<PAGE>
=================
ALL-AMERICAN
TERM TRUST INC.
SEMIANNUAL REPORT
JULY 31, 1999
<PAGE>
ALL-AMERICAN TERM TRUST INC. SEMIANNUAL REPORT
September 15, 1999
Dear Shareholder,
We are pleased to present you with the semiannual report for the All-American
Term Trust Inc. (the "Trust") for the six-month period ended July 31, 1999.
MARKET REVIEW
[GRAPHIC OMITTED] Inflation risk became the dominant theme driving bond yields
during the period. Bond prices declined as investors reacted to improving
economic prospects in Asia and Latin America, rapidly growing U.S. demand,
higher oil prices and fears that future wage increases would not be offset by
commodity deflation. Long-term interest rates rose almost one percentage point
vs. the beginning of the period. From January through July, the Treasury yield
curve flattened as rates for bonds with maturities of two years rose more than
those of bonds with maturities of 30 years.
The overall bond market suffered losses as spreads (the difference in yield or
income that securities must pay to compensate for the additional risk) over
Treasurys widened. We attribute this widening to: profit-taking in the corporate
and mortgage sectors; heavy net issuance of asset-backed securities, commercial
mortgage-backed securities and high-yield bonds; and uncertainty about whether
the Federal Reserve would raise rates. The Fed raised rates twice by 0.25%--once
on June 30 and again on August 24.
OUTLOOK
Our outlook for calendar year 1999 calls for gross domestic product growth of
about 3% and inflation around 2%. We believe the Federal Reserve may be inclined
to raise rates by another 0.25% before year-end. We expect the long bond to
remain range-bound around the 6% level.
We expect corporate bond issuance to increase over the third quarter, as
companies rush to get their financing done ahead of potential Y2K problems. The
surge of issuance is likely to pressure spreads wider. However, the forecast for
healthy corporate profits and renewed demand for yield could ultimately bode
well for corporate bonds. Spreads over Treasurys are near historically wide
levels and seem likely to narrow. Also, higher market interest rates may benefit
the mortgage portion of the Trust.
- --------------------------------------------------------------------------------
ALL-AMERICAN TERM TRUST INC.
PROFILE: as of July 31, 1999
Investment Objective:
high current income, consistent with capital preservation. The Trust will
terminate on or about January 31, 2003
Portfolio Managers:
Julieanna M. Berry,
James F. Keegan &
Thomas J. Libassi,
Mitchell Hutchins
Asset Management Inc.
Commencement:
March 1, 1993
NYSE Symbol:
AAT
Dividend Payments:
monthly
Total Net Assets:
$182.6 million
Weighted Avg. Maturity:
5.76 years*
Weighted Avg. Duration:
3.31 years*
Leverage:
30.21%*
* The Trust's portfolio is actively managed and its composition will vary
over time.
- --------------------------------------------------------------------------------
1
<PAGE>
ALL-AMERICAN TERM TRUST INC. SEMIANNUAL REPORT
[The following table was depicted as a bar chart in the printed material.]
Top Five Sectors*
Finance/Banking 10.1%
Municipals 8.2%
Energy 7.0%
Cable/Media 6.9%
Diversified Industrials 6.0%
[The following table was depicted as a bar chart in the printed material.]
Portfolio Composition*
Corporates 58.6%
ARMs/Mortgages 30.2%
Municipals 8.2%
Treasurys/Agencies 1.9%
Cash & Cash Equivalents 1.1%
PORTFOLIO REVIEW
PERFORMANCE AND SHARE PRICE AS OF JULY 31, 1999
Six Months Ended 7/31/99(1) Share Price
- --------------------------------------------------------------------------------
Net Asset Value Return(2) -0.88% --
Market Price Return(3) -2.31% --
Net Asset Value -- $13.32
Market Price -- $12.38
Market Yield(4) -- 6.79%
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
[GRAPHIC OMITTED] Within the high-grade component of the portfolio, the Trust
increased its exposure to broker/dealers (3.0%).* We continue to have a core
position in the cable/media sector (8.2%) with exposure to News America Holdings
Inc. (3.7%) and Telecommunications Inc. (2.0%). As financing conditions
improved, we added exposure to agency adjustable-rate mortgages (ARMs) (30.2%),
which increased the portfolio's leverage. ARMs prices were attractive as a
result of general market conditions as well as historically high prepayments. We
anticipate a rebound in prices, as market liquidity has improved and prepayments
have declined.
Duration (a measure of a bond fund's sensitivity to interest rates) is
constrained at about three years since the Trust will terminate on or about
January 31, 2003. Due to its decreasing duration, we have gradually decreased
the Trust's exposure to high yield bonds (see graph below). The reduced exposure
to high yield bonds has lowered the Trust's income and reduced the Trust's
dividend distributions. As the Trust nears termination its duration will
continue to decrease, and consequently its exposure to high yield bonds can be
expected to continue to decrease.
[The following table was depicted as a bar chart in the printed material.]
HIGH YIELD BONDS AS % OF TOTAL PORTFOLIO ASSETS (EXCLUDES EQUITIES)*
1/98 34.2
7/98 33.0
1/99 33.2
7/99 24.5
(1) Returns for periods of less than one year are not annualized.
(2) Assumes, for illustration only, that dividends were reinvested at the net
asset value on the payable dates.
(3) Assumes dividends were reinvested under the Dividend Reinvestment Plan.
(4) Market yield--the dividend paid in July divided by the Trust's market
price on July 31, 1999, multiplied by 12. Market prices and yields will
vary.
* Weightings represent percentages of portfolio assets as of July 31, 1999.
The Trust's portfolio is actively managed and its composition will vary
over time.
2
<PAGE>
ALL-AMERICAN TERM TRUST INC. SEMIANNUAL REPORT
CREDIT QUALITY*
- --------------------------------------------------------------------------------
AAA 41.4
AA 2.0
A 9.8
BBB 21.7
BB 8.3
B 11.9
Non-Rated 4.6
Below B 0.3
- --------------------------------------------------------------------------------
100.0
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. For a Quarterly Review on All-American
Term Trust Inc. or a fund in the PaineWebber Family of Funds,(5) please contact
your Financial Advisor.
Sincerely,
/s/ Margo Alexander
Margo Alexander
President and Chief Executive Officer
Mitchell Hutchins Asset Management Inc.
/s/ Dennis L. McCauley
Dennis L. McCauley
Chief Investment Officer -- Fixed Income
Mitchell Hutchins Asset Management Inc.
/s/ James F. Keegan
James F. Keegan
Portfolio Manager
All-American Term Trust Inc.
/s/ Brian M. Storms
Brian M. Storms
President and Chief Operating Officer
Mitchell Hutchins Asset Management Inc.
/s/ Julieanna M. Berry
Julieanna M. Berry
Portfolio Manager
All-American Term Trust Inc.
/s/ Thomas J. Libassi
Thomas J. Libassi
Portfolio Manager
All-American Term Trust Inc.
* Weightings represent percentages of portfolio assets as of July 31, 1999.
The Trust's portfolio is actively managed and its composition will vary
over time.
(5) Mutual funds are sold by prospectus only. The prospectuses for the funds
contain more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
This letter is intended to assist shareholders in understanding how the Trust
performed during the six-month period ended July 31, 1999, and reflects our
views at the time of its writing. Of course, these views may change in response
to changing circumstances. We encourage you to consult your Financial Advisor
regarding your personal investment program.
3
<PAGE>
ALL-AMERICAN TERM TRUST INC.
PORTFOLIO OF INVESTMENTS JULY 31, 1999 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- ------------
<S> <C> <C> <C> <C>
Collateralized Mortgage Obligations--0.48%
$ 6,115 FNMA Trust 1993-41, Class H* (cost--$866,616) ....... 03/25/23 7.000% $ 869,950
------------
Federal Home Loan Mortgage Corporation Certificates--11.94%
21,401 FHLMC ARM (cost--$22,053,348) ....................... 02/01/22 to 03/01/24 6.837 to 6.848 21,804,455
------------
Federal National Mortgage Association Certificates--16.55%
20,000 FNMA ARM ............................................ TBA 6.000 18,512,500
9,504 FNMA ARM ............................................ 11/01/23 7.038 9,768,119
1,868 FNMA CMT ARM ........................................ 03/01/23 6.649 1,935,800
------------
Total Federal National Mortgage Association Certificates (cost--$31,373,563) 30,216,419
------------
Government National Mortgage Association Certificates--14.30%
25,745 GNMA II ARM (cost--$26,189,310) ..................... 07/20/23 to 08/20/24 6.625 26,105,339
------------
U.S. Government Agency Obligations--2.68%
5,000 FNMA (cost--$5,126,359) ............................. 04/15/03 5.750 4,899,195
------------
Corporate Bonds--76.53%
Automotive--0.55%
1,000 HDA Parts Systems Incorporated** .................... 08/01/05 12.000 1,010,000
------------
Banking--3.21%
6,000 Providian National Bank ............................. 03/15/03 6.700 5,856,006
------------
Broker/Dealer--4.29%
2,000 Goldman Sachs Group L. P. ........................... 02/01/03 6.250 1,958,738
4,000 Lehman Brothers Holdings Incorporated ............... 04/01/03 6.250 3,869,568
2,000 Lehman Brothers Incorporated ........................ 04/15/03 7.250 2,004,360
------------
7,832,666
------------
Cable--4.73%
3,500 International CableTel Incorporated ................. 04/15/05 12.750+ 3,395,000
5,000 Telecommunications Incorporated .................... 01/15/03 8.250 5,235,885
------------
8,630,885
------------
Communications-Fixed--3.26%
2,110 GST USA Incorporated ................................ 12/15/05 13.875+ 1,793,500
5,000 Hyperion Telecommunications Incorporated ............ 04/15/03 13.000+ 4,150,000
------------
5,943,500
------------
Consumer Manufacturing--0.62%
1,025 Apparel Ventures Incorporated(a) .................... 12/31/00 12.250 174,250
1,000 Decora Industries Incorporated ...................... 05/01/05 11.000 957,500
------------
1,131,750
------------
Energy--7.43%
6,000 Enron Corporation ................................... 04/01/03 9.125 6,390,054
2,000 Northern Offshore ASA ............................... 05/15/05 10.000 1,220,000
5,000 R & B Falcon Corporation ............................ 04/15/03 6.500 4,368,750
1,604 Transcontinental Refining Corporation** ............. 12/01/03 15.000 1,587,712
------------
13,566,516
------------
</TABLE>
4
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- ------------
<S> <C> <C> <C> <C>
Corporate Bonds (continued)
Finance--3.24%
$ 4,000 General Motors Acceptance Corporation ............... 01/22/03 5.875% $ 3,876,492
2,000 Reliance Group Holdings Incorporated ................ 11/15/00 9.000 2,035,400
------------
5,911,892
------------
Food & Beverage--6.96%
3,375 Iowa Select Farms L.P.** ............................ 12/01/05 10.750 2,750,625
3,000 Mrs. Fields Original Cookies Incorporated ........... 12/01/04 10.125 2,700,000
6,000 Nabisco Incorporated ................................ 02/01/33 6.125 5,776,278
1,500 Packaged Ice Incorporated ........................... 02/01/05 9.750 1,485,000
------------
12,711,903
------------
Freight, Air, Sea & Land--3.08%
5,500 Airborne Freight Corporation ........................ 12/15/02 8.875 5,632,055
------------
General Industrial--3.84%
2,000 J.B. Poindexter & Company Incorporated .............. 05/15/04 12.500 1,880,000
5,000 Tenneco Incorporated ................................ 10/01/02 8.075 5,125,845
------------
7,005,845
------------
Healthcare--3.19%
6,000 Tenet Healthcare Corporation ........................ 01/15/03 7.875 5,820,000
------------
Hotels, Lodging--2.20%
4,000 Hilton Hotels Corporation ........................... 07/15/02 7.700 4,022,216
------------
Insurance--3.81%
7,000 Prudential Insurance Company of America ............. 04/15/03 6.875 6,965,336
------------
Media--6.89%
4,000 InterAct Systems Incorporated ....................... 08/01/03 14.000+ 1,680,000
9,000 News America Holdings Incorporated .................. 02/01/03 8.625 9,438,750
2,000 Source Media Incorporated ........................... 11/01/04 12.000 1,460,000
------------
12,578,750
------------
Packaging--1.06%
2,000 Grupo Industrial Durango S.A ........................ 07/15/01 12.000 1,930,000
------------
Restaurants--1.79%
3,625 American Restaurant Group Incorporated .............. 02/15/03 11.500 3,271,562
------------
Service--2.13%
1,000 Browning Ferris Industries Incorporated ............. 01/15/03 6.100 937,500
1,000 Premier Graphics Incorporated ....................... 12/01/05 11.500 935,000
2,000# Waste Systems International Incorporated** .......... 01/15/06 11.500 2,010,000
------------
3,882,500
------------
Steel/Oil--3.29%
6,000 USX Corporation MTN ................................. 08/05/02 7.990 6,000,000
------------
Technology--5.56%
2,000 Ampex Corporation++ ................................. 03/15/03 12.000 2,080,000
3,000 Comdisco Corporation MTN ............................ 01/28/02 9.500 3,176,226
5,000 Electronic Retailing Systems International .......... 02/01/04 13.250+ 1,350,000
3,500 Samsung Electronics America Incorporated** .......... 05/01/03 9.750 3,552,500
------------
10,158,726
------------
</TABLE>
5
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- ------------
<S> <C> <C> <C> <C>
Corporate Bonds (concluded)
Tobacco--3.59%
$ 6,500 Philip Morris Companies Incorporated ................ 01/15/03 7.250% $ 6,558,136
------------
Transportation--0.44%
850 Eletson Holdings Incorporated ....................... 11/15/03 9.250 807,500
------------
Utilities--1.37%
2,500 Niagara Mohawk Power Corporation .................... 10/01/02 7.250 2,500,400
------------
Total Corporate Bonds (cost-- $149,020,109) .................................. 139,728,144
------------
Convertible Bonds--5.12%
Communications--0.36%
420 GST Telecommunications Incorporated ................. 12/15/05 13.875+ 672,000
------------
Service--3.15%
5,200 Corporate Express Incorporated ...................... 07/01/00 4.500 5,070,000
797 Waste Systems International Incorporated** .......... 05/13/05 7.000 677,548
------------
5,747,548
------------
Technology--1.61%
3,000 Softkey International Incorporated .................. 11/01/00 5.500 2,936,250
------------
Total Convertible Bonds (cost--$8,931,141) ................................... 9,355,798
------------
Zero Coupon Municipal Securities(1)--11.70%
650 Bolingbrook Illinois Park District .................. 01/01/03 5.475 558,805
995 Cook County Illinois High School District ........... 12/01/02 6.124 860,247
4,500 Houston Texas Independent School District ........... 08/15/02 5.200 to 5.250 3,945,688
7,000 Houston Texas Water & Sewer ......................... 12/01/02 5.050 6,059,900
1,000 Maricopa County Arizona School District ............. 01/01/02 5.300 901,760
3,895 NorthEast Independent School District Texas ......... 02/01/03 5.150 3,332,796
6,000 San Antonio Texas Electric & Gas .................... 02/01/03 5.150 to 5.900 5,133,960
650 William County Illinois Community School District ... 12/15/02 6.024 561,756
------------
Total Zero Coupon Municipal Securities (cost--$20,744,902) 21,354,912
------------
</TABLE>
6
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
Number of
Shares Value
- --------- ------------
<S> <C>
Common Stocks(a)--1.02%
Food & Beverages--0.04%
15,356 Packaged Ice Incorporated ........................... $ 77,740
------------
Gaming--0.03%
30,000 Hollywood Casino Corporation ........................ 56,250
------------
Retail--0.63%
261,250 Samuels Jewelers Incorporated++(2) .................. 1,142,969
------------
Service--0.16%
43,575 Waste Systems International Incorporated ............ 283,237
------------
Technology--0.16%
68,000 Ampex Corporation ................................... 297,500
------------
Total Common Stocks (cost--$2,831,188) ....................................... 1,857,696
------------
Preferred Stock(a)--0.02%
Energy--0.02%
62,241 Orion (cost--$39,461) .............................. 42,511
------------
<CAPTION>
Number of
Warrants
- ---------
<S> <C>
Warrants(a)--0.06%
Consumer Manufacturing--0.00%
525 AVI Holdings Incorporated ........................... 5
------------
General Industrial--0.01%
2,000 SabreLiner Corporation .............................. 20,000
------------
Media--0.01%
4,000 InterAct Systems Incorporated ....................... 20,000
------------
Service--0.03%
30,000 Waste Systems International Incorporated** .......... 60,000
------------
Technology--0.01%
3,000 Electronic Retailing Systems International .......... 15,000
------------
Total Warrants (cost--$146,476) .............................................. 115,005
------------
</TABLE>
7
<PAGE>
ALL-AMERICAN TERM TRUST INC.
<TABLE>
<CAPTION>
Principal
Amount Maturity Interest
(000) Dates Rates Value
- --------- -------------------- -------------- ------------
<S> <C> <C> <C> <C>
Repurchase Agreement--1.13%
$ 2,054 Repurchase Agreement dated 07/30/99 with Dresdner
Bank, collateralized by $1,976,000 U.S. Treasury
Notes, 7.500% due 05/15/02 (value--$2,095,943);
proceeds: $2,054,861 (cost--$2,054,000) ........... 08/02/99 5.030% $ 2,054,000
------------
Total Investments (cost--$269,376,473)--141.53% .............................. 258,403,424
Liabilities in excess of other assets--(41.53)% .............................. (75,831,318)
------------
Net Assets--100.00% .......................................................... $182,572,106
============
</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 securities representing 1.77% of net assets.
(a) Non-income producing securities.
# Security represents a unit which is composed of the stated bond with
attached warrants or common stock.
(1) Interest rates shown reflect yield to maturity at purchase date for zero
coupon bonds.
(2) Security is being fair valued by a management committee under the
direction of the board of directors.
ARM Adjustable Rate Mortgage, the interest rate shown is the current rate at
July 31, 1999.
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, 1999 (unaudited)
Assets:
Investments in securities, at value (cost--$269,376,473) ...... $ 258,403,424
Cash .......................................................... 51,489
Interest receivable ........................................... 3,782,380
Other assets .................................................. 237
-------------
Total assets .................................................. 262,237,530
-------------
Liabilities:
Payable for investments purchased ............................. 63,056,143
Payable for reverse repurchase agreements ..................... 16,300,000
Payable to investment adviser and administrator ............... 140,547
Accrued expenses and other liabilities ........................ 168,734
-------------
Total liabilities ............................................. 79,665,424
-------------
Net Assets:
Capital Stock--$0.001 par value; 100,000,000 shares authorized;
13,706,667 shares issued and outstanding ................... 205,571,205
Undistributed net investment income ........................... 7,334,198
Accumulated net realized losses from investment transactions .. (19,360,248)
Net unrealized depreciation on investments .................... (10,973,049)
-------------
Net assets applicable to shares outstanding ................... $ 182,572,106
=============
Net asset value per share ..................................... $ 13.32
=============
See accompanying notes to financial statements
9
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six
Months Ended
July 31, 1999
(unaudited)
-------------
<S> <C>
Investment income:
Interest ........................................................... $ 8,184,222
-----------
Expenses:
Investment advisory and administration ............................. 833,170
Interest expense ................................................... 211,219
Custody and accounting ............................................. 55,851
Reports and notices to shareholders ................................ 34,042
Legal and audit .................................................... 28,485
Directors' fees .................................................... 5,250
Transfer agency fees ............................................... 4,879
Other expenses ..................................................... 41,284
-----------
1,214,180
-----------
Net investment income .............................................. 6,970,042
-----------
Realized and unrealized losses from investment activities:
Net realized loss from investment transactions ..................... (8,237,513)
Net change in unrealized appreciation/depreciation of investments .. (352,985)
-----------
Net realized and unrealized loss from investment activities ........ (8,590,498)
-----------
Net decrease in net assets resulting from operations ............... $(1,620,456)
===========
</TABLE>
See accompanying notes to financial statements
10
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
July 31, 1999 January 31,
(unaudited) 1999
------------- -------------
<S> <C> <C>
From operations:
Net investment income .............................................. $ 6,970,042 $ 15,001,651
Net realized loss from investments ................................. (8,237,513) (1,596,043)
Net change in unrealized appreciation/depreciation of investments .. (352,985) (16,150,151)
------------- -------------
Net decrease in net assets resulting from operations ............... (1,620,456) (2,744,543)
------------- -------------
Dividends to shareholders from:
Net investment income .............................................. (6,305,067) (13,569,600)
------------- -------------
Net decrease in net assets ......................................... (7,925,523) (16,314,143)
Net assets:
Beginning of period ................................................ 190,497,629 206,811,772
------------- -------------
End of period (including undistributed net investment income
of $7,334,198 and $6,669,223, respectively) ..................... $ 182,572,106 $ 190,497,629
============= =============
</TABLE>
See accompanying notes to financial statements
11
<PAGE>
ALL-AMERICAN TERM TRUST INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six
Months Ended
July 31, 1999
(unaudited)
-------------
<S> <C>
Cash flows used for operating activities:
Interest received ........................................................ $ 6,466,612
Operating expenses paid .................................................. (2,199,033)
Interest paid ............................................................ (209,074)
Purchase of short-term portfolio investments, net ........................ (332,000)
Purchases of long-term portfolio investments ............................. (421,318,259)
Sales of long-term portfolio investments ................................. 407,648,310
-------------
Net cash flows used for operating activities ............................. (9,943,444)
-------------
Cash flows provided from financing activities:
Dividends paid to shareholders ........................................... (6,305,067)
Increase in reverse repurchase agreements ................................ 16,300,000
-------------
Net cash flows provided from financing activities ........................ 9,994,933
-------------
Net increase in cash ..................................................... 51,489
Cash at beginning of period .............................................. 0
-------------
Cash at end of period .................................................... $ 51,489
=============
Reconciliation of net decrease in net assets resulting from operations
to net cash flows used for operating activities:
Net decrease in net assets resulting from operations ..................... $ (1,620,456)
-------------
Increase in investments, at value ........................................ (25,506,290)
Increase in interest receivable .......................................... (351,558)
Decrease in other assets ................................................. 2,135
Increase in payable for investments purchased ............................ 18,728,787
Decrease in payable to custodian ......................................... (1,096,510)
Decrease in payable to investment adviser and administrator .............. (4,814)
Decrease in accrued expenses and other liabilities ....................... (94,738)
-------------
Total adjustments ........................................................ (8,322,988)
-------------
Net cash flows used for operating activities ............................. $ (9,943,444)
=============
</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 will terminate on or about January 31, 2003.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the Trust's 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--The Trust calculates its net asset value based
on the current market value for its portfolio securities. The Trust normally
obtains market values for its securities from independent pricing sources.
Independent pricing sources may use reported last sale prices, current market
quotations or valuations from computerized "matrix" systems that derive values
based on comparable securities. Securities traded in the over-the-counter
("OTC") market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally
are valued at the last sale price on Nasdaq prior to valuation. Other OTC
securities are valued at the last bid price available prior to valuation.
Securities which are listed on U.S. and foreign stock exchanges normally are
valued at the last sale price on the day the securities are valued or, lacking
any sales on such day, at the last available bid price. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated as the primary market by Mitchell Hutchins Asset
Management Inc. ("Mitchell Hutchins"), a wholly owned asset management
subsidiary of PaineWebber Incorporated ("PaineWebber") and investment adviser
and administrator of the Trust. If a market value is not available from an
independent pricing source for a particular security, that security is valued at
fair value as determined in good faith by or under the direction of the Trust's
board of directors (the "board"). The amortized cost method of valuation, which
approximates market value, generally is used to value short-term debt
instruments with sixty days or less remaining to maturity, unless the board
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.
Reverse Repurchase Agreements--The Trust enters into reverse repurchase
agreements with qualified, third party broker-dealers as determined by, and
under the direction of, the board. Interest on the value of reverse repurchase
agreements issued and outstanding is based upon competitive market rates at the
time of issuance. At the time the Trust enters into a reverse repurchase
agreement, it establishes and maintains a segregated account with the Trust's
custodian containing liquid securities having a value not less than the
repurchase price, including accrued interest, of the reverse repurchase
agreement.
The average monthly balance of reverse repurchase agreements outstanding
during the six months ended July 31, 1999 was $16,973,750 at a weighted average
interest rate of 4.93%.
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<PAGE>
NOTES TO FINANCIAL STATEMENTS (unaudited)
Dollar Rolls--The Trust enters 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 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,
1999 was substantially the same as the cost of securities for financial
statement purposes.
At July 31, 1999, the components of net unrealized depreciation of
investments were as follows:
<TABLE>
<S> <C>
Gross appreciation (investments having an excess of value over cost) ... $ 2,735,728
Gross depreciation (investments having an excess of cost over value) .. (13,708,777)
------------
Net unrealized depreciation of investments ............................. $(10,973,049)
============
</TABLE>
For the six months ended July 31, 1999, total aggregate purchases and
sales of portfolio securities, excluding short-term securities, were
$440,047,046 and $406,354,552, 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, 1999, Mitchell Hutchins owned
8,900 shares.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 will pay any applicable
excise tax.
At January 31, 1999, the Trust had a net capital loss carryforward of
$10,895,746 which will expire by 2007 or upon termination of the Trust,
whichever occurs sooner. 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 capital stock outstanding throughout each period is
presented below:
<TABLE>
<CAPTION>
For the Six
Months Ended For the Years Ended January 31,
July 31, 1999 ----------------------------------------------------
(unaudited) 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......................... $ 13.90 $ 15.09 $ 14.54 $ 14.37 $ 13.31 $ 15.30
-------- -------- -------- -------- -------- --------
Net investment income ........................................ 0.51 1.09 1.15 1.10 1.19 1.24
Net realized and unrealized gains (losses) from investments .. (0.63) (1.29) 0.42 0.13 0.99 (2.01)
-------- -------- -------- -------- -------- --------
Net increase (decrease) from investment operations ........... (0.12) (0.20) 1.57 1.23 2.18 (0.77)
-------- -------- -------- -------- -------- --------
Dividends from net investment income ......................... (0.46) (0.99) (1.02) (1.06) (1.12) (1.22)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ............................... $ 13.32 $ 13.90 $ 15.09 $ 14.54 $ 14.37 $ 13.31
======== ======== ======== ======== ======== ========
Per share market value, end of period ........................ $ 12.38 $ 13.13 $ 14.06 $ 12.75 $ 13.25 $ 12.13
======== ======== ======== ======== ======== ========
Total investment return(1) ................................... (2.31)% 0.31% 18.93% 4.59% 19.34% (7.13)%
======== ======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of period (000's) ............................ $182,572 $190,498 $206,812 $199,303 $196,997 $182,437
Expenses to average net assets ............................... 1.31%*+ 1.09% 1.10% 1.18% 1.05% 1.05%
Net investment income to average net assets .................. 7.53%* 7.50% 7.81% 7.70% 8.49% 8.95%
Portfolio turnover rate ...................................... 160% 337% 398% 391% 415% 383%
Asset coverage++ ............................................. $ 3,343 -- -- -- -- --
</TABLE>
- ----------
* Annualized.
+ Ratio includes 0.23% related to interest expense for the six months ended
July 31, 1999 which represents the cost of leverage to the Trust.
++ Per $1,000 of reverse repurchase agreements and dollar roll transactions
outstanding.
(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
return does not reflect brokerage commissions and has not been annualized
for periods of less than one year.
16
<PAGE>
ALL-AMERICAN TERM TRUST INC.
GENERAL INFORMATION (unaudited)
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., an asset management subsidiary of
PaineWebber Incorporated ("PaineWebber"), which has over $58.8 billion in assets
under management as of August 31, 1999.
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.
An annual meeting of shareholders of the Trust was held on May 20,1999. 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 and Carl W. Schafer were elected to serve as directors until the next
annual of shareholders, or until their successors are elected and qualified; and
Ernst & Young LLP was ratified as independent auditors for the Trust for the
fiscal year ended January 31, 2000.
Proposal 1
ALL SHARES VOTING AS A SINGLE CLASS:
Shares Shares
Voted Withhold
For Authority
---------- ---------
To vote for or against the election of:
Margo N. Alexander .............................. 10,874,853 149,190
Richard Q. Armstrong ............................ 10,885,152 138,891
E. Garrett Bewkes, Jr. .......................... 10,882,194 141,849
Richard R. Burt ................................. 10,884,381 139,662
Mary C. Farrell ................................. 10,877,046 146,997
Meyer Feldberg .................................. 10,883,071 140,973
George W. Gowen ................................. 10,882,285 141,758
Frederic V. Malek ............................... 10,881,885 142,158
Carl W. Schafer ................................. 10,883,976 140,067
17
<PAGE>
ALL-AMERICAN TERM TRUST INC.
Proposal 2
Shares Shares Shares
Voted Voted Withhold
For Against Authority
------ ------- ---------
To vote for or against
the ratification of the
selection of Ernst & Young
as the Fund's independent
auditors for the fiscal year
ending January 31, 2000. 10,870,769 77,818 75,456
(Broker non-votes and abstentions are included within the "Shares Withhold
Authority" totals.)
YEAR 2000 RISKS
Like other funds and financial and business organizations around the
world, the Trust could be adversely affected if the computer systems used by its
investment adviser, other service providers and entities with computer systems
that are linked to Trust records do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Issue."
Mitchell Hutchins is taking steps that it believes are reasonably designed
to address the Year 2000 Issue with respect to the computer system that it uses,
and to obtain satisfactory assurances that each of the Trust's other major
service providers is taking comparable steps. However, there can be no assurance
that these steps will be sufficient to avoid any adverse impact on the Trust. In
addition, issuers of securities in which the Trust invests may be adversely
affected by year 2000 related problems. This could have an impact on the value
of the Trust's investments and share price.
DISTRIBUTION POLICY
The Trust's Board of Directors has established a Dividend Reinvestment
Plan (the "Plan") under which all common stockholders 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 of common stock, unless such common stockholders
elect to receive cash. Common stockholders 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. The ability of such
stockholders to participate in the Plan may change if their shares are
transferred into the name of another broker or nominee.
A stockholder may elect not to participate in the Plan or may terminate
participation in the Plan at any time without penalty, and stockholders who have
previously terminated participation in the Plan may rejoin it at any time.
Changes in elections must be made in writing to the Trust's transfer agent and
should include the stockholder's name and address as they appear on the share
certificate or in the transfer agent's records. An election to terminate
participation in the Plan, until such election is changed, will be deemed an
election by a stockholder to take all subsequent distributions in cash. An
election will be effective only for distributions declared and having a record
date at least ten days after the date on which the election is received.
Additional shares of common stock 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 of the common stock at the
time of the purchase. The number of shares of common stock purchased with each
dividend will be equal to the result obtained by dividing the
18
<PAGE>
amount of the dividend payable to a particular stockholder by the average price
per share (including applicable brokerage commissions) that the transfer agent
was able to obtain in the open market. The Trust will not issue any new shares
of common stock in connection with the Plan. There is no charge to participants
for reinvesting dividends or other distributions. The transfer agent's fees for
handling the reinvestment of distributions will be paid by the Trust. However,
each participant pays a pro rata share of brokerage commissions incurred with
respect to the transfer agent's open market purchases of common stock in
connection with the reinvestment of distributions. The automatic reinvestment of
dividends and other distributions in shares of common stock does not relieve
participants of any income tax that may be payable on such distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Trust reserves the right to amend or terminate the Plan with
respect to any dividend or other distribution if notice of the change is sent to
Plan participants at least 30 days before the record date for such distribution.
The Plan also may be amended or terminated by the transfer agent by at least 30
days' written notice to all Plan participants. Additional information regarding
the Plan may be obtained from, and all correspondence concerning the Plan should
be directed to, the transfer agent at PNC Bank, National Association, c/o PFPC
Inc., P.O. Box 8950, Wilmington, Delaware 19899.
19
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<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
Brian M. Storms
PRINCIPAL OFFICERS
Margo N. Alexander
President
Victoria E. Schonfeld
Vice President
Dianne E. O'Donnell
Vice President and Secretary
Paul H. Schubert
Vice President and Treasurer
Dennis L. McCauley
Vice President
Thomas J. Libassi
Vice President
James F. Keegan
Vice President
Julieanna Berry
Vice President
Mark Tincher
Vice President
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 shares of its
common stock in the open market at market prices.
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 the use in the
purchase or sale of shares of the Trust or of any securities mentioned in this
report.
<PAGE>
PaineWebber
(Copyright)1999 PaineWebber Incorporated
Member SIPC
All-American Term Trust Inc.
July, 1999
