<PAGE>
ALL-AMERICAN TERM
TRUST INC.
ANNUAL REPORT
JANUARY 31, 1995
<PAGE>
--------------------------------------------------------------------------------
March 15, 1995
Dear Shareholder,
During the year ended January 31, 1995, the United States economy exhibited
steady growth. In a series of monetary tightenings that began early in 1994, the
Federal Reserve Board raised the benchmark Federal Funds rate, the rate banks
charge each other for overnight borrowing, six times in 1994 for a total
increase of 2.5%. These increases, which were implemented to moderate economic
expansion and forestall inflation, triggered stock and bond market volatility
throughout most of 1994. The Federal Reserve tightened another 0.5% on February
1, 1995, increasing the Federal Funds rate to 6.0%
Productivity gains in the workplace and the increased competitiveness of
United States corporations in the global marketplace contributed to the low
inflation and steady growth which characterized the economy during the year
ended January 31, 1995. Unemployment continued to decline, and retail sales
remained brisk, sparked by strengthened consumer confidence and an upward trend
in personal income. However, side effects of higher interest rates, including a
decline in single family housing starts, crept into economic data during the
latter half of 1994. As we move into the new year, the economy remains
healthy--although it is not yet clear what impact higher interest rates will
have on economic growth.
PORTFOLIO REVIEW
During the year ended January 31, 1995, the Federal Reserve's successive
interest rate increases initiated a period of widescale declines in the prices
of most fixed income securities. As short-term interest rates increased during
the period, most bond prices depreciated. Volatility in the Treasury market
influenced both the corporate bond and high yield markets, which caused
liquidity to decline. As a result of this market decline, All-American Term
Trust Inc. ('the Trust') had a total return for the year ended January 31, 1995
of (4.99)% based on the portfolio's net asset value and (7.13)% based on the
Trust's share price on the New York Stock Exchange. During the year ended
January 31, 1995, the Trust made distributions totaling $1.22 per share. As of
January 31, 1995, the Trust's net asset value per share was $13.31, while the
share price on the New York Stock Exchange was $12.13.
The Trust seeks to provide a high level of current income consistent with
the preservation of capital. As described in the prospectus, the Trust will
terminate on or about January 31, 2003 and will liquidate all of its assets and
distribute the net proceeds to shareholders. While the portfolio is being
managed in an effort to return the initial offering price of $15.00 per share,
this is not guaranteed. The Trust maintains a diversified portfolio of
investment grade corporate bonds, mortgage-backed securities, high yield bonds
and AAA-rated zero coupon municipal bonds.
On January 31, 1995, the investment grade portion of the portfolio had a
weighted average maturity of 7.9 years in non-callable bonds in the industrial,
bank and finance sectors. We believed these sectors offered the best relative
value and improving credit stories. The Trust's high yield component continued
to be focused primarily in single B securities in various industrial sectors
with maturities ranging from
--------------------------------------------------------------------------------
<PAGE>
--------------------------------------------------------------------------------
5.4 to 7.9 years, with adequate call protection. In addition, the portfolio
remained fully invested with an average maturity of 5.2 years as of January 31,
1995.
Going forward, we expect the economy to continue to grow during 1995,
although perhaps not as rapidly as in 1994. There are encouraging signs that the
Federal Reserve may in fact be engineering a sustainable level of economic
growth coupled with modest inflation, which is a good long-term scenario for
corporate debt. The Trust's emphasis continues to be on security selection to
minimize credit risk.
We value you as a shareholder and as a client, and thank you for your
continued support. We welcome any comments or questions you may have.
Sincerely,
/s/ Frank P.L. Minard /s/ Mary B. King
FRANK P.L. MINARD MARY B. KING
Chairman, Portfolio Manager,
Mitchell Hutchins Asset Management Inc. All-American Term Trust Inc.
/s/ Thomas J. Libassi
THOMAS J. LIBASSI
Portfolio Manager,
All-American Term Trust Inc.
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2
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Portfolio of Investments
January 31, 1995
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
---------- -------- ------- ------------
<S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES -- 18.50%
$ 5,227 GNMA II ARM................................................ 10/20/21 5.125% $ 5,010,010
3,621 GNMA II ARM................................................ 02/20/22 5.500 3,475,806
1,513 GNMA II ARM................................................ 03/20/22 5.500 1,452,946
8,910 GNMA II ARM................................................ 08/20/23 7.000 8,865,177
15,000 GNMA II ARM TBA............................................ TBA 7.000 14,939,063
------------
Total Government National Mortgage Association Certificates
(cost -- $33,266,773)................................................ 33,743,002
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION CERTIFICATES -- 28.79%
12,000 FNMA CMT ARM TBA........................................... TBA 5.436 11,688,750
22,500 FNMA COFI ARM TBA.......................................... TBA 5.627 21,923,438
6,596 FNMA CMT ARM............................................... 02/01/23 5.692 6,578,116
8,609 FNMA CMT ARM............................................... 03/01/23 5.854 8,502,057
3,776 FNMA CMT ARM............................................... 12/01/21 7.745 3,835,681
------------
Total Federal National Mortgage Association Certificates (cost --
$52,342,337)......................................................... 52,528,042
------------
AGENCY BACKED COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.53%
15,353 FNMA Trust 1993-41, Class H................................ 01/25/21 8.000* 4,298,870
6,115 FNMA Trust 1993-G8, Class PT............................... 03/25/23 7.000* 2,132,576
------------
Total Agency Backed Collateralized Mortgage Obligations (cost --
$6,845,755).......................................................... 6,431,446
------------
CORPORATE BONDS -- 84.70%
BANKING -- 6.47%
4,000 BankAmerica Corp........................................... 10/15/02 7.500 3,766,044
3,000 Chemical Bank New York..................................... 09/15/02 7.250 2,831,190
5,500 First Chicago Corp......................................... 01/15/03 7.625 5,215,667
------------
11,812,901
------------
CABLE/MEDIA -- 10.34%
2,400 Dial Page Inc. ............................................ 02/15/00 12.250 2,304,000
1,000 Mobile Telecommunications.................................. 12/15/02 13.500 1,016,250
9,000 News America Holdings Inc. ................................ 02/01/03 8.625 8,835,363
7,000 Telecommunications Inc. ................................... 01/15/03 8.250 6,716,521
------------
18,872,134
------------
CHEMICAL -- 1.05%
2,000 IMC Fertilizer Group Inc. ................................. 10/01/00 9.250 1,910,000
------------
</TABLE>
3
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
---------- -------- ------- ------------
CORPORATE BONDS (CONTINUED)
<S> <C> <C> <C>
CONSUMER PRODUCTS -- 4.56%
$2,000 Mary Kay Corp. ............................................ 12/31/00 10.250% $ 1,930,000
2,500 Revlon Consumer Products Corp. ............................ 06/01/99 9.500 2,287,500
2,000 Williamhouse Regency Delaware Inc. ........................ 06/15/05 11.500 1,860,000
2,500 Wilrig AS.................................................. 03/15/04 11.250 2,237,500
------------
8,315,000
------------
DIVERSIFIED-ENERGY -- 4.75%
4,000 Coastal Corp. ............................................. 09/15/02 8.125 3,839,440
5,000 Tenneco Inc. .............................................. 10/01/02 7.875 4,826,550
------------
8,665,990
------------
DIVERSIFIED-INDUSTRIAL -- 6.47%
4,300 Anacomp Inc. .............................................. 11/01/00 15.000 4,214,000
2,000 Florida Steel Corp. ....................................... 12/15/00 11.500 2,000,000
1,000 Stone Container Corp. ..................................... 10/01/02 10.750 990,000
2,000 Synthetic Industries....................................... 12/01/02 12.750 1,850,000
2,500 Welbilt Corp. ............................................. 11/01/99 12.250 2,743,750
------------
11,797,750
------------
FINANCE -- 15.49%
2,000 BF Saul Real Estate Investors.............................. 04/01/02 11.625 1,740,000
3,000 Comdisco Corp. MTN......................................... 01/28/02 9.500 3,153,267
5,000 CS First Boston Inc. MTN................................... 01/15/03 7.650 4,604,000
6,500 General Motors Acceptance Corp. ........................... 01/01/03 8.500 6,504,342
4,500 Phoenix RE Corp. .......................................... 08/15/03 9.750 4,455,000
2,000 PRT Funding Corp. ......................................... 04/14/04 11.625 1,540,000
7,000 Salomon Inc. MTN........................................... 01/15/03 7.150 6,266,050
------------
28,262,659
------------
FOOD & BEVERAGE -- 4.89%
3,000 American Restaurant Group.................................. 09/15/98 12.000 2,790,000
2,250 Dr. Pepper Bottling Corp. ................................. 02/15/00 10.250 2,272,500
2,000 Flagstar Corp. ............................................ 11/01/04 11.250 1,610,000
1,000 RJR Nabisco Inc. .......................................... 12/01/02 8.625 948,536
1,500 Royal Crown Corp. ......................................... 08/01/00 9.750 1,305,000
------------
8,926,036
------------
</TABLE>
4
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
---------- -------- ------- ------------
CORPORATE BONDS (CONCLUDED)
<S> <C> <C> <C>
FOREST PRODUCTS -- 1.02%
$2,000 Pacific Lumber Corp. ...................................... 03/01/03 10.500% $ 1,860,000
------------
GAMING/HOTEL -- 14.60%
2,000 Aztar Corp. ............................................... 10/01/02 11.000 1,840,000
1,500 Bally Entertainment Corp. ................................. 12/15/06 10.000 1,155,000
3,250 Bally's Grand Inc. ........................................ 12/15/03 10.375 2,925,000
4,000 California Hotel Finance Corp. ............................ 12/01/02 11.000 3,800,000
4,000 Hilton Hotels Corp. ....................................... 07/15/02 7.700 3,505,088
3,914 Host Marriott Hospitality.................................. 11/01/01 10.875 3,914,000
5,000 MGM Grand Hotel Financial Corp. ........................... 05/01/02 12.000 5,437,500
2,972 Sahara Finance Corp. ...................................... 08/31/96 12.125 2,674,839
1,000# Sam Houston Race Park Ltd.(A) ............................. 07/15/99 11.750 150,000
1,803 Trump Taj Mahal Funding Inc. .............................. 11/15/99 11.350 1,239,474
------------
26,640,901
------------
HEALTHCARE -- 0.81%
1,500 General Medical Corp. ..................................... 08/15/03 10.875 1,470,000
------------
INDUSTRIAL -- 0.95%
2,000 Sabreliner Corp. Unit...................................... 04/15/03 12.500 1,740,000
------------
LEISURE & ENTERTAINMENT -- 2.51%
2,000 Kloster Cruise Ltd. ....................................... 05/01/03 13.000 1,560,000
3,000 Time Warner Entertainment Inc. ............................ 05/01/02 9.625 3,025,500
------------
4,585,500
------------
OIL & GAS -- 6.05%
3,500 Giant Industries Inc. ..................................... 11/15/03 9.750 3,185,000
2,000 Global Marine Inc. ........................................ 12/15/99 12.750 2,140,000
6,000 USX Corp. MTN.............................................. 08/05/02 7.990 5,711,220
------------
11,036,220
------------
RETAIL -- 3.26%
2,000 Bradlees Inc. ............................................. 03/01/03 9.250 1,560,000
1,000 Central Rents Inc. ........................................ 12/15/03 12.875 910,000
3,000 Levitz Furniture Corp. .................................... 07/15/03 9.625 2,310,000
1,200 Loehmans Holdings Inc. .................................... 02/15/99 13.750 1,164,000
------------
5,944,000
------------
TEXTILES -- 1.48%
3,000 Westpoint Stevens Inc. .................................... 12/15/05 9.375 2,692,500
------------
Total Corporate Bonds (cost -- $169,689,994)........................... 154,531,591
------------
</TABLE>
5
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Yield
Amount Maturity to
(000) Dates Maturity Value
---------- -------- ------- ------------
<S> <C> <C> <C>
ZERO COUPON MUNICIPAL SECURITIES -- 8.63%
$ 650 Bolingbrook Illinois Park District......................... 01/01/03 5.93% $ 408,623
995 Cook County Illinois High School District.................. 12/01/02 6.12 627,606
4,500 Houston Texas Independent School District.................. 08/15/02 5.22 2,919,960
7,000 Houston Texas Water & Sewer................................ 12/01/02 5.05 4,466,000
1,000 Maricopa County Arizona School District.................... 01/01/02 5.30 672,460
3,895 Northeast Texas Independent School District................ 02/01/03 5.15 2,450,851
6,000 San Antonio Texas Electric & Gas........................... 02/01/03 5.90 3,797,518
650 William County Illinois Community School District.......... 12/15/02 6.02 411,255
------------
Total Zero Coupon Municipal Securities (cost -- $16,414,255)........... 15,754,273
------------
<CAPTION>
Number of
Warrants
----------
<S> <C>
WARRANTS -- 0.03%
1,000 Central Rents Inc. ........................................................... 30,000
2,000 Sabreliner Corp. ............................................................. 20,000
------------
Total Warrants (cost -- $70,000).......................................................... 50,000
------------
<CAPTION>
Principal
Amount Maturity Interest
(000) Date Rate
---------- -------- -------
<S> <C> <C> <C>
REPURCHASE AGREEMENT -- 0.62%
$1,128 Repurchase Agreement dated 01/31/95, with Yamaichi
International, collateralized by $1,240,000 Treasury Note,
4.750% due 09/30/98; proceeds: $1,128,182
(cost -- $1,128,000)....................................... 02/01/95 5.800 1,128,000
------------
Total Investments (cost -- $279,757,114) -- 144.80%.................... 264,166,354
Liabilities in excess of other assets -- (44.80%)...................... (81,728,970)
------------
NET ASSETS -- 100.00%.................................................. $182,437,384
------------
------------
</TABLE>
------------
* Planned amortization class interest only security. This security entitles the
holder to receive interest payments from an underlying pool of mortgages. The
risk associated with this security is related to the speed of principal
paydowns outside a designated range. High prepayments would result in a
smaller amount of interest being received and cause the yield to decrease. Low
prepayments would result in greater amount of interest being received and
cause the yield to increase.
# Security represents a unit which is comprised of the stated bond with attached
warrants.
(A) Non-income producing security.
ARM--Adjustable Rate Mortgage
CMT--Constant Maturity Treasury Index
COFI--11th District Cost of Funds Index
MTN--Medium Term Note
TBA--(To Be Announced) Securities are purchased on a forward commitment basis
with approximated (generally +/-2.5%) principal amount and no definite
maturity date. The actual principal amount and maturity date will be
determined upon settlement when specific mortgage pools are assigned.
See accompanying notes to financial statements
6
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Statement of Assets and Liabilities
January 31, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost -- $279,757,114)... $264,166,354
Interest receivable.......................................... 4,071,234
Deferred organizational expenses............................. 141,654
Other assets................................................. 6,157
------------
Total assets.............................................. 268,385,399
------------
LIABILITIES
Payable for investments purchased............................ 85,609,109
Payable to affiliate......................................... 138,209
Accrued expenses and other liabilities....................... 200,697
------------
Total liabilities......................................... 85,948,015
------------
NET ASSETS
Capital stock -- $0.001 par value; 100,000,000 shares
authorized;
13,706,667 shares issued and outstanding................... 205,597,650
Undistributed net investment income.......................... 1,272,031
Accumulated net realized losses from investment
transactions............................................... (8,841,537)
Net unrealized depreciation of investments................... (15,590,760)
------------
Net assets applicable to shares outstanding.................. $182,437,384
------------
------------
Net asset value per share.................................... $13.31
</TABLE>
See accompanying notes to financial statements
7
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Statement of Operations
For the Year Ended January 31, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................... $ 19,059,578
-------------
EXPENSES:
Investment advisory and administration..................... 1,715,693
Custody and accounting..................................... 80,374
Legal and audit............................................ 57,876
Reports and notices to shareholders........................ 49,000
Amortization of organizational expenses.................... 46,000
Transfer agency fees....................................... 21,157
Directors' fees............................................ 6,000
Other expenses............................................. 27,359
-------------
2,003,459
-------------
NET INVESTMENT INCOME......................................... 17,056,119
-------------
REALIZED AND UNREALIZED LOSSES FROM INVESTMENT ACTIVITIES:
Net realized losses from investment transactions........... (7,819,054)
Net change in unrealized appreciation/depreciation of
investments.............................................. (19,811,269)
-------------
Net realized and unrealized losses from investment
activities.................................................. (27,630,323)
-------------
Net decrease in net assets resulting from operations.......... $ (10,574,204)
-------------
-------------
</TABLE>
See accompanying notes to financial statements
8
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Statement of Cash Flows
For the Year Ended January 31, 1995
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Interest received.......................................... $ 20,320,993
Expenses paid.............................................. (1,877,331)
Purchases of short-term portfolio investments, net......... (558,000)
Purchases of long-term portfolio investments............... (1,059,647,002)
Sales of long-term portfolio investments................... 1,058,524,594
---------------
Net cash provided by operating activities.................. 16,763,254
---------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Dividends and distributions paid to shareholders........... (16,763,254)
---------------
NET CHANGE IN CASH........................................... 0
Cash at beginning of period................................ 0
---------------
Cash at end of period...................................... $ 0
---------------
---------------
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations....... (10,574,204)
---------------
Decrease in cost of investments............................ 16,095,995
Increase in net unrealized appreciation/depreciation....... 19,811,269
Decrease in interest receivable............................ 229,127
Decrease in payable for investments purchased.............. (8,924,965)
Decrease in deferred organization expenses................. 46,000
Decrease in payable to affiliate........................... (20,745)
Increase in accrued expenses and other liabilities......... 103,873
Increase in other assets................................... (3,096)
---------------
Total adjustments........................................ 27,337,458
---------------
Net cash provided by operating activities........... $ 16,763,254
---------------
---------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the
Period
March 1,
1993
(commencement
of
For the Year operations)
Ended to
January 31, January 31,
1995 1994
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income....................... $ 17,056,119 $15,181,710
Net realized losses from investment
transactions.............................. (7,819,054) (433,776)
Net change in unrealized
appreciation/depreciation of
investments............................... (19,811,269) 4,220,509
------------ ------------
Net increase (decrease) in net assets
resulting from operations................. (10,574,204) 18,968,443
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................. (16,763,254) (14,463,275)
In excess of net realized gains from
investment transactions................... -- (330,331)
------------ ------------
Total dividends and distributions to
shareholders.............................. (16,763,254) (14,793,606)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from initial public offering (net
of underwriting discount and
commissions).............................. -- 205,500,000
------------ ------------
Net increase (decrease) in net assets....... (27,337,458) 209,674,837
NET ASSETS:
Beginning of period......................... 209,774,842 100,005
------------ ------------
End of period (including undistributed net
investment income of $1,272,031 and
$718,435, respectively)................... $182,437,384 $209,774,842
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Notes to Financial Statements
--------------------------------------------------------------------------------
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
All-American Term Trust Inc. (the 'Trust') was incorporated in Maryland on
November 19, 1992 as a closed-end diversified management investment company. The
Trust is anticipated to terminate on or about January 31, 2003. Prior to March
1, 1993, the Trust had no activities other than organizational matters and the
sale to Mitchell Hutchins Asset Management Inc. ('Mitchell Hutchins'),
investment adviser and administrator of the Trust, of 6,667 shares of common
stock for a total of $100,005. Organizational costs of $230,000 have been
deferred and are being amortized on the straight line method over a period not
to exceed 60 months from the date the Trust commenced operations. PaineWebber
Incorporated, the parent company of Mitchell Hutchins, paid all offering costs
in connection with the offering.
Valuation of Investments -- Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect, in the judgement of Mitchell Hutchins, the fair value of the
securities. When market quotations are not readily available, securities are
valued based upon appraisals derived from information concerning those
securities or similar securities received from recognized dealers in those
securities. All other securities are valued at fair value as determined in good
faith by or under the direction of the Board of Directors. The amortized cost
method of valuation, which approximates market value, is used to value debt
obligations with 60 days or less remaining to maturity, unless the Board of
Directors determines that this does not represent fair value.
The ability of the issuers of the debt securities held by the Trust to meet
their obligations may be affected by economic developments, including those
particular to a specific industry or region.
Investment Transactions and Investment Income -- Investment transactions
are recorded on the trade date. Realized gains and losses from investment
transactions are calculated using the identified cost method. Interest income is
recorded on an accrual basis. Discounts are accreted and premiums are amortized
as adjustments to interest income and the identified cost of investments. The
Trust also earns fee income from transactions in which the Trust sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date (the 'roll period'). During the roll period the Trust
forgoes principal and interest paid on the securities. The Trust is compensated
by the interest earned on the cash proceeds on the initial sale and by fee
income or a lower repurchase price.
Repurchase Agreements -- The Trust's custodian takes possession of the
collateral pledged for investments in repurchase agreements. The underlying
collateral is valued daily on a mark-to-market basis to ensure that the value,
including accrued interest, is at least equal to the repurchase price. In
11
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Notes to Financial Statements -- (continued)
--------------------------------------------------------------------------------
the event of default of the obligations to repurchase, the Trust has the right
to liquidate the collateral and apply the proceeds in satisfaction of the
obligation. Under certain circumstances, in the event of default or bankruptcy
by the other party to the agreement, realization and/or retention of the
collateral may be subject to legal proceedings.
Federal Tax Status -- The Trust intends to distribute all of its taxable
income and to comply with the other requirements of the Internal Revenue Code
applicable to regulated investment companies. Accordingly, no provision for
federal income taxes is required. In addition, to the extent that the Trust
distributes during each calendar year substantially all of its taxable net
investment income, capital gains and certain other amounts, if any, the Trust
may not be subject to a federal excise tax.
Dividends and Other Distributions -- Dividends and distributions are
recorded on the ex-dividend date. The Trust intends to pay monthly dividends at
a constant rate that over time will result in the distribution of substantially
all of the Trust's net investment income. The amount of dividends and
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These 'book/tax'
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital. On or about January 31, 2003, the Trust will liquidate its
assets and will declare and make a termination distribution to its shareholders
in an aggregate amount equal to the net proceeds of such liquidation after
payment of the Trust's expenses and liabilities, including amounts owed on any
outstanding borrowings by the Trust.
INVESTMENT ADVISER AND ADMINISTRATOR
The Trust has entered into an Investment Advisory and Administration
Contract ('Advisory Contract') with Mitchell Hutchins. The Advisory Contract
provides Mitchell Hutchins with an investment advisory and administration fee,
computed weekly and paid monthly, at an annual rate of 0.90% of the Trust's
average weekly net assets.
12
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Notes to Financial Statements -- (concluded)
--------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at January
31, 1995 was substantially the same as the cost of securities for financial
statement purposes.
At January 31, 1995, the components of net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (from investments having an excess of
value over cost)........................................ $ 916,043
Gross depreciation (from investments having an excess of
cost over value)........................................ (16,506,803)
------------
Net unrealized depreciation of invesments................. $(15,590,760)
------------
------------
</TABLE>
For the year ended January 31, 1995, total aggregate purchases and sales of
portfolio securities excluding short-term securities, were $1,050,722,037 and
$1,058,524,594, respectively.
CAPITAL STOCK
There are 100,000,000 shares of $0.001 par value common stock authorized.
Of the 13,706,667 shares outstanding at January 31, 1995, Mitchell Hutchins
owned 6,667 shares.
FEDERAL TAX STATUS
At January 31, 1995, the Trust had a net capital loss carryforward of
$5,276,006. The loss carryforward is available as a reduction, to the extent
provided in the regulations, of future net realized capital gains, and will
expire January 31, 2003.
At January 31, 1994, the cumulative effect of permanent book/tax
reclassifications resulted in increases (decreases) to the components of net
assets as follows:
<TABLE>
<S> <C>
Beneficial interest......................................... $(2,355)
Undistributed net investment income......................... 2,355
</TABLE>
For the year ended January 31, 1995, the reclassification arising from
permanent book/tax differences resulted in increases (decreases) to the
components of net assets as follows:
<TABLE>
<S> <C>
Undistributed net investment income......................... $ 258,376
Accumulated net realized losses............................. (258,376)
</TABLE>
13
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Quarterly Results of Operations (unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET REALIZED AND
UNREALIZED NET INCREASE
GAINS/(LOSSES) (DECREASE)
FROM IN NET ASSETS
NET INVESTMENT INVESTMENT RESULTING FROM
INCOME ACTIVITIES OPERATIONS
-------------- ----------------- -----------------
TOTAL PER TOTAL PER TOTAL PER
QUARTER ENDED (000'S) SHARE (000'S) SHARE (000'S) SHARE
------------------------------ ------- ----- -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
January 31, 1995.............. $ 4,089 $0.30 $ (1,707) $(0.13) $ 2,382 $ 0.17
October 31, 1994.............. 4,284 0.31 (6,907) (0.50) (2,623) (0.19)
July 31, 1994................. 4,356 0.31 (2,454) (0.17) 1,902 0.14
April 30, 1994................ 4,327 0.32 (16,562) (1.21) (12,235) (0.89)
------- ----- -------- ------ -------- ------
Total.................... $17,056 $1.24 $(27,630) $(2.01) $(10,574) $(0.77)
------- ----- -------- ------ -------- ------
------- ----- -------- ------ -------- ------
January 31, 1994.............. $ 3,895 $0.29 $ 1,634 $ 0.11 $ 5,529 $ 0.40
October 31, 1993.............. 4,442 0.32 145 0.01 4,587 0.33
July 31, 1993................. 4,541 0.33 3,682 0.28 8,223 0.61
April 30, 1993*............... 2,304 0.17 (1,674) (0.13) 630 0.04
------- ----- -------- ------ -------- ------
Total.................... $15,182 $1.11 $ 3,787 $ 0.27 $ 18,969 $ 1.38
------- ----- -------- ------ -------- ------
------- ----- -------- ------ -------- ------
</TABLE>
------------------
* For the period March 1, 1993 (commencement of operations) to April 30, 1993.
14
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Financial Highlights
--------------------------------------------------------------------------------
Selected data for a share of common stock outstanding for each of the
periods represented below:
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 1, 1993
(COMMENCEMENT
FOR THE YEAR OF OPERATIONS)
ENDED TO
JANUARY 31, 1995 JANUARY 31, 1994
---------------- ----------------
<S> <C> <C>
Net asset value, beginning of period......................................... $ 15.30 $ 15.00
---------------- ----------------
Net investment income........................................................ 1.24 1.11
Net realized and unrealized gains (losses) on investment transactions........ (2.01) 0.27
---------------- ----------------
Net increase (decrease) in net asset value resulting from operations......... (0.77) 1.38
---------------- ----------------
Less dividends and distributions:
Dividends from net investment income......................................... (1.22) (1.06)
Distributions in excess of net realized gains from investment transactions... -- (0.02)
---------------- ----------------
Total dividends and distributions............................................ (1.22) (1.08)
---------------- ----------------
---------------- ----------------
Net asset value, end of period............................................... $ 13.31 $ 15.30
---------------- ----------------
---------------- ----------------
Per share market value, end of period........................................ $ 12.13 $ 14.38
---------------- ----------------
---------------- ----------------
Total investment return(1)................................................... (7.13)% 3.04%
---------------- ----------------
---------------- ----------------
Ratios/Supplemental Data:
Net assets, end of period (000 omitted)...................................... $182,437 $209,775
Ratio of expenses to average net assets...................................... 1.05% 1.04%*
Ratio of net investment income to average net assets......................... 8.95% 8.02%*
Portfolio turnover rate...................................................... 382.55% 416.05%
</TABLE>
------------------
* Annualized
(1) Total investment return is calculated assuming a purchase of one share of
common stock at the current market price on the first day of each period
reported and a sale at the current market price on the last day of each
period reported, and assuming reinvestment of dividends to common
stockholders at prices obtained under the Trust's Dividend Reinvestment
Plan. Total investment return does not reflect brokerage commissions and
has not been annualized for periods of less than one year.
15
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Report of Ernst & Young LLP, Independent Auditors
--------------------------------------------------------------------------------
The Board of Directors and Shareholders
All-American Term Trust Inc.
We have audited the accompanying statement of assets and liabilities of
All-American Term Trust Inc. (the 'Trust'), including the portfolio of
investments, as of January 31, 1995, and the related statements of operations
and cash flows for the year then ended, and the statement of changes in net
assets and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at January
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Trust at January 31, 1995, the results of its operations, its cash flows, the
changes in its net assets, and the financial highlights for the indicated
periods in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
March 6, 1995
16
<PAGE>
ALL-AMERICAN TERM TRUST INC.
--------------------------------------------------------------------------------
Tax Information
--------------------------------------------------------------------------------
We are required by subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Trust's fiscal year end (January
31, 1995), as to the federal tax status of distributions received by
stockholders during such fiscal year. Accordingly, we are advising you that the
distributions paid during the period by the Trust were derived from net
investment income and are taxable as ordinary income. Additionally, 0.05% of the
distributions paid qualifies for the dividends received deduction available to
corporate shareholders.
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need
not be reported as taxable income. Some retirement trusts (e.g., corporate,
Keogh and 403(b)(7) plans) may need this information for their annual
information reporting.
Because the Trust's fiscal year is not the calendar year, another
notification will be sent in respect of calendar year 1995. The second
notification, which reflects the amount to be used by calendar year taxpayers on
their federal income tax returns, will be made in conjunction with Form 1099 DIV
and will be mailed in January 1996. Shareholders are advised to consult their
own tax advisers with respect to the tax consequences of their investment in the
Trust.
17
<PAGE>
------------------------------------
DIRECTORS
E. Garrett Bewkes, Jr., Chairman
John R. Torell III
William D. White
------------------------------------
PRINCIPAL OFFICERS
Paul B. Guenther
President
Victoria E. Schonfeld
Vice President
Mary B. King
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Julian F. Sluyters
Vice President and Treasurer
------------------------------------
INVESTMENT ADVISER
AND ADMINISTRATOR
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
------------------------------------
Notice is hereby given in accordance
with Section 23(c) of the Investment
Company Act of 1940 that from time
to time the Trust may purchase at
market prices shares of its common
stock in the open market.
This report is sent to the
shareholders of the Trust for their
information. It is not a prospectus,
circular or representation intended
for use in the purchase or sale of
shares of the Trust or of any
securities mentioned in the report.
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