph
3.1).
1.2. The Assets shall include all cash, cash equivalents, securities,
receivables (including interest and dividends receivable), claims and rights of
action, rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on Target's books, and
other property owned by Target, at the Effective Time (as defined in paragraph
3.1).
1.3. The Liabilities shall include all of Target's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute, accrued,
contingent, or otherwise, whether or not arising in the ordinary course of
business, whether or not determinable at the Effective Time, and whether or not
specifically referred to in this Agreement. Notwithstanding the foregoing,
Target agrees to use its best efforts to discharge all its known Liabilities
before the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without regard
to any deduction for dividends paid) and substantially all of its realized net
capital gain, if any, for the current taxable year through the Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares it received
pursuant to paragraph 1.1 to its shareholders of record, determined as of the
Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. That distribution shall be
accomplished by AAdvantage Trust's transfer agent's opening accounts on
Acquiring Fund's share transfer books in the Shareholders' names and
transferring those Acquiring Fund Shares thereto. Each Shareholder's account
shall be credited with the respective PRO RATA number of full and fractional
(rounded to the third decimal place) Acquiring Fund Shares due that Shareholder.
All outstanding Target Shares, including any represented by certificates, shall
simultaneously be canceled on Target's share transfer books. Acquiring Fund
shall not issue certificates representing the Acquiring Fund Shares issued in
connection with the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within six months after
the Effective Time, Target shall be terminated as a series of Mileage Trust and
any further actions shall be taken in connection therewith as required by
applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
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1.8. Any transfer taxes payable on issuance of Acquiring Fund Shares in a
name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
those Acquiring Fund Shares are to be issued, as a condition of that transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"), using the
valuation procedures set forth in its then-current prospectus and statement of
additional information ("SAI"), less (b) the amount of the Liabilities as of the
Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in Acquiring Fund's then-current prospectus and SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of AMR Investment Services, Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the Investment Companies'
principal office on or about March 1, 2002, or at such other place and/or on
such other date as to which the Investment Companies may agree. All acts taking
place at the Closing shall be deemed to take place simultaneously as of the
close of business on the date thereof or at such other time as to which the
Investment Companies may agree ("Effective Time"). If, immediately before the
Valuation Time, (a) the NYSE is closed to trading or trading thereon is
restricted or (b) trading or the reporting of trading on the NYSE or elsewhere
is disrupted, so that accurate appraisal of Target's net value and/or the NAV of
an Acquiring Fund Share is impracticable, the Effective Time shall be postponed
until the first business day after the day when that trading has been fully
resumed and that reporting has been restored.
3.2. Mileage Trust's fund accounting and pricing agent shall deliver at
the Closing a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities, transferred by Target to Acquiring
Fund, as reflected on Acquiring Fund's books immediately after the Closing, does
or will conform to that information on Target's books immediately before the
Closing. Mileage Trust's custodian shall deliver at the Closing a certificate of
an authorized officer stating that (a) the Assets it holds will be transferred
to Acquiring Fund at the Effective Time and (b) all necessary taxes in
conjunction with the delivery of the Assets, including all applicable federal
and state stock transfer stamps, if any, have been paid or provision for payment
has been made.
3.3. Mileage Trust shall deliver to AAdvantage Trust at the Closing a list
of the names and addresses of the Shareholders and the number of outstanding
Target Shares each Shareholder owns, all as of the Effective Time, certified by
Mileage Trust's Secretary or an Assistant Secretary thereof. AAdvantage Trust's
transfer agent shall deliver at the Closing a certificate as to the opening on
Acquiring Fund's share transfer books of accounts in the Shareholders' names.
AAdvantage Trust shall issue and deliver a confirmation to Mileage Trust
A-3
evidencing the Acquiring Fund Shares to be credited to Target at the Effective
Time or provide evidence satisfactory to Mileage Trust that those Acquiring Fund
Shares have been credited to Target's account on Acquiring Fund's books.
3.4. Each Investment Company shall deliver to the other at the Closing (a)
a certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement and (b) bills of sale, checks,
assignments, stock certificates, receipts, and other documents the other
Investment Company or its counsel reasonably requests.
4. REPRESENTATIONS AND WARRANTIES
4.1. Mileage Trust represents and warrants as follows:
4.1.1. Mileage Trust is a trust operating under a written
declaration of trust, the beneficial interest in which is divided into
transferable shares ("Business Trust"), that is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts; and a copy
of its Amended and Restated Declaration of Trust ("Mileage Trust's
Declaration") is on file with the Secretary of the Commonwealth of
Massachusetts;
4.1.2. Mileage Trust is duly registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
("1940 Act"), and that registration is in full force and effect;
4.1.3. Target is a duly established and designated series of Mileage
Trust;
4.1.4. At the Closing, Target will have good and marketable title to
the Assets and full right, power, and authority to sell, assign, transfer,
and deliver the Assets free of any liens or other encumbrances (except
securities that are subject to "securities loans" as referred to in
section 851(b)(2) of the Code); and on delivery and payment for the
Assets, Acquiring Fund will acquire good and marketable title thereto;
4.1.5. Target's current prospectus and SAI conform in all material
respects to the applicable requirements of the Securities Act of 1933, as
amended ("1933 Act"), and the 1940 Act and the rules and regulations
thereunder and do not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby
will not conflict with or violate, Massachusetts law or any provision of
Mileage Trust's Declaration or By-Laws or of any agreement, instrument,
lease, or other undertaking to which Target is a party or by which it is
bound or result in the acceleration of any obligation, or the imposition
of any penalty, under any agreement, judgment, or decree to which Target
A-4
is a party or by which it is bound, except as otherwise disclosed in
writing to and accepted by AAdvantage Trust;
4.1.7. Except as otherwise disclosed in writing to and accepted by
AAdvantage Trust, all material contracts and other commitments of or
applicable to Target (other than this Agreement and investment contracts,
including options, futures, and forward contracts) will be terminated, or
provision for discharge of any liabilities of Target thereunder will be
made, at or prior to the Effective Time, without either Fund's incurring
any liability or penalty with respect thereto and without diminishing or
releasing any rights Target may have had with respect to actions taken or
omitted or to be taken by any other party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by
AAdvantage Trust, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or (to Mileage Trust's knowledge) threatened against Mileage Trust
with respect to Target or any of its properties or assets that, if
adversely determined, would materially and adversely affect Target's
financial condition or the conduct of its business; and Mileage Trust
knows of no facts that might form the basis for the institution of any
such litigation, proceeding, or investigation and is not a party to or
subject to the provisions of any order, decree, or judgment of any court
or governmental body that materially or adversely affects its business or
its ability to consummate the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement
have been duly authorized as of the date hereof by all necessary action on
the part of Mileage Trust's board of trustees, which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and, subject
to approval by Target's shareholders, this Agreement constitutes a valid
and legally binding obligation of Target, enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating
to or affecting creditors' rights and by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement
shall have been duly authorized by all necessary action by Target's
shareholders;
4.1.11. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934, as amended ("1934 Act"), or the 1940 Act for the execution or
performance of this Agreement by Mileage Trust, except for (a) the filing
with the Securities and Exchange Commission ("SEC") of a registration
statement by AAdvantage Trust on Form N-14 relating to the Acquiring Fund
Shares issuable hereunder, and any supplement or amendment thereto
("Registration Statement"), including therein a prospectus/proxy statement
("Proxy Statement"), and (b) such consents, approvals, authorizations, and
filings as have been made or received or as may be required subsequent to
the Effective Time;
4.1.12. On the effective date of the Registration Statement, at the
time of the Shareholders' Meeting (as defined in paragraph 5.2), and at
the Effective Time, the Proxy Statement will (a) comply in all material
A-5
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the rules and regulations thereunder and (b) not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by AAdvantage Trust for use therein;
4.1.13. Target incurred the Liabilities in the ordinary course of its
business; and there are no Liabilities other than liabilities disclosed or
provided for in Mileage Trust's financial statements referred to in
paragraph 4.1.18 and liabilities incurred by Target in the ordinary course
of its business subsequent to October 31, 2001, or otherwise disclosed to
AAdvantage Trust, none of which has been materially adverse to the
business, assets, or results of Target's operations;
4.1.14. Target is a "fund" as defined in section 851(g)(2) of the
Code; it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for
that qualification for its current taxable year; the Assets will be
invested at all times through the Effective Time in a manner that ensures
compliance with the foregoing; and Target has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M
did not apply to it;
4.1.15. Target is not under the jurisdiction of a court in a "title
11 or similar case" (within the meaning of section 368(a)(3)(A) of the
Code);
4.1.16. During the five-year period ending at the Effective Time, (a)
neither Target nor any person "related" (as defined in section
1.368-1(e)(3) of the Regulations) to Target will have acquired Target
Shares, either directly or through any transaction, agreement, or
arrangement with any other person, with consideration other than Acquiring
Fund Shares or Target Shares, except for shares redeemed in the ordinary
course of Target's business as a series of an open-end investment company
as required by Section 22(e) of the 1940 Act, and (b) no distributions
will have been made with respect to Target Shares, other than normal,
regular dividend distributions made pusuant to Target's historic
dividend-paying practice that qualify for the deduction for dividends paid
(as defined in section 561 of the Code) referred to in sections 852(a)(1)
and 4982(c)(1)(A) of the Code;
4.1.17. Target's federal income tax returns, and all applicable state
and local tax returns, for all taxable years through and including the
taxable year ended October 31, 2000, have been timely filed and all taxes
payable pursuant to those returns have been timely paid; and
4.1.18. Mileage Trust's financial statements for the year ended
October 31, 2001, to be delivered to AAdvantage Trust, fairly represent
Target's financial position as of that date and the results of its
operations and changes in its net assets for the year then ended.
A-6
4.2. AAdvantage Trust represents and warrants as follows:
4.2.1. AAdvantage Trust is a Business Trust that is duly organized
and validly existing under the laws of the Commonwealth of Massachusetts;
and a copy of its Amended and Restated Declaration of Trust ("AAdvantage
Trust's Declaration") is on file with the Secretary of the Commonwealth of
Massachusetts;
4.2.2. AAdvantage Trust is duly registered as an open-end management
investment company under the 1940 Act, and that registration is in full
force and effect;
4.2.3. Acquiring Fund is a duly established and designated series of
AAdvantage Trust;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to
Target hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, will be duly and
validly issued and outstanding shares of Acquiring Fund, fully paid and
non-assessable;
4.2.6. Acquiring Fund's current prospectus and SAI conform in all
material respects to the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations thereunder and do not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Massachusetts law
or any provision of AAdvantage Trust's Declaration or By-Laws or of any
agreement, instrument, lease, or other undertaking to which Acquiring Fund
is a party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Acquiring Fund is a party or by which it is
bound, except as otherwise disclosed in writing to and accepted by Mileage
Trust;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Mileage Trust, no litigation, administrative proceeding, or investigation
of or before any court or governmental body is presently pending or (to
AAdvantage Trust's knowledge) threatened against AAdvantage Trust with
respect to Acquiring Fund or any of its properties or assets that, if
adversely determined, would materially and adversely affect Acquiring
Fund's financial condition or the conduct of its business; and AAdvantage
Trust knows of no facts that might form the basis for the institution of
any such litigation, proceeding, or investigation and is not a party to or
subject to the provisions of any order, decree, or judgment of any court
or governmental body that materially or adversely affects its business or
its ability to consummate the transactions contemplated hereby;
A-7
4.2.9. The execution, delivery, and performance of this Agreement
have been duly authorized as of the date hereof by all necessary action on
the part of AAdvantage Trust's board of trustees (together with Mileage
Trust's board of trustees, the "Boards"), which has made the
determinations required by Rule 17a-8(a) under the 1940 Act; and this
Agreement constitutes a valid and legally binding obligation of Acquiring
Fund, enforceable in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by AAdvantage Trust, except
for (a) the filing with the SEC of the Registration Statement and (b) such
consents, approvals, authorizations, and filings as have been made or
received or as may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the Shareholders' Meeting, and at the Effective Time, the Proxy
Statement will (a) comply in all material respects with the applicable
provisions of the 1933 Act, the 1934 Act, and the 1940 Act and the rules
and regulations thereunder and (b) not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that
the foregoing shall not apply to statements in or omissions from the Proxy
Statement made in reliance on and in conformity with information furnished
by Mileage Trust for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2) of
the Code; it qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; it
intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year
in which the provisions of Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares
issued in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund, or any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to
Acquiring Fund, have any plan or intention to acquire -- during the
five-year period beginning at the Effective Time, either directly or
through any transaction, agreement, or arrangement with any other person
-- with consideration other than Acquiring Fund Shares, any Acquiring Fund
Shares issued to the Shareholders pursuant to the Reorganization, except
for redemptions in the ordinary course of such business as required by
section 22(e) of the 1940 Act;
4.2.14. Following the Reorganization, Acquiring Fund (a) will
continue Target's "historic business" (within the meaning of section
1.368-1(d)(2) of the Regulations) and (b) will use a significant portion
of Target's "historic business assets" (within the meaning of section
1.368-1(d)(3) of the Regulations) in a business; in addition, Acquiring
A-8
Fund has no plan or intention to sell or otherwise dispose of any of the
Assets, except for dispositions made in the ordinary course of that
business and dispositions necessary to maintain its status as a RIC;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another business trust or a corporation or any
"fund" thereof (within the meaning of section 851(g)(2) of the Code)
following the Reorganization;
4.2.16. Acquiring Fund does not directly or indirectly own, nor at
the Effective Time will it directly or indirectly own, nor has it directly
or indirectly owned at any time during the past five years, any shares of
Target;
4.2.17. During the five-year period ending at the Effective Time,
neither Acquiring Fund nor any person "related" (as defined in section
1.368-1(e)(3) of the Regulations) to Acquiring Fund will have acquired
Target Shares with consideration other than Acquiring Fund Shares;
4.2.18. Acquiring Fund's federal income tax returns, and all
applicable state and local tax returns, for all taxable years through and
including the taxable year ended October 31, 2000, have been timely filed
and all taxes payable pursuant to such returns have been timely paid; and
4.2.19. AAdvantage Trust's financial statements for the year ended
October 31, 2001, to be delivered to Mileage Trust, fairly represent
Acquiring Fund's financial position as of that date and the results of its
operations and changes in its net assets for the year then ended.
4.3. Each Investment Company represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares received
by each Shareholder will be approximately equal to the fair market value
of its Target Shares constructively surrendered in exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person "related"
(within the meaning of section 1.368-1(e)(3) of the Regulations) to either
Fund or (ii) any portion of the Acquiring Fund Shares to be received by
them in the Reorganization to any person "related" (within such meaning)
to Acquiring Fund, (b) does not anticipate dispositions of those Acquiring
Fund Shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of dispositions of shares of Target as a series
of an open-end investment company, (c) expects that the percentage of
Shareholder interests, if any, that will be disposed of as a result of or
at the time of the Reorganization will be DE MINIMIS, and (d) does not
anticipate that there will be extraordinary redemptions of Acquiring Fund
Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
A-9
4.3.4. The fair market value of the Assets on a going concern basis
will equal or exceed the Liabilities to be assumed by Acquiring Fund and
those to which the Assets are subject;
4.3.5. There is no intercompany indebtedness between the Funds that
was issued or acquired, or will be settled, at a discount;
4.3.6. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, Target held immediately before the Reorganization.
For the purposes of this representation, any amounts Target used to pay
its Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions in the
ordinary course of its business required by section 22(e) of the 1940 Act
and (b) regular, normal dividend distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) will be included as assets held thereby
immediately before the Reorganization;
4.3.7. None of the compensation received by any Shareholder who is
an employee of or service provider to Target will be separate
consideration for, or allocable to, any of the Target Shares that
Shareholder held; none of the Acquiring Fund Shares any such Shareholder
received will be separate consideration for, or allocable to, any
employment agreement, investment advisory agreement, or other service
agreement; and the consideration paid to any such Shareholder will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services;
4.3.8. Immediately after the Reorganization, the Shareholders will
not own shares constituting "control" (within the meaning of section
304(c) of the Code) of Acquiring Fund;
4.3.9. Neither Fund will be reimbursed for any expenses incurred by
it or on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1
C.B. 187) ("Reorganization Expenses"); and
4.3.10. The aggregate value of the acquisitions, redemptions, and
distributions limited by paragraphs 4.1.16, 4.2.13, and 4.2.17 will not
exceed 50% of the value (without giving effect to such acquisitions,
redemptions, and distributions) of the proprietary interest in Target at
the Effective Time.
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the
ordinary course between the date hereof and the Closing, it being understood
that --
A-10
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and changes in operations
contemplated by each Fund's normal business activities, and
(b) each Fund will retain exclusive control of its investments until the
Closing; provided that Target shall not dispose of more than an
insignificant portion of its historic business assets (as defined
above) during that period without Acquiring Fund's prior consent.
5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby ("Shareholders' Meeting").
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof. 5.4. Target covenants
that it will assist AAdvantage Trust in obtaining information AAdvantage Trust
reasonably requests concerning the beneficial ownership of Target Shares.
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to AAdvantage Trust at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal and state securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all assignments and other instruments, and will take or cause to be
taken further action, the other Fund may deem necessary or desirable to vest in,
and confirm to, (a) Acquiring Fund, title to and possession of all the Assets,
and (b) Target, title to and possession of the Acquiring Fund Shares to be
delivered hereunder, and otherwise to carry out the intent and purpose hereof.
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and state
securities laws it deems appropriate to continue its operations after the
Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) the other Fund's
performance of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
A-11
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by each Board and shall have been approved by
Target's shareholders in accordance with Mileage Trust's Declaration and By-Laws
and applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
adverse effect on either Fund's assets or properties, provided that either
Investment Company may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Mileage Trust shall have received an opinion of Kirkpatrick &
Lockhart LLP ("Counsel") substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of AAdvantage
Trust, a Business Trust duly organized and validly existing under the laws
of the Commonwealth of Massachusetts with power under AAdvantage Trust's
Declaration to own all its properties and assets and, to the knowledge of
Counsel, to carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by AAdvantage Trust on behalf of Acquiring Fund and (b) assuming
due authorization, execution, and delivery of this Agreement by Mileage
Trust on behalf of Target, is a valid and legally binding obligation of
AAdvantage Trust with respect to Acquiring Fund, enforceable in accordance
with its terms, except as the same may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, and similar
laws relating to or affecting creditors' rights and by general principles
of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized, validly issued
and outstanding, and fully paid and non-assessable;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate AAdvantage Trust's Declaration or By-Laws or any provision of any
agreement (known to Counsel, without any independent inquiry or
A-12
investigation) to which AAdvantage Trust (with respect to Acquiring Fund)
is a party or by which it is bound or (to the knowledge of Counsel,
without any independent inquiry or investigation) result in the
acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which AAdvantage Trust (with respect
to Acquiring Fund) is a party or by which it is bound, except as set forth
in that opinion or as otherwise disclosed in writing to and accepted by
Mileage Trust;
6.4.5. To the knowledge of Counsel (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by
AAdvantage Trust (on behalf of Acquiring Fund) of the transactions
contemplated herein, except those obtained under the 1933 Act, the 1934
Act, and the 1940 Act and those that may be required under state
securities laws;
6.4.6. AAdvantage Trust is registered with the SEC as an investment
company, and to the knowledge of Counsel no order has been issued or
proceeding instituted to suspend that registration; and
6.4.7. To the knowledge of Counsel (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to AAdvantage Trust (with respect to Acquiring Fund) or any
of its properties or assets attributable or allocable to Acquiring Fund
and (b) AAdvantage Trust (with respect to Acquiring Fund) is not a party
to or subject to the provisions of any order, decree, or judgment of any
court or governmental body that materially and adversely affects Acquiring
Fund's business, except as set forth in that opinion or as otherwise
disclosed in writing to and accepted by Mileage Trust.
In rendering the foregoing opinion, Counsel may (1) make assumptions regarding
the authenticity, genuineness, and/or conformity of documents and copies thereof
without independent verification thereof, (2) limit that opinion to applicable
federal and state law, and (3) define the word "knowledge" and related terms to
mean the knowledge of attorneys then with Counsel who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.5. AAdvantage Trust shall have received an opinion of Counsel
substantially to the effect that:
6.5.1. Target is a duly established series of Mileage Trust, a
Business Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under Mileage Trust's Declaration
to own all its properties and assets and, to the knowledge of Counsel, to
carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Mileage Trust on behalf of Target and (b) assuming due
authorization, execution, and delivery of this Agreement by AAdvantage
Trust on behalf of Acquiring Fund, is a valid and legally binding
obligation of Mileage Trust with respect to Target, enforceable in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws relating to or affecting creditors' rights and by general
principles of equity;
A-13
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Mileage Trust's Declaration or By-Laws or any provision of any
agreement (known to Counsel, without any independent inquiry or
investigation) to which Mileage Trust (with respect to Target) is a party
or by which it is bound or (to the knowledge of Counsel, without any
independent inquiry or investigation) result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Mileage Trust (with respect to Target) is a
party or by which it is bound, except as set forth in that opinion or as
otherwise disclosed in writing to and accepted by AAdvantage Trust;
6.5.4. To the knowledge of Counsel (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by
Mileage Trust (on behalf of Target) of the transactions contemplated
herein, except those obtained under the 1933 Act, the 1934 Act, and the
1940 Act and those that may be required under state securities laws;
6.5.5. Mileage Trust is registered with the SEC as an investment
company, and to the knowledge of Counsel no order has been issued or
proceeding instituted to suspend that registration; and
6.5.6. To the knowledge of Counsel (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Mileage Trust (with respect to Target) or any of its
properties or assets attributable or allocable to Target and (b) Mileage
Trust (with respect to Target) is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially and adversely affects Target's business, except as
set forth in that opinion or as otherwise disclosed in writing to and
accepted by AAdvantage Trust.
In rendering the foregoing opinion, Counsel may (1) make assumptions regarding
the authenticity, genuineness, and/or conformity of documents and copies thereof
without independent verification thereof, (2) limit such opinion to applicable
federal and state law, and (3) define the word "knowledge" and related terms to
mean the knowledge of attorneys then with Counsel who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.6. Each Investment Company shall have received an opinion of Counsel,
addressed to and in form and substance reasonably satisfactory to it, as to the
federal income tax consequences mentioned below ("Tax Opinion"). In rendering
the Tax Opinion, Counsel may rely as to factual matters, exclusively and without
independent verification, on the representations made in this Agreement, which
Counsel may treat as representations made to it, or in separate letters
addressed to Counsel and the certificates delivered pursuant to paragraph 3.4.
The Tax Opinion shall be substantially to the effect that, based on the facts
and assumptions stated therein and conditioned on consummation of the
Reorganization in accordance with this Agreement, for federal income tax
purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely
for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares pro rata to
A-14
the Shareholders constructively in exchange for their Target Shares, will
qualify as a reorganization within the meaning of section 368(a)(1)(C) of
the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer of the
Assets to Acquiring Fund in exchange solely for Acquiring Fund Shares and
Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
6.6.3. Acquiring Fund will recognize no gain or loss on its receipt
of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis in the Assets will be the same as
Target's basis therein immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's aggregate basis in the Acquiring Fund Shares
it receives in the Reorganization will be the same as the aggregate basis
in its Target Shares it constructively surrenders in exchange for those
Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided
the Shareholder held them as capital assets at the Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.
At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, that waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Each Fund will bear half of the total Reorganization Expenses.
8. ENTIRE AGREEMENT; NO SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
A-15
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach
of any representation, warranty, or covenant contained herein to be performed at
or prior to the Effective Time or (b) if a condition to its obligations has not
been met and it reasonably appears that such condition will not or cannot be
met; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraph 9.2, there shall be no liability for
damages on the part of either Fund, or the trustees or officers of either
Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in any manner
mutually agreed on in writing by the parties; provided that following that
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts; provided that, in the
case of any conflict between those laws and the federal securities laws, the
latter shall govern.
11.2. Nothing expressed or implied herein is intended or shall be
construed to confer on or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
11.3. Each Investment Company acknowledges that the other is a Business
Trust organized in series form. This Agreement is executed by AAdvantage Trust
on behalf of Acquiring Fund, and by Mileage Trust on behalf of Target, and by
their respective trustees and/or officers in their capacities as such, and not
individually. Each Investment Company's obligations under this Agreement are not
binding on or enforceable against any of its trustees, officers, or shareholders
but are only binding on and enforceable against (a) in the case of AAdvantage
Trust, the assets and property of Acquiring Fund and no other series thereof and
(b) in the case of Mileage Trust, the assets and property of Target and no other
series thereof. A trustee of one Investment Company shall not be personally
liable hereunder to the other Investment Company or its trustees or shareholders
for any act, omission, or obligation of the former Investment Company or any
other trustee thereof. Each Investment Company agrees that, in asserting any
rights or claims under this Agreement on behalf of its Fund, it shall look only
to the other Fund's assets and property in settlement of those rights and claims
and not to those trustees, officers, or shareholders.
A-16
11.4. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other party. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officer as of the day and year first
written above.
AMERICAN AADVANTAGE MILEAGE FUNDS,
on behalf of each of its series
listed on Schedule A
By:
----------------------------
William F. Quinn, President
AMERICAN AADVANTAGE FUNDS,
on behalf of each of its series
listed on Schedule A
By:
----------------------------
William F. Quinn, President
A-17
SCHEDULE A
TARGETS ACQUIRING FUNDS
(All Series of Mileage Trust) (All Series of AAdvantage Trust)
- ---------------------------------------- -------------------------------------
American AAdvantage Balanced Mileage American AAdvantage Balanced Fund
Fund
American AAdvantage Large Cap Value American AAdvantage Large Cap Value
Mileage Fund Fund
American AAdvantage Small Cap Value American AAdvantage Small Cap Value
Mileage Fund Fund
American AAdvantage International American AAdvantage International
Equity Mileage Fund Equity Fund
American AAdvantage S&P 500 Index American AAdvantage S&P 500 Index
Mileage Fund Fund
American AAdvantage Intermediate Bond American AAdvantage Intermediate
Mileage Fund Bond Fund
American AAdvantage Short-Term Bond American AAdvantage Short-Term Bond
Mileage Fund Fund
A-18
APPENDIX B
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PERFORMANCE
---------------------------------------------------
B-1
APPENDIX C
SHAREHOLDERS WHO BENEFICIALLY OWN 5% OR MORE OF THE MILEAGE FUNDS
BALANCED MILEAGE FUND
- ---------------------------- ---------------------------------------------------
NUMBER AND PERCENTAGE OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF DECEMBER 31, 2001
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
Each shareholder listed may be contacted c/o [ ].
LARGE-CAP VALUE MILEAGE FUND
- ---------------------------- ---------------------------------------------------
NUMBER AND PERCENTAGE OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF DECEMBER 31, 2001
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
Each shareholder listed may be contacted c/o [ ].
SMALL-CAP VALUE MILEAGE FUND
- ---------------------------- ---------------------------------------------------
NUMBER AND PERCENTAGE OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF DECEMBER 31, 2001
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
Each shareholder listed may be contacted c/o [ ].
INTERNATIONAL EQUITY MILEAGE FUND
- ---------------------------- ---------------------------------------------------
NUMBER AND PERCENTAGE OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF DECEMBER 31, 2001
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- ---------------------------- ----------------------
C-1
[-----]%
- ---------------------------- ---------------------------- ----------------------
[-----]%
- ---------------------------- ---------------------------- ----------------------
Each shareholder listed may be contacted c/o [ ].
S&P 500 INDEX MILEAGE FUND
- ------------------------------------------ -------------------------------------
NUMBER AND PERCENTAGE OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF DECEMBER 31, 2001
- ---------------------------- --------------------------- -----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
Each shareholder listed may be contacted c/o [ ].
INTERMEDIATE BOND MILEAGE FUND
- ---------------------------- --------------------------- -----------------------
NUMBER AND PERCENTAGE OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF DECEMBER 31, 2001
- ---------------------------- --------------------------- -----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
Each shareholder listed may be contacted c/o [ ].
SHORT-TERM BOND MILEAGE FUND
- ---------------------------- ---------------------------------------------------
NUMBER AND PERCENTAGE OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS OF DECEMBER 31, 2001
- ---------------------------- ---------------------------------------------------
[-----]%
- ---------------------------- ---------------------------------------------------
[-----]%
- ---------------------------- ---------------------------------------------------
[-----]%
- ---------------------------- --------------------------- -----------------------
Each shareholder listed may be contacted c/o [ ].
C-2
APPENDIX D
FINANCIAL HIGHLIGHTS
The following financial highlights tables are intended to help you
understand the Mileage Funds' and the AAdvantage Funds' financial performance
for the periods shown. Certain information reflects financial results for a
single Fund share. In the tables, "total investment return" represents the rate
that an investor would have earned (or lost) on an investment in the Fund,
assuming reinvestment of all dividends and distributions. This information has
been audited by Ernst & Young LLP, independent auditors for the Mileage Funds
and the AAdvantage Funds, whose report, along with the financial statements for
the Funds, are included in their respective Annual Report to Shareholders, dated
October 31, 2001 (for the Mileage Funds), October 31, 2001 (for the AAdvantage
Funds), and December 31, 2000 (for the S&P 500 Index Funds), which may be
obtained without charge by calling 1-800-388-3344.
D-1
BALANCED FUND-PLANAHEAD CLASS
-------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
2001 2000(A E) 1999(A) 1998(A) 1997(A)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: -------- --------- ------- ------- -------
Net asset value, beginning of period........................ $ 12.79 $ 14.35 $ 16.03 $ 15.03
------- ------- ------- ------- -------
Income from investment operations
Net investment income................................... 0.53(D) 0.44(D) 0.47(D) 0.63(D)
Net gains (losses) on securities (realized and
unrealized)........................................... --(D) (0.39)(D) 0.75(D) 2.10(D)
------- ------- ------- ------- -------
Total from investment operations............................ 0.53 0.05 1.22 2.73
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (0.46) (0.44) (0.64) (0.57)
Distributions from net realized gains on securities..... (0.78) (1.17) (2.26) (1.16)
------- ------- ------- ------- -------
Total distributions......................................... (1.24) (1.61) (2.90) (1.73)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 12.08 $ 12.79 $ 14.35 $ 16.03
======= ======= ======= ======= =======
Total return................................................ 4.88% 0.22% 8.73% 19.75%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $11,643 $22,753 $40,717 $34,354
Ratios to average net assets (annualized)
Expenses............................................ 0.90%(D) 0.90%(D) 0.89%(D) 0.90%(D)
Net investment income............................... 4.01%(D) 3.21%(D) 3.23%(D) 3.52%(D)
Portfolio turnover rate(C).................................. 121% 90% 87% 105%
(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) Capital Guardian Trust Company was replaced by Brandywine Asset Management,
Inc. as an investment adviser to the Balanced Fund on April 1, 1996.
(C) The American AAdvantage Balanced 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 Balanced Portfolio.
(E) GSB Investment Management, Inc. was removed as an investment adviser to the
Balanced Fund on March 1, 2000.
D-2
LARGE CAP VALUE FUND-PLANAHEAD CLASS
-----------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2001 2000(A F) 1999(A E) 1998(A) 1997(A)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: --------- --------- --------- ------- -------
Net asset value, beginning of period........................ $ 18.41 $ 20.67 $ 21.38 $ 18.33
------- ------- ------- ------- -------
Income from investment operations
Net investment income................................... 0.60(D) 0.35(D) 0.35(D) 0.35(D)
Net gains (losses) on securities (realized and
unrealized)........................................... (0.13)(D) 0.01(D) 0.86(D) 4.39(D)
------- ------- ------- ------- -------
Total from investment operations............................ 0.47 0.36 1.21 4.74
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (0.43) (0.36) (0.34) (0.38)
Distributions from net realized gains on securities..... (3.05) (2.26) (1.58) (1.31)
------- ------- ------- ------- -------
Total distributions......................................... (3.48) (2.62) (1.92) (1.69)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ 15.40 $ 18.41 $ 20.67 $ 21.38
======= ======= ======= ======= =======
Total return................................................ 4.56% 1.41% 5.94% 27.64%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $11,507 $20,095 $40,907 $29,684
Ratios to average net assets (annualized)
Expenses............................................ 0.84%(D) 0.90%(D) 0.86%(D) 0.93%(D)
Net investment income............................... 2.51%(D) 1.62%(D) 1.58%(D) 1.85%(D)
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager................. -- -- -- --
Portfolio turnover rate(C).................................. 58% 33% 40% 35%
(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) Capital Guardian Trust Company was replaced by Brandywine Asset Management,
Inc. as an investment adviser to the Large Cap Value Fund on April 1, 1996.
(C) The American AAdvantage Large Cap Value 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 Large Cap Value Portfolio.
(E) Prior to March 1, 1999, the Large Cap Value Fund was known as the Growth and
Income Fund.
(F) GSB Investment Management, Inc. was removed as an investment adviser to the
Large Cap Value Fund on March 1, 2000.
D-3
SMALL CAP VALUE FUND-
PLANAHEAD CLASS
------------------------------------------------------------
YEAR ENDED YEAR ENDED MARCH 1 TO
OCTOBER 31, 2001 OCTOBER 31, 2000 OCTOBER 31, 1999
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ---------------- ---------------- ----------------
Net asset value, beginning of period........................ $ 9.05 $ 9.13
------ ------ ------
Income from investment operations:
Net investment income(A)................................ 0.08 0.02
Net gains (losses) on securities (both realized and
unrealized)(A)......................................... 1.14 (0.10)
------ ------ ------
Total from investment operations............................ 1.22 (0.08)
------ ------ ------
Less distributions:
Dividends from net investment income.................... (0.02) --
Distributions from net realized gains on securities..... (0.17) --
------ ------ ------
Total distributions......................................... (0.19) --
------ ------ ------
Net asset value, end of period.............................. $10.08 $ 9.05
====== ====== ======
Total return (not annualized)............................... 13.76% (0.88)%
====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ 440 $ 74
Ratios to average net assets (annualized)(A):
Expenses............................................ 1.18% 1.28%
Net investment income............................... 1.71% 0.57%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager.................. 0.06% 0.18%
Portfolio turnover rate(B).................................. 63% 31%
(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.
(B) The American AAdvantage Small Cap Value Fund invests all of its investable
assets in its corresponding Portfolio. Portfolio turnover rate is that of
the Portfolio.
D-4
INTERNATIONAL EQUITY FUND-PLANAHEAD CLASS
-----------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
2001 2000(A) 1999(A B) 1998(A) 1997(A)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ------- ------- --------- ------- -------
Net asset value, beginning of period........................ $ 19.13 $ 16.75 $ 16.92 $ 14.90
------ ------- ------- ------- -------
Income from investment operations
Net investment income................................... 0.31(D) 0.30(D) 0.31(D) 0.30(D)
Net gains on securities (realized and unrealized)....... 0.18(D) 2.89(D) 0.31(D) 2.41(D)
------ ------- ------- ------- -------
Total from investment operations............................ 0.49 3.19 0.62 2.71
------ ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (0.26) (0.32) (0.31) (0.28)
Distributions from net realized gains on securities..... (1.64) (0.49) (0.48) (0.41)
------ ------- ------- ------- -------
Total distributions......................................... (1.90) (0.81) (0.79) (0.69)
------ ------- ------- ------- -------
Net asset value, end of period.............................. $ 17.72 $ 19.13 $ 16.75 $ 16.92
====== ======= ======= ======= =======
Total return................................................ 2.08% 19.68% 3.94% 18.71%
====== ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $85,680 $60,602 $46,242 $20,075
Ratios to average net assets (annualized)
Expenses............................................ 1.01%(D) 0.93%(D) 1.08%(D) 1.14%(D)
Net investment income............................... 1.43%(D) 1.71%(D) 1.72%(D) 1.95%(D)
Portfolio turnover rate(C).................................. 45% 63% 24% 15%
(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 March 1, 1999, Morgan Stanley Asset Management, Inc. was replaced as an
investment adviser to the International Equity Fund by Lazard Asset
Management and Independence Investment Associates.
(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.
D-5
S&P 500 INDEX FUND-
PLANAHEAD CLASS
--------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED MARCH 2,
JUNE 30, DECEMBER 31, DECEMBER 31,
----------- ----------------- ----------------
2001 2000(A) 1999 1998
----------- ------- ------ ----------------
(UNAUDITED)
NET ASSET VALUE, BEGINNING OF PERIOD............... $17.99 $20.12 $16.83 $14.27
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income.......................... 0.09 0.13 0.15 0.08
Net realized and unrealized gain (loss) on
investments and futures transactions......... (1.34) (2.00) 3.25 2.56
------ ------ ------ ------
Total from investment operations................... (1.25) (1.87) 3.40 2.64
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income........... (0.03) (0.26)(C) (0.11) (0.08)
------ ------ ------ ------
Total distributions............................ (0.03) (0.26) (0.11) (0.08)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD..................... $16.71 $17.99 $20.12 $16.83
====== ====== ====== ======
TOTAL RETURN....................................... (6.98%)(D) (9.38%) 20.24% 18.58%(D)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)....... $6,270 $5,143 $6,173 $1,963
Ratios to average net assets (annualized):
Net investment income..................... 0.77% 0.66% 0.91% 1.04%
Expenses, including expenses of the master
portfolio, after waivers(B)............. 0.55% 0.54% 0.55% 0.55%
Expenses, including expenses of the master
portfolio, before waivers(B)............ 0.70% 0.70% 0.72% 0.79%
Decrease reflected in above expense ratio
due to absorption of expenses by State
Street Bank, BT Alex Brown and AMR
Investment Services, Inc................ 0.15% 0.16% 0.17% 0.24%
- - ---------------
(A) On March 1, 2000, the Fund invested all of its investable assets in the
State Street Bank Equity 500 Portfolio. Prior to March 1, 2000, the Fund
invested all of its investable assets in the BT Equity 500 Portfolio.
(B) Includes expenses of the BT Equity 500 Index Portfolio for the period
January 1, 2000 to February 29, 2000 and the expenses of the State Street
Bank Equity 500 Index Portfolio from March 1, 2000 to December 31, 2000.
(C) Includes a tax return of capital distribution which amounted to less than
$0.01 per share.
(D) Not annualized.
D-6
INTERMEDIATE BOND
FUND-PLANAHEAD CLASS
-----------------------------------------
YEAR ENDED MARCH 2
OCTOBER 31, TO
------------------------- OCTOBER 31,
2001 2000 1999 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ------ ------ ------ -----------
Net asset value, beginning of period........................ $ $ 9.63 $10.55 $10.25
------ ------ ------ ------
Income from investment operations
Net investment income(A)................................ 0.59 0.53 0.37
Net gains (losses) on securities (realized and
unrealized)(A)......................................... (0.06) (0.63) 0.30
------ ------ ------ ------
Total from investment operations............................ 0.53 (0.10) 0.67
------ ------ ------ ------
Less distributions:
Dividends from net investment income.................... (0.59) (0.53) (0.37)
Distributions from net realized gains on securities..... -- (0.29) --
------ ------ ------ ------
Total distributions......................................... (0.59) (0.82) (0.37)
------ ------ ------ ------
Net asset value, end of period.............................. $ $ 9.57 $ 9.63 $10.55
====== ====== ====== ======
Total return (not annualized)............................... 5.76% (0.98)% 6.63%
====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ $ 102 $1,545 $ 30
Ratios to average net assets (annualized)(A)
Expenses............................................ 0.87% 0.85% 0.86%
Net investment income............................... 6.07% 5.32% 5.21%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager(A)............... 0.02% -- --
Portfolio turnover rate (not annualized)(B)................. 102% 123% 181%
(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.
(B) The American AAdvantage Intermediate Bond Fund invests all of its investable
assets in its corresponding Portfolio. Portfolio turnover rate is that of
the Portfolio.
D-7
SHORT-TERM BOND FUND-PLANAHEAD CLASS
-------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------
2001 2000 1999 1998(A) 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ------ ------ ------ ------- ------
Net asset value, beginning of period........................ $ $ 9.30 $ 9.64 $ 9.63 $ 9.68
------ ------ ------ ------ ------
Income from investment operations
Net investment income................................... 0.59(C) 0.54(C) 0.60(C) 0.61(C)
Net gains (losses) on securities (realized and
unrealized)........................................... (0.09)(C) (0.33)(C) 0.01(C) (0.05)(C)
------ ------ ------ ------ ------
Total from investment operations............................ 0.50 0.21 0.61 0.56
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income.................... (0.59) (0.55) (0.60) (0.61)
Distributions from net realized gains on securities..... -- -- -- --
------ ------ ------ ------ ------
Total distributions......................................... (0.59) (0.55) (0.60) (0.61)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $ $ 9.21 $ 9.30 $ 9.64 $ 9.63
====== ====== ====== ====== ======
Total return................................................ 5.56% 2.21% 6.50% 6.01%
====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ $ 489 $1,638 $3,722 $5,096
Ratios to average net assets (annualized)
Expenses............................................ 0.84%(C) 0.84%(C) 0.85%(C) 0.85%(C)
Net investment income............................... 6.29%(C) 5.75%(C) 6.24%(C) 6.36%(C)
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager................. 0.10% 0.09% 0.08% 0.05%
Portfolio turnover rate(B).................................. 89% 115% 74% 282%
(A) Prior to March 1, 1998, the American AAdvantage Short-Term Bond Fund was
known as the American AAdvantage Limited-Term Income Fund.
(B) The American AAdvantage Short-Term Bond Fund invests all of its investable
assets in its corresponding Portfolio. Portfolio turnover rate is that of
the Portfolio.
(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 Short-Term Bond Portfolio.
D-8
BALANCED MILEAGE FUND
-------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
2001 2000(D) 1999 1998 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ------- ------- ------- ------- -------
Net asset value, beginning of period(B)..................... $ $ 17.50 $ 18.08 $ 18.32 $ 16.01
------- ------- ------- ------- -------
Income from investment operations
Net investment income(C)................................ 0.69 0.64 0.57 0.58
Net gains (losses) on securities (both realized and
unrealized)(C)........................................ 0.03 (0.60) 0.93 2.44
------- ------- ------- ------- -------
Total from investment operations............................ 0.72 0.04 1.50 3.02
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (0.64) (0.62) (0.58) (0.49)
Distributions from net realized gains on securities..... (0.19) -- (1.16) (0.22)
------- ------- ------- ------- -------
Total distributions......................................... (0.83) (0.62) (1.74) (0.71)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ $ 17.39 $ 17.50 $ 18.08 $ 18.32
======= ======= ======= ======= =======
Total return................................................ 4.55% 0.13% 8.74% 19.52%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ $ 2,410 $ 3,282 $ 3,808 $ 3,437
Ratios to average net assets (annualized)(C):
Expenses............................................ 1.25% 0.99% 0.99% 0.99%
Net investment income............................... 3.68% 3.16% 3.16% 3.45%
Decrease reflected in above expense ratio due to
absorption of expenses by the manager................. 0.43% 0.76% 0.75% 0.84%
Portfolio turnover rate(E).................................. 121% 90% 87% 105%
(A) Capital Guardian Trust Company was replaced by Brandywine Asset Management
as an investment adviser to the Balanced Fund on April 1, 1996.
(B) The net asset value per share for the Balanced Mileage Fund has been
adjusted for a stock split which occurred on November 1, 1995 in the ratio
of 1.43169.
(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 respective AMR Investment Services Portfolio.
(D) GSB Investment Management, Inc. was removed as an investment adviser to the
Balanced Fund on March 1, 2000.
(E) Portfolio turnover rate is that of the Portfolio.
LARGE CAP VALUE MILEAGE FUND
-------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
2001 2000(E) 1999(D) 1998 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ------- ------- ------- ------- -------
Net asset value, beginning of period(B)..................... $ $ 21.52 $ 23.43 $ 23.72 $ 19.35
------- ------- ------- ------- -------
Income from investment operations:
Net investment income(C)................................ 0.49 0.39 0.45 0.31
Net gains (losses) on securities (both realized and
unrealized)(C)........................................ 0.10 (0.02) 0.92 4.87
------- ------- ------- ------- -------
Total from investment operations............................ 0.59 0.37 1.37 5.18
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (0.43) (0.39) (0.39) (0.34)
Distributions from net realized gains on securities..... (2.45) (1.89) (1.27) (0.47)
------- ------- ------- ------- -------
Total distributions......................................... (2.88) (2.28) (1.66) (0.81)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ $ 19.23 $ 21.52 $ 23.43 $ 23.72
======= ======= ======= ======= =======
Total return................................................ 4.15% 1.32% 6.01% 27.60%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ $ 5,578 $ 8,242 $10,015 $12,513
Ratios to average net assets (annualized)(C):
Expenses............................................ 1.24% 0.99% 0.98% 0.99%
Net investment income............................... 2.17% 1.53% 1.46% 1.78%
Decrease reflected in above expense ratio due to
absorption of expenses by the manager................. 0.13% 0.30% 0.23% 0.32%
Portfolio turnover rate(F).................................. 58% 33% 40% 35%
(A) Capital Guardian Trust Company was replaced by Brandywine Asset Management
as an investment adviser to the Large Cap Value Fund on April 1, 1996.
(B) The net asset value per share for the Large Cap Value Mileage Fund has been
adjusted for a stock split which occurred on November 1, 1995 in the ratio
of 1.254705.
(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 respective AMR Investment Services Portfolio.
(D) Prior to March 1, 1999, the Large Cap Value Fund was known as the Growth and
Income Fund.
(E) GSB Investment Management, Inc. was removed as an investment adviser to the
Large Cap Value Fund on March 1, 2000.
(F) Portfolio turnover rate is that of the Portfolio.
D-9
SMALL CAP VALUE
MILEAGE FUND
-------------------------
MARCH 1,
YEAR ENDED TO
OCTOBER 31, OCTOBER 31,
2001 2000 1999
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ----------- ----------- -----------
Net asset value, beginning of period........................ $ $ 9.95 $10.00
------ ------ ------
Income from investment operations:
Net investment income (loss)(A)......................... (0.10) 0.22
Net gains (losses) on securities (both realized and
unrealized)(A)......................................... 1.56 (0.27)
------ ------ ------
Total from investment operations............................ 1.46 (0.05)
------ ------ ------
Less distributions:
Dividends from net investment income.................... (0.02) --
Distributions from net realized gains on securities..... (0.97) --
------ ------ ------
Total distributions......................................... (0.99) --
------ ------ ------
Net asset value, end of period.............................. $ $10.42 $ 9.95
====== ====== ======
Total return (not annualized)............................... 16.38% (0.50)%
====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ $ 74 $ 53
Ratios to average net assets (annualized)(A):
Expenses.............................................. 1.47% 1.51%
Net investment income................................. 1.38% 0.45%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager.................. 30.80% 8.87%
Portfolio turnover rate(B).................................. 63% 31%
(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 respective AMR Investment Services Portfolio.
(B) Portfolio turnover rate is that of the Portfolio.
INTERNATIONAL EQUITY MILEAGE FUND
-------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
2001 2000 1999(C) 1998 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ------- ------- ------- ------- -------
Net asset value, beginning of period(A)..................... $ $ 20.17 $ 17.56 $ 17.67 $ 15.31
------- ------- ------- ------- -------
Income from investment operations:
Net investment income(B)................................ 0.21 0.23 0.25 0.25
Net gains on securities (both realized and
unrealized)(B)........................................ 0.28 3.06 0.33 2.52
------- ------- ------- ------- -------
Total from investment operations............................ 0.49 3.29 0.58 2.77
------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income.................... (0.21) (0.25) (0.27) (0.18)
Distributions from net realized gains on securities..... (2.03) (0.43) (0.42) (0.23)
------- ------- ------- ------- -------
Total distributions......................................... (2.24) (0.68) (0.69) (0.41)
------- ------- ------- ------- -------
Net asset value, end of period.............................. $ $ 18.42 $ 20.17 $ 17.56 $ 17.67
======= ======= ======= ======= =======
Total return................................................ 1.84% 19.27% 3.49% 18.44%
======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ $5,452 $6,334 $5,356 $5,219
Ratios to average net assets (annualized)(B):
Expenses............................................ 1.41% 1.41% 1.47% 1.47%
Net investment income............................... 0.91% 1.23% 1.32% 1.61%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager................. 0.01% 0.08% 0.18% 0.21%
Portfolio turnover rate(D).................................. 45% 63% 24% 15%
(A) The net asset value per share for the International Equity Mileage Fund has
been adjusted for a stock split which occurred on November 1, 1995 in the
ratio of 1.520913.
(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 respective AMR Investment Services Portfolio.
(C) On March 1, 1999, Morgan Stanley Asset Management, Inc. was replaced as an
investment adviser to the International Equity Mileage Fund by Lazard Asset
Management and Independence Investment Associates.
(D) Portfolio turnover rate is that of the Portfolio.
D-10
S&P 500 INDEX
MILEAGE FUND
-----------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED MARCH 2, TO
JUNE 30, DECEMBER 31, DECEMBER 31,
------------- ---------------------------- ------------
2001 2000(A) 1999 1998
------------- ------------- ------------ ------------
(UNAUDITED)
NET ASSET VALUE, BEGINNING OF PERIOD.... $12.61 $14.05 $11.78 $10.00
------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income................. 0.05 0.10 0.11 0.10
Net realized and unrealized gain
(loss) on investments and futures
transactions........................ (0.93) (1.44) 2.27 1.78
------ ------ ------ ------
Total from investment operations........ (0.88) (1.34) 2.38 1.88
------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment
income.............................. (0.02) (0.10) (0.11) (0.10)
------ ------ ------ ------
Total distributions..................... (0.02) (0.10) (0.11) (0.10)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD.......... $11.71 $12.61 $14.05 $11.78
====== ====== ====== ======
TOTAL RETURN............................ (6.96%)(C) (9.60%) 20.31% 18.92%(C)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands).......................... $4,468 $4,853 $4,685 $2,551
Ratios to average net assets
(annualized):
Net investment income............... 0.75% 0.71% 0.87% 1.00%
Expenses, including expenses of the
master portfolio, after
waivers(B)........................ 0.56% 0.55% 0.55% 0.55%
Expenses, including expenses of the
master portfolio, before
waivers(B)........................ 1.31% 1.25% 1.72% 3.36%
Decrease reflected in above expense
ratio due to absorption of
expenses by State Street Bank, BT
Alex Brown, and AMR Investment
Services, Inc..................... 0.75% 0.70% 1.17% 2.81%
- ----------------
(A) On March 1, 2000, the Fund invested all of its investable assets in the
State Street Bank Equity 500 Portfolio. Prior to March 1, 2000, the Fund
invested all of its investable assets in the BT Equity 500 Portfolio.
(B) Includes expenses of the BT Equity 500 Index Portfolio for the period
January 1, 2000 to February 29, 2000 and the expenses of the State Street
Bank Equity 500 Index Portfolio from March 1, 2000 to December 31, 2000.
(C) Not annualized.
INTERMEDIATE BOND
MILEAGE FUND
--------------------------------------
YEAR ENDED
OCTOBER 31, MARCH 2 TO
----------------------- OCTOBER 31,
2001 2000 1999 1998
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ------ ------ ------ -----------
Net asset value, beginning of period........................ $ $ 9.72 $10.40 $ 10.00
------ ------ ------ -------
Income from investment operations:
Net investment income(A)................................ 0.62 0.53 0.38
Net gains (losses) on securities (both realized and
unrealized)(A)......................................... (0.06) (0.67) 0.40
------ ------ ------ -------
Total from investment operations............................ 0.56 (0.14) 0.78
------ ------ ------ -------
Less distributions:
Dividends from net investment income.................... (0.62) (0.53) (0.38)
Distributions from net realized gains on securities..... -- (0.01) --
------ ------ ------ -------
Total distributions......................................... (0.62) (0.54) (0.38)
------ ------ ------ -------
Net asset value, end of period.............................. $ $ 9.66 $ 9.72 $ 10.40
====== ====== ====== =======
Total return (not annualized)............................... 5.98% (1.43)% 7.94%
====== ====== ====== =======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ $ 141 $ 501 $ 58
Ratios to average net assets (annualized)(A):
Expenses............................................ 0.89% 0.88% 0.87%
Net investment income............................... 6.36% 5.48% 5.53%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager.................. 2.35% 9.60% 116.08%
Portfolio turnover rate(B).................................. 102% 123% 181%
(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 respective AMR Investment Services Portfolio.
(B) Portfolio turnover rate is that of the Portfolio.
D-11
SHORT-TERM BOND
MILEAGE FUND
-----------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------
2001 2000 1999 1998(A) 1997
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD: ------ ------ ------ ------- ------
Net asset value, beginning of period(B)..................... $ $ 9.29 $ 9.60 $ 9.60 $ 9.65
------ ------ ------ ------ ------
Income from investment operations:
Net investment income(C)................................ 0.58 0.55 0.60 0.61
Net gains (losses) on securities (both realized and
unrealized)(C)........................................ (0.09) (0.31) -- (0.05)
------ ------ ------ ------ ------
Total from investment operations............................ 0.49 0.24 0.60 0.56
------ ------ ------ ------ ------
Less distributions:
Dividends from net investment income.................... (0.58) (0.55) (0.60) (0.61)
Distributions from net realized gains on securities..... -- -- -- --
------ ------ ------ ------ ------
Total distributions......................................... (0.58) (0.55) (0.60) (0.61)
------ ------ ------ ------ ------
Net asset value, end of period.............................. $ $ 9.20 $ 9.29 $ 9.60 $ 9.60
====== ====== ====== ====== ======
Total return................................................ 5.46% 2.61% 6.45% 5.90%
====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in thousands)................ $ $ 860 $ 866 $1,494 $1,226
Ratios to average net assets (annualized)(C):
Expenses............................................ 0.85% 0.85% 0.85% 0.85%
Net investment income............................... 6.29% 5.78% 6.24% 6.37%
Decrease reflected in above expense ratio due to
absorption of expenses by the Manager................. 1.73% 1.52% 1.89% 2.16%
Portfolio turnover rate(D).................................. 89% 115% 74% 282%
(A) Prior to March 1, 1998, the American AAdvantage Short-Term Bond Mileage Fund
was known as the American AAdvantage Limited-Term Income Mileage Fund.
(B) The net asset value per share for the Short-Term Bond Mileage Fund has been
adjusted for a stock split which occurred on November 1, 1995 in the ratio
of 2.034588.
(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 respective AMR Investment Services Portfolio.
(D) Portfolio turnover rate is that of the Portfolio.
D-12
AMERICAN AADVANTAGE MILEAGE FUNDS
Balanced Mileage Fund
Large Cap Value Mileage Fund
Small Cap Value Mileage Fund
International Equity Mileage Fund
S&P 500 Index Mileage Fund
Intermediate Bond Mileage Fund
Short-Term Bond Mileage Fund
(collectively, "Mileage Funds")
AMERICAN AADVANTAGE FUNDS
Balanced Fund
Large Cap Value Fund
Small Cap Value Fund
International Equity Fund
S&P 500 Index Fund
Intermediate Bond Fund
Short-Term Bond Fund
(collectively, "AAdvantage Funds")
4333 Amon Carter Boulevard, MD 5645
Fort Worth, Texas 76155
___________________________
STATEMENT OF ADDITIONAL INFORMATION
January __, 2002
This Statement of Additional Information ("SAI") relates specifically to
the reorganization of the Mileage Funds into a corresponding AAdvantage Fund.
Under a proposed Agreement and Plan of Reorganization and Termination ("Plan"),
each AAdvantage Fund will acquire all of the assets, and will assume all of the
liabilities, of the corresponding Mileage Fund in exchange solely for PlanAhead
Class shares of the AAdvantage Funds ("Reorganization"). The exchange of each
Mileage Fund's assets for each AAdvantage Fund's shares will be at their
respective net asset values ("NAV"). Each Mileage Fund then will distribute
those PlanAhead Class shares to its shareholders. As a result, each Mileage Fund
shareholder will receive PRO RATA full and fractional PlanAhead Class shares of
the corresponding AAdvantage Fund. The Mileage Funds and the AAdvantage Funds
operate as feeder funds in a master-feeder structure.
This SAI is not a prospectus and should be read only in conjunction with
the Combined Proxy Statement and Prospectus dated January __, 2002 relating to
the Reorganization. A copy of the Combined Proxy Statement and Prospectus may be
obtained by contacting AMR Investment Services, Inc. at 800-388-3344. This SAI
consists of the information set forth herein and the following described
documents, each of which is incorporated by reference herein (legally forms a
part of the SAI):
1. The audited financial statements of the Mileage Funds, except the S&P 500
Index Mileage Fund, and notes thereto for the fiscal year ended October 31,
2001, and the reports of Ernst & Young LLP, independent auditors, with
respect to such audited financial statements of such Mileage Funds,
previously filed with the Securities and Exchange Commission ("SEC") on
December __, 2001, EDGAR Accession Number ___________________________.
2. The audited financial statements of the S&P 500 Index Mileage Fund and
notes thereto for the fiscal year ended December 31, 2000, and the reports
of Ernst & Young LLP, independent auditors, with respect to such audited
financial statements of such Mileage Fund, previously filed with the SEC on
March 1, 2001, EDGAR Accession Number 0000950134-01-001858.
3. The unaudited financial statements of the S&P 500 Index Mileage Fund and
notes thereto for the semi-annual period ended June 30, 2001 previously
filed with the SEC on August 29, 2001, EDGAR Accession Number
0000950134-01-505968.
4. The audited financial statements of the AAdvantage Funds, except the S&P
500 Index Fund, and notes thereto for the fiscal year ended October 31,
2001, and the reports of Ernst & Young LLP, independent auditors, with
respect to such audited financial statements of such AAdvantage Funds,
previously filed with the SEC on December __, 2001, EDGAR Accession Number
__________________.
5. The audited financial statements of the AAdvantage S&P 500 Index Fund and
notes thereto for the fiscal year ended December 31, 2000, and the reports
of Ernst & Young LLP, independent auditors, with respect to such audited
financial statements of such AAdvantage Fund, previously filed with the SEC
on March 1, 2001, EDGAR Accession Number 0000950134-01-001864.
6. The unaudited financial statements of the AAdvantage S&P 500 Index Fund and
notes thereto for the semi-annual period ended June 30, 2001 previously
filed with the SEC on August 29, 2001, EDGAR Accession Number
0000950134-01-505969.
9. The Statement of Additional Information as it relates to the Mileage Funds,
dated March 1, 2001, previously filed with the SEC on March 1, 2001, EDGAR
Accession Number 0000950134-01-001836.
10. Supplement to the Statement of Additional Information as it relates to the
Mileage Funds, dated August 29, 2001, previously filed with the SEC on
August 30, 2001, EDGAR Accession Number 0000943824-01-500005.
11. Supplement to the Statement of Additional Information as it relates to the
Mileage Funds, dated September 6, 2001, previously filed with the SEC on
September 6, 2001, EDGAR Accession Number 0000943824-01-500006.
12. The Statement of Additional Information as it relates to the PlanAhead
Class of the AAdvantage Funds, dated March 1, 2001, previously filed with
the SEC on February 28, 2001, EDGAR Accession Number 0000950134-01-509149.
13. Supplement to the Statement of Additional Information as it relates to the
Institutional Class of the AAdvantage Funds, dated July 18, 2001,
previously filed with the SEC on July 18, 2001, EDGAR Accession Number
0000809593-01-500007.
2
14. Supplement to the Statement of Additional Information as it relates to the
AMR, Institutional and PlanAhead Classes of the AAdvantage Funds, dated
August 29, 2001, previously filed with the SEC on August 30, 2001, EDGAR
Accession Number 0000809593-01-500010.
15. Supplement to the Statement of Additional Information as it relates to the
AMR, Institutional and PlanAhead Classes of the AAdvantage Funds, dated
September 6, 2001, previously filed with the SEC on September 6, 2001,
EDGAR Accession Number 0000809593-01-500011.
16. Supplement to the Statement of Additional Information as it relates to the
Institutional Class of the AAdvantage Funds, dated November 30, 2001,
previously filed with the SEC on November 30, 2001, EDGAR Accession Number
0000809593-01-500015.
3
PART C. OTHER INFORMATION
Item 15. INDEMNIFICATION
Article XI, Section 2 of the Registrant's Declaration of Trust provides
that:
(a) Subject to the exceptions and limitations contained in paragraph
(b) below:
(i) every person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as "Covered Person") shall be indemnified by
the appropriate portfolios to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil, criminal or
other, including appeals), actual or threatened while in office or thereafter,
and the words "liability" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office (A) by the court or other body approving
the settlement; (B) by at least a majority of those Trustees who are neither
interested persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry); provided,
however, that any Shareholder may, by appropriate legal proceedings, challenge
any such determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be such
Trustee or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit, or proceeding of this character described in
paragraph (a) of this Section 2 may be paid by the applicable Portfolio from
time to time prior to final disposition thereof upon receipt of an undertaking
by or on behalf of such Covered Person that such amount will be paid over by his
to the Trust if it is ultimately determined that he is not entitled to
indemnification under this Section2; provided, however, that:
(i) such Covered Person shall have provided appropriate
security for such undertaking;
(ii) the Trust is insured against losses arising out of any
such advance payments; or
(iii) either a majority of the Trustees who are neither
interested persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Section 2.
According to Article XII, Section 1 of the Declaration of Trust, the
Trust is a trust, not a partnership. Trustees are not liable personally to any
person extending credit to, contracting with or having any claim against the
Trust, a particular Portfolio or the Trustees. A Trustee, however, is not
protected from liability due to willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
Article XII, Section 2 provides that, subject to the provisions of
Section 1 of Article XII and to Article XI, the Trustees are not liable for
errors of judgment or mistakes of fact or law, or for any act or omission in
accordance with advice of counsel or other experts or for failing to follow such
advice.
Insofar as indemnification for liabilities arising under the 1933 Act,
may be provided to Trustees, officers and controlling persons of the Trust,
pursuant to the foregoing provisions or otherwise, the Trust has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Trust of expenses incurred or
paid by a Trustee, officer or controlling person of the Trust in connection with
the successful defense of any action, suit or proceeding or payment pursuant to
any insurance policy) is asserted against the Trust by such Trustee, officer or
controlling person in connection with the securities being registered, the Trust
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 16. EXHIBITS
(1) Declaration of Trust 5/
(2) By-Laws 5/
(3) Copies of any voting trust agreement -none
(4) A copy of the Agreement and Plan of Reorganization and Termination is
included in the Combined Proxy Statement and Prospectus as Appendix A
thereto and incorporated by reference.
(5) Instruments defining the rights of the holders of Registrant's shares
of beneficial interest *
(6) (a) Fund Management Agreement between American AAdvantage
Funds and AMR Investment Services, Inc., dated April 3, 1987
5/
(b) Supplement to Fund Management Agreement dated August 1, 1994
5/
(c) Supplement to Fund Management Agreement dated August 1, 1995
5/
(d) Supplement to Fund Management Agreement dated November 1, 1995
8/
(e) Amendment to Schedule A of Fund Management Agreement, dated
December 1, 1995 2/
(f) Supplement to Fund Management Agreement, dated December 17,
1996 3/
(g) Supplement to Fund Management Agreement, dated July 25, 1997
4/
(h) Supplement to Fund Management Agreement, dated September 1,
1998 7/
(i) Supplement to Fund Management Agreement, dated January 1, 1999
8/
(j) Supplemental Terms and Conditions to the Management Agreement,
dated May 19, 2000 10/
(k) Supplement to Fund Management Agreement, dated November 16,
2000 12/
(l) Supplement to Fund Management Agreement, dated October 17,
2001 16/
(m) Investment Advisory Agreement between AMR Investment Services,
Inc. and Independence Investment Associates, Inc. dated
November 1, 1995 5/
(n) Investment Advisory Agreement between AMR Investment Services,
Inc. and Templeton Investment Counsel, Inc. dated November 1,
1995 5/
(o) Investment Advisory Agreement between AMR Investment Services,
Inc. and Barrow, Hanley, Mewhinney & Strauss, Inc. dated
November 1, 1995 5/
(p) Investment Advisory Agreement between AMR Investment Services,
Inc. and Brandywine Asset Management, Inc. dated January 16,
1998 6/
(q) Investment Advisory Agreement between AMR Investment Services,
Inc. and Hotchkis and Wiley, a division of the Capital
Management Group of Merrill Lynch Asset Management, L.P. dated
November 12, 1996 3/
(r) Form of Investment Advisory Agreement between AMR Investment
Services, Inc. and Lazard Asset Management 8/
(s) Amendment to Schedule A of Advisory Agreement between AMR
Investment Services, Inc. and Brandywine Asset Management,
Inc. dated October 15, 1998 7/
(t) Amendment to Schedule A of Advisory Agreement between AMR
Investment Services, Inc. and Hotchkis and Wiley, a division
of the Capital Management Group of Merrill Lynch Asset
Management, L.P. dated October 15, 1998 7/
(u) Amendment to Schedule A of Advisory Agreement between AMR
Investment Services, Inc. and Independence Investment
Associates, Inc. dated March 1, 1999 8/
(v) Investment Advisory Agreement between AMR Investment Services,
Inc. and Goldman Sachs & Co., dated July 31, 2000 11/
(w) Investment Advisory Agreement between AMR Investment Services,
Inc. and J.P. Morgan Investment Management Inc., dated July
31, 2000 11/
(x) Investment Advisory Agreement between AMR Investment Services,
Inc. and Morgan Stanley Dean Witter Investment Management
Inc., dated July 31, 2000 11/
(y) Investment Advisory Agreement between AMR Investment Services,
Inc. and The Boston Company Asset Management, LLC, dated July
31, 2000 11/
(z) Investment Advisory Agreement between AMR Investment Services,
Inc. and MW Post Advisory Group, LLC, dated December 29, 2000
12/
(aa) Investment Advisory Agreement between AMR Investment Services,
Inc. and Metropolitan West Capital Management, LLC, dated
November 30, 2000 12/
(bb) Investment Advisory Agreement between AMR Investment Services,
Inc. and Causeway Capital Management LLC, dated August 31,
2001 16/
(cc) Investment Advisory Agreement between AMR Investment Services,
Inc. and Hotchkis and Wiley Capital Management, LLC 16/
(dd) Administrative Services Agreement between the American
AAdvantage Funds and AMR Investment Services, Inc., dated
November 21, 1997 5/
(ee) Supplement to Administrative Services Agreement, dated
September 1, 1998 7/
(ff) Supplement to Administrative Services Agreement, dated January
1, 1999 8/
(gg) Supplement to Administrative Services Agreement, dated March
1, 2000 9/
(hh) Supplement to Administrative Services Agreement, dated May 19,
2000 11/
(ii) Supplement to Administrative Services Agreement, dated
November 16, 2000 12/
(jj) Supplement to Administrative Services Agreement, dated
November 30, 2001 16/
(kk) Administrative Agreement for S&P 500 Index Fund with State
Street Bank & Trust Company, dated March 1, 2000 8/
(7) (a) Distribution Agreement among the American AAdvantage
Mileage Funds, the American AAdvantage Funds, and Brokers
Transaction Services, Inc., dated September 1, 1995 5/
(b) Distribution Agreement among the American AAdvantage Mileage
Funds, the American AAdvantage Funds, the American Select
Funds and SWS Financial Services, Inc., dated December 31,
1999 9/
(8) Bonus, profit sharing or pension plans - none
(9) (a) Custodian Agreement between the American AAdvantage Funds and
State Street Bank and Trust Company, dated December 1, 1997 6/
(b) Amendment to Custodian Agreement to add Small Cap Value Fund,
dated January 1, 1999 10/
(c) Form of Amendment to Custodian Agreement to add four new
series of the American AAdvantage Funds, dated July 31, 2000
10/
(10) (a) Plan pursuant to Rule 12b-1 for the Institutional,
PlanAhead and AMR Classes 5/
(b) Amended and Restated Plan pursuant to Rule 18f-3 5/
(11) Opinion and consent of Counsel on legality of shares (filed herewith)
(12) Opinion and consent of Counsel on tax matters (to be filed)
(13) (a) Transfer Agency and Service Agreement between the American
AAdvantage Funds-and State Street Bank and Trust Company dated
January 1, 1998 6/
(b) Amendment to Transfer Agency Agreement to add Small Cap Value
Fund, dated March 1, 1999 10/
(c) Form of Amendment to Transfer Agency Agreement to add four new
series of the American AAdvantage Funds, dated July 31, 2000
10/
(d) Securities Lending Authorization Agreement between American
AAdvantage Funds and State Street Bank and Trust Company dated
January 2, 1998 6/
(e) Amendment to Securities Lending Authorization Agreement to add
Small Cap Value Fund, dated January 1, 1999 13/
(f) Service Plan Agreement for the American AAdvantage Funds
PlanAhead Class, dated August 1, 1994 5/
(g) Credit Agreement between American AAdvantage Funds and AMR
Investment Services, Inc., dated December 1, 1999 8/
(h) Administrative Services Agreement among American AAdvantage
Funds, American AAdvantage Mileage Funds, AMR Investment
Services Trust, AMR Investment Services, Inc. and State Street
Bank and Trust Company dated November 29, 1999 8/
(14) Consent of Independent Auditors (to be filed)
(15) Financial statements omitted from prospectus - none
(16) (a) Powers of Attorney for Trustees of the American AAdvantage
Funds and the AMR Investment Services Trust (filed herewith)
(b) Powers of Attorney for Trustees of the State Street Equity 500
Index Portfolio, a series of the State Street Master Funds 9/
(17) Additional Exhibits
(a) Form of Proxy (filed herewith)
- ------------------------------
* Article VIII of the Declaration of Trust and Article III of
Registrant's By-Laws, regarding shareholder's rights and powers, is
incorporated by reference from Post-Effective Amendment No. 23 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on December 18, 1997.
1/ Incorporated by reference from Post-Effective Amendment No. 4 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on December 31, 1990.
2/ Incorporated by reference from Post-Effective Amendment No. 15 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on December 22, 1995.
3/ Incorporated by reference from Post-Effective Amendment No. 19 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on February 13, 1997.
4/ Incorporated by reference from Post-Effective Amendment No. 20 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on July 1, 1997.
5/ Incorporated by reference from Post-Effective Amendment No. 23 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on December 18, 1997.
6/ Incorporated by reference from Post-Effective Amendment No. 24 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on February 27, 1998.
7/ Incorporated by reference from Post-Effective Amendment No. 25 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on October 15, 1998.
8/ Incorporated by reference from Post-Effective Amendment No. 28 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on December 21, 1999.
9/ Incorporated by reference from Post-Effective Amendment No. 29 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on March 1, 2000.
10/ Incorporated by reference from Post-Effective Amendment No. 32 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on July 7, 2000.
11/ Incorporated by reference from Post-Effective Amendment No. 33 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on October 11, 2000.
12/ Incorporated by reference from Post-Effective Amendment No. 34 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on December 29, 2000.
13/ Incorporated by reference from Post-Effective Amendment No. 35 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on February 28, 2001.
14/ Incorporated by reference from Post-Effective Amendment No. 36 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on June 20, 2001.
15/ Incorporated by reference from Post-Effective Amendment No. 37 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on October 1, 2001.
16/ Incorporated by reference from Post-Effective Amendment No. 38 to the
American AAdvantage Funds' Registration Statement on Form N-1A, SEC
File No. 33-11387, as filed with the Securities and Exchange Commission
on November 30, 2001.
Item 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public
re-offering of the securities registered through the use of a prospectus which
is a part of this Registration Statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, the re-offering prospectus will contain the information called for by the
applicable registration form for re-offerings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new Registration Statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant, American AAdvantage Funds, has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Fort Worth and State of Texas, on the 14th day of
December, 2001.
AMERICAN AADVANTAGE FUNDS
By: /s/ William F. Quinn
---------------------------------
William F. Quinn
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ William F. Quinn Chairman, President and December 14, 2001
- ----------------------------- Trustee
William F. Quinn
Alan D. Feld* Trustee December 14, 2001
- -----------------------------
Alan D. Feld
Ben J. Fortson* Trustee December 14, 2001
- -----------------------------
Ben J. Fortson
Dee J. Kelly, Jr.* Trustee December 14, 2001
- -----------------------------
Dee J. Kelly, Jr.
Stephen D. O'Sullivan* Trustee December 14, 2001
- -----------------------------
Stephen D. O'Sullivan
R. Gerald Turner* Trustee December 14, 2001
- -----------------------------
R. Gerald Turner
Kneeland Youngblood* Trustee December 14, 2001
- -----------------------------
Kneeland Youngblood
*By /s/ William F. Quinn
--------------------------------
William F. Quinn, Attorney-in-Fact
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the AMR Investment Services Trust has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereto duly authorized, in the City
of Fort Worth and State of Texas, on the 14th day of December, 2001.
AMR INVESTMENT SERVICES TRUST
By: /s/ William F. Quinn
---------------------------------
William F. Quinn
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ William F. Quinn Chairman, President and December 14, 2001
- ----------------------------- Trustee
William F. Quinn
Alan D. Feld* Trustee December 14, 2001
- -----------------------------
Alan D. Feld
Ben J. Fortson* Trustee December 14, 2001
- -----------------------------
Ben J. Fortson
Dee J. Kelly, Jr.* Trustee December 14, 2001
- -----------------------------
Dee J. Kelly, Jr.
Stephen D. O'Sullivan* Trustee December 14, 2001
- -----------------------------
Stephen D. O'Sullivan
R. Gerald Turner* Trustee December 14, 2001
- -----------------------------
R. Gerald Turner
Kneeland Youngblood* Trustee December 14, 2001
- -----------------------------
Kneeland Youngblood
*By /s/ William F. Quinn
--------------------------------
William F. Quinn, Attorney-in-Fact
SIGNATURES
This Registration Statement contains certain disclosures regarding the
State Street Equity 500 Index Portfolio (the "Portfolio"), a series of State
Street Master Funds (the "Trust"). The Trust has, subject to the next following
sentence, duly caused this Registration Statement on Form N-14 of the American
AAdvantage Funds (the "Registrant") to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on December 14, 2001. The Trust is executing this
Registration Statement only in respect of the disclosures contained herein
specifically describing the Trust and the Portfolio, and hereby disclaims any
responsibility or liability as to any other disclosures in this Registration
Statement.
STATE STREET MASTER FUNDS
By: /s/Kathleen Cuocolo
-------------------
Kathleen Cuocolo
President, State Street Master Funds
This Registration Statement on Form N-14 of the Registrant has been signed
below by the following persons, solely in the capacities indicated and subject
to the next following sentence, on December 14, 2001. Each of the following
persons is signing this Registration Statement only in respect of the
disclosures contained herein specifically describing the Trust and the
Portfolio, and hereby disclaims any responsibility or liability as to any other
disclosures in this Registration Statement.
SIGNATURE TITLE
/s/Kathleen Cuocolo President (Principal Executive Officer),
- ------------------------ State Street Master Funds
Kathleen Cuocolo
/s/Janine Cohen Treasurer (Principal Accounting Officer),
- ------------------------ State Street Master Funds
Janine Cohen
William L. Boyan* Trustee, State Street Master Funds
- ------------------------
William L. Boyan
Michael F. Holland* Trustee, State Street Master Funds
- ------------------------
Michael F. Holland
Rina K. Spence* Trustee, State Street Master Funds
- ------------------------
Rina K. Spence
Douglas T. Williams* Trustee, State Street Master Funds
- ------------------------
Douglas T. Williams
*By: /s/Julie A. Tedesco
------------------------------------------
Julie A. Tedesco
as Attorney-in-Fact pursuant to Powers of Attorney
AMERICAN AADVANTAGE FUNDS
Form N-14
EXHIBIT INDEX
Item 16 (11) Opinion and consent of Counsel on legality of shares
Item 16 (16)(a) Powers of Attorney for Trustees of the
American AAdvantage Funds and the AMR Investment
Services Trust
Item 16 (17)(a) Form of Proxy