<PAGE>
SEMIANNUAL REPORT -- SEPTEMBER 16, 1996
---------------------------------------------------------------
DEAR SHAREHOLDER,
We are pleased to present you with the semiannual report for All-American Term
Trust Inc. (the 'Trust') for the six months ended July 31, 1996.
GENERAL MARKET OVERVIEW
After exceptional performance during most of 1995, the first half of 1996 was
difficult for fixed income investors. Accelerating economic growth, reflected in
strong employment, retail sales and investment spending numbers, as well as a
surprisingly robust housing sector, combined to sway market expectations from
the Fed easing, to the Fed tightening. The change in sentiment was clearly
reflected in the 30-year U.S. Treasury bond, the benchmark of bond market
performance, as its yield increased from 5.95% on December 29, 1995, to 6.97% by
July 31, 1996. When bond yields increase, bond prices decrease. Meanwhile, the
Federal Reserve Board's Open Market Committee decided to keep monetary policy
unchanged at the March, May and July 1996 meetings; the Fed's decision to do so
suggested that officials did not foresee a recession or accelerating inflation.
PORTFOLIO REVIEW
The unexpected strength of the economy and the rising interest rate environment
were not beneficial to the performance of fixed income securities. Almost all
areas of the bond market, with the exception of the high yield market,
experienced negative performance. Despite this, the Trust had a total return
(the net asset value change with dividends reinvested) for the six months ended
July 31, 1996 of 2.37% based on the Trust's net asset value, but a (2.52)%
return based on the Trust's share price on the New York Stock Exchange. During
the six months ended July 31, 1996, the Trust made distributions totalling $0.54
per share. As of July 31, 1996, the Trust's net asset value per share was
$14.16, while its share price on the New York Stock Exchange was $12.38.
On April 1, 1996, James F. Keegan assumed portfolio management responsibility
for the investment grade portion of the Trust, joining the present portfolio
manager, Julieanna Berry. Tom Libassi continues to manage the high yield portion
of the Trust. Mr. Keegan joined Mitchell Hutchins from the Merrion Group, an
investment firm, where he served as the Director of Fixed Income Strategy and
Research. Prior to the Merrion Group, Mr. Keegan
<PAGE>
-------------------------------------------------------------
PORTFOLIO REVIEW
was a Vice President at Bankers Trust Company, where he was the Director of
Credit Research for the Global Investment Management Group.
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 as
noted in the original prospectus, 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.
As of July 31, 1996, the investment grade portion of the portfolio was invested
in non-callable bonds in the industrial, bank and finance sectors. We believe
these sectors offer the best relative value and improving credit stories. The
Trust's high yield component continues to focus primarily on single B securities
in various industrial sectors. During the six month period, the Trust remained
fully invested with an average maturity of 8.9 years as of July 31, 1996.
Moving forward, it is our opinion that the economy will continue to expand, but
at a moderate rate. We forecast that inflation will remain subdued, creating a
stable environment for interest rates. Moreover, the overextension of consumers
would suggest a slowing down in future spending. However, the near-term picture
is not so positive. Monetary tightening has become a question of when, not if.
Current economic fundamentals suggest higher rates. Based on this, market
psychology remains bearish in the short run.
2
<PAGE>
-------------------------------------------------------------
PORTFOLIO REVIEW
Our ultimate objective in managing your investments is to help you successfully
meet your financial goals. We thank you for your continued support and welcome
any comments or questions you may have.
Sincerely,
MARGO N. ALEXANDER JULIEANNA M. BERRY
President, Portfolio Manager,
Mitchell Hutchins Asset All-American Term Trust Inc.
Management Inc.
THOMAS J. LIBASSI JAMES F. KEEGAN
Portfolio Manager, Portfolio Manager,
All-American Term Trust Inc. All-American Term Trust Inc.
3
<PAGE>
ALL-AMERICAN TERM TRUST INC.
PORTFOLIO OF INVESTMENTS JULY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- ------------------------------------------------------------- --------------------- -------------- -----------
<S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES-29.03%
$ 22,123 GNMA II ARM....................................... 10/20/24 6.500% $22,434,024
6,757 GNMA II ARM....................................... 08/20/23 7.250 6,849,031
27,000 GNMA II ARM TBA................................... TBA 6.500 27,033,750
-----------
Total Government National Mortgage Association Certificates
(cost - $55,965,100)....................................... 56,316,805
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION CERTIFICATES-6.14%
11,490 FHLMC ARM (cost - $11,831,196).................... 03/01/24 7.858 11,913,838
-----------
FEDERAL NATIONAL MORTGAGE ASSOCIATION CERTIFICATES-2.78%
5,275 FNMA CMT ARM (cost - $5,393,327).................. 03/01/23 7.848 5,389,213
COLLATERALIZED MORTGAGE OBLIGATION-0.87%
6,115 FNMA Trust 1993-41, Class H (cost - $1,821,958)... 03/25/23 7.000* 1,689,245
-----------
CORPORATE BONDS-87.04%
AEROSPACE-0.86%
2,000 SabreLiner Corp. Series A......................... 04/15/03 12.500 1,670,000
-----------
BANKING-7.96%
4,000 BankAmerica Corp.................................. 10/15/02 7.500 4,069,932
2,700 Bankers Trust New York Corp....................... 01/15/02 7.500 2,736,242
3,000 Chemical Bank New York............................ 09/15/02 7.250 3,017,910
5,500 First Chicago Corp................................ 01/15/03 7.625 5,620,104
-----------
15,444,188
-----------
CABLE-11.17%
4,000 Echostar Satellite Broadcasting................... 03/15/04 13.125+ 2,480,000
4,000 International CableTel Inc........................ 04/15/05 12.750+ 2,620,000
9,000 News America Holdings Inc. ....................... 02/01/03 8.625 9,535,014
7,000 Telecommunications Inc............................ 01/15/03 8.250 7,041,118
-----------
21,676,132
-----------
COMMUNICATIONS-7.09%
3,500 Comcast Cellular.................................. 03/05/00 7.264(1) 2,406,250
2,000 Communications & Power Industries Inc. ........... 08/01/05 12.000 2,105,000
3,360 GST Telecommunications Inc........................ 12/15/05 13.875+ 1,881,600
3,000 Interactive Systems Corp.**....................... 08/01/03 14.000 2,010,000
2,000 IXC Communications Inc.**......................... 10/01/05 12.500 2,060,000
2,000 Paxson Communications............................. 10/01/02 11.625 2,080,000
1,250 People's Telecommunications Co.................... 07/15/02 12.250 1,218,750
-----------
13,761,600
-----------
</TABLE>
4
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- ------------------------------------------------------------- --------------------- -------------- -----------
<S> <C> <C> <C>
CORPORATE BONDS-(CONTINUED)
CONSUMER MANUFACTURING-2.45%
$ 500 Apparel Ventures Inc.............................. 12/31/00 12.250% $ 380,000
2,000 Chattem Inc. ..................................... 06/15/04 12.750 2,060,000
3,000 Decorative Home Accents........................... 06/30/02 13.000 2,310,000
-----------
4,750,000
-----------
DIVERSIFIED-ENERGY-4.79%
4,000 Coastal Corp...................................... 09/15/02 8.125 4,148,800
5,000 Tenneco Inc. ..................................... 10/01/02 7.875 5,150,440
-----------
9,299,240
-----------
ENERGY-3.26%
1,500 Crown Central Petroleum........................... 02/01/05 10.875 1,522,500
2,000 Empire Gas Corp. ................................. 07/15/04 12.875+ 1,670,000
3,150 TransTexas Gas Corp............................... 06/15/02 11.500 3,134,250
-----------
6,326,750
-----------
ENTERTAINMENT-1.83%
250 Cobb Theaters**................................... 03/01/03 10.625 253,750
3,000 Time Warner Entertainment Inc..................... 05/01/02 9.625 3,289,590
-----------
3,543,340
-----------
FINANCE-11.40%
3,000 Comdisco Corp. MTN................................ 01/28/02 9.500 3,307,736
5,000 CS First Boston Inc. MTN.......................... 01/15/03 7.650 5,050,000
6,500 General Motors Acceptance Corp.................... 01/01/03 8.500 6,911,177
7,000 Salomon Inc. MTN.................................. 01/15/03 7.150 6,839,903
-----------
22,108,816
-----------
FINANCIAL SERVICES-1.99%
2,000 Imperial Credit Industries........................ 01/15/04 9.750 1,860,000
2,000 Reliance Group Holdings Inc. ..................... 11/15/00 9.000 1,995,000
-----------
3,855,000
-----------
FOOD & BEVERAGE-2.62%
2,500 American Rice Inc. ............................... 07/31/02 13.000 2,325,000
2,000 Flagstar Corp..................................... 12/01/02 10.875 1,750,000
1,000 RJR Nabisco Inc................................... 12/01/02 8.625 1,011,444
-----------
5,086,444
-----------
GAMING-3.50%
2,500 El Comandante Capital Corp........................ 12/15/03 11.750 2,412,500
2,000 Fitzgeralds Gaming Corp........................... 12/31/02 13.000 1,560,000
2,000 Harrah's Jazz..................................... 11/15/01 14.250(a) 1,040,000
1,700 PRT Funding Inc................................... 04/15/04 11.625 1,564,000
532 Sam Houston Race Park Ltd. ....................... 09/01/01 11.000 220,666
-----------
6,797,166
-----------
</TABLE>
5
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- ------------------------------------------------------------- --------------------- -------------- -----------
<S> <C> <C> <C>
CORPORATE BONDS-(CONTINUED)
GENERAL INDUSTRIAL-4.51%
$ 3,250 Alpine Group...................................... 07/15/03 12.250% $ 3,315,000
2,250 Jordan Industries................................. 08/01/05 11.750+ 1,631,250
2,000 Poindexter JB Inc................................. 05/15/04 12.500 1,840,000
2,000 Walbro Corp....................................... 07/15/05 9.875 1,970,000
-----------
8,756,250
-----------
HOTELS & LODGING-2.07%
4,000 Hilton Hotels Corp................................ 07/15/02 7.700 4,014,880
-----------
MEDIA-3.64%
3,000 NeoData Services Inc.............................. 05/01/03 12.000 2,992,500
2,000 Pegasus Media..................................... 07/01/05 12.500 2,140,000
2,000 Sullivan Graphics Inc............................. 08/01/05 12.750 1,925,000
-----------
7,057,500
-----------
METAL/MINING/STEEL-0.70%
1,400 Weirton Steel Corp.**............................. 07/01/04 11.375 1,358,000
-----------
OIL & GAS-4.22%
2,000 Cliffs Drilling................................... 05/15/03 10.250 2,000,000
6,000 USX Corp. MTN..................................... 08/05/02 7.990 6,187,500
-----------
8,187,500
-----------
PACKAGING-2.16%
2,000 Grupo Industrial Durango S.A...................... 07/15/01 12.000 2,030,000
2,000 Owens-Illinois Inc................................ 12/01/03 11.000 2,155,000
-----------
4,185,000
-----------
RETAIL-2.87%
2,500 Big Five Holdings................................. 09/15/02 13.625 2,375,000
2,000 County Seat....................................... 10/01/02 12.000 1,640,000
500 Great American Cookie Inc......................... 01/15/01 10.875 397,500
1,500 Michaels Stores Inc............................... 01/15/03 6.750 1,170,000
-----------
5,582,500
-----------
SUPERMARKETS & DRUGSTORES-3.34%
3,500 Di Giorgio Corp. ................................. 02/15/03 12.000 3,377,500
1,000 Farm Fresh Holdings............................... 10/01/00 12.250 850,000
1,500 Hills Stores Co.**................................ 07/01/03 12.500 1,342,500
1,000 Pantry Inc........................................ 11/15/00 12.000 905,000
-----------
6,475,000
-----------
TRANSPORT NON-AIR-2.63%
3,000 Alamo Rent A Car.................................. 01/31/06 11.750 3,120,000
2,000 Stena Shipping.................................... 12/15/05 10.500 1,985,000
-----------
5,105,000
-----------
</TABLE>
6
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000) MATURITY DATES INTEREST RATES VALUE
- ------------------------------------------------------------ --------------------- -------------- -----------
<S> <C> <C> <C>
CORPORATE BONDS-(CONCLUDED)
UTILITY-ELECTRIC-1.98%
$ 2,000 Calpine Corp..................................... 02/01/04 9.250% $ 1,880,000
2,000 Cleveland Electric............................... 05/15/05 9.500 1,953,180
-----------
3,833,180
-----------
Total Corporate Bonds (cost - $171,265,136)................. 168,873,486
-----------
CONVERTIBLE BONDS-0.21%
COMMUNICATIONS-0.21%
420 GST Telecommunications Inc. (cost - $241,701).... 12/15/05 13.875+ 411,600
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ---------
<S> <C>
COMMON STOCK-0.29%
GAMING-0.29%
43,875 Casino America Inc. ...................................................................... 301,641
77,682 Colorado Gaming & Entertainment Co........................................................ 233,046
149 SHRP Equity Inc........................................................................... 34,270
-----------
Total Common Stock (cost - $561,265)................................................................. 568,957
-----------
<CAPTION>
NUMBER OF
WARRANTS
- ---------
<S> <C>
WARRANTS-0.24%
AEROSPACE-0.00%
2,000 SabreLiner Corp. ......................................................................... 10,000
-----------
CONSUMER MANUFACTURING-0.01%
500 AVI Holdings Inc. ........................................................................ 2,500
3,000 Decorative Home Accents................................................................... 18,000
-----------
20,500
-----------
ENERGY-0.09%
85,466 Transamerican Refining Corp............................................................... 170,932
-----------
GAMING-0.08%
7,767 Casino America Inc. ...................................................................... 37,283
2,500 HDA Management Corp....................................................................... 112,750
-----------
150,033
-----------
MEDIA-0.06%
200 Pegasus Media............................................................................. 120,000
-----------
RETAIL-0.00%
90 Cookies USA Inc........................................................................... 900
-----------
Total Warrants (cost - $200,922)..................................................................... 472,365
-----------
</TABLE>
7
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- --------- -------- -------------- ------------
<S> <C> <C> <C>
ZERO COUPON MUNICIPAL SECURITIES(1)-9.25%
$ 650 Bolingbrook Illinois Park District.......................... 01/01/03 5.475% $ 466,700
995 Cook County Illinois High School District................... 12/01/02 6.124 721,942
4,500 Houston Texas Independent School District................... 08/15/02 5.200 to 5.250 3,323,880
7,000 Houston Texas Water & Sewer................................. 12/01/02 5.050 5,094,670
1,000 Maricopa County Arizona School District..................... 01/01/02 5.300 762,060
3,895 NorthEast Independent School District Texas................. 02/01/03 5.150 2,793,455
6,000 San Antonio Texas Electric & Gas............................ 02/01/03 5.150 to 5.900 4,303,140
650 William County Illinois Community School District........... 12/15/02 6.024 473,922
------------
Total Zero Coupon Municipal Securities (cost - $17,740,175)............ 17,939,769
------------
REPURCHASE AGREEMENT-1.16%
2,250 Repurchase Agreement dated 07/31/96, with State Street Bank
& Trust Co., collateralized by $2,275,000 Treasury Notes,
6.125% due 5/15/98; proceeds: $2,250,344 (cost -
$2,250,000)............................................... 08/01/96 5.500 2,250,000
------------
Total Investments (cost - $267,270,780) - 137.01%...................... 265,825,278
Liabilities in excess of other assets - (37.01)%....................... (71,805,080)
------------
Net Assets - 100.00%................................................... $194,020,198
------------
------------
</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 a greater amount of interest
being received and cause the yield to increase.
** Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Denotes a step-up bond or zero coupon bond that converts to the noted fixed
rate at a designated future date.
(a) Non-income producing security
(1) Interest rates shown reflect yield to maturity at purchase date.
ARM-Adjustable Rate Mortgage
CMT-Constant Maturity Treasury index
MTN-Medium Term Note
TBA-To Be Assigned-Securities are purchased on a forward commitment basis with
approximate (generally +/-1.0%) principal amount and generally stated
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
8
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES JULY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost - $267,270,780)........................................... $265,825,278
Cash................................................................................................ 504
Interest receivable................................................................................. 3,694,016
Deferred organizational expenses.................................................................... 72,654
Other assets........................................................................................ 4,586
------------
Total assets........................................................................................ 269,597,038
------------
LIABILITIES
Payable for investments purchased................................................................... 75,380,902
Payable to investment adviser and administrator..................................................... 147,745
Accrued expenses and other liabilities.............................................................. 48,193
------------
Total liabilities................................................................................... 75,576,840
------------
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................................................................. 2,518,871
Accumulated net realized losses from investment transactions........................................ (12,650,821)
Net unrealized depreciation of investments.......................................................... (1,445,502)
------------
Net assets applicable to shares outstanding......................................................... $194,020,198
------------
------------
Net asset value per share........................................................................... $14.16
------------
------------
</TABLE>
See accompanying notes to financial statements
9
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest........................................................... $8,627,915
-----------
EXPENSES:
Investment advisory and administration............................. 870,941
Custody and accounting............................................. 52,225
Reports and notices to shareholders................................ 34,988
Legal and audit.................................................... 32,613
Amortization of organizational expenses............................ 23,000
Transfer agency fees............................................... 14,477
Directors' fees.................................................... 6,125
Other expenses..................................................... 15,391
-----------
1,049,760
-----------
NET INVESTMENT INCOME.............................................. 7,578,155
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES:
Net realized gains from investment transactions.................... 22,921
Net change in unrealized appreciation/depreciation of
investments...................................................... (3,176,522)
-----------
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENT ACTIVITIES........ (3,153,601)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............... $4,424,554
-----------
-----------
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JULY 31, ENDED
1996 JANUARY 31,
(UNAUDITED) 1996
------------ ------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income......................................................... $ 7,578,155 $16,353,219
Net realized gains (losses) from investment transactions...................... 22,921 (3,832,205)
Net change in unrealized appreciation/depreciation of investments............. (3,176,522) 17,321,780
------------ ------------
Net increase in net assets resulting from operations.......................... 4,424,554 29,842,794
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income.................................................... (7,401,600) (15,282,934)
------------ ------------
Net increase (decrease) in net assets......................................... (2,977,046) 14,559,860
NET ASSETS:
Beginning of period........................................................... 196,997,244 182,437,384
------------ ------------
End of period (including undistributed net investment income of $2,518,871 and
$2,342,316, respectively).................................................... $194,020,198 $196,997,244
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Interest received............................................................................ $ 8,203,400
Expenses paid................................................................................ (1,096,596)
Purchases of short-term portfolio investments, net........................................... (278,000)
Purchases of long-term portfolio investments................................................. (516,243,332)
Sales of long-term portfolio investments..................................................... 516,816,632
-------------
Net cash provided by operating activities.................................................... 7,402,104
-------------
CASH FLOWS USED FOR FINANCING ACTIVITIES:
Dividends and distributions paid to shareholders............................................. (7,401,600)
-------------
NET INCREASE IN CASH............................................................................. 504
Cash at beginning of period.................................................................. 0
-------------
Cash at end of period........................................................................ $ 504
-------------
-------------
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net increase in net assets resulting from operations......................................... $ 4,424,554
-------------
Decrease in investments, at value............................................................ 7,851,465
Decrease in receivable for investments sold.................................................. 6,602,041
Decrease in interest receivable.............................................................. 359,969
Amortization of deferred organizational expenses............................................. 23,000
Decrease in other assets..................................................................... 8,267
Decrease in payable for investments purchased................................................ (11,789,089)
Decrease in payable to investment adviser and administrator.................................. (2,072)
Decrease in accrued expenses and other liabilities........................................... (76,031)
-------------
TOTAL ADJUSTMENTS................................................................................ 2,977,550
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................................................ $ 7,402,104
-------------
-------------
</TABLE>
See accompanying notes to financial statements
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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. Organizational
costs 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.
The preparation of financial statements in accordance with generally accepted
accounting principles requires Trust management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
Valuation of Investments - Where market quotations are readily available,
portfolio securities are valued thereon, provided such quotations adequately
reflect, in the judgment of Mitchell Hutchins Asset Management Inc. ('Mitchell
Hutchins'), the investment adviser and a wholly-owned subsidiary of PaineWebber
Incorporated, 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 a management committee under the direction
of the Trust's 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 Trust's Board of Directors determines
that this does not represent fair value.
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 the event of
default of the obligation 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. The Trust occasionally participates in joint repurchase
agreement transactions with other funds managed by Mitchell Hutchins.
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.
13
<PAGE>
Dollar Rolls - The Trust may enter into 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.
Dividends and Other Distributions - Dividends and distributions are recorded on
the ex-dividend date. 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. 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.
CONCENTRATION OF RISK
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. Mortgage- and asset-backed
securities may decrease in value as a result of increases in interest rates and
may benefit less than other fixed-income securities from declining interest
rates because of the risk of prepayments.
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.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at July 31, 1996
was substantially the same as the cost of securities for financial statement
purposes.
At July 31, 1996, the components of net unrealized depreciation of investments
were as follows:
<TABLE>
<S> <C>
Gross depreciation (investments having an excess of cost over value)........ $(5,599,145)
Gross appreciation (investments having an excess of value over cost)........ 4,153,643
-----------
Net unrealized depreciation of investments.................................. $(1,445,502)
-----------
-----------
</TABLE>
14
<PAGE>
For the six months ended July 31, 1996, total aggregate purchases and sales of
portfolio securities excluding short-term securities, were $504,454,243 and
$510,214,591, 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 July 31, 1996, Mitchell Hutchins owned 6,667
shares.
FEDERAL TAX STATUS
It is the Trust's intention to continue to meet the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
sufficient amounts of its taxable income to shareholders. Therefore, no Federal
income tax provision is required. As part of a tax planning strategy, the Trust
may retain a portion of its taxable income and would pay any applicable excise
tax.
At January 31, 1996, the Trust had a net capital loss carryforward of
$11,960,046 which expires as follows: $5,276,006 in 2003 and $6,684,040 in 2004.
The loss carryforward is available as a reduction, to the extent provided in the
regulations, of future net realized capital gains. To the extent such losses are
used, as provided in the regulations, to offset future net realized capital
gains, it is probable those gains will not be distributed.
15
<PAGE>
ALL-AMERICAN TERM TRUST INC.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding for each of the periods is
presented below:
<TABLE>
<CAPTION>
FOR THE
PERIOD
MARCH 1, 1993
(COMMENCEMENT
OF
FOR THE FOR THE YEARS ENDED OPERATIONS)
SIX MONTHS ENDED JANUARY 31, TO
JULY 31, 1996 -------------------- JANUARY 31,
(UNAUDITED) 1996 1995 1994
---------------- -------- -------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 14.37 $ 13.31 $ 15.30 $ 15.00
---------------- -------- -------- -------------
Net investment income.............................. 0.55 1.19 1.24 1.11
Net realized and unrealized gains (losses) on
investment transactions.......................... (0.22) 0.99 (2.01) 0.27
---------------- -------- -------- -------------
Net increase (decrease) in net asset value
resulting from operations........................ 0.33 2.18 (0.77) 1.38
---------------- -------- -------- -------------
Dividends from net investment income............... (0.54) (1.12) (1.22) (1.06)
Distributions in excess of net realized gains from
investment transactions.......................... -- -- -- (0.02)
---------------- -------- -------- -------------
Total dividends and distributions
to shareholders.................................. (0.54) (1.12) (1.22) (1.08)
---------------- -------- -------- -------------
Net asset value, end of period..................... $ 14.16 $ 14.37 $ 13.31 $ 15.30
---------------- -------- -------- -------------
---------------- -------- -------- -------------
Per share market value, end of period.............. $ 12.38 $ 13.25 $ 12.13 $ 14.38
---------------- -------- -------- -------------
---------------- -------- -------- -------------
Total investment return(1)......................... (2.52)% 19.34% (7.13)% 3.04%
---------------- -------- -------- -------------
---------------- -------- -------- -------------
Ratios/Supplemental Data:
Net assets, end of period (000's)................ $194,020 $196,997 $182,437 $ 209,775
Expenses to average net assets................... 1.08%* 1.05% 1.05% 1.04%*
Net investment income to average net assets...... 7.82%* 8.49% 8.95% 8.02%*
Portfolio turnover rate.......................... 191% 415% 383% 416%
</TABLE>
- ------------------
* Annualized
(1) Total investment return is calculated assuming a purchase 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 and distributions at prices obtained
under the Trust's Dividend Reinvestment Plan. Total investment returns do
not reflect brokerage commissions and have not been annualized for periods
of less than one year.
16
<PAGE>
ALL-AMERICAN TERM TRUST INC.
GENERAL INFORMATION
THE TRUST
All American Term Trust Inc. (the 'Trust') is a diversified, closed-end
management investment company whose shares trade on the New York Stock Exchange
('NYSE'). The Trust's investment objective is to provide a high level of current
income, consistent with the preservation of capital. The Trust will terminate on
or about January 31, 2003 and, in conjunction therewith, will liquidate all of
its assets and distribute the net proceeds to shareholders. The Trust will be
managed in an effort to return the initial offering price of $15.00 per share
and will normally be invested in a diversified portfolio of investment grade and
high-yield corporate bonds, mortgage-backed securities and triple-A rated zero
coupon municipal bonds. The Trust's investment adviser and administrator is
Mitchell Hutchins Asset Management Inc., a wholly owned subsidiary of
PaineWebber Incorporated ('PaineWebber'), which has over $43 billion in assets
under management as of August 31, 1996.
SHAREHOLDER INFORMATION
The NYSE ticker symbol for the Trust is AAT. Weekly comparative net asset value
and market price information about the Trust is published each Monday in The
Wall Street Journal, each Sunday in The New York Times and each Saturday in
Barron's, as well as other newspapers.
A special meeting of shareholders of the Fund was held on April 11, 1996. At the
meeting, Margo N. Alexander, Richard Q. Armstrong, E. Garrett Bewkes, Jr.,
Richard R. Burt, Mary C. Farrell, Meyer Feldberg, George W. Gowen, Frederic V.
Malek, Carl W. Schafer and John R. Torell III were elected to serve as directors
until the next annual meeting of shareholders, or until their successors are
elected and qualified.
PROPOSAL 1
To elect ten members of its Board of Directors:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED FOR WITHHOLD AUTHORITY
--------- ------------------
<S> <C> <C>
Margo N. Alexander...................... 6,865,435 489,006
Richard Q. Armstrong.................... 6,876,299 478,142
E. Garrett Bewkes, Jr................... 6,874,487 479,954
Richard R. Burt......................... 6,868,774 485,667
Mary C. Farrell......................... 6,877,312 477,129
Meyer Feldberg.......................... 6,878,936 475,505
George W. Gowen......................... 6,869,053 485,388
Frederic V. Malek....................... 6,874,967 479,474
Carl W. Schafer......................... 6,879,962 474,479
John R. Torell III...................... 6,875,689 478,752
</TABLE>
17
<PAGE>
ALL-AMERICAN TERM TRUST INC.
PROPOSAL 2
Approval of the proposed changes to the Fund's fundamental investment
restrictions and policies:
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
VOTED FOR AGAINST ABSTAIN NON-VOTES
--------- ------- ------- ---------
<S> <C> <C> <C> <C>
Modification of fundamental restriction on
portfolio diversification:................ 5,614,165 67,935 472,341 1,200,000
Modification of fundamental restriction on
concentration:............................ 5,616,323 57,062 481,056 1,200,000
Modification of fundamental restriction on
senior securities and borrowing:.......... 5,616,787 68,589 469,065 1,200,000
Modification of fundamental restriction on
making loans:............................. 5,597,824 80,368 476,249 1,200,000
Modification of fundamental restriction on
underwriting securities:.................. 5,611,137 68,682 474,622 1,200,000
Modification of fundamental restriction on
real estate investments:.................. 5,619,961 68,531 465,949 1,200,000
Modification of fundamental restriction on
investing in commodities:................. 5,579,118 102,515 472,807 1,200,000
Elimination of fundamental restriction on
margin transactions:...................... 5,580,598 103,388 470,454 1,200,000
Elimination of fundamental restriction on
short sales:.............................. 5,581,068 95,824 477,548 1,200,000
</TABLE>
18
<PAGE>
ALL-AMERICAN TERM TRUST INC.
DISTRIBUTION POLICY
The Trust has established a Dividend Reinvestment Plan (the 'Plan') under which
shareholders whose shares are registered in their own names, or in the name of
PaineWebber or its nominee, will have all dividends and other distributions on
their shares automatically reinvested in additional shares, unless such
shareholders elect to receive cash. Shareholders who elect to hold their shares
in the name of another broker or nominee should contact such broker or nominee
to determine whether, or how, they may participate in the Plan. Additional
shares acquired under the Plan will be purchased in the open market, on the NYSE
or otherwise, at prices that may be higher or lower than the net asset value per
share at the time of the purchase. The Trust will not issue any new shares in
connection with its Plan.
19
<PAGE>
DIRECTORS
E. Garrett Bewkes, Jr., Chairman
Margo N. Alexander
Richard Q. Armstrong
Richard R. Burt
Mary C. Farrell
Meyer Feldberg
George W. Gowen
Frederic V. Malek
Carl W. Schafer
John R. Torell III
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
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.
The financial information included herein is taken from the records of the Trust
without examination by independent auditors who do not express an opinion
thereon.
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.
PaineWebber
(Copyright)1996 PaineWebber Incorporated
Member SIPC
- --------------------------------------------------------------------------------
ALL-AMERICAN
TERM TRUST INC.
SEMIANNUAL REPORT
JULY 31, 1996
