UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-9018
AMERICAN AADVANTAGE MILEAGE FUNDS
(Exact name of registrant as specified in charter)
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Address of principal executive offices)-(Zip code)
WILLIAM F. QUINN, PRESIDENT
4151 Amon Carter Boulevard, MD 2450
Fort Worth, Texas 76155
(Name and address of agent for service)
Registrant's telephone number, including area code: (817) 967-3509
Date of fiscal year end: December 31, 2003
Date of reporting period: June 30, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
[LOGO OF AMERICAN AADVANTAGE MILEAGE FUNDS]
AMERICAN AADVANTAGE MILEAGE FUNDS (R)
- -----------------------------------[GRAPHIC]------------------------------------
SEMI-ANNUAL REPORT
JUNE 30, 2003
[GRAPHIC]
MONEY MARKET FUNDS
Money Market Fund
U.S. Government Money Market Fund
Municipal Money Market Fund
MANAGED BY AMR INVESTMENTS
ABOUT AMR INVESTMENTS
- --------------------------------------------------------------------------------
AMR Investments is an experienced provider of investment advisory services to
institutional and retail markets. We act as manager of the American AAdvantage
Funds, a family of diversified mutual funds, and offer customized fixed income
portfolio management services.
Our clients include defined benefit plans, defined contribution plans,
foundations, endowments, corporations, and other institutional investors.
AMR Investments is a wholly owned subsidiary of AMR Corporation, the parent
company of American Airlines, Inc.
Incorporated in 1986, we are directly responsible for the investment management
and oversight of AMR Corporation's defined benefit and defined contribution
plans, as well as its fixed income investments.
CONTENTS
- --------------------------------------------------------------------------------
President's Message ........................................ 1
Financial Highlights
Money Market Mileage Fund ............................... 14
U.S. Government
Money Market Mileage Fund ............................... 16
Municipal Money Market Mileage Fund ..................... 18
Schedule of Investments
Money Market Portfolio .................................. 20
U.S. Government
Money Market Portfolio .................................. 22
Municipal Money Market Portfolio ........................ 23
Additional Information ..................................... Inside Back Cover
----------------------------------------------------------------------
Any opinions herein, including forecasts, reflect our judgement as of
the end of the reporting period and are subject to change. Each
adviser's strategies and each Fund's portfolio composition will change
depending on economic and market conditions. This report is not a
complete analysis of market conditions and therefore, should not be
relied upon as investment advice. Although economic and market
information has been compiled from reliable sources, AMR Investment
Services, Inc. makes no representation as to the completeness or
accuracy of the statements contained herein.
----------------------------------------------------------------------
American AAdvantage Mileage Funds June 30, 2003
[GRAPHIC OF AMR INVESTMENTS]
FELLOW SHAREHOLDERS:
I am pleased to present you with the Semi-Annual Report for the American
AAdvantage Mileage Funds for the six months ended June 30, 2003. While this
period was marked with some uncertainty, investors were pleased as most major
stock market indices posted positive returns for the first time in three years.
June ended with a new low for interest rates as the Fed Funds rate was decreased
by 25 basis points to 1.00%.
The past six months saw a quick resolution to the war in Iraq, the lowest
interest rates in 45 years, the ongoing fight against global terrorism, the
effects of the SARS epidemic, and a tax cut.
The Money Market Mileage Fund-Mileage Class returned 0.41% for the six
months, outperforming the Lipper Money Market Instrument Average return of
0.26%. The Municipal Money Market Mileage Fund-Mileage Class outpaced the Lipper
Tax-Exempt Money Market Average with a return of 0.34% versus 0.27% for the
Average.
In mid-July, Federal Reserve Chairman Alan Greenspan expressed his belief
that the economy would post stronger growth by year's end. He cautioned against
deflation, renewing his commitment to keep interest rates low for a prolonged
period. Thus, we will continue to closely monitor Federal Reserve policy
and structure the Funds accordingly.
Please review the enclosed portfolio listings and detailed financial data.
As always, we welcome the opportunity to serve your financial needs. We value
the trust you have placed in the American AAdvantage Mileage Funds. Should you
have any questions about the enclosed information, please do not hesitate to
contact us at 800-967-9009. You may also access fund and account information at
www.aafunds.com. Thank you for your continued confidence in the American
AAdvantage Mileage Funds.
Sincerely,
/s/ William F. Quinn
William F. Quinn
President
American AAdvantage Mileage Funds
1
ECONOMIC OVERVIEW
================================================================================
The year began with the possibility of war with Iraq, unemployment on the rise
and a stock market that had bounced back from previous lows. After a successful
campaign in Iraq, the Bush Administration shifted its focus to stimulating the
economy through tax cuts. However, a great deal of uncertainty surrounded
short-term interest rates, as the world economy remained weak and excess
capacity continued to hinder the goods and labor markets. Federal Reserve
Chairman Alan Greenspan expressed concern over deflation, indicating that
policymakers would be diligent in monitoring the potential threat of falling
prices. Subsequently, the overnight Fed Funds Rate was lowered by 25 basis
points to 1% in June. This was the lowest overnight level in over forty-five
years. In addition, the housing market remained robust due to historically low
interest rates, which prompted a refinancing boom. However, the employment
picture remained weak, as the unemployment rate rose to 6.4% in June - a rate
not seen since 1994. By the end of June, overall consumer confidence had picked
up, and the stock market posted some significantly positive returns.
Looking forward, all indications are that the Federal Reserve Bank will
continue to implement an accommodative monetary policy until they see a
prolonged period of stronger economic data. The low interest rates should have a
positive effect on consumer spending, while the recent drop in the dollar should
spur commercial spending. This positive outlook has led many economists to
forecast an increase in economic activity for the second half of the year.
2
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE MONEY MARKET MILEAGE FUND(SM)
================================================================================
The American AAdvantage Money Market Mileage Fund adopted a neutral stance
in the first quarter of the year in anticipation of a stable interest rate
environment. However, as forecasts indicated lower interest rates during the
second quarter, the weighted average maturity was extended close to 60 days.
This strategy proved successful as the Federal Reserve Bank lowered interest
rates at the June 25th FOMC meeting.
For the six months ended June 30, 2003, the total return of the American
AAdvantage Money Market Mileage Fund - Mileage Class was 0.41%. The Fund
outperformed the Lipper Money Market Instrument Average return of 0.26% by 15
basis points.
The Fund will continue to look for opportunities in both the variable rate
securities and commercial paper markets in the months ahead.
MILEAGE CLASS TOTAL RETURNS AS OF JUNE 30, 2003
[CHART OF MILEAGE CLASS]
American AAdvantage Lipper Money Market
Money Market Mileage Fund Instrument Average
1 Year 1.02% 0.72%
3 Years* 2.86% 2.56%
5 Years* 3.76% 3.47%
10 Years* 4.27% 4.08%
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
===================================
AS OF 6/30/03
-----------------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1,2) ............... 1.02% 3.76% 4.27%
Platinum Class (1,3) .............. 0.41% 3.26% 3.91%
1 Past performance is not indicative of future performance. An investment in
this Fund is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share it is
possible to lose money by investing in this Fund.
2 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included in
this report. The Companion Fund has been managed by AMR Investments since
its inception on September 1, 1987. Like the Fund, the Companion Fund
invests all of its investable assets in a corresponding Portfolio of the
AMR Investment Services Trust. The performance results from inception
through October 31, 1995 are those of the Companion Fund's Mileage Class of
shares. The Fund began offering its shares on November 1, 1995. Thus,
performance results shown from that date through June 30, 2003 are for the
Fund. Because the Companion Fund had lower expenses, its performance was
better than the Fund would have realized in the same period.
3 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included in
this report. The Companion Fund has been managed by AMR Investments since
its inception on September 1, 1987. Like the Fund, the Companion Fund
invests all of its investable assets in a corresponding Portfolio of the
AMR Investment Services Trust. The performance results from inception
through October 31, 1995 are those of the Companion Fund's Mileage Class of
shares. The Fund began offering its shares on November 1, 1995. Performance
results shown from that date through January 28, 1996 are for the initial
class of Fund shares. The Platinum Class of the Fund began offering its
shares on January 29, 1996. Thus, performance results from that date
through June 30, 2003 are for the Platinum Class of Fund shares. Because
the Companion Fund and the Fund's initial class had lower expenses, their
performance was better than the Fund would have realized in the same
period.
PORTFOLIO STATISTICS AS OF JUNE 30, 2003
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 0.71% 0.06%
7-day Effective Yield* 0.71% 0.06%
30-day Yield* 0.76% 0.10%
Weighted Average Maturity 37 Days 37 Days
*Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day
yield.
TOP TEN HOLDINGS AS OF JUNE 30, 2003
Metropolitan Life Insurance Company 7.8%
Bank One, NA 7.4%
General Electric Capital Assurance Company 5.9%
National City Bank 5.6%
Goldman Sachs Group, LP 4.8%
Tulip Funding Corporation 4.7%
General Electric Capital Corporation 4.3%
Southtrust Bank, NA 3.6%
Merrill Lynch & Company, Incorporated 3.6%
Branch Banking & Trust Company 3.6%
3
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET MILEAGE FUND (SM)
================================================================================
As short-term interest rates remained flat to declining during the first
half of the year, the American AAdvantage U.S. Government Money Market Mileage
Fund maintained a weighted average maturity towards 60 days. This was
accomplished primarily by purchasing fixed rate agencies with maturities of six
months to one year. In addition to term agencies, the Fund maintained liquidity
by investing in overnight investments such as repurchase agreements. This
strategy worked well during the past six months as the Federal Reserve Bank
lowered the Fed Funds Rate in June to 1.00%.
For the six months ended June 30, 2003, the total return of the American
AAdvantage U.S. Government Money Market Mileage Fund - Mileage Class was 0.25%
as compared to the Lipper U.S. Government Money Market Average return of 0.28%.
In anticipation of a prolonged period of a stable overnight rate, the Fund
will seek to take advantage of a positively sloped yield curve. The weighted
average maturity will likely remain in the 40 to 50 day range until the economy
shows stronger signs of strength.
MILEAGE CLASS TOTAL RETURNS AS OF JUNE 30, 2003
[CHART OF MILEAGE CLASS]
American AAdvantage Lipper U.S.
U.S. Government Government
Money Market Mileage Fund Money Market Average
1 Year 0.66% 0.76%
3 Years* 2.70% 2.60%
5 Years* 3.59% 3.48%
10 Years* 4.11% 4.04%
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
===========================================
AS OF 6/30/03
-------------------------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1,2) .............. 0.66% 3.59% 4.11%
Platinum Class (1,3) ............. 0.32% 3.27% 3.95%
1 Past performance is not indicative of future performance. An investment in
this Fund is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share, it is
possible to lose money by investing in this Fund.
2 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included
in this report. The Companion Fund has been managed by AMR Investments
since its inception on March 2, 1992. Like the Fund, the Companion Fund
invests all of its investable assets in a corresponding Portfolio of the
AMR Investment Services Trust. The performance results from inception
through October 31, 1995 are those of the Companion Fund. (Results through
October 31, 1993 are for the Companion Fund's Institutional Class of
shares and from November 1, 1993 through October 31, 1995 are for the
Companion Fund's Mileage Class of shares.) The Fund began offering its
shares on November 1, 1995. Thus, performance results shown from that date
through June 30, 2003 are for the Fund. Because the Companion Fund had
lower expenses, its performance was better than the Fund would have
realized in the same period.
3 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included
in this report. The Companion Fund has been managed by AMR Investments
since its inception on March 2, 1992. Like the Fund, the Companion Fund
invests all of its investable assets in a corresponding Portfolio of the
AMR Investment Services Trust. The performance results from inception
through October 31, 1995 are those of the Companion Fund. (Results through
October 31, 1993 are for the Companion Fund's Institutional Class of
shares and from November 1, 1993 through October 31, 1995 are for the
Companion Fund's Mileage Class of shares.) The Fund began offering its
shares on November 1, 1995. Performance results shown from that date
through October 31, 1999 are for the initial class of Fund shares. The
Platinum Class of the Fund began offering its shares on November 1, 1999.
Thus, performance results from that date through June 30, 2003 are for the
Platinum Class of Fund shares. Because the Companion Fund and the Fund's
initial class had lower expenses, their performance was better than the
Fund would have realized in the same period.
PORTFOLIO STATISTICS AS OF JUNE 30, 2003
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 0.55% 0.06%
7-day Effective Yield* 0.56% 0.06%
30-day Yield* 0.64% 0.11%
Weighted Average Maturity 37 Days 37 Days
*Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day
yield.
4
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET MILEAGE FUND (SM)
================================================================================
In anticipation of a stable interest rate environment, the American
AAdvantage Municipal Money Market Mileage Fund began the year with a neutral
average maturity. However, as interest rates began to fall, commercial paper was
purchased to extend the weighted average maturity of the portfolio. Maturity
dates in April and August were targeted, as those months typically see an
increase in short-term rates. During this period, the Fund continued to purchase
variable rate commercial paper backed by letters of credit and short-term notes
with the highest ratings.
For the six months ended June 30, 2003, the total return of the American
AAdvantage Municipal Money Market Mileage Fund - Mileage Class was 0.34%. The
Fund outperformed the Lipper Tax-Exempt Money Market Average return of 0.27% by
7 basis points.
As we move forward, the Fund will continue to look for opportunities within
the commercial paper and fixed-rate note markets.
MILEAGE CLASS TOTAL RETURNS AS OF JUNE 30, 2003
[CHART OF MILEAGE CLASS]
American AAdvantage
Municipal Lipper Tax-Exempt
Money Market Mileage Fund Money Market Average
1 Year 0.75% 0.67%
3 Years* 1.72% 1.72%
5 Years* 2.22% 2.20%
Since Inception* 2.61% 2.57%
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
===========================================
AS OF 6/30/03
-------------------------------------------
SINCE
1 YEAR 5 YEARS INCEP.
------ ------- ------
Mileage Class (1,2) .............. 0.75% 2.22% 2.61%
Platinum Class (1,3) ............. 0.20% 1.85% 2.42%
1 Past performance is not indicative of future performance. An investment in
this Fund is neither insured nor guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund
seeks to preserve the value of an investment at $1.00 per share, it is
possible to lose money by investing in this Fund.
2 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included in
this report. The Companion Fund has been managed by AMR Investments since
its inception on November 10, 1993. Like the Fund, the Companion Fund
invests all of its investable assets in a corresponding Portfolio of the
AMR Investment Services Trust. The performance results from inception
through October 31, 1995 are those of the Companion Fund's Mileage Class of
shares. The Fund began offering its shares on November 1, 1995. Thus,
performance results shown from that date through June 30, 2003 are for the
Fund. Because the Companion Fund had lower expenses, its performance was
better than the Fund would have realized in the same period.
3 The Fund's performance is derived from a combination of the Fund's
performance and that of another fund (the "Companion Fund") not included in
this report. The Companion Fund has been managed by AMR Investments since
its inception on November 10, 1993. Like the Fund, the Companion Fund
invests all of its investable assets in a corresponding Portfolio of the
AMR Investment Services Trust. The performance results from inception
through October 31, 1995 are those of the Companion Fund's Mileage Class of
shares. The Fund began offering its shares on November 1, 1995. Performance
results shown from that date through October 31, 1999 are for the initial
class of Fund shares. The Platinum Class of the Fund began offering its
shares on November 1, 1999. Thus, performance results from that date
through June 30, 2003 are for the Platinum Class of Fund shares. Because
the Companion Fund and the Fund's initial class had lower expenses, their
performance was better than the Fund would have realized in the same
period.
PORTFOLIO STATISTICS AS OF JUNE 30, 2003
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 0.58% 0.05%
7-day Effective Yield* 0.58% 0.05%
30-day Yield* 0.62% 0.08%
Weighted Average Maturity 15 Days 15 Days
*Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day
yield.
TOP TEN HOLDINGS AS OF JUNE 30, 2003
State of Texas Tax and Revenue 14.5%
Moffat County, Colorado Pollution Control 8.0%
Gulf Coast Waste Disposal Authority (Texas) 7.0%
Pierce County, Washington Economic
Development Corporation 6.2%
Claremore Industrial and Redevelopment
Authority 6.0%
Brazos Harbor Industrial Development
Corporation 6.0%
Clark County, Nevada Highway Revenue 4.8%
Alachua County, Florida Housing
Financial Authority 4.4%
Ohio Water Development Authority 4.1%
South Carolina JOBS Economic Development
Authority 4.1%
5
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE AMOUNTS)
ASSETS:
Investment in Portfolio, at value ............................. $ 512,601 $ 19,775 $ 31,302
Receivable for fund shares sold ............................... 23 - -
------------ ----------- -----------
TOTAL ASSETS ............................................... 512,624 19,775 31,302
------------ ----------- -----------
LIABILITIES:
Payable for fund shares redeemed .............................. 37 1 -
Distribution fees payable ..................................... 105 4 6
Administrative services fees payable (Note 2) ................. 285 4 6
Other liabilities ............................................. 54 13 12
------------ ----------- -----------
TOTAL LIABILITIES .......................................... 481 22 24
------------ ----------- -----------
NET ASSETS ....................................................... $ 512,143 $ 19,753 $ 31,278
============ =========== ===========
ANALYSIS OF NET ASSETS:
Paid-in-capital ............................................... 512,143 19,753 31,278
------------ ----------- -----------
NET ASSETS ....................................................... $ 512,143 $ 19,753 $ 31,278
============ =========== ===========
Shares outstanding (no par value):
Mileage Class: ................................................ 55,459,704 13,746,446 23,945,331
============ =========== ===========
Platinum Class: ............................................... 456,683,857 6,006,919 7,332,516
============ =========== ===========
Net asset value, offering and redemption price per share:
Mileage Class: ................................................ $ 1.00 $ 1.00 $ 1.00
============ =========== ===========
Platinum Class: ............................................... $ 1.00 $ 1.00 $ 1.00
============ =========== ===========
See accompanying notes
- --------------------------------------------------------------------------------
6
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
------------ --------------- ------------
(IN THOUSANDS)
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income ............................................. $ 3,738 $ 149 $ 210
Portfolio expenses .......................................... (316) (14) (21)
------- ----- -----
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ........... 3,422 135 189
------- ----- -----
FUND EXPENSES:
Administrative service fees (Note 2) ........................ 278 11 17
Administrative service fees - Platinum Class (Note 2) ....... 1,608 22 24
Transfer agent fees - Mileage Class ......................... 6 15 2
Transfer agent fees - Platinum Class ........................ 13 - -
Professional fees ........................................... 20 1 2
Registration fees and expenses .............................. 19 12 11
Distribution fees - Mileage Class (Note 2) .................. 76 20 32
Distribution fees - Platinum Class (Note 2) ................. 619 8 9
Accounting expenses ......................................... 3 2 -
Other expenses .............................................. 37 4 2
------- ----- -----
TOTAL FUND EXPENSES ...................................... 2,679 95 99
------- ----- -----
LESS REIMBURSEMENT OF FUND EXPENSES (NOTE 2) ................... 1 3 1
------- ----- -----
NET FUND EXPENSES ........................................ 2,678 92 98
------- ----- -----
NET INVESTMENT INCOME .......................................... 744 43 91
------- ----- -----
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments ............................ 4 - -
------- ----- -----
NET GAIN ON INVESTMENTS .................................. 4 - -
------- ----- -----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........... $ 748 $ 43 $ 91
======= ===== =====
See accompanying notes
- --------------------------------------------------------------------------------
7
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
MONEY MARKET
----------------------------------
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002
------------- ------------
(IN THOUSANDS)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................................ $ 744 $ 5,923
Net realized gain on investments ..................................... 4 3
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 748 5,926
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - Mileage Class ................................ (255) (936)
Net investment income - Platinum Class ............................... (489) (4,988)
Net realized gain on investments - Mileage Class ..................... - -
Net realized gain on investments - Platinum Class .................... (4) (3)
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS: .................................... (748) (5,927)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares ........................................ 73,941 239,488
Reinvestment of dividends and distributions .......................... 742 5,915
Cost of shares redeemed .............................................. (180,666) (392,212)
--------- ---------
NET DECREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ............................................. (105,983) (146,809)
--------- ---------
NET DECREASE IN NET ASSETS .............................................. (105,983) (146,810)
NET ASSETS:
Beginning of period .................................................. 618,126 764,936
--------- ---------
END OF PERIOD ........................................................ $ 512,143 $ 618,126
========= =========
See accompanying notes
- --------------------------------------------------------------------------------
8
================================================================================
U.S. GOVERNMENT MONEY MARKET MUNICIPAL MONEY MARKET
- -------------------------------- -------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2003 DECEMBER 31, JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002 (UNAUDITED) 2002
- ------------- ------------ ------------- ------------
(IN THOUSANDS)
$ 43 $ 315 $ 91 $ 219
- 3 - -
------- ------- ------- -------
43 318 91 219
------- ------- ------- -------
(39) (223) (87) (194)
(4) (92) (4) (25)
- (2) - -
- (1) - -
------- ------- ------- -------
(43) (318) (91) (219)
------- ------- ------- -------
5,994 55,481 32,315 35,403
42 317 90 218
(13,324) (63,458) (33,555) (37,450)
------- ------- ------- -------
(7,288) (7,660) (1,150) (1,829)
------- ------- ------- -------
(7,288) (7,660) (1,150) (1,829)
27,041 34,701 32,428 34,257
------- ------- ------- -------
$19,753 $27,041 $31,278 $32,428
======= ======= ======= =======
See accompanying notes
- --------------------------------------------------------------------------------
9
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
June 30, 2003 (Unaudited)
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
American AAdvantage Mileage Funds (the "Trust") is organized as a
Massachusetts business trust under a Declaration of Trust dated February 14,
1995 and is registered under the Investment Company Act of 1940 (the "Act"), as
amended, as a no load, open-end management investment company with separate
series. The following series are included in this report: American AAdvantage
Money Market Mileage Fund, American AAdvantage U.S. Government Money Market
Mileage Fund and American AAdvantage Municipal Money Market Mileage Fund (each a
"Fund" and collectively the "Funds"). The Funds commenced active operations on
November 1, 1995. The U.S. Government Money Market and Municipal Money Market
Mileage Funds commenced sales of a second class of shares designated as
"Platinum Class" on November 1, 1999. At the same time, the existing shares of
the U.S. Government Money Market and Municipal Money Market Mileage Funds were
redesignated as "Mileage Class" shares.
Each Fund invests all of its investable assets in the corresponding
portfolio of the AMR Investment Services Trust, an open-end diversified
management investment company, as follows:
AMERICAN AADVANTAGE: --> INVESTS ASSETS IN --> AMR INVESTMENT SERVICES TRUST:
- -------------------- ------------------------------
Money Market Mileage Fund Money Market Portfolio
U.S. Government Money Market Mileage Fund U.S. Government Money Market Portfolio
Municipal Money Market Mileage Fund Municipal Money Market Portfolio
Each AMR Investment Services Trust Portfolio has the same investment
objectives as its corresponding Fund. The value of such investment reflects each
Fund's proportionate interest in the net assets of the corresponding portfolio
(12.18%, 8.06% and 75.44% at June 30, 2003 of the AMR Investment Services Trust
Money Market, U.S. Government Money Market and Municipal Money Market
Portfolios, respectively) (each a "Portfolio" and collectively the
"Portfolios"). The financial statements of the Portfolios are included elsewhere
in this report and should be read in conjunction with the Funds' financial
statements.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services to the Trust and other
investors.
The following is a summary of the significant accounting policies followed
by the Funds.
Valuation of Investments
Valuation of securities by the Portfolios is discussed in Note 1 of the
Portfolios' Notes to Financial Statements which are included elsewhere in this
report.
Investment Income and Dividends to Shareholders
Each Fund records its share of net investment income (loss) and realized
gain (loss) in the Portfolio each day. All net investment income (loss) and
realized gain (loss) of each Portfolio are allocated pro rata among the
corresponding Fund and other investors in each Portfolio at the time of such
determination. The Funds generally declare dividends daily from net investment
income and net short-term capital gain, if any, payable monthly.
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently than accounting principles generally
accepted in the United States.
- --------------------------------------------------------------------------------
10
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2003 (Unaudited)
================================================================================
Federal Income and Excise Taxes
It is the policy of each of the Funds to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all net investment income as well as any net realized
capital gains on the sale of investments. Therefore, no federal income or excise
tax provision is required.
All dividends paid by the Municipal Money Market Mileage Fund were "exempt
- - interest dividends" and therefore are 100% free of any regular federal income
tax. Approximately 22% of interest earned was derived from investments in
certain private activity bonds for purposes of the federal alternative minimum
tax calculation.
Expenses
Expenses directly attributable to a Fund are charged to that Fund's
operations. Expenses directly attributable to a Class of shares are charged to
that Class. Expenses incurred by the Trust with respect to any two or more of
the Funds are allocated in proportion to the net assets of each Fund, except
where allocations of direct expenses to each Fund can otherwise be made fairly.
Each share of each Fund, regardless of class, bears equally those expenses that
are allocated to the Fund as a whole.
Valuation of Shares
The price per share is calculated separately for each class of each Fund on
each day on which shares are offered for sale and orders accepted or upon
receipt of a redemption request. With respect to a class of a Fund, price per
share is computed by dividing the value of the Class' pro rata allocation of the
Fund's investments and other assets, less liabilities, by the number of Class
shares outstanding.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimated.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Manager and the Trust entered into a Management Agreement which
obligates the Manager to provide or oversee administrative and management
services to the Funds. As compensation for performing administrative duties
required under the Management Agreement, the Manager receives an annualized fee
of 0.10% of the average daily net assets of each of the Funds.
- --------------------------------------------------------------------------------
11
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2003 (Unaudited)
================================================================================
Administrative Services Plan
The Trust has adopted an Administrative Services Plan with respect to the
Platinum Class of the Funds. As compensation for providing administrative
services, the Manager receives an annual fee of 0.65% of the average daily net
assets of each of the Platinum Classes of the Funds.
Distribution Plan
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule
12b-1 under the Act. A separate plan has been adopted by the Mileage Class and
Platinum Class of the Funds. Under each Plan, as compensation for distribution
assistance, the Manager receives an annual fee of 0.25% of the average daily net
assets of each Class or Fund. The fee will be payable without regard to whether
the amount of the fee is more or less than the actual expenses incurred in a
particular month by the Manager for distribution assistance. During the six
months ended June 30, 2003, the Manager waived distribution fees as follows:
FUND AMOUNT
- ---- ------
Money Market Mileage Fund
Platinum Class ................................................................ $ 889
U.S. Government Money Market Mileage Fund
Platinum Class ................................................................ 2,534
Municipal Money Market Mileage Fund
Platinum Class ................................................................ 946
Reimbursement of Expenses
The Manager has contractually agreed to reimburse the Platinum Class of the
Municipal Money Market and U.S. Government Money Market Mileage Funds for other
expenses through December 31, 2003 to the extent that total annual fund
operating expenses exceed 1.20%. In addition, effective 6/25/03, the Manager
agreed to voluntarily waive additional fees to the extent necessary to preserve
a certain minimum level of returns for Platinum Class Fund shareholders.
Thereafter, for a period of up to three years, each Platinum Class Fund is
required to reimburse the Manager for these expenses, provided that its average
net assets have grown or expenses have declined sufficiently to allow
reimbursement without causing its expense ratio to exceed the previously agreed
upon contractual expense waiver.
Other
Certain officers or trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Unaffiliated trustees and their spouses are provided
free unlimited air transportation on American. However, the Trust compensates
each trustee with payments in an amount equal to the trustee's income tax on the
value of this free airline travel. Retired trustees and their spouses receive
American Airlines flight benefits, plus reimbursement of any tax liability
relating to such benefits, up to a maximum annual value of $40,000. One trustee,
as a retiree of American, already receives flight benefits. This trustee
receives an annual retainer of $40,000 plus $1,250 for each Board meeting
attended. For the six months ended June 30, 2003, the cost of air transportation
was not material to any of the Funds.
- --------------------------------------------------------------------------------
12
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2003 (Unaudited)
================================================================================
3. CAPITAL SHARE TRANSACTIONS
The tables below summarizes the activity in capital shares of the Funds (in
thousands). Each share of the Funds is valued at $1.00:
Six Months Ended June 30, 2003
- ------------------------------
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
MILEAGE FUND MILEAGE FUND MILEAGE FUND
-------------------------------- ----------------------------- ------------------------------
MILEAGE CLASS PLATINUM CLASS MILEAGE CLASS PLATINUM CLASS MILEAGE CLASS PLATINUM CLASS
------------- -------------- ------------- -------------- ------------- --------------
Shares sold ............. 18,952 54,989 2,243 3,751 24,301 8,014
Reinvestment of
dividends ............ 254 488 38 4 86 4
Shares redeemed ......... (27,630) (153,036) (8,171) (5,153) (25,353) (8,202)
------- -------- ------ ------ ------- ------
Net decrease in
capital shares
outstanding .......... (8,424) (97,559) (5,890) (1,398) (966) (184)
======= ======== ====== ====== ======= ======
Year Ended December 31, 2002
- ----------------------------
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
MILEAGE FUND MILEAGE FUND MILEAGE FUND
-------------------------------- ----------------------------- ------------------------------
MILEAGE CLASS PLATINUM CLASS MILEAGE CLASS PLATINUM CLASS MILEAGE CLASS PLATINUM CLASS
------------- -------------- ------------- -------------- ------------- --------------
Shares sold ............. 64,014 175,474 38,380 17,101 24,143 11,260
Reinvestment of
dividends ............ 925 4,990 224 93 193 25
Shares redeemed ......... (87,964) (304,248) (36,766) (26,692) (25,219) (12,231)
------- -------- ------- ------- ------- -------
Net increase
(decrease) in
capital shares
outstanding .......... (23,025) (123,784) 1,838 (9,498) (883) (946)
======= ======== ======= ======= ======= =======
- --------------------------------------------------------------------------------
13
AMERICAN AADVANTAGE MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
MILEAGE CLASS
-----------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED OCTOBER 31,
JUNE 30, -------------------------------- DECEMBER 31, ------------------------
2003 2002 2001 2000 1999 1999 1998
----------- -------- -------- -------- ------------ ---------- ----------
(UNAUDITED)
Net asset value, beginning of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------- -------- --------
Net investment income (A).......... - 0.01 0.04 0.06 0.01 0.05 0.05
Less dividends from net
investment income................ - (0.01) (0.04) (0.06) (0.01) (0.05) (0.05)
------- ------- ------- ------- -------- -------- --------
Net asset value, end of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======== ======== ========
Total return.......................... 0.41%(B) 1.29% 3.76% 6.07% 0.89%(B) 4.74% 5.18%
======= ======= ======= ======= ======== ======== ========
Ratios and supplemental data:
Net assets, end of period
(in thousands)................... $55,460 $63,884 $86,910 $97,698 $112,653 $124,703 $114,844
Ratios to average net assets
(annualized) (A):
Expenses...................... 0.51% 0.63% 0.63% 0.61% 0.57% 0.59% 0.66%
Net investment income......... 0.83% 1.29% 3.74% 5.87% 5.30% 4.63% 5.07%
Decrease reflected in
above expense ratio
due to absorption of
expenses by the Manager.... - - - - - - 0.03%
- --------------
(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 Money Market Portfolio.
(B) Not annualized.
- --------------------------------------------------------------------------------
14
================================================================================
PLATINUM CLASS
- -----------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED OCTOBER 31,
JUNE 30, -------------------------------- DECEMBER 31, ------------------------
2003 2002 2001 2000 1999 1999 1998
- ----------- -------- -------- -------- ------------ ---------- ----------
(UNAUDITED)
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- -------- -------
- 0.01 0.03 0.05 0.01 0.04 0.05
- (0.01) (0.03) (0.05) (0.01) (0.04) (0.05)
-------- -------- -------- -------- -------- -------- -------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== ======== =======
0.10%(B) 0.81% 3.32% 5.57% 0.80%(B) 4.22% 4.74%
======== ======== ======== ======== ======== ======== =======
$456,683 $554,242 $678,026 $643,693 $442,218 $342,192 $73,875
1.15% 1.10% 1.06% 1.08% 1.09% 1.09% 1.09%
0.20% 0.82% 3.26% 5.46% 4.80% 4.17% 4.64%
- - - - 0.01% - 0.03%
- --------------------------------------------------------------------------------
15
AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
MILEAGE CLASS
-----------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED OCTOBER 31,
JUNE 30, -------------------------------- DECEMBER 31, ------------------------
2003 2002 2001 2000 1999 1999 1998
----------- -------- -------- -------- ------------ ---------- ----------
(UNAUDITED)
Net asset value, beginning of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
Net investment income (A).......... - 0.01 0.04 0.06 0.01 0.04 0.05
Less dividends from net
investment income................ - (0.01) (0.04) (0.06) (0.01) (0.04) (0.05)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= =======
Total return.......................... 0.25%(C) 1.06% 3.72% 5.93% 0.87%(C) 4.50% 5.13%
======= ======= ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period
(in thousands)................... $13,746 $19,636 $17,798 $18,400 $29,407 $34,059 $33,713
Ratios to average net assets
(annualized) (A):
Expenses...................... 0.84% 0.79% 0.62% 0.62% 0.62% 0.62% 0.62%
Net investment income......... 0.49% 1.06% 3.66% 5.72% 5.17% 4.41% 5.02%
Decrease reflected in
above expense ratio
due to absorption of
expenses by the Manager.... - 0.01% 0.08% 0.26% 0.16% 0.10% 0.04%
- --------------
(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 U.S. Government Money Market Portfolio.
(B) The Platinum Class of the U.S. Government Money Market Mileage Fund
commenced active operations on November 1, 1999 and at that time the
existing shares of the Fund were designated as Mileage Class shares.
(C) Not annualized.
- --------------------------------------------------------------------------------
16
================================================================================
PLATINUM CLASS (B)
- --------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, -------------------------------- DECEMBER 31,
2003 2002 2001 2000 1999
- ----------- -------- -------- -------- ------------
(UNAUDITED)
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------- ------- ------
- 0.01 0.03 0.05 0.01
- (0.01) (0.03) (0.05) (0.01)
------ ------ ------- ------- ------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======= ======= ======
0.06%(C) 0.69% 3.22% 5.47% 0.80%(C)
====== ====== ======= ======= ======
$6,007 $7,405 $16,903 $12,350 $ 1
1.20% 1.15% 1.10% 1.10% 1.10%
0.13% 0.74% 3.11% 5.55% 4.69%
0.08% 0.06% 0.08% 0.14% 0.20%
- --------------------------------------------------------------------------------
17
AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
MILEAGE CLASS
-----------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED OCTOBER 31,
JUNE 30, -------------------------------- DECEMBER 31, ------------------------
2003 2002 2001 2000 1999 1999 1998
----------- -------- -------- -------- ------------ ---------- ----------
(UNAUDITED)
Net asset value, beginning of period.. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- -------
Net investment income (A).......... - 0.01 0.02 0.04 0.01 0.03 0.03
Less dividends from net
investment income................ - (0.01) (0.02) (0.04) (0.01) (0.03) (0.03)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= =======
Total return.......................... 0.34%(C) 0.77% 2.17% 3.63% 0.55%(C) 2.69% 3.16%
======= ======= ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of period
(in thousands)................... $23,945 $24,911 $25,792 $28,971 $28,693 $28,338 $24,742
Ratios to average net assets
(annualized) (A):
Expenses...................... 0.59% 0.74% 0.65% 0.61% 0.57% 0.64% 0.65%
Net investment income......... 0.68% 0.77% 2.15% 3.58% 3.27% 2.64% 3.12%
Decrease reflected in
above expense ratio
due to absorption of
expenses by the Manager.... - 0.05% 0.13% 0.01% - 0.08% 0.18%
- --------------
(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 Municipal Money Market Portfolio.
(B) The Platinum Class of the Municipal Money Market Mileage Fund commenced
active operations on November 1, 1999 and at that time the existing
shares of the Fund were designated as Mileage Class Shares.
(C) Not annualized.
- --------------------------------------------------------------------------------
18
================================================================================
PLATINUM CLASS (B)
- --------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED
JUNE 30, -------------------------------- DECEMBER 31,
2003 2002 2001 2000 1999
- ----------- -------- -------- -------- ------------
(UNAUDITED)
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------
- - 0.02 0.03 0.01
- - (0.02) (0.03) (0.01)
------ ------ ------ ------ ------
$ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
0.05%(C) 0.35% 1.72% 3.05% 0.45%(C)
====== ====== ====== ====== ======
$7,333 $7,517 $8,464 $7,889 $ 1
1.17% 1.16% 1.10% 1.10% 1.10%
0.10% 0.34% 1.72% 3.29% 2.74%
0.02% 0.07% 0.13% 0.06% 0.17%
- --------------------------------------------------------------------------------
19
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2003 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
TIME DEPOSITS - 10.10%
Den Danske Bank, 1.31%, Due 7/1/2003 ...................................... $ 200,000 $ 200,000
Societe Generale, 1.31%, Due 7/1/2003 ..................................... 225,000 225,000
----------
TOTAL TIME DEPOSITS .................................................. 425,000
----------
VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES (NOTE E) - 34.13%
Bank One, NA,
1.45%, Due 8/21/2003 .................................................... 25,000 25,007
1.30%, Due 9/15/2003 .................................................... 75,000 75,034
1.17%, Due 9/17/2003 .................................................... 213,000 213,061
Bank of New York, 1.36%, Due 10/20/2003 ................................... 100,000 100,024
Branch Banking & Trust Company, 1.22%, Due 2/10/2004 ...................... 150,000 149,991
Canadian Imperial Bank of Commerce, 1.12%, Due 3/12/2004 .................. 100,000 99,996
FCC National Bank, 1.44%, Due 2/10/2004 ................................... 47,000 47,058
First Tennessee Bank, NA, 1.36%, Due 7/21/2004 ............................ 50,000 50,052
First Union National Bank,
1.46%, Due 6/3/2004 ..................................................... 96,500 96,698
1.29%, Due 6/16/2004 .................................................... 5,000 5,010
National City Bank,
1.31%, Due 11/14/2003 ................................................... 35,000 35,007
1.19%, Due 12/9/2003 .................................................... 200,000 199,991
Southtrust Bank, NA,
1.16%, Due 3/19/2004 .................................................... 50,000 50,045
1.36%, Due 5/24/2004 .................................................... 82,000 82,077
1.11%, Due 6/21/2004 .................................................... 21,500 21,521
Suntrust Bank, NA,
1.37%, Due 9/5/2003 ..................................................... 11,100 11,103
1.39%, Due 4/12/2004 .................................................... 125,000 125,157
US Bank, NA, 1.35%, Due 10/29/2003 ........................................ 50,000 50,013
----------
TOTAL VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES ........... 1,436,845
----------
PROMISSORY NOTES - 4.75%
Goldman Sachs Group, LP, 1.25%, Due 9/26/2003 ............................. 200,000 200,000
----------
TOTAL PROMISSORY NOTES ............................................... 200,000
----------
VARIABLE RATE FUNDING AGREEMENTS (NOTES A AND E) - 13.78%
General Electric Capital Assurance Company, 1.35%, Due 12/2/2003 .......... 250,000 250,000
Metropolitan Life Insurance Company,
1.39%, Due 7/18/2003 .................................................... 135,000 135,000
1.36%, Due 11/21/2003 ................................................... 195,000 195,000
----------
TOTAL VARIABLE RATE FUNDING AGREEMENTS ............................... 580,000
----------
ASSET-BACKED COMMERCIAL PAPER, 144A (NOTES C AND D) - 5.93%
Jupiter Asset Securitization Corporation, 1.07%, Due 8/11/2003 ............ 50,000 49,941
Tulip Funding Corporation, 1.07%, Due 8/1/2003 ............................ 200,000 199,822
----------
TOTAL ASSET-BACKED COMMERCIAL PAPER .................................. 249,763
----------
VARIABLE RATE MEDIUM-TERM NOTES (NOTE E) - 17.56%
American Honda Finance Corporation, 144A (Note C),
1.25%, Due 11/26/2003 ................................................... 50,000 49,996
1.48%, Due 12/5/2003 .................................................... 15,000 15,015
1.35%, Due 6/11/2004 .................................................... 15,000 15,027
Bank of America Corporation,
1.55%, Due 5/3/2004 ..................................................... 5,000 5,012
1.38%, Due 7/2/2004 ..................................................... 35,000 35,041
Citigroup, Incorporated, 1.42%, Due 7/26/2004 ............................. 60,000 60,107
Donaldson, Lufkin & Jenrette, 1.85%, Due 7/18/2003 ........................ 13,200 13,203
General Electric Capital Corporation, 1.17%, Due 7/17/2004 ................ 180,000 180,000
See accompanying notes
- --------------------------------------------------------------------------------
20
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
June 30, 2003 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
Merrill Lynch & Company, Incorporated,
1.46%, Due 1/14/2004 .................................................... $ 50,000 $ 50,044
1.60%, Due 1/26/2004 .................................................... 100,000 100,160
Salomon Smith Barney Holdings,
1.60%, Due 7/24/2003 .................................................... 17,000 17,003
1.49%, Due 10/10/2003 ................................................... 20,000 20,013
1.20%, Due 12/19/2003 ................................................... 35,000 35,027
1.45%, Due 1/28/2004 .................................................... 10,000 10,010
SLM Corporation, 1.47%, Due 7/26/2004 ..................................... 37,000 37,073
US Bancorp, 1.41%, Due 9/15/2003 .......................................... 11,500 11,507
USA Education, Incorporated, 1.40%, Due 6/16/2004 ......................... 24,000 24,066
Wells Fargo Financial, Incorporated, 1.14%, Due 3/26/2004 ................. 61,000 61,040
----------
TOTAL VARIABLE RATE MEDIUM-TERM NOTES ................................ 739,344
----------
REPURCHASE AGREEMENTS (NOTE B) - 19.82%
Banc of America Securities, LLC, 1.25%, Due 7/1/2003 ...................... 300,000 300,000
Goldman Sachs, 1.25%, Due 7/1/2003 ........................................ 300,000 300,000
UBS Securities, LLC, 1.22%, Due 7/1/2003 .................................. 234,350 234,350
----------
TOTAL REPURCHASE AGREEMENTS .......................................... 834,350
----------
TOTAL INVESTMENTS - 106.07% (COST $4,465,302) ............................. 4,465,302
----------
LIABILITIES, NET OF OTHER ASSETS - (6.07%) ................................ (255,450)
----------
TOTAL NET ASSETS - 100% ................................................... $4,209,852
==========
- --------------
Based on the cost of investments of $4,465,302 for federal income tax purposes
at June 30, 2003, there was no unrealized appreciation or depreciation of
investments.
(A) Obligation is subject to an unconditional put back to the issuer with
ninety calendar days notice.
(B) Collateral held at Bank of New York for Banc of America Securities, LLC,
6.00%, Due 3/1/2033, Total Value - $306,000,000; and Goldman Sachs,
3.83%-7.00%, Due 8/1/2014-6/1/2033, Total Value - $306,000,000; and at JP
Morgan Chase Bank for UBS Securities, LLC, 4.50%-8.00%, Due
10/1/2010-5/1/2033, Total Value - $239,040,414.
(C) Security exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $329,801 or 7.83% of net
assets.
(D) Rates represent discount rate at time of purchase.
(E) The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
ABBREVIATIONS:
LLC - Limited Liability Company
LP - Limited Partnership
NA - National Association
See accompanying notes
- --------------------------------------------------------------------------------
21
AMR INVESTMENT SERVICES U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2003 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
REPURCHASE AGREEMENTS (NOTES A AND B) - 47.15%
Banc of America Securities, LLC, 1.25%, Due 7/1/2003 ...................... $ 50,000 $ 50,000
Goldman Sachs, 1.25%, Due 7/1/2003 ........................................ 50,000 50,000
UBS Securities, LLC, 1.22%, Due 7/1/2003 .................................. 15,617 15,617
----------
TOTAL REPURCHASE AGREEMENTS .......................................... 115,617
----------
U.S. GOVERNMENT AGENCY INSTRUMENTS - 43.79%
Federal Farm Credit Bank,
Discount Note, 0.95%, Due 7/17/2003 ..................................... 5,000 5,000
Federal Home Loan Bank,
Discount Note, 1.34%, Due 7/17/2003 (Note C) ............................ 2,100 2,099
Discount Note, 1.23%, Due 11/14/2003 (Note C) ........................... 5,000 4,977
Note 4.857%, 1.255%, Due 4/16/2004 ...................................... 4,000 4,113
Floating Rate Note, 1.151%, Due 8/11/2004 (Note D) ...................... 5,000 4,998
Federal Home Loan Mortgage Corporation, (Note C)
Discount Note, 1.76%, Due 7/17/2003 ..................................... 10,000 9,992
Discount Note, 1.23%, Due 11/6/2003 ..................................... 2,525 2,514
Discount Note, 1.24%, Due 12/15/2003 .................................... 4,765 4,737
Federal National Mortgage Association,
Discount Note, 0.97%, Due 7/7/2003 (Note C) ............................. 20,000 19,997
Discount Note, 1.24%, Due 8/20/2003 (Note C) ............................ 10,000 9,983
Discount Note, 1.67%, Due 8/22/2003 (Note C) ............................ 15,000 14,964
Discount Note, 1.24%, Due 8/27/2003 (Note C) ............................ 1,195 1,193
Discount Note, 1.24%, Due 9/30/2003 (Note C) ............................ 5,000 4,984
Discount Note, 1.23%, Due 11/14/2003 (Note C) ........................... 4,005 3,986
Discount Note, 1.23%, Due 1/29/2004 (Note C) ............................ 1,000 993
Discount Note, 1.25%, Due 1/29/2004 (Note C) ............................ 2,650 2,630
Note 5.125%, 1.28%, Due 2/13/2004 ....................................... 5,000 5,116
Note 5.125%, 1.33%, Due 2/13/2004 ....................................... 5,000 5,117
----------
TOTAL U.S. GOVERNMENT AGENCY INSTRUMENTS ............................. 107,393
----------
SHARES
-----------
SHORT-TERM INVESTMENTS - 8.97%
AIM Government Money Market Fund .......................................... 11,000,000 11,000
One Group Institutional Money Market Fund ................................. 11,000,000 11,000
----------
TOTAL SHORT-TERM INVESTMENTS ......................................... 22,000
----------
TOTAL INVESTMENTS - 99.91% (COST $245,010) ................................ 245,010
----------
OTHER ASSETS, NET OF LIABILITIES - 0.09% .................................. 216
----------
TOTAL NET ASSETS - 100% ................................................... $ 245,226
==========
- --------------
Based on the cost of investments of $245,010 for federal income tax purposes at
June 30, 2003, there was no unrealized appreciation or depreciation of
investments.
(A) Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. All collateral is held at a tri-party bank.
The collateral is monitored daily by the Portfolio so that its market value
exceeds the carrying value of the repurchase agreement.
(B) Collateral held at Bank of New York for Banc of America Securities, LLC,
6.00%, Due 3/1/2033, Total Value - $51,000,000; and Goldman Sachs, 5.50%,
Due 11/1/2017, Total Value - $51,000,000; and at JP Morgan Chase Bank for
UBS Securities, LLC, 6.50%, Due 7/1/2032, Total Value - $15,852,742.
(C) Rates represent discount rate.
(D) The coupon rate shown on floating or adjustable rate securities represents
the rate at period end. The due date on these types of securities reflects
the final maturity date.
ABBREVIATIONS:
LLC - Limited Liability Company
See accompanying notes
- --------------------------------------------------------------------------------
22
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
June 30, 2003 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
MUNICIPAL OBLIGATIONS - 92.71%
COMMERCIAL PAPER (NOTE A) - 3.61%
Sarasota County Public Hospital District, Variable Rate Demand Hospital
Revenue Bonds, Series A (Sarasota Memorial Hospital Project), 1.10%,
Due 8/14/2003, LOC Suntrust Bank ......................................... $ 1,500 $ 1,500
----------
TOTAL COMMERCIAL PAPER ................................................ 1,500
----------
TAX AND REVENUE ANTICIPATION NOTES (NOTE A) - 14.49%
State of Texas Tax and Revenue Anticipation Notes, 2.75%, Due 8/29/2003 .... 6,000 6,012
----------
TOTAL TAX AND REVENUE ANTICIPATION NOTES .............................. 6,012
----------
DEMAND OBLIGATIONS (NOTE A) - 74.61%
FIXED RATE - 3.38%
School District of Palm Beach County, Florida, General Obligation
Refunding Bonds, Fixed Rate, Series 2002A, 3.50%,
Due 8/1/2003, Bond Insurance - FGIC ..................................... 1,400 1,402
----------
TOTAL FIXED RATE ..................................................... 1,402
----------
VARIABLE RATE - 71.23%
COLORADO - 7.95%
Moffat County, Colorado Pollution Control Revenue Bonds, Series
1984 (Ute Electric Company Project), Bond Insurance - Ambac Assurance
Corporation, 1.25%, Due 7/1/2010, SPA Societe Generale .................. 3,300 3,300
----------
TOTAL COLORADO ....................................................... 3,300
----------
FLORIDA - 7.71%
Alachua County, Florida Housing Financial Authority, Multifamily
Housing Revenue Bonds, Series 2001 (University Cove Apartment
Project), 1.00%, Due 6/15/2034, LOC Southtrust Bank, NA ................. 1,835 1,835
Florida Housing Finance Corporation, Multifamily Mortgage Revenue
Bonds, Series 2002 L-1 (Bridgewater Club Apartments Project), 1.03%,
Due 6/1/2034, LOC Suntrust Bank ......................................... 1,365 1,365
----------
TOTAL FLORIDA ........................................................ 3,200
----------
ILLINOIS - 2.58%
Solid Waste Disposal Facility Revenue Bonds for the County of Lake,
Illinois, Series 1996 (Countryside Landfill Inc. Project), 1.15%,
Due 4/1/2021, LOC JP Morgan Chase Bank .................................. 1,070 1,070
----------
TOTAL ILLINOIS ....................................................... 1,070
----------
INDIANA - 4.84%
Fort Wayne, Indiana Industrial Economic Development Revenue Bonds,
Series 1989 (ND-Tech Corporation Project), 1.10%, Due 7/1/2009,
LOC Societe Generale .................................................... 1,000 1,000
City of Garrett, Indiana, Variable Rate Economic Development Revenue
Bonds, Series 1991 (Group Dekko Int'l Project), 1.05%,
Due 12/1/2011, LOC Bank One ............................................. 1,010 1,010
----------
TOTAL INDIANA ........................................................ 2,010
----------
LOUISIANA - 3.83%
Calcasieu Parish Public Trust Authority, Waste Disposal Revenue
Bonds, Series 1997 (WPT Corporation Project), 1.05%,
Due 12/1/2027, LOC JP Morgan Chase Bank ................................. 1,589 1,589
----------
TOTAL LOUISIANA ...................................................... 1,589
----------
NEVADA - 4.82%
Clark County, Nevada Highway Revenue (Motor Vehicle Tax) Commercial
Paper Notes, Series B, 1.00%, Due 11/1/2031, LOC Toronto Dominion ....... 2,000 2,000
----------
TOTAL NEVADA ......................................................... 2,000
----------
OHIO - 4.10%
Ohio Water Development Authority, Environmental Improvement Revenue
Bonds, Series 2000B (Waste Management, Incorporated, Project), 1.20%,
Due 7/1/2020, LOC Fleet National Bank ................................... 1,700 1,700
----------
TOTAL OHIO ........................................................... 1,700
----------
See accompanying notes
- --------------------------------------------------------------------------------
23
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
June 30, 2003 (Unaudited)
================================================================================
PAR
AMOUNT VALUE
------------ -----------
(DOLLARS IN THOUSANDS)
OKLAHOMA - 6.02%
Claremore Industrial and Redevelopment Authority, Development
Revenue Bonds, Series 2001 (Whirlwind Steel Buildings, Inc.
Project), 1.15%, Due 9/1/2019, LOC JP Morgan Chase Bank ................. $ 2,500 $ 2,500
----------
TOTAL OKLAHOMA ...................................................... 2,500
----------
PENNSYLVANIA - 5.99%
Berks County Industrial Development Authority Manufacturing Facilities
Revenue Bonds, Series 1995 (Grafika Commerial Printing Inc.), 1.15%,
Due 9/1/2010, LOC First Union National Bank ............................. 1,485 1,485
Chartiers Valley, Pennsylvania Industrial and Commercial Development
Authority Commercial Development Bonds (William Penn Plaza
Project), 1.20%, Due 12/1/2016, LOC PNC Bank, NA ........................ 1,000 1,000
----------
TOTAL PENNSYLVANIA .................................................. 2,485
----------
SOUTH CAROLINA - 4.10%
South Carolina JOBS Economic Development Authority Revenue Bonds,
Series 1998 (Klockner Namasco Corporation Project), 1.10%,
Due 4/1/2008, LOC Bayeriche Landesbank .................................. 1,700 1,700
----------
TOTAL SOUTH CAROLINA ................................................ 1,700
----------
TEXAS - 13.06%
Brazos Harbor Industrial Development Corporation Solid Waste Disposal
Revenue Bonds, Series 2002 (Republic Waste Services of Texas, Ltd.
Project), 1.10%, Due 12/1/2024, LOC Bank of America Corporation ......... 2,500 2,500
Gulf Coast Waste Disposal Authority (Texas), Enviromental Facilities
Revenue Bonds, Series 2002 (Waste Corporation of Texas, L.P.
Project), 1.15%, Due 9/1/2022, LOC - Wells Fargo Texas .................. 2,920 2,920
----------
TOTAL TEXAS ......................................................... 5,420
----------
WASHINGTON - 6.23%
Pierce County, Washington Economic Development Corporation Dock & Wharf
Facilities Revenue Bonds, Series 1995 (SCS Industries Project), 1.10%,
Due 7/1/2030, LOC Bank of Nova Scotia ................................... 2,585 2,585
----------
TOTAL WASHINGTON .................................................... 2,585
----------
TOTAL VARIABLE RATE ................................................. 29,559
----------
TOTAL DEMAND OBLIGATIONS ............................................ 30,961
----------
TOTAL MUNICIPAL OBLIGATIONS ......................................... 38,473
----------
SHARES
----------
SHORT-TERM INVESTMENTS - 6.79%
Dreyfus Municipal Cash Management Plus .................................... 76 -
Federated Municipal Obligations Fund ...................................... 1,935,707 1,936
Provident Muni Cash Fund .................................................. 877,644 878
----------
TOTAL OTHER INVESTMENTS ......................................... 2,814
----------
TOTAL INVESTMENTS - 99.50% (COST $41,287) ................................. 41,287
----------
OTHER ASSETS, NET OF LIABILITIES - 0.50% .................................. 207
----------
TOTAL NET ASSETS - 100% ................................................... $ 41,494
==========
- --------------
Based on the cost of investments of $41,287 for federal income tax purposes at
June 30, 2003, there was no unrealized appreciation or depreciation of
investments.
(A) Rates represent yield to maturity or yield to next reset date.
ABBREVIATIONS:
FGIC - Financial Guaranty Insurance Company
LOC - Letter of Credit
SPA - Support Agreement
NA - National Association
See accompanying notes
- --------------------------------------------------------------------------------
24
AMERICAN INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
June 30, 2003 (Unaudited)
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
------------ --------------- ------------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE AMOUNTS)
ASSETS:
Investments in securities at value (cost - $3,630,952;
$129,393, $41,287, respectively) ............................. $ 3,630,952 $ 129,393 $ 41,287
Repurchase agreements (cost - $834,350; $115,617; $0,
respectively) ................................................ 834,350 115,617 -
Cash ........................................................... 19 - -
Dividends and interest receivable .............................. 4,685 246 215
----------- ----------- ---------
TOTAL ASSETS ................................................ 4,470,006 245,256 41,502
----------- ----------- ---------
LIABILITIES:
Payable for investments purchased .............................. 259,789 - -
Management and investment advisory fees payable (Note 2) ....... 274 19 4
Other liabilities .............................................. 91 11 4
----------- ----------- ---------
TOTAL LIABILITIES ........................................... 260,154 30 8
----------- ----------- ---------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS ......... $ 4,209,852 $ 245,226 $ 41,494
=========== =========== =========
See accompanying notes
- --------------------------------------------------------------------------------
25
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2003 (Unaudited)
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
------------ --------------- ------------
(IN THOUSANDS)
INVESTMENT INCOME:
Interest income ................................................ $ 32,850 $ 2,260 $ 330
----------- ----------- ---------
TOTAL INVESTMENT INCOME. .................................... 32,850 2,260 330
----------- ----------- ---------
EXPENSES:
Management and investment advisory fees (Note 2) ............... 2,418 170 26
Custodian fees ................................................. 140 19 5
Professional fees .............................................. 65 3 1
Other expenses ................................................. 95 18 1
----------- ----------- ---------
TOTAL EXPENSES .............................................. 2,718 210 33
----------- ----------- ---------
NET INVESTMENT INCOME ............................................ 30,132 2,050 297
----------- ----------- ---------
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ............................... 28 3 -
----------- ----------- ---------
NET GAIN ON INVESTMENTS ..................................... 28 3 -
----------- ----------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. $ 30,160 $ 2,053 $ 297
=========== =========== =========
See accompanying notes
- --------------------------------------------------------------------------------
26
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
U.S. GOVERNMENT
MONEY MARKET MONEY MARKET
------------------------------- -------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
2003 DECEMBER 31, 2003 DECEMBER 31,
(UNAUDITED) 2002 (UNAUDITED) 2002
------------- -------------- ------------- --------------
(IN THOUSANDS)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .......................... $ 30,132 $ 165,857 $ 2,050 $ 6,840
Net realized gain on investments ............... 28 6 3 34
------------ ------------- ----------- ------------
TOTAL INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................... 30,160 165,863 2,053 6,874
------------ ------------- ----------- ------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS:
Contributions .................................. 26,940,823 106,944,248 618,081 2,200,353
Withdrawals .................................... (29,996,802) (108,139,347) (845,545) (2,032,412)
------------ ------------- ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS ........... (3,055,979) (1,195,099) (227,464) 167,941
------------ ------------- ----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS ....... (3,025,819) (1,029,236) (225,411) 174,815
------------ ------------- ----------- ------------
NET ASSETS:
Beginning of period ............................ 7,235,671 8,264,907 470,637 295,822
------------ ------------- ----------- ------------
END OF PERIOD .................................. $ 4,209,852 $ 7,235,671 $ 245,226 $ 470,637
============ ============= =========== ============
MUNICIPAL
MONEY MARKET
- ------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED
2003 DECEMBER 31,
(UNAUDITED) 2002
- ------------- --------------
$ 297 $ 1,656
- -
- ----------- ------------
297 1,656
- ----------- ------------
44,127 204,033
(115,040) (191,801)
- ----------- ------------
(70,913) 12,232
- ----------- ------------
(70,616) 13,888
- ----------- ------------
112,110 98,222
- ----------- ------------
$ 41,494 $ 112,110
=========== ============
See accompanying notes
- --------------------------------------------------------------------------------
27
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
FINANCIAL HIGHLIGHTS
================================================================================
MONEY MARKET
------------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED OCTOBER 31,
JUNE 30, -------------------------------- DECEMBER 31, ------------------------
2003 2002 2001 2000 1999 1999 1998
----------- -------- -------- -------- ------------ ---------- ----------
(UNAUDITED)
Total Return.......................... 0.61%(A) 1.81% 4.30% N/A N/A N/A N/A
Ratios to average net assets
(annualized):
Expenses........................... 0.11% 0.11% 0.11% 0.11% 0.11% 0.11% 0.16%
Net investment income.............. 1.26% 1.81% 3.95% 6.40% 5.77% 5.11% 5.56%
- --------------
(A) Not annualized.
- --------------------------------------------------------------------------------
28
================================================================================
U.S. GOVERNMENT MONEY MARKET
- ------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED OCTOBER 31,
JUNE 30, -------------------------- DECEMBER 31, ------------------------
2003 2002 2001 2000 1999 1999 1998
- ----------- ------ ------ ------ ------------ ---------- ----------
(UNAUDITED)
0.60%(A) 1.74% 4.24% N/A N/A N/A N/A
0.12% 0.12% 0.11% 0.13% 0.12% 0.12% 0.17%
1.21% 1.71% 3.99% 6.27% 5.67% 4.89% 5.45%
MUNCIPAL MONEY MARKET
- ------------------------------------------------------------------------------------
SIX MONTHS TWO MONTHS
ENDED YEAR ENDED DECEMBER 31, ENDED YEAR ENDED OCTOBER 31,
JUNE 30, -------------------------- DECEMBER 31, ------------------------
2003 2002 2001 2000 1999 1999 1998
- ----------- ------ ------ ------ ------------ ---------- ----------
(UNAUDITED)
0.57%(A) 1.39% 2.71% N/A N/A N/A N/A
0.13% 0.12% 0.13% 0.13% 0.14% 0.15% 0.19%
1.14% 1.39% 2.71% 4.05% 3.69% 3.13% 3.55%
- --------------------------------------------------------------------------------
29
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 2003 (Unaudited)
================================================================================
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
AMR Investment Services Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a no load, open-end management
investment company which was organized as a trust under the laws of the State of
New York pursuant to a Declaration of Trust dated as of June 27, 1995 and
amended on August 11, 1995. Beneficial interests in the Trust are divided into
separate series, each having distinct investment objectives and policies. These
financial statements relate to the AMR Investment Services Money Market
Portfolio, AMR Investment Services U.S. Government Money Market Portfolio and
AMR Investment Services Municipal Money Market Portfolio (each a "Portfolio" and
collectively the "Portfolios"). The assets of each Portfolio belong only to that
Portfolio, and the liabilities of each Portfolio are borne solely by that
Portfolio and no other.
AMR Investment Services, Inc. (the "Manager") is a wholly-owned subsidiary
of AMR Corporation, the parent company of American Airlines, Inc. ("American"),
and was organized in 1986 to provide business management, advisory,
administrative and asset management consulting services.
The following is a summary of the significant accounting policies followed
by the Portfolios.
Security Valuation
Securities of the Portfolios are valued using the amortized cost method. In
the event that a deviation of 1/2 of 1% or more exists between the $1.00 per
share price of the Portfolios, calculated at amortized cost, and the price per
share calculated by reference to market quotations, or if there is any other
deviation which the Board believes would result in a material dilution to
shareholders or purchasers, the Board will promptly consider the appropriate
action which should be initiated.
Security Transactions and Investment Income
Security transactions are recorded on the trade date of the security
purchase or sale. Interest income is earned from settlement date, recorded on
the accrual basis, and adjusted, if necessary, for amortization of premiums or
accretion of discounts on investment grade short-term securities and zero coupon
instruments. For financial and tax reporting purposes, realized gains and losses
are determined on the basis of specific lot identification.
Federal Income and Excise Taxes
The Portfolios will be treated as partnerships for federal income tax
purposes. As such, each investor in a Portfolio will be taxed on its share of
the Portfolio's ordinary income and capital gains. It is intended that each
Portfolio's assets will be managed in such a way that an investor in the
Portfolio will be able to satisfy the requirements of subchapter M of the
Internal Revenue Code.
Repurchase Agreements
Under the terms of a repurchase agreement, securities are acquired by a
Portfolio from a securities dealer or a bank which are subject to resale at a
later date. Repurchase agreements are fully collateralized by U.S. Treasury or
Government agency securities. All collateral is held at the Portfolio's
custodian bank, State Street Bank and Trust Company, or at subcustodian banks.
The collateral is monitored daily by each Portfolio so that the collateral's
market value exceeds the carrying value of the repurchase agreement.
- --------------------------------------------------------------------------------
30
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2003 (Unaudited)
================================================================================
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimated.
2. TRANSACTIONS WITH AFFILIATES
Management Agreement
The Trust and the Manager are parties to a Management Agreement which
obligates the Manager to provide or oversee the provision of all administrative,
investment advisory and portfolio management services. The Manager serves as the
sole investment adviser to each of the Portfolios. As compensation for
performing the duties required under the Management Agreement, the Manager
receives from the Portfolios 0.10% of the average daily net assets of each of
the Portfolios.
Other
Certain officers or trustees of the Trust are also current or former
officers or employees of the Manager or American. The Trust makes no direct
payments to its officers. Unaffiliated trustees and their spouses are provided
free unlimited air transportation on American. However, the Trust compensates
each trustee with payments in an amount equal to the trustee's income tax on the
value of this free airline travel. Retired trustees and their spouses receive
American Airlines flight benefits, plus reimbursement of any tax liability
relating to such benefits, up to a maximum annual value of $40,000. One trustee,
as a retiree of American, already receives flight benefits. This trustee
receives an annual retainer of $40,000 plus $1,250 for each Board meeting
attended. For the six months ended June 30, 2003, the cost of air transportation
was not material to any of the Funds.
- --------------------------------------------------------------------------------
31
[GRAPHIC]
- --------------------------------------------------------------------------------
32
[LOGO OF AMERICAN AADVANTAGE MILEAGE FUNDS]
AMERICAN AADVANTAGE MILEAGE FUNDS(R)
- --------------------------------------------------------------------------------
To reduce expenses, your financial institution may mail only one copy of the
Prospectus, Annual Report, and Semi-Annual Report to those addresses shared by
two or more accounts. If you wish to receive individual copies of these
documents, please contact your financial institution. They will begin sending
you individual copies thirty days after receiving your request.
TO OBTAIN MORE INFORMATION ABOUT THE FUNDS:
[GRAPHIC OF KEYBOARD] [GRAPHIC OF MOUSE]
BY E-MAIL: ON THE INTERNET:
American_AAdvantage.Funds@aa.com Visit our website at www.aafunds.com
- --------------------------------------------------------------------------------
[GRAPHIC OF TELEPHONE] [GRAPHIC OF MAILBOX]
BY TELEPHONE: BY MAIL:
Mileage Class(R) Platinum Class(SM) Mileage Class(R) Platinum Class(SM)
- ---------------- ------------------ ---------------- ------------------
Call (800) Call (800) American American
388-3344 967-9009 AAdvantage Funds AAdvantage Funds
P.O. Box 219643 P.O. Box 619003,
Kansas City, MO MD 2450
64121-9643 DFW Airport, TX
75261-9003
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT AUDITORS DISTRIBUTOR
STATE STREET BANK AND TRUST NATIONAL FINANCIAL DATA SERVICES ERNST & YOUNG LLP SWS FINANCIAL SERVICES
Boston, Massachusetts Kansas City, Missouri Dallas, Texas Dallas, Texas
This report is prepared for shareholders of the American AAdvantage Mileage
Funds and may be distributed to others only if preceded or accompanied by a
current prospectus.
- --------------------------------------------------------------------------------
American Airlines is not responsible for investments made in the American
AAdvantage Mileage Funds. American AAdvantage Mileage Funds is a registered
service mark of AMR Corporation. Mileage Class is a registered service mark of
AMR Investment Services, Inc. Platinum Class, American AAdvantage Money Market
Mileage Fund, American AAdvantage U.S. Government Money Market Mileage Fund, and
American AAdvantage Municipal Money Market Mileage Fund are service marks of AMR
Investment Services, Inc.
- --------------------------------------------------------------------------------
[GRAPHIC]
527729
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon an evaluation within 90 days of the filing date of this
report, the principal executive and financial officers concluded
that the disclosure controls and procedures of the registrant are
effective.
(b) There have been no significant changes in the registrant's internal
control over financial reporting during the registrant's last fiscal
half-year that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a)(1) Not Applicable.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule
30a-2(a) under the Investment Company Act of 1940 is attached hereto
as EX-99.CERT.
(b) The certification required by Rule 30a-2(b) under the Investment
Company Act of 1940 is attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American AAdvantage Mileage Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: September 8, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: September 8, 2003
By /s/ Rebecca L. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: September 8, 2003