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: December 31, 2003
ITEM 1. REPORT TO STOCKHOLDERS.
AMERICAN AADVANTAGE
MILEAGE FUNDS(R)
[LOGO OF AMERICAN AADVANTAGE MILEAGE FUNDS]
- ------------------------------------[GRAPHIC]-----------------------------------
ANNUAL REPORT
DECEMBER 31, 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. 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 ................................ 16
U.S. Government
Money Market Mileage Fund................................. 18
Municipal Money Market Mileage Fund....................... 20
Schedule of Investments
Money Market Portfolio.................................... 23
U.S. Government
Money Market Portfolio.................................... 26
Municipal Money Market Portfolio.......................... 28
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 December 31, 2003
[GRAPHIC OF AMR INVESTMENTS]
FELLOW SHAREHOLDERS:
I am pleased to present you with the Annual Report for the American AAdvantage
Mileage Funds for the twelve months ended December 31, 2003. During this time,
the American AAdvantage Mileage Funds performed well versus their peers.
During the past year, investors experienced both upward and downward market
trends while hoping to avoid a fourth consecutive annual decline in the stock
market (something that has not occurred since 1932). Fortunately, the up markets
outpaced downward periods by a larger margin. The reality seems to be that the
economic recovery has arrived. The economy had to overcome the war with Iraq,
the occupation of Afghanistan, and the SARS outbreak. However, the lowest Fed
Funds rate in 45 years at 1.0% improved corporate earnings growth, and was
reflected in the markets.
The American AAdvantage Mileage Funds produced strong relative returns for
the period. The Money Market Mileage Fund Mileage Class returned 0.73% for the
year, outperforming the Lipper Money Market Instrument Average return of 0.44%.
The U.S. Government Money Market Mileage Fund Mileage Class outpaced the
Lipper U.S. Government Money Market Average with a return of 0.47% versus 0.46%
for the Average. Additionally, the Municipal Money Market Mileage Fund Mileage
Class posted a gain of 0.57%, outperforming the Lipper Tax-Exempt Money Market
Average return of 0.45%.
As the Fed intends to remain accommodative and "patient" with monetary
policy, thereby, keeping short-term interest rates at historical lows, the
American AAdvantage Mileage Funds continue to emphasize fundamental investing
on behalf of our shareholders. We believe our disciplined investment process,
credit analysis, and low costs will produce value-added results over the long
term.
Please review the enclosed portfolio listings and detailed financial data.
As always, we welcome the opportunity to serve your financial needs. 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 uncertainty of a war with Iraq, unemployment on the rise
and a bounce in the stock market's average indices. After a successful campaign
in Iraq, the Bush Administration shifted its focus to stimulating economic
growth through tax cuts. A great deal of uncertainty surrounded monetary policy,
as the world and U.S. economic recovery appeared tentative. Excess capacity
hindered pricing power and productivity increases hindered the labor market.
Inflation posed no threat during the year; in fact, Federal Reserve Chairman
Alan Greenspan expressed concern over deflation, indicating the Fed would be
diligent in monitoring the potential threat of falling prices. Indeed, with the
Fed's apparent conviction to utilize all means necessary to avoid deflation and
stimulate the economy, the overnight Fed Funds rate was lowered by 25 basis
points to 1% at the June FOMC meeting. This is the lowest overnight level in
over forty years.
As the year progressed, the economy appeared to be heading down the path of
an economic growth recovery. The third quarter GDP growth rate of 8.2% was the
highest since 1983 and economists have been forecasting 4% GDP growth for the
fourth quarter of 2003 and throughout 2004. The stock market's extraordinary
returns, the continued robust housing market, and the capture of Saddam Hussein
all helped improve consumer confidence. The recent drop in the dollar should
make U.S. exports more appealing. The only remaining area of concern from a
recovery viewpoint is jobs creation. Although the jobless rate has edged its way
down to 5.7% from a high of 6.3% in May, we have yet to see strong increases in
the number of new non-farm payrolls that many economists have been anticipating.
Productivity has enabled companies to produce more without having to hire
additional workers. The third quarter productivity pace was the fastest in 20
years. With inflation still benign, productivity increasing, and lackluster jobs
creation, there is little reason to doubt Fed Chairman Greenspan's repeated
assertions that monetary policy could remain accommodative for a "considerable
period", or at least through the first half of 2004.
2
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE MONEY MARKET MILEAGE FUND (SM)
================================================================================
As evidence mounted that money market interest rates would head lower, the
weighted-average maturity of the American AAdvantage Money Market Mileage Fund
was extended close to the 60 day maximum for "AAA" rated funds. This strategy
enabled the Fund to lock in higher rates. The extension became even more
beneficial when the Fed lowered the Fed Funds rate 25 basis points from 1.25% to
1.00% at the June FOMC meeting. After thirteen consecutive easings by the Fed
since January 2001, a positively sloped money market yield curve emerged in the
second half of 2003. The market began to anticipate in July that the next move
by the Fed would be to increase interest rates. That notion gained momentum
after third quarter GDP growth came in at a surprising 8.2%. Since then, the
economic growth recovery has remained on track, but with disappointing jobs
creation. The encouraging news on productivity coupled with the disappointing
news on jobs creation led us to concur with Chairman Greenspan's repeated
assertions that monetary policy could remain accommodative and money market
interest rates will remain at historically low levels for a "considerable
period". The Fund's large position in variable rate securities will likely be
maintained and the weighted-average maturity of the Fund will likely be in the
50 to 60 day range until evidence of a recovery in jobs creation emerges and the
likelihood of a Fed rate hike increases.
For the twelve months ended December 31, 2003, the total return of the
American AAdvantage Money Market Mileage Fund - Mileage Class was 0.73%. The
Fund outperformed the Lipper Money Market Instrument Average return of 0.44% by
29 basis points.
MILEAGE CLASS TOTAL RETURNS AS OF DECEMBER 31, 2003
[CHART OF MILEAGE CLASS TOTAL RETURNS AS OF DECEMBER 31, 2003]
American AAdvantage Lipper Money
Money Market Market Instrument
Mileage Fund Average
------------------- -----------------
1 Year 0.73 0.44
3 Years* 1.92 1.63
5 Years* 3.32 3.02
10 Years* 4.15 3.95
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
=================================
AS OF 12/31/03
---------------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1,2) ............... 0.73% 3.32% 4.15%
Platinum Class (1,3) .............. 0.12% 2.80% 3.76%
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 December 31, 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 December 31, 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 DECEMBER 31, 2003
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 0.62% 0.05%
7-day Effective Yield* 0.62% 0.05%
30-day Yield* 0.61% 0.05%
Weighted Average Maturity 50 Days 50 Days
*Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day
yield.
3
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE MONEY MARKET MILEAGE FUND (SM) -- CONTINUED
================================================================================
TOP TEN HOLDINGS AS OF DECEMBER 31, 2003
% OF
NET ASSETS
----------
General Electric Capital Corporation 4.7%
Edison Asset Securitization 4.5%
Metropolitan Life Insurance Company 3.9%
Bank of America Corporation 3.8%
Bayerische Landesbank 3.5%
Federal Home Loan Mortgage Corporation 3.3%
Wells Fargo Financial, Incorporated 3.2%
Southtrust Bank, NA 3.2%
American Honda Finance Corporation 3.0%
First Tennessee Bank 3.0%
4
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET MILEAGE FUND (SM)
================================================================================
The American AAdvantage U.S. Government Money Market Mileage Fund
maintained a weighted-average maturity toward the longer end of the maximum
maturity of 60 days allowed for "AAA" rated funds. This was accomplished
primarily by purchasing fixed rate agencies with maturities of six months to one
year. This strategy worked well during the first half of the year, especially in
light of the Fed lowering the Fed Funds rate in June to 1% from 1.25%.
After thirteen consecutive easings by the Fed since January 2001, a positively
sloped money market yield curve emerged in the second half of 2003. The market
began to anticipate in July that the next move by the Fed would be to increase
interest rates. That notion gained momentum after third quarter GDP growth came
in at a surprising 8.2%. Since then, the economic growth recovery has remained
on track but with disappointing jobs creation. The encouraging news on
productivity coupled with the disappointing news on jobs creation led us to
concur with Chairman Greenspan's repeated assertions that monetary policy could
remain accommodative and money market interest rates would remain at
historically low levels for a "considerable period".The weighted-average
maturity of the Fund will likely remain in the 50 to 60 day range until evidence
of a recovery in jobs creation emerges and the likelihood of a Fed rate hike
increases.
For the twelve months ended December 31, 2003, the total return of the
American AAdvantage U.S. Government Money Market Mileage Fund - Mileage Class
was 0.47% as compared to the Lipper U.S. Government Money Market Average return
of 0.46%.
MILEAGE CLASS TOTAL RETURNS AS OF DECEMBER 31, 2003
[CHART OF MILEAGE CLASS TOTAL RETURNS AS OF DECEMBER 31, 2003]
American AAdvantage Lipper U.S. Government
U.S. Government Money Market
Money Market Mileage Fund Average
------------------------- ----------------------
1 Year 0.47 0.46
3 Years* 1.74 1.67
5 Years* 3.14 3.04
10 Years* 3.98 3.92
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
=================================
AS OF 12/31/03
---------------------------------
1 Year 5 Years 10 Years
------ ------- --------
Mileage Class (1,2) ............. 0.47% 3.14% 3.98%
Platinum Class (1,3) ............ 0.09% 2.78% 3.80%
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 December 31, 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 December
31, 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 DECEMBER 31, 2003
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 0.41% 0.05%
7-day Effective Yield* 0.41% 0.05%
30-day Yield* 0.41% 0.05%
Weighted Average Maturity 48 Days 48 Days
*Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day
yield.
5
PERFORMANCE OVERVIEW
AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET MILEAGE FUND (SM)
================================================================================
The American AAdvantage Municipal Money Market Mileage Fund targeted a
neutral weighted-average maturity in the first half of the year, focusing on
variable rate demand notes backed by either bond insurance or a bank letter of
credit. As it became apparent the Fed would lower interest rates at least 25
basis points at the June FOMC meeting, the Fund locked in higher yields by
purchasing commercial paper. During the second half of the year, the focus
returned to the variable rate demand note market, as that proved to be the most
attractive investment alternative. If interest rates remain low, as anticipated,
the Fund will look for opportunities in the fixed rate market.
For the twelve months ended December 31, 2003, the total return of the
American AAdvantage Municipal Money Market Mileage Fund - Mileage Class was
0.57%. The Fund outperformed the Lipper Tax-Exempt Money Market Average return
of 0.45% by 12 basis points.
MILEAGE CLASS TOTAL RETURNS AS OF DECEMBER 31, 2003
[CHART OF MILEAGE CLASS TOTAL RETURNS AS OF DECEMBER 31, 2003]
American AAdvantage Lipper Tax-Exempt
Municipal Money Market Money Market
Mileage Fund Average
---------------------- -----------------
1 Year 0.57 0.45
3 Years* 1.17 1.17
5 Years* 1.98 1.95
10 Years* 2.51 2.47
[END CHART]
*Annualized
ANNUALIZED TOTAL RETURNS
===================================
AS OF 12/31/03
-----------------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Mileage Class (1,2) .............. 0.57% 1.98% 2.51%
Platinum Class (1,3) ............. 0.07% 1.57% 2.30%
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 December 31, 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 December 31, 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 DECEMBER 31, 2003
MILEAGE CLASS PLATINUM CLASS
------------- --------------
7-day Current Yield* 0.68% 0.05%
7-day Effective Yield* 0.68% 0.05%
30-day Yield* 0.55% 0.05%
Weighted Average Maturity 12 Days 12 Days
*Annualized. You may call 1-800-388-3344 to obtain the Fund's current seven day
yield.
TOP TEN HOLDINGS AS OF DECEMBER 31, 2003
% OF
NET ASSETS
----------
Moffat County, Colorado Pollution Control 8.3%
Gulf Coast Waste Disposal Authority (Texas) 7.2%
Pierce County, Washington Economic
Development Corporation 6.5%
Brazos Harbor Industrial Development
Corporation 6.3%
Claremore Industrial and Redevelopment
Authority 6.0%
Michigan State Housing Development Authority 4.9%
Montgomery County, Maryland Variable
Rate Housing Revenue Bonds 4.8%
Alachua County, Florida Housing
Financial Authority 4.6%
Mesa Arizona Industrial Development Authority 4.4%
Ohio Water Development Authority 4.3%
South Carolina JOBS Economic Development
Authority 4.3%
6
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
American AAdvantage Money Market Mileage Fund
American AAdvantage U.S. Government Money Market Mileage Fund
American AAdvantage Municipal Money Market Mileage Fund
We have audited the accompanying statements of assets and liabilities of the
American AAdvantage Money Market Mileage Fund, the American AAdvantage U.S.
Government Money Market Mileage Fund, and the American AAdvantage Municipal
Money Market Mileage Fund, (collectively, "the Funds") (separate funds
comprising the American AAdvantage Mileage Funds) as of December 31, 2003, and
the related statements of operations, the statements of changes in net assets
and the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures included
confirmation of investments owned as of December 31, 2003, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective American AAdvantage Mileage Funds at December 31, 2003, the
results of their operations, the changes in their net assets, and the financial
highlights for each of the periods indicated therein, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Chicago, Illinois
February 13, 2004
7
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2003
===============================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============ =============== ============
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE AMOUNTS)
ASSETS:
Investment in Portfolio, at value ............................... $ 481,042 $ 16,823 $ 33,455
Receivable for fund shares sold ................................. - - 1
Receivable from Manager for expense reimbursement (Note 2) ...... 36 - -
------------ ------------ ------------
TOTAL ASSETS ................................................. 481,078 16,823 33,456
------------ ------------ ------------
LIABILITIES:
Payable for fund shares redeemed ................................ 64 - 1
Distribution fees payable ....................................... 103 4 7
Administrative services fees payable (Note 2) ................... 282 4 7
Other liabilities ............................................... 52 8 11
------------ ------------ ------------
TOTAL LIABILITIES ............................................ 501 16 26
------------ ------------ ------------
NET ASSETS ........................................................ $ 480,577 $ 16,807 $ 33,430
------------ ------------ ------------
ANALYSIS OF NET ASSETS:
Paid-in-capital ................................................. 480,577 16,807 33,430
============ ============ ============
NET ASSETS ........................................................ $ 480,577 $ 16,807 $ 33,430
============ ============ ============
Shares outstanding (no par value):
Mileage Class: .................................................. 49,053,281 12,125,769 25,532,170
============ ============ ============
Platinum Class: ................................................. 431,523,461 4,681,637 7,898,194
============ ============ ============
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
- --------------------------------------------------------------------------------
8
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF OPERATIONS
Year Ended December 31, 2003
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============ =============== ============
(IN THOUSANDS)
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO:
Interest income ................................................. $6,593 $253 $390
Portfolio expenses .............................................. (608) (25) (41)
------ ---- ----
NET INVESTMENT INCOME ALLOCATED FROM PORTFOLIO ............ 5,985 228 349
------ ---- ----
FUND EXPENSES:
Administrative service fees (Note 2) ............................ 534 21 34
Administrative service fees - Platinum Class (Note 2) ........... 3,074 40 48
Transfer agent fees - Mileage Class ............................. 7 15 2
Transfer agent fees - Platinum Class ............................ 37 - 1
Professional fees ............................................... 27 2 4
Registration fees and expenses .................................. 45 27 25
Distribution fees - Mileage Class (Note 2) ...................... 142 36 65
Distribution fees - Platinum Class (Note 2) ..................... 1,182 16 19
Accounting expenses ............................................. 3 2 -
Other expenses .................................................. 114 7 7
------ ---- ----
TOTAL FUND EXPENSES ....................................... 5,165 166 205
------ ---- ----
LESS WAIVER AND REIMBURSEMENT OF FUND EXPENSES (NOTE 2) ........... 201 10 10
------ ---- ----
NET FUND EXPENSES ......................................... 4,964 156 195
------ ---- ----
NET INVESTMENT INCOME ............................................. 1,021 72 154
------ ---- ----
REALIZED GAIN ALLOCATED FROM PORTFOLIO:
Net realized gain on investments ................................ 6 1 -
------ ---- ----
NET GAIN ON INVESTMENTS ................................... 6 1 -
------ ---- ----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .............. $1,027 $ 73 $154
====== ==== ====
See accompanying notes
- --------------------------------------------------------------------------------
9
AMERICAN AADVANTAGE MILEAGE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
MONEY MARKET
=======================
YEAR ENDED DECEMBER 31,
=======================
2003 2002
--------- ---------
(IN THOUSANDS)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ............................................ $ 1,021 $ 5,923
Net realized gain on investments ................................. 6 3
--------- ---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,027 5,926
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - Mileage Class ............................ (419) (936)
Net investment income - Platinum Class ........................... (601) (4,988)
Net realized gain on investments - Mileage Class ................. (1) -
Net realized gain on investments - Platinum Class ................ (5) (3)
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS: .............................. (1,026) (5,927)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares .................................... 160,060 239,488
Reinvestment of dividends and distributions ...................... 1,018 5,915
Cost of shares redeemed .......................................... (298,628) (392,212)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ....................................... (137,550) (146,809)
--------- ---------
NET INCREASE (DECREASE) IN NET ASSETS ................................ (137,549) (146,810)
NET ASSETS:
Beginning of period .............................................. 618,126 764,936
--------- ---------
END OF PERIOD .................................................... $ 480,577 $ 618,126
========= =========
See accompanying notes
- --------------------------------------------------------------------------------
10
=======================================================
U.S. GOVERNMENT MONEY MARKET MUNICIPAL MONEY MARKET
============================ =======================
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
============================ =======================
2003 2002 2003 2002
------ ------ ------ ------
INCREASE (DECREASE) IN NET ASSETS: (IN THOUSANDS)
OPERATIONS:
Net investment income ............................................ $ 72 $ 315 $ 154 $ 219
Net realized gain on investments ................................. 1 3 - -
-------- -------- -------- --------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 73 318 154 219
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - Mileage Class ............................ (66) (223) (148) (194)
Net investment income - Platinum Class ........................... (6) (92) (6) (25)
Net realized gain on investments - Mileage Class ................. (1) (2) - -
Net realized gain on investments - Platinum Class ................ - (1) - -
-------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS: .............................. (73) (318) (154) (219)
-------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares .................................... 12,999 55,481 60,607 35,403
Reinvestment of dividends and distributions ...................... 71 317 153 218
Cost of shares redeemed .......................................... (23,304) (63,458) (59,758) (37,450)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ....................................... (10,234) (7,660) 1,002 (1,829)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS ................................ (10,234) (7,660) 1,002 (1,829)
NET ASSETS:
Beginning of period .............................................. 27,041 34,701 32,428 34,257
-------- -------- -------- --------
END OF PERIOD .................................................... $ 16,807 $ 27,041 $ 33,430 $ 32,428
======== ======== ======== ========
See accompanying notes
- --------------------------------------------------------------------------------
11
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
================================================================================
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
(9.72%, 7.15% and 84.09% at December 31, 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
The Funds record their investment in the Portfolios at fair value.
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.
- --------------------------------------------------------------------------------
12
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2003
================================================================================
Dividends are determined in accordance with income tax principles which may
treat certain transactions differently than accounting principles generally
accepted in the United States.
Federal Income and Excise Taxes
It is the policy of each of the Funds to comply with the requirements of
subchapter M of the Internal Revenue Code 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 23% of interest earned was derived from investments in
certain private activity bonds for purposes of the federal alternative minimum
tax calculation.
Allocation of Income, Expenses, Gains and Losses
Income, expenses (other than those attributable to a specific class), gains
and losses are allocated daily to each class of shares based upon the relative
proportion of net assets represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations of that
class.
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.
- --------------------------------------------------------------------------------
13
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2003
================================================================================
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 annualized fee of 0.65% of the average daily
net assets of the Platinum Class of each Fund.
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 annualized fee of 0.25% of the average daily
net assets of each Class. The fee will be payable without regard to whether the
amount of the fee is more or less than the actual expenses incurred in a
particular month by the Manager for distribution assistance.
Reimbursement and Waiver of Expenses
The Manager 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 June 25, 2003, the
Manager agreed to voluntarily reimburse additional fees to the extent necessary
to preserve a certain minimum level of returns for Platinum Class Fund
shareholders. During the year ended December 31, 2003, the Manager waived or
reimbursed expenses as follows:
FUND AMOUNT
- ---- ------
Money Market Mileage Fund
Platinum Class ................................................... $200,654
U.S. Government Money Market Mileage Fund
Platinum Class .................................................... 10,186
Municipal Money Market Mileage Fund
Platinum Class .................................................... 9,923
Expense Reimbursement Plan
Effective July 10, 2003, the Funds adopted an Expense Reimbursement Plan
whereby the Manager may seek repayment of fees waived or expenses reimbursed for
a period of up to three years. However, reimbursement will occur only if the
Class' 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 limit. The following waived fees or reimbursed
expenses are subject to potential recovery:
FUND AMOUNT EXPIRING IN
- ---- ------ -----------
Money Market Mileage Fund .............................. $200,654 2006
U.S. Government Money Market Mileage Fund .............. 7,709 2006
Municipal Money Market Fund ............................ 9,134 2006
- --------------------------------------------------------------------------------
14
AMERICAN AADVANTAGE MILEAGE FUNDS
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2003
================================================================================
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. In addition, 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 year ended December 31, 2003, the cost of air
transportation was not material to any of the Funds.
3. CAPITAL SHARE TRANSACTIONS
The tables below summarize the activity in capital shares for each class
of the Funds (in thousands). Each share is valued at $1.00:
Year Ended December 31, 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 ............ 31,560 128,500 3,594 9,405 45,496 15,111
Reinvestment of
dividends ............ 416 602 65 6 147 6
Shares redeemed ........ (46,807) (251,821) (11,170) (12,134) (45,023) (14,735)
------- -------- ------- ------- ------- -------
Net increase (decrease)
in capital shares
outstanding .......... (14,831) (122,719) (7,511) (2,723) 620 382
======= ======== ======= ======= ======= =======
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)
======= ======== ======= ======= ======= =======
- --------------------------------------------------------------------------------
15
AMERICAN AADVANTAGE MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
==============================================================================
MILEAGE CLASS
==============================================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
============================================= DECEMBER 31, OCTOBER 31,
2003 2002 2001 2000 1999 1999
------- ------- ------- ------- ------------ -----------
Net asset value, beginning of
period ................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- -------- ---------
Net investment income (A)............. 0.01 0.01 0.04 0.06 0.01 0.05
Less dividends from net
investment income ................. (0.01) (0.01) (0.04) (0.06) (0.01) (0.05)
------- ------- ------- ------- -------- ---------
Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======== =========
Total return ............................. 0.73% 1.29% 3.76% 6.07% 0.89%(B) 4.74%
======= ======= ======= ======= ======== =========
Ratios and supplemental data:
Net assets, end of period
(in thousands) .................... $49,053 $63,884 $86,910 $97,698 $112,653 $ 124,703
Ratios to average net assets
(annualized) (A):
Expenses ....................... 0.51% 0.63% 0.63% 0.61% 0.57% 0.59%
Net investment
income ...................... 0.74% 1.29% 3.74% 5.87% 5.30% 4.63%
Decrease reflected in
above expense ratio due
to absorption of expenses
by the Manager .............. - - - - - -
- -------------------
(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.
(C) Amount is less than $0.01 per share.
- --------------------------------------------------------------------------------
16
AMERICAN AADVANTAGE MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
================================================================================
PLATINUM CLASS
================================================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
================================================= DECEMBER 31, OCTOBER 31,
2003 2002 2001 2000 1999 1999
-------- --------- -------- -------- ------------ -----------
Net asset value, beginning of
period ................................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------- ---------
Net investment income (A)............. - (C) 0.01 0.03 0.05 0.01 0.04
Less dividends from net
investment income ................. - (C) (0.01) (0.03) (0.05) (0.01) (0.04)
-------- -------- -------- -------- -------- ---------
Net asset value, end of period ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== =========
Total return ............................. 0.12% 0.81% 3.32% 5.57% 0.80% (B) 4.22%
======== ======== ======== ======== ======== =========
Ratios and supplemental data:
Net assets, end of period
(in thousands) .................... $431,524 $554,242 $678,026 $643,693 $442,218 $ 342,192
Ratios to average net assets
(annualized) (A):
Expenses ....................... 1.12% 1.10% 1.06% 1.08% 1.09% 1.09%
Net investment
income ...................... 0.13% 0.82% 3.26% 5.46% 4.80% 4.17%
Decrease reflected in
above expense ratio due
to absorption of expenses
by the Manager .............. 0.04% - - - 0.01% -
- -------------------
(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.
(C) Amount is less than $0.01 per share.
- --------------------------------------------------------------------------------
17
AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
==============================================================================
MILEAGE CLASS
==============================================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
============================================= DECEMBER 31, OCTOBER 31,
2003 2002 2001 2000 1999 1999
------- ------- ------- ------- ----------- -----------
Net asset value,
beginning of period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- --------
Net investment
income (A) ........................... 0.01 0.01 0.04 0.06 0.01 0.04
Less dividends from
net investment
income ............................... (0.01) (0.01) (0.04) (0.06) (0.01) (0.04)
------- ------- ------- ------- ------- --------
Net asset value,
end of period ............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ========
Total return ................................. 0.47% 1.06% 3.72% 5.93% 0.87%(C) 4.50%
======= ======= ======= ======= ======= ========
Ratios and supplemental data:
Net assets, end of
period (in thousands) ................ $12,126 $19,636 $17,798 $18,400 $29,407 $ 34,059
Ratios to average net assets
(annualized) (A):
Expenses ............................. 0.77% 0.79% 0.62% 0.62% 0.62% 0.62%
Net investment income ................ 0.46% 1.06% 3.66% 5.72% 5.17% 4.41%
Decrease reflected in
above expense ratio due
to absorption of expenses
by the Manager .................... - 0.01% 0.08% 0.26% 0.16% 0.10%
- ---------------
(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.
(D) Amount is less than $0.01 per share.
- --------------------------------------------------------------------------------
18
AMERICAN AADVANTAGE U.S. GOVERNMENT MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
===============================================================
PLATINUM CLASS (B)
===============================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED
================================================ DECEMBER 31,
2003 2002 2001 2000 1999
------ ------ ------- ------ ------
Net asset value,
beginning of period ....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------- ------- ------
Net investment
income (A) ........................... -(D) 0.01 0.03 0.05 0.01
Less dividends from
net investment
income ............................... -(D) (0.01) (0.03) (0.05) (0.01)
------ ------ ------- ------- ------
Net asset value,
end of period ............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ======= ======= ======
Total return ................................. 0.09% 0.69% 3.22% 5.47% 0.80%(C)
====== ====== ======= ======= ======
Ratios and supplemental data:
Net assets, end of
period (in thousands) ................ $4,681 $7,405 $16,903 $12,350 $ 1
Ratios to average net assets
(annualized) (A):
Expenses ............................. 1.14% 1.15% 1.10% 1.10% 1.10%
Net investment income ................ 0.09% 0.74% 3.11% 5.55% 4.69%
Decrease reflected in
above expense ratio due
to absorption of expenses
by the Manager .................... 0.17% 0.06% 0.08% 0.14% 0.20%
- ---------------
(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.
(D) Amount is less than $0.01 per share.
- --------------------------------------------------------------------------------
19
AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
============================================================================
MILEAGE CLASS
============================================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
============================================= DECEMBER 31, OCTOBER 31,
2003 2002 2001 2000 1999 1999
------- ------- ------- ------- ----------- -----------
Net asset value,
beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- -------
Net investment
income (A) ................. 0.01 0.01 0.02 0.04 0.01 0.03
Less dividends from
net investment
income ..................... (0.01) (0.01) (0.02) (0.04) (0.01) (0.03)
------- ------- ------- ------- ------- -------
Net asset value,
end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= =======
Total return ...................... 0.57% 0.77% 2.17% 3.63% 0.55%(C) 2.69%
======= ======= ======= ======= ======= =======
Ratios and supplemental data:
Net assets, end of
period (in thousands) ...... $25,532 $24,911 $25,792 $28,971 $28,693 $28,338
Ratios to average net assets
(annualized) (A):
Expenses ................... 0.59% 0.74% 0.65% 0.61% 0.57% 0.64%
Net investment income ...... 0.57% 0.77% 2.15% 3.58% 3.27% 2.64%
Decrease reflected in
above expense ratio due
to absorption of expenses
by the Manager .......... - 0.05% 0.13% 0.01% - 0.08%
- -------
(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.
(D) Amount is less than $0.01 per share.
- --------------------------------------------------------------------------------
20
AMERICAN AADVANTAGE MUNICIPAL MONEY MARKET MILEAGE FUND
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
================================================================================
===================================================================
PLATINUM CLASS (B)
===================================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED
==================================================== DECEMBER 31,
2003 2002 2001 2000 1999
------ ------ ------ ------- ------------
Net asset value,
beginning of period ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------- -------
Net investment
income (A) ................. -(D) -(D) 0.02 0.03 0.01
Less dividends from
net investment
income ..................... -(D) -(D) (0.02) (0.03) (0.01)
------ ------ ------ ------- -------
Net asset value,
end of period ................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ======= =======
Total return ...................... 0.07% 0.35% 1.72% 3.05% 0.45%(C)
====== ====== ====== ======= =======
Ratios and supplemental data:
Net assets, end of
period (in thousands) ...... $7,898 $7,517 $8,464 $7,889 $ 1
Ratios to average net assets
(annualized) (A):
Expenses ................... 1.09% 1.16% 1.10% 1.10% 1.10%
Net investment income ...... 0.07% 0.34% 1.72% 3.29% 2.74%
Decrease reflected in
above expense ratio due
to absorption of expenses
by the Manager .......... 0.13% 0.07% 0.13% 0.06% 0.17%
- -------
(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.
(D) Amount is less than $0.01 per share.
- --------------------------------------------------------------------------------
21
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
AMR Investment Services Money Market Portfolio
AMR Investment Services U.S. Government Money Market Portfolio
AMR Investment Services Municipal Money Market Portfolio
We have audited the accompanying statements of assets and liabilities of the AMR
Investment Services Money Market Portfolio, the AMR Investment Services U.S.
Government Money Market Portfolio, and the AMR Investment Services Municipal
Money Market Portfolio (collectively, "the Portfolios") (separate portfolios
comprising the AMR Investment Services Trust), including the schedules of
investments, as of December 31, 2003 and the related statements of operations,
the statements of changes in net assets, and the financial highlights for each
of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Portfolios' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of investments owned as of December 31, 2003, by correspondence
with the custodian. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Portfolios of the AMR Investment Services Trust at December 31, 2003, the
results of their operations, the changes in their net assets, and the financial
highlights for each of the periods indicated therein, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Chicago, Illinois
February 13, 2004
22
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2003
================================================================================
PAR
AMOUNT VALUE
---------- ----------
(DOLLARS IN THOUSANDS)
REPURCHASE AGREEMENTS (NOTE B) - 5.05%
Goldman Sachs, 1.00%, Due 1/2/2004 ................................... $ 200,000 $ 200,000
JP Morgan Chase Securities, 1.00%, Due 1/2/2004 ...................... 50,000 50,000
----------
TOTAL REPURCHASE AGREEMENTS ..................................... 250,000
----------
TIME DEPOSITS - 11.89%
Deutsche Bank Cash Reserves, 0.938%, Due 1/2/2004 .................... 188,648 188,648
Societe Generale, 0.938%, Due 1/2/2004 ............................... 200,000 200,000
UBS Securities, LLC, 0.938%, Due 1/2/2004 ............................ 200,000 200,000
----------
TOTAL TIME DEPOSITS ............................................. 588,648
----------
VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES (NOTE E) - 23.03%
Bank One, NA, 1.181%, Due 1/27/2005 .................................. 25,000 25,017
Bayerische Landesbank, 1.17%, Due 12/17/2004 ......................... 171,140 171,210
Canadian Imperial Bank of Commerce, 1.11%, Due 3/12/2004 ............. 100,000 99,999
Credit Suisse First Boston Corporation, 1.12%, Due 7/7/2004 .......... 150,000 150,000
First Tennessee Bank,
1.20%, Due 7/21/2004 ............................................... 50,000 50,027
1.25%, Due 11/26/2004 .............................................. 100,000 100,102
First Union National Bank,
1.358%, Due 6/3/2004 ............................................... 96,500 96,590
1.338%, Due 6/16/2004 .............................................. 5,000 5,005
Marshall & Ilsley Bank, 1.20%, Due 12/20/2004 ........................ 125,500 125,588
Southtrust Bank, NA,
1.27%, Due 3/19/2004 ............................................... 50,700 50,713
1.25%, Due 5/24/2004 ............................................... 85,382 85,417
1.25%, Due 6/21/2004 ............................................... 22,000 22,010
Suntrust Bank, NA,
1.24%, Due 4/12/2004 ............................................... 125,000 125,056
1.27%, Due 6/21/2004 ............................................... 25,000 25,015
Wachovia Bank, NA, 1.22%, Due 10/19/2004 ............................. 8,000 8,006
----------
TOTAL VARIABLE RATE CERTIFICATES OF DEPOSIT AND BANK NOTES ...... 1,139,755
----------
VARIABLE RATE FUNDING AGREEMENTS (NOTES A AND E) - 5.96%
General Electric Capital Assurance Company, 1.253%, Due 12/15/2004 ... 100,000 100,000
Metropolitan Life Insurance Company, 1.253%, Due 11/22/2004 .......... 195,000 195,000
----------
TOTAL VARIABLE RATE FUNDING AGREEMENTS .......................... 295,000
----------
ASSET-BACKED COMMERCIAL PAPER (NOTES C AND D) - 11.41%
Atlantis One Funding Corporation, 144A,
1.12%, Due 3/15/2004 ............................................... 45,022 44,918
1.15%, Due 6/10/2004 ............................................... 73,682 73,303
Edison Asset Securitization, 144A,
1.12%, Due 3/25/2004 ............................................... 71,101 70,915
1.12%, Due 4/1/2004 ................................................ 150,000 149,575
Moat Funding LLC, 144A,
1.15%, Due 3/15/2004 ............................................... 70,000 69,835
1.15%, Due 4/6/2004 ................................................ 17,500 17,446
Sigma Financial, Incorporated, 144A,
1.13%, Due 3/15/2004 ............................................... 100,000 99,768
1.16%, Due 3/15/2004 ............................................... 5,000 4,988
1.145%, Due 4/13/2004 .............................................. 34,000 33,889
----------
TOTAL ASSET-BACKED COMMERCIAL PAPER ............................. 564,637
----------
See accompanying notes
- --------------------------------------------------------------------------------
23
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
December 31, 2003
================================================================================
PAR
AMOUNT VALUE
---------- ----------
(DOLLARS IN THOUSANDS)
VARIABLE RATE COMMERCIAL PAPER - 2.02%
Goldman Sachs Group, LP, 1.14%, Due 1/18/2005 ........................ $ 100,000 $ 100,000
----------
TOTAL VARIABLE RATE COMMERCIAL PAPER ............................ 100,000
----------
VARIABLE RATE MEDIUM-TERM NOTES (Note E) - 36.60%
American General Finance Corporation, 1.34%, Due 8/6/2004 ............ 49,270 49,324
American Honda Finance Corporation, 144A (NOTE C)
1.32%, Due 6/11/2004 ............................................... 15,000 15,013
1.30%, Due 10/7/2004 ............................................... 50,000 50,069
1.33%, Due 12/9/2004 ............................................... 60,000 60,108
1.28%, Due 1/13/2005 ............................................... 25,000 25,042
Bank of America Corporation,
1.41%, Due 5/3/2004 ................................................ 5,500 5,505
1.26%, Due 7/2/2004 ................................................ 52,000 52,030
1.45%, Due 10/22/2004 .............................................. 128,890 129,224
Citigroup, Incorporated,
1.26%, Due 7/26/2004 ............................................... 63,500 63,559
1.32%, Due 10/22/2004 .............................................. 77,700 77,822
General Electric Capital Corporation,
1.13%, Due 5/4/2004 ................................................ 55,000 54,786
1.23%, Due 1/19/2005 ............................................... 180,000 180,000
Goldman Sachs Group, LP, 1.40%, Due 11/16/2004 ....................... 143,000 143,330
HSBC USA, Incorporated, 1.32%, Due 9/24/2004 ......................... 60,000 60,072
Merrill Lynch & Company, Incorporated,
1.33%, Due 1/14/2004 ............................................... 50,000 50,003
1.47%, Due 1/13/2005 ............................................... 59,000 59,217
1.47%, Due 1/18/2005 ............................................... 20,000 20,073
Morgan Stanley & Company, Incorporated, 1.42%, Due 1/24/2005 70,000 70,220
Paccar Financial Corporation,
1.20%, Due 4/26/2004 ............................................... 15,000 15,004
1.21%, Due 9/20/2004 ............................................... 100,000 100,057
Salomon Smith Barney Holdings,
1.288%, Due 1/28/2004 .............................................. 10,000 10,001
1.50%, Due 5/21/2004 ............................................... 14,750 14,772
1.271%, Due 8/18/2004 .............................................. 50,000 50,046
1.34%, Due 9/20/2004 ............................................... 50,000 50,074
1.321%, Due 11/18/2004 ............................................. 22,400 22,438
SLM Corporation, 1.31%, Due 7/26/2004 ................................ 40,670 40,712
Toyota Motor Credit Corporation, 1.15%, Due 1/14/2005 ................ 50,000 50,024
USA Education, Incorporated,
1.448%, Due 6/16/2004 .............................................. 24,000 24,032
1.49%, Due 10/25/2004 .............................................. 73,500 73,706
US Bank, NA, 1.30%, Due 4/13/2004 .................................... 9,000 9,005
Wachovia Bank, NA, 1.57%, Due 8/19/2004 .............................. 28,000 28,082
Wells Fargo Financial, Incorporated,
1.21%, Due 3/26/2004 ............................................... 61,000 61,013
1.23%, Due 10/1/2004 ............................................... 97,090 97,156
----------
TOTAL VARIABLE RATE MEDIUM-TERM NOTES ........................... 1,811,519
----------
See accompanying notes
- --------------------------------------------------------------------------------
24
AMR INVESTMENT SERVICES MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
December 31, 2003
===============================================================================
PAR
AMOUNT VALUE
---------- ----------
(DOLLARS IN THOUSANDS)
U.S. GOVERNMENT AGENCY INSTRUMENTS (NOTE D) - 3.95%
Federal Home Loan Mortgage Corporation, Discount Note, 1.14%, Due 5/10/2004 ... $115,650 $ 115,174
Discount Note, 1.14%, Due 5/12/2004 ......................................... 50,000 49,791
Federal National Mortgage Association, Discount Note, 1.13%, Due 5/5/2004 ..... 30,850 30,729
----------
TOTAL U.S. GOVERNMENT AGENCY INSTRUMENTS ................................. 195,694
----------
TOTAL INVESTMENTS - 99.91% (COST $4,945,253) .................................. 4,945,253
----------
OTHER ASSETS, NET OF LIABILITIES - 0.09% ...................................... 4,364
----------
TOTAL NET ASSETS - 100% ....................................................... $4,949,617
==========
- ------------------
Based on the cost of investments of $4,945,253 for federal income tax purposes
at December 31, 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 Goldman Sachs, 4.50% - 5.00%, Due
10/1/2033 - 12/1/2033, Total Value - $204,000,000; and at JP Morgan Chase
Bank for JP Morgan Chase Securities, 5.00%, Due 11/1/2018 - 12/1/2018,
Total Value - $51,000,456.
(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 $714,869 or 14.44% of net
assets.
(D) Rates associated with money market securities 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.
See accompanying notes
- --------------------------------------------------------------------------------
25
AMR INVESTMENT SERVICES U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2003
================================================================================
PAR
AMOUNT VALUE
-------- -------
(DOLLARS IN THOUSANDS)
REPURCHASE AGREEMENTS (NOTE A) - 40.13%
Bank of America Securities, LLC, 1.00%, Due 1/2/2004 . $50,000 $50,000
Goldman Sachs, 1.00%, Due 1/2/2004 ................... 44,343 44,343
-------
TOTAL REPURCHASE AGREEMENTS ..................... 94,343
-------
U.S. GOVERNMENT AGENCY INSTRUMENTS - 59.70%
Federal Home Loan Bank,
Discount Note, 1.065%, Due 1/21/2004 (Note B) ...... 1,600 1,599
Discount Note, 1.06%, Due 2/25/2004 (Note B) ....... 4,000 3,993
Discount Note, 1.11%, Due 3/10/2004 (Note B) ....... 1,000 998
Discount Note, 1.09%, Due 3/15/2004 (Note B) ....... 1,000 998
Agency Note, 3.75%, Due 4/15/2004 .................. 4,595 4,630
Agency Note, 4.875%, Due 4/16/2004 ................. 4,000 4,041
Floating Rate Note, 1.041%, Due 8/11/2004 (Note C) . 5,000 4,999
Federal Home Loan Mortgage Corporation,
Discount Note, 1.08%, Due 1/15/2004 (Note B) ....... 4,842 4,840
Agency Note, 1.20%, Due 8/6/2004, Callable 1/16/2004 5,000 5,000
Discount Note, 1.08%, Due 2/2/2004 (Note B) ........ 1,100 1,099
Discount Note, 1.13%, Due 2/5/2004 (Note B) ........ 5,000 4,994
Discount Note, 1.09%, Due 2/19/2004 (Note B) ....... 2,900 2,896
Discount Note, 1.12%, Due 3/1/2004 (Note B) ........ 3,150 3,144
Discount Note, 1.06%, Due 3/4/2004 (Note B) ........ 4,400 4,392
Discount Note, 1.10%, Due 3/5/2004 (Note B) ........ 3,000 2,994
Agency Note, 3.75%, Due 4/15/2004 .................. 2,000 2,015
Discount Note, 1.18%, Due 4/22/2004 (Note B) ....... 749 746
Discount Note, 1.09%, Due 5/12/2004 (Note B) ....... 5,731 5,708
Discount Note, 1.11%, Due 5/12/2004 (Note B) ....... 2,131 2,122
Discount Note, 1.09%, Due 5/13/2004 (Note B) ....... 5,000 4,980
Discount Note, 1.10%, Due 5/13/2004 (Note B) ....... 2,000 1,992
Discount Note, 1.09%, Due 6/16/2004 (Note B) ....... 3,000 2,985
Federal National Mortgage Association,
Discount Note, 1.08%, Due 1/20/2004 (Note B) ....... 2,000 1,999
Discount Note, 1.23%, Due 1/29/2004 (Note B) ....... 1,000 999
Discount Note, 1.25%, Due 1/29/2004 (Note B) ....... 2,650 2,647
Discount Note, 1.09%, Due 2/2/2004 (Note B) ........ 1,000 999
Discount Note, 1.10%, Due 2/4/2004 (Note B) ........ 1,200 1,199
Discount Note, 1.12%, Due 2/4/2004 (Note B) ........ 5,000 4,995
Discount Note, 1.13%, Due 2/11/2004 (Note B) ....... 1,353 1,351
Agency Note, 5.13%, Due 2/13/2004 .................. 15,000 15,067
Discount Note, 1.07%, Due 2/18/2004 (Note B) ....... 5,000 4,993
Discount Note, 1.09%, Due 2/18/2004 (Note B) ....... 2,800 2,796
Discount Note, 1.10%, Due 2/19/2004 (Note B) ....... 1,568 1,566
Discount Note, 1.12%, Due 3/3/2004 (Note B) ........ 2,403 2,398
Discount Note, 1.14%, Due 3/3/2004 (Note B) ........ 900 898
Discount Note, 1.10%, Due 3/5/2004 (Note B) ........ 1,150 1,148
See accompanying notes
- --------------------------------------------------------------------------------
26
AMR INVESTMENT SERVICES U.S. GOVERNMENT MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
December 31, 2003
================================================================================
PAR
AMOUNT VALUE
-------- -------
(DOLLARS IN THOUSANDS)
Discount Note, 1.11%, Due 3/10/2004 (Note B)........ $ 2,700 $ 2,694
Discount Note, 1.12%, Due 3/10/2004 (Note B)........ 5,000 4,989
Discount Note, 1.13%, Due 3/31/2004 (Note B)........ 2,500 2,493
Discount Note, 1.12%, Due 4/7/2004 (Note B)......... 5,000 4,985
Discount Note, 1.12%, Due 5/4/2004 (Note B)......... 5,000 4,981
Discount Note, 1.13%, Due 5/5/2004 (Note B)......... 1,000 996
Discount Note, 1.10%, Due 5/26/2004 (Note B)........ 5,000 4,978
--------
TOTAL U.S. GOVERNMENT AGENCY INSTRUMENTS......... 140,336
--------
TOTAL INVESTMENTS - 99.83% (COST $234,679) ........... 234,679
--------
OTHER ASSETS, NET OF LIABILITIES - 0.17% ............. 391
--------
TOTAL NET ASSETS - 100% $235,070
========
- ---------------
Based on the cost of investments of $234,679 for federal income tax purposes at
December 31, 2003, there was no unrealized appreciation or depreciation of
investments.
(A) Collateral held at Bank of New York for Bank of America Securities, LLC,
4.50 - 5.00%, Due 6/1/2033 - 11/1/2033, Total Value - $51,000,001; and
Goldman Sachs, 4.50 - 7.00%, Due 11/1/2010 - 12/1/2033, Total Value -
$45,230,092.
(B) Rates represent discount rate.
(C) 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.
See accompanying notes
- --------------------------------------------------------------------------------
27
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
December 31, 2003
================================================================================
PAR
AMOUNT VALUE
------ ----------
(DOLLARS IN THOUSANDS)
MUNICIPAL OBLIGATIONS - 96.33%
COMMERCIAL PAPER (NOTE A) - 3.77%
Sarasota County Public Hospital District, Variable Rate Demand Hospital Revenue Bonds,
Series A (Sarasota Memorial Hospital Project), 1.01%, Due 2/13/2004, LOC SunTrust Bank............ $1,500 $ 1,500
----------
TOTAL COMMERCIAL PAPER ....................................................................... 1,500
----------
DEMAND OBLIGATIONS (NOTE A) - 92.56%
ARIZONA - 4.42%
Mesa Arizona Industrial Development Authority, Variable Rate Revenue Bonds,
Series 1999B (Discovery Health Systems), 1.12%, Due 1/1/2029,
LOC MBIA/JP Morgan Chase Bank .................................................................... 1,760 1,760
----------
TOTAL ARIZONA ................................................................................ 1,760
----------
COLORADO - 8.29%
Moffat County, Colorado Pollution Control Revenue Bonds, Series 1984
(Ute Electric Company Project), Bond Insurance - Ambac Assurance Corporation, 1.45%,
Due 7/1/2010, SPA Societe Generale ............................................................... 3,300 3,300
----------
TOTAL COLORADO ............................................................................... 3,300
----------
FLORIDA - 8.04%
Alachua County, Florida Housing Financial Authority, Multifamily Housing Revenue Bonds,
Series 2001 (University Cove Apartment Project), 1.13%,
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 - 2.69%
Solid Waste Disposal Facility Revenue Bonds for the County of Lake, Illinois, Series 1996
(Countryside Landfill Inc. Project), 1.40%, Due 4/1/2021, LOC JP Morgan Chase Bank ............... 1,070 1,070
----------
TOTAL ILLINOIS ............................................................................... 1,070
----------
INDIANA - 4.55%
Fort Wayne, Indiana Industrial Economic Development Revenue Bonds,
Series1989 (ND-Tech Corporation Project), 1.25%, 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 ...................... 810 810
----------
TOTAL INDIANA ................................................................................ 1,810
----------
KENTUCKY - 2.76%
Carroll County, Kentucky Solid Waste Disposal Revenue Bonds,
Series 2001 (North American Stainless, L.P.), 1.15%, Due 5/1/2031, LOC Fifth Third Bank .......... 1,100 1,100
----------
TOTAL KENTUCKY ............................................................................... 1,100
----------
LOUISIANA - 3.99%
Calcasieu Parish Public Trust Authority, Waste Disposal Revenue Bonds,
Series 1997 (WPT Corporation Project), 1.18%, Due 12/1/2027,
LOC JP Morgan Chase Bank ......................................................................... 1,589 1,589
----------
TOTAL LOUISIANA .............................................................................. 1,589
----------
See accompanying notes
- --------------------------------------------------------------------------------
28
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
December 31, 2003
================================================================================
PAR
AMOUNT VALUE
------ ----------
(DOLLARS IN THOUSANDS)
MARYLAND - 4.78%
Montgomery County, Maryland Variable Rate Housing Revenue Bonds,
Series 1997, Issue I (The Grand), 1.13%, Due 6/1/2030,
LOC Federal National Mortgage Association .......................................................... $1,900 $ 1,900
---------
TOTAL MARYLAND .................................................................................. 1,900
---------
MICHIGAN - 7.39%
Michigan Higher Education Student Loan Authority, Student Loan Revenue Bonds,
Series XII-X, Bond Insurance - Ambac Assurance Corporation, 1.15%,
Due 9/1/2031, SPA Lloyds TSB ....................................................................... 1,000 1,000
Michigan State Housing Development Authority Variable Rate Limited
Obligation Multifamily Housing Revenue Refunding Bonds, 1.16%,
Due 6/1/2028, LOC Bank of New York ................................................................. 1,940 1,940
---------
TOTAL MICHIGAN .................................................................................. 2,940
---------
OHIO - 4.27%
Ohio Water Development Authority, Environmental Improvement Revenue Bonds,
Series 2000B (Waste Management, Incorporated, Project), 1.27%,
Due 7/1/2020, LOC Fleet National Bank .............................................................. 1,700 1,700
---------
TOTAL OHIO ...................................................................................... 1,700
---------
OKLAHOMA - 6.03%
Claremore Industrial and Redevelopment Authority, Development Revenue Bonds,
Series 2001 (Whirlwind Steel Buildings, Inc. Project), 1.35%,
Due 9/1/2019, LOC JP Morgan Chase Bank ............................................................. 2,400 2,400
---------
TOTAL OKLAHOMA .................................................................................. 2,400
---------
PENNSYLVANIA - 5.69%
Berks County Industrial Development Authority Manufacturing Facilities Revenue Bonds,
Series 1995 (Grafika Commerial Printing Inc.), 1.30%, Due 9/1/2010,
LOC First Union National Bank ...................................................................... 1,265 1,265
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 .............................................................................. 2,265
---------
SOUTH CAROLINA - 4.27%
South Carolina JOBS Economic Development Authority Revenue Bonds,
Series 1998 (Klockner Namasco Corporation Project), 1.35%, Due 4/1/2008,
LOC Bayerische Landesbank .......................................................................... 1,700 1,700
---------
TOTAL SOUTH CAROLINA ............................................................................ 1,700
---------
TEXAS - 16.00%
Brazos Harbor Industrial Development Corporation Solid Waste Disposal Revenue Bonds,
Series 2002 (Republic Waste Services of Texas, Ltd. Project), 1.35%, 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), 1.30%,
Due 9/1/2022, LOC - Wells Fargo Texas .............................................................. 2,860 2,860
State of Texas TRANs, 1.18%, Due 8/31/2004 ........................................................... 1,000 1,005
---------
TOTAL TEXAS ..................................................................................... 6,365
---------
UTAH - 2.89%
Morgan County UT Solid Waste Disposal Revenue Bonds,
Series 1996 (Holman, Inc. Project), 1.15%, Due 8/1/2031,
LOC Wachovia Bank, NA .............................................................................. 1,150 1,150
---------
TOTAL UTAH ...................................................................................... 1,150
---------
See accompanying notes
- --------------------------------------------------------------------------------
29
AMR INVESTMENT SERVICES MUNICIPAL MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS - CONTINUED
December 31, 2003
================================================================================
PAR
AMOUNT VALUE
--------- ----------
(DOLLARS IN THOUSANDS)
WASHINGTON - 6.50%
Pierce County, Washington Economic Development Corporation Dock &
Wharf Facilities Revenue Bonds, Series 1995 (SCS Industries Project), 1.25%,
Due 7/1/2030, LOC Bank of Nova Scotia ............................................................. $ 2,585 $ 2,585
-------
TOTAL WASHINGTON ................................................................................ 2,585
-------
TOTAL DEMAND OBLIGATIONS ........................................................................ 36,834
-------
TOTAL MUNICIPAL OBLIGATIONS ..................................................................... 38,334
-------
SHARES
---------
OTHER INVESTMENTS - 3.53%
Dreyfus Municipal Cash Management Plus ............................................................... 4,974 5
Federated Municipal Obligations Fund ................................................................. 1,295,949 1,296
BlackRock Provident MuniCash Fund .................................................................... 95,629 96
-------
TOTAL OTHER INVESTMENTS ..................................................................... 1,397
-------
TOTAL INVESTMENTS - 99.86% (COST $39,731) ............................................................ 39,731
-------
OTHER ASSETS, NET OF LIABILITIES - 0.14% ............................................................. 56
-------
TOTAL NET ASSETS - 100% .............................................................................. $39,787
=======
- ---------------
Based on the cost of investments of $39,731 for federal income tax purposes at
December 31, 2003, there was no unrealized appreciation or depreciation of
investments.
(A) Rates associated with money market securities represent yield to maturity or
yield to next reset date.
See accompanying notes
- --------------------------------------------------------------------------------
30
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2003
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============ =============== =============
(IN THOUSANDS)
ASSETS:
Investments in securities at value (cost - $4,695,253;
$140,336; $39,731, respectively .................................. $ 4,695,253 $ 140,336 $ 39,731
Repurchase agreements (cost - $250,000; $94,343; $0,
respectively) .................................................... 250,000 94,343 -
Dividends and interest receivable ................................... 4,976 422 64
----------- --------- --------
Total assets ................................................. 4,950,229 235,101 39,795
----------- --------- --------
LIABILITIES:
Management and investment advisory fees payable (Note 2)............. 396 17 4
Other liabilities ................................................... 216 14 4
----------- --------- --------
TOTAL LIABILITIES ............................................ 612 31 8
----------- --------- --------
NET ASSETS APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS ................ $ 4,949,617 $ 235,070 $ 39,787
=========== ========= ========
See accompanying notes
- --------------------------------------------------------------------------------
31
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF OPERATIONS
Year Ended December 31, 2003
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============ =============== =============
(IN THOUSANDS)
INVESTMENT INCOME:
Interest income .................................................... $ 57,947 $ 3,439 $ 553
-------- ------- -----
TOTAL INVESTMENT INCOME ...................................... 57,947 3,439 553
-------- ------- -----
Expenses:
Management and investment advisory fees (Note 2) ................... 4,629 276 47
Custodian fees ..................................................... 295 26 6
Professional fees .................................................. 104 9 3
Other expenses ..................................................... 248 29 1
-------- ------- -----
TOTAL EXPENSES ............................................... 5,276 340 57
-------- ------- -----
NET INVESTMENT INCOME ................................................... 52,671 3,099 496
-------- ------- -----
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................................... 42 9 -
-------- ------- -----
NET GAIN ON INVESTMENTS ...................................... 42 9 -
-------- ------- -----
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... $ 52,713 $ 3,108 $ 496
======== ======= =====
See accompanying notes
- --------------------------------------------------------------------------------
32
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
U.S. GOVERNMENT MUNICIPAL
MONEY MARKET MONEY MARKET MONEY MARKET
============================ ======================== =======================
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
============================ ======================== =======================
2003 2002 2003 2002 2003 2002
------------ ------------- ----------- ----------- ---------- ---------
(IN THOUSANDS)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ...................... $ 52,671 $ 165,857 $ 3,099 $ 6,840 $ 496 $ 1,656
Net realized gain on investments ........... 42 6 9 34 - -
------------ ------------- ----------- ----------- -------- ---------
TOTAL INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........ 52,713 165,863 3,108 6,874 496 1,656
------------ ------------- ----------- ----------- -------- ---------
TRANSACTIONS IN INVESTORS' BENEFICIAL
INTERESTS:
Contributions .............................. 55,478,689 106,944,248 1,085,963 2,200,353 81,957 204,033
Withdrawals ................................ (57,817,456) (108,139,347) (1,324,638) (2,032,412) (154,776) (191,801)
------------ ------------- ----------- ----------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM TRANSACTIONS IN
INVESTORS' BENEFICIAL INTERESTS .. (2,338,767) (1,195,099) (238,675) 167,941 (72,819) 12,232
------------ ------------- ----------- ----------- -------- ---------
NET INCREASE (DECREASE) IN NET ASSETS (2,286,054) (1,029,236) (235,567) 174,815 (72,323) 13,888
------------ ------------- ----------- ----------- -------- ---------
NET ASSETS:
Beginning of period ....................... 7,235,671 8,264,907 470,637 295,822 112,110 98,222
------------ ------------- ----------- ----------- -------- ---------
END OF PERIOD ............................. $ 4,949,617 $ 7,235,671 $ 235,070 $ 470,637 $ 39,787 $ 112,110
============ ============= =========== =========== ======== =========
See accompanying notes
- --------------------------------------------------------------------------------
33
AMR INVESTMENT SERVICES TRUST PORTFOLIOS
FINANCIAL HIGHLIGHTS
================================================================================
MONEY MARKET
========================================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
======================================== DECEMBER 31, OCTOBER 31,
2003 2002 2001 2000 1999 1999
---- ---- ---- ---- ------------ -----------
Total Return ..................................... 1.13% 1.81% 4.30% 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%
Net investment income ...................... 1.14% 1.81% 3.95% 6.40% 5.77% 5.11%
- --------------------------------------------------------------------------------
34
===============================================================
U.S. GOVERNMENT MONEY MARKET
===============================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
=================================== DECEMBER 31, OCTOBER 31,
2003 2002 2001 2000 1999 1999
----- ---- ----- ----- ------------ -----------
Total Return ..................................... 1.11% 1.74% 4.24% N/A N/A N/A
Ratios to average net assets (annualized):
Expenses ................................... 0.12% 0.12% 0.11% 0.13% 0.12% 0.12%
Net investment income ...................... 1.13% 1.71% 3.99% 6.27% 5.67% 4.89%
===============================================================
U.S. GOVERNMENT MONEY MARKET
===============================================================
TWO MONTHS
YEAR ENDED DECEMBER 31, ENDED YEAR ENDED
=================================== DECEMBER 31, OCTOBER 31,
2003 2002 2001 2000 1999 1999
----- ---- ----- ----- ------------ -----------
Total Return ..................................... 1.08% 1.39% 2.71% N/A N/A N/A
Ratios to average net assets (annualized):
Expenses ................................... 0.12% 0.12% 0.13% 0.13% 0.14% 0.15%
Net investment income ...................... 1.05% 1.39% 2.71% 4.05% 3.69% 3.13%
- --------------------------------------------------------------------------------
35
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 2003
================================================================================
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 at fair value, which approximates
amortized cost. 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.
- --------------------------------------------------------------------------------
36
AMR INVESTMENT SERVICES TRUST
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2003
================================================================================
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. In addition, 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 year ended December 31, 2003, the cost of air trans-
portation was not material to any of the Funds.
- --------------------------------------------------------------------------------
37
TRUSTEES AND OFFICERS OF THE TRUST
AND THE AMR INVESTMENT SERVICES TRUST
(Unaudited)
================================================================================
The Trustees and officers of the Trust and the AMR Trust are listed below,
together with their principal occupations during the past five years. Unless
otherwise indicated, the address of each person listed below is 4151 Amon Carter
Boulevard, MD 2450, Fort Worth, Texas 76155. Each Trustee oversees twenty-five
funds in the fund complex that includes the AMR Trust, the American AAdvantage
Funds, the American AAdvantage Mileage Funds, and the American AAdvantage Select
Funds. The Trust's Statement of Additional Information contains additional
information about the Trustees and is available without charge by calling
1-800-388-3344.
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH EACH TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ----------------- --------------------------------------------
INTERESTED TRUSTEES
TERM
----
Lifetime of Trust
until removal,
resignation or
retirement*
William F. Quinn** (55) Trustee and President, AMR Investment Services, Inc. (1986-Present); Chairman, (1989-
President 2003) and Director (2003-Present) American Airlines Federal Credit Union;
since 1995 Director, Crescent Real Estate Equities, Inc. (1994-Present); Director,
Pritchard, Hubble & Herr, LLC (2001-Present); Director, Southern
Methodist University Endowment Fund Investment Committee (1996-
Present); Member, Southern Methodist University Cox School of Business
Advisory Board (1999-2002); Member, New York Stock Exchange Pension
Manager Committee (1997-1998, 2000-2002); Chairman, Committee for the
Investment of Employee Benefits Defined Benefit Sub-Committee (1982-
Present); Trustee, American AAdvantage Funds (1987-Present); Trustee,
American AAdvantage Select Funds (1999-Present).
Alan D. Feld** (67) Trustee since 1996 Partner, Akin, Gump, Strauss, Hauer & Feld, LLP (law firm) (1960-
Present); Director, Clear Channel Communications (1984-Present); Trustee,
CenterPoint Properties (1994-Present); Trustee, American AAdvantage
Funds (1996-Present); Trustee, American AAdvantage Select Funds (1999-
Present).
NON-INTERESTED TRUSTEES
TERM
----
Lifetime of Trust
until removal,
resignation or
retirement*
Stephen D. O'Sullivan (68) Trustee since 1995 Consultant (1994-Present); Trustee, American AAdvantage Funds (1987-
Present); Trustee, American AAdvantage Select Funds (1999-Present).
R. Gerald Turner (58) Trustee since 2001 President, Southern Methodist University (1995-Present); Director,
225 Perkins Admin. Bldg. ChemFirst (1986-2002); Director, J.C. Penney Company, Inc. (1996-Present);
Southern Methodist Univ. Director, California Federal Preferred Capital Corp. (2001-2003); Director,
Dallas, Texas 75275 Kronus Worldwide, Inc. (chemical manufacturing) (2003-Present); Director,
First Broadcasting Investment Partners, LLC (2003-Present); Member, United
Way of Dallas Board of Directors; Member, Salvation Army of Dallas
Board of Directors; Member, Methodist Hospital Advisory Board; Member,
Knight Commission on Intercollegiate Athletics; Trustee, American
AAdvantage Funds (2001-Present); Trustee, American AAdvantage Select
Funds (2001-Present).
- --------------------------------------------------------------------------------
38
TRUSTEES AND OFFICERS OF THE TRUST
AND THE AMR INVESTMENT SERVICES TRUST - CONTINUED
(Unaudited)
================================================================================
POSITION, TERM OF
OFFICE AND LENGTH
OF TIME SERVED PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
NAME, AGE AND ADDRESS WITH EACH TRUST AND CURRENT DIRECTORSHIPS
- --------------------- ----------------- --------------------------------------------
NON-INTERESTED TRUSTEES (CONT.)
Kneeland Youngblood (48) Trustee since 1996 Managing Partner, Pharos Capital Group, LLC (a private equity firm)
100 Crescent Court (1998-Present); Trustee, The Hockaday School (1997-Present); Director,
Suite 1740 Starwood Hotels and Resorts (2001-Present); Member, Council on Foreign
Dallas, Texas 75201 Relations (1995-Present); Director, Just For the Kids (1995-2001); Director,
L&B Realty Advisors (1998-2000); Trustee, Teachers Retirement System of
Texas (1993-1999); Director, Starwood Financial Trust (1998-2001);
Trustee, St. Mark's School of Texas (2002-Present); Trustee, American
AAdvantage Funds (1996-Present); Trustee, American AAdvantage Select
Funds (1999-Present).
OFFICERS
TERM
----
One Year
Nancy A. Eckl (41) VP since 1995 Vice President, Trust Investments, AMR Investment Services, Inc.
(1990-Present).
Michael W. Fields (49) VP since 1995 Vice President, Fixed Income Investments, AMR Investment Services, Inc.
(1988-Present).
Barry Y. Greenberg (40) VP and Assistant Vice President, Legal and Compliance, AMR Investment Services, Inc.
Secretary since (1995-Present).
1995
Rebecca L. Harris (37) Treasurer since Vice President, Finance, AMR Investment Services, Inc. (1995-Present).
1995
John B. Roberson (45) VP since 1995 Vice President, Director of Sales, AMR Investment Services, Inc. (1991-
Present).
Robert J. Zutz (50) Secretary since Partner, Kirkpatrick & Lockhart LLP (law firm).
1800 Massachusetts Ave. NW 1998
2nd Floor
Washington, D.C. 20036
- ----------------
* The Board has adopted a retirement plan that requires Trustees to retire no
later than the last day of the calendar year in which they reach the age of
70, with the exception of Mr. Quinn.
** Mr. Quinn is deemed to be an "interested person" of the Trust and AMR Trust,
as defined by the 1940 Act, because of his position as President of the
Manager. Mr. Feld is deemed to be an "interested person" of the AMR Trust
only, as defined by the 1940 Act, because Mr. Feld's law firm of Akin, Gump,
Strauss, Hauer & Feld LLP has provided legal services within the past two
years to one or more of the AMR Trust's sub-advisers.
- --------------------------------------------------------------------------------
39
AMERICAN AADVANTAGE MILEAGE FUNDS
PRIVACY POLICY
(Unaudited)
================================================================================
The American AAdvantage Mileage Funds recognizes and respects the privacy of our
shareholders. We are providing this notice to you so you will understand how
shareholder information may be collected and used.
We may collect nonpublic personal information about you from one or more of the
following sources:
o information we receive from you on applications or other forms;
o information about your transactions with us or our service providers; and
o information we receive from third parties.
We do not disclose any nonpublic personal information about our shareholders or
former shareholders to anyone, except as permitted by law.
We restrict access to your nonpublic personal information to those employees or
service providers who need to know that information to provide products or
services to you. To ensure the confidentiality of your nonpublic information, we
maintain safeguards that comply with federal standards.
- --------------------------------------------------------------------------------
40
[LOGO OF AMERICAN AADVANTAGE 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 Platinum Mileage Class(R) Platinum Class(sm)
Class(R) Class(sm) ---------------- -----------------
-------- ---------- American AAdvantage American AAdvantage
Call (800) Call (800) Funds Funds
388-3344 967-9009 P.O. Box 219643 4151 Amon Carter
Kansas City, Blvd., MD 2450
MO 64121-9643 Fort Worth, TX 76155
FUND SERVICE PROVIDERS:
CUSTODIAN TRANSFER AGENT INDEPENDENT AUDITORS DISTRIBUTOR
STATE STREET BANK AND TRUST BOSTON FINANCIAL DATA SERVICES ERNST & YOUNG LLP SWS FINANCIAL SERVICES
Boston, Massachusetts Kansas City, Missouri Chicago, Illinois Dallas, Texas
This report is prepared for shareholders of the American AAdvantage Funds and
may be distributed to others only if preceded or accompanied by a current
prospectus.
- --------------------------------------------------------------------------------
American Airlines is not responsible for investments made in the American
AAdvantage Funds. American AAdvantage Funds is a registered service mark of AMR
Corporation. PlanAhead Class and American AAdvantage Money Market Fund are
registered service marks of AMR Investment Services, Inc. Platinum Class,
American AAdvantage U.S. Government Money Market Fund, and American AAdvantage
Municipal Money Market Fund are service marks of AMR Investment Services, Inc.
- --------------------------------------------------------------------------------
[GRAPHIC]
530097
ITEM 2. CODE OF ETHICS.
The Trust has adopted a code of ethics that applies to its principal
executive and financial officers (the "Code"). The Trust did not amend the
Code nor did it grant any waivers to the provisions of the Code during the
period covered by the shareholder report presented in Item 1. The Code is
filed herewith as Exhibit 99.CODE ETH.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Trust's Board of Trustees has determined that Stephen O'Sullivan, a
member of the Trust's audit committee, is an "audit committee financial
expert" as defined in Form N-CSR. Mr. O'Sullivan is "independent" as defined
in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a)
<Table>
<Caption>
Audit Fees Fiscal Year Ended
- ---------- -----------------
$18,202 12/31/2002
$19,257 12/31/2003
</Table>
(b)
<Table>
<Caption>
Audit-Related Fees Fiscal Year Ended
- ------------------ -----------------
$0 12/31/2002
$0 12/31/2003
</Table>
(c)
<Table>
<Caption>
Tax Fees Fiscal Year Ended
- -------- -----------------
$1,954* 12/31/2002
$3,321** 12/31/2003
</Table>
<FN>
* For review of 2001 tax returns
** For review of 2002 tax returns
</FN>
(d)
<Table>
<Caption>
All Other Fees Fiscal Year Ended
- -------------- -----------------
$0 12/31/2002
$0 12/31/2003
</Table>
(e)(1) Pursuant to its charter, the Trust's audit committee shall have the
following duties and powers pertaining to pre-approval of audit and non-audit
services provided by the Trust's principal accountant:
- to approve, prior to appointment, the engagement of auditors to
annually audit and provide their opinion on the Trust's financial
statements, and, in connection therewith, to review and evaluate
matters potentially affecting the independence and capabilities of the
auditors;
- to approve, prior to appointment, the engagement of the auditors to
provide non-audit services to the Trust, an investment adviser to any
series of the Trust or any entity controlling, controlled by, or under
common control with an investment adviser that provides ongoing
services to the Trust, if the engagement relates directly to the
operations and financial reporting of the Trust;
- to review the arrangements for and scope of the annual audit and any
special audits; and
- to review and approve the fees proposed to be charged to the Trust by
the auditors for each audit and non-audit service.
The audit committee may delegate any portion of its authority, including the
authority to grant pre-approvals of audit and permitted non-audit services,
to a subcommittee of one or more members. Any decisions of the subcommittee
to grant pre-approvals shall be presented to the full audit committee at its
next regularly scheduled meeting.
(e)(2) None of the fees disclosed in paragraphs (b) through (d) above were
approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.
(f) Not Applicable.
(g)
<Table>
<Caption>
Aggregate Non-Audit Fees for Services Rendered to the:
- ------------------------------------------------------
Adviser's Affiliates Providing
Registrant Adviser Ongoing Services to Registrant Fiscal Year Ended
- ---------- ------- ------------------------------ -----------------
$1,954 $0 N/A 12/31/2002
$3,321 $0 N/A 12/31/2003
</Table>
(h) Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not Applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not Applicable.
ITEM 8. PUCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not Applicable.
ITEM 9. CONTROLS AND PROCEDURES.
Based upon an evaluation within 90 days of the filing date of this report,
the principal executive and financial officers concluded that the disclosure
controls and procedures of the Trust are effective. There were no changes in
the Trust's internal control over financial reporting during the Trust's last
fiscal half-year that materially affected, or were reasonably likely to
materially affect, the Trust's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a)(1) Filed herewith as EX-99.CODE ETH.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the Trust as required by Rule 30a-2(a)
under the Investment Company Act of 1940 is attached hereto as EX-
99.CERT.
(a)(3) Not Applicable.
(b) The certifications required by Rule 30a-2(b) under the Investment
Company Act of 1940 are attached hereto as EX-99.906CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant): American AAdvantage Mileage Funds
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: March 9, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By /s/ William F. Quinn
--------------------
William F. Quinn
President
Date: March 9, 2004
By /s/ Rebecca l. Harris
---------------------
Rebecca L. Harris
Treasurer
Date: March 9, 2004
EX-99.CERT
CERTIFICATIONS
I, Rebecca L. Harris, certify that:
1. I have reviewed this report on Form N-CSR of American AAdvantage Mileage
Funds;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations, changes in net assets, and
cash flows (if the financial statements are required to include a statement
of cash flows) of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant
and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date within
90 days prior to the filing date of this report based on such evaluation; and
(c) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal half-year that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize, and report financial information; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: March 9, 2004 /s/ Rebecca L. Harris
------------- ---------------------
Rebecca L. Harris
Treasurer
American AAdvantage Mileage Funds
I, William F. Quinn, certify that:
1. I have reviewed this report on Form N-CSR of American AAdvantage Mileage
Funds;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations, changes in net assets, and
cash flows (if the financial statements are required to include a statement
of cash flows) of the registrant as of, and for, the periods presented in
this report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant
and have:
(a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date within
90 days prior to the filing date of this report based on such evaluation; and
(c) disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal half-year that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize, and report financial information; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: March 9, 2004 /s/ William F. Quinn
------------- ---------------------
William F. Quinn
President
American AAdvantage Mileage Funds
EX-99.906CERT
William F. Quinn and Rebecca L. Harris, respectively, the President and
Treasurer of the American AAdvantage Mileage Funds (the "Registrant"), each
certify to the best of his or her knowledge and belief that:
1. the Registrant's report on Form N-CSR for the period ended December 31,
2003 (the "Form N-CSR") fully complies with the requirements of Section 15(d)
of the Securities Exchange Act of 1934, as amended; and
2. the information contained in such Form N-CSR fairly presents, in all
material respects, the financial condition and results of operations of the
Registrant.
/s/ William F. Quinn /s/ Rebecca L. Harris
- -------------------- ---------------------
William F. Quinn Rebecca L. Harris
President Treasurer
American AAdvantage Mileage Funds American AAdvantage Mileage Funds
Date: March 9, 2004
A signed original of this written statement required by Section 906 has been
provided to American AAdvantage Mileage Funds and will be retained by
American AAdvantage Mileage Funds and furnished to the Securities and
Exchange Commission or its staff upon request.