<PAGE>
All-American Term Trust Inc.
Annual Report
March 17, 1997
____________________________
|
All-American Term |
Trust Inc. |
FUND PROFILE |
|
Goal: |
High level of |
current income, |
consistent with the |
preservation of |
capital. The Trust |
will terminate on or |
about January 31, 2003 |
|
Portfolio Managers: |
Julieanna Berry, |
James F. Keegan, |
Tom Libassi, |
Mitchell Hutchins |
Asset Management Inc. |
|
Total Net Assets: |
$199.3 million as of |
January 31, 1997 |
|
Dividend Payment: |
Monthly |
___________________________|
Dear Shareholder,
We are pleased to present you with the annual report for All-American Term
Trust Inc. (the "Trust") for the year ended January 31, 1997.
General Market Overview
Although 1996 was a difficult year for fixed income investors, higher yielding
securities--a component of the Trust--managed to demonstrate strong
per-formance. This can be at- tributed to a number of elements, including a
com-pression of yields, strong cash inflows and extremely low new issue
defaults. Overall, however, the volatile nature of the Treasury market over the
12-month period ended January 31, 1997 made for a sentiment-driven market. Signs
of strength in employment and housing, coupled with healthy retail and capital
spending, created concern that the Federal Reserve Board (the "Fed") may raise
rates. However, tempered inflation persisted and ultimately kept the Fed on hold
for the period. As the 12-month period drew to a close, moderating growth in the
economy prevailed and the risk of inflationary pressures persisted in the
marketplace.
Portfolio Review
The Trust's total return for the 12 months ended January 31, 1997 was 8.97%
based on the Trust's net asset value and 4.59% based on the Trust's share price
on the New York Stock Exchange. During the 12 months ended January 31, 1997, the
Trust made distributions totalling $1.06 per share. As of January 31, 1997, the
Trust's net asset value per share was $14.54, while its share price on the New
York Stock Exchange was $12.75. 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. As of
January 31, 1997, the investment grade portion of the portfolio was
1
<PAGE>
Annual Report
concentrated in the bank and finance sector (15.74% of net assets), as
well as various industrial sectors, particularly cable/media (20.77% of
net assets). Over the 12-month period, we be-lieved these sectors
offered the best relative value. As mentioned previously, higher
yielding securities turned in strong performance compared to other
fixed income securities, and the Trust benefited from its position in
this sector as a result. During the period, this component of the Fund
continued to focus primarily on B-rated securities within several
industrial sectors, including media (6.28%), consumer manufacturing
(2.09%) and retail (2.61%). During the year, the Trust remained fully
invested with an average maturity of 8.78 years as of January 31, 1997.
Outlook
Going 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. Both of
these scenarios are fundamentally positive for the bond markets.
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,
/s/ MARGO N. ALEXANDER /s/ JULIEANNA M. BERRY
------------------------ ----------------------------
MARGO N. ALEXANDER JULIEANNA M. BERRY
President, Portfolio Manager,
Mitchell Hutchins Asset Management Inc. All-American Term Trust Inc.
/s/ THOMAS J. LIBASSI /s/ JAMES F. KEEGAN
------------------------ ----------------------------
THOMAS J. LIBASSI JAMES F. KEEGAN
Portfolio Manager, Portfolio Manager,
All-American Term Trust Inc. All-American Term Trust Inc.
2
<PAGE>
ALL-AMERICAN TERM TRUST INC.
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- --------------------- ---------------- ------------
<S> <C> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION CERTIFICATES - 27.38%
$ 20,350 GNMA II ARM.................................. 10/20/24 6.875% $ 20,818,264
6,197 GNMA II ARM.................................. 08/20/23 7.125 6,356,283
27,000 GNMA II ARM TBA.............................. TBA 6.000 27,388,125
------------
Total Government National Mortgage Association
Certificates (cost-$54,062,798)........................... 54,562,672
------------
FEDERAL HOME LOAN MORTGAGE CORPORATION CERTIFICATES - 5.56%
10,640 FHLMC ARM (cost-$10,999,064)................. 03/01/24 7.584 11,088,865
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION CERTIFICATES - 9.76%
4,448 FNMA CMT ARM................................. 03/01/23 7.137 4,560,291
15,000 FNMA TBA..................................... TBA 6.089 14,901,563
------------
Total Federal National Mortgage Association Certificates
(cost-$19,424,837)........................................ 19,461,854
------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.83%
6,115 FNMA Trust 1993-41, Class H
(cost-$1,677,318).......................... 03/25/23 7.000* 1,649,116
------------
CORPORATE BONDS - 84.58%
Aerospace - 0.97%
2,000 SabreLiner Corporation Series A.............. 04/15/03 12.500 1,940,000
------------
Banking - 1.39%
2,700 Bankers Trust New York Corporation........... 01/15/02 7.500 2,770,357
------------
Broker/Dealer - 8.12%
5,000 CS First Boston Incorporated MTN++........... 01/15/03 7.650 5,148,300
4,000 Lehman Brothers Incorporated................. 04/15/03 7.250 4,028,428
7,000 Saloman Incorporated MTN..................... 01/15/03 7.150 7,012,187
------------
16,188,915
------------
Cable - 8.55%
4,000 Continental Cablevision Incorporated......... 08/15/03 8.625 4,318,840
4,000 International CableTel Incorporated.......... 04/15/05 12.750+ 2,980,000
2,500 Multicanal S.A.**............................ 02/01/02 9.250 2,534,375
7,000 Telecommunications Incorporated.............. 01/15/03 8.250 7,210,140
------------
17,043,355
------------
Communications - 5.20%
3,000 360 Communications Company................... 03/01/03 7.125 2,960,901
5,500 Comcast Cellular............................. 03/05/00 7.264(1) 4,008,125
3,360 GST USA Telecommunications Incorporated...... 12/15/05 13.875+ 2,074,800
1,250 People's Telecommunications Company.......... 07/15/02 12.250 1,328,125
------------
10,371,951
------------
Consumer Manufacturing - 3.20%
500 Apparel Ventures Incorporated................ 12/31/00 12.250 400,000
2,000 Chattem Incorporated......................... 06/15/04 12.750 2,200,000
3,000 Coleman Holdings Incorporated................ 05/27/98 11.736(1) 2,602,500
2,250 Decorative Home Accents...................... 06/30/02 13.000 1,170,000
------------
6,372,500
------------
</TABLE>
3
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- --------------------- ---------------- ------------
<S> <C> <C> <C> <C>
CORPORATE BONDS - (CONTINUED)
Energy - 2.72%
$ 2,000 Cliffs Drilling Company...................... 05/15/03 10.250% $ 2,150,000
1,500 Crown Central Petroleum...................... 02/01/05 10.875 1,533,750
2,000 Empire Gas Corporation....................... 07/15/04 7.000+ 1,730,000
------------
5,413,750
------------
Entertainment - 1.81%
250 Cobb Theatres................................ 03/01/03 10.625 263,438
3,000 Time Warner Entertainment Incorporated....... 05/01/02 9.625 3,346,650
------------
3,610,088
------------
Finance - 6.23%
3,000 Comdisco Corporation MTN..................... 01/28/02 9.500 3,346,170
6,500 General Motors Acceptance Corporation........ 01/01/03 8.500 7,014,195
2,000 Reliance Group Holdings Incorporated......... 11/15/00 9.000 2,060,000
------------
12,420,365
------------
Food & Beverage - 1.20%
2,500 American Rice Incorporated................... 07/31/02 13.000 2,400,000
------------
Gaming - 2.58%
2,500 Casino America Incorporated.................. 08/01/03 12.500 2,462,500
2,500 El Comandante Capital Corporation............ 12/15/03 11.750 2,437,500
561 Sam Houston Race Park Limited................ 09/01/01 11.000 232,802
------------
5,132,802
------------
General Industrial - 2.96%
2,250 Jordan Industries............................ 08/01/05 11.750+ 1,856,250
2,000 Poindexter JB Incorporated................... 05/15/04 12.500 1,985,000
2,000 Revlon Consumer Products Corporation......... 04/01/01 9.375 2,050,000
------------
5,891,250
------------
Homebuilding - 1.02%
2,000 Ryland Group Incorporated.................... 07/15/02 10.500 2,040,000
------------
Hotels & Lodging - 2.05%
4,000 Hilton Hotels Corporation.................... 07/15/02 7.700 4,082,192
------------
Industrial Manufacturing - 2.66%
5,000 Tenneco Incorporated......................... 10/01/02 8.075 5,300,630
------------
Media - 12.19%
3,000 All American Communications Incorporated..... 10/15/01 10.875 3,030,000
2,000 KIII Communications Corporation.............. 05/01/02 10.625 2,095,000
3,000 NeoData Services Incorporated................ 05/01/03 12.000 3,210,000
9,000 News America Holdings Incorporated........... 02/01/03 8.625 9,667,224
2,000 Paxson Communications Corporation............ 10/01/02 11.625 2,100,000
2,000 Pegasus Media & Communcations Incorporated... 07/01/05 12.500 2,200,000
2,000 Sullivan Graphics Incorporated............... 08/01/05 12.750 1,985,000
------------
24,287,224
------------
Metals & Mining - 0.72%
1,400 Weirton Steel Corporation.................... 07/01/04 11.375 1,438,500
------------
</TABLE>
4
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATES RATES VALUE
- ------------- --------------------- ---------------- ------------
<S> <C> <C> <C>
CORPORATE BONDS - (CONCLUDED)
Oil & Gas - 3.15%
$ 6,000 USX Corporation MTN.......................... 08/05/02 7.990% $ 6,282,000
------------
Packaging - 2.20%
2,000 Grupo Industrial Durango S.A................. 07/15/01 12.000 2,155,000
2,000 Owens-Illinois Incorporated.................. 12/01/03 11.000 2,225,000
------------
4,380,000
------------
Real Estate - 0.51%
1,000 Hovnanian K Enterprises Incorporated......... 04/15/02 11.250 1,022,500
------------
Retail - 2.89%
2,500 Big Five Holdings............................ 09/15/02 13.625 2,650,000
1,500 County Seat Stores Incorporated.............. 10/01/02 12.000(a) 562,500
500 Great American Cookie Incorporated........... 01/15/01 10.875 475,000
2,000 Specialty Retailers Incorporated............. 08/15/00 10.000 2,080,000
------------
5,767,500
------------
Supermarkets & Drugstores - 3.82%
3,500 Di Giorgio Corporation....................... 02/15/03 12.000 3,640,000
1,000 Farm Fresh Holdings.......................... 10/01/00 12.250 840,000
1,500 Hills Stores Company New..................... 07/01/03 12.500 1,110,000
2,000 Pantry Incorporated.......................... 11/15/00 12.000 2,015,000
------------
7,605,000
------------
Tobacco - 0.52%
1,000 RJR Nabisco Incorporated..................... 12/01/02 8.625 1,027,416
------------
Technology - 1.79%
3,000 Electronic Retailing Systems
International**............................ 02/01/04 13.250+ 2,070,000
3,000 Inter Act Systems Incorporated............... 08/01/03 14.000+ 1,492,500
------------
3,562,500
------------
Transportation - 3.00%
5,500 Airborne Freight Corporation................. 12/15/02 8.875 5,971,350
------------
Transport Non-Air - 2.11%
2,000 Stena Shipping............................... 12/15/05 10.500 2,160,000
2,000 Walbro Corporation........................... 07/15/05 9.875 2,050,000
------------
4,210,000
------------
Utilities - 1.02%
2,000 Calpine Corporation.......................... 02/01/04 9.250 2,035,000
------------
Total Corporate Bonds (cost-$166,854,922)................... 168,567,145
------------
CONVERTIBLE BONDS - 1.17%
Communications - 0.19%
420 GST Telecommunications Incorporated.......... 12/15/05 13.875+ 369,600
Retail - 0.57%
1,500 Michaels Stores Incorporated................. 01/15/03 6.750 1,140,000
Technology - 0.41%
1,000 Softkey International Incorporated........... 11/01/00 5.500 826,250
------------
Total Convertible Bonds (cost-$2,393,646)................... 2,335,850
------------
</TABLE>
5
<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) - 9.37%
$ 650 Bolingbrook Illinois Park District........... 01/01/03 5.475% $ 486,148
995 Cook County Illinois High School District.... 12/01/02 6.124 751,066
4,500 Houston Texas Independent School District.... 08/15/02 5.200 to 5.250 3,454,695
7,000 Houston Texas Water & Sewer.................. 12/01/02 5.050 5,298,930
1,000 Maricopa County Arizona School District...... 01/01/02 5.300 792,750
3,895 NorthEast Independent School District
Texas...................................... 02/01/03 5.150 2,909,760
6,000 San Antonio Texas Electric & Gas............. 02/01/03 5.150 to 5.900 4,482,300
650 William County Illinois Community School
District................................... 12/15/02 6.024 493,675
------------
Total Zero Coupon Municipal Securities (cost-$18,208,646)... 18,669,324
------------
</TABLE>
NUMBER OF
SHARES
- -------------
COMMON STOCK(A) - 0.30%
Gaming - 0.27%
43,875 Casino America Incorporated.......................... 120,656
77,681 Colorado Gaming & Entertainment Company.............. 388,405
149 SHRP Equity Incorporated............................. 34,270
-------
543,331
-------
Media - 0.03%
4,513 Pegasus Media & Communications Corporation............ 55,282
-------
Total Common Stock (cost-$561,265)............................. 598,613
-------
NUMBER OF
WARRANTS
- -------------
WARRANTS(A) - 0.19%
Aerospace - 0.00%
2,000 SabreLiner Corporation................................ 10,000
-------
Consumer Manufacturing - 0.01%
500 AVI Holdings Incorporated**........................... 2,500
2,250 Decorative Home Accents**............................. 11,250
-------
13,750
-------
Energy - 0.12%
85,466 Transamerican Refining Corporation.................... 235,031
-------
Gaming - 0.06%
7,767 Casino America Incorporated........................... 13,981
2,500 HDA Management Corporation............................ 98,150
-------
112,131
-------
Retail - 0.00%
90 Cookies USA Incorporated**............................ 900
-------
Technology - 0.00%
3,000 Inter Act Systems Incorporated**...................... 6,750
-------
Total Warrants (cost-$282,395)................................. 378,562
-------
6
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MATURITY INTEREST
(000) DATE RATE VALUE
- ------------- --------------------- ---------------- ------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT - 1.42%
$ 2,829 Repurchase Agreement dated 01/31/97, with
Dresdner Kleinwort Benson N.A. LLC,
collateralized by $2,826,000 U.S. Treasury
Notes, 6.875% due 4/30/97; proceeds:
$2,830,311 (cost-$2,829,000)............... 02/03/97 5.560% $ 2,829,000
------------
TOTAL INVESTMENTS (cost-$277,293,891)-140.56%............... 280,141,001
Liabilities in excess of other assets-(40.56)%.............. (80,838,384)
------------
NET ASSETS-100.00%.......................................... $199,302,617
============
</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.
++ Illiquid security representing 1.84% of total investments.
(a) Non-income producing securities
(1) Interest rates shown reflect yield to maturity at purchase date for zero
coupon bonds.
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
7
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES JANUARY 31, 1997
Assets:
Investments in securities, at
value (cost-$277,293,891)................................... $ 280,141,001
Cash.......................................................... 84,571
Interest receivable........................................... 3,624,014
Receivable for investments sold............................... 2,956,480
Deferred organizational expenses.............................. 49,654
Other assets.................................................. 4,977
-------------
Total assets.................................................. 286,860,697
-------------
Liabilities:
Payables for investments purchased............................ 87,171,183
Payable to investment adviser and administrator............... 151,481
Accrued expenses and other liabilities........................ 235,416
-------------
Total liabilities............................................. 87,558,080
-------------
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........................... 2,983,897
Accumulated net realized losses from
investment transactions..................................... (12,126,040)
Net unrealized appreciation of investments.................... 2,847,110
-------------
Net assets applicable to shares outstanding................... $ 199,302,617
=============
Net asset value per share..................................... $14.54
======
See accompanying notes to financial statements
8
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF OPERATIONS For the Year Ended January 31, 1997
Investment income:
Interest........................................................ $17,345,334
-----------
Expenses:
Investment advisory and administration.......................... 1,762,781
Custody and accounting.......................................... 150,633
Reports and notices to shareholders............................. 171,371
Legal and audit................................................. 87,345
Amortization of organizational expenses......................... 46,000
Transfer agency fees............................................ 34,634
Directors' fees................................................. 12,250
Other expenses.................................................. 37,121
-----------
2,302,135
-----------
Net investment income........................................... 15,043,199
-----------
Realized and unrealized gains from investment activities:
Net realized gains from investment transactions................. 675,151
Net change in unrealized appreciation/depreciation
of investments................................................ 1,116,090
-----------
Net realized and unrealized gains from investment activities.... 1,791,241
-----------
Net increase in net assets resulting from operations............ $16,834,440
===========
See accompanying notes to financial statements
9
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Years
Ended January 31
----------------------------
1997 1996
------------ ------------
From operations:
Net investment income............................ $ 15,043,199 $ 16,353,219
Net realized gains (losses) from investments..... 675,151 (3,832,205)
Net change in unrealized appreciation/depreciation
of investments................................. 1,116,090 17,321,780
------------- -------------
Net increase in net assets
resulting from operations...................... 16,834,440 29,842,794
------------- -------------
Dividends to shareholders from:
Net investment income............................ (14,529,067) (15,282,934)
------------- -------------
Net increase in net assets....................... 2,305,373 14,559,860
Net assets:
Beginning of year............................... 196,997,244 182,437,384
------------- -------------
End of year (including undistributed net
investment income of $2,983,897 and
$2,342,316, respectively)..................... $199,302,617 $196,997,244
============ ============
See accompanying notes to financial statements
10
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF CASH FLOWS For The Year Ended January 31, 1997
Cash flows provided by operating activities:
Interest received.......................................... $ 15,968,094
Expenses paid.............................................. (2,135,401)
Purchases of short-term portfolio investments, net......... (857,000)
Purchases of long-term portfolio investments............... (1,049,741,264)
Sales of long-term portfolio investments................... 1,051,379,209
----------------
Net cash provided by operating activities.................. 14,613,638
----------------
Cash flows used for financing activities:
Dividends paid to shareholders............................. (14,529,067)
----------------
Net change in cash......................................... 84,571
Cash at beginning of period................................ 0
----------------
Cash at end of period...................................... $ 84,571
================
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....... $ 16,834,440
----------------
Increase in investments, at value.......................... (6,464,258)
Decrease in receivable for investments sold................ 3,645,561
Decrease in interest receivable............................ 429,971
Amortization of deferred organizational expenses........... 46,000
Decrease in other assets................................... 7,876
Increase in payable for investments purchased.............. 1,192
Increase in payable to investment adviser
and administrator........................................ 1,664
Increase in accrued expenses and other liabilities......... 111,192
----------------
(2,220,802)
----------------
Net cash provided by operating activities.................. $ 14,613,638
================
See accompanying notes to financial statements
11
<PAGE>
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. 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. The following
is a summary of significant accounting policies:
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.
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
12
<PAGE>
interest earned on the cash proceeds on the initial sale and by
fee income or a lower repurchase price.
Dividends and 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 January 31, 1997 was substantially the same as the cost of
securities for financial statement purposes.
At January 31, 1997, the components of net unrealized
appreciation of investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost)........ $7,141,296
Gross depreciation (investments having an excess of cost over value)........ (4,294,186)
----------
Net unrealized appreciation of investments.................................. $2,847,110
==========
</TABLE>
For the year ended January 31, 1997, tota1 aggregate purchases
and sales of portfolio securities, excluding short-term
securities, were $1,049,779,750 and $1,047,733,568,
respectively.
13
<PAGE>
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,
1997, Mitchell Hutchins owned 7,453 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 the
Trust's investment objective to return $15.00 per share to
investors on or about January 31, 2003, the Trust may retain a
portion of its taxable income and would pay any applicable
excise and federal income tax.
At January 31, 1997, the Trust had a net capital loss
carryforward of $11,059,831 which expires as follows:
$4,375,790 in 2003 and $6,684,041 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.
To reflect reclassifications arising from permanent 'book/tax'
differences for the year ended January 31, 1997, the fund's
undistributed net investment income was increased by $127,449
and accumulated net realized losses from investment
transactions was increased by $127,449.
14
<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
FOR THE YEARS MARCH 1, 1993
ENDED JANUARY 31, (COMMENCEMENT
-------------------------------- OF OPERATIONS) TO
1997 1996 1995 JANUARY 31, 1994
-------- -------- -------- ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................... $ 14.37 $ 13.31 $ 15.30 $ 15.00
-------- -------- -------- ----------
Net investment income.................................. 1.10 1.19 1.24 1.11
Net realized and unrealized gains (losses) from
investments.......................................... 0.13 0.99 (2.01) 0.27
-------- -------- -------- ----------
Net increase (decrease) in net asset value resulting
from operations...................................... 1.23 2.18 (0.77) 1.38
-------- -------- -------- ----------
Dividends from net investment income................... (1.06) (1.12) (1.22) (1.06)
Distributions in excess of net realized gains from
investment transactions.............................. -- -- -- (0.02)
-------- -------- -------- ----------
Total dividends and distributions to shareholders...... (1.06) (1.12) (1.22) (1.08)
-------- -------- -------- ----------
Net asset value, end of period......................... $ 14.54 $ 14.37 $ 13.31 $ 15.30
-------- -------- -------- ----------
-------- -------- -------- ----------
Per share market value, end of period.................. $ 12.75 $ 13.25 $ 12.13 $ 14.38
-------- -------- -------- ----------
-------- -------- -------- ----------
Total investment return(1)............................. 4.59% 19.34% (7.13)% 3.04%
-------- -------- -------- ----------
-------- -------- -------- ----------
Ratios/Supplemental Data:
Net assets, end of period (000's)...................... $199,303 $196,997 $182,437 $ 209,775
Expenses to average net assets......................... 1.18% 1.05% 1.05% 1.04%*
Net investment income to average net assets............ 7.70% 8.49% 8.95% 8.02%*
Portfolio turnover rate................................ 391% 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.
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, 1997,
and the related statements of operations and cash flows for the
year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and 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 and financial highlights. Our procedures
included confirmation of securities owned at January 31, 1997
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 All-American Term Trust
Inc. at January 31, 1997, the results of its operations and its
cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and
the financial highlights for each of the indicated periods, in
conformity with generally accepted accounting principles.
New York, New York
March 11, 1997
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, 1997), 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.
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
1997. 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 1998. Shareholders are advised to
consult their own tax advisers with respect to the tax
consequences of their investment in the Trust.
17
<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 $44 billion in assets under
management as of February 28, 1997.
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 weekly in Barron's, as well as other
newspapers.
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.
18
<PAGE>
Directors
E. Garrett Bewkes, Jr. Meyer Feldberg
Chairman George W. Gowen
Margo N. Alexander Frederic V. Malek
Richard Q. Armstrong Carl W. Schafer
Richard Burt John R. Torell III
Mary C. Farrell
Principal Officers
Margo N. Alexander Julieanna N. Berry
President Vice President
Victoria E. Schonfeld Thomas J. Libassi
Vice President Vice President
Dianne E. O'Donnell James F. Keegan
Vice President and Secretary Vice President
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 Fund may purchase shares of its
common stock in the open market at market prices.
This report is sent to the shareholders of the Fund for their information. It
is not a prospectus, circular or representation intended for the use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
<PAGE>
January 31, 1997
-----------------------------------
All-American
Term Trust Inc.
Annual Report
(C)1997 PaineWebber Incorporated
Member SIPC
