<PAGE>
1998
ANNUAL REPORT
AMERICAN MUNICIPAL
TERM TRUSTS
AXT
BXT
CXT
[LOGO] FIRST AMERICAN
ASSET MANAGEMENT
<PAGE>
[LOGO] FIRST AMERICAN
ASSET MANAGEMENT
- --------------------------------------------------------------------------------
CONTENTS
2 Fund Overview
7 Financial Statements and Notes
Investments in Securities
20 AXT
26 BXT
31 CXT
35 Independent Auditors' Report
36 Federal Income Tax Information
38 Shareholder Update
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.
Each fund's income may be subject to state or local tax and the federal
alternative minimum tax. Investors should consult their tax advisors. As with
other investment companies, there can be no assurance that any fund will achieve
its objective.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
- --------------------------------------------------------------------------------
Based on net asset value for the periods ended December 31, 1998
[GRAPH]
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL AMERICAN MUNICIPAL AMERICAN MUNICIPAL
TERM TRUST TERM TRUST II TERM TRUST III
(AXT, inception (BXT, inception (CXT, inception
3/27/1991) 9/26/1991) 11/27/1992)
<S> <C> <C> <C>
One Year 5.37% 5.36% 6.28%
Five Year 5.28% 5.66% 6.65%
Since Inception 8.82% 8.87% 9.00%
</TABLE>
All total returns are through December 31, 1998, and reflect the reinvestment of
distributions but not sales charges. Net asset value (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, 1998, were
7.11%, 7.80% and 8.35% for AXT, 7.65%, 7.78% and 8.24% for BXT and 8.86%, 8.26%
and 7.92% 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.
1 1998 ANNUAL REPORT AMERICAN MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW
- --------------------------------------------------------------------------------
FUND MANAGEMENT
DOUG WHITE, CFA, is primarily responsible for the management of the American
Municipal Term Trusts. He has 15 years of financial experience.
RON REUSS, ISFA, assists with the management of the American Municipal Term
Trusts. He has 29 years of financial experience.
FEBRUARY 15, 1999
WE ARE PLEASED THAT THE AMERICAN MUNICIPAL TERM TRUSTS (AXT, BXT AND CXT) REMAIN
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, 1998, the funds continued to
earn more than their monthly common and preferred stock dividends and add to
their dividend reserves. Since the funds' inceptions, AXT, BXT and CXT have
maintained monthly common stock distributions of 5.42, 5.17 and 4.75 cents per
share, respectively. In addition, the funds' net asset values remain above the
$10 per share objective. The net asset values for AXT, BXT and CXT as of
December 31, 1998 were $11.37, $11.55 and $11.46, respectively.
AS OF DECEMBER 31, 1998, AXT AND BXT'S DIVIDEND RESERVES HAVE REACHED A LEVEL
WHERE THE FUNDS CANNOT CONTINUE TO ACCUMULATE ADDITIONAL AMOUNTS. As a result,
if AXT and BXT continue to earn more than their monthly common and preferred
stock dividend, they may be required to pay the excess out as additional
dividends rather than adding to their dividend reserves.
BOND PRICES WERE VOLATILE IN 1998, AND THE SUPPLY OF MUNICIPAL ISSUES INCREASED.
Mixed domestic economic signals and foreign economic problems caused turmoil in
the bond market, but for the year, growth continued to outpace expectations
while inflation remained lower than anticipated. Refundings and new issues due
to lowered interest rates created an increased supply of municipal issues. This
resulted in
BONDS MATURING LESS THAN A YEAR BEYOND THE FUNDS' TERMINATION DATES
<TABLE>
<CAPTION>
AXT BXT CXT
Inception Inception Inception
3/27/1991 9/26/1991 11/27/1992
<S> <C> <C> <C>
At the Fund's Inception 0% 0% 0%
- ------------------------------------------------------------------------------
As of December 31, 1998 75% 74% 41%
- ------------------------------------------------------------------------------
</TABLE>
2 1998 ANNUAL REPORT AMERICAN MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW CONTINUED
- -------------------------------------------------------------------------------
the second highest year for municipal bond issuance, surpassed only by 1993.
Ongoing economic expansion kept municipal credits strong with credit rating
upgrades surpassing downgrades.
THE INCREASED SUPPLY OF MUNICIPALS FACILITATED OUR ONGOING STRATEGY OF SELLING
LONGER MATURITY BONDS IN FAVOR OF THOSE CLOSER TO THE FUNDS' TERMINATION DATES.
As shown in the table on page 2, the percentage of bonds with maturity or refund
dates less than a year beyond the funds' termination dates continues to
increase. Advance refunding is responsible for a portion of this increase. In
addition, we made appropriate trades as interest rates fell and bond prices
increased. This restructuring generated capital gains, which were distributed to
shareholders. Also, restructuring proceeds were reinvested at lower interest
rates, decreasing fund income.
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. A
number of bonds currently have market values in excess of their maturity values.
As the maturity and/or refunding dates of these bonds approach, their market
prices will converge toward prices that are at or near their maturity or
refunding prices.
IN ADDITION, AS THE FUNDS APPROACH TERMINATION AND AS OPPORTUNITIES ARISE, WE
MAY CONTINUE TO SELL LONGER MATURITY BONDS IN FAVOR OF BONDS WITH
DISTRIBUTION HISTORY SINCE INCEPTION
<TABLE>
<CAPTION>
AXT BXT CXT
Inception Inception Inception
3/27/1991 9/26/1991 11/27/1992
<S> <C> <C> <C>
Total Monthly Income Distributions Through 12/31/1998
- ---------------------------------------------------------------------------------------------------------
Common Shareholders $5.04 $4.50 $3.47
- ---------------------------------------------------------------------------------------------------------
Preferred Shareholders (On a Common Share Basis) $1.26 $1.17 $0.96
- ---------------------------------------------------------------------------------------------------------
Total Capital Gains Distributions to Common
Shareholders Through 12/31/1998 $0.19 $0.13 $0.13
- ---------------------------------------------------------------------------------------------------------
</TABLE>
3 1998 ANNUAL REPORT AMERICAN MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW CONTINUED
- -------------------------------------------------------------------------------
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 supplement common and/or preferred dividends.
See the net asset value summary chart 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 CAN HAVE AN IMPACT ON NET ASSET VALUE.
However, we are optimistic about achieving the funds' objectives and do not
anticipate events that would cause us to change the funds' investment strategy
as they move toward termination.
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.
NET ASSET VALUE SUMMARY OF COMMON SHARES
<TABLE>
<CAPTION>
AXT BXT CXT
Inception Inception Inception
3/27/1991 9/26/1991 11/27/1992
<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 12/31/1998 $0.00 $0.00 $0.00
- ---------------------------------------------------------------------------------------------------------
SUBTOTAL $9.33 $9.34 $9.33
- ---------------------------------------------------------------------------------------------------------
Dividend Reserve
(Undistributed Net Investment Income) at 12/31/1998 +$0.80 +$0.79 +$0.54
- ---------------------------------------------------------------------------------------------------------
Unrealized Appreciation on Investments at 12/31/1998 +$1.24 +$1.42 +$1.59
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE ON 12/31/1998 $11.37 $11.55 $11.46
- ---------------------------------------------------------------------------------------------------------
</TABLE>
4 1998 ANNUAL REPORT AMERICAN MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW CONTINUED
PORTFOLIO COMPOSITION
As a percentage of total assets on December 31, 1998
AMERICAN MUNICIPAL TERM TRUST
[CHART]
<TABLE>
<S> <C>
Water/Sewer/Pollution Control Revenue 7%
Leasing Revenue 3%
Education Revenue 4%
Other Assets 3%
General Obligations 17%
Hospital Revenue 20%
Industrial Development Revenue 1%
Sales/Excise Tax Revenue 12%
Airport Revenue 1%
Housing Revenue 2%
Electric Revenue 30%
</TABLE>
AMERICAN MUNICIPAL TERM TRUST II
[CHART]
<TABLE>
<S> <C>
Water/Sewer/Pollution Control Revenue 10%
Leasing Revenue 5%
Education Revenue 7%
Other Assets 1%
Multiple Utility Revenue 2%
General Obligations 17%
Hospital Revenue 24%
Industrial Development Revenue 2%
Sales/Excise Tax Revenue 6%
Airport Revenue 1%
Housing Revenue 2%
Miscellaneous Revenue 5%
Electric Revenue 18%
</TABLE>
AMERICAN MUNICIPAL TERM TRUST III
[CHART]
<TABLE>
<S> <C>
Water/Sewer/Pollution Control Revenue 20%
Education Revenue 4%
Leasing Revenue 10%
Electric Revenue 13%
General Obligations 19%
Housing Revenue 5%
Other Assets 1%
Multiple Utility Revenue 6%
Hospital Revenue 22%
</TABLE>
5 1998 ANNUAL REPORT AMERICAN MUNICIPAL TERM TRUSTS
<PAGE>
FUND OVERVIEW CONTINUED
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.
6 1998 ANNUAL REPORT AMERICAN MUNICIPAL TERM TRUSTS
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES December 31, 1998
................................................................................
<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) ........ $140,722,855 $ 120,288,470 $ 86,322,454
Cash in bank on demand deposit ............................. 55,948 172,520 83,562
Accrued interest receivable ................................ 2,524,695 2,009,348 1,251,192
------------- -------------- --------------
Total assets ............................................. 143,303,498 122,470,338 87,657,208
------------- -------------- --------------
LIABILITIES:
Common stock dividends payable (note 2) .................... 458,261 380,296 251,750
Preferred stock dividends payable (note 3) ................. 13,158 14,445 16,033
Payable for investment securities purchased on a when-issued
basis (note 2) ........................................... 4,063,080 -- --
Accrued investment management fee .......................... 29,518 25,961 18,586
Accrued remarketing agent fee .............................. 41,912 34,939 20,642
Accrued administrative fee ................................. 17,712 15,577 11,151
Other accrued expenses ..................................... 8,116 7,275 5,323
------------- -------------- --------------
Total liabilities ........................................ 4,631,757 478,493 323,485
------------- -------------- --------------
Net assets applicable to outstanding capital stock ....... $138,671,741 $ 121,991,845 $ 87,333,723
------------- -------------- --------------
------------- -------------- --------------
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock) ......................................... $121,429,920 $ 105,774,191 $ 76,084,420
Undistributed net investment income ........................ 6,731,423 5,784,744 2,855,345
Unrealized appreciation of investments ..................... 10,510,398 10,432,910 8,393,958
------------- -------------- --------------
Total - representing net assets applicable to outstanding
capital stock .......................................... $138,671,741 $ 121,991,845 $ 87,333,723
------------- -------------- --------------
------------- -------------- --------------
* Investments in securities at identified cost ............. $130,212,457 $ 109,855,560 $ 77,928,496
------------- -------------- --------------
------------- -------------- --------------
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ...................... $ 96,171,741 $ 84,991,845 $ 60,733,723
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 ............................................ $ 11.37 $ 11.55 $ 11.46
Market price ............................................... $ 11.56 $ 11.56 $ 11.25
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.
- --------------------------------------------------------------------------------
1998 Annual Report 7 American Municipal Term Trusts
<PAGE>
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Year Ended December 31, 1998
................................................................................
<TABLE>
<CAPTION>
AMERICAN
AMERICAN AMERICAN MUNICIPAL
MUNICIPAL MUNICIPAL TERM TRUST
TERM TRUST TERM TRUST II III
------------ ------------- ------------
<S> <C> <C> <C>
INCOME:
Interest .................................................. $ 8,455,291 $ 7,268,265 $ 4,884,425
------------ ------------- ------------
EXPENSES (NOTE 5):
Investment management fee .................................. 349,124 305,868 218,331
Administrative fee ......................................... 209,474 183,521 130,999
Remarketing agent fee ...................................... 107,726 93,783 67,423
Custodian and accounting fees .............................. 85,117 70,584 58,134
Transfer agent fees ........................................ 3,677 3,158 2,397
Reports to shareholders .................................... 43,295 23,300 20,632
Directors' fees ............................................ 9,339 9,339 9,339
Audit and legal fees ....................................... 41,851 41,141 41,934
Other expenses ............................................. 23,392 29,173 25,311
------------ ------------- ------------
Total expenses ........................................... 872,995 759,867 574,500
Less expenses paid indirectly .......................... (6,219) (5,001) (7,452)
------------ ------------- ------------
Total net expenses ....................................... 866,776 754,866 567,048
------------ ------------- ------------
Net investment income .................................... 7,588,515 6,513,399 4,317,377
------------ ------------- ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 889,510 353,801 414,745
Net change in unrealized appreciation or depreciation of
investments .............................................. (1,829,143) (1,013,370) (42,338)
------------ ------------- ------------
Net gain (loss) on investments ........................... (939,633) (659,569) 372,407
------------ ------------- ------------
Net increase in net assets resulting from operations ... $ 6,648,882 $ 5,853,830 $ 4,689,784
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1998 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
12/31/98 12/31/97
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 7,588,515 $ 7,673,737
Net realized gain on investments ........................... 889,510 353,781
Net change in unrealized appreciation or depreciation of
investments .............................................. (1,829,143) (534,779)
------------- -------------
Net increase in net assets resulting from operations ..... 6,648,882 7,492,739
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (5,499,132) (5,499,132)
Preferred stock dividends ................................ (1,385,872) (1,464,545)
From net realized gains:
Common stock dividends ................................... (697,538) (477,708)
Preferred stock dividends ................................ (195,761) (133,125)
------------- -------------
Total distributions ...................................... (7,778,303) (7,574,510)
------------- -------------
Total decrease in net assets ........................... (1,129,421) (81,771)
Net assets at beginning of year ............................ 139,801,162 139,882,933
------------- -------------
Net assets at end of year .................................. $138,671,741 $ 139,801,162
------------- -------------
------------- -------------
Undistributed net investment income ........................ $ 6,731,423 $ 6,028,533
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1998 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
12/31/98 12/31/97
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 6,513,399 $ 6,520,017
Net realized gain on investments ........................... 353,801 507,944
Net change in unrealized appreciation or depreciation of
investments .............................................. (1,013,370) 564,172
------------- -------------
Net increase in net assets resulting from operations ..... 5,853,830 7,592,133
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (4,563,551) (4,563,551)
Preferred stock dividends ................................ (1,291,977) (1,264,544)
From net realized gains:
Common stock dividends ................................... (279,521) (393,536)
Preferred stock dividends ................................ (82,152) (115,597)
------------- -------------
Total distributions ...................................... (6,217,201) (6,337,228)
------------- -------------
Total increase (decrease) in net assets ................ (363,371) 1,254,905
Net assets at beginning of year ............................ 122,355,216 121,100,311
------------- -------------
Net assets at end of year .................................. $121,991,845 $ 122,355,216
------------- -------------
------------- -------------
Undistributed net investment income ........................ $ 5,784,744 $ 5,131,623
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1998 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
12/31/98 12/31/97
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 4,317,377 $ 4,346,533
Net realized gain on investments ........................... 414,745 390,738
Net change in unrealized appreciation or depreciation of
investments .............................................. (42,338) 2,143,340
------------- -------------
Net increase in net assets resulting from operations ..... 4,689,784 6,880,611
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (3,021,000) (3,021,000)
Preferred stock dividends ................................ (875,748) (873,017)
From net realized gains:
Common stock dividends ................................... (323,300) (367,290)
Preferred stock dividends ................................ (102,809) (116,919)
------------- -------------
Total distributions ...................................... (4,322,857) (4,378,226)
------------- -------------
Total increase in net assets ........................... 366,927 2,502,385
Net assets at beginning of year ............................ 86,966,796 84,464,411
------------- -------------
Net assets at end of year .................................. $87,333,723 $ 86,966,796
------------- -------------
------------- -------------
Undistributed net investment income ........................ $ 2,855,345 $ 2,443,912
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1998 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 investment grade 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 fund 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.
Securities transactions are accounted for on the date securities
are purchased or sold. Realized gains and losses are calculated
- --------------------------------------------------------------------------------
1998 Annual Report 12 American Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
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 values if the funds make such purchases while remaining
substantially fully invested. As of December 31, 1998, American
Municipal Term Trust Inc. had entered into outstanding when-
issued or forward commitments of $4,063,080.
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 and losses may
differ for financial statement and tax purposes primarily
because of market discount amortization. The character of
distributions made during the year from net investment income or
net realized gains may differ from its ultimate characterization
for federal income tax purposes. In addition, due to the timing
of dividend
- --------------------------------------------------------------------------------
1998 Annual Report 13 American Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
distributions, the fiscal year in which amounts are distributed
may differ from the year that the income or realized gains or
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 ............................... $ 621 $4,750 $9,196
Decrease accumulated net realized loss
on investments ....................... $4,405 $8,349 $9,196
Decrease additional paid-in capital .... $3,784 $3,599 --
</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
make estimates and assumptions that affect the reported amounts
in the financial statements. Actual results could differ from
these estimates.
- --------------------------------------------------------------------------------
1998 Annual Report 14 American Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(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, 1998, 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.
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, 1998, were as follows:
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
TERM TRUST TERM TRUST II TERM TRUST III
----------- -------------- ---------------
<S> <C> <C> <C>
Purchases .............................. $14,333,348 $3,712,317 $4,338,287
Proceeds from sales .................... $10,618,188 $2,776,487 $4,423,734
</TABLE>
(5) EXPENSES
............................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
On August 10, 1998, the funds entered into an investment
advisory agreement with U.S. Bank National Association (U.S.
Bank), acting through its division, First American Asset
Management. Prior thereto, Piper Capital Management
Incorporated, which was acquired by U.S. Bancorp on May 1, 1998,
had served as the funds' advisor. U.S. Bank also serves as the
funds' administrator under an administration agreement effective
May 1, 1998. Prior thereto, Piper Capital provided services
under an administration agreement through April 30, 1998.
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
- --------------------------------------------------------------------------------
1998 Annual Report 15 American Municipal Term Trusts
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
stock, 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 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.
- --------------------------------------------------------------------------------
1998 Annual Report 16 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST
Year Ended December 31,
--------------------------------------------
1998(g) 1997 1996 1995 1994
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $11.51 $ 11.52 $ 11.83 $ 10.52 $ 11.89
------- ------- ------- ------- --------
Operations:
Net investment income ................ 0.90 0.91 0.93 0.94 0.93
Net realized and unrealized gains
(losses) on investments ............ (0.12 ) (0.02) (0.35) 1.22 (1.50)
------- ------- ------- ------- --------
Total from operations .............. 0.78 0.89 0.58 2.16 (0.57)
------- ------- ------- ------- --------
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 ..... (0.16 ) (0.17) (0.17) (0.20) (0.15)
From net realized gains
Paid to common shareholders ........ (0.08 ) (0.06) (0.05) -- --
Paid to preferred shareholders ..... (0.03 ) (0.02) (0.02) -- --
------- ------- ------- ------- --------
Total distributions to
shareholders ..................... (0.92 ) (0.90) (0.89) (0.85) (0.80)
------- ------- ------- ------- --------
Net asset value, common stock, end of
period ............................... $11.37 $ 11.51 $ 11.52 $ 11.83 $ 10.52
------- ------- ------- ------- --------
------- ------- ------- ------- --------
Market value, common stock, end of
period ............................... $11.56 $ 11.50 $ 11.25 $ 11.00 $ 10.00
------- ------- ------- ------- --------
------- ------- ------- ------- --------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 5.37 % 6.22% 3.47% 18.93% (6.34)%
Total return, common stock, market value
(b) .................................. 7.11 % 8.89% 9.06% 16.91% (2.11)%
Net assets at end of period (in
millions) ............................ $ 139 $ 140 $ 140 $ 143 $ 131
Ratio of expenses to average weekly net
assets applicable to common shares
(c) .................................. 0.90 % 0.90% 0.91% 0.88% 0.84%
Ratio of net investment income to
average weekly net assets applicable
to common stock (d) (e) .............. 6.40 % 6.39% 6.57% 6.53% 7.04%
Portfolio turnover rate (excluding
short-term securities) ............... 8 % 4% 9% 1% 1%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 43 $ 43 $ 43 $ 43 $ 43
Asset coverage ratio (f) ............... 326 % 329% 329% 335% 309%
</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%, 0.63%,
0.64%, 0.61% AND 0.58% IN FISCAL YEARS 1998, 1997, 1996, 1995 AND 1994,
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 5.43%,
5.49%, 5.59%, 5.72% AND 5.80% IN FISCAL YEARS 1998, 1997, 1996, 1995 AND
1994, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL
MANAGEMENT TO U.S. BANK.
- --------------------------------------------------------------------------------
1998 Annual Report 17 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:
AMERICAN MUNICIPAL TERM TRUST II
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998(g) 1997 1996 1995 1994
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $11.60 $ 11.43 $ 11.71 $ 10.27 $ 11.66
----------- -------- -------- -------- --------
Operations:
Net investment income ................ 0.89 0.89 0.90 0.90 0.90
Net realized and unrealized gains
(losses) on investments ............ (0.09) 0.14 (0.35) 1.37 (1.52)
----------- -------- -------- -------- --------
Total from operations .............. 0.80 1.03 0.55 2.27 (0.62)
----------- -------- -------- -------- --------
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 ..... (0.18) (0.17) (0.17) (0.20) (0.15)
From net realized gains
Paid to common shareholders ........ (0.04) (0.05) (0.03) (0.01) --
Paid to preferred shareholders ..... (0.01) (0.02) (0.01) -- --
----------- -------- -------- -------- --------
Total distributions to
shareholders ..................... (0.85) (0.86) (0.83) (0.83) (0.77)
----------- -------- -------- -------- --------
Net asset value, common stock, end of
period ............................... $11.55 $ 11.60 $ 11.43 $ 11.71 $ 10.27
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------
Market value, common stock, end of
period ............................... $11.56 $ 11.38 $ 10.75 $ 10.63 $ 9.63
----------- -------- -------- -------- --------
----------- -------- -------- -------- --------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 5.36% 7.57% 3.33% 20.48% (6.80)%
Total return, common stock, market value
(b) .................................. 7.65% 12.46% 7.66% 17.28% (4.83)%
Net assets at end of period (in
millions) ............................ $ 122 $ 122 $ 121 $ 123 $ 113
Ratio of expenses to average weekly net
assets applicable to common shares
(c) .................................. 0.89% 0.91% 0.92% 0.90% 0.88%
Ratio of net investment income to
average weekly net assets applicable
to common stock (d) (e) .............. 6.12% 6.21% 6.41% 6.35% 7.01%
Portfolio turnover rate (excluding
short-term securities and dollar roll
transactions) ........................ 2% %6 %6 %3 --
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 37 $ 37 $ 37 $ 37 $ 37
Asset coverage ratio (f) ............... 330% 331% 327% 333% 304%
</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 0.62%, 0.64%,
0.64%, 0.62% AND 0.60% IN FISCAL YEARS 1998, 1997, 1996, 1995, AND 1994,
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 5.32%,
5.36%, 5.48%, 5.58% AND 5.72% IN FISCAL YEARS 1998, 1997, 1996, 1995, AND
1994, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL
MANAGEMENT TO U.S. BANK.
- --------------------------------------------------------------------------------
1998 Annual Report 18 American Municipal Term Trusts
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of common stock outstanding
throughout each period and selected information for each period
are as follows:
AMERICAN MUNICIPAL TERM TRUST III
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1998(g) 1997 1996 1995 1994
----------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $11.39 $ 10.92 $ 11.11 $ 9.31 $ 10.95
----------- -------- -------- -------- ---------
Operations:
Net investment income ................ 0.81 0.82 0.83 0.83 0.83
Net realized and unrealized gains
(losses) on investments ............ 0.08 0.47 (0.27) 1.73 (1.75)
----------- -------- -------- -------- ---------
Total from operations .............. 0.89 1.29 0.56 2.56 (0.92)
----------- -------- -------- -------- ---------
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 ..... (0.17) (0.16) (0.18) (0.19) (0.15)
From net realized gain
Paid to common shareholders ........ (0.06) (0.07) -- -- --
Paid to preferred shareholders ..... (0.02) (0.02) -- -- --
----------- -------- -------- -------- ---------
Total distributions to
shareholders ..................... (0.82) (0.82) (0.75) (0.76) (0.72)
----------- -------- -------- -------- ---------
Net asset value, common stock, end of
period ............................... $11.46 $ 11.39 $ 10.92 $ 11.11 $ 9.31
----------- -------- -------- -------- ---------
----------- -------- -------- -------- ---------
Market value, common stock, end of
period ............................... $11.25 $ 10.94 $ 10.38 $ 10.13 $ 8.50
----------- -------- -------- -------- ---------
----------- -------- -------- -------- ---------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ 6.28% 10.42% 3.65% 25.93% (10.04)%
Total return, common stock, market value
(b) .................................. 8.86% 11.93% 8.38% 26.32% (10.93)%
Net assets at end of period (in
millions) ............................ $ 87 $ 87 $ 84 $ 85 $ 76
Ratio of expenses to average weekly net
assets applicable to common shares
(c) .................................. 0.95% 0.99% 1.01% 0.98% 0.96%
Ratio of net investment income to
average weekly net assets applicable
to common stock (d) (e) .............. 5.67% 5.91% 6.08% 6.05% 6.88%
Portfolio turnover rate (excluding
short-term securities and dollar roll
transactions) ........................ 5% %7 %3 %5 %3
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 27 $ 27 $ 27 $ 27 $ 27
Asset coverage ratio (f) ............... 328% 327% 318% 321% 285%
</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 0.66%, 0.68%,
0.69%, 0.66% AND 0.64% IN FISCAL YEARS 1998, 1997, 1996, 1995 AND 1994,
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 4.94%,
5.09%, 5.26%, 5.38% AND 5.53% IN FISCAL YEARS 1998, 1997, 1996, 1995 AND
1994, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL
MANAGEMENT TO U.S. BANK.
- --------------------------------------------------------------------------------
1998 Annual Report 19 American Municipal Term Trusts
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST December 31, 1998
.......................................................................................
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 (100.3%):
CALIFORNIA (2.9%):
Southern California Public Power Authority Power
Project Revenue, 5.00%, 7/1/01 .................... $ 4,000,000(f) $ 4,094,080
------------
COLORADO (2.1%):
Health Care Facility (FSA) (Prerefunded to 2/15/01),
7.25%, 2/15/16 . 1,925,000(d) 2,104,776
Health Facilities Authority Revenue, 4.10%-4.45%,
1/1/99-1/1/01 ..................................... 795,000 799,968
------------
2,904,744
------------
DISTRICT OF COLUMBIA (3.4%):
General Obligation (MBIA) (Callable 6/1/00 at 102),
6.75%, 6/1/08 ..................................... 40,000 42,476
General Obligation (MBIA) (Prerefunded to 6/1/00),
6.75%, 6/1/08 ..................................... 4,360,000(d) 4,646,190
------------
4,688,666
------------
FLORIDA (2.3%):
Jacksonville Electric Authority (Prerefunded to
10/1/00), 7.00%, 10/1/12 .......................... 3,000,000(d) 3,229,530
------------
GEORGIA (2.2%):
Municipal Electric Authority (MBIA) (Prerefunded to
1/1/01), 7.00%, 1/1/16 ............................ 2,840,000(d) 3,083,956
------------
HAWAII (0.5%):
State Department Budget and Finance, 4.45%,
7/1/01 ............................................ 720,000 725,623
------------
ILLINOIS (8.5%):
Chicago Motor Fuel Tax (AMBAC) (Prerefunded to
1/1/01), 7.10%, 1/1/11 ............................ 1,525,000(d) 1,658,483
Health Facility-Evangelical Hospital (FSA) (Callable
1/1/01 at 102), 7.13%, 1/1/21 ..................... 2,500,000 2,690,400
Higher Education Facility-Augustana College (Connie
Lee), 4.80%, 10/1/01 .............................. 500,000 513,370
State Dedicated Tax - Civic Center (Prerefunded to
12/15/00), 7.00%, 12/15/13 ........................ 555,000(d) 603,335
State Sales Tax Revenue (Prerefunded to 6/15/01),
6.90%, 6/15/12-6/15/13 ............................ 2,300,000(d) 2,519,052
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 Annual Report 20 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>
State Sales Tax Revenue (Prerefunded to 6/15/99),
7.25%, 6/15/14 . $ 3,650,000(d) $ 3,791,109
------------
11,775,749
------------
INDIANA (5.2%):
Hamilton S.E. School Building Corporation (AMBAC)
(Callable 1/1/01 at 102), 7.00%, 7/1/08 ........... 3,445,000 3,726,973
Indiana Bond Bank, 5.00%, 2/1/01 .................... 650,000 666,198
Marion County Convention Center (AMBAC) (Callable
6/1/01 at 102), 7.00%, 6/1/10 ..................... 345,000 375,767
Marion County Convention Center (AMBAC) (Prerefunded
to 6/1/01), 7.00%, 6/1/10 ......................... 870,000(d) 953,659
St. Joseph County Hospital Authority (MBIA) (Callable
8/15/01 at 102), 7.00%, 8/15/11 ................... 1,000,000 1,101,710
Whitley County Middle School Building Corp. (FSA),
3.90%, 1/10/99 . 455,000 455,096
------------
7,279,403
------------
IOWA (1.0%):
Dubuque Hospital Revenue (Callable 1/1/02 at 102),
6.88%, 1/1/12 . 1,000,000 1,080,820
Keokuk Hospital Facility Revenue, 4.40%-4.60%,
12/1/00-12/1/01 ................................... 240,000 240,780
------------
1,321,600
------------
MAINE (2.4%):
Municipal Bond Bank (Prerefunded to 11/1/01), 7.20%,
11/1/13 ........................................... 3,000,000(d) 3,340,920
------------
MINNESOTA (0.9%):
East Grand Forks Industrial Development Revenue
(Callable 4/1/01 at 102), 8.00%, 4/1/11 ........... 1,000,000 1,077,380
Moorhead Gross Revenue, 4.75%, 12/1/00 .............. 115,000 116,033
------------
1,193,413
------------
NEBRASKA (0.8%):
Hospital Lease Investment Financing (MBIA)
(Prerefunded to 3/1/01), 7.00%, 3/1/06 ............ 1,000,000(d) 1,090,050
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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>
NEVADA (6.4%):
Clark County School District (MBIA) (Prerefunded to
6/1/01), 7.00%, 6/1/09 ............................ $ 3,000,000(d) $ 3,261,690
University of Nevada Revenue (AMBAC) (Prerefunded to
7/1/00), 7.13%, 7/1/16 ............................ 2,720,000(d) 2,920,954
Washoe County Limited Tax General Obligation,
Zero-Coupon (MBIA), 7.12%, 7/1/06 ................. 3,725,000(b) 2,715,339
------------
8,897,983
------------
NEW YORK (3.7%):
New York City General Obligation, 5.00%, 8/1/01 ..... 4,000,000 4,128,680
State Local Government Assistance Corp., 6.00%,
4/1/99 ............................................ 1,000,000 1,007,380
------------
5,136,060
------------
OHIO (0.6%):
Franklin County Health Care Facility Revenue,
4.30%-4.50%, 8/15/99-8/15/01 ...................... 890,000 893,691
------------
OKLAHOMA (1.3%):
Tulsa County Independent School District No. 5,
6.00%, 7/1/00-7/1/01 .............................. 1,670,000 1,745,681
------------
PENNSYLVANIA (3.1%):
Higher Education-Duquesne University (MBIA) (Callable
4/1/01 at 100), 7.00%, 4/1/10 ..................... 1,000,000 1,073,000
Sayre Healthcare Facility (AMBAC) (Callable 3/1/01 at
102), 7.00%, 3/1/11 ............................... 3,000,000 3,240,000
------------
4,313,000
------------
SOUTH DAKOTA (3.6%):
Health and Education Facility Revenue (Callable
5/1/01 at 102), 7.00%, 11/1/07 .................... 2,500,000 2,715,175
Rapid City Area School District (MBIA) (Prerefunded
to 1/1/02), 7.20%, 1/1/11 ......................... 1,770,000(d) 1,948,717
Sioux Falls Health Facilities Revenue (AMBAC)
(Callable 12/01/99 at 100), 4.45%, 6/1/01 ......... 370,000 372,257
------------
5,036,149
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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>
TENNESSEE (2.8%):
Bristol Health and Education Facility (FGIC)
(Prerefunded to 3/1/01), 7.00%, 9/1/11 ............ $ 1,000,000(d) $ 1,089,390
Housing Development Authority (FSA) (Callable 7/1/00
at 103), 7.60%, 7/1/16 ............................ 1,700,000 1,783,453
Memphis-Shelby County Airport Authority (MBIA), AMT,
5.25%, 2/15/01 .................................... 1,000,000(e) 1,032,760
------------
3,905,603
------------
TEXAS (19.1%):
Abliene Health Care Facility Development,
4.10%-4.70%, 11/15/99-11/15/01 .................... 1,450,000 1,450,872
Austin Utility System Revenue (BIG) (Prerefunded to
5/15/01), 8.00%, 11/15/16 ......................... 500,000(d) 549,560
Corpus Christi Utility System Revenue (FGIC)
(Callable 7/15/00 at 102), 7.00%, 7/15/10 ......... 1,500,000 1,603,065
Harris County Health Facilities (FSA) (Callable
10/1/01 at 102), 6.85%, 10/1/06 ................... 2,000,000 2,203,740
Houston Hotel Occupancy (FGIC) (Prerefunded to
7/1/01), 7.00%, 7/1/15 ............................ 4,700,000(d) 5,078,820
Houston Independent School District, Zero-Coupon
(AMBAC), 7.14%, 8/15/06 ........................... 4,285,000(b) 3,098,269
Lower Colorado River Authority (AMBAC) (Callable
1/1/01 at 102), 7.00%, 1/1/11 ..................... 415,000 447,706
Lower Colorado River Authority (AMBAC) (Prerefunded
to 1/1/01), 7.00%, 1/1/11 ......................... 585,000(d) 635,251
Lower Colorado River Authority, Zero-Coupon (AMBAC),
7.17%, 1/1/06 ..................................... 765,000(b) 567,967
Municipal Power Agency, Zero-Coupon (AMBAC), 7.11%,
9/1/06 ............................................ 3,000,000(b) 2,165,040
San Antonio Electric and Gas, Zero-Coupon (FGIC),
7.11%, 2/1/06 ..................................... 3,000,000(b) 2,219,430
Trinity River Authority (AMBAC) (Prerefunded to
8/1/00), 7.10%, 8/1/16 ............................ 2,250,000(d) 2,379,442
Weatherford Utility System, Water Revenue (MBIA)
(Prerefunded to 9/1/01), 7.00%, 9/1/11 ............ 3,750,000(d) 4,071,187
------------
26,470,349
------------
UTAH (2.9%):
Intermountain Power Agency (FSA), 5.25%, 7/1/01 ..... 3,810,000 3,956,228
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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>
WASHINGTON (15.6%):
Chelan County Public Utilities District (MBIA), AMT,
5.20%-5.35%, 7/1/00-7/1/01 ........................ $ 885,000(e) $ 910,322
King and Snohomish Counties School District (FGIC)
(Prerefunded to 12/1/00), 7.00%, 12/1/09 .......... 1,450,000(d) 1,547,208
Public Power Supply System (Prerefunded to 1/1/00),
7.25%, 7/1/15 1,435,000(d) 1,520,139
Public Power Supply System (Prerefunded to 1/1/01),
7.63%, 7/1/10 5,000,000(d) 5,482,200
Public Power Supply System (Prerefunded to 7/1/00),
7.38%, 7/1/12 1,550,000(d) 1,668,839
Public Power Supply System, Zero-Coupon (BIG), 7.15%,
7/1/06 ............................................ 1,500,000(b) 1,090,230
Public Power Supply System, Zero-Coupon (FGIC),
7.17%, 7/1/06 ..................................... 5,000,000(b) 3,634,100
Public Power Supply Systems, 5.00%-5.25%,
7/1/00-7/1/01 ..................................... 3,500,000 3,599,585
Seattle Water Revenue (Prerefunded to 5/1/00), 7.25%,
5/1/17 ............................................ 2,000,000(d) 2,140,500
------------
21,593,123
------------
WEST VIRGINIA (3.5%):
School Building Authority (MBIA) (Prerefunded to
7/1/00), 7.25%, 7/1/15 ............................ 4,000,000(d) 4,302,480
State Water Development Authority (FSA) (Callable
11/1/01 at 102), 7.00%, 11/1/11 ................... 500,000 550,380
------------
4,852,860
------------
WISCONSIN (5.5%):
Amery Revenue, 4.50%-4.65%, 6/1/00-6/1/01 ........... 780,000 783,326
Health and Education Facilities-Gundersen Clinic
(FSA), 5.50%, 12/1/01 ............................. 2,500,000 2,620,575
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Callable 8/15/00 at 102), 7.25%,
8/15/19 ........................................... 105,000 112,379
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Prerefunded to 8/15/00), 7.25%,
8/15/19 ........................................... 1,570,000(d) 1,694,909
Health and Education Facility (MBIA) (Prerefunded to
6/1/00), 7.00%, 6/1/20 ............................ 1,600,000(d) 1,710,976
Neenah Industrial Development Revenue (Callable
6/1/00 at 101), AMT, 6.75%, 6/1/12 ................ 650,000(e) 677,229
------------
7,599,394
------------
Total Municipal Long-Term Securities
(cost: $128,617,457) ............................ 139,127,855
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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>
MUNICIPAL SHORT-TERM SECURITIES (1.2%):
MICHIGAN (0.2%):
Flint Hospital Building Authority, 4.00%, 7/1/15 .... $ 300,000(c) $ 300,000
------------
NEW YORK (1.0%):
New York City, Municipal Water Authority, 5.20%,
6/15/25 ........................................... 200,000(c) 200,000
New York City, Series B, 5.00%, 10/1/20 ............. 745,000(c) 745,000
New York City, Subseries A-10, 4.05%, 8/1/17 ........ 200,000(c) 200,000
New York City, Subseries B-4, 4.40%, 8/15/22 ........ 150,000(c) 150,000
------------
1,295,000
------------
Total Municipal Short-Term Securities
(cost: $1,595,000) .............................. 1,595,000
------------
Total Investments in Securities
(cost: $130,212,457) (g) ........................ $140,722,855
------------
------------
</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, 1998. 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, 1998, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$2,620,311, WHICH REPRESENTS 1.89% OF NET ASSETS.
(f) ON DECEMBER 31 1998, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $4,063,080.
(g) ON DECEMBER 31, 1998, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $130,071,110. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 10,651,745
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 10,651,745
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
1998 Annual Report 25 American Municipal Term Trusts
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST II December 31, 1998
.......................................................................................
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 (98.1%):
FLORIDA (4.8%):
Manatee County, Zero-Coupon (MBIA), 6.91%,
10/1/07 ........................................... $ 2,995,000(b) $ 2,074,726
University Community Hospital (FSA) (Prerefunded to
9/1/00), 7.50%, 9/1/11 ............................ 3,500,000(e) 3,800,930
------------
5,875,656
------------
ILLINOIS (22.1%):
Belleville General Obligation (FGIC) (Prerefunded to
12/1/01), 7.13%, 12/1/08 .......................... 1,000,000(e) 1,096,590
Carbondale General Obligation (FGIC) (Prerefunded to
5/1/01), 6.90%, 5/1/12 ............................ 3,200,000(e) 3,437,600
Central Lake County, Zero-Coupon (MBIA), 6.98%,
5/1/07 ............................................ 2,370,000(b) 1,650,397
Chicago Motor Fuel Tax (AMBAC) (Prerefunded to
1/1/01), 7.10%, 1/1/11 ............................ 1,500,000(e) 1,631,295
Chicago Wastewater Revenue (FGIC) (Prerefunded to
11/15/00), 6.75%, 11/15/20 ........................ 2,000,000(e) 2,158,940
Cook County General Obligation (AMBAC) (Prerefunded
to 11/1/01), 6.75%, 11/1/18 ....................... 5,000,000(e) 5,510,700
Decatur, Zero-Coupon (AMBAC), 6.98%, 10/1/07 ........ 1,250,000(b) 854,850
Health Facility-Evangelical Hospital (escrowed to
maturity) (Callable 4/15/02 at 102), 6.75%,
4/15/12 ........................................... 990,000 1,193,950
Health Facility-Evangelical Hospital (Prerefunded to
4/15/02), 6.75%, 4/15/12-4/15/17 .................. 1,190,000(e) 1,319,996
Health Facility-Highland Park Hospital (FGIC), 5.30%,
10/1/02 ........................................... 1,265,000 1,319,420
Higher Education Facility-Augustana College (Connie
Lee), 4.90%, 10/1/02 .............................. 500,000 516,905
Kane County Public Building Authority (MBIA)
(Prerefunded to 12/1/99), 6.88%, 12/1/10 .......... 1,000,000(e) 1,034,400
Kendall, Kane, and Will Counties, Zero-Coupon (FGIC),
6.96%, 3/1/07 975,000(b) 683,894
Lake County Water and Sewer System (AMBAC)
(Prerefunded to 12/1/01), 6.75%,
12/1/08-12/1/09 ................................... 4,215,000(e) 4,579,345
------------
26,988,282
------------
INDIANA (13.4%):
Boonville School Building Corporation (Callable
7/1/02 at 102), 6.90%, 7/1/09 ..................... 2,000,000 2,211,420
Indiana Bond Bank, 5.15%, 2/1/02 .................... 900,000 931,455
Indiana University, Zero-Coupon (AMBAC), 7.07%,
8/1/07 ............................................ 3,180,000(b) 2,196,076
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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) $ 2,746,250
Noblesville/Hamilton County School Building
Corporation (Prerefunded to 2/1/01), 7.00%,
2/1/13 ............................................ 1,000,000(e) 1,087,010
Port Commission, Cargill Inc. Project (Callable
5/1/02 at 102), 6.88%, 5/1/12 ..................... 450,000(c) 489,438
Purdue University (AMBAC) (Prerefunded to 7/1/01),
7.00%, 7/1/14 ..................................... 3,000,000(e) 3,295,920
St. Joseph County Hospital Authority (MBIA) (Callable
12/1/01 at 102), 7.00%, 12/1/12 ................... 3,000,000 3,331,320
------------
16,288,889
------------
IOWA (3.0%):
Keokuk Hospital Facility Revenue, 4.70%, 12/1/02 .... 125,000 125,554
Mason City Hospital Facilities (FSA) (Prerefunded to
8/15/01), 6.88%, 8/15/09 .......................... 1,265,000(e) 1,390,754
Polk County Health Facilities (MBIA) (Prerefunded to
11/1/01), 7.10%, 11/1/09 .......................... 1,895,000(e) 2,088,915
------------
3,605,223
------------
KENTUCKY (1.0%):
Owensboro Electric Light and Power, Zero-Coupon
(AMBAC), 6.91%, 1/1/07 ............................ 1,775,000(b) 1,268,894
------------
LOUISIANA (3.1%):
New Orleans General Obligation, Zero-Coupon (AMBAC),
7.01%, 9/1/07 ..................................... 5,000,000(b) 3,452,250
Parrish of St. Martin, Cargill Inc. Project (Callable
10/1/02 at 102), 6.63%, 10/1/12 ................... 300,000(c) 324,474
------------
3,776,724
------------
MICHIGAN (0.9%):
State Housing Development Authority (FSA) (Callable
10/15/02 at 103), 6.85%, 10/15/18 ................. 1,000,000 1,081,040
------------
MONTANA (1.8%):
State Board of Investment (MBIA) (escrowed to
maturity) (Callable 6/1/01 at 102), 6.88%,
6/1/20 ............................................ 2,000,000 2,183,980
------------
NEVADA (1.7%):
Clark County School District (FGIC), 5.75%,
6/15/02 ........................................... 2,000,000 2,129,400
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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 (0.9%):
Single Family Housing Authority (Callable 7/1/03 at
102), 5.85%, 7/1/10 ............................... $ 1,000,000 $ 1,042,740
------------
NEW JERSEY (1.8%):
State Educational Facilities Authority (Callable
7/1/01 at 102), 6.88%, 7/1/10 ..................... 2,000,000 2,145,940
------------
NEW YORK (1.7%):
Long Island Power Authority, 4.00%, 4/1/02 .......... 1,000,000 1,004,490
New York City General Obligation, 5.10%, 8/1/02 ..... 1,000,000 1,041,770
------------
2,046,260
------------
NORTH DAKOTA (4.7%):
Bismark Hospital Revenue (AMBAC) (Callable 5/1/01 at
102), 6.90%, 5/1/06 ............................... 4,300,000 4,676,766
Grand Forks Health Care Authority (MBIA) (Callable
12/1/01 at 102), 6.63%, 12/1/10 ................... 1,000,000 1,091,160
------------
5,767,926
------------
OKLAHOMA (0.7%):
Tulsa County Independent School District No. 5,
5.00%, 7/1/02 ..................................... 850,000 881,441
------------
SOUTH CAROLINA (1.4%):
Lexington County Health Services (FSA) (Prerefunded
to 10/1/01), 6.75%, 10/1/18 ....................... 1,600,000(e) 1,761,072
------------
SOUTH DAKOTA (0.5%):
Health & Education Facility Revenue (AMBAC), 4.50%,
8/1/02 ............................................ 565,000 578,876
------------
TENNESSEE (1.1%):
Memphis-Shelby County Airport Authority (MBIA), AMT,
5.25%, 2/15/02 .................................... 1,235,000(f) 1,287,018
------------
TEXAS (8.7%):
Abilene Health Facility Development, 4.80%,
11/15/02 .......................................... 605,000 605,605
Harris County Health Facilities (FSA) (Callable
10/1/01 at 102), 7.00%, 10/1/14 ................... 2,225,000 2,460,316
Houston Hotel Occupancy (FGIC) (Prerefunded to
7/1/01), 7.00%, 7/1/15 ............................ 5,095,000(e) 5,505,657
Houston Water and Sewer, Zero-Coupon (AMBAC), 6.91%,
12/1/07 ........................................... 3,000,000(b) 2,042,190
------------
10,613,768
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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 (16.9%):
Chelan County Public Utilities District (Callable
7/1/03 at 100), AMT, 7.60%, 7/1/25 ................ $ 3,000,000(f) $ 3,386,130
Chelan County Public Utilities District (MBIA), AMT,
5.45%, 7/1/02 ..................................... 385,000(f) 404,477
Clark County Public Utility District (FGIC)
(Prerefunded to 1/1/01), 6.50%, 1/1/11 ............ 2,000,000(e) 2,152,240
King and Snohomish Counties School District (FGIC)
(Prerefunded to 12/1/02), 6.63%, 12/1/12 .......... 300,000(e) 331,596
Public Power Supply System, 5.25%, 7/1/01 ........... 2,000,000 2,071,440
Public Power Supply System (Prerefunded to 1/1/00),
7.25%, 7/1/15 3,875,000(e) 4,104,904
Public Power Supply System (Prerefunded to 7/1/00),
7.00%-7.38%, 7/1/11-7/1/12 ........................ 5,225,000(e) 5,621,898
Public Power Supply System (Prerefunded to 7/1/01),
6.75%, 7/1/11 1,350,000(e) 1,473,795
Snohomish County Solid Waste Revenue (MBIA) (Callable
12/1/01 at 102), 7.00%, 12/1/10 ................... 1,000,000 1,111,320
------------
20,657,800
------------
WEST VIRGINIA (4.0%):
School Building Authority (MBIA) (Prerefunded to
7/1/00), 6.75%, 7/1/17 ............................ 2,500,000(e) 2,671,300
State Water Development Authority (Prerefunded to
11/1/01), 7.30%-7.40%, 11/1/11-11/1/19 ............ 2,000,000(e) 2,234,310
------------
4,905,610
------------
WISCONSIN (3.9%):
Amery Revenue, 4.80%, 6/1/02 ........................ 420,000 423,167
Health and Education Facilities-Gundersen Clinic
(FSA), 5.10%, 12/1/02 ............................. 3,000,000 3,130,590
Neenah Industrial Development Revenue (Callable
6/1/00 at 101), AMT, 6.75%, 6/1/12 ................ 1,150,000(f) 1,198,174
------------
4,751,931
------------
Total Municipal Long-Term Securities
(cost: $109,205,560) ............................ 119,638,470
------------
MUNICIPAL SHORT-TERM SECURITIES (0.6%):
ILLINOIS (0.2%):
Health Facilities Authority, 5.10%, 11/1/20 ......... 200,000(d) 200,000
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 Annual Report 29 American Municipal Term Trusts
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
AMERICAN MUNICIPAL TERM TRUST II
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
INDIANA (0.4%):
Hospital Equipment Finance Authority, 4.00%,
12/1/15 ........................................... $ 450,000(d) $ 450,000
------------
Total Municipal Short-Term Securities
(cost: $650,000) ................................ 650,000
------------
Total Investments in Securities
(cost: $109,855,560) (g) ........................ $120,288,470
------------
------------
</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, 1998, THE
TOTAL MARKET VALUE OF THESE INVESTMENTS WAS $813,912 OR 0.67% 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, 1998. 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) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1998, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$6,275,799, WHICH REPRESENTS 5.14% OF NET ASSETS.
(g) ON DECEMBER 31, 1998, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $109,756,352. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 10,532,118
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 10,532,118
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
1998 Annual Report 30 American Municipal Term Trusts
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL TERM TRUST III December 31, 1998
.......................................................................................
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 (98.8%):
ALABAMA (0.6%):
Agricultural and Mechanical University Revenue (MBIA)
(Callable 11/1/02 at 102), 6.45%, 11/1/17 ......... $ 500,000 $ 557,190
------------
CALIFORNIA (1.2%):
State Housing Finance Revenue (FHA), 4.80%,
8/1/03 ............................................ 1,000,000 1,017,230
------------
COLORADO (2.4%):
Health Facilities Authority Revenue, 4.65%,
1/1/03 ............................................ 1,055,000 1,069,095
Snowmass Village Multifamily Housing (FSA) (Callable
12/15/02 at 102), 6.25%, 12/15/16 ................. 1,000,000 1,055,980
------------
2,125,075
------------
DISTRICT OF COLUMBIA (3.6%):
Catholic University of America (Connie Lee) (Callable
10/1/03 at 102), 6.30%, 10/1/13 ................... 1,000,000 1,095,610
General Obligation (MBIA), 4.75%, 6/1/03 ............ 1,960,000 2,018,525
------------
3,114,135
------------
FLORIDA (0.8%):
Broward County School District, Zero-Coupon (MBIA),
6.55%, 2/15/08 1,000,000(b) 678,950
------------
HAWAII (1.5%):
State General Obligation (FGIC), 4.80%, 3/1/03 ...... 1,250,000 1,295,937
------------
ILLINOIS (18.7%):
Chicago Wastewater Revenue (FGIC) (Prerefunded to
1/1/03), 6.35%, 1/1/22 ............................ 1,000,000(d) 1,112,190
Greenville Educational Facility Revenue, 4.65%,
6/1/03 ............................................ 320,000 320,000
Health Facility-Alexian Brothers Medical Center
(MBIA) (Callable 1/1/02 at 102), 6.38%, 1/1/15 .... 1,125,000 1,215,146
Health Facility-Elmhurst Memorial Hospital (FGIC)
(Callable 1/1/02 at 102), 6.50%, 1/1/12 ........... 1,190,000 1,289,520
Health Facility-Highland Park Hospital (FGIC), 5.40%,
10/1/03 ........................................... 1,000,000 1,053,100
Health Facility-Lutheran General Systems (FSA)
(escrowed to maturity) (Callable 4/1/03 at 102),
6.13%, 4/1/12 ..................................... 1,000,000 1,105,760
Henry Hospital District (AMBAC) (Callable 12/1/02 at
100), 6.60%, 12/1/17 .............................. 2,000,000 2,211,900
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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>
Higher Education Facility-Augustana College (Connie
Lee), 5.00%, 10/1/03 .............................. $ 330,000 $ 344,055
Lake County Housing and Finance Corporation (FHA)
(Callable 11/1/02 at 100), 6.70%, 11/1/14 ......... 2,000,000 2,106,420
Rochelle Water and Sewer Revenue (Callable 5/1/02 at
102), 7.15%, 5/1/14 ............................... 2,000,000 2,185,600
State General Obligation (FSA) (Callable 10/1/02 at
102), 6.25%, 10/1/12 .............................. 3,100,000 3,385,107
------------
16,328,798
------------
INDIANA (15.2%):
Crawfordsville School Building Corporation (Callable
1/1/03 at 102), 6.25%, 7/1/11 ..................... 500,000 546,430
Freemont Middle School Building (AMBAC) (Prerefunded
to 3/15/02), 6.75%, 3/15/13 ....................... 3,000,000(d) 3,300,540
Health Facilities-Community Hospital Project (MBIA)
(Callable 5/1/02 at 102), 6.40%, 5/1/12 ........... 5,000,000 5,420,000
Health Facilities-Methodist Hospital (AMBAC)
(escrowed to maturity) (Callable 9/1/02 at 102),
5.75%, 9/1/15 ..................................... 1,000,000 1,078,150
Indiana Health Facility, 5.00%, 5/15/03 ............. 600,000 609,636
Lake County Redevelopment Authority (MBIA) (Callable
2/1/05 at 102), 6.45%, 2/1/11 ..................... 1,600,000 1,799,520
Patoka Lake Regional Water and Sewer District (AMBAC)
(Callable 1/1/04 at 101), 6.45%, 1/1/15 ........... 500,000 561,780
------------
13,316,056
------------
IOWA (1.5%):
Cedar Rapids Hospital Facilities (FGIC) (Callable
8/15/03 at 102), 6.13%, 8/15/13 ................... 1,200,000 1,335,192
------------
KANSAS (2.0%):
Kansas City Utility Systems, Zero-Coupon (AMBAC),
6.40%, 3/1/08 ..................................... 1,060,000(b) 718,330
Kansas City Utility Systems, Zero-Coupon (AMBAC)
(escrowed to maturity), 6.40%, 3/1/08 ............. 1,515,000(b) 1,025,746
------------
1,744,076
------------
MAINE (2.5%):
Water and Sewer Revenue (Callable 11/1/02 at 102),
6.60%, 11/1/15 2,000,000 2,205,280
------------
NEVADA (1.2%):
Clark County School District (FGIC), 5.75%,
6/15/03 ........................................... 1,000,000 1,078,110
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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 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 $ 1,100,950
------------
NEW YORK (2.1%):
State General Obligation, 5.20%, 8/1/03 ............. 1,735,000 1,826,382
------------
NORTH DAKOTA (3.9%):
Mercer County Pollution Control Revenue (AMBAC),
7.20%, 6/30/13 .................................... 2,700,000 3,384,990
------------
OKLAHOMA (1.0%):
Tulsa County Independent School District No. 5,
5.00%, 7/1/03 ..................................... 850,000 886,108
------------
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 1,315,608
------------
SOUTH CAROLINA (1.6%):
Piedmont Municipal Power Agency (MBIA) (Prerefunded
to 1/1/03), 6.30%, 1/1/14 ......................... 1,285,000(d) 1,428,830
------------
SOUTH DAKOTA (3.0%):
State Building Authority (AMBAC) (escrowed to
maturity), 6.63%, 9/1/12 .......................... 2,350,000 2,607,442
------------
TEXAS (21.9%):
Abilene Health Facility Development, 4.90%,
11/15/03 .......................................... 665,000 664,561
Austin Utility System Revenue, Zero-Coupon (MBIA),
6.53%, 11/15/08 5,000,000(b) 3,250,500
Houston Water and Sewer Revenue (FSA) (Callable
12/1/02 at 102), 6.38%, 12/1/14 ................... 1,900,000 2,070,639
Montgomery County Hospital District (FSA)
(Prerefunded to 4/1/02), 6.63%, 4/1/17 ............ 3,300,000(d) 3,648,150
Pflugerville Independent School District (Callable
8/15/04 at 100), 5.75%, 8/15/15 ................... 975,000 1,026,977
San Antonio Electric and Gas, Zero-Coupon (FGIC),
6.40%, 2/1/08 ..................................... 4,500,000(b) 3,027,870
San Antonio Water System Revenue (MBIA) (Callable
5/15/02 at 102)), 6.50%, 5/15/10 .................. 1,685,000 1,842,969
San Antonio Water System Revenue (MBIA) (escrowed to
maturity), 6.50%, 5/15/10 ......................... 440,000 520,573
San Antonio Water System Revenue (MBIA) (Prerefunded
to 5/15/02), 6.50%, 5/15/10 ....................... 875,000(d) 967,278
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1998 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>
State Capital Appreciation, Zero-Coupon (FGIC),
6.43%, 4/1/08 ..................................... $ 3,100,000(b) $ 2,070,738
------------
19,090,255
------------
WASHINGTON (7.7%):
Chelan County Public Utilities District (MBIA), AMT,
5.55%, 7/1/03 ..................................... 305,000(c) 324,551
Public Power Supply (Callable 7/1/02 at 102), 6.25%,
7/1/12 ............................................ 770,000 833,802
Public Power Supply System (Prerefunded to 7/1/01),
6.50%, 7/1/18 ..................................... 2,515,000(d) 2,730,737
Public Power Supply System (Prerefunded to 7/1/02),
6.25%, 7/1/12 ..................................... 2,600,000(d) 2,855,216
------------
6,744,306
------------
WEST VIRGINIA (3.3%):
Clarksburg Water Revenue (Asset Guaranty) (Callable
9/1/02 at 102), 6.25%, 9/1/14 ..................... 2,620,000 2,838,770
------------
WISCONSIN (0.3%):
Amery Revenue, 4.90%, 6/1/03 ........................ 300,000 302,784
------------
Total Municipal Long-Term Securities
(cost: $77,928,496) ............................. 86,322,454
------------
Total Investments in Securities
(cost: $77,928,496) (e) ......................... $ 86,322,454
------------
------------
</TABLE>
Notes to Investements 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) AMT - ALTERNATIVE MINIMUM TAX. AS OF DECEMBER 31, 1998, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$324,551, WHICH REPRESENTS 0.37% OF NET ASSETS.
(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, 1998, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $77,890,548. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 8,431,906
GROSS UNREALIZED DEPRECIATION ...... --
------------
NET UNREALIZED APPRECIATION ...... $ 8,431,906
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
1998 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, 1998, 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, 1998 and the financial
highlights for each of the years in the five-year period ended December 31,
1998. 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 II Inc. and
American Municipal Term Trust III Inc. as of December 31, 1998, 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 12, 1999
- --------------------------------------------------------------------------------
1998 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 12, 1998 ....................... $0.0542 $0.0517 $0.0475
February 25, 1998 ...................... 0.0542 0.0517 0.0475
March 25, 1998 ......................... 0.0542 0.0517 0.0475
April 22, 1998 ......................... 0.0542 0.0517 0.0475
May 27, 1998 ........................... 0.0542 0.0517 0.0475
June 24, 1998 .......................... 0.0542 0.0517 0.0475
July 29, 1998 .......................... 0.0542 0.0517 0.0475
August 26, 1998 ........................ 0.0542 0.0517 0.0475
September 23, 1998 ..................... 0.0542 0.0517 0.0475
October 28, 1998 ....................... 0.0542 0.0517 0.0475
November 24, 1998 ...................... 0.0542 0.0517 0.0475
December 16, 1998 ...................... 0.0542 0.0517 0.0475
----------- ------- -------
Total .............................. $0.6504 $0.6204 $0.5700
----------- ------- -------
----------- ------- -------
</TABLE>
COMMON STOCK LONG-TERM GAINS
(TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II TERM TRUST III
- ---------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C>
December 16, 1998 ...................... $0.0825 $0.0380 $0.0610
----------- ------- -------
----------- ------- -------
</TABLE>
- --------------------------------------------------------------------------------
1998 Annual Report 36 American Municipal Term Trusts
<PAGE>
FEDERAL INCOME TAX INFORMATION (continued)
- --------------------------------------------------------------------------------
PREFERRED STOCK INCOME DISTRIBUTIONS
(INCOME FROM TAX-EXEMPT SECURITIES, 100%, 100% AND 100%
QUALIFYING AS EXEMPT-INTEREST DIVIDENDS, RESPECTIVELY)
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
MUNICIPAL MUNICIPAL MUNICIPAL
PAYABLE DATE TERM TRUST TERM TRUST II TERM TRUST III
- ---------------------------------------- ----------- -------------- ---------------
<S> <C> <C> <C>
Total .............................. $815.20 $872.96 $822.55
----------- ------- -------
----------- ------- -------
</TABLE>
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>
January 5, 1998 ........................ $ -- $ -- $ 3.57
December 1, 1998 ....................... -- 27.57 --
December 3, 1998 ....................... 35.45 -- --
December 7, 1998 ....................... -- -- 25.17
December 8, 1998 ....................... -- 26.37 --
December 10, 1998 ...................... 24.93 -- --
December 14, 1998 ...................... -- -- 26.37
December 15, 1998 ...................... -- 1.57 --
December 17, 1998 ...................... 25.17 -- --
December 21, 1998 ...................... -- -- 25.16
December 24, 1998 ...................... 26.97 -- --
December 28, 1998 ...................... -- -- 16.88
December 31, 1998 ...................... 2.65 -- --
----------- ------ ------
Total .............................. $115.17 $55.51 $97.15
----------- ------ ------
----------- ------ ------
</TABLE>
- --------------------------------------------------------------------------------
1998 Annual Report 37 American Municipal Term Trusts
<PAGE>
Shareholder Update
- --------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
10, 1998. 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 ....................... 1,545 120
Leonard W. Kedrowski ................... 1,545 120
AMERICAN MUNICIPAL TERM TRUST II
David T. Bennett ....................... 1,465 12
Leonard W. Kedrowski ................... 1,465 12
AMERICAN MUNICIPAL TERM TRUST III
David T. Bennett ....................... 1,064 --
Leonard W. Kedrowski ................... 1,064 --
</TABLE>
- --------------------------------------------------------------------------------
1998 Annual Report 38 American Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
(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
Robert J. Dayton ....................... 7,765,825 212,861
Roger A. Gibson ........................ 7,765,825 212,861
Andrew M. Hunter III ................... 7,765,879 212,807
Robert L. Spies ........................ 7,767,172 211,514
Joseph D. Strauss ...................... 7,770,127 208,559
Virginia L. Stringer ................... 7,770,127 208,559
AMERICAN MUNICIPAL TERM TRUST II
Robert J. Dayton ....................... 6,626,728 180,675
Roger A. Gibson ........................ 6,629,589 177,814
Andrew M. Hunter III ................... 6,629,589 177,814
Robert L. Spies ........................ 6,630,278 177,125
Joseph D. Strauss ...................... 6,631,410 175,993
Virginia L. Stringer ................... 6,631,410 175,993
AMERICAN MUNICIPAL TERM TRUST III
Robert J. Dayton ....................... 4,812,655 254,660
Roger A. Gibson ........................ 4,814,055 253,260
Andrew M. Hunter III ................... 4,814,055 253,260
Robert L. Spies ........................ 4,814,055 253,260
Joseph D. Strauss ...................... 4,814,055 253,260
Virginia L. Stringer ................... 4,814,055 253,260
</TABLE>
(3) The funds preferred and common shareholders, voting as a
class, ratified the selection by a majority of the
independent members of the funds Board of Directors of KPMG
Peat Marwick LLP as the independent public accountants for
the funds for the fiscal year ending December 31, 1998. 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 .................................... 7,765,882 26,712 186,091 --
BXT .................................... 6,885,003 -- -- --
CXT .................................... 4,969.159 31,397 66,759 --
</TABLE>
- --------------------------------------------------------------------------------
1998 Annual Report 39 American Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
(4) The funds' preferred and common shareholders, voting as a
class, approved an interim advisory agreement between the
funds and Piper Capital Management Inc. (Piper Capital), and
the receipt of investment advisory fees by Piper Capital
under such agreement. 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 .................................... 7,572,266 120,436 285,938 --
BXT .................................... 6,592,499 86,208 128,695 --
CXT .................................... 4,922,683 57,628 87,003 --
</TABLE>
(5) The funds' preferred and common shareholders, voting as a
class, approved a new investment advisory agreement between
the funds and U.S. Bank. 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 .................................... 7,605,650 26,712 271,062 --
BXT .................................... 6,640,189 61,480 105,733 --
CXT .................................... 4,914,348 56,396 96,567 --
</TABLE>
CHANGE OF ACCOUNTANTS
On September 9, 1998, the funds' board of directors, upon the
recommendation of the audit committee, appointed Ernst & Young
LLP the independent accountants for the funds for the fiscal
year ending December 31, 1999, and dismissed KPMG Peat Marwick
LLP ("KPMG"). KPMG's reports on the funds' financial statements
for the past two years have not contained an adverse opinion or
a disclaimer of opinion, and have not been qualified as to
uncertainty, audit scope, or accounting principles. In addition,
there have not been any disagreements with KPMG during the
funds' two most recent fiscal years on any matter of accounting
principles or practices, financial statement disclosure, or
auditing scope or procedure which, if
- --------------------------------------------------------------------------------
1998 Annual Report 40 American Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
not resolved to the satisfaction of KPMG, would have caused it
to make a reference to the subject matter of the disagreement in
connection with its reports.
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the Dividend
Reinvestment Plan. It's a convenient and economical way to buy
additional shares of the fund by automatically reinvesting
dividends and capital gains. The plan is administered by
Investors Fiduciary Trust Company (IFTC), the plan agent.
ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of distributions
will begin with the next distribution paid, provided your
request is received at least 10 days before the record date for
that distribution.
If your shares are in certificate form, you may join the plan
directly and have your distributions reinvested in additional
shares of the fund. To enroll in this plan, call IFTC at
1-800-543-1627. If your shares are registered in your brokerage
firm's name or another name, ask the holder of your shares how
you may participate.
Banks, brokers or nominees, on behalf of their beneficial owners
who wish to reinvest dividend and capital gains distributions,
may participate in the plan by informing IFTC at least 10 days
before each shares 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
- --------------------------------------------------------------------------------
1998 Annual Report 41 American Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
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.
TAX INFORMATION
Distributions invested in additional shares of the fund are
subject to income tax to the same extent 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.
- --------------------------------------------------------------------------------
1998 Annual Report 42 American Municipal Term Trusts
<PAGE>
SHAREHOLDER UPDATE (continued)
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
1998 Annual Report 43 American Municipal Term Trusts
<PAGE>
[LOGO] FIRST AMERICAN
ASSET MANAGEMENT
AMERICAN MUNICIPAL TERM TRUSTS
1998 ANNUAL REPORT
[LOGO] This document is printed on paper
made from 100% total recovered fiber,
including 15% post-consumer waste.
2/1999 164-99
