<PAGE>
American Municipal Term Trusts - 1997 Annual Report
1997 Annual Report
AMERICAN
MUNICIPAL TERM
TRUSTS
AXT
BXT
CXT
[LOGO]
<PAGE>
[LOGO]
<TABLE>
CONTENTS
<S> <C>
Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . 7
Investments in Securities
AXT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
BXT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
CXT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . .35
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . .36
Shareholder Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . .45
</TABLE>
***This report includes a glossary to help you understand financial terms used
in the portfolio managers' letter. When you see this symbol, it indicates a word
that is defined in the glossary.
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 management
investment 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.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
- --------------------------------------------------------------------------------
Based on net asset value for the periods ended December 31, 1997
- --------------------------------------------------------------------------------
[GRAPH]
<TABLE>
<CAPTION>
One Five Since
Year Year Inception
<S> <C> <C> <C>
American Municipal Term Trust (AXT, inception 3/27/91) 6.22% 7.86% 9.34%
American Municipal Term Trust II (BXT, inception 9/26/91) 7.57% 8.44% 9.44%
American Municipal Term Trust III (CXT, inception 11/27/92) 10.42% 9.40% 9.62%
</TABLE>
All total returns are through December 31, 1997, and reflect the reinvestment of
distributions but not sales charges. NAV-based performance is used to measure
investment management results. As noted in earlier shareholder reports, we no
longer compare the funds' NAV performance to a market benchmark. This is 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 at the funds' termination dates.
Average annualized total returns based on the change in market price for the
one-year, five-year and since inception periods ended December 31, 1997, were
8.89%, 8.35% and 8.54% for AXT, 12.46%, 8.19% and 8.33% for BXT and 11.93%,
8.16% and 7.73% for CXT. These returns assume reinvestment of all distributions
and reflect sales charges on those distributions described in the funds'
dividend reinvestment plan, but not on initial purchases.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THESE INVESTMENTS. 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. Closed-end funds, such as these funds, often
trade at discounts to net asset value. Therefore, you may be unable to realize
the full net asset value of your shares when you sell.
- --------------------------------------------------------------------------------
1997 Annual Report 1 American Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER
- --------------------------------------------------------------------------------
[PHOTO]
DOUG WHITE, CFA
shares responsibility
for the management of
the American Municipal
Term Trusts. He has 14
years of financial
experience.
- --------------------------------------------------------------------------------
February 18, 1998
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
WE ARE PLEASED THAT THE AMERICAN MUNICIPAL TERM TRUSTS (AXT, BXT AND CXT)
REMAINED ON TARGET TO MEET THEIR INVESTMENT OBJECTIVES OF PROVIDING HIGH
TAX-EXEMPT INCOME AND RETURNING $10 PER SHARE TO INVESTORS ON OR SHORTLY
BEFORE THEIR TERMINATION DATES. For the year ended December 31, 1997, the
funds continued to earn more than their monthly common and preferred stock***
dividends and add to their dividend reserves. Since the funds' inceptions,
the funds have maintained monthly common stock distributions of 5.42 cents,
5.17 cents and 4.75 cents per share, respectively. In addition, the funds'
net asset values remain above the $10 per share objective. As of December 31,
1997, the net asset values for AXT, BXT and CXT were $11.51, $11.60 and
$11.39, respectively.
DURING THE FUNDS' FISCAL YEAR, MUNICIPAL BOND PRICES WERE VOLATILE; HOWEVER, NO
EVENTS WERE EXTREME ENOUGH TO CAUSE US TO CHANGE OUR STRATEGY FOR THESE TERM
TRUSTS. Economically speaking, the year had a strong start, prompting the
Federal Reserve Board to raise the federal funds rate in March from 5.25% to
5.50%, which caused bond yields to rise and prices to fall. By April, the
economy showed signs of slowing, sending interest rates down and bond prices up,
a trend that reversed again in the third quarter. In the
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTION HISTORY SINCE INCEPTION
AXT BXT CXT
Inception Inception Inception
3/27/91 9/26/91 11/27/92
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total Monthly Income Distributions Through 12/31/97
Common Shareholders $4.39 $3.88 $2.90
Preferred Shareholders (On a Common Share Basis) $1.10 $0.99 $0.79
Total Capital Gains Distributions to Common
Shareholders Through 12/31/97 $0.11 $0.09 $0.07
</TABLE>
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1997 Annual Report 2 American Municipal Term Trusts
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS' LETTER (CONTINUED)
- --------------------------------------------------------------------------------
[PHOTO]
RON REUSS, ISFA,
shares responsibility
for the management of
the American Municipal
Term Trusts. He has 28
years of financial
experience.
- --------------------------------------------------------------------------------
fourth quarter, the expectation of continued moderate economic growth, low
inflation and a flight-to-quality resulting from the Asian turmoil fueled a
U.S. bond market rally. Given the lack of direct foreign demand for municipal
issues, municipal yields decreased more slowly than Treasury yields. This,
along with an increase in municipal issues, caused the municipal market to
underperform its taxable counterpart during the last quarter of the year.
During 1997, the national supply of municipal issues increased by 20%,
compared to 1996.
AS THE FUNDS NEAR THEIR TERMINATION DATES, WE CONTINUE TO SELL LONGER MATURITY
BONDS IN FAVOR OF THOSE CLOSER TO THE FUNDS' TERMINATIONS. As shown in the chart
below, the percentage of bonds with maturity or refunded dates*** within a year
of the funds' termination dates continues to increase. We made appropriate
trades as opportunities arose. As interest rates fell during the year and bond
prices increased, restructuring generated capital gains, which were distributed.
Also, restructuring proceeds were reinvested at lower interest rates, decreasing
fund income. Advance refunding*** is responsible for a portion of the increase
in the percentages shown in the chart.
WE EXPECT THAT THE FUNDS' NET ASSET VALUES WILL DECLINE AS THE FUNDS NEAR THEIR
TERMINATION DATES. There are several events that could cause this to occur. As
the maturity and/or refunding dates of
- --------------------------------------------------------------------------------
BONDS MATURING WITHIN A YEAR OF TERMINATION
The chart below illustrates the percentage of bonds in each fund with maturity
or refunded dates within a year of the funds' termination dates.
<TABLE>
<CAPTION>
AXT BXT CXT
Inception Inception Inception
3/27/91 9/26/91 11/27/92
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
At the Fund's Inception 0% 0% 0%
As of December 31, 1997 62% 65% 31%
</TABLE>
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1997 Annual Report 3 American Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
- --------------------------------------------------------------------------------
these bonds approach, their market prices will converge toward a price that is
at or near their maturity or refunding prices. In addition, as the funds
approach termination, we continue to sell longer maturity bonds in favor of
bonds with shorter maturities and lower coupons*** that come due closer to the
funds' termination dates. Any gains realized as a result of these sales will be
distributed to shareholders, reducing net asset value. If the shorter-maturity
bonds pay insufficient income to maintain our current dividends, the funds'
dividend reserves may be used to pay common and/or preferred dividends. See the
chart below for each fund's current accumulated realized*** gains, unrealized***
appreciation and current dividend reserve. Shareholders also should remember
that the funds are always subject to interest rate risk*** and credit risk,***
which could have an impact on net asset value.
WE ARE OPTIMISTIC ABOUT THE MUNICIPAL MARKET DURING THE COMING MONTHS, AND
AGAIN, WE DON'T ANTICIPATE EVENTS THAT WOULD CAUSE US TO CHANGE THE FUNDS'
INVESTMENT STRATEGY AS THEY MOVE TOWARD TERMINATION. However, we remain watchful
for further negative news about Asian economies or a significant increase in the
- --------------------------------------------------------------------------------
NET ASSET VALUE SUMMARY
<TABLE>
<CAPTION>
Common Shares AXT BXT CXT
Inception Inception Inception
3/27/91 9/26/91 11/27/92
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Initial Offering Price $10.00 $10.00 $10.00
Initial Offering and Underwriting Expenses
(Common and Preferred Stock) - $0.67 - $0.66 - $0.67
Accumulated Realized Gains or Losses at 12/31/97 $0.00 $0.00 $0.00
- ----------------------------------------------------------------------------------------------------------------
SUBTOTAL $9.33 $9.34 $9.33
Dividend Reserve
(Undistributed Net Investment Income) at 12/31/97 + $0.72 + $0.70 + $0.46
Unrealized Appreciation on Investments at 12/31/97 + $1.46 + $1.56 + $1.60
NET ASSET VALUE PER SHARE ON 12/31/97 $11.51 $11.60 $11.39
</TABLE>
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1997 Annual Report 4 American Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
- --------------------------------------------------------------------------------
number of municipal bond refundings due to lower interest rates and will manage
your funds accordingly.
Thank you for your investment in the American Municipal Term Trusts. We remain
committed to providing you with quality service and look forward to helping you
achieve your investment goals.
Sincerely,
/s/ Douglas J. White /s/ Ronald R. Reuss
Douglas J. White Ronald R. Reuss
Portfolio Manager Portfolio Manager
- -------------------------------------------------------------------------------
1997 Annual Report 5 American Municipal Term Trusts
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITIONS
- --------------------------------------------------------------------------------
As a percentage of total assets on December 31, 1997
AMERICAN MUNICIPAL TERM TRUST (AXT)
[PIE]
Hospital Revenue 18%
Industrial Development Revenue 1%
Sales/Excise Tax Revenue 14%
Airport Revenue 1%
Housing Revenue 1%
Electric Revenue 27%
General Obligations 16%
Other Assets 2%
Education Revenue 6%
Leasing Revenue 3%
Water/Sewer/Pollution Control Revenue 11%
AMERICAN MUNICIPAL TERM TRUST II(BXT)
[PIE]
Hospital Revenue 24%
Industrial Development Revenue 2%
Sales/Excise Tax Revenue 6%
Airport Revenue 1%
Housing Revenue 2%
Miscellaneous Revenue 5%
Electric Revenue 17%
General Obligations 16%
Multiple Utility Revenue 1%
Other Assets 2%
Education Revenue 8%
Leasing Revenue 6%
Water/Sewer/Pollution Control Revenue 10%
AMERICAN MUNICIPAL TERM TRUST III(CXT)
General Obligations 17%
Housing Revenue 5%
Other Assets 2%
Multiple Utility Revenue 4%
Hospital Revenue 20%
Electric Revenue 13%
Leasing Revenue 13%
Education Revenue 4%
Water/Sewer/Pollution Control Revenue 22%
- --------------------------------------------------------------------------------
1997 Annual Report 6 American Municipal Term Trusts
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1997
................................................................................
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II TERM TRUST III
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in securities at market value* (note 2) ........ $137,752,328 $ 121,412,209 $ 86,885,494
Cash in bank on demand deposit ............................. 59,983 124,285 211,108
Accrued interest receivable ................................ 2,521,349 1,969,749 1,173,018
------------- -------------- --------------
Total assets ............................................. 140,333,660 123,506,243 88,269,620
------------- -------------- --------------
LIABILITIES:
Common stock dividends payable (note 2) .................... 458,261 380,296 251,750
Preferred stock dividends payable (note 3) ................. 9,897 8,616 13,664
Payable for investment securities purchased on a when-issued
basis .................................................... -- 700,263 1,000,000
Accrued investment management fee .......................... 29,697 25,973 18,418
Accrued remarketing agent fee .............................. 16,825 20,295 7,941
Accrued administrative fee ................................. 17,818 15,584 11,051
------------- -------------- --------------
Total liabilities ........................................ 532,498 1,151,027 1,302,824
------------- -------------- --------------
Net assets applicable to outstanding capital stock ....... $139,801,162 $ 122,355,216 $ 86,966,796
------------- -------------- --------------
------------- -------------- --------------
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock) ......................................... $121,433,704 $ 105,777,790 $ 76,084,420
Undistributed net investment income ........................ 6,028,533 5,131,623 2,443,912
Accumulated net realized gain (loss) on investments ........ (616) (477) 2,168
Unrealized appreciation of investments ..................... 12,339,541 11,446,280 8,436,296
------------- -------------- --------------
Total - representing net assets applicable to outstanding
capital stock .......................................... $139,801,162 $ 122,355,216 $ 86,966,796
------------- -------------- --------------
------------- -------------- --------------
* Investments in securities at identified cost ............. $125,412,787 $ 109,965,929 $ 78,449,198
------------- -------------- --------------
------------- -------------- --------------
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ...................... $ 97,301,162 $ 85,355,216 $ 60,366,796
Shares of common stock outstanding (authorized 200 million
shares for each fund of $0.01 par value) ................. 8,455,000 7,355,820 5,300,000
Net asset value ............................................ $ 11.51 $ 11.60 $ 11.39
Market price ............................................... $ 11.50 $ 11.38 $ 10.94
LIQUIDATION PREFERENCE OF PREFERRED STOCK:
Net assets applicable to preferred stock (note 3) .......... $ 42,500,000 $ 37,000,000 $ 26,600,000
Shares of preferred stock outstanding (authorized 1 million
shares for each fund) .................................... 1,700 1,480 1,064
Liquidation preference per share ........................... $ 25,000 $ 25,000 $ 25,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1997 Annual Report 7 American Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Year Ended December 31, 1997
................................................................................
<TABLE>
<CAPTION>
AMERICAN
AMERICAN AMERICAN MUNICIPAL
MUNICIPAL MUNICIPAL TERM TRUST
TERM TRUST TERM TRUST II III
------------ ------------- ------------
<S> <C> <C> <C>
INCOME:
Interest ................................................... $ 8,546,099 $ 7,289,396 $ 4,922,741
------------ ------------- ------------
EXPENSES (NOTE 5):
Investment management fee .................................. 349,298 303,974 213,481
Administrative fee ......................................... 209,579 182,385 128,088
Remarketing agent fee ...................................... 108,022 94,038 67,607
Custodian and accounting fees .............................. 81,500 73,355 55,090
Transfer agent fees ........................................ 4,439 3,831 3,021
Reports to shareholders .................................... 26,710 21,781 21,148
Directors' fees ............................................ 12,641 15,055 15,055
Audit and legal fees ....................................... 44,368 44,065 44,067
Other expenses ............................................. 41,317 34,841 33,618
------------ ------------- ------------
Total expenses ........................................... 877,874 773,325 581,175
Less expenses paid indirectly .......................... (5,512) (3,946) (4,967)
------------ ------------- ------------
Total net expenses ....................................... 872,362 769,379 576,208
------------ ------------- ------------
Net investment income .................................... 7,673,737 6,520,017 4,346,533
------------ ------------- ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 353,781 507,944 390,738
Net change in unrealized appreciation or depreciation of
investments .............................................. (534,779) 564,172 2,143,340
------------ ------------- ------------
Net gain (loss) on investments ........................... (180,998) 1,072,116 2,534,078
------------ ------------- ------------
Net increase in net assets resulting from operations ... $ 7,492,739 $ 7,592,133 $ 6,880,611
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Annual Report 8 American Municipal Term Trusts
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL
TERM TRUST
-----------------------------
Year Ended Year Ended
12/31/97 12/31/96
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 7,673,737 $ 7,840,100
Net realized gain on investments ........................... 353,781 912,314
Net change in unrealized appreciation or depreciation of
investments .............................................. (534,779) (3,877,256)
------------- -------------
Net increase in net assets resulting from operations ..... 7,492,739 4,875,158
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (5,499,132) (5,499,132)
Preferred stock dividends ................................ (1,464,545) (1,410,067)
From net realized gains:
Common stock dividends ................................... (477,708) (448,115)
Preferred stock dividends ................................ (133,125) (135,256)
------------- -------------
Total distributions ...................................... (7,574,510) (7,492,570)
------------- -------------
Total decrease in net assets ........................... (81,771) (2,617,412)
Net assets at beginning of year ............................ 139,882,933 142,500,345
------------- -------------
Net assets at end of year .................................. $139,801,162 $ 139,882,933
------------- -------------
------------- -------------
Undistributed net investment income ........................ $ 6,028,533 $ 5,318,473
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1997 Annual Report 9 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
12/31/97 12/31/96
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 6,520,017 $ 6,621,493
Net realized gain on investments ........................... 507,944 298,902
Net change in unrealized appreciation or depreciation of
investments .............................................. 564,172 (2,841,031)
------------- -------------
Net increase in net assets resulting from operations ..... 7,592,133 4,079,364
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (4,563,551) (4,563,551)
Preferred stock dividends ................................ (1,264,544) (1,247,224)
From net realized gains:
Common stock dividends ................................... (393,536) (227,294)
Preferred stock dividends ................................ (115,597) (71,619)
------------- -------------
Total distributions ...................................... (6,337,228) (6,109,688)
------------- -------------
Total increase (decrease) in net assets ................ 1,254,905 (2,030,324)
Net assets at beginning of year ............................ 121,100,311 123,130,635
------------- -------------
Net assets at end of year .................................. $122,355,216 $ 121,100,311
------------- -------------
------------- -------------
Undistributed net investment income ........................ $ 5,131,623 $ 4,440,413
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1997 Annual Report 10 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
12/31/97 12/31/96
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 4,346,533 $ 4,396,666
Net realized gain on investments ........................... 390,738 230,484
Net change in unrealized appreciation or depreciation of
investments .............................................. 2,143,340 (1,679,008)
------------- -------------
Net increase in net assets resulting from operations ..... 6,880,611 2,948,142
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (3,021,000) (3,021,000)
Preferred stock dividends ................................ (873,017) (930,034)
From net realized gains:
Common stock dividends ................................... (367,290) (15,900)
Preferred stock dividends ................................ (116,919) (5,298)
------------- -------------
Total distributions ...................................... (4,378,226) (3,972,232)
------------- -------------
Total increase (decrease) in net assets ................ 2,502,385 (1,024,090)
Net assets at beginning of year ............................ 84,464,411 85,488,501
------------- -------------
Net assets at end of year .................................. $ 86,966,796 $ 84,464,411
------------- -------------
------------- -------------
Undistributed net investment income ........................ $ 2,443,912 $ 2,008,961
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1997 Annual Report 11 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) ORGANIZATION
................................
American Municipal Term Trust Inc. (AXT), American Municipal Term
Trust Inc. II (BXT) and American Municipal Term Trust Inc. III
(CXT) (the funds) are registered under the Investment Company Act
of 1940 (as amended) as diversified, closed-end management
investment companies. AXT, BXT and CXT 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
Portfolio securities for which market quotations are readily
available are valued at current market value. If market
quotations or valuations are not readily available, or if such
quotations or valuations are believed to be inaccurate,
unreliable or not reflective of market value, portfolio
securities are valued according to procedures adopted by the
funds' board of directors in good faith at "fair value", that is,
a price that the funds might reasonably expect to receive for the
security or other asset upon its current sale.
The current market value of certain fixed income securities is
provided by an independent pricing service. Fixed income
securities for which prices are not available from an independent
pricing service but where an active market exists are valued
using market quotations obtained from one or more dealers that
make markets in the securities or from a widely-used quotation
system. Short-term securities with maturities of 60 days or less
are valued at amortized cost, which approximates market value.
- ---------------------------------------------------------------------
1997 Annual Report 12 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Securities transactions are accounted for on the date 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, is recorded on an
accrual basis.
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-commitment basis may increase the volatility of the
funds' net asset value if the funds make such purchases while
remaining substantially fully invested. As of December 31, 1997,
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 $0,
$700,263, and $1,000,000, 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 intend to distribute their
taxable net investment income and realized gains, if any, to
avoid the payment of any federal excise taxes.
Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
market discount amortization. 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
- ---------------------------------------------------------------------
1997 Annual Report 13 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 as follows:
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II TERM TRUST III
----------- -------------- ---------------
<S> <C> <C> <C>
Decrease undistributed net investment
income ............................... -- $712 $17,565
Decrease accumulated net realized loss
on investments ....................... -- $712 $17,565
</TABLE>
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 business on
the ex-dividend date and preferred stock dividends are accrued
daily. Per share common stock distributions of $0.0542, $0.0517,
and $0.0475 for American Municipal Term Trust Inc., American
Municipal Term Trust Inc. II, and American Municipal Term Trust
Inc. III, respectively, were declared in December and are payable
in January. Net realized gains distributions, if any, will be
made 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
- ---------------------------------------------------------------------
1997 Annual Report 14 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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, 1997, 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, 1997, the dividend rates were 4.25%, 4.25% and 6.25%
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, 1997, were as follows:
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II TERM TRUST III
---------- -------------- ---------------
<S> <C> <C> <C>
Purchases .............................. $5,894,200 $7,095,521 $6,850,040
Proceeds from sales .................... $6,093,800 $7,793,868 $5,648,923
</TABLE>
(5) EXPENSES
................................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The funds have entered into the following agreements with Piper
Capital Management Incorporated (the advisor and administrator):
The investment advisory agreement provides the advisor with a
monthly investment management fee in an amount equal to an
annualized rate of 0.25% of the funds' average weekly net assets
(computed by subtracting liabilities, which exclude preferred
stock,
- ---------------------------------------------------------------------
1997 Annual Report 15 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
from the value of the total assets of the funds). For its fee,
the advisor 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 regulatory reporting and record-keeping services for the
funds.
REMARKETING AGENT FEE
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.
OTHER FEES AND EXPENSES
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.
(6) PENDING
ACQUISITION
................................
On December 15, 1997, Piper Jaffray Companies, Inc., the parent
company of the funds' investment advisor, announced that it had
entered into an agreement to be acquired by U.S. Bancorp. It is
anticipated that this acquisition will be completed in the second
- ---------------------------------------------------------------------
1997 Annual Report 16 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
quarter of 1998, subject to regulatory approval, the approval of
Piper Jaffray Companies shareholders and the satisfaction of
customary closing conditions.
U.S. Bancorp is a multi-state bank holding company headquartered
in Minneapolis, Minnesota with a geographic service area spanning
17 states. As of December 31, 1997, U.S. Bancorp was the 15th
largest U.S. commercial bank holding company, with assets of
nearly $71.3 billion. U.S. Bank National Association ("U.S.
Bank"), a wholly owned subsidiary of U.S. Bancorp, currently acts
as the investment advisor to 32 mutual funds (the "First American
Funds"). As of December 31, 1997, U.S. Bank, acting through its
First American Asset Management group, managed more than $55
billion in assets, including approximately $20.5 billion in
assets of the First American Funds.
Under the Investment Company Act of 1940, as amended (the "1940
Act"), consummation of the acquisition of Piper Jaffray Companies
by U.S. Bancorp will result in the assignment and automatic
termination of the funds' investment advisory agreement with
Piper Capital Management Incorporated. The 1940 Act requires that
any new investment advisory agreement for the funds be approved
by the funds' boards of directors and shareholders.
- ---------------------------------------------------------------------
1997 Annual Report 17 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) 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>
Year ended December 31,
--------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $11.52 $11.83 $10.52 $11.89 $10.57
------ ------ ------ ------ ------
Operations:
Net investment income ................ 0.91 0.93 0.94 0.93 0.92
Net realized and unrealized gains
(losses) on investments ............ (0.02) (0.35) 1.22 (1.50) 1.17
------ ------ ------ ------ ------
Total from operations .............. 0.89 0.58 2.16 (0.57) 2.09
------ ------ ------ ------ ------
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) (0.17) (0.20) (0.15) (0.12)
From net realized gains
Paid to common shareholders ........ (0.06) (0.05) -- -- --
Paid to preferred shareholders ..... (0.02) (0.02) -- -- --
------ ------ ------ ------ ------
Total distributions to
shareholders ..................... (0.90) (0.89) (0.85) (0.80) (0.77)
------ ------ ------ ------ ------
Net asset value, common stock, end of
period ............................... $11.51 $11.52 $11.83 $10.52 $11.89
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Market value, common stock, end of
period ............................... $11.50 $11.25 $11.00 $10.00 $10.88
------ ------ ------ ------ ------
------ ------ ------ ------ ------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 6.22% 3.47% 18.93% (6.34%) 18.98%
Total return, common stock, market value
(b) .................................. 8.89% 9.06% 16.91% (2.11%) 9.83%
Net assets at end of period (in
millions) ............................ $ 140 $ 140 $ 143 $ 131 $ 143
Ratio of expenses to average weekly net
assets applicable to common shares
(c) .................................. 0.90% 0.91% 0.88% 0.84% 0.85%
Ratio of net investment income to
average weekly net assets applicable
to common stock (d)(e) ............... 6.39% 6.57% 6.53% 7.04% 7.11%
Portfolio turnover rate (excluding
short-term securities) ............... 4% 9% 1% 1% 2%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 43 $ 43 $ 43 $ 43 $ 43
Asset coverage ratio (f) ............... 329% 329% 335% 309% 336%
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.63%, 0.64%,
0.61%, 0.58% AND 0.59% IN FISCAL YEARS 1997, 1996, 1995, 1994 AND 1993,
RESPECTIVELY. DIVIDEND PAYMENTS TO PREFERRED SHAREHOLDERS ARE NOT
CONSIDERED AN EXPENSE.
(d) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY NET ASSETS APPLICABLE TO
COMMON SHARES.
(e) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 5.49%,
5.59%, 5.72%, 5.80% AND 5.65% IN FISCAL YEARS 1997, 1996, 1995, 1994 AND
1993, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
- ---------------------------------------------------------------------
1997 Annual Report 18 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) 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>
Year ended December 31,
--------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $11.43 $11.71 $10.27 $11.66 $10.26
------ ------ ------ ------ ------
Operations:
Net investment income ................ 0.89 0.90 0.90 0.90 0.89
Net realized and unrealized gains
(losses) on investments ............ 0.14 (0.35) 1.37 (1.52) 1.25
------ ------ ------ ------ ------
Total from operations .............. 1.03 0.55 2.27 (0.62) 2.14
------ ------ ------ ------ ------
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) (0.17) (0.20) (0.15) (0.12)
From net realized gains
Paid to common shareholders ........ (0.05) (0.03) (0.01) -- --
Paid to preferred shareholders ..... (0.02) (0.01) -- -- --
------ ------ ------ ------ ------
Total distributions to
shareholders ..................... (0.86) (0.83) (0.83) (0.77) (0.74)
------ ------ ------ ------ ------
Net asset value, common stock, end of
period ............................... $11.60 $11.43 $11.71 $10.27 $11.66
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Market value, common stock, end of
period ............................... $11.38 $10.75 $10.63 $ 9.63 $10.75
------ ------ ------ ------ ------
------ ------ ------ ------ ------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 7.57% 3.33% 20.48% (6.80%) 20.03%
Total return, common stock, market value
(b) .................................. 12.46% 7.66% 17.28% (4.83%) 9.74%
Net assets at end of period (in
millions) ............................ $ 122 $ 121 $ 123 $ 113 $ 123
Ratio of expenses to average weekly net
assets applicable to common shares
(c) .................................. 0.91% 0.92% 0.90% 0.88% 0.87%
Ratio of net investment income to
average weekly net assets applicable
to common stock (d)(e) ............... 6.21% 6.41% 6.35% 7.01% 6.89%
Portfolio turnover rate (excluding
short-term securities) ............... 6% 6% 3% 0% 2%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 37 $ 37 $ 37 $ 37 $ 37
Asset coverage ratio (f) ............... 331% 327% 333% 304% 332%
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.64%, 0.64%,
0.62%, 0.60% AND 0.60% IN FISCAL YEARS 1997, 1996, 1995, 1994 AND 1993,
RESPECTIVELY. DIVIDEND PAYMENTS TO PREFERRED SHAREHOLDERS ARE NOT
CONSIDERED AN EXPENSE.
(d) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY NET ASSETS APPLICABLE TO
COMMON SHARES.
(e) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 5.36%,
5.48%, 5.58%, 5.72% AND 5.51% IN FISCAL YEARS 1997, 1996, 1995, 1994 AND
1993, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
- ---------------------------------------------------------------------
1997 Annual Report 19 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) 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>
Year ended December 31,
--------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $10.92 $11.11 $ 9.31 $10.95 $ 9.57
------ ------ ------ ------ ------
Operations:
Net investment income ................ 0.82 0.83 0.83 0.83 0.81
Net realized and unrealized gains
(losses) on investments ............ 0.47 (0.27) 1.73 (1.75) 1.36
------ ------ ------ ------ ------
Total from operations .............. 1.29 0.56 2.56 (0.92) 2.17
------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........ (0.57) (0.57) (0.57) (0.57) (0.57)
Paid to preferred shareholders ..... (0.16) (0.18) (0.19) (0.15) --
From net realized gains
Paid to common shareholders ........ (0.07) -- -- -- -
Paid to preferred shareholders ..... (0.02) -- -- -- -
------ ------ ------ ------ ------
Total distributions to
shareholders ..................... (0.82) (0.75) (0.76) (0.72) (0.68)
------ ------ ------ ------ ------
Offering costs and underwriting
discounts associated with the remarket
preferred stock ...................... -- -- -- -- (0.11)
------ ------ ------ ------ ------
Net asset value, common stock, end of
period ............................... $11.39 $10.92 $11.11 $ 9.31 $10.95
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Market value, common stock, end of
period ............................... $10.94 $10.38 $10.13 $ 8.50 $10.13
------ ------ ------ ------ ------
------ ------ ------ ------ ------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 10.42% 3.65% 25.93% (10.04%) 20.74%
Total return, common stock, market value
(b) .................................. 11.93% 8.38% 26.32% (10.93%) 8.35%
Net assets at end of period (in
millions) ............................ $ 87 $ 84 $ 85 $ 76 $ 85
Ratio of expenses to average weekly net
assets applicable to common shares
(c) .................................. 0.99% 1.01% 0.98% 0.96% 0.91%
Ratio of net investment income to
average weekly net assets applicable
to common stock (d)(e) ............... 5.91% 6.08% 6.05% 6.88% 6.85%
Portfolio turnover rate (excluding
short-term securities) ............... 7% 3% 5% 3% 1%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 27 $ 27 $ 27 $ 27 $ 27
Asset coverage ratio (f) ............... 327% 318% 321% 285% 318%
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) RATIO OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.68%, 0.69%,
0.66%, 0.64% AND 0.61% IN FISCAL YEARS 1997, 1996, 1995, 1994 AND 1993,
RESPECTIVELY. DIVIDEND PAYMENTS TO PREFERRED SHAREHOLDERS ARE NOT
CONSIDERED AN EXPENSE.
(d) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY NET ASSETS APPLICABLE TO
COMMON SHARES.
(e) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 5.09%,
5.26%, 5.38%, 5.53% AND 5.34% IN FISCAL YEARS 1997, 1996, 1995, 1994 AND
1993, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
- ---------------------------------------------------------------------
1997 Annual Report 20 American Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST December 31, 1997
........................................................................................
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 (97.5%):
COLORADO (1.5%):
Health Care Facility (FSA) (Prerefunded to 2/15/01),
7.25%, 2/15/16 .................................... $ 1,925,000(d) $ 2,136,904
-------------
DISTRICT OF COLUMBIA (3.4%):
General Obligation (MBIA) (Callable 6/1/00 at 102),
6.75%, 6/1/08 ..................................... 4,400,000 4,738,492
-------------
FLORIDA (2.4%):
Jacksonville Electric Authority (Prerefunded to
10/1/00), 7.00%, 10/1/12 .......................... 3,000,000(d) 3,273,930
-------------
GEORGIA (2.2%):
Municipal Electric Authority (MBIA) (Prerefunded to
1/1/01), 7.00%, 1/1/16 ............................ 2,840,000(d) 3,126,073
-------------
ILLINOIS (12.4%):
Chicago Motor Fuel Tax (AMBAC) (Prerefunded to
1/1/01), 7.10%, 1/1/11 ............................ 1,525,000(d) 1,682,883
Health Facility-Evangelical Hospital (FSA) (Callable
1/1/01 at 102), 7.13%, 1/1/21 ..................... 2,500,000 2,720,125
Higher Education Facility-Augustana College (Connie
Lee), 4.80%, 10/1/01 .............................. 500,000 510,885
Kankakee General Obligation (FGIC) (Callable 5/1/03
at 102), 6.88%, 5/1/11 ............................ 1,000,000 1,125,670
State Dedicated Tax-Civic Center (AMBAC) (Callable
12/15/00 at 102), 7.00%, 12/15/13 ................. 4,500,000 4,909,140
State Sales Tax Revenue (Prerefunded to 6/15/01),
6.90%, 6/15/12-6/15/13 ............................ 2,300,000(d) 2,547,020
State Sales Tax Revenue (Prerefunded to 6/15/99),
7.25%, 6/15/14 .................................... 3,650,000(d) 3,891,885
-------------
17,387,608
-------------
INDIANA (4.9%):
Hamilton S.E. School Building Corporation (AMBAC)
(Callable 1/1/01 at 102), 7.00%, 7/1/08 ........... 3,445,000 3,777,132
Indiana Bond Bank, 5.00%, 2/1/01 .................... 650,000 664,209
Marion County Convention Center (AMBAC) (Callable
6/1/01 at 102), 7.00%, 6/1/10 ..................... 345,000 379,327
Marion County Convention Center (AMBAC) (Prerefunded
to 6/1/01), 7.00%, 6/1/10 ......................... 870,000(d) 965,517
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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 ................... $ 1,000,000 $ 1,096,840
-------------
6,883,025
-------------
IOWA (0.8%):
Dubuque Hospital Revenue (Callable 1/1/02 at 102),
6.88%, 1/1/12 ..................................... 1,000,000 1,086,290
-------------
MAINE (2.4%):
Municipal Bond Bank (Prerefunded 11/1/01), 7.20%,
11/1/13 3,000,000(d) 3,371,640
-------------
MINNESOTA (0.8%):
East Grand Forks Industrial Development Revenue
(Callable 4/1/01 at 102), 8.00%, 4/1/11 ........... 1,000,000 1,096,640
-------------
NEBRASKA (0.8%):
Hospital Lease Investment Financing (MBIA)
(Prerefunded to 3/1/01), 7.00%, 3/1/06 ............ 1,000,000(d) 1,104,450
-------------
NEVADA (6.3%):
Clark County School District (MBIA) (Prerefunded to
6/1/01), 7.00%, 6/1/09 ............................ 3,000,000(d) 3,302,250
University of Nevada Revenue (AMBAC) (Prerefunded to
7/1/00), 7.13%, 7/1/16 ............................ 2,720,000(d) 2,968,581
Washoe County Limited Tax General Obligation,
Zero-Coupon (MBIA), 7.12%, 7/1/06 ................. 3,725,000(b) 2,534,900
-------------
8,805,731
-------------
NEW YORK (2.9%):
New York City General Obligation, 5.00%, 8/1/01 ..... 4,000,000 4,090,600
-------------
PENNSYLVANIA (3.1%):
Higher Education-Duquesne University (MBIA) (Callable
4/1/01 at 100), 7.00%, 4/1/10 ..................... 1,000,000 1,078,470
Sayre Healthcare Facility (AMBAC) (Callable 3/1/01 at
102), 7.00%, 3/1/11 ............................... 3,000,000 3,268,140
-------------
4,346,610
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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 (3.8%):
Health and Education Facility Revenue (Callable
5/1/01 at 102), 7.00%, 11/1/07 .................... $ 3,000,000 $ 3,259,800
Rapid City Area School District (MBIA) (Prerefunded
to 1/1/02), 7.20%, 1/1/11 ......................... 1,770,000(d) 1,976,417
-------------
5,236,217
-------------
TENNESSEE (2.8%):
Bristol Health and Education Facility (FGIC)
(Prerefunded to 3/1/01), 7.00%, 9/1/11 ............ 1,000,000(d) 1,103,190
Housing Development Authority (FSA) (Callable 7/1/00
at 103), 7.60%, 7/1/16 ............................ 1,700,000 1,797,801
Memphis-Shelby County Airport Authority (MBIA), AMT,
5.25%, 2/15/01 .................................... 1,000,000(e) 1,033,040
-------------
3,934,031
-------------
TEXAS (17.7%):
Austin Utility System Revenue (MBIA) (Prerefunded to
5/15/01), 8.00%, 11/15/16 ......................... 500,000(d) 561,300
Corpus Christi Utility System Revenue (FGIC)
(Callable 7/15/00 at 102), 7.00%, 7/15/10 ......... 1,500,000 1,622,190
Harris County Health Facilities (FSA) (Callable
10/1/01 at 102), 6.85%, 10/1/06 ................... 2,000,000 2,213,600
Houston Hotel Occupancy (FGIC) (Prerefunded to
7/1/01), 7.00%, 7/1/15 ............................ 4,700,000(d) 5,142,646
Houston Independent School District, Zero-Coupon
(AMBAC), 7.14%, 8/15/06 ........................... 4,285,000(b) 2,899,917
Lower Colorado River Authority (AMBAC) (Callable
1/1/01 at 102), 7.00%, 1/1/11 ..................... 415,000 452,545
Lower Colorado River Authority (AMBAC) (Prerefunded
to 1/1/01), 7.00%, 1/1/11 ......................... 585,000(d) 643,927
Lower Colorado River Authority, Zero-Coupon (AMBAC),
7.17%, 1/1/06 ..................................... 765,000(b) 532,517
Municipal Power Agency, Zero-Coupon (AMBAC), 7.11%,
9/1/06 ............................................ 3,000,000(b) 2,026,200
San Antonio Electric and Gas, Zero-Coupon (FGIC),
7.11%, 2/1/06 ..................................... 3,000,000(b) 2,080,410
Trinity River Authority (AMBAC) (Prerefunded to
8/1/00), 7.10%, 8/1/16 ............................ 2,250,000(d) 2,418,908
Weatherford Utility System, Water Revenue (MBIA)
(Prerefunded to 9/1/01), 7.00%, 9/1/11 ............ 3,750,000(d) 4,118,475
-------------
24,712,635
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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 $ 3,957,790
-------------
WASHINGTON (18.1%):
Chelan County Public Utilities District (Callable
7/1/03 at 100), AMT, 7.60%, 7/1/25 ................ 3,375,000(e) 3,773,554
Chelan County Public Utilities District (MBIA), AMT,
5.20%-5.35%, 7/1/00-7/1/01 ........................ 885,000(e) 910,814
King and Snohomish Counties School District (FGIC)
(Prerefunded to 12/1/00), 7.00%, 12/1/09 .......... 1,450,000(d) 1,567,320
Public Power Supply System (Prerefunded to 1/1/00),
7.25%, 7/1/15 ..................................... 1,435,000(d) 1,550,446
Public Power Supply System (Prerefunded to 1/1/01),
7.63%, 7/1/10 ..................................... 5,000,000(d) 5,585,100
Public Power Supply System (Prerefunded to 7/1/00),
7.38%, 7/1/12 ..................................... 1,550,000(d) 1,699,606
Public Power Supply System, Zero-Coupon (BIG), 7.15%,
7/1/06 1,500,000(b) 1,012,320
Public Power Supply System, Zero-Coupon (FGIC),
7.17%, 7/1/06 ..................................... 5,000,000(b) 3,374,400
Public Power Supply Systems, 5.00%-5.25%,
7/1/00-7/1/01 ..................................... 3,500,000 3,589,480
Seattle Water Revenue (Prerefunded to 5/1/00), 7.25%,
5/1/17 ............................................ 2,000,000(d) 2,180,120
-------------
25,243,160
-------------
WEST VIRGINIA (3.5%):
School Building Authority (MBIA) (Prerefunded to
7/1/00), 7.25%, 7/1/15 ............................ 4,000,000(d) 4,378,320
State Water Development Authority (FSA) (Callable
11/1/01 at 102), 7.00%, 11/1/11 ................... 500,000 555,135
-------------
4,933,455
-------------
WISCONSIN (4.9%):
Health and Education Facilities-Gundersen Clinic
(FSA), 5.50%, 12/1/01 ............................. 2,500,000 2,624,450
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Callable 8/15/00 at 102), 7.25%,
8/15/19 ........................................... 105,000 113,983
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Prerefunded to 8/15/00), 7.25%,
8/15/19 ........................................... 1,570,000(d) 1,721,882
Health and Education Facility (MBIA) (Prerefunded to
6/1/00), 7.00%, 6/1/20 ............................ 1,600,000(d) 1,737,056
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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), AMT, 6.75%, 6/1/12 ................ $ 650,000(e) $ 689,676
-------------
6,887,047
-------------
Total Municipal Long-Term Securities
(cost: $124,012,787) ............................ 136,352,328
-------------
MUNICIPAL SHORT-TERM SECURITIES (1.0%):
MICHIGAN (0.6%):
Flint Hospital Building Authority, 4.15%, 7/1/15 .... 800,000(c) 800,000
-------------
NEW YORK (0.3%):
New York City, Municipal Water Authority, 4.15%,
6/15/25 ........................................... 500,000(c) 500,000
-------------
NORTH DAKOTA (0.1%):
Grand Forks, Health Care, United Hospital, 5.10%,
12/1/25 ........................................... 100,000(c) 100,000
-------------
Total Municipal Short-Term Securities
(cost: $1,400,000) .............................. 1,400,000
-------------
Total Investments in Securities
(cost: $125,412,787) (f) ........................ $ 137,752,328
-------------
-------------
</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, 1997. 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) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1997, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$6,407,084, WHICH REPRESENTS 4.58% OF NET ASSETS.
(f) ON DECEMBER 31, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $125,330,293. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 12,422,035
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 12,422,035
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 25 American Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST II December 31, 1997
........................................................................................
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 (97.5%):
FLORIDA (4.7%):
Manatee County, Zero-Coupon (MBIA), 6.91%,
10/1/07 ........................................... $ 2,995,000(b) $ 1,944,414
University Community Hospital (FSA) (Prerefunded to
9/1/00), 7.50%, 9/1/11 ............................ 3,500,000(e) 3,868,235
-------------
5,812,649
-------------
ILLINOIS (23.3%):
Belleville General Obligation (FGIC) (Prerefunded to
12/1/01), 7.13%, 12/1/08 .......................... 1,000,000(e) 1,108,960
Carbondale General Obligation (FGIC) (Prerefunded to
5/1/01), 6.90%, 5/1/12 ............................ 3,200,000(e) 3,490,336
Central Lake County, Zero-Coupon (MBIA), 6.98%,
5/1/07 ............................................ 2,370,000(b) 1,538,983
Chicago Motor Fuel Tax (AMBAC) (Prerefunded to
1/1/01), 7.10%, 1/1/11 ............................ 1,500,000(e) 1,655,295
Chicago Wastewater Revenue (FGIC) (Prerefunded to
11/15/00), 6.75%, 11/15/20 ........................ 2,000,000(e) 2,181,880
Cook County General Obligation (AMBAC) (Prerefunded
to 11/1/01), 6.75%, 11/1/18 ....................... 5,000,000(e) 5,553,650
Decatur, Zero-Coupon (AMBAC), 6.98%, 10/1/07 ........ 1,250,000(b) 796,200
Health Facility-Evangelical Hospital (escrowed to
maturity) (Callable 4/15/02 at 102), 6.75%,
4/15/12-4/15/17 ................................... 2,310,000 2,743,032
Health Facility-Evangelical Hospital (Prerefunded to
4/15/02), 6.75%, 4/15/12-4/15/17 .................. 1,190,000(e) 1,327,231
Health Facility-Highland Park Hospital (FGIC), 5.30%,
10/1/02 . 1,265,000 1,322,051
Higher Education Facility-Augustana College (Connie
Lee), 4.90%, 10/1/02 .............................. 500,000 514,355
Kane County Public Building Authority (MBIA)
(Prerefunded to 12/1/99), 6.88%, 12/1/10 .......... 1,000,000(e) 1,053,720
Kendall, Kane, and Will Counties, Zero-Coupon (FGIC),
6.96%, 3/1/07 ..................................... 975,000(b) 638,030
Lake County Water and Sewer System (AMBAC)
(Prerefunded to 12/1/01), 6.75%,
12/1/08-12/1/09 ................................... 4,215,000(e) 4,617,575
-------------
28,541,298
-------------
INDIANA (13.3%):
Boonville School Building Corporation (Callable
7/1/02 at 102), 6.90%, 7/1/09 ..................... 2,000,000 2,236,740
Indiana Bond Bank, 5.15%, 2/1/02 .................... 900,000 927,486
Indiana University, Zero-Coupon (AMBAC), 7.07%,
8/1/07 ............................................ 3,180,000(b) 2,041,210
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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>
Lake Central Multi-District School Building
Corporation (Prerefunded to 7/15/01), 7.00%,
1/15/14-1/15/18 ................................... $ 2,500,000(e) $ 2,775,000
Noblesville/Hamilton County School Building
Corporation (Prerefunded to 2/1/01), 7.00%,
2/1/13 ............................................ 1,000,000(e) 1,101,350
Port Commission, Cargill Inc. Project (Callable
5/1/02 at 102), 6.88%, 5/1/12 ..................... 450,000(c) 495,009
Purdue University (AMBAC) (Prerefunded to 7/1/01),
7.00%, 7/1/14 ..................................... 3,000,000(e) 3,334,620
St. Joseph County Hospital Authority (MBIA) (Callable
12/1/01 at 102), 7.00%, 12/1/12 ................... 3,000,000 3,307,710
-------------
16,219,125
-------------
IOWA (2.9%):
Mason City Hospital Facilities (FSA) (Prerefunded to
8/15/01), 6.88%, 8/15/09 .......................... 1,265,000(e) 1,404,491
Polk County Health Facilities (MBIA) (Prerefunded to
11/1/01), 7.10%, 11/1/09 .......................... 1,895,000(e) 2,111,921
-------------
3,516,412
-------------
KENTUCKY (1.0%):
Owensboro Electric Light and Power, Zero-Coupon
(AMBAC), 6.91%, 1/1/07 ............................ 1,775,000(b) 1,186,073
-------------
LOUISIANA (2.9%):
New Orleans General Obligation, Zero-Coupon (AMBAC),
7.01%, 9/1/07 ..................................... 5,000,000(b) 3,242,750
Parrish of St. Martin, Cargill Inc. Project (Callable
10/1/02 at 102), 6.63%, 10/1/12 ................... 300,000(c) 326,940
-------------
3,569,690
-------------
MICHIGAN (0.9%):
State Housing Development Authority (FSA) (Callable
10/15/02 at 103), 6.85%, 10/15/18 ................. 1,000,000 1,076,110
-------------
MONTANA (2.8%):
State Board of Investment (MBIA) (escrowed to
maturity) (Callable 6/1/01 at 102), 6.88%,
6/1/20 ............................................ 3,000,000 3,426,046
-------------
NEVADA (1.7%):
Clark County School District (FGIC), 5.75%,
6/15/02 ........................................... 2,000,000 2,129,920
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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>
NEW HAMPSHIRE (0.8%):
Single Family Housing Authority (Callable 7/1/03 at
102), 5.85%, 7/1/10 ............................... $ 1,000,000 $ 1,037,430
-------------
NEW JERSEY (1.8%):
State Educational Facilities Authority (Callable
7/1/01 at 102), 6.88%, 7/1/10 ..................... 2,000,000 2,160,080
-------------
NEW YORK (0.8%):
New York City General Obligation, 5.10%, 8/1/02 ..... 1,000,000 1,028,310
-------------
NORTH DAKOTA (4.8%):
Bismark Hospital Revenue (AMBAC) (Callable 5/1/01 at
102), 6.90%, 5/1/06 ............................... 4,300,000 4,730,774
Grand Forks Health Care Authority (MBIA) (Callable
12/1/01 at 102), 6.63%, 12/1/10 ................... 1,000,000 1,094,930
-------------
5,825,704
-------------
SOUTH CAROLINA (1.5%):
Lexington County Health Services (FSA) (Prerefunded
to 10/1/01), 6.75%, 10/1/18 ....................... 1,600,000(e) 1,775,408
-------------
SOUTH DAKOTA (0.6%):
Health & Education Facility Revenue (AMBAC), 4.50%,
8/1/02 . 700,000(f) 703,213
-------------
TENNESSEE (1.0%):
Memphis-Shelby County Airport Authority (MBIA), AMT,
5.25%, 2/15/02 .................................... 1,235,000(g) 1,282,140
-------------
TEXAS (8.1%):
Harris County Health Facilities (FSA) (Callable
10/1/01 at 102), 7.00%, 10/1/14 ................... 2,225,000 2,449,992
Houston Hotel Occupancy (FGIC) (Prerefunded to
7/1/01), 7.00%, 7/1/15 ............................ 5,095,000(e) 5,574,847
Houston Water and Sewer, Zero-Coupon (AMBAC), 6.91%,
12/1/07 ........................................... 3,000,000(b) 1,905,420
-------------
9,930,259
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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 (17.0%):
Chelan County Public Utilities District (Callable
7/1/03 at 100), AMT, 7.60%, 7/1/25 ................ $ 3,000,000(g) $ 3,354,270
Chelan County Public Utilities District (MBIA), AMT,
5.45%, 7/1/02 ..................................... 385,000(g) 403,661
Clark County Public Utility District (FGIC)
(Prerefunded to 1/1/01), 6.50%, 1/1/11 ............ 2,000,000(e) 2,173,480
King and Snohomish Counties School District (FGIC)
(Prerefunded to 12/1/02), 6.63%, 12/1/12 .......... 300,000(e) 332,241
Public Power Supply System, 5.25%, 7/1/01 ........... 2,000,000 2,066,700
Public Power Supply System (Prerefunded to 1/1/00),
7.25%, 7/1/15 ..................................... 3,875,000(e) 4,186,744
Public Power Supply System (Prerefunded to 7/1/00),
7.00%-7.38%, 7/1/11-7/1/12 ........................ 5,225,000(e) 5,723,136
Public Power Supply System (Prerefunded to 7/1/01),
6.75%, 7/1/11 ..................................... 1,350,000(e) 1,486,404
Snohomish County Solid Waste Revenue (MBIA) (Callable
12/1/01 at 102), 7.00%, 12/1/10 ................... 1,000,000 1,110,190
-------------
20,836,826
-------------
WEST VIRGINIA (4.1%):
School Building Authority (MBIA) (Prerefunded to
7/1/00), 6.75%, 7/1/17 ............................ 2,500,000(e) 2,707,000
State Water Development Authority (Prerefunded to
11/1/01), 7.30%-7.40%, 11/1/11-11/1/19 ............ 2,000,000(e) 2,260,960
-------------
4,967,960
-------------
WISCONSIN (3.5%):
Health and Education Facilities-Gundersen Clinic
(FSA), 5.10%, 12/1/02 ............................. 3,000,000 3,117,360
Neenah Industrial Development Revenue (Callable
6/1/00 at 101), AMT, 6.75%, 6/1/12 ................ 1,150,000(g) 1,220,196
-------------
4,337,556
-------------
Total Municipal Long-Term Securities
(cost: $107,915,929) ............................ 119,362,209
-------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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>
MUNICIPAL SHORT-TERM SECURITIES (1.7%):
INDIANA (1.5%):
Hospital Equipment Finance Authority, 3.75%,
12/1/15 ........................................... $ 1,850,000(d) $ 1,850,000
-------------
NEW YORK (0.2%):
New York City, Series B, 4.15%, 10/1/21 ............. 100,000(d) 100,000
New York City, Series C, 4.15%, 10/1/23 ............. 100,000(d) 100,000
-------------
200,000
-------------
Total Municipal Short-Term Securities
(cost: $2,050,000) .............................. 2,050,000
-------------
Total Investments in Securities
(cost: $109,965,929) (h) ........................ $ 121,412,209
-------------
-------------
</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 AND ARE CONSIDERED TO BE ILLIQUID. ON DECEMBER 31, 1997, THE
TOTAL MARKET VALUE OF THESE INVESTMENTS WAS $821,949 OR .67% OF TOTAL NET
ASSETS.
(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, 1997. 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, 1997, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $700,263.
(g) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1997, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$6,260,267, WHICH REPRESENTS 5.12% OF NET ASSETS.
(h) ON DECEMBER 31, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $109,879,399. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 11,532,810
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 11,532,810
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 30 American Municipal Term Trusts
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST III December 31, 1997
.......................................................................................
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 (98.9%):
ALABAMA (0.6%):
Agricultural and Mechanical University Revenue (MBIA)
(Callable 11/1/02 at 102), 6.45%, 11/1/17 ......... $ 500,000 $ 550,415
------------
CALIFORNIA (1.2%):
State Housing Finance Revenue (FHA), 4.80%,
8/1/03 ............................................ 1,000,000(e) 1,009,440
------------
COLORADO (1.2%):
Snowmass Village Multifamily Housing (FSA) (Callable
12/15/02 at 102), 6.25%, 12/15/16 ................. 1,000,000 1,051,080
------------
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 1,088,150
General Obligation (MBIA), 4.75%, 6/1/03 ............ 1,960,000 2,001,493
------------
3,089,643
------------
FLORIDA (0.7%):
Broward County School District, Zero-Coupon (MBIA),
6.55%, 2/15/08 .................................... 1,000,000(b) 634,820
------------
HAWAII (1.5%):
State General Obligation (FGIC), 4.80%, 3/1/03 ...... 1,250,000 1,283,275
------------
ILLINOIS (18.4%):
Chicago Wastewater Revenue (FGIC) (Prerefunded to
1/1/03), 6.35%, 1/1/22 ............................ 1,000,000(d) 1,112,070
Health Facility-Alexian Brothers Medical Center
(MBIA) (Callable 1/1/02 at 102), 6.38%, 1/1/15 .... 1,125,000 1,212,525
Health Facility-Elmhurst Memorial Hospital (FGIC)
(Callable 1/1/02 at 102), 6.50%, 1/1/12 ........... 1,190,000 1,287,961
Health Facility-Highland Park Hospital (FGIC), 5.40%,
10/1/03 ........................................... 1,000,000 1,055,440
Health Facility-Lutheran General Systems (FSA)
(escrowed to maturity) (Callable 4/1/03 at 102),
6.13%, 4/1/12 ..................................... 1,000,000 1,111,210
Henry Hospital District (AMBAC) (Callable 12/1/02 at
100), 6.60%, 12/1/17 .............................. 2,000,000 2,171,380
Higher Education Facility-Augustana College (Connie
Lee), 5.00%, 10/1/03 .............................. 330,000 341,550
Lake County Housing and Finance Corporation (FHA)
(Callable 11/1/02 at 100), 6.70%, 11/1/14 ......... 2,000,000 2,112,600
Rochelle Water and Sewer Revenue (Callable 5/1/02 at
102), 7.15%, 5/1/14 ............................... 2,000,000 2,209,340
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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>
State General Obligation (FSA) (Callable 10/1/02 at
102), 6.25%, 10/1/12 .............................. $ 3,100,000 $ 3,375,435
------------
15,989,511
------------
INDIANA (16.8%):
Crawfordsville School Building Corporation (Callable
1/1/03 at 102), 6.25%, 7/1/11 ..................... 1,500,000 1,619,340
Freemont Middle School Building (AMBAC) (Prerefunded
to 3/15/02), 6.75%, 3/15/13 ....................... 3,000,000(d) 3,325,500
Health Facilities-Community Hospital Project (MBIA)
(Callable 5/1/02 at 102), 6.40%, 5/1/12 ........... 5,000,000 5,415,200
Health Facilities-Methodist Hospital (AMBAC)
(escrowed to maturity) (Callable 9/1/02 at 102),
5.75%, 9/1/15 ..................................... 1,750,000 1,913,030
Lake County Redevelopment Authority (MBIA) (Callable
2/1/05 at 102), 6.45%, 2/1/11 ..................... 1,600,000 1,781,776
Patoka Lake Regional Water and Sewer District (AMBAC)
(Callable 1/1/04 at 101), 6.45%, 1/1/15 ........... 500,000 550,450
------------
14,605,296
------------
IOWA (1.5%):
Cedar Rapids Hospital Facilities (FGIC) (Callable
8/15/03 at 102), 6.13%, 8/15/13 ................... 1,200,000 1,297,080
------------
KANSAS (1.9%):
Kansas City Utility Systems, Zero-Coupon (AMBAC),
6.40%, 3/1/08 ..................................... 1,060,000(b) 668,245
Kansas City Utility Systems, Zero-Coupon (AMBAC)
(escrowed to maturity), 6.40%, 3/1/08 ............. 1,515,000(b) 943,284
------------
1,611,529
------------
MAINE (2.5%):
Water and Sewer Revenue (Callable 11/1/02 at 102),
6.60%, 11/1/15 .................................... 2,000,000 2,208,120
------------
MICHIGAN (0.5%):
State Building Authority (Callable 10/1/02 at 102),
6.25%, 10/1/12 .................................... 400,000 437,340
------------
NEVADA (1.2%):
Clark County School District (FGIC), 5.75%,
6/15/03 ........................................... 1,000,000 1,073,540
------------
NEW MEXICO (1.3%):
Las Cruces Health Facility-Evangelical Lutheran
Project (FSA) (Callable 12/1/02 at 102), 6.45%,
12/1/17 ........................................... 1,000,000 1,097,450
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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>
NEW YORK (2.1%):
State General Obligation, 5.20%, 8/1/03 ............. $ 1,735,000 $ 1,793,435
------------
NORTH DAKOTA (3.8%):
Mercer County Pollution Control Revenue (AMBAC),
7.20%, 6/30/13 .................................... 2,700,000 3,302,424
------------
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 1,309,488
------------
SOUTH CAROLINA (2.0%):
Piedmont Municipal Power Agency (MBIA) (Callable
1/1/03 at 102), 6.30%, 1/1/14 ..................... 1,600,000 1,751,024
------------
SOUTH DAKOTA (4.9%):
Heartland Consumers Power District (FSA), 6.00%,
1/1/17 ............................................ 85,000 95,125
State Building Authority (AMBAC) (escrowed to
maturity), 6.63%, 9/1/12 .......................... 3,600,000 4,134,384
------------
4,229,509
------------
TEXAS (20.6%):
Austin Utility System Revenue, Zero-Coupon (MBIA),
6.53%, 11/15/08 ................................... 5,000,000(b) 3,020,500
Houston Water and Sewer Revenue (FSA) (Callable
12/1/02 at 102), 6.38%, 12/1/14 ................... 2,000,000 2,180,600
Montgomery County Hospital District (FSA)
(Prerefunded to 4/1/02), 6.63%, 4/1/17 ............ 3,300,000(d) 3,666,993
Pflugerville Independent School District (Callable
8/15/04 at 100), 5.75%, 8/15/15 ................... 975,000 1,019,080
San Antonio Electric and Gas, Zero-Coupon (FGIC),
6.40%, 2/1/08 ..................................... 4,500,000(b) 2,819,700
San Antonio Water System Revenue (MBIA) (Callable
5/15/02 at 102), 6.50%, 5/15/10 ................... 3,000,000 3,293,730
State Capital Appreciation, Zero-Coupon (FGIC),
6.43%, 4/1/08 ..................................... 3,100,000(b) 1,927,518
------------
17,928,121
------------
WASHINGTON (8.0%):
Chelan County Public Utilities District (MBIA), AMT,
5.55%, 7/1/03 ..................................... 305,000(f) 322,961
Public Power Supply System (Callable 7/1/02 at 102),
6.25%, 7/1/12 ..................................... 3,555,000 3,888,779
Public Power Supply System (Prerefunded to 7/1/01),
6.50%, 7/1/18 ..................................... 2,515,000(d) 2,748,845
------------
6,960,585
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 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>
WEST VIRGINIA (3.2%):
Clarksburg Water Revenue (Asset Guaranty) (Callable
9/1/02 at 102), 6.25%, 9/1/14 ..................... $ 2,620,000 $ 2,822,369
------------
Total Municipal Long-Term Securities
(cost: $77,599,198) ............................. 86,035,494
------------
MUNICIPAL SHORT-TERM SECURITIES (1.0%):
ILLINOIS (0.1%):
Health Facilities Authority, 4.15%, 1/1/16 .......... 100,000(c) 100,000
------------
NEW YORK (0.2%):
New York City, Municipal Water Authority, 4.15%,
6/15/25 ........................................... 150,000(c) 150,000
------------
NORTH DAKOTA (0.2%):
Grand Forks, Health Care, United Hospital, 5.10%,
12/1/16 ........................................... 200,000(c) 200,000
------------
WISCONSIN (0.5%):
Health and Education Facilities Authority, 4.10%,
8/15/16 ........................................... 400,000(c) 400,000
------------
Total Municipal Short-Term Securities
(cost: $850,000) ................................ 850,000
------------
Total Investments in Securities
(cost: $78,449,198) (g) ......................... $ 86,885,494
------------
------------
</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, 1997. 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, 1997, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $1,000,000.
(f) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1997, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$322,961, WHICH REPRESENTS .37% OF NET ASSETS.
(g) ON DECEMBER 31, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $78,412,431. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 8,473,063
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 8,473,063
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1997 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, 1997, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period ended December 31, 1997, and the financial
highlights for each of the years in the five-year period ended December 31,
1997. 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, 1997, 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 6, 1998
- ---------------------------------------------------------------------
1997 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 advisor on how to report these distributions at the state
and local levels.
COMMON 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
PAYABLE DATE TERM TRUST TERM TRUST II TERM TRUST III
- ---------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C>
January 10, 1997 ....................... $0.0542 $0.0517 $0.0475
February 26, 1997 ...................... 0.0542 0.0517 0.0475
March 26, 1997 ......................... 0.0542 0.0517 0.0475
April 23, 1997 ......................... 0.0542 0.0517 0.0475
May 28, 1997 ........................... 0.0542 0.0517 0.0475
June 25, 1997 .......................... 0.0542 0.0517 0.0475
July 23, 1997 .......................... 0.0542 0.0517 0.0475
August 27, 1997 ........................ 0.0542 0.0517 0.0475
September 24, 1997 ..................... 0.0542 0.0517 0.0475
October 29, 1997 ....................... 0.0542 0.0517 0.0475
November 25, 1997 ...................... 0.0542 0.0517 0.0475
December 17, 1997 ...................... 0.0542 0.0517 0.0475
----------- -------------- ---------------
Total .............................. $0.6504 $0.6204 $0.5700
----------- -------------- ---------------
----------- -------------- ---------------
</TABLE>
COMMON STOCK SHORT-TERM GAINS
(TAXABLE AS ORDINARY DIVIDENDS)
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II TERM TRUST III
- ---------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C>
December 17, 1997 ...................... $ -- $0.0009 $ --
----------- -------------- ---------------
----------- -------------- ---------------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 36 American Municipal Term Trusts
<PAGE>
Federal Income Tax Information (continued)
- --------------------------------------------------------------------------------
COMMON STOCK LONG-TERM GAINS
(TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II TERM TRUST III
- ---------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C>
December 17, 1997 ...................... $0.0565 $0.0526 $0.0693
----------- -------------- ---------------
----------- -------------- ---------------
</TABLE>
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 TRUST TERM TRUST II TERM TRUST III
----------- -------------- ---------------
<S> <C> <C> <C>
Total .............................. $ 861.5000 $854.4200 $820.5000
----------- -------------- ---------------
----------- -------------- ---------------
</TABLE>
PREFERRED STOCK SHORT-TERM GAINS
(TAXABLE AS ORDINARY DIVIDENDS)
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II TERM TRUST III
- ---------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C>
December 2, 1997 ....................... $ -- $0.4600 $ --
December 9, 1997 ....................... -- 0.4500 --
December 16, 1997 ...................... -- 0.3800 --
----------- -------------- ---------------
Total .............................. $ -- $1.2900 $ --
----------- -------------- ---------------
----------- -------------- ---------------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 37 American Municipal Term Trusts
<PAGE>
Federal Income Tax Information (continued)
- --------------------------------------------------------------------------------
PREFERRED STOCK LONG-TERM GAINS
(TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II TERM TRUST III
- ---------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C>
December 2, 1997 ....................... $ -- $27.1100 $ --
December 4, 1997 ....................... 34.5200 -- --
December 8, 1997 ....................... -- -- 26.6100
December 9, 1997 ....................... -- 27.1200 --
December 11, 1997 ...................... 26.6100 -- --
December 15, 1997 ...................... -- -- 26.6100
December 16, 1997 ...................... -- 22.5900 --
December 18, 1997 ...................... 17.1800 -- --
December 22, 1997 ...................... -- -- 27.0900
December 29, 1997 ...................... -- -- 28.0500
January 5, 1998 ........................ -- -- 3.5700
----------- -------------- ---------------
Total .............................. $78.3100 $76.8200 $111.9300
----------- -------------- ---------------
----------- -------------- ---------------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 38 American Municipal Term Trusts
<PAGE>
Shareholder Update
- --------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
20, 1997. Each matter voted upon at that 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 "FOR" AUTHORITY TO VOTE
------------- ------------------
<S> <C> <C>
AMERICAN MUNICIPAL TERM TRUST
David T. Bennett........................ 1,048 39
William H. Ellis........................ 1,048 39
AMERICAN MUNICIPAL TERM TRUST II
David T. Bennett........................ 954 3
William H. Ellis........................ 954 3
AMERICAN MUNICIPAL TERM TRUST III
David T. Bennett........................ 628 3
William H. Ellis........................ 628 3
</TABLE>
(2) The funds' preferred and common shareholders, voting as a
class, elected the following directors:
<TABLE>
<CAPTION>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- ------------------
<S> <C> <C>
AMERICAN MUNICIPAL TERM TRUST
Jaye F. Dyer............................ 5,630,224 139,860
Karol D. Emmerich....................... 5,631,324 138,760
Luella G. Goldberg...................... 5,630,324 139,760
David A. Hughey......................... 5,631,324 138,760
George Latimer.......................... 5,630,898 139,186
AMERICAN MUNICIPAL TERM TRUST II
Jaye F. Dyer............................ 4,829,460 63,829
Karol D. Emmerich....................... 4,829,328 63,961
Luella G. Goldberg...................... 4,829,460 63,829
David A. Hughey......................... 4,830,460 62,829
George Latimer.......................... 4,828,328 64,961
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 39 American Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- ------------------
AMERICAN MUNICIPAL TERM TRUST III
<S> <C> <C>
Jaye F. Dyer............................ 3,338,526 63,267
Karol D. Emmerich....................... 3,338,526 63,267
Luella G. Goldberg...................... 3,338,526 63,267
David A. Hughey......................... 3,338,526 63,267
George Latimer.......................... 3,338,526 63,267
</TABLE>
(3) The funds' preferred and common shareholders, voting as a
class, ratified the selection by a majority of the
independent members of the funds' Boards of Directors of KPMG
Peat Marwick LLP as the independent public accountants for
the funds for the fiscal year ending December 31, 1997. The
following votes were cast regarding this matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
------------- ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
AXT..................................... 5,672,170 9,689 88,225 --
BXT..................................... 4,837,284 5,169 50,835 --
CXT..................................... 3,323,769 26,652 51,372 --
</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
- ---------------------------------------------------------------------
1997 Annual Report 40 American Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
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.
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 and will furnish written confirmation of all
transactions, including information you need for tax records.
Reinvested shares in your account will be held by IFTC in
noncertificated form in your name.
- ---------------------------------------------------------------------
1997 Annual Report 41 American Municipal Term Trusts
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
TAX INFORMATION
Distributions invested in additional shares of the fund are
subject to income tax, just as they would be if received in cash.
Shareholders, as required by the Internal Revenue Service, will
receive Form 1099 regarding the federal tax status of the prior
year's distributions.
PLAN WITHDRAWAL
If you hold your shares in certificate form, you may terminate
your participation in the plan at any time by giving written
notice to IFTC. If your shares are registered in your brokerage
firm's name, you may terminate your participation via verbal or
written instructions to your investment professional. Written
instructions should include your name and address as they appear
on the certificate or account.
If notice is received at least 10 days before the record date,
all future distributions will be paid directly to the shareholder
of record.
If your shares are 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.
- ---------------------------------------------------------------------
1997 Annual Report 42 American Municipal Term Trusts
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
1997 Annual Report 43 American Municipal Term Trusts
<PAGE>
GLOSSARY OF TERMS***
- --------------------------------------------------------------------------------
Advance refunding
The sale of new bonds (a refunding issue) in advance, usually by some years, of
the first call date of the old bonds (issue to be refunded). The refunding issue
would normally have a lower rate than the issue to be refunded and the proceeds
from the sale of the refunding issue would be invested, usually in government
securities, until the higher-rate bonds become callable.
Coupon
The interest rate on a bond that the issuer promises to pay to the holder until
the bond matures or resets its rate. It is expressed as an annual percentage of
face value.
Credit risk
The risk that a bond issuer will not make timely principal and interest payments
and a loss to the investor will result.
Interest rate risk
The risk that after an investor purchases a bond, interest rates will rise and
the price of the bond will go down.
Preferred stock
The preferred stock issued by AXT, BXT and CXT 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.
Refunded date
The specific date when a bond is redeemed before maturity.
Realized gains
Profits earned by a fund from the sale of a security at a market price that is
higher than its cost basis.
Unrealized appreciation
A bond is said to be trading at unrealized gains when its current market price
is higher than its cost basis.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
1997 Annual Report 44 American Municipal Term Trusts
<PAGE>
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, Retired 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 ADVISOR
- --------------------------------------------------------------------------------
Piper Capital Management Incorporated
222 South Ninth Street, Minneapolis, MN 55402-3804
CUSTODIAN, ACCOUNTING AND TRANSFER AGENT
- --------------------------------------------------------------------------------
Investors Fiduciary Trust Company
801 Pennsylvania, Kansas City, MO 64105-1307
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
KPMGPeat Marwick LLP
4200 Norwest Center, Minneapolis, MN 55402
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Dorsey & Whitney LLP
220 South Sixth Street, Minneapolis, MN 55402
FOR MORE INFORMATION
BY PHONE [GRAPHIC]
800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer your
questions.
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 funds' 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 800 866-7778, or mail a request to us.
On-Line [GRAPHIC]
http://www.piperjaffray.com/
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
<PAGE>
[LOGO]
PIPER CAPITAL MANAGEMENT INCORPORATED
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM 100% TOTAL RECOVERED FIBER,
INCLUDES 15% POST-CONSUMER WASTE.
#11200 2/1998 066-98
Bulk Rate
U.S. Postage
PAID
Permit No. 3008
Mpls, MN
