AMERICAN MUNICIPAL TERM TRUST INC, N-30D, 1996-03-01

AMERICAN MUNICIPAL TERM TRUST INC
N-30D, 1996-03-01

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<PAGE>

AMERICAN
MUNICIPAL
TERM
TRUSTS
* * *
ANNUAL REPORT
1995

<PAGE>

- --------------------------------------------------------------------------------
TABLE OF CONTENTS

AMERICAN MUNICIPAL TERM TRUSTS
American Municipal Term Trust (AXT), American Municipal Term Trust II (BXT), and
American Municipal Term Trust III (CXT) are diversified, closed-end investment
management companies. The investment objectives of AXT, BXT and CXT are to
provide high current income exempt from regular federal income tax and to return
$10 per share on or shortly before April 15, 2001; April 15, 2002; and April 15,
2003, respectively - although each fund's termination may be extended up to five
years if necessary to assist the fund in reaching its $10 per share objective.
To realize their objectives, the funds invest primarily in high-quality
municipal obligations including municipal zero-coupon securities. As with other
investment companies, there can be no assurance these funds will achieve their
objectives. Since each fund's inception, March 27, 1991; September 26, 1991; and
November 27, 1992, respectively, they have been rated AAf by Standard & Poor's
Mutual Funds Rating Group (S&P).* Fund shares trade on the New York Stock
Exchange under the symbols AXT, BXT and CXT, respectively.

*THE FUNDS ARE RATED AAf, WHICH MEANS INVESTMENTS IN EACH FUND HAVE AN OVERALL
CREDIT QUALITY OF AA. CREDIT QUALITIES ARE ASSESSED BY STANDARD & POOR'S MUTUAL
FUNDS RATING GROUP. S&P DOES NOT EVALUATE THE MARKET RISK OF AN INVESTMENT WHEN
ASSIGNING A CREDIT RATING. SEE STANDARD & POOR'S CORPORATE AND MUNICIPAL RATING
DEFINITIONS FOR AN EXPLANATION OF AA.

THE FUNDS ALSO HAVE BEEN GIVEN MARKET RISK RATINGS BY S&P, WHICH WE CANNOT
PUBLISH DUE TO NASD REGULATIONS. RISK RATINGS EVALUATE VARIOUS INVESTMENT RISKS
THAT CAN AFFECT THE PERFORMANCE OF A BOND FUND AND INDICATE THE FUNDS' OVERALL
STABILITY AND SENSITIVITY TO CHANGING MARKET CONDITIONS. THESE RATINGS ARE
AVAILABLE BY CALLING S&P AT 1 800 424-FUND.

<TABLE>
<S> <C>
AVERAGE ANNUALIZED TOTAL RETURNS................... 1
FUND PERFORMANCE................................... 2
LETTER TO SHAREHOLDERS............................. 3
SUMMARY OF MATURITY OR CALL DATES.................. 9
TAX REFORM PROPOSALS............................... 10
FINANCIAL STATEMENTS AND NOTES..................... 11
INVESTMENTS IN SECURITIES
AXT............................................ 23
BXT............................................ 27
CXT............................................ 31
INDEPENDENT AUDITORS' REPORT....................... 35
FEDERAL TAX INFORMATION............................ 36
SHAREHOLDER UPDATE................................. 38
</TABLE>

CALL TO RECEIVE QUARTERLY AXT, BXT AND CXT UPDATES

If you would like to be put on our mailing list to receive quarterly fund
updates for the American Municipal Term Trusts, call our Shareholder Services
Department at 1 800 866-7778. Please identify which fund updates (AXT, BXT
or CXT) you would like to receive.

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AVERAGE ANNUALIZED TOTAL RETURNS

AMERICAN MUNICIPAL TERM TRUST (AXT)

[GRAPHIC REPRESENTATION OF BAR CHART]

<TABLE>
<CAPTION>
Since Inception
One Year Three Year 3/27/91
<S> <C> <C> <C>
American Municipal Term Trust.................. 18.93% 9.94% 11.30%
Lehman Brothers 7-Year Municipal Bond Index.... 14.15% 7.02% 8.34%
</TABLE>

AMERICAN MUNICIPAL TERM TRUST II (BXT)

[GRAPHIC REPRESENTATION OF BAR CHART]

<TABLE>
<CAPTION>
Since Inception
One Year Three Year 9/26/91
<S> <C> <C> <C>
American Municipal Term Trust II............... 20.48% 10.51% 11.39%
Lehman Brothers 7-Year Municipal Bond Index.... 14.15% 7.02% 7.98%
</TABLE>

AMERICAN MUNICIPAL TERM TRUST III (CXT)

[GRAPHIC REPRESENTATION OF BAR CHART]

<TABLE>
<CAPTION>
Since Inception
One Year Three Year 11/27/92
<S> <C> <C> <C>
American Municipal Term Trust III.............. 25.93% 11.06% 11.38%
Lehman Brothers 7-Year Municipal Bond Index.... 14.15% 7.02% 7.43%
</TABLE>

Average annualized total return figures are through December 31, 1995, and are
based on the change in net asset value (NAV) and reflect the reinvestment of
distributions but do not reflect sales charges. NAV-based performance is used to
measure investment management results.

Average annualized total return figures based on the change in market price for
the one-year, three-year and since inception periods ended December 31, 1995,
were 16.91%, 7.94% and 7.98% for AXT; 17.28%, 7.01% and 7.69% for BXT; and
26.32%, 6.85% and 6.37% for CXT. These figures also assume reinvested
distributions and do not reflect sales charges.

The Lehman Brothers 7-Year Municipal Bond Index is an unmanaged index that
represents the 7-year, high-quality, tax-exempt bond market. It assumes all
distributions are reinvested.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.

<PAGE>

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FUND PERFORMANCE

NET ASSET VALUE SUMMARY PER SHARE
(COMMON SHARES)

<TABLE>
<CAPTION>
American American American
Municipal Municipal Municipal
Term Trust Term Trust II Term Trust III

INCEPTION INCEPTION INCEPTION
3/27/91 9/26/91 11/27/92
<S> <C> <C> <C>
Initial Offering Price..................................... $10.00 $10.00 $10.00

Initial Offering and Underwriting Expenses................. -$0.67 -$0.66 -$0.67
(Common and Preferred Stock)

Accumulated Realized Gains or Losses
At 12/31/95................................................ -$0.01 $0.00 -$0.02
------ ------ ------
SUBTOTAL................................................... $9.32 $9.34 $9.31

Undistritubed Net Investment Income
(Dividend Reserve) At 12/31/95............................. +$0.52 +$0.49 +$0.29

Unrealized Appreciation on Investments
At 12/31/95................................................ +$1.99 +$1.88 +$1.51
------ ------ ------
NET ASSET VALUE ON 12/31/95................................ $11.83 $11.71 $11.11
</TABLE>

DISTRIBUTION HISTORY

<TABLE>
<CAPTION>
American American American
Municipal Municipal Municipal
Term Trust Term Trust II Term Trust III

INCEPTION INCEPTION INCEPTION
3/27/91 9/26/91 11/27/92
<S> <C> <C> <C>
Total Monthly Income Dividends
Through 12/31/95

Common Shareholders.................................... $3.09 $2.64 $1.76

Preferred Shareholders
(On a Common Share Basis).............................. $0.76 $0.65 $0.45

Total Capital Gains Distributions to Common
Shareholders Through 12/31/95.............................. $0.00 $0.01 $0.00
</TABLE>

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AMERICAN MUNICIPAL TERM TRUSTS

February 15, 1996

[PHOTO]
Dear Shareholders:

FPO 55%
THE NET ASSET VALUE TOTAL RETURNS FOR THE AMERICAN
DOUG WHITE, CFA, (ABOVE) MUNICIPAL TERM TRUSTS (AXT, BXT, CXT) IN 1995 WERE
SHARES RESPONSIBILITY 18.93%, 20.48% AND 25.93%*, RESPECTIVELY, ASSUMING
FOR THE MANAGEMENT OF DISTRIBUTIONS WERE REINVESTED AND NOT INCLUDING
THE AMERICAN MUNICIPAL SALES CHARGES. Comparatively, the Lehman Brothers
TERM TRUSTS. HE HAS 7-Year Municipal Bond Index had a total return of
13 YEARS OF FINANCIAL 14.15% during the same one-year period. The higher
EXPERIENCE. returns of AXT, BXT and CXT were due to their longer
effective durations relative to the index resulting
primarily from their use of leverage, in the form of
preferred stock, which magnified the effect of
[PHOTO] declining market interest rates. CXT's longer
effective duration relative to the other funds
caused its returns to be higher than those of AXT
FPO 56% and BXT. Based on market price, the funds' total
returns for the one-year period ended December 31,
RON REUSS, (BELOW) 1995, were 16.91%, 17.28% and 26.32%, respectively,
SHARES RESPONSIBILITY assuming distributions were reinvested and not
FOR THE MANAGEMENT OF including sales charges. During the year, AXT, BXT
THE AMERICAN MUNICIPAL and CXT maintained their common stock distribution
TERM TRUSTS. HE HAS yields of 6.50%, 6.20% and 5.70%, respectively,
27 YEARS OF FINANCIAL which have been unchanged since each fund's
EXPERIENCE. inception.**

THE NET ASSET VALUES OF THE FUNDS INCREASED DURING 1995 AND ARE CURRENTLY HIGHER
THAN OUR TARGETED TERMINATION PRICE OF $10 PER SHARE. The net asset values for
AXT, BXT and CXT on December

* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES, WHEN SOLD,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.

** THESE FIGURES REPRESENT ANNUALIZED YIELDS FOR THE ONE-YEAR PERIOD ENDED
DECEMBER 31, 1995, BASED ON THE INITIAL OFFERING PRICE OF $10 PER SHARE. ACTUAL
YIELDS MAY DIFFER, DEPENDING ON THE INDIVIDUAL SHAREHOLDER'S COST BASIS. THESE
YIELD FIGURES REPRESENT PAST PERFORMANCE. YIELDS ON FUND SHARES MAY FLUCTUATE.

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AMERICAN MUNICIPAL TERM TRUSTS

31, 1995, were $11.83, $11.71 and $11.11, respectively. The funds, along with
other municipal bond investments, were generally well-rewarded during the year
due to decreasing market interest rates, a declining supply of new municipal
bond issues and a declining supply of outstanding municipal bonds. Municipal
investors enjoyed strong returns despite ongoing concerns about proposed tax
reforms (see page 10 for more information) and competition from a robust stock
market. Although these factors caused the municipal bond market to slightly lag
the Treasury bond market, on an after-tax basis most municipal investors likely
found their tax-exempt yields to be higher than the yields of their taxable
counterparts. Even though we expect to see some further market volatility in
1996 - due to the ongoing tax-reform debate - we believe municipal bonds will
benefit this year from a declining supply of outstanding bonds
and strong demand for municipal issues.

AMERICAN MUNICIPAL TERM TRUST (AXT)
PORTFOLIO COMPOSITION

DECEMBER 31, 1995

[GRAPHIC REPRESENTATION OF PIE CHART]

<TABLE>
<S> <C>
Electrical Revenue..................................... 20%
General Obligations.................................... 13%
Other Assets........................................... 2%
Housing Revenue........................................ 2%
Leasing Revenue........................................ 3%
Education.............................................. 6%
Hospital Revenue....................................... 17%
Multiple Utility Revenue............................... 1%
Sales/Excise Tax Revenue............................... 14%
Water/Sewer Utility Revenue............................ 13%
Industrial Development Revenue......................... 9%
</TABLE>

INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.

AS THE FUNDS MOVE CLOSER TO THEIR TERMINATION DATES, YOU SHOULD NOT EXPECT THEIR
NET ASSET VALUES TO REMAIN AT SUCH HIGH LEVELS. The net asset values of the
funds will likely begin to decrease at some point in the future since the market
values of most of the bonds in the funds (except for the zero-coupon bonds)are
currently higher than they will be at maturity. As these bonds move closer to
maturity, their market values will decline toward their maturity or call values,
which are at par or a slight premium.

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AMERICAN MUNICIPAL TERM TRUSTS

AS THE CHARTS ON PAGE 9 ILLUSTRATE, THE FUNDS' HOLDINGS OF LONGER-MATURITY BONDS
HAVE BEEN REDUCED SINCE EACH FUND'S INCEPTION, PRIMARILY THROUGH THE
PREREFUNDING OF BONDS BY THEIR ISSUERS. This has reduced each fund's effective
duration and interest rate risk - an important part of our strategy as we move
closer to the funds' termination dates. When an issuer prerefunds a bond, the
time until the bond matures is reduced. As of December 31, 1995, 43%, 38% and 9%
of the bonds in AXT, BXT and CXT, respectively, had been prerefunded to dates
within a year of the fund's termination date. The closer the maturity date of a
bond is to the fund's termination date, the more certain we can be of the value
of the bond at termination (in other words, the value of the bond will be less
affected by interest rates at the time of termination.) Keep in mind, however,
that prior to their maturity dates, these prerefunded bonds, like other bonds in
the funds' portfolios, are still subject to interest rate risk and will
fluctuate in value. We will likely see an increase in the number of prerefunded
bonds in the funds should interest rates remain at current levels or decline.

AMERICAN MUNICIPAL TERM TRUST II (BXT)
PORTFOLIO COMPOSITION

DECEMBER 31, 1995

[GRAPHIC REPRESENTATION OF PIE CHART]

<TABLE>
<S> <C>
Industrial Development Revenue......................... 8%
Multiple Utility Revenue............................... 1%
Sales/Excise Tax Revenue............................... 6%
General Obligations.................................... 15%
Electrical Revenue..................................... 15%
Housing Revenue........................................ 2%
Education.............................................. 7%
Hospital Revenue....................................... 23%
Other Assets........................................... 2%
Leasing Revenue........................................ 4%
Miscellaneous Revenue.................................. 7%
Water/Sewer Utility Revenue............................ 10%
</TABLE>

INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.

WE WILL CONTINUE OUR STRATEGY OF GRADUALLY SHORTENING THE EFFECTIVE DURATIONS OF
THE PORTFOLIOS, WHICH MAY CAUSE THE FUNDS TO PAY CAPITAL GAINS DISTRIBUTIONS.
Because part of our objective is to provide high current income exempt from
federal income tax, we would like to avoid paying capital gains distributions,
which are taxable

<PAGE>

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AMERICAN MUNICIPAL TERM TRUSTS

distributions for shareholders. However, as we strive to meet the objective of
returning $10 per share upon termination, when appropriate we will follow our
strategy of positioning the funds more defensively by increasing the percentage
of shorter-term securities in the portfolios as the funds near their termination
dates. Due to appreciation of the funds' securities, the funds currently have
substantial unrealized capital gains. Consequently, the funds may have to pay
capital gains distributions (which would decrease their net asset values penny
for penny)if we sold any of these bonds at a gain and were unable to offset that
gain by selling another bond at a loss. Additionally, the proceeds from the sale
of these bonds may have to be reinvested in lower-yielding securities, which may
lower the income earned in the funds.

AMERICAN MUNICIPAL TERM TRUST III (CXT)
PORTFOLIO COMPOSITION

DECEMBER 31, 1995

[GRAPHIC REPRESENTATION OF PIE CHART]

<TABLE>
<S> <C>
Water/Sewer Utility Revenue............................ 21%
Sales/Excise Tax Revenue............................... 2%
Nursing Home Revenue................................... 1%
Electrical Revenue..................................... 15%
Leasing Revenue........................................ 9%
Housing Revenue........................................ 4%
Education.............................................. 3%
Other Assets........................................... 2%
Hospital Revenue....................................... 24%
General Obligations.................................... 11%
Multiple Utility Revenue............................... 4%
Miscellaneous Revenue.................................. 4%
</TABLE>

INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.

SINCE THEIR INCEPTIONS, THE FUNDS HAVE BEEN GENERATING HIGH INCOME LEVELS AND
THEIR DIVIDEND RESERVES HAVE BEEN INCREASING. The dividend reserves have been
increasing primarily due to the funds' issuance of preferred stock, which has
proved beneficial to common shareholders to date. Long-term interest rates have
remained higher than short-term rates, allowing the funds to earn income in
excess of the monthly common and preferred stock dividends they are paying out.
As a result, we have been able to add to each fund's dividend reserve. These
reserves are an important part of our strategy as we seek to return $10 per
share. The retention of income helps replace the funds' initial offering and

<PAGE>

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AMERICAN MUNICIPAL TERM TRUSTS

underwriting expenses (see chart on page 2). While the reserves are not
guaranteed, they can also be used to help maintain common stock distributions
in times when the funds may be paying higher rates on preferred stock. Rates
paid on preferred stock (3.40% for AXT; 3.25% for BXT; 3.25% for CXT on
February 15) are reset every seven days and are based on short-term, tax-exempt
interest rates.

IF THE FUNDS CONTINUE TO ADD TO THEIR DIVIDEND RESERVES, THE FUNDS MAY BE
REQUIRED TO PAY EXTRA DIVIDENDS TO SATISFY STATE OR FEDERAL TAX DISTRIBUTION
REQUIREMENTS. This is likely to occur sooner in AXT and BXT than in CXT;
however, we are not certain it will occur in any fund.

THE FUNDS REMAIN WELL-DIVERSIFIED ACROSS THE UNITED STATES. Their geographic
focus continues to be on the central and northwestern United States with
Illinois, Washington, Texas and Indiana representing the largest state
concentrations. We are also looking at portions of the Southeast and West -
for example, South Carolina, Georgia, Arizona and Nevada - which have recently
shown substantial economic growth.

OUR PROPRIETARY CREDIT ANALYSIS ON THE FUNDS' HOLDINGS HAS HELPED THE FUNDS
AVOID ANY PAYMENT DEFAULTS. We continue to manage credit risk, or the risk of
failure of an issuer to make payment, through extensive due diligence and credit
analysis prior to purchasing bonds as well as while the

PREFERRED STOCK
Preferred stock pays dividends at a specified rate and has preference over
common stock in the payments of dividends and the liquidation of assets. Rates
paid on preferred stock are reset every seven days and are based on short-term,
tax-exempt interest rates. Preferred shareholders accept these short-term rates
in exchange for low credit risk (shares of preferred stock are rated AAA by
Moody's and S&P) and high liquidity (shares of preferred stock trade at par and
are remarketed every seven days). The proceeds from the sale of preferred stock
are invested at intermediate- and long-term tax-exempt rates. Because these
intermediate- and long-term rates are normally higher than the short-term rates
paid on preferred stock, common shareholders benefit by receiving higher
dividends and/or an increase to the dividend reserve. However, the risk of
having preferred stock is that if short-term rates rise higher than
intermediate- and long-term rates, creating an inverted yield curve, common
shareholders may receive a lower rate of return than if their fund did not have
any preferred stock outstanding. This type of economic environment is unusual
and historically has been short term in nature. Investors should also be aware
that the issuance of preferred stock results in the leveraging of common stock
which increases the volatility of both the net asset value of the fund and
the market value of shares of common stock.

<PAGE>

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AMERICAN MUNICIPAL TERM TRUSTS

bonds are held in the portfolios. This research, which goes beyond the ratings
issued by Moody's or S&P, helps ensure we maintain the quality of the
portfolios. While we have not experienced any problems associated with payment
defaults so far, keep in mind that these funds, and any funds investing in
municipal securities, continue to have credit risk, and the failure of an issuer
to make payments could result in a decrease in net asset value and a decrease in
the income earned by the fund.

THE FUNDS REMAIN FULLY INVESTED IN INVESTMENT-GRADE, TAX-EXEMPT MUNICIPAL BONDS
AT YIELDS THAT ARE GENERALLY HIGHER THAN YIELDS ON BONDS AVAILABLE TODAY WITH
SIMILAR QUALITY AND MATURITIES. In addition, the portfolios' average call
protection continues to extend approximately to the funds' termination dates.

Thank you for your investment in the American Municipal Term Trusts, and if you
have any questions, please contact your investment professional.

Sincerely,

/s/ DOUGLAS J. WHITE

Douglas J. White
Portfolio Manager

/s/ RONALD R. REUSS

Ronald R. Reuss
Portfolio Manager

<PAGE>

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SUMMARY OF MATURITY OR CALL DATES

The graphs below illustrate the maturity dates of the securities within each
portfolio at each fund's inception and as of December 31, 1995. You will notice
a reduction in longer-maturity bonds and an increase in shorter-maturity bonds,
which shortens the funds' effective durations and reduces interest rate risk.

[GRAPHIC REPRESENTATION OF BAR CHART]

As of the American Municipal American Municipal American Municipal
fund's inception Term Trust (AXT) Term Trust II (BXT) Term Trust III (CXT)
<S> <C> <C> <C>
2000 to 2001............... 0% 0% 0%
2002 to 2006............... 11% 14% 8%
After 2006................. 89% 86% 92%

<CAPTION>
American Municipal American Municipal American Municipal
As of December 31, 1995 Term Trust (AXT) Term Trust II (BXT) Term Trust III (CXT)
<S> <C> <C> <C>
2000 to 2001............... 43% 41% 9%
2002 to 2006............... 13% 14% 10%
After 2006................. 44% 45% 81%
</TABLE>

<PAGE>

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TAX REFORM PROPOSALS

Tossing out the current U.S. tax code and replacing it with a simpler tax system
became a hot issue among politicians in 1995. One proposal in particular - the
flat tax - became the most popular among congressional leaders and presidential
candidates.

While there are many varying flat tax proposals, they all share some common
elements of which municipal bond investors should be aware. Many flat tax
proposals would only tax income from wages and salary and would exempt from tax
the interest, dividends and capital gains earned on investments and real estate.
Proponents of a flat tax argue that this would encourage more people to save
money and would be good for investments. However, opponents of a flat tax say it
would hurt tax-exempt municipal bond investors because municipal bonds currently
have interest yields that are lower than taxable interest yields since the
interest paid on municipal bonds is free from federal income tax. If all
interest income were free of taxes, the advantage of investing in municipal
securities would be eliminated and their prices would likely fall because
municipal bonds pay lower interest yields than taxable bonds with similar
maturities and credit quality.

Most flat tax proposals would also do away with current deductions, exemptions
and credits such as interest on home mortgage loans, charitable contributions,
state and local taxes, and medical expenses.

In spite of tax reform's increased popularity, many outspoken critics of a flat
tax have emerged. These include Jerry Brown, the former governor of California,
who was one of the first proponents of the flat tax. He stated that the flat tax
by itself would not balance the budget, which is one benefit flat tax proponents
are touting. The budget could only possibly be balanced with an additional
wealth tax, Brown said.

Other critics agree that the flat tax proposal is unfair. The U.S. tax system
has always been based on a graduated system, where those with more money pay
more taxes because of their ability to do so. Homeowners and municipal bond
investors and issuers, among others, have also begun to realize that they have
too much to lose not to challenge this issue.

We anticipate that the flat tax debate will continue during 1996 but will
subside after the November elections. In the meantime, we will continue to
closely monitor this issue. We encourage you to keep an eye on the tax reform
debate as well, but strongly suggest you continue to take advantage of the tax-
free income that can be earned by investing in municipal bonds.

<PAGE>
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FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
American American American
Municipal Municipal Municipal
Term Trust Term Trust II Term Trust III
------------ -------------- ---------------
<S> <C> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) .... $ 140,362,464 121,560,751 84,335,834
Cash in bank on demand deposit ........................... 54,868 5,776 101,821
Receivable for investment securities sold ................ -- 100,274 --
Accrued interest receivable .............................. 2,630,578 1,970,271 1,363,974
------------ -------------- ---------------
Total assets ......................................... 143,047,910 123,637,072 85,801,629
------------ -------------- ---------------
LIABILITIES:
Common stock dividends payable ($0.0542; $0.0517 and
$0.0475 per share, respectively) ....................... 458,261 380,296 251,750
Capital gain distribution payable ........................ -- 44,282 --
Preferred stock dividends payable (note 3) ............... 24,452 30,411 21,863
Accrued investment management fee ........................ 30,189 26,049 18,050
Accrued remarketing agent fee ............................ 7,379 4,879 2,031
Accrued administrative fee ............................... 18,114 15,629 10,830
Other accrued expenses ................................... 9,170 4,891 8,604
------------ -------------- ---------------
Total liabilities .................................... 547,565 506,437 313,128
------------ -------------- ---------------
Net assets applicable to outstanding capital stock ....... $ 142,500,345 123,130,635 85,488,501
------------ -------------- ---------------
------------ -------------- ---------------
REPRESENTED BY:
Preferred stock - authorized 1 million shares for each
fund of $25,000 liquidation preference per share;
outstanding, 1,700, 1,480 and 1,064 shares, respectively
(note 3) ............................................. $ 42,500,000 37,000,000 26,600,000
------------ -------------- ---------------
Common stock - authorized 200 million shares for each fund
of $0.01 par value; outstanding, 8,455,000, 7,355,820
and 5,300,000, respectively ............................ 84,550 73,558 53,000
Additional paid-in capital ............................... 78,849,154 68,704,232 49,431,420
Undistributed net investment income ...................... 4,387,572 3,629,706 1,563,329
Accumulated net realized loss on investments ............. (72,507) -- (131,212)
Unrealized appreciation of investments ................... 16,751,576 13,723,139 7,971,964
------------ -------------- ---------------
Total - representing net assets applicable to
outstanding common stock ........................... 100,000,345 86,130,635 58,888,501
------------ -------------- ---------------
Total net assets ................................... $ 142,500,345 123,130,635 85,488,501
------------ -------------- ---------------
------------ -------------- ---------------
Net asset value per share of outstanding common stock (net
assets divided by 8,455,000; 7,355,820 and 5,300,000
shares of common stock outstanding, respectively) . $ 11.83 11.71 11.11
------------ -------------- ---------------
------------ -------------- ---------------
* Investments in securities at identified cost ........... $ 123,610,888 107,837,612 76,363,870
------------ -------------- ---------------
------------ -------------- ---------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

11
<PAGE>
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FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995

American American American
Municipal Municipal Municipal
Term Trust Term Trust II Term Trust III
----------- -------------- ---------------
<S> <C> <C> <C>
INCOME:
Interest ............................................... $ 8,771,058 7,378,213 4,934,241
----------- -------------- ---------------

EXPENSES (NOTE 5):
Investment management fee ................................ 346,597 298,006 204,305
Administrative fee ....................................... 207,958 178,804 122,583
Remarketing agent fee .................................... 107,726 93,783 67,423
Custodian, accounting and transfer agent fees ............ 53,347 44,941 31,739
Reports to shareholders .................................. 28,496 22,694 20,740
Directors' fees .......................................... 10,957 10,957 10,956
Audit and legal fees ..................................... 40,296 40,374 40,425
Other expenses ........................................... 47,638 46,689 44,932
----------- -------------- ---------------
Total expenses ....................................... 843,015 736,248 543,103
Less expenses paid indirectly ............................ (6,947) (6,431) (6,762)
----------- -------------- ---------------
Total net expenses ................................... 836,068 729,817 536,341
----------- -------------- ---------------

Net investment income ................................ 7,934,990 6,648,396 4,397,900
----------- -------------- ---------------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain (loss) on investments (note 4) ......... (51,340) 118,989 (5,681)
Net change in unrealized appreciation or depreciation of
investments ............................................ 10,386,266 9,879,162 9,213,825
----------- -------------- ---------------
Net gain on investments ................................ 10,334,926 9,998,151 9,208,144
----------- -------------- ---------------

Net increase in net assets resulting from
operations ....................................... $ 18,269,916 16,646,547 13,606,044
----------- -------------- ---------------
----------- -------------- ---------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

12
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN MUNICIPAL TERM TRUST

<TABLE>
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 7,934,990 7,901,086
Net realized loss on investments ......................... (51,340) (21,183)
Net change in unrealized appreciation or depreciation of
investments ............................................ 10,386,266 (12,690,038)
------------ ------------

Net increase (decrease) in net assets resulting from
operations ........................................... 18,269,916 (4,810,135)
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (5,499,132) (5,497,953)
Preferred stock dividends .............................. (1,690,429) (1,264,920)
From net realized gains:
Common stock dividends ................................. -- (1,179)
------------ ------------
Total distributions .................................... (7,189,561) (6,764,052)
------------ ------------
Total increase (decrease) in net assets .............. 11,080,355 (11,574,187)

Net assets at beginning of year ............................ 131,419,990 142,994,177
------------ ------------

Net assets at end of year ................................ $ 142,500,345 131,419,990
------------ ------------
------------ ------------

Undistributed net investment income ...................... $ 4,387,572 3,642,113
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN MUNICIPAL TERM TRUST II

<TABLE>
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 6,648,396 6,647,805
Net realized gain (loss) on investments .................. 118,989 (17,206)
Net change in unrealized appreciation or depreciation of
investments ............................................ 9,879,162 (11,187,024)
------------ ------------

Net increase (decrease) in net assets resulting from
operations ........................................... 16,646,547 (4,556,425)
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (4,563,551) (4,563,551)
Preferred stock dividends .............................. (1,455,027) (1,090,550)
From net realized gains:
Common stock dividends ................................. (44,282) --
Preferred stock dividends .............................. (14,060) --
------------ ------------
Total distributions .................................... (6,076,920) (5,654,101)
------------ ------------
Total increase (decrease) in net assets .............. 10,569,627 (10,210,526)

Net assets at beginning of year ............................ 112,561,008 122,771,534
------------ ------------

Net assets at end of year ................................ $ 123,130,635 112,561,008
------------ ------------
------------ ------------

Undistributed net investment income ...................... $ 3,629,706 2,999,951
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

14
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS
AMERICAN MUNICIPAL TERM TRUST III

<TABLE>
<CAPTION>
Year Ended Year Ended
12/31/95 12/31/94
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 4,397,900 4,394,918
Net realized loss on investments ......................... (5,681) (124,896)
Net change in unrealized appreciation or depreciation of
investments ............................................ 9,213,825 (9,159,720)
------------ ------------

Net increase (decrease) in net assets resulting
from operations ...................................... 13,606,044 (4,889,698)
------------ ------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................. (3,021,000) (3,018,931)
Preferred stock dividends .............................. (1,030,403) (775,517)
From net realized gains:
Common stock dividends ................................. -- (2,069)
------------ ------------
Total distributions .................................... (4,051,403) (3,796,517)
------------ ------------
Total increase (decrease) in net assets .............. 9,554,641 (8,686,215)

Net assets at beginning of year ............................ 75,933,860 84,620,075
------------ ------------

Net assets at end of year ................................ $ 85,488,501 75,933,860
------------ ------------
------------ ------------

Undistributed net investment income ...................... $ 1,563,329 1,220,025
------------ ------------
------------ ------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

15
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION
American Municipal Term Trust, American Municipal Term Trust II,
and American Municipal Term Trust III (the funds) are registered
under the Investment Company Act of 1940 (as amended) as
diversified closed-end investment companies. Shares of the funds
are listed on the New York Stock Exchange. American Municipal
Term Trust, American Municipal Term Trust II, and American
Municipal Term Trust III expect to terminate operations and
distribute all of their net assets to shareholders on or shortly
before April 15, 2001, April 15, 2002, and April 15, 2003,
respectively, although termination may be extended to a date no
later than April 15, 2006, April 15, 2007, and April 15, 2008,
respectively, to assist the funds in meeting their objective of
returning $10 per share on common stock. To realize their
objectives, the funds invest in investment grade municipal
obligations including municipal zero-coupon securities.
(2) SIGNIFICANT
ACCOUNTING
POLICIES
INVESTMENTS IN SECURITIES
The values of fixed income securities are determined using
pricing services or prices quoted by independent brokers. Open
financial futures contracts are valued at the last settlement
price. When market quotations are not readily available,
securities are valued at fair value according to methods
selected in good faith by the board of directors. Short-term
securities with maturities of 60 days or less are valued at
amortized cost which approximates market value.

Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are
calculated on the identified-cost basis. Interest income,
including amortization of bond discount and premium computed on
a level-yield basis, is accrued daily.

FUTURES TRANSACTIONS
In order to gain exposure to or protect against changes in the
market, the funds may buy and sell financial futures contracts
and related options. Risks of entering into futures contracts
and related options include the possibility there may be an
illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the
underlying securities.

Upon entering into a futures contract, the funds are required to
deposit either cash or securities in an amount (initial margin)
equal

16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the funds
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized
gains and losses. The funds recognize a realized gain or loss
when the contract is closed or expires.

SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the funds on a forward-commitment or when-issued basis can take
place a month or more after the transaction date. During this
period, such securities do not earn interest, are subject to
market fluctuations and may increase or decrease in value prior
to their delivery. The funds maintain, in segregated accounts
with their custodian, assets with a market value equal to the
amount of their purchase commitments. The purchase of securities
on a when-issued or forward-commitment basis may increase the
volatility of the funds' NAVs, to the extent the funds make such
purchases while remaining substantially fully invested. As of
December 31, 1995, the funds had no outstanding when-issued or
forward commitments.

FEDERAL TAXES
The funds intend to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute their taxable income to shareholders. Therefore, no
income tax provision is required. In addition, on a
calendar-year basis, the funds will distribute substantially all
of their taxable net investment income and realized gains, if
any, to avoid the payment of any federal excise taxes.

Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
market discount amortization and the deferral of "wash sale"
losses for tax purposes. The character of distributions made
during the year from net investment income or net realized gains
may also differ from their ultimate characterization for federal
income tax purposes. In addition, due to the timing of dividend
distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains
(losses) were recorded by the funds.

17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income will be made on a
monthly basis for common shareholders and on a weekly basis for
preferred stock shareholders. Common stock distributions are
recorded as of the close of business on the ex-dividend date and
preferred stock dividends are accrued daily. Realized capital
gains, if any, will be distributed on an annual basis.
Distributions are payable in cash or for common shareholders
pursuant to the funds' dividend reinvestment plans, reinvested
in additional shares of the funds' common stock. Under the
plans, common shares will be purchased in the open market.

USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported results of operations during the reporting period.
Actual results could differ from those estimates.

(3) REMARKETED
PREFERRED STOCK
American Municipal Term Trust, American Municipal Term Trust II,
and American Municipal Term Trust III have issued and, as of
December 31, 1995, have outstanding 1,700 shares, 1,480 shares,
and 1,064 shares, respectively, of remarketed preferred stock
("RP-Registered Trademark-") with a liquidation preference of
$25,000 per share for each fund. The dividend rate on the
RP-Registered Trademark- is adjusted every seven days as
determined by the remarketing agent. On December 31, 1995, the
dividend rates were 5.25%, 5.00% and 5.00% for American
Municipal Term Trust, American Municipal Term Trust II, and
American Municipal Term Trust III, respectively.

(4) SECURITIES
TRANSACTIONS
Purchases of securities and proceeds from sales, other than
temporary investments in short-term securities, for the year
ended December 31, 1995, were as follows: $1,219,755 and
$2,400,436, respectively, for American Municipal Term Trust;
$3,263,963 and $5,388,825, respectively, for American Municipal
Term Trust II; and $3,642,469 and $3,956,303, respectively, for
American Municipal Term Trust III.

(5) FEES AND
EXPENSES
The funds have entered into the following agreements with Piper
Capital Management Incorporated (the adviser and administrator):

18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

The investment advisory agreement provides the adviser with a
monthly investment management fee calculated at the annualized
rate of 0.25% of the funds' average weekly net assets (computed
by subtracting liabilities, which exclude preferred stock, from
the value of the total assets of the funds). For its fee, the
adviser will provide investment advice and, in general, will
conduct the management and investment activity of the funds.

The administration agreement provides the administrator with a
monthly fee in an amount equal to an annualized rate of 0.15% of
the funds' average weekly net assets (computed by subtracting
liabilities, which exclude preferred stock, from the value of
the total assets of the funds). For its fee, the administrator
will provide certain reporting, regulatory and record-keeping
services for the funds.

The funds have entered into a remarketing agent agreement with
Merrill Lynch, Pierce, Fenner & Smith (the remarketing agent).
The remarketing agreement provides the remarketing agent with a
monthly fee in an amount equal to an annualized rate of 0.25% of
the fund's average amount of RP-Registered Trademark-
outstanding. For its fee, the remarketing agent will remarket
shares of RP-Registered Trademark- tendered to it, on behalf of
shareholders thereof, and will determine the applicable dividend
rate for each seven-day dividend period.

In addition to the advisory, the administrative, and the
remarketing agent fees, the funds are responsible for paying
most other operating expenses including outside directors' fees
and expenses, custodian fees, registration fees, printing and
shareholder reports, transfer agent fees and expenses, legal,
auditing and accounting services, insurance, interest and other
miscellaneous expenses.

(6) CAPITAL LOSS
CARRYOVER
For federal income tax purposes, American Municipal Term Trust
and American Municipal Term Trust III had capital loss
carryovers of $72,507 and $131,212, respectively, as of December
31, 1995, which, if not offset by subsequent capital gains, will
expire in the years 2002 through 2004 for American Municipal
Term Trust and 2002 and 2003 for American Municipal Term Trust
III. It is unlikely the board of directors will authorize a
distribution of any net realized capital gains until the
available capital loss carryovers have been offset or expired.

19
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

(7) FINANCIAL
HIGHLIGHTS
Per share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:
AMERICAN MUNICIPAL TERM TRUST

<TABLE>
<CAPTION>
Year Ended December 31, Period from
------------------------------------ 3/27/91(a) to
1995 1994 1993 1992 12/31/91
------ ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, common stock,
beginning of period .................................... $ 10.52 11.89 10.57 9.99 9.44
------ ------- ------- ------- ------
Operations:
Net investment income .................................... 0.94 0.93 0.92 0.92 0.65
Net realized and unrealized gains (losses) on
investments ............................................ 1.22 (1.50) 1.17 0.47 0.63
------ ------- ------- ------- ------
Total from operations .................................. 2.16 (0.57) 2.09 1.39 1.28
------ ------- ------- ------- ------
Distributions to shareholders from net investment income:
Paid to common shareholders .............................. (0.65) (0.65) (0.65) (0.65) (0.49)
Paid to preferred shareholders ........................... (0.20) (0.15) (0.12) (0.16) (0.13)
------ ------- ------- ------- ------
Total distributions to shareholders .................... (0.85) (0.80) (0.77) (0.81) (0.62)
------ ------- ------- ------- ------
Offering costs and underwriting discounts associated with
the remarketed preferred stock ........................... -- -- -- -- (0.11)
------ ------- ------- ------- ------
Net asset value, common
stock, end of period ................................... $ 11.83 10.52 11.89 10.57 9.99
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Market value, common stock, end of period ................ $ 11.00 10.00 10.88 10.50 10.13
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Total return, common stock, market value (b) ............... 16.91% (2.11%) 9.83% 10.26% 6.21%
Total return, common stock,
net asset value (c) ...................................... 18.93% (6.34%) 18.98% 12.68% 11.25%
Net assets at end of period (in millions) ................ $ 143 131 143 132 127
Ratio of expenses to average weekly
net assets (d) ........................................... 0.61% 0.58% 0.59% 0.62% 0.56%(e)
Ratio of net investment income to average weekly net
assets ................................................... 5.72% 5.80% 5.65% 6.03% 6.27%(e)
Portfolio turnover rate (excluding short-term
securities) .............................................. 1% 1% 2% 4% 24%
Remarketed preferred stock, outstanding (in millions) .... $ 43 43 43 43 43
Asset coverage ratio (f) ................................... 335% 309% 336% 310% 299%
</TABLE>

(A) COMMENCEMENT OF OPERATIONS.
(B) TOTAL RETURN, MARKET VALUE, IS BASED ON THE CHANGE IN MARKET PRICE OF A
COMMON SHARE DURING THE PERIOD AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT
ACTUAL PRICES PURSUANT TO THE FUND'S DIVIDEND REINVESTMENT PLAN.
(C) TOTAL RETURN, NET ASSET VALUE, IS BASED ON THE CHANGE IN NET ASSET VALUE OF
A COMMON SHARE DURING THE PERIOD AND ASSUMES REINVESTMENT OF DISTRIBUTIONS
AT NET ASSET VALUE.
(D) BEGINNING IN FISCAL 1995, THE EXPENSE RATIO REFLECTS THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
(E) ADJUSTED TO AN ANNUAL BASIS.
(F) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.

20
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

(7) FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:
AMERICAN MUNICIPAL TERM TRUST II

<TABLE>
<CAPTION>
Year Ended December 31, Period from
------------------------------------ 9/26/91(a) to
1995 1994 1993 1992 12/31/91
------ ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, common stock,
beginning of period .................................... $ 10.27 11.66 10.26 9.71 9.45
------ ------- ------- ------- ------
Operations:
Net investment income .................................... 0.90 0.90 0.89 0.89 0.19
Net realized and unrealized gains (losses) on
investments ............................................ 1.37 (1.52) 1.25 0.44 0.36
------ ------- ------- ------- ------
Total from operations .................................. 2.27 (0.62) 2.14 1.33 0.55
------ ------- ------- ------- ------
Distributions to shareholders:
From net investment income
Paid to common shareholders ............................ (0.62) (0.62) (0.62) (0.62) (0.16)
Paid to preferred shareholders ......................... (0.20) (0.15) (0.12) (0.16) (0.02)
From net realized gains
Paid to common shareholders ............................ (0.01) -- -- -- --
Paid to preferred shareholders ......................... -- -- -- -- --
------ ------- ------- ------- ------
Total distributions to shareholders .................... (0.83) (0.77) (0.74) (0.78) (0.18)
------ ------- ------- ------- ------
Offering costs and underwriting discounts associated with
the remarketed
preferred stock .......................................... -- -- -- -- (0.11)
------ ------- ------- ------- ------
Net asset value, common stock,
end of period .......................................... $ 11.71 10.27 11.66 10.26 9.71
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Market value, common stock,
end of period .......................................... $ 10.63 9.63 10.75 10.38 9.88
------ ------- ------- ------- ------
------ ------- ------- ------- ------
Total return, common stock, market value (b) ............... 17.28% (4.83%) 9.74% 11.59% 0.30%
Total return, common stock, net asset value (c) ............ 20.48% (6.80%) 20.03% 12.41% 4.42%
Net assets at end of period (in millions) ................ $ 123 113 123 112 108
Ratio of expenses to average weekly
net assets (d) ........................................... 0.62% 0.60% 0.60% 0.64% 0.58%(e)
Ratio of net investment income to average weekly net
assets ................................................... 5.58% 5.72% 5.51% 5.92% 6.24%(e)
Portfolio turnover rate (excluding short-term
securities) .............................................. 3% 0% 2% 11% 18%
Remarketed preferred stock, outstanding (in millions) .... $ 37 37 37 37 37
Asset coverage ratio (f) ................................... 333% 304% 332% 304% 293%
</TABLE>

21
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Year Ended December 31, Period from
-------------------------- 11/27/92(a)
1995 1994 1993 to 12/31/92
------ ------- ------- -------------
<S> <C> <C> <C> <C>
Net asset value, common stock,
beginning of period ...................... $ 9.31 10.95 9.57 9.44
------ ------- ------- -----
Operations:
Net investment income ...................... 0.83 0.83 0.81 0.04
Net realized and unrealized gains (losses)
on investments ........................... 1.73 (1.75) 1.36 0.14
------ ------- ------- -----
Total from operations .................... 2.56 (0.92) 2.17 0.18
------ ------- ------- -----
Distributions to shareholders from net
investment income:
Paid to common shareholders ................ (0.57) (0.57) (0.57) (0.05)
Paid to preferred shareholders ............. (0.19) (0.15) (0.11) --
------ ------- ------- -----
Total distributions to shareholders ...... (0.76) (0.72) (0.68) (0.05)
------ ------- ------- -----
Offering costs and underwriting discounts
associated with the remarketed preferred
stock ...................................... -- -- (0.11) --
------ ------- ------- -----
Net asset value, common stock,
end of period ............................ $ 11.11 9.31 10.95 9.57
------ ------- ------- -----
------ ------- ------- -----
Market value, common stock,
end of period ............................ $ 10.13 8.50 10.13 9.88
------ ------- ------- -----
------ ------- ------- -----
Total return, common stock,
market value (b) ........................... 26.32% (10.93%) 8.35% (0.78%)
Total return, common stock, net
asset value (c) ............................ 25.93% (10.04%) 20.74% 1.88%
Net assets at end of period (in millions) ...$ 85 76 85 51
Ratio of expenses to average weekly
net assets (d) ............................. 0.66% 0.64% 0.61% 0.60%(e)
Ratio of net investment income to average
weekly net assets .......................... 5.38% 5.53% 5.34% 4.90%(e)
Portfolio turnover rate (excluding short-term
securities) ................................ 5% 3% 1% 0%
Remarketed preferred stock, outstanding (in
millions) ................................ $ 27 27 27 --
Asset coverage ratio (f) ..................... 321% 285% 318% --
</TABLE>

22
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST
DECEMBER 31, 1995

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

MUNICIPAL LONG-TERM SECURITIES (97.9%):
COLORADO (1.6%):
Colorado Health Care Facility (FSA) (Prerefunded to
2/15/01), 7.25%, 2/15/16 ........................... $ 1,925,000 2,220,449
------------
DISTRICT OF COLUMBIA (3.3%):
General Obligation (MBIA), 6.75%, 6/1/08 .............. 4,400,000 4,755,300
------------
FLORIDA (2.4%):
Jacksonville Electric Authority (Prerefunded to
10/1/00), 7.00%, 10/1/12 ............................. 3,000,000(e) 3,410,670
------------
GEORGIA (2.3%):
Municipal Electric Authority (MBIA) (Prerefunded to
1/1/01), 7.00%, 1/1/16 ............................... 2,840,000(e) 3,238,992
------------
ILLINOIS (15.4%):
Chicago Motor Fuel Tax (AMBAC) (Prerefunded to 1/1/01),
7.10%, 1/1/11 ........................................ 1,525,000(e) 1,746,064
Development Financial Authority, 7.38%, 7/1/21 ........ 1,000,000 1,121,270
Health Facilities Authority, Evangelical Hospital
(FSA), 7.13%, 1/1/21 ................................. 2,500,000 2,782,925
Kankakee General Obligation (FGIC), 6.88%-7.00%,
5/1/11-5/1/16 ........................................ 3,000,000 3,412,300
Rochelle Water and Sewer Revenue, 7.15%, 5/1/14 ....... 1,000,000 1,097,710
State Dedicated Tax-Civic Center (AMBAC), 7.00%,
12/15/13 ............................................. 4,500,000 5,042,700
State Sales Tax Revenue (Prerefunded to 6/15/01),
6.90%, 6/15/12-6/15/13 ............................... 2,300,000(e) 2,632,005
State Sales Tax Revenue (Prerefunded to 6/15/99),
7.25%, 6/15/14 ....................................... 3,650,000(e) 4,087,124
------------
21,922,098
------------
INDIANA (8.9%):
Hamilton S.E. School Building Corporation (AMBAC),
7.00%, 7/1/08 ........................................ 3,445,000 3,878,174
Marion County Convention Center (AMBAC), 7.00%,
6/1/10 ............................................... 345,000 391,047
Marion County Convention Center (AMBAC) (Prerefunded to
6/1/01), 7.00%, 6/1/10 ............................... 870,000(e) 999,047
Rockport Pollution Control Revenue (FGIC), 7.60%,
3/1/16 ............................................... 3,500,000 4,048,345
St. Joseph County Hospital Authority (MBIA), 7.00%,
8/15/11 .............................................. 3,000,000 3,367,050
------------
12,683,663
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

23
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ------------
<S> <C> <C>
IOWA (0.8%):
Dubuque Hospital Revenue, 6.88%, 1/1/12 ............. $ 1,000,000 1,074,110
------------

LOUISIANA (0.2%):
Parish of St. Martin, Cargill Inc. Project, 6.63%,
10/1/12 .............................................. 200,000(c) 214,156
------------

MAINE (2.4%):
Municipal Bond Bank (Prerefunded 11/1/01), 7.20%,
11/1/13 .............................................. 3,000,000(e) 3,484,830
------------

MINNESOTA (0.8%):
East Grand Forks Industrial Development Revenue, 8.00%,
4/1/11 ............................................... 1,000,000 1,083,270
------------

NEBRASKA (0.8%):
Hospital Lease Investment Financing (MBIA), 7.00%,
3/1/06 ............................................... 1,000,000 1,132,260
------------

NEVADA (6.1%):
Clark County School District (MBIA) (Prerefunded to
6/1/01), 7.00%, 6/1/09 ............................... 3,000,000(e) 3,421,110
University of Nevada Revenue (AMBAC) (Prerefunded to
7/1/00), 7.13%, 7/1/16 ............................... 2,720,000(e) 3,094,626
Washoe County Limited Tax General Obligation,
Zero-Coupon (MBIA), 7.12%, 7/1/06 .................... 3,725,000(b) 2,219,020
------------
8,734,756
------------

PENNSYLVANIA (3.2%):
Higher Education-Duquesne University (MBIA), 7.00%,
4/1/10 ............................................... 1,000,000 1,117,000
Sayre Healthcare Facility (AMBAC), 7.00%, 3/1/11 ...... 3,000,000 3,381,900
------------
4,498,900
------------

SOUTH DAKOTA (3.7%):
Health and Education Facility Revenue, 7.00%,
11/1/07 .............................................. 3,000,000 3,265,650
Rapid City Area School District #514 (MBIA)
(Prerefunded to 1/1/02), 7.20%, 1/1/11 ............... 1,770,000(e) 2,035,111
------------
5,300,761
------------

TENNESSEE (2.4%):
Bristol Health and Education Facility (FGIC)
(Prerefunded to 3/1/01), 7.00%, 9/1/11 ............... 1,000,000(e) 1,143,000
Housing Development Authority (FSA), 7.60%, 7/1/16 .... 2,120,000 2,272,237
------------
3,415,237
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

24
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ------------
<S> <C> <C>
TEXAS (18.2%):
Austin Utility System Revenue (MBIA) (Prerefunded to
5/15/01), 8.00%, 11/15/16 .......................... $ 500,000(e) 589,525
Corpus Christi Utility System Revenue (FGIC), 7.00%,
7/15/10 .............................................. 1,500,000 1,681,980
Harris County Health Facilities (FSA), 6.85%,
10/1/06 .............................................. 2,000,000 2,287,080
Harris County Toll Road, 6.75%, 8/1/14 ................ 1,500,000 1,659,765
Houston Hotel Occupancy (FGIC) (Prerefunded to 7/1/01),
7.00%, 7/1/15 ........................................ 4,700,000 5,331,022
Houston Water and Sewer, Zero-Coupon (AMBAC), 7.14%,
8/15/06 .............................................. 4,285,000(b) 2,525,750
Lower Colorado River Authority (AMBAC), 7.00%,
1/1/11 ............................................... 415,000 469,178
Lower Colorado River Authority (AMBAC) (Prerefunded to
1/1/01), 7.00%, 1/1/11 ............................... 585,000(e) 667,187
Lower Colorado River Authority, Zero-Coupon (AMBAC),
7.17%, 1/1/06 ........................................ 765,000(b) 470,483
Municipal Power Agency, Zero-Coupon (AMBAC), 7.11%,
9/1/06 ............................................... 3,000,000(b) 1,764,030
San Antonio Electric and Gas, Zero-Coupon (FGIC),
7.11%, 2/1/06 ........................................ 3,000,000(b) 1,819,200
Trinity River Authority (AMBAC) (Prerefunded to
8/1/00), 7.10%, 8/1/16 ............................... 2,250,000(e) 2,524,635
Weatherford Utility System, Water Revenue (MBIA),
7.00%, 9/1/11 ........................................ 3,750,000 4,199,512
------------
25,989,347
------------

WASHINGTON (18.8%):
Chelan County Public Utility District, 7.60%,
7/1/25 ............................................... 3,375,000 3,876,457
King and Snohomish County School District (FGIC)
(Prerefunded to 12/1/00), 7.00%, 12/1/09 ............. 1,450,000(e) 1,632,207
Port Longview Industrial Development Revenue, 7.45%,
2/1/13 ............................................... 5,400,000 5,880,600
Public Power Supply System (Prerefunded to 1/1/00),
7.25%, 7/1/15 ........................................ 1,435,000(e) 1,619,110
Public Power Supply System (Prerefunded to 1/1/01),
7.63%, 7/1/10 ........................................ 5,000,000(e) 5,842,150
Public Power Supply System (Prerefunded to 7/1/00),
7.38%, 7/1/12 ........................................ 1,550,000(e) 1,779,261
Public Power Supply System, Zero Coupon (FGIC),
7.15%-7.17%, 7/1/06 .................................. 6,500,000(b) 3,852,355
Seattle Water Revenue (Prerefunded to 5/1/00), 7.25%,
5/1/17 ............................................... 2,000,000(e) 2,277,180
------------
26,759,320
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

25
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ------------
<S> <C> <C>
WEST VIRGINIA (3.5%):
School Building Authority (MBIA) (Prerefunded to
7/1/00), 7.25%, 7/1/15 ............................. $ 4,000,000(e) 4,571,280
State Water Development Authority (CGIC), 7.00%,
11/1/11 .............................................. 500,000 570,540
------------
5,141,820
------------

WISCONSIN (3.1%):
Health and Education Facility (AMBAC), 7.25%,
8/15/19 .............................................. 1,675,000 1,896,787
Health and Education Facility (MBIA) (Prerefunded to
6/1/00), 7.00%, 6/1/20 ............................... 1,600,000(e) 1,809,120
Neenah Industrial Development Revenue, 6.75%,
6/1/12 ............................................... 650,000 696,618
------------
4,402,525
------------

Total Municipal Long-Term Securities
(cost: $122,710,888) ................................ 139,462,464
------------

MUNICIPAL SHORT-TERM SECURITIES (0.6%):
INDIANA (0.6%):
Hospital Equipment Financing Authority, 2.20%, 12/1/15
(cost: $900,000) ..................................... 900,000(d) 900,000
------------

Total Investments in Securities
(cost: $123,610,888) (f) .......................... $ 140,362,464
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:

(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) FOR ZERO COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(C) SECURITIES PURCHASED WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM AND MAY
BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS.
(D) VARIABLE RATE DEMAND NOTE. INTEREST RATE VARIES TO REFLECT CURRENT MARKET
CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON DECEMBER 31, 1995.
(E) PREREFUNDED ISSUES ARE BACKED BY U.S. GOVERNMENT OBLIGATIONS. THESE BONDS
ARE CALLED AND MATURE AT THE CALL DATE INDICATED.
(F) ON DECEMBER 31, 1995, FOR FEDERAL INCOME TAX PURPOSES, THE COST OF
INVESTMENTS WAS $123,517,926. THE AGGREGATE GROSS UNREALIZED APPRECIATION
AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS
FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 16,844,538
GROSS UNREALIZED DEPRECIATION ...... --
----------
NET UNREALIZED APPRECIATION .... $ 16,844,538
----------
----------
</TABLE>

26
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST II
DECEMBER 31, 1995

MUNICIPAL LONG-TERM SECURITIES (97.1%):
ALABAMA (1.0%):
DCH Health Care Authority, 5.70%, 6/1/15 ............ $ 1,250,000 1,236,200
------------

FLORIDA (6.8%):
Manatee County, Zero-Coupon (MBIA), 6.91%, 10/1/07 .... 2,995,000(b) 1,683,669
Sumter County School District (CGIC), 7.15%,
11/1/15 .............................................. 2,045,000 2,592,528
University Community Hospital (FSA) (Prerefunded to
9/1/00), 7.50%, 9/1/11 ............................... 3,500,000(e) 4,060,560
------------
8,336,757
------------

ILLINOIS (24.4%):
Belleville General Obligation (FGIC), 7.13%,
12/1/08 .............................................. 1,000,000 1,130,940
Carbondale General Obligation (FGIC) (Prerefunded to
5/1/01), 6.90%, 5/1/12 ............................... 3,200,000(e) 3,602,624
Central Lake County, Zero-Coupon (MBIA), 6.98%,
5/1/07 ............................................... 2,370,000(b) 1,333,006
Chicago Motor Fuel Tax (AMBAC) (Prerefunded to 1/1/01),
7.10%, 1/1/11 ........................................ 1,500,000(e) 1,717,440
Chicago Waste Water Revenue (FGIC) (Prerefunded to
11/15/00), 6.75%, 11/15/20 ........................... 2,000,000(e) 2,260,100
Commonwealth Edison Pollution Control (MBIA), 7.25%,
6/1/11 ............................................... 3,000,000 3,436,110
Cook County General Obligation (AMBAC) (Prerefunded to
11/1/01), 6.75%, 11/1/18 ............................. 5,000,000(e) 5,721,000
Decatur, Zero-Coupon (AMBAC), 6.98%, 10/1/07 .......... 1,250,000(b) 688,350
Health Facilities Authority, Evangelical Hospital,
6.75%, 4/15/12-4/15/17 ............................... 3,500,000 3,728,790
Kane County Public Building Authority (MBIA), 6.88%,
12/1/10 1,000,000 1,093,310
Kendall, Kane, and Will Counties, Zero-Coupon (FGIC),
6.96%, 3/1/07 ........................................ 975,000(b) 553,049
Lake County Water and Sewer System (AMBAC) (Prerefunded
to 12/1/01), 6.75%, 12/1/08-12/1/09 .................. 4,215,000(e) 4,763,793
------------
30,028,512
------------

INDIANA (12.4%):
Boonville School Building Corporation, 6.90%,
7/1/09 ............................................... 2,000,000 2,245,560
Indiana University, Zero-Coupon (AMBAC), 7.07%,
8/1/07 ............................................... 3,180,000(b) 1,766,045
Lake Central Multi-District School Building Corporation
(Prerefunded to 7/15/01), 7.00%, 1/15/14-1/15/18 ..... 2,500,000(e) 2,863,925
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

27
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST II
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ------------
<S> <C> <C>
Noblesville/Hamilton County (Prerefunded to 2/1/01),
7.00%, 2/1/13 ...................................... $ 1,000,000(e) 1,138,780
Port Commission, Cargill Inc. Project, 6.88%,
5/1/12 ............................................... 450,000(c) 494,154
Purdue University (AMBAC) (Prerefunded to 7/1/01),
7.00%, 7/1/14 ........................................ 3,000,000(e) 3,450,390
St. Joseph County Hospital Authority (MBIA), 7.00%,
12/1/12 .............................................. 3,000,000 3,362,880
------------
15,321,734
------------

IOWA (2.9%):
Mason City Hospital facilities (FSA), 6.88%,
8/15/09 .............................................. 1,265,000 1,412,056
Polk County Health Facilities (MBIA), 7.10%,
11/1/09 .............................................. 1,895,000 2,154,236
------------
3,566,292
------------

KENTUCKY (0.8%):
Owensboro Electric Light and Power, Zero-Coupon
(AMBAC), 6.91%, 1/1/07 ............................... 1,775,000(b) 1,035,411
------------

LOUISIANA (2.5%):
New Orleans General Obligation, Zero-Coupon (AMBAC),
7.01%, 9/1/07 ........................................ 5,000,000(b) 2,780,850
Parish of St. Martin, Cargill Inc. Project, 6.63%,
10/1/12 .............................................. 300,000(c) 321,234
------------
3,102,084
------------

MICHIGAN (0.9%):
State Housing Development Authority (FSA), 6.85%,
10/15/18 ............................................. 1,000,000 1,065,960
------------

MONTANA (2.8%):
State Board of Investment (MBIA), 6.88%, 6/1/20 ....... 3,000,000 3,412,592
------------

NEW HAMPSHIRE (0.8%):
New Hampshire Single Family Housing Authority, 5.85%,
7/1/10 ............................................... 1,000,000 1,018,970
------------

NEW JERSEY (1.8%):
State Educational Facilities Authority, 6.88%,
7/1/10 ............................................... 2,000,000 2,185,220
------------

NORTH DAKOTA (4.8%):
Bismark Hospital Revenue (AMBAC), 6.90%, 5/1/06 ....... 4,300,000 4,862,311
Grand Forks Health Care Authority (MBIA), 6.63%,
12/1/10 .............................................. 1,000,000 1,108,440
------------
5,970,751
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

28
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST II
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ------------
<S> <C> <C>
SOUTH CAROLINA (3.3%):
Lexington County Health Services (FSA), 6.75%,
10/1/18 ............................................ $ 3,600,000 4,018,320
------------

TEXAS (10.9%):
Harris County Health Facilities (FSA), 7.00%,
10/1/14 .............................................. 2,225,000 2,494,492
Houston Hotel Occupancy (FGIC) (Prerefunded to 7/1/01),
7.00%, 7/1/15 ........................................ 5,095,000 5,779,055
Houston Water and Sewer, Zero-Coupon (AMBAC), 6.91%,
12/1/07 .............................................. 3,000,000(b) 1,640,040
Sabine River Authority, 8.25%, 10/1/20 ................ 3,200,000 3,540,512
------------
13,454,099
------------

WASHINGTON (15.9%):
Chelan County Public Utility District, 7.60%,
7/1/25 ............................................... 3,000,000 3,445,740
Clark County Public Utility District (FGIC), 6.50%,
1/1/11 ............................................... 2,000,000 2,183,580
King and Snohomish Counties School District (FGIC),
6.63%, 12/1/12 ....................................... 900,000 989,334
Public Power Supply System (Prerefunded to 7/1/00),
7.38%, 7/1/12 ........................................ 4,525,000(e) 5,194,293
Public Power Supply System, Project #1, Series A,
7.00%, 7/1/11 700,000 768,404
Public Power Supply System, Project #3, 6.75%,
7/1/11 ............................................... 1,350,000 1,455,597
Public Power Supply System, Project #3 (Prerefunded to
1/1/00), 7.25%, 7/1/15 ............................... 3,875,000(e) 4,372,163
Snohomish County Solid Waste Revenue (MBIA), 7.00%,
12/1/10 .............................................. 1,000,000 1,134,230
------------
19,543,341
------------

WEST VIRGINIA (4.1%):
School Building Authority (MBIA), 6.75%, 7/1/17 ....... 2,500,000 2,749,150
State Water Development Authority, 7.30%, 11/1/11 ..... 1,000,000 1,163,890
State Water Development Authority (Prerefunded to
11/1/01), 7.40%, 11/1/19 ............................. 1,000,000(e) 1,168,990
------------
5,082,030
------------

WISCONSIN (1.0%):
Neenah Industrial Development Revenue, 6.75%,
6/1/12 ............................................... 1,150,000 1,232,478
------------

Total Municipal Long-Term Securities
(cost: $105,887,612) ................................ 119,610,751
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

29
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST II
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ------------
<S> <C> <C>
MUNICIPAL SHORT-TERM SECURITIES (1.6%)(D):
ILLINOIS (0.2%):
Illinois Health, Ingalls Hospital, 3.60%, 1/1/16 .... $ 200,000 200,000
------------

INDIANA (1.4%):
Hospital Equipment Financing Authority, 2.20%,
12/1/15 .............................................. 1,650,000 1,650,000
Indiana Health Capital Access, 4.00%, 11/1/09 ......... 100,000 100,000
------------
1,750,000
------------

Total Municipal Short-Term Securities
(cost: $1,950,000) .................................. 1,950,000
------------

Total Investments in Securities
(cost: $107,837,612) (f) .......................... $ 121,560,751
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:

(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) FOR ZERO COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(C) SECURITIES PURCHASED WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM AND MAY
BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS.
(D) VARIABLE RATE DEMAND NOTE. INTEREST RATE VARIES TO REFLECT CURRENT MARKET
CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON DECEMBER 31, 1995.
(E) PREREFUNDED ISSUES ARE BACKED BY U.S. GOVERNMENT OBLIGATIONS. THESE BONDS
ARE CALLED AND MATURE AT THE CALL DATE INDICATED.
(F) ON DECEMBER 31, 1995, FOR FEDERAL INCOME TAX PURPOSES, THE COST OF
INVESTMENTS WAS $107,791,947. THE AGGREGATE GROSS UNREALIZED APPRECIATION
AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS
FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 13,768,804
GROSS UNREALIZED DEPRECIATION ...... --
----------
NET UNREALIZED APPRECIATION .... $ 13,768,804
----------
----------
</TABLE>

30
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST III
DECEMBER 31, 1995

MUNICIPAL LONG-TERM SECURITIES (98.4%):
ALABAMA (0.6%):
Agricultural and Mechanical University Revenue (MBIA),
6.45%, 11/1/17 ..................................... $ 500,000 541,525
------------

COLORADO (1.2%):
Snowmass Village Multi-Family Housing (FSA), 6.25%,
12/15/16 ............................................. 1,000,000 1,041,710
------------

DISTRICT OF COLUMBIA (1.2%):
Catholic University of America (Connie Lee), 6.30%,
10/1/13 .............................................. 1,000,000 1,065,500
------------

FLORIDA (0.6%):
Broward County School District, Zero-Coupon (MBIA),
6.55%, 2/15/08 ....................................... 1,000,000(b) 544,870
------------

ILLINOIS (20.6%):
Chicago Wastewater Revenue (FGIC), 6.35%, 1/1/22 ...... 1,000,000 1,068,880
Health Facility-Alexian Brothers Medical Center (MBIA),
6.38%, 1/1/15 ........................................ 1,125,000 1,196,662
Health Facility-Elmhurst Memorial Hospital (FGIC),
6.50%, 1/1/12 ........................................ 1,190,000 1,286,092
Health Facility-Lutheran General Systems (FSA), 6.13%,
4/1/12 ............................................... 1,000,000 1,060,020
Health Facility-Wyndemere Retirement Home (MBIA),
5.75%, 11/1/22 ....................................... 1,000,000 1,010,120
Henry Hospital District (AMBAC), 6.60%, 12/1/17 ....... 2,000,000 2,155,520
Lake County Housing Finance Corporation (FHA), 6.70%,
11/1/14 .............................................. 2,000,000 2,089,900
Rochelle Water and Sewer Revenue, 7.15%, 5/1/14 ....... 2,000,000 2,195,420
State General Obligation (CGIC), 6.25%, 10/1/12 ....... 3,370,000 3,585,545
State Sales Tax Revenue, 5.50%, 6/15/20 ............... 2,000,000 1,969,560
------------
17,617,719
------------

INDIANA (19.8%):
Crawfordsville School Building Corporation, 6.25%,
7/1/11 ............................................... 1,500,000 1,629,495
Freemont Middle School Building (AMBAC) (Prerefunded to
3/15/02), 6.75%, 3/15/13 ............................. 3,000,000(d) 3,412,680
Health Facilities-Community Hospital Project (MBIA),
6.40%, 5/1/12 ........................................ 5,000,000 5,381,800
Health Facilities-Methodist Hospital (AMBAC), 5.75%,
9/1/15 ............................................... 1,750,000 1,759,683
Indianapolis Public Improvement Bonds, 6.75%,
2/1/20 ............................................... 2,250,000 2,465,325
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

31
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST III
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ------------
<S> <C> <C>
Lake County Redevelopment Authority, 6.45%, 2/1/11 ...$ 1,600,000 1,761,536
Patoka Lake Regional Water and Sewer District (AMBAC),
6.45%, 1/1/15 ........................................ 500,000 540,915
------------
16,951,434
------------

IOWA (1.5%):
Cedar Rapids Hospital Facilities (FGIC), 6.13%,
8/15/13 .............................................. 1,200,000 1,288,320
------------

KANSAS (1.6%):
Kansas City Utility Systems, Zero-Coupon (AMBAC),
6.40%, 3/1/08 ........................................ 2,575,000(b) 1,406,461
------------

MAINE (2.6%):
Water and Sewer Revenue, 6.60%, 11/1/15 ............... 2,000,000 2,183,160
------------

MICHIGAN (1.8%):
Municipal Bond Authority Revenue, 6.50%, 5/1/16 ....... 1,000,000 1,087,700
State Building Authority, 6.25%, 10/1/12 .............. 400,000 427,316
------------
1,515,016
------------

NEW MEXICO (1.3%):
Las Cruces Health Facility-Evangelical Lutheran Project
(CGIC), 6.45%, 12/1/17 ............................... 1,000,000 1,080,690
------------

NORTH DAKOTA (3.9%):
Mercer County Pollution Control Revenue (AMBAC), 7.20%,
6/30/13 .............................................. 2,700,000 3,362,927
------------

RHODE ISLAND (1.5%):
State Health and Education Building Dorporation (Connie
Lee), 6.38%, 4/1/12 .................................. 1,200,000 1,287,384
------------

SOUTH CAROLINA (2.0%):
Piedmont Municipal Power Agency (MBIA), 6.30%,
1/1/14 ............................................... 1,600,000 1,714,000
------------

SOUTH DAKOTA (7.6%):
Heartland Consumers Power District (FSA), 6.00%,
1/1/12-1/1/17 ........................................ 2,085,000 2,294,636
State Building Authority (AMBAC) (escrowed to
maturity), 6.63%, 9/1/12 ............................. 3,600,000 4,184,604
------------
6,479,240
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

32
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

AMERICAN MUNICIPAL TERM TRUST III
(CONTINUED)

WASHINGTON (7.6%):
Public Power Supply System, 6.25%-6.50%,
7/1/12-7/1/18 ........................................ 6,070,000 6,380,345
------------

WEST VIRGINIA (3.2%):
Clarksburg Water Revenue (Asset Guaranty), 6.25%,
9/1/14 ............................................... 2,620,000 2,734,573
------------

Total Municipal Long-Term Securities
(cost: $76,138,870) ................................. 84,110,834
------------

MUNICIPAL SHORT-TERM SECURITIES (0.3%):
INDIANA (0.3%):
Hospital Equipment Financing Authority, 2.20%, 12/1/15
(cost: $225,000) ..................................... 225,000(c) 225,000
------------

Total Investments in Securities
(cost: $76,363,870) (e) ........................... $ 84,335,834
------------
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

33
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

NOTES TO INVESTMENTS IN SECURITIES:

(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) FOR ZERO COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(C) VARIABLE RATE DEMAND NOTE. INTEREST RATE VARIES TO REFLECT CURRENT MARKET
CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON DECEMBER 31, 1995.
(D) PREREFUNDED ISSUES ARE BACKED BY U.S. GOVERNMENT OBLIGATIONS. THESE BONDS
ARE CALLED AND MATURE AT THE CALL DATE INDICATED.
(E) ON DECEMBER 31, 1995, FOR FEDERAL INCOME TAX PURPOSES, THE COST OF
INVESTMENTS WAS $76,294,612. THE AGGREGATE GROSS UNREALIZED APPRECIATION
AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS
FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 8,041,222
GROSS UNREALIZED DEPRECIATION ...... --
----------
NET UNREALIZED APPRECIATION .... $ 8,041,222
----------
----------
</TABLE>

34
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND SHAREHOLDERS
AMERICAN MUNICIPAL TERM TRUST INC.
AMERICAN MUNICIPAL TERM TRUST INC. II
AMERICAN MUNICIPAL TERM TRUST INC. III:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments in securities, of American Municipal Term Trust
Inc., American Municipal Term Trust Inc. II, and American Municipal Term Trust
Inc. III as of December 31, 1995, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period ended December 31, 1995 and the financial
highlights presented in footnote 7 to the financial statements. These financial
statements and the financial highlights are the responsibility of the fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the 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. Investment securities held in custody are confirmed to us by the
custodian. As to securities sold but not delivered, we request confirmations
from brokers, and where replies are not received, we carry out other appropriate
auditing procedures. 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 the financial highlights referred
to above present fairly, in all material respects, the financial position of
American Municipal Term Trust Inc., American Municipal Term Trust Inc. II and
American Municipal Term Trust Inc. III as of December 31, 1995 and the results
of their operations for the year then ended, changes in their net assets for
each of the years in the two-year period ended December 31, 1995 and the
financial highlights presented in footnote 7 to the financial statements, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 30, 1996

35
<PAGE>
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FEDERAL TAX INFORMATION

Fiscal Year Ended December 31, 1995

Federal tax information is presented as an aid to you in
reporting distributions. Please consult a tax adviser on
how to report these distributions at the state and local
levels.

SOURCE OF DISTRIBUTIONS
During the year ended December 31, 1995, 100% of
American Municipal Term Trust, 100% of American Muncipal
Term Trust II, and 100% of American Muncipal Term Trust
III distributions were derived from interest on
municipal securities and qualify as exempt-interest
dividends for federal tax purposes.

FEDERAL TAXATION
Exempt-interest dividends are exempt from federal income
taxes and should not be included in your gross income.
They do, however, need to be reported on your income tax
return for informational purposes.

American Municipal Term Trust Inc.
<TABLE>
<CAPTION>
COMMON STOCK
Payable Date Per Share
- ----------------------------------------------- -----------

<S> <C>
February 22, 1995 ........................... $ 0.0542
March 29, 1995 ................................ 0.0542
April 26, 1995 ................................ 0.0542
May 24, 1995 .................................. 0.0542
June 28, 1995 ................................. 0.0542
July 26, 1995 ................................. 0.0542
August 23, 1995 ............................... 0.0542
September 27, 1995 ............................ 0.0542
October 25, 1995 .............................. 0.0542
November 22, 1995 ............................. 0.0542
December 27, 1995 ............................. 0.0542
January 11, 1996 .............................. 0.0542
-----------
$ 0.6504
-----------
-----------

PREFERRED STOCK
(at $25,000/share) Per Share
- ----------------------------------------------- -----------
<S> <C>

Total ....................................... $ 994.37
-----------
-----------
</TABLE>

36
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION

American Municipal Term Trust II Inc.
<TABLE>
<CAPTION>
COMMON STOCK
Payable Date Per Share
- ----------------------------------------------- -----------
<S> <C>
February 22, 1995 ........................... $ 0.05170
March 29, 1995 ................................ 0.05170
April 26, 1995 ................................ 0.05170
May 24, 1995 .................................. 0.05170
June 28, 1995 ................................. 0.05170
July 26, 1995 ................................. 0.05170
August 23, 1995 ............................... 0.05170
September 27, 1995 ............................ 0.05170
October 25, 1995 .............................. 0.05170
November 22, 1995 ............................. 0.05170
December 27, 1995 ............................. 0.05170
January 11, 1996 .............................. 0.05772(a)
-----------
$ 0.62642
-----------
-----------
(a) This distribution includes $0.00602 of long-term capital
gains.

<CAPTION>
PREFERRED STOCK
(at $25,000/share) Per Share
- ----------------------------------------------- -----------
<S> <C>
Total ....................................... $ 992.63(b)
-----------
-----------
(b) This distribution includes $9.50 of long-term capital
gains.
</TABLE>

American Municipal Term Trust III Inc.
<TABLE>
<CAPTION>
COMMON STOCK
Payable Date Per Share
- ----------------------------------------------- -----------
<S> <C>
February 22, 1995 ........................... $ 0.0475
March 29, 1995 ................................ 0.0475
April 26, 1995 ................................ 0.0475
May 24, 1995 .................................. 0.0475
June 28, 1995 ................................. 0.0475
July 26, 1995 ................................. 0.0475
August 23, 1995 ............................... 0.0475
September 27, 1995 ............................ 0.0475
October 25, 1995 .............................. 0.0475
November 22, 1995 ............................. 0.0475
December 27, 1995 ............................. 0.0475
January 11, 1996 .............................. 0.0475
-----------
$ 0.5700
-----------
-----------

<CAPTION>
PREFERRED STOCK
(at $25,000/share) Per Share
- ----------------------------------------------- -----------
<S> <C>

Total ....................................... $ 968.42
-----------
-----------
</TABLE>

37
<PAGE>
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SHAREHOLDER UPDATE

ANNUAL MEETING RESULTS
An annual meeting of the funds' shareholders was held on August 17, 1995. Each
matter voted upon at the meeting, as well as the number of votes cast for,
against or withheld, and the number of abstentions with respect to such matter,
are set forth below.

1. The funds' preferred shareholders elected the following two directors:
American Municipal Term Trust Inc. (AXT)

<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
David T. Bennett............................. 775 243
William H. Ellis............................. 775 243
</TABLE>

American Municipal Term Trust Inc. II (BXT)

<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
David T. Bennett............................. 873 --
William H. Ellis............................. 873 --
</TABLE>

American Municipal Term Trust Inc. III (CXT)

<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
David T. Bennett............................. 564 11
William H. Ellis............................. 564 11
</TABLE>

2. The funds' preferred and common shareholders, voting as a class, elected the
following four directors:

American Municipal Term Trust Inc. (AXT)

<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
Jaye F. Dyer............................... 7,659,609 124,659
Karol D. Emmerich.......................... 7,662,609 121,659
Luella G. Goldberg......................... 7,664,609 119,659
George Latimer............................. 7,664,233 120,035
</TABLE>

38
<PAGE>
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SHAREHOLDER UPDATE

American Municipal Term Trust Inc. II (BXT)

<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
Jaye F. Dyer............................... 6,623,346 127,447
Karol D. Emmerich.......................... 6,625,846 126,315
Luella G. Goldberg......................... 6,620,289 126,315
George Latimer............................. 6,624,046 127,002
</TABLE>

American Municipal Term Trust Inc. III (CXT)

<TABLE>
<CAPTION>
Shares Shares Withholding
Voted "For" Authority to Vote
------------ ------------------
<S> <C> <C>
Jaye F. Dyer............................... 4,888,892 106,843
Karol D. Emmerich.......................... 4,888,892 106,843
Luella G. Goldberg......................... 4,888,892 106,843
George Latimer............................. 4,888,892 106,843
</TABLE>

3. The funds' preferred and common shareholders, voting as a class, ratified
the selection by a majority of the independent members of the funds' Board
of Directors of KPMG Peat Marwick LLP as the independent public accountants
for the fund for the fiscal year ending December 31, 1995. The following
votes were cast regarding this matter:

<TABLE>
<CAPTION>
Shares Shares
Voted "For" Voted "Against" Abstentions
------------ ---------------- -----------
<S> <C> <C> <C>
AXT................................. 7,645,713 31,521 108,034
BXT................................. 6,623,379 23,906 103,375
CXT................................. 4,867,530 33,109 95,094
</TABLE>

SHARE REPURCHASE PROGRAM
Your fund's board of directors has voted to discontinue the share repurchase
program, effective February 6, 1996. This program had enabled the fund to 'buy
back' shares of its common stock in the open market.

TERMS AND CONDITIONS OF THE TERM TRUST DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in your fund's Term Trust
Dividend Reinvestment Plan. It is a convenient and economical way to buy
additional shares of the fund by automatically reinvesting dividends and capital
gains. The plan is administered by Investors Fiduciary Trust Company (IFTC), the
plan agent.

39
<PAGE>
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SHAREHOLDER UPDATE

ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of distributions will begin with
the next distribution paid, provided your enrollment card is received at least
10 days before the record date for that distribution.

If your shares are in certificate form, you may join the plan directly and have
your distributions reinvested in additional shares of the fund. To enroll in
this plan, call IFTC at 1-800-543-1627. If your shares are registered in your
brokerage firm's name or another name, ask the holder of your shares how you may
participate.

Banks, brokers or nominees, on behalf of their beneficial owners who wish to
reinvest dividend and capital gain distributions, may participate in the plan by
informing IFTC at least 10 days before each share's dividend and/or capital
gains distribution.

PLAN ADMINISTRATION
Beginning no more than five business days before the dividend payment date, IFTC
will buy shares of the fund on the New York Stock Exchange or elsewhere on the
open market.

The fund will not issue any new shares in connection with the plan. All
reinvestments will be at a market price plus a pro rata share of any brokerage
commissions, which may be more or less than the fund's net asset value per
share. The number of shares allocated to you is determined by dividing the
amount of the dividend or distribution by the applicable price per share.

There is no direct charge for reinvestment of dividends and capital gains, since
IFTC fees are paid for by the fund. However, each participant pays a pro rata
portion of the brokerage commissions. Brokerage charges are expected to be lower
than those for individual transactions because shares are purchased for all
participants in blocks. As long as you continue to participate in the plan,
distributions paid on the shares in your term trust account will be reinvested.

IFTC maintains accounts for plan participants holding shares in certificate
form. You will receive a monthly statement detailing total dividend and capital
gain distributions, date of investment, shares acquired, price per share, and
total shares held in your account, both certificate-form shares and unissued
shares acquired through the plan.

TAX INFORMATION
Distributions reinvested in additional shares of the fund are subject to income
tax, just as they would be if received in cash. In general, the tax basis of
such shares will equal

40
<PAGE>
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SHAREHOLDER UPDATE
the price paid by IFTC plus the pro rata share of any commission. Each January,
you will receive IRS Form 1099 regarding the federal tax status of the prior
year's distributions.

PLAN WITHDRAWAL
If you hold your shares in certificate form, you may terminate your
participation in the plan at any time by giving written notice to IFTC. If your
shares are registered in your brokerage firm's name, you may terminate your
participation via verbal or written instructions to your investment
professional. Written instructions should include your name and address as they
appear on the certificate or account.

If notice is received at least 10 days before the record date, all future
distributions will be paid directly to the shareholder of record.

If your shares are in certificate form and you discontinue your participation in
the plan, you (or your nominee) will receive an additional certificate for all
full shares and a check for any fractional shares in your account.

PLAN AMENDMENT/TERMINATION
The funds reserve the right to amend or terminate the plan. Should the plan be
terminated, participants will be notified in writing at least 90 days before the
record date for the next dividend or distribution. The plan may also be amended
or terminated by IFTC with at least 90 days' written notice to participants in
the plan.

Any questions about the plan should be directed to your investment professional
or to Investors Fiduciary Trust Company, P.O. Box 419432, Kansas City, Missouri
64141, 1-800-543-1627.

EFFECTIVE DURATION
Effective duration estimates the interest rate risk of a security, in other
words how much the value of the security is expected to change with a given
change in interest rates. The longer a security's effective duration, the more
sensitive its price is to changes in interest rates. For example, if interest
rates were to increase by 1%, the market value of a bond with an effective
duration of five years would decrease by about 5%, with all other factors being
constant.

It is important to understand that, while a valuable measure, effective duration
is based upon certain assumptions and has several limitations. It is most
effective as a measure of interest rate risk when interest rate changes are
small, rapid and occur equally across all the different points of the yield
curve. In addition, effective duration is difficult to calculate precisely
especially in the case of a bond that is callable prior to maturity.

41
<PAGE>
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DIRECTORS AND OFFICERS

DIRECTORS David T. Bennett, CHAIRMAN, HIGHLAND HOMES,
INC., USL PRODUCTS INC., KIEFER BUILT,
INC., OF COUNSEL, GRAY, PLANT, MOOTY,
MOOTY & BENNETT, P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT
COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY
COMPANIES INC.,
PIPER CAPITAL MANAGEMENT INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE
GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL,
RELIASTAR FINANCIAL CORP., HORMEL FOODS
CORP.
George Latimer, CHIEF EXECUTIVE OFFICER,
NATIONAL EQUITY FUND, INC.

OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
Ronald R. Reuss, PRESIDENT
Douglas J. White, EXECUTIVE/SENIOR VICE
PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT AND
TREASURER
Molly J. Destro, VICE PRESIDENT
Susan S. Miley, SECRETARY

INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402

CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 WEST TENTH STREET, KANSAS CITY, MO
64105-1716

LEGAL COUNSEL Dorsey & Whitney P.L.L.P.
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402

INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 4200 NORWEST CENTER, MINNEAPOLIS, MN 55402

42
<PAGE>

PIPER CAPITAL
MANAGEMENT

PIPER CAPITAL MANAGEMENT INCORPORATED Bulk Rate
222 SOUTH NINTH STREET U.S. Postage
MINNEAPOLIS, MN 55402-3804 PAID
Permit No. 3008
Mpls., MN

PIPER JAFFRAY INC., FUND SPONSOR AND NASD MEMBER.
Recycle THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
Logo 100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.

In an effort to reduce costs to our shareholders, we have
implemented a process to reduce duplicate mailings of
the fund's annual and semiannual reports. This
householding process should allow us to mail one report
to each address where one or more registered shareholders
with the same last name reside. If you would like to have
additional reports mailed to your address, please call our
Shareholder Services area at 1 800 866-7778, or mail your
request to:

Corporate Communications
Piper Capital Management
222 South Ninth Street
Minneapolis, MN 55402-3804

080-96 XXT 01 2/96

STAPLES