<PAGE>
American Municipal Term Trusts - 1996 Annual Report
1996 Annual Report
AMERICAN
MUNICIPAL
TERM
TRUSTS
AXT
BXT
CXT
[LOGO]
<PAGE>
[LOGO]
CONTENTS
President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . 8
Investments in Securities
AXT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
BXT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
CXT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . .35
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . .36
Shareholder Update . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . .42
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
AMERICAN MUNICIPAL TERM TRUSTS
- ------------------------------
PRIMARY INVESTMENTS
High-quality municipal obligations including municipal zero-coupon securities.
FUND OBJECTIVE
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.
The funds' income may be subject to state or local tax and the federal
alternative minimum tax. Investors should consult their tax advisers. As with
other investment companies, there can be no assurance that each fund will
achieve its objective.
<PAGE>
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
[PHOTO]
William H. Ellis
President
Piper Capital
Management
- --------------------------------------------------------------------------------
February 18, 1997
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
Check out the best sellers' list at your local bookstore. You'll notice a
number of books about companies that have gone through dramatic changes in
recent years. Surprising? Not really. Every company experiences change
periodically. And we're no exception. At Piper Capital Management, we've made
significant changes to enhance our ability to achieve consistent, competitive
performance and provide a higher level of quality service.
We've upgraded our toll-free telephone system so you spend less time
listening to voice response and more time receiving information you can put to
use. Also, when calling our toll-free number, you now have the option to listen
to our portfolio managers talk about their current investment strategies. Find
out the many ways to reach us on the back page of this report.
Take a close look at the annual report in your hand. We've made our
portfolio managers' commentaries simpler and more inviting, and added a glossary
of terms at the back to help you understand commonly used financial terms.
Whenever you see this symbol***, it indicates a term defined in the glossary.
You'll hear the word "team" more often when we talk about our portfolio
managers. We've enhanced our approach, allowing managers to interact more
frequently and share their best ideas to improve the investment capabilities of
Piper Capital.
The recent changes we have made represent a new way of doing business at
Piper Capital - an approach we believe will enable us to establish an
unparalleled reputation for prudent investing and high-quality service.
That said, we look forward to serving your future financial needs and
exceeding your expectations in every way we can. Thank you for your investment.
Sincerely,
/s/ William H. Ellis
William H. Ellis
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1996 Annual Report 1 American Municipal Term Trusts
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
- -------------------------------------------------------------------------------
Based on net asset value for the period ended December 31, 1996.
- -------------------------------------------------------------------------------
ONE YEAR FIVE YEAR SINCE INCEPTION
AMERICAN MUNICIPAL TERM TRUST
(AXT, inception 3/27/91).......... 3.47% 9.14% 9.90%
AMERICAN MUNICIPAL TERM TRUST II
(BXT, inception 9/26/91).......... 3.33% 9.39% 9.80%
AMERICAN MUNICIPAL TERM TRUST III
(CXT, inception 11/27/92)......... 3.65% N/A 9.43%
Average annualized total return figures are through December 31, 1996, are based
on the change in net asset value (NAV) and reflect the reinvestment of
distributions but not 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, five-year and since inception periods ended December 31, 1996,
were 9.06%, 8.62% and 8.47% for AXT and 7.66%, 8.03% and 7.57% for BXT. The
one-year and since inception figures were 8.38% and 6.73% for CXT. These figures
also assume reinvested distributions and do not reflect sales charges.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. 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.
- -------------------------------------------------------------------------------
1996 Annual Report 2 American Municipal Term Trusts
<PAGE>
AMERICAN MUNICIPAL TERM TRUSTS
- --------------------------------------------------------------------------------
[PHOTO]
DOUG WHITE, CFA,
shares responsibility
for the management
of the American
Municipal Term
Trusts. He has 14
years of financial
experience.
- -------------------------------------------------------------------------------
February 18, 1997
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
WE WERE PLEASED WITH THE PERFORMANCE OF THE AMERICAN MUNICIPAL TERM TRUSTS (AXT,
BXT AND CXT) DURING FISCAL YEAR 1996. They continued to earn a high level of
current income, and their net asset values remained above the investment
objective of $10 per share at termination, despite a slight decrease during the
year due to a rise in interest rates. The charts below and on the following page
will help you evaluate the funds' performance. They show each fund's net asset
value and the history of distributions paid by each fund since inception. On
December 31, 1996, the net asset values for AXT, BXT and CXT were $11.52, $11.43
and $10.92, respectively. In addition, the funds maintained their monthly common
stock distributions of $0.0542, $0.0517 and $0.0475, respectively, which have
been unchanged since each fund's inception.
- --------------------------------------------------------------------------------
NET ASSET VALUE SUMMARY PER SHARE
- --------------------------------------------------------------------------------
Common Shares AXT BXT CXT
Inception Inception Inception
3/27/91 9/26/91 11/27/92
Initial Offering Price $10.00 $10.00 $10.00
Initial Offering and Underwriting Expenses
(Common and Preferred Stock) - $0.67 - $0.66 - $0.67
Accumulated Realized Gains or Losses At
12/31/96 + $0.03 +$0.00 +$0.01
- -------------------------------------------------------------------------------
SUBTOTAL $9.36 $9.34 $9.34
Undistributed Net Investment Income
(Dividend Reserve) At 12/31/96 + $0.63 + $0.60 + $0.38
Unrealized Appreciation on Investments At
12/31/96 + $1.53 + $1.49 + $1.20
- -------------------------------------------------------------------------------
NET ASSET VALUE ON 12/31/96 $11.52 $11.43 $10.92
- -------------------------------------------------------------------------------
1996 Annual Report 3 American Municipal Term Trusts
<PAGE>
AMERICAN MUNICIPAL TERM TRUSTS (continued)
- --------------------------------------------------------------------------------
[PHOTO]
Ron Reuss, ISFA,
shares responsibility for the management of the American Municipal Term Trusts.
He has 28 years of financial experience.
- -------------------------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996, THE NET ASSET VALUE TOTAL RETURNS FOR
AXT, BXT AND CXT WERE 3.47%, 3.33% AND 3.65%, RESPECTIVELY. Based on market
price, the funds' total returns for the year were 9.06%, 7.66% and 8.38%.*
Beginning with this annual report, we have stopped comparing the funds'
performance to a market benchmark, *** because our primary goal is to meet the
funds' investment objectives of providing high current income exempt from
regular federal income tax and returning $10 per share to investors upon the
funds' termination dates. As the funds approach their termination dates, we will
continue to shorten their average maturities, so a benchmark comparison becomes
less and less useful in measuring results.
THROUGHOUT THE YEAR, BONDS REACTED TO VOLATILITY IN INTEREST RATES. In the first
half of 1996, bonds generally had negative returns because of a rise in interest
rates. However, municipal bonds, including those in the American Municipal Term
Trusts, performed better than most of their taxable counterparts for three
principal reasons: subsiding concerns about tax reform, a decreased supply of
new issues, and favorable after-tax yields for municipal bonds in comparison to
taxable bonds. This favorable performance continued for most of the year, before
making a
* All returns include reinvested distributions, but not sales charges. 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.
- --------------------------------------------------------------------------------
DISTRIBUTION HISTORY
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AXT BXT CXT
Inception Inception Inception
3/27/91 9/26/91 11/27/92
<S> <C> <C> <C>
Total Monthly Income Distributions Through 12/31/96
Common Shareholders $3.74 $3.26 $2.33
Preferred Shareholders (On a Common Share Basis) $0.93 $0.82 $0.63
Total Capital Gains Distributions to Common
Shareholders Through 12/31/96 $0.05 $0.04 $0.00
</TABLE>
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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1996 Annual Report 4 American Municipal Term Trusts
<PAGE>
AMERICAN MUNICIPAL TERM TRUSTS (continued)
- --------------------------------------------------------------------------------
sharp reversal in October when a substantial drop in yields during September
prompted municipal issuers to flood the market with new bonds, which forced
prices down. Rates fell (and prices rose) in November, but then mixed signals
about inflation triggered rising municipal interest rates from early December
through year-end, with a corresponding drop in municipal bond prices.
IN THIS ENVIRONMENT, WE CONTINUED OUR STRATEGY OF SHORTENING EACH FUND'S AVERAGE
MATURITY AS IT MOVES TOWARD ITS SCHEDULED TERMINATION DATE. We do this by
reducing holdings in longer-maturity bonds and adding securities with maturities
near the funds' termination dates. (See chart below.) These steps reduce
interest rate risk *** and help move the funds toward their objective of
returning $10 per share at maturity. The closer a bond's maturity date 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 rate fluctuations at the time of termination. Please note the security
may still be subject to credit risk. Also, income on shorter-maturity bonds may
be lower; as a result, the funds' income levels may decrease as they near
termination. We continue to monitor the funds' progress closely as they move
toward their termination dates and make adjustments as appropriate.
DUE TO THIS MATURITY-SHORTENING ACTIVITY OVER THE PAST YEAR, THE FUNDS REALIZED
SMALL NET LONG-TERM CAPITAL GAINS, WHICH ARE TAXABLE TO SHAREHOLDERS. Because
interest rates are now lower than when the
PERCENTAGE OF BONDS MATURING WITHIN A YEAR OF TERMINATION
- --------------------------------------------------------------------------------
The graph below illustrates the percentage of bonds in each fund with maturity
dates within a year of the funds' termination dates.
AXT BXT CXT
Inception Inception Inception
3/27/91 9/26/91 11/27/92
At the fund's inception 0% 0% 0%
As of December 31, 1996 58% 48% 16%
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1996 Annual Report 5 American Municipal Term Trusts
<PAGE>
American Municipal Term Trusts (continued)
- --------------------------------------------------------------------------------
funds were originally structured, most holdings are currently at unrealized
gains. Therefore, unless interest rates on municipal bonds rise (and, therefore,
prices fall) before or during any future trading, the funds may incur capital
gains on the sales transactions and may pay out additional capital gains. This
maturity-shortening activity also slightly reduced the funds' income, though the
funds continue to earn more than their monthly common and preferred stock ***
dividends and add to their dividend reserves. (Please remember these reserves
may be reduced or eliminated over time to pay dividends.)
THE SUPPLY OF NEW MUNICIPAL BONDS IS EXPECTED TO INCREASE 8%-12% IN 1997 VERSUS
1996, TO APPROXIMATELY $193 BILLION. If the current modest pace of economic
growth and comparatively low inflation continues, we would expect a relatively
benign interest rate environment in 1997. In this scenario, the funds should
remain attractive vehicles for investors seeking income free from regular
federal income tax. As always, we will apply our proprietary credit analysis to
existing holdings and new purchases as we work toward meeting the funds'
objectives.
We appreciate your investment in the American Municipal Term Trusts. We look
forward to continuing our relationship with you and helping you meet your
investment goals in the new fiscal year and beyond.
Sincerely,
/s/ Douglas J. White
Douglas J. White
Portfolio Manager
/s/ Ronald R. Reuss
Ronald R. Reuss
Portfolio Manager
***-This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- -------------------------------------------------------------------------------
1996 Annual Report 6 American Municipal Term Trusts
<PAGE>
American Municipal Term Trusts (continued)
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITIONS
- --------------------------------------------------------------------------------
As a percentage of total assets on December 31, 1996.
American Municipal Term Trust (AXT)
Water/Sewer/Polution Control Revenue................. 11%
Leasing Revenue...................................... 3%
Education Revenue.................................... 6%
Other Assets......................................... 4%
Sales/Excise Tax Revenue............................. 14%
Hospital Revenue..................................... 18%
Industrial Development Revenue....................... 4%
Airport Revenue...................................... 1%
General Obligations.................................. 12%
Housing Revenue...................................... 1%
Electric Revenue..................................... 26%
American Municipal Term Trust II(BXT)
Water/Sewer/Pollution Control Revenue................ 10%
Leasing Revenue...................................... 5%
Education Revenue.................................... 8%
Other Assets......................................... 3%
Multiple Utility Revenue............................. 1%
General Obligations.................................. 12%
Hospital Revenue..................................... 23%
Industrial Development Revenue....................... 5%
Sales/Excise Tax Revenue............................. 6%
Airport Revenue...................................... 1%
Housing Revenue...................................... 2%
Miscellaneous Revenue................................ 7%
Electric Revenue..................................... 17%
American Municipal Term Trust III(CXT)
Water/Sewer/Pollution Control Revenue................ 21%
Education Revenue.................................... 3%
Other Assets......................................... 3%
Sales/Excise Tax Revenue............................. 2%
Leasing Revenue...................................... 13%
Hospital Revenue..................................... 20%
Housing Revenue...................................... 4%
Miscellaneous Revenue................................ 3%
General Obligations.................................. 13%
Multiple Utility Revenue............................. 4%
Electric Revenue..................................... 14%
- --------------------------------------------------------------------------------
1996 Annual Report 7 American Municipal Term Trusts
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1996
..................................................................
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MUNICIPAL MUNICIPAL
MUNICIPAL TERM TRUST TERM TRUST
TERM TRUST II III
------------- ------------ -------------
<S> <C> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) ........ $139,732,926 $121,138,440 $ 83,700,299
Cash in bank on demand deposit ............................. 92,667 85,520 186,512
Accrued interest receivable ................................ 2,491,046 1,933,907 1,172,741
------------- ------------ -------------
Total assets ............................................. 142,316,639 123,157,867 85,059,552
------------- ------------ -------------
LIABILITIES:
Common stock dividends payable ($0.0542; $0.0517 and $0.0475
per share, respectively) ................................. 458,261 380,296 251,750
Preferred stock dividends payable (note 3) ................. 28,993 3,801 7,288
Payable for investment securities purchased on a when-issued
basis .................................................... 1,890,959 1,626,937 305,047
Accrued investment management fee .......................... 29,702 25,704 17,909
Accrued remarketing agent fee .............................. 7,970 5,396 2,401
Accrued administrative fee ................................. 17,821 15,422 10,746
------------- ------------ -------------
Total liabilities ........................................ 2,433,706 2,057,556 595,141
------------- ------------ -------------
Net assets applicable to outstanding capital stock ......... $139,882,933 $121,100,311 $ 84,464,411
------------- ------------ -------------
------------- ------------ -------------
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 ........................ 5,318,473 4,440,413 2,008,961
Accumulated net realized gain on investments ............... 256,436 -- 78,074
Unrealized appreciation of investments ..................... 12,874,320 10,882,108 6,292,956
------------- ------------ -------------
Total - representing net assets applicable to outstanding
common stock ........................................... 97,382,933 84,100,311 57,864,411
------------- ------------ -------------
Total net assets ......................................... $139,882,933 $121,100,311 $ 84,464,411
------------- ------------ -------------
------------- ------------ -------------
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) ........ $ 11.52 $ 11.43 $ 10.92
------------- ------------ -------------
------------- ------------ -------------
* Investments in securities at identified cost ............. $126,858,606 $110,256,332 $ 77,407,343
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1996 Annual Report 8 American Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Year Ended December 31, 1996
..................................................................
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MUNICIPAL MUNICIPAL
MUNICIPAL TERM TRUST TERM TRUST
TERM TRUST II III
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Interest ................................................... $ 8,725,957 $ 7,384,700 $ 4,963,958
------------ ------------ ------------
EXPENSES (NOTE 5):
Investment management fee .................................. 350,792 302,212 209,135
Administrative fee ......................................... 210,475 181,327 125,481
Remarketing agent fee ...................................... 108,021 94,043 67,609
Custodian and accounting fees .............................. 78,477 67,544 52,845
Transfer agent fees ........................................ 10,654 9,341 6,665
Reports to shareholders .................................... 28,375 21,647 20,917
Directors' fees ............................................ 11,226 8,812 8,812
Audit and legal fees ....................................... 52,331 42,724 42,688
Other expenses ............................................. 41,077 40,796 39,674
------------ ------------ ------------
Total expenses ........................................... 891,428 768,446 573,826
Less expenses paid indirectly .............................. (5,571) (5,239) (6,534)
------------ ------------ ------------
Total net expenses ....................................... 885,857 763,207 567,292
------------ ------------ ------------
Net investment income .................................... 7,840,100 6,621,493 4,396,666
------------ ------------ ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 912,314 298,902 230,484
Net change in unrealized appreciation or depreciation of
investments .............................................. (3,877,256) (2,841,031) (1,679,008)
------------ ------------ ------------
Net loss on investments .................................. (2,964,942) (2,542,129) (1,448,524)
------------ ------------ ------------
Net increase in net assets resulting from operations ..... $ 4,875,158 $ 4,079,364 $ 2,948,142
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1996 Annual Report 9 American Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL
TERM TRUST
--------------------------
Year Ended Year Ended
12/31/96 12/31/95
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 7,840,100 $ 7,934,990
Net realized gain (loss) on investments .................... 912,314 (51,340)
Net change in unrealized appreciation or depreciation of
investments .............................................. (3,877,256) 10,386,266
------------ -----------
Net increase in net assets resulting from operations ..... 4,875,158 18,269,916
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (5,499,132) (5,499,132)
Preferred stock dividends ................................ (1,410,067) (1,690,429)
From net realized gains:
Common stock dividends ................................... (448,115) --
Preferred stock dividends ................................ (135,256) --
------------ -----------
Total distributions .................................... (7,492,570) (7,189,561)
------------ -----------
Total increase (decrease) in net assets .............. (2,617,412) 11,080,355
Net assets at beginning of year ............................ 142,500,345 131,419,990
------------ -----------
Net assets at end of year .................................. $139,882,933 $142,500,345
------------ -----------
------------ -----------
Undistributed net investment income ........................ $ 5,318,473 $ 4,387,572
------------ -----------
------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1996 Annual Report 10 American Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL
TERM TRUST II
--------------------------
Year Ended Year Ended
12/31/96 12/31/95
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 6,621,493 $ 6,648,396
Net realized gain on investments ........................... 298,902 118,989
Net change in unrealized appreciation or depreciation of
investments .............................................. (2,841,031) 9,879,162
------------ -----------
Net increase in net assets resulting from operations ..... 4,079,364 16,646,547
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (4,563,551) (4,563,551)
Preferred stock dividends ................................ (1,247,224) (1,455,027)
From net realized gains:
Common stock dividends ................................... (227,294) (44,282)
Preferred stock dividends ................................ (71,619) (14,060)
------------ -----------
Total distributions .................................... (6,109,688) (6,076,920)
------------ -----------
Total increase (decrease) in net assets .............. (2,030,324) 10,569,627
Net assets at beginning of year ............................ 123,130,635 112,561,008
------------ -----------
Net assets at end of year .................................. $121,100,311 $123,130,635
------------ -----------
------------ -----------
Undistributed net investment income ........................ $ 4,440,413 $ 3,629,706
------------ -----------
------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1996 Annual Report 11 American Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL
TERM TRUST III
--------------------------
Year Ended Year Ended
12/31/96 12/31/95
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 4,396,666 $ 4,397,900
Net realized gain (loss) on investments .................... 230,484 (5,681)
Net change in unrealized appreciation or depreciation of
investments .............................................. (1,679,008) 9,213,825
------------ -----------
Net increase in net assets resulting from operations ..... 2,948,142 13,606,044
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (3,021,000) (3,021,000)
Preferred stock dividends ................................ (930,034) (1,030,403)
From net realized gains:
Common stock dividends ................................... (15,900) --
Preferred stock dividends ................................ (5,298) --
------------ -----------
Total distributions .................................... (3,972,232) (4,051,403)
------------ -----------
Total increase (decrease) in net assets .............. (1,024,090) 9,554,641
Net assets at beginning of year ............................ 85,488,501 75,933,860
------------ -----------
Net assets at end of year .................................. $84,464,411 $85,488,501
------------ -----------
------------ -----------
Undistributed net investment income ........................ $ 2,008,961 $ 1,563,329
------------ -----------
------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1996 Annual Report 12 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements
- ----------------------------------------
(1) ORGANIZATION
................................
American Municipal Term Trust Inc., American Municipal Term Trust
Inc. II, and American Municipal Term Trust Inc. III (the funds)
are registered under the Investment Company Act of 1940 (as
amended) as diversified, closed-end management investment
companies. American Municipal Term Trust Inc., American Municipal
Term Trust Inc. II, and American Municipal Term Trust Inc. 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. The funds invest
primarily in high-quality municipal obligations including
municipal zero-coupon securities. Fund shares are listed on the
New York Stock Exchange under the symbols AXT, BXT and CXT,
respectively.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
The values of certain fixed income securities will be provided by
an independent pricing service, which determines these valuations
at a time earlier than the close of the New York Stock Exchange.
Fixed income securities for which prices are not available from
an independent pricing service but where an active market exists
will be valued using market quotations obtained from one or more
dealers that make markets in the securities.
Occasionally, events affecting the value of such securities may
occur between the time valuations are determined and the close of
the New York Stock Exchange. If events materially affecting the
value of such securities occur, if the fund's management
determines for any other reason that valuations provided by the
pricing service or dealer are inaccurate or when market
quotations are not readily available, securities will be valued
at their fair value according to procedures decided upon 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.
- ---------------------------------------------------------------------
1996 Annual Report 13 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
Financial futures contracts are valued at the last settlement
price established each day by the board of trade or exchange on
which they are traded. Such valuations are determined using
independent pricing services or prices quoted by independent
brokers.
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
For hedging purposes, the funds may buy and sell financial
futures contracts and related options. Risks of entering into
futures contracts and related options include the possibility
that 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 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 when-issued or forward-commitment 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 fluctuation and may increase or decrease in value prior to
their delivery. The funds segregate, 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-
- ---------------------------------------------------------------------
1996 Annual Report 14 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
commitment basis may increase the volatility of the funds' net
asset values if the funds make such purchases while remaining
substantially fully invested. As of December 31, 1996, American
Municipal Term Trust Inc., American Municipal Term Trust Inc. II,
and American Municipal Term Trust Inc. III had entered into
outstanding when-issued or forward commitments of $1,890,959,
$1,626,937 and $305,047, respectively.
FEDERAL TAXES
Each fund is treated separately for federal income tax purposes.
Each fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and not
be subject to federal income tax. Therefore, no income tax
provision is required. The funds also intend to distribute their
taxable net investment income and realized gains, if any, in
amounts sufficient 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. The character of distributions made
during the year from net investment income or net realized gains
may differ from its 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.
On the statements of assets and liabilities, as a result of
permanent book-to-tax differences, reclassification adjustments
have been made to decrease accumulated net realized loss on
investments and decrease undistributed net investment income by
$11 for American Municipal Term Trust Inc. II.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly for
common shareholders and weekly for preferred shareholders. Common
stock distributions are recorded as of the close of
- ---------------------------------------------------------------------
1996 Annual Report 15 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
business on the ex-dividend date and preferred stock dividends
are accrued daily. Realized capital gains, if any, will be
distributed at least annually. 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
in the financial statements. Actual results could differ from
these estimates.
(3) REMARKETED
PREFERRED
STOCK
................................
American Municipal Term Trust Inc., American Municipal Term Trust
Inc. II, and American Municipal Term Trust Inc. III have issued
and, as of December 31, 1996, have outstanding 1,700 shares,
1,480 shares, and 1,064 shares, respectively, of remarketed
preferred stock (RP) with a liquidation preference of $25,000 per
share for each fund. The dividend rate on the RP is adjusted
every seven days as determined by the remarketing agent. On
December 31, 1996, the dividend rates were 4.15%, 3.75% and 5.00%
for American Municipal Term Trust Inc., American Municipal Term
Trust Inc. II, and American Municipal Term Trust Inc. III,
respectively.
RP is a registered trademark of Merrill Lynch & Company.
(4) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the year
ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MUNICIPAL MUNICIPAL
MUNICIPAL TERM TRUST TERM TRUST
TERM TRUST II III
------------ ----------- -----------
<S> <C> <C> <C>
Purchases ................................... $ 12,531,799 $8,753,105 $2,731,669
Proceeds from sales ......................... $ 12,296,395 $6,833,287 $3,093,680
</TABLE>
- ---------------------------------------------------------------------
1996 Annual Report 16 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
For the year ended December 31, 1996, no brokerage commissions
were paid to Piper Jaffray Inc., an affiliated broker.
(5) EXPENSES
................................
The funds have entered into the following agreements with Piper
Capital Management Incorporated (the adviser and administrator):
The investment advisory agreement provides the adviser with a
monthly investment management fee equal to an 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
provides investment advice and, in general, conducts 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 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 funds' average amount of RP outstanding. For its fee, the
remarketing agent will remarket shares of RP 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 investment management, 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; taxes and
other miscellaneous expenses.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on miscellaneous cash balances maintained by the
funds.
- ---------------------------------------------------------------------
1996 Annual Report 17 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
AMERICAN MUNICIPAL TERM TRUST
<TABLE>
<CAPTION>
Fiscal year ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning of
period .................................... $ 11.83 $ 10.52 $ 11.89 $ 10.57 $ 9.99
------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.93 0.94 0.93 0.92 0.92
Net realized and unrealized gains (losses)
on investments .......................... (0.35) 1.22 (1.50) 1.17 0.47
------- ------- ------- ------- -------
Total from operations ................... 0.58 2.16 (0.57) 2.09 1.39
------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income
Paid to common shareholders ............. (0.65) (0.65) (0.65) (0.65) (0.65)
Paid to preferred shareholders .......... (0.17) (0.20) (0.15) (0.12) (0.16)
From net realized gains
Paid to common shareholders ............. (0.05) -- -- -- --
Paid to preferred shareholders .......... (0.02) -- -- -- --
------- ------- ------- ------- -------
Total distributions to shareholders ..... (0.89) (0.85) (0.80) (0.77) (0.81)
------- ------- ------- ------- -------
Net asset value, common stock, end of
period .................................... $ 11.52 $ 11.83 $ 10.52 $ 11.89 $ 10.57
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Market value, common stock, end of period ... $ 11.25 $ 11.00 $ 10.00 $ 10.88 $ 10.50
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 3.47% 18.93% (6.34%) 18.98% 12.68%
Total return, common stock, market value
(b) ....................................... 9.06% 16.91% (2.11%) 9.83% 10.26%
Net assets at end of period (in millions) ... $ 140 $ 143 $ 131 $ 143 $ 132
Ratio of expenses to total average weekly net
assets (c) ................................ 0.64% 0.61% 0.58% 0.59% 0.62%
Ratio of expenses to average weekly net
assets applicable to common shares (c) .... 0.91% 0.88% 0.84% 0.85% 0.92%
Ratio of net investment income to total
average weekly net assets ................. 5.59% 5.72% 5.80% 5.65% 6.03%
Ratio of net investment income to average
weekly net assets applicable to common
shares (d) ................................ 6.57% 6.53% 7.04% 7.11% 7.44%
Portfolio turnover rate (excluding short-term
securities) ............................... 9% 1% 1% 2% 4%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 43 $ 43 $ 43 $ 43 $ 43
Asset coverage ratio (e) .................... 329% 335% 309% 336% 310%
</TABLE>
(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A COMMON SHARE DURING THE PERIOD
AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(B) 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 REINVESTMENT PLAN.
(C) BEGINNING IN FISCAL 1995, THE EXPENSE RATIOS REFLECT THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
(D) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY AVERAGE WEEKLY NET
ASSETS APPLICABLE TO COMMON SHARES.
(E) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
- ---------------------------------------------------------------------
1996 Annual Report 18 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
AMERICAN MUNICIPAL TERM TRUST II
<TABLE>
<CAPTION>
Fiscal year ended December 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning of
period .................................... $ 11.71 $ 10.27 $ 11.66 $ 10.26 $ 9.71
------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.90 0.90 0.90 0.89 0.89
Net realized and unrealized gains (losses)
on investments .......................... (0.35) 1.37 (1.52) 1.25 0.44
------- ------- ------- ------- -------
Total from operations ................... 0.55 2.27 (0.62) 2.14 1.33
------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income
Paid to common shareholders ............. (0.62) (0.62) (0.62) (0.62) (0.62)
Paid to preferred shareholders .......... (0.17) (0.20) (0.15) (0.12) (0.16)
From net realized gains
Paid to common shareholders ............. (0.03) (0.01) -- -- --
Paid to preferred shareholders .......... (0.01) -- -- -- --
------- ------- ------- ------- -------
Total distributions to shareholders ..... (0.83) (0.83) (0.77) (0.74) (0.78)
------- ------- ------- ------- -------
Net asset value, common stock, end of
period .................................... $ 11.43 $ 11.71 $ 10.27 $ 11.66 $ 10.26
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Market value, common stock, end of period ... $ 10.75 $ 10.63 $ 9.63 $ 10.75 $ 10.38
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 3.33% 20.48% (6.80%) 20.03% 12.41%
Total return, common stock, market value
(b) ....................................... 7.66% 17.28% (4.83%) 9.74% 11.59%
Net assets at end of period (in millions) ... $ 121 $ 123 $ 113 $ 123 $ 112
Ratio of expenses to total average weekly net
assets (c) ................................ 0.64% 0.62% 0.60% 0.60% 0.64%
Ratio of expenses to average weekly net
assets applicable to common shares (c) .... 0.92% 0.90% 0.88% 0.87% 0.97%
Ratio of net investment income to total
average weekly net assets ................. 5.48% 5.58% 5.72% 5.51% 5.92%
Ratio of net investment income to average
weekly net assets applicable to common
shares (d) ................................ 6.41% 6.35% 7.01% 6.89% 7.38%
Portfolio turnover rate (excluding short-term
securities) ............................... 6% 3% 0% 2% 11%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 37 $ 37 $ 37 $ 37 $ 37
Asset coverage ratio (e) .................... 327% 333% 304% 332% 304%
</TABLE>
(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A COMMON SHARE DURING THE PERIOD
AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(B) 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 REINVESTMENT PLAN.
(C) BEGINNING IN FISCAL 1995, THE EXPENSE RATIOS REFLECT THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
(D) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY AVERAGE WEEKLY NET
ASSETS APPLICABLE TO COMMON SHARES.
(E) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
- ---------------------------------------------------------------------
1996 Annual Report 19 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
AMERICAN MUNICIPAL TERM TRUST III
<TABLE>
<CAPTION>
Fiscal year ended December 31, Period
------------------------------------------- Ended
1996 1995 1994 1993 12/31/92(f)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning of
period .................................... $ 11.11 $ 9.31 $ 10.95 $ 9.57 $ 9.44
------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.83 0.83 0.83 0.81 0.04
Net realized and unrealized gains (losses)
on investments .......................... (0.27) 1.73 (1.75) 1.36 0.14
------- ------- ------- ------- -------
Total from operations ................... 0.56 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) (0.57) (0.05)
Paid to preferred shareholders .......... (0.18) (0.19) (0.15) (0.11) --
------- ------- ------- ------- -------
Total distributions to shareholders ..... (0.75) (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 .................................... $ 10.92 $ 11.11 $ 9.31 $ 10.95 $ 9.57
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Market value, common stock, end of period ... $ 10.38 $ 10.13 $ 8.50 $ 10.13 $ 9.88
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 3.65% 25.93% (10.04%) 20.74% 1.88%
Total return, common stock, market value
(b) ....................................... 8.38% 26.32% (10.93%) 8.35% (0.78%)
Net assets at end of period (in millions) ... $ 84 $ 85 $ 76 $ 85 $ 51
Ratio of expenses to total average weekly net
assets (c) ................................ 0.69% 0.66% 0.64% 0.61% 0.60%(g)
Ratio of expenses to average weekly net
assets applicable to common shares (c) .... 1.01% 0.98% 0.96% 0.91% 0.60%(g)
Ratio of net investment income to total
average weekly net assets ................. 5.26% 5.38% 5.53% 5.34% 4.90%(g)
Ratio of net investment income to average
weekly net assets applicable to common
shares (d) ................................ 6.08% 6.05% 6.88% 6.85% 4.90%(g)
Portfolio turnover rate (excluding short-term
securities) ............................... 3% 5% 3% 1% 0%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 27 $ 27 $ 27 $ 27 $ --
Asset coverage ratio (e) .................... 318% 321% 285% 318% --
</TABLE>
(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A COMMON SHARE DURING THE PERIOD
AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(B) 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 REINVESTMENT PLAN.
(C) BEGINNING IN FISCAL 1995, THE EXPENSE RATIOS REFLECT THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
(D) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY AVERAGE WEEKLY NET
ASSETS APPLICABLE TO COMMON SHARES.
(E) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(F) COMMENCEMENT OF OPERATIONS WAS NOVEMBER 27, 1992.
(G) ADJUSTED TO AN ANNUAL BASIS.
- ---------------------------------------------------------------------
1996 Annual Report 20 American Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST December 31, 1996
.......................................................................................
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (97.7%):
COLORADO (1.5%):
Health Care Facility (FSA) (Prerefunded to 2/15/01),
7.25%, 2/15/16 .................................... $ 1,925,000(e) $ 2,156,770
------------
DISTRICT OF COLUMBIA (3.4%):
General Obligation (MBIA) (Callable 6/1/00 at 102),
6.75%, 6/1/08 ..................................... 4,400,000 4,767,444
------------
FLORIDA (2.4%):
Jacksonville Electric Authority (Prerefunded to
10/1/00), 7.00%, 10/1/12 .......................... 3,000,000(e) 3,319,710
------------
GEORGIA (2.2%):
Municipal Electric Authority (MBIA) (Prerefunded to
1/1/01), 7.00%, 1/1/16 ............................ 2,840,000(e) 3,158,648
------------
ILLINOIS (12.2%):
Chicago Motor Fuel Tax (AMBAC) (Prerefunded to
1/1/01), 7.10%, 1/1/11 ............................ 1,525,000(e) 1,696,867
Health Facilities Authority, Evangelical Hospital
(FSA) (Callable 1/1/01 at 102), 7.13%, 1/1/21 ..... 2,500,000 2,753,025
Kankakee General Obligation (FGIC) (Callable 5/1/03
at 102), 6.88%, 5/1/11 ............................ 1,000,000 1,122,510
State Dedicated Tax-Civic Center (AMBAC) (Callable
12/15/00 at 102), 7.00%, 12/15/13 ................. 4,500,000 4,955,580
State Sales Tax Revenue (Prerefunded to 6/15/01),
6.90%, 6/15/12-6/15/13 ............................ 2,300,000(e) 2,564,707
State Sales Tax Revenue (Prerefunded to 6/15/99),
7.25%, 6/15/14 .................................... 3,650,000(e) 3,978,390
------------
17,071,079
------------
INDIANA (6.1%):
Hamilton S.E. School Building Corporation (AMBAC)
(Callable 1/1/01 at 102), 7.00%, 7/1/08 ........... 3,445,000 3,787,433
Marion County Convention Center (AMBAC) (Callable
6/1/01 at 102), 7.00%, 6/1/10 ..................... 345,000 381,846
Marion County Convention Center (AMBAC) (Prerefunded
to 6/1/01), 7.00%, 6/1/10 ......................... 870,000(e) 973,286
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 21 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
St. Joseph County Hospital Authority (MBIA)(Callable
8/15/01 at 102), 7.00%, 8/15/11 ................... $ 3,000,000 $ 3,335,190
------------
8,477,755
------------
IOWA (0.8%):
Dubuque Hospital Revenue (Callable 1/1/02 at 102),
6.88%, 1/1/12 ..................................... 1,000,000 1,068,530
------------
LOUISIANA (0.1%):
Parrish of St. Martin, Cargill Inc. Project (Callable
10/1/02 at 102), 6.63%, 10/1/12 ................... 200,000(c) 213,358
------------
MAINE (2.4%):
Municipal Bond Bank (Prerefunded 11/1/01), 7.20%,
11/1/13 3,000,000(e) 3,401,400
------------
MINNESOTA (0.8%):
East Grand Forks Industrial Development Revenue
(Callable 4/1/01 at 102), 8.00%, 4/1/11 ........... 1,000,000 1,082,410
------------
NEBRASKA (0.8%):
Hospital Lease Investment Financing (MBIA) (Callable
3/1/01 at 102), 7.00%, 3/1/06 ..................... 1,000,000 1,103,510
------------
NEVADA (6.2%):
Clark County School District (MBIA) (Prerefunded to
6/1/01), 7.00%, 6/1/09 ............................ 3,000,000(e) 3,328,860
University of Nevada Revenue (AMBAC) (Prerefunded to
7/1/00), 7.13%, 7/1/16 ............................ 2,720,000(e) 2,998,664
Washoe County Limited Tax General Obligation,
Zero-Coupon (MBIA), 7.12%, 7/1/06 ................. 3,725,000(b) 2,293,669
------------
8,621,193
------------
PENNSYLVANIA (3.1%):
Higher Education-Duquesne University (MBIA) (Callable
4/1/01 at 100), 7.00%, 4/1/10 ..................... 1,000,000 1,087,380
Sayre Healthcare Facility (AMBAC) (Callable 3/1/01 at
102), 7.00%, 3/1/11 ............................... 3,000,000 3,310,530
------------
4,397,910
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 22 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
SOUTH DAKOTA (3.7%):
Health and Education Facility Revenue (Callable
5/1/01 at 102), 7.00%, 11/1/07 .................... $ 3,000,000 $ 3,229,980
Rapid City Area School District (MBIA) (Prerefunded
to 1/1/02), 7.20%, 1/1/11 ......................... 1,770,000(e) 1,983,126
------------
5,213,106
------------
TENNESSEE (2.9%):
Bristol Health and Education Facility (FGIC)
(Prerefunded to 3/1/01), 7.00%, 9/1/11 ............ 1,000,000(e) 1,110,350
Housing Development Authority (FSA) (Callable 7/1/00
at 103), 7.60%, 7/1/16 ............................ 1,805,000 1,904,618
Memphis-Shelby County Airport Authority (MBIA),
5.25%, 2/15/01 .................................... 1,000,000(f) 1,007,300
------------
4,022,268
------------
TEXAS (17.3%):
Austin Utility System Revenue (MBIA) (Prerefunded to
5/15/01), 8.00%, 11/15/16 ......................... 500,000(e) 570,100
Corpus Christi Utility System Revenue (FGIC)
(Callable 7/15/00 at 102), 7.00%, 7/15/10 ......... 1,500,000 1,640,040
Harris County Health Facilities (FSA) (Callable
10/1/01 at 102), 6.85%, 10/1/06 ................... 2,000,000 2,215,300
Houston Hotel Occupancy (FGIC) (Prerefunded to
7/1/01), 7.00%, 7/1/15 ............................ 4,700,000(e) 5,192,983
Houston Water and Sewer, Zero-Coupon (AMBAC), 7.14%,
8/15/06 ........................................... 4,285,000(b) 2,622,077
Lower Colorado River Authority (AMBAC) (Callable
1/1/01 at 102), 7.00%, 1/1/11 ..................... 415,000 456,251
Lower Colorado River Authority (AMBAC) (Prerefunded
to 1/1/01), 7.00%, 1/1/11 ......................... 585,000(e) 650,409
Lower Colorado River Authority, Zero-Coupon (AMBAC),
7.17%, 1/1/06 ..................................... 765,000(b) 483,228
Municipal Power Agency, Zero-Coupon (AMBAC), 7.11%,
9/1/06 ............................................ 3,000,000(b) 1,831,620
San Antonio Electric and Gas, Zero-Coupon (FGIC),
7.11%, 2/1/06 ..................................... 3,000,000(b) 1,886,970
Trinity River Authority (AMBAC) (Prerefunded to
8/1/00), 7.10%, 8/1/16 ............................ 2,250,000(e) 2,459,002
Weatherford Utility System, Water Revenue (MBIA)
(Prerefunded to 9/1/01), 7.00%, 9/1/11 ............ 3,750,000(e) 4,156,162
------------
24,164,142
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 23 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
UTAH (2.8%):
Intermountain Power Agency (FSA), 5.25%, 7/1/01 ..... $ 3,810,000 $ 3,926,015
------------
WASHINGTON (20.5%):
Chelan County Public Utilities District (Callable
7/1/03 at 100), 7.60%, 7/1/25 ..................... 3,375,000 3,778,481
Chelan County Public Utilities District (MBIA),
5.20%-5.35%, 7/1/00-7/1/01 ........................ 885,000(f) 889,414
King and Snohomish Counties School District (FGIC)
(Prerefunded to 12/1/00), 7.00%, 12/1/09 .......... 1,450,000(e) 1,589,940
Port Longview Industrial Development Revenue
(Callable 2/1/01 at 102), 7.45%, 2/1/13 ........... 3,400,000 3,717,730
Public Power Supply System (Prerefunded to 1/1/00),
7.25%, 7/1/15 ..................................... 1,435,000(e) 1,575,874
Public Power Supply System (Prerefunded to 1/1/01),
7.63%, 7/1/10 ..................................... 5,000,000(e) 5,648,900
Public Power Supply System (Prerefunded to 7/1/00),
7.38%, 7/1/12 ..................................... 1,550,000(e) 1,724,964
Public Power Supply System, Zero-Coupon (BIG), 7.15%,
7/1/06 ............................................ 1,500,000(b) 911,730
Public Power Supply System, Zero-Coupon (FGIC),
7.17%, 7/1/06 ..................................... 5,000,000(b) 3,039,100
Public Power Supply Systems, 5.00%-5.25%,
7/1/00-7/1/01 ..................................... 3,500,000 3,547,225
Seattle Water Revenue (Prerefunded to 5/1/00), 7.25%,
5/1/17 ............................................ 2,000,000(e) 2,216,280
------------
28,639,638
------------
WEST VIRGINIA (3.6%):
School Building Authority (MBIA) (Prerefunded to
7/1/00), 7.25%, 7/1/15 ............................ 4,000,000(e) 4,449,280
State Water Development Authority (CGIC) (Callable
11/1/01 at 102), 7.00%, 11/1/11 ................... 500,000 558,420
------------
5,007,700
------------
WISCONSIN (4.9%):
Health and Education Facilities - Gundersen Clinic
(FSA), 5.50%, 12/1/01 ............................. 2,500,000 2,605,700
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Callable 8/15/00 at 102), 7.25%,
8/15/19 ........................................... 105,000 115,683
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Prerefunded to 8/15/00), 7.25%,
8/15/19 ........................................... 1,570,000(e) 1,748,666
Health and Education Facility (MBIA) (Prerefunded to
6/1/00), 7.00%, 6/1/20 ............................ 1,600,000(e) 1,761,616
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 24 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Neenah Industrial Development Revenue (Callable
6/1/00 at 101), 6.75%, 6/1/12 ..................... $ 650,000 $ 688,675
------------
6,920,340
------------
Total Municipal Long-Term Securities
(cost: $123,858,606) ............................ 136,732,926
------------
MUNICIPAL SHORT-TERM SECURITIES (2.2%):
INDIANA (1.6%):
Hospital Equipment Finance Authority, 4.20%,
12/1/15 ........................................... 2,200,000(d) 2,200,000
------------
MICHIGAN (0.6%):
Flint Hospital Building Authority, 4.20%, 7/1/15 .... 800,000(d) 800,000
------------
Total Municipal Short-Term Securities
(cost: $3,000,000) .............................. 3,000,000
------------
Total Investments in Securities
(cost: $126,858,606) (g) ........................ $139,732,926
------------
------------
</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 AS PART OF A PRIVATE PLACEMENT WHICH HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933. MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER
ACCREDITED INVESTORS.
(D) FLOATING OR VARIABLE RATE OBLIGATION MATURING IN MORE THAN ONE YEAR. THE
INTEREST RATE, WHICH IS BASED ON SPECIFIC, OR AN INDEX OF, MARKET INTEREST
RATES, IS SUBJECT TO CHANGE PERIODICALLY AND IS THE EFFECTIVE RATE ON
DECEMBER 31, 1996. THIS INSTRUMENT MAY ALSO HAVE A DEMAND FEATURE WHICH
ALLOWS THE RECOVERY OF PRINCIPAL AT ANY TIME, OR AT SPECIFIED INTERVALS NOT
EXCEEDING ONE YEAR, ON UP TO 30 DAYS' NOTICE. MATURITY DATE SHOWN
REPRESENTS FINAL MATURITY.
(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, 1996, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $1,890,959.
(G) ON DECEMBER 31, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $126,791,652. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 12,941,274
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 12,941,274
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1996 Annual Report 25 American Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST II December 31, 1996
.......................................................................................
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (98.2%):
FLORIDA (6.7%):
Manatee County, Zero-Coupon (MBIA), 6.91%,
10/1/07 ........................................... $ 2,995,000(b) $ 1,742,940
Sumter County School District (CGIC), 7.15%,
11/1/15 ........................................... 2,045,000 2,476,904
University Community Hospital (FSA) (Prerefunded to
9/1/00), 7.50%, 9/1/11 ............................ 3,500,000(e) 3,935,155
------------
8,154,999
------------
ILLINOIS (24.3%):
Belleville General Obligation (FGIC) (Callable
12/1/01 at 100), 7.13%, 12/1/08 ................... 1,000,000 1,105,070
Carbondale General Obligation (FGIC) (Prerefunded to
5/1/01), 6.90%, 5/1/12 ............................ 3,200,000(e) 3,502,336
Central Lake County, Zero-Coupon (MBIA), 6.98%,
5/1/07 ............................................ 2,370,000(b) 1,377,586
Chicago Motor Fuel Tax (AMBAC) (Prerefunded to
1/1/01), 7.10%, 1/1/11 ............................ 1,500,000(e) 1,669,050
Chicago Wastewater Revenue (FGIC) (Prerefunded to
11/15/00), 6.75%, 11/15/20 ........................ 2,000,000(e) 2,203,480
Commonwealth Edison Pollution Control (MBIA)
(Callable 6/1/01 at 102), 7.25%, 6/1/11 ........... 3,000,000 3,349,980
Cook County General Obligation (AMBAC) (Prerefunded
to 11/1/01), 6.75%, 11/1/18 ....................... 5,000,000(e) 5,569,850
Decatur, Zero-Coupon (AMBAC), 6.98%, 10/1/07 ........ 1,250,000(b) 710,862
Health Facilities Authority, Evangelical Hospital
(Callable 4/15/02 at 102), 6.75%,
4/15/12-4/15/17 ................................... 3,500,000 3,696,340
Kane County Public Building Authority (MBIA)
(Prerefunded 12/1/99), 6.88%, 12/1/10 ............. 1,000,000(e) 1,073,090
Kendall, Kane, and Will Counties, Zero-Coupon (FGIC),
6.96%, 3/1/07 ..................................... 975,000(b) 571,711
Lake County Water and Sewer System (AMBAC)
(Prerefunded to 12/1/01), 6.75%,
12/1/08-12/1/09 ................................... 4,215,000(e) 4,633,802
------------
29,463,157
------------
INDIANA (12.5%):
Boonville School Building Corporation (Callable
7/1/02 at 102), 6.90%, 7/1/09 ..................... 2,000,000 2,218,920
Indiana University, Zero-Coupon (AMBAC), 7.07%,
8/1/07 ............................................ 3,180,000(b) 1,824,302
Lake Central Multi-District School Building
Corporation (Prerefunded to 7/15/01), 7.00%,
1/15/14-1/15/18 ................................... 2,500,000(e) 2,786,600
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 26 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Noblesville/Hamilton County School Building
Corporation (Prerefunded to 2/1/01), 7.00%,
2/1/13 ............................................ $ 1,000,000(e) $ 1,108,740
Port Commission, Cargill Inc. Project (Callable
5/1/02 at 102), 6.88%, 5/1/12 ..................... 450,000(c) 490,199
Purdue University (AMBAC) (Prerefunded to 7/1/01),
7.00%, 7/1/14 ..................................... 3,000,000(e) 3,341,820
St. Joseph County Hospital Authority (MBIA) (Callable
12/1/01 at 102), 7.00%, 12/1/12 ................... 3,000,000 3,332,670
------------
15,103,251
------------
IOWA (2.9%):
Mason City Hospital Facilities (FSA) (Callable
8/15/01 at 102), 6.88%, 8/15/09 ................... 1,265,000 1,399,836
Polk County Health Facilities (MBIA) (Callable
11/1/01 at 101), 7.10%, 11/1/09 ................... 1,895,000 2,106,747
------------
3,506,583
------------
KENTUCKY (0.9%):
Owensboro Electric Light and Power, Zero-Coupon
(AMBAC), 6.91%, 1/1/07 ............................ 1,775,000(b) 1,060,243
------------
LOUISIANA (2.7%):
New Orleans General Obligation, Zero-Coupon (AMBAC),
7.01%, 9/1/07 ..................................... 5,000,000(b) 2,885,750
Parrish of St. Martin, Cargill Inc. Project (Callable
10/1/02 at 102), 6.63%, 10/1/12 ................... 300,000(c) 320,037
------------
3,205,787
------------
MICHIGAN (2.2%):
State Housing Development Authority (FSA) (Callable
10/15/02 at 103), 6.85%, 10/15/18 ................. 1,000,000 1,058,680
University Michigan Revenue (Callable 4/1/03 at 102),
5.80%, 4/1/11 ..................................... 1,500,000 1,540,275
------------
2,598,955
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 27 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
MONTANA (2.7%):
State Board of Investment (MBIA) (Callable 6/1/01 at
102), 6.88%, 6/1/20 ............................... $ 845,000 $ 929,830
State Board of Investment (MBIA) (Callable 6/1/01 at
102), 6.88%, 6/1/20 ............................... 2,155,000 2,369,601
------------
3,299,431
------------
NEW HAMPSHIRE (0.8%):
Single Family Housing Authority (Callable 7/1/03 at
102), 5.85%, 7/1/10 ............................... 1,000,000 1,012,680
------------
NEW JERSEY (1.8%):
State Educational Facilities Authority (Callable
7/1/01 at 102), 6.88%, 7/1/10 ..................... 2,000,000 2,133,460
------------
NORTH DAKOTA (4.8%):
Bismark Hospital Revenue (AMBAC) (Callable 5/1/01 at
102), 6.90%, 5/1/06 ............................... 4,300,000 4,741,395
Grand Forks Health Care Authority (MBIA) (Callable
12/1/01 at 102), 6.63%, 12/1/10 ................... 1,000,000 1,085,920
------------
5,827,315
------------
SOUTH CAROLINA (1.4%):
Lexington County Health Services (FSA) (Callable
10/1/01 at 102), 6.75%, 10/1/18 ................... 1,600,000 1,748,288
------------
TENNESSEE (1.0%):
Memphis-Shelby County Airport Authority (MBIA),
5.25%, 2/15/02 .................................... 1,235,000(f) 1,240,249
------------
TEXAS (8.1%):
Harris County Health Facilities (FSA) (Callable
10/1/01 at 102), 7.00%, 10/1/14 ................... 2,225,000 2,478,583
Houston Hotel Occupancy (FGIC) (Prerefunded to
7/1/01), 7.00%, 7/1/15 ............................ 5,095,000(e) 5,629,415
Houston Water and Sewer, Zero-Coupon (AMBAC), 6.91%,
12/1/07 ........................................... 3,000,000(b) 1,700,220
------------
9,808,218
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 28 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
WASHINGTON (17.8%):
Chelan County Public Utilities District (Callable
7/1/03 at 100), 7.60%, 7/1/25 ..................... $ 3,000,000 $ 3,358,650
Chelan County Public Utilities District (MBIA),
5.45%, 7/1/02 ..................................... 385,000(f) 388,042
Clark County Public Utility District (FGIC) (Callable
1/1/01 at 102), 6.50%, 1/1/11 ..................... 2,000,000 2,161,200
King and Snohomish Counties School District (FGIC)
(Callable 12/1/02 at 100), 6.63%, 12/1/12 ......... 900,000 979,578
Public Power Supply System (Callable 7/1/01 at 102),
6.75%, 7/1/11 ..................................... 1,350,000 1,436,778
Public Power Supply System (Prerefunded to 1/1/00),
7.25%, 7/1/15 ..................................... 3,875,000(e) 4,266,956
Public Power Supply System (Prerefunded to 7/1/00),
7.00%-7.38%, 7/1/11-7/1/12 ........................ 5,225,000(e) 5,806,370
Public Power Supply Systems, 5.25%, 7/1/01 .......... 2,000,000 2,041,720
Snohomish County Solid Waste Revenue (MBIA) (Callable
12/1/01 at 102), 7.00%, 12/1/10 ................... 1,000,000 1,115,550
------------
21,554,844
------------
WEST VIRGINIA (4.1%):
School Building Authority (MBIA) (Callable 7/1/00 at
102), 6.75%, 7/1/17 ............................... 2,500,000 2,711,625
State Water Development Authority (Prerefunded to
11/1/01), 7.30%-7.40%, 11/1/11-11/1/19 ............ 2,000,000(e) 2,270,190
------------
4,981,815
------------
WISCONSIN (3.5%):
Health and Education Facilities - Gundersen Clinic
(FSA), 5.10%, 12/1/02 ............................. 3,000,000 3,070,740
Neenah Industrial Development Revenue (Callable
6/1/00 at 101), 6.75%, 6/1/12 ..................... 1,150,000 1,218,425
------------
4,289,165
------------
Total Municipal Long-Term Securities
(cost: $108,106,332) ............................ 118,988,440
------------
MUNICIPAL SHORT-TERM SECURITIES (1.8%):
ILLINOIS (0.2%):
Health Facilities Authority, 3.50%, 1/1/16 .......... 200,000(d) 200,000
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 29 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
INDIANA (1.6%):
Hospital Equipment Finance Authority, 4.20%,
12/1/15 ........................................... $ 1,950,000(d) $ 1,950,000
------------
Total Municipal Short-Term Securities
(cost: $2,150,000) .............................. 2,150,000
------------
Total Investments in Securities
(cost: $110,256,332) (g) ........................ $121,138,440
------------
------------
</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 AS PART OF A PRIVATE PLACEMENT WHICH HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933. MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER
ACCREDITED INVESTORS.
(D) FLOATING OR VARIABLE RATE OBLIGATION MATURING IN MORE THAN ONE YEAR. THE
INTEREST RATE, WHICH IS BASED ON SPECIFIC, OR AN INDEX OF, MARKET INTEREST
RATES, IS SUBJECT TO CHANGE PERIODICALLY AND IS THE EFFECTIVE RATE ON
DECEMBER 31, 1996. THIS INSTRUMENT MAY ALSO HAVE A DEMAND FEATURE WHICH
ALLOWS THE RECOVERY OF PRINCIPAL AT ANY TIME, OR AT SPECIFIED INTERVALS NOT
EXCEEDING ONE YEAR, ON UP TO 30 DAYS' NOTICE. MATURITY DATE SHOWN
REPRESENTS FINAL MATURITY.
(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, 1996, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $1,626,937.
(G) ON DECEMBER 31, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $110,185,839. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 10,954,231
GROSS UNREALIZED DEPRECIATION ...... (1,630)
------------
NET UNREALIZED APPRECIATION ...... $ 10,952,601
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1996 Annual Report 30 American Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST III December 31, 1996
.......................................................................................
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (97.4%):
ALABAMA (0.6%):
Agricultural and Mechanical University Revenue (MBIA)
(Callable 11/1/02 at 102), 6.45%, 11/1/17 ......... $ 500,000 $ 537,815
------------
COLORADO (1.2%):
Snowmass Village Multifamily Housing (FSA) (Callable
12/15/02 at 102), 6.25%, 12/15/16 ................. 1,000,000 1,033,460
------------
DISTRICT OF COLUMBIA (3.5%):
Catholic University of America (Connie Lee) (Callable
10/1/03 at 102), 6.30%, 10/1/13 ................... 1,000,000 1,053,100
General Obligation (MBIA), 4.75%, 6/1/03 ............ 1,960,000 1,947,201
------------
3,000,301
------------
FLORIDA (0.7%):
Broward County School District, Zero-Coupon (MBIA),
6.55%, 2/15/08 .................................... 1,000,000(b) 564,980
------------
ILLINOIS (19.6%):
Chicago Wastewater Revenue (FGIC) (Prerefunded to
1/1/03), 6.35%, 1/1/22 ............................ 1,000,000(d) 1,108,020
Health Facility-Alexian Brothers Medical Center
(MBIA) (Callable 1/1/02 at 102), 6.38%, 1/1/15 .... 1,125,000 1,190,588
Health Facility-Elmhurst Memorial Hospital (FGIC)
(Callable 1/1/02 at 102), 6.50%, 1/1/12 ........... 1,190,000 1,279,857
Health Facility-Lutheran General Systems (FSA)
(Callable 4/1/03 at 102), 6.13%, 4/1/12 ........... 1,000,000 1,075,190
Henry Hospital District (AMBAC) (Callable 12/1/02 at
100), 6.60%, 12/1/17 .............................. 2,000,000 2,141,460
Lake County Housing and Finance Corporation (FHA)
(Callable 11/1/02 at 100), 6.70%, 11/1/14 ......... 2,000,000 2,071,820
Rochelle Water and Sewer Revenue (Callable 5/1/02 at
102), 7.15%, 5/1/14 ............................... 2,000,000 2,176,140
State General Obligation (CGIC) (Callable 10/1/02 at
102), 6.25%, 10/1/12 .............................. 3,370,000 3,589,690
State Sales Tax Revenue (Callable 6/15/02 at 101),
5.50%, 6/15/20 .................................... 2,000,000 1,917,380
------------
16,550,145
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 31 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST III
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
INDIANA (18.5%):
Crawfordsville School Building Corporation (Callable
1/1/03 at 102), 6.25%, 7/1/11 ..................... $ 1,500,000 $ 1,575,495
Freemont Middle School Building (AMBAC) (Prerefunded
to 3/15/02), 6.75%, 3/15/13 ....................... 3,000,000(d) 3,335,310
Health Facilities-Community Hospital Project (MBIA)
(Callable 5/1/02 at 102), 6.40%, 5/1/12 ........... 5,000,000 5,341,100
Health Facilities-Methodist Hospital (AMBAC)
(Callable 9/1/02 at 102), 5.75%, 9/1/15 ........... 1,750,000 1,748,845
Indianapolis Public Improvement Bonds (Callable
2/1/03 at 102), 6.75%, 2/1/20 ..................... 1,250,000 1,357,575
Lake County Redevelopment Authority (Callable 2/1/05
at 102), 6.45%, 2/1/11 ............................ 1,600,000 1,731,168
Patoka Lake Regional Water and Sewer District (AMBAC)
(Callable 1/1/04 at 101), 6.45%, 1/1/15 ........... 500,000 539,315
------------
15,628,808
------------
IOWA (1.5%):
Cedar Rapids Hospital Facilities (FGIC) (Callable
8/15/03 at 102), 6.13%, 8/15/13 ................... 1,200,000 1,260,516
------------
KANSAS (1.7%):
Kansas City Utility Systems, Zero-Coupon (AMBAC),
6.40%, 3/1/08 ..................................... 2,575,000(b) 1,443,753
------------
MAINE (2.6%):
Water and Sewer Revenue (Callable 11/1/02 at 102),
6.60%, 11/1/15 .................................... 2,000,000 2,161,960
------------
MICHIGAN (1.8%):
Municipal Bond Authority Revenue (Callable 11/1/02 at
102), 6.50%, 5/1/16 ............................... 1,000,000 1,061,220
State Building Authority (Callable 10/1/02 at 102),
6.25%, 10/1/12 .................................... 400,000 420,096
------------
1,481,316
------------
NEW MEXICO (1.3%):
Las Cruces Health Facility-Evangelical Lutheran
Project (CGIC) (Callable 12/1/02 at 102), 6.45%,
12/1/17 ........................................... 1,000,000 1,073,170
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 32 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST III
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
NORTH DAKOTA (3.8%):
Mercer County Pollution Control Revenue (AMBAC),
7.20%, 6/30/13 .................................... $ 2,700,000 $ 3,231,333
------------
RHODE ISLAND (1.5%):
State Health and Education Building Corporation
(Connie Lee) (Callable 4/1/03 at 102), 6.38%,
4/1/12 ............................................ 1,200,000 1,280,640
------------
SOUTH CAROLINA (2.0%):
Piedmont Municipal Power Agency (MBIA) (Callable
1/1/03 at 102), 6.30%, 1/1/14 ..................... 1,600,000 1,692,016
------------
SOUTH DAKOTA (6.1%):
Heartland Consumers Power District (FSA), 6.00%,
1/1/12-1/1/17 ..................................... 1,085,000 1,161,228
State Building Authority (AMBAC) (escrowed to
maturity), 6.63%, 9/1/12 .......................... 3,600,000 3,962,952
------------
5,124,180
------------
TEXAS (20.0%):
Austin Utility System Revenue, Zero-Coupon (MBIA),
6.53%, 11/15/08 ................................... 5,000,000(b) 2,665,300
Houston Water and Sewer Revenue (FSA) (Callable
12/1/02 at 102), 6.38%, 12/1/14 ................... 2,000,000 2,109,020
Montgomery County Hospital District (FSA)
(Prerefunded to 4/1/02), 6.63%, 4/1/17 ............ 3,300,000(d) 3,665,970
Pflugerville Independent School District (Callable
8/15/04 at 100), 5.75%, 8/15/15 ................... 975,000 988,426
San Antonio Electric and Gas, Zero-Coupon (FGIC),
6.40%, 2/1/08 ..................................... 4,500,000(b) 2,501,145
San Antonio Water System Revenue (MBIA) (Callable
5/15/02 at 102), 6.50%, 5/15/10 ................... 3,000,000 3,272,610
State Capital Appreciation, Zero-Coupon (FGIC),
6.43%, 4/1/08 ..................................... 3,100,000(b) 1,717,245
------------
16,919,716
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1996 Annual Report 33 American Municipal Term Trusts
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST III
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
WASHINGTON (7.8%):
Chelan County Public Utilities District (MBIA),
5.55%, 7/1/03 ..................................... $ 305,000(e) $ 308,837
Public Power Supply System (Callable 7/1/01 at 102),
6.50%, 7/1/18 ..................................... 2,515,000 2,629,256
Public Power Supply System (Callable 7/1/02 at 102),
6.25%, 7/1/12 ..................................... 3,555,000 3,639,254
------------
6,577,347
------------
WEST VIRGINIA (3.2%):
Clarksburg Water Revenue (Asset Guaranty) (Callable
9/1/02 at 102), 6.25%, 9/1/14 ..................... 2,620,000 2,738,843
------------
Total Municipal Long-Term Securities
(cost: $76,007,343) ............................. 82,300,299
------------
MUNICIPAL SHORT-TERM SECURITIES (1.7%):
INDIANA (1.7%):
Hospital Equipment Finance Authority, 4.20%, 12/1/15
(cost: $1,400,000) ................................ 1,400,000(c) 1,400,000
------------
Total Investments in Securities
(cost: $77,407,343) (f) ......................... $ 83,700,299
------------
------------
</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) FLOATING OR VARIABLE RATE OBLIGATION MATURING IN MORE THAN ONE YEAR. THE
INTEREST RATE, WHICH IS BASED ON SPECIFIC, OR AN INDEX OF, MARKET INTEREST
RATES, IS SUBJECT TO CHANGE PERIODICALLY AND IS THE EFFECTIVE RATE ON
DECEMBER 31, 1996. THIS INSTRUMENT MAY ALSO HAVE A DEMAND FEATURE WHICH
ALLOWS THE RECOVERY OF PRINCIPAL AT ANY TIME, OR AT SPECIFIED INTERVALS NOT
EXCEEDING ONE YEAR, ON UP TO 30 DAYS' NOTICE. MATURITY DATE SHOWN
REPRESENTS FINAL MATURITY.
(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, 1996, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $305,047.
(F) ON DECEMBER 31, 1996, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $77,364,870. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 6,335,429
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 6,335,429
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1996 Annual Report 34 American Municipal Term Trusts
<PAGE>
Independent Auditors' Report
- ----------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
AMERICAN MUNICIPAL TERM TRUST INC.,
AMERICAN MUNICIPAL TERM TRUST INC. II AND
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, 1996, 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 then ended and the financial highlights presented
in note 6 to the financial statements. These financial statements and the
financial highlights are the responsibility of the funds' 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 purchased but not received, 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, 1996, and the results
of their operations, the changes in their net assets and the financial
highlights for the periods stated in the first paragraph above, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
February 7, 1997
- ---------------------------------------------------------------------
1996 Annual Report 35 American Municipal Term Trusts
<PAGE>
Federal Income Tax Information
- ----------------------------------------
The following per-share information describes the federal tax
treatment of distributions made during the fiscal year. Exempt-
interest dividends are exempt from federal income tax and should
not be included in your gross income, but need to be reported on
your income tax return for informational purposes. Please consult
a tax adviser on how to report these distributions at the state
and local levels.
COMMON STOCK INCOME DISTRIBUTIONS
100%, 100% AND 100% QUALIFYING AS EXEMPT-INTEREST DIVIDENDS,
RESPECTIVELY
<TABLE>
<CAPTION>
AMERICAN
AMERICAN AMERICAN MUNICIPAL
MUNICIPAL MUNICIPAL TERM
TERM TERM TRUST
PAYABLE DATE TRUST TRUST II III
- --------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
February 21, 1996 ........................... $0.0542 $0.0517 $0.0475
March 27, 1996 .............................. 0.0542 0.0517 0.0475
April 24, 1996 .............................. 0.0542 0.0517 0.0475
May 29, 1996 ................................ 0.0542 0.0517 0.0475
June 26, 1996 ............................... 0.0542 0.0517 0.0475
July 24, 1996 ............................... 0.0542 0.0517 0.0475
August 28, 1996 ............................. 0.0542 0.0517 0.0475
September 25, 1996 .......................... 0.0542 0.0517 0.0475
October 23, 1996 ............................ 0.0542 0.0517 0.0475
November 27, 1996 ........................... 0.0542 0.0517 0.0475
December 18, 1996 ........................... 0.0542 0.0517 0.0475
January 10, 1997 ............................ 0.0542 0.0517 0.0475
-------- -------- --------
Total ................................... $0.6504 $0.6204 $0.5700
-------- -------- --------
-------- -------- --------
</TABLE>
COMMON STOCK LONG-TERM GAINS
(TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)
<TABLE>
<CAPTION>
AMERICAN
AMERICAN AMERICAN MUNICIPAL
MUNICIPAL MUNICIPAL TERM
TERM TERM TRUST
PAYABLE DATE TRUST TRUST II III
- --------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
November 27, 1996 ........................... $0.0530 $0.0309 $ --
December 18, 1996 ........................... -- -- 0.0030
-------- -------- --------
Total ................................... $0.0530 $0.0309 $0.0030
-------- -------- --------
-------- -------- --------
</TABLE>
- ---------------------------------------------------------------------
1996 Annual Report 36 American Municipal Term Trusts
<PAGE>
Federal Income Tax Information (continued)
- ---------------------------------------------------------------------
PREFERRED STOCK INCOME DISTRIBUTIONS
(INCOME FROM TAX-EXEMPT SECURITIES, 100%, 100% AND 100%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)
<TABLE>
<CAPTION>
AMERICAN
AMERICAN AMERICAN MUNICIPAL
MUNICIPAL MUNICIPAL TERM
TERM TERM TRUST
TRUST TRUST II III
-------- -------- --------
<S> <C> <C> <C>
Total ................................... $829.45 $842.72 $874.09
-------- -------- --------
-------- -------- --------
</TABLE>
PREFERRED STOCK LONG-TERM GAINS
(TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MUNICIPAL MUNICIPAL
MUNICIPAL TERM TERM
TERM TRUST TRUST
PAYABLE DATE TRUST II III
- --------------------------------------------- ------- ------- ------
<S> <C> <C> <C>
November 5, 1996 ............................ $ -- $25.41 $ --
November 7, 1996 ............................ 25.41 -- --
November 12, 1996 ........................... -- 22.98 --
November 14, 1996 ........................... 25.41 -- --
November 21, 1996 ........................... 25.41 -- --
November 27, 1996 ........................... 3.33 -- --
December 16, 1996 ........................... -- -- 4.98
------- ------- ------
Total ................................... $79.56 $48.39 $4.98
------- ------- ------
------- ------- ------
</TABLE>
- ---------------------------------------------------------------------
1996 Annual Report 37 American Municipal Term Trusts
<PAGE>
Shareholder Update
- ----------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of fund's shareholders was held on August 23,
1996. Each matter voted upon at the meeting, as well as the
number of votes cast for, against or withheld, the number of
abstentions, and the number of broker non-votes with respect to
such matters, are set forth below.
(1) The funds' preferred shareholders elected the following
directors:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED AUTHORITY
"FOR" TO VOTE
------ ---
<S> <C> <C>
AMERICAN MUNICIPAL TERM TRUST
David T. Bennett ............................ 1,546 2
William H. Ellis ............................ 1,546 2
AMERICAN MUNICIPAL TERM TRUST II
David T. Bennett ............................ 1,469 9
William H. Ellis ............................ 1,467 11
AMERICAN MUNICIPAL TERM TRUST III
David T. Bennett ............................ 831 4
William H. Ellis ............................ 831 4
</TABLE>
(2) The funds' preferred and common shareholders, voting as a
class, elected the following directors:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED AUTHORITY
"FOR" TO VOTE
---------- --------
<S> <C> <C>
AMERICAN MUNICIPAL TERM TRUST
Jaye F. Dyer ................................ 7,749,819 263,457
Karol D. Emmerich ........................... 7,763,638 249,636
Luella G. Goldberg .......................... 7,763,638 249,636
George Latimer .............................. 7,758,327 254,947
AMERICAN MUNICIPAL TERM TRUST II
Jaye F. Dyer ................................ 6,689,531 140,695
Karol D. Emmerich ........................... 6,686,700 143,526
Luella G. Goldberg .......................... 6,683,613 146,613
George Latimer .............................. 6,690,041 140,185
AMERICAN MUNICIPAL TERM TRUST III
Jaye F. Dyer ................................ 4,891,004 74,535
Karol D. Emmerich ........................... 4,888,329 77,210
Luella G. Goldberg .......................... 4,887,129 78,410
George Latimer .............................. 4,891,129 74,410
</TABLE>
- ---------------------------------------------------------------------
1996 Annual Report 38 American Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
(3) The funds' preferred and common shareholders, voting as a
class, ratified the selection by a majority of the
independent members of the funds' Boards of Directors of KPMG
Peat Marwick LLP as the independent public accountants for
the funds for the fiscal year ending December 31, 1996. The
following votes were cast regarding this matter:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED VOTED BROKER
"FOR" "AGAINST" ABSTENTIONS NON-VOTES
---------- ------- -------- ---
<S> <C> <C> <C> <C>
AXT ......................................... 7,817,124 56,541 139,608 0
BXT ......................................... 6,686,870 62,542 80,814 0
CXT ......................................... 4,859,919 33,675 71,944 0
</TABLE>
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the Dividend
Reinvestment Plan. It's 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.
ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of distributions
will begin with the next distribution paid, provided your request
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 gains distributions,
may participate in the plan by informing IFTC at least 10 days
before each share's dividend and/or capital gains distribution.
- ---------------------------------------------------------------------
1996 Annual Report 39 American Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
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 (NYSE) 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
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 invested 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 the price
paid by IFTC plus the pro rata share of any commission.
Shareholders, as required by the Internal Revenue Service, will
receive Form 1099 regarding the federal tax status of the prior
year's distributions.
- ---------------------------------------------------------------------
1996 Annual Report 40 American Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
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 issued 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 fund reserves the right to amend or terminate the plan.
Should the plan be amended or terminated, participants will be
notified in writing at least 90 days before the record date for
such 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 question 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.
- ---------------------------------------------------------------------
1996 Annual Report 41 American Municipal Term Trusts
<PAGE>
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.
David A. Hughey, RETIRED EXECUTIVE VICE PRESIDENT AND CHIEF
ADMINISTRATIVE OFFICER OF DEAN WITTER INTERCAPITAL INC. AND
DEAN WITTER TRUST CO.
George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL EQUITY FUNDS
OFFICERS
William H. Ellis,
CHAIRMAN OF THE BOARD
Paul A. Dow,
PRESIDENT
Robert H. Nelson,
VICE PRESIDENT AND TREASURER
Susan Sharp Miley,
SECRETARY
INVESTMENT ADVISER
Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
LEGAL COUNSEL
Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
4200 NORWEST CENTER, MINNEAPOLIS, MN 55402
- ---------------------------------------------------------------------
1996 Annual Report 42 American Municipal Term Trusts
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
1996 Annual Report 43 American Municipal Term Trusts
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
1996 Annual Report 44 American Municipal Term Trusts
<PAGE>
GLOSSARY OF TERMS ***
- --------------------------------------------------------------------------------
BENCHMARK
An established basis of comparison for an investment's performance, a benchmark
may be an unmanaged index or a group of similar investments.
INTEREST RATE RISK
Interest rate risk is the risk that after an investor purchases a bond, interest
rates will rise and the price of the bond will go down.
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.
FOR MORE INFORMATION
BY PHONE [GRAPHIC]
1 800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer your
questions.
TO LISTEN TO MONTHLY FUND UPDATES
press 3, press 2, then press:
33 American Municipal Term Trusts
TO ORDER LITERATURE
press 5, ask a service representative to mail you additional literature,
including a Quarterly Update. You can also request to be put on a mailing list
to receive this information automatically each quarter.
BY MAIL [GRAPHIC]
Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804
In an effort to reduce costs to our shareholders, we have implemented a process
to reduce duplicate mailings of the fund's shareholder 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 Mutual
Fund Services area at 1 800 866-7778, or mail a request to us.
ON-LINE [GRAPHIC]
http://www.piperjaffray.com/
money_management/
***-This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
45
<PAGE>
[LOGO] ------------
Bulk Rate
U.S. Postage
PIPER CAPITAL MANAGEMENT INCORPORATED PAID
222 SOUTH NINTH STREET Permit No. 3008
MINNEAPOLIS, MN 55402-3804 Mpls., MN
[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
#11200 2/1997 108-97
