<PAGE>
[GRAPHIC]
1999 SEMIANNUAL REPORT
AMERICAN STRATEGIC
INCOME PORTFOLIO
ASP
[LOGO]- SM- FIRST AMERICAN
ASSET MANAGEMENT
<PAGE>
[LOGO]- SM- FIRST AMERICAN
ASSET MANAGEMENT
CONTENTS
1 Fund Overview
4 Financial Statements and Notes
14 Investments in Securities
17 Shareholder Update
................................................................................
AMERICAN STRATEGIC INCOME PORTFOLIO
PRIMARY INVESTMENTS Mortgage-related assets that directly or indirectly
represent a participation in or are secured by and payable from mortgage loans.
The fund may also invest in asset-backed securities, U.S. government securities,
corporate debt securities, municipal obligations, unregistered securities and
mortgage servicing rights. The fund may borrow using reverse repurchase
agreements and revolving credit facilities. Use of certain of these investments
and investment techniques may cause the fund's net asset value to fluctuate to a
greater extent than would be expected from interest rate movements alone.
FUND OBJECTIVE High level of current income. Its secondary objective is to seek
capital appreciation. As with other investment companies, there can be no
assurance this fund will achieve its objective.
AVERAGE ANNUAL TOTAL RETURNS
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Based on net asset value for the periods ended May 31, 1999
[CHART]
<TABLE>
<CAPTION>
Since Inception
One Year Five Year 12/267/1991
-------- --------- ---------------
<S> <C> <C> <C>
American Strategic Income
Portfolio 5.79% 8.68% 8.43%
Lehman Brothers Mutual Fund
Government/Mortgage Index 4.66% 7.76% 6.91%
</TABLE>
The average annual total returns for American Strategic Income Portfolio are
based on the change in its net asset value (NAV), assume all distributions were
reinvested and do not reflect sales charges. NAV-based performance is used to
measure investment management results.
Average annual total returns based on the change in market price for the
one-year, five-year and since-inception periods ended May 31, 1999, were 10.92%,
7.23% and 6.89%, respectively. These returns assume reinvestment of all
distributions and reflect sales charges on distributions as described in the
fund's dividend reinvestment plan, but not on initial purchases.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more or
less than their original cost. Closed-end funds, such as this fund, often trade
at discounts to net asset value.
Therefore, you may be unable to realize the full net asset value of your shares
when you sell.
The fund uses the Lehman Brothers Mutual Fund Government/ Mortgage Index as a
benchmark. Although we believe this is the most appropriate benchmark available,
it is not a perfect match. The benchmark index is comprised of U.S. government
securities while American Strategic Income Portfolio is comprised primarily of
non-securitized, illiquid whole loans. This limits the ability of the fund to
respond quickly to market changes.
The Lehman Brothers Mutual Fund Government/Mortgage Index is comprised of all
U.S. government agency and Treasury securities and agency mortgage-backed
securities. Developed by Lehman Brothers for comparative use by the mutual fund
industry, this index is unmanaged and does not include any fees or expenses in
its total return calculations.
The since-inception number for the Lehman index is calculated from the month end
following the fund's inception through May 31, 1999.
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NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
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<PAGE>
FUND OVERVIEW
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FUND MANAGEMENT
JOHN WENKER
is primarily responsible for the management of American Strategic Income
Portfolio. He has 13 years of financial experience.
DAVID STEELE
assists with the management of American Strategic Income Portfolio. He has 20
years of financial experience.
RUSS KAPPENMAN
assists with the management of American Strategic Income Portfolio. He has 13
years of financial experience.
JULY 15, 1999
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1999, AMERICAN STRATEGIC INCOME PORTFOLIO
HAD A NET ASSET VALUE TOTAL RETURN OF 1.90%, WITH MUCH OF THE RETURN
ATTRIBUTABLE TO INCOME GENERATED BY THE FUND.* This compares to a -0.58% return
for the Lehman Brothers Mutual Fund Government/Mortgage Index. The fund's total
return based on market price was 2.13%.* As of May 31, 1999, the fund traded at
a discount to net asset value; the market price was $11.875 per share with a net
asset value of $12.72 per share.
ALONG WITH ITS STABLE SHARE PRICE, THE FUND CONTINUED TO PROVIDE AN ATTRACTIVE
DIVIDEND. For the six-month period, dividends paid amounted to $0.50 per share.
The fund's annualized distribution rate was 8.59% based on the May 31 market
price of $11.875 per share. Current monthly earnings of $0.0839 per share (based
on an average of the three months ended May 31) would result in an annualized
earnings rate of 8.48% based on the May 31 market price. Of course, past
performance is no guarantee of future results, and those rates will fluctuate.
THE FUND'S MONTHLY DIVIDEND WAS INCREASED BY 0.25 CENTS PER SHARE, BEGINNING
WITH THE DIVIDEND PAID IN MARCH, TO $0.0850 PER SHARE. The dividend reserve grew
from $0.0948 per share to $0.1035 per share over the reporting period. This
reserve continues to support dividend levels. For most of the year, we continued
to benefit from high income generated by loans held in the portfolio. This has
played a major role in allowing us to hold the dividend fairly steady.
* All returns assume reinvestment of distributions and do not reflect sales
charges, except the fund's total return based on market price, which does
reflect sales charges on distributions as described in the fund's dividend
reinvestment plan, but not on initial purchases. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more
or less than their original cost.
PORTFOLIO COMPOSITION
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As a percentage of total assets on May 31, 1999
[CHART]
<TABLE>
<S> <C>
Single Family Loans 40%
Private Fixed-rate Mortgage-backed
Securities 1%
U.S. Treasury Securities 13%
Other 1%
Multifamily Loans 23%
U.S. Agency Fixed-rate Mortgage-backed
Securities 3%
Mortgage Service Rights 1%
Commerical Loan 17%
Short-term Securities 1%
</TABLE>
DELINQUENT LOAN PROFILE
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The chart below shows the percentage of single family loans** in the portfolio
that are 30, 60, 90 or 120 days delinquent as of May 31, 1999, based on
principal amounts outstanding.
<TABLE>
<S> <C>
Current 94.2%
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30 Days 2.3%
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60 Days 1.5%
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90 Days 0.0%
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120+ Days 2.0%
- -----------------------------------
</TABLE>
** As of May 31, 1999, there were no multifamily or commerical loans delinquent.
1 1999 SEMIANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO III
<PAGE>
FUND OVERVIEW CONTINUED
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THE FUND MAINTAINED ITS FOCUSED STRATEGY. We continued to emphasize single
family, multifamily and commercial whole loans. These types of mortgage
securities represent approximately 80% of total assets, with the remainder
invested primarily in U.S. Treasury securities and FNMA mortgage-backed
securities. The higher interest rate environment of the last six months slowed
mortgage prepayments in the portfolio. This has helped maintain income at
attractive levels.
SINCE THE CAPITAL MARKETS VOLATILITY IN THE FALL OF 1998, THE COMMERCIAL REAL
ESTATE MARKET HAS BEEN RELATIVELY STABLE. Commercial new construction has slowed
for most property types and property sales have slowed as well. Generally, real
estate markets across the country are in equilibrium with supply and demand in
balance. This should help extend the real estate cycle and create a better
outlook in the near term for the real estate risk associated with the fund.
AS WE HAVE STATED IN THE PAST, LOAN PREPAYMENTS OCCURRING IN TODAY'S INTEREST
RATE ENVIRONMENT ARE TYPICALLY REINVESTED IN LOWER-YIELDING SECURITIES.
Depending on interest rate and market trends in the months and years to come,
this may eventually result in a reduced dividend. We continue to do all we can
to find securities that offer current attractive yields within proper
risk/reward relationships.
GEOGRAPHICAL DISTRIBUTION
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We attempt to buy mortgage loans in many parts of the country to help avoid the
risks of concentrating in one area. These percentages reflect principal value
of whole loans as of May 31, 1999. Shaded areas without values indicate states
in which the fund has invested less than 0.50% of its assets.
[MAP]
<TABLE>
<S> <C>
Alabama Less then 0.05%
Alaska Less then 0.05%
Arizona 7%
Arkansas Less then 0.05%
California 11%
Colorado 3%
Connecticut Less then 0.05%
Delaware 1%
Florida 6%
Georgia 1%
Hawaii Less then 0.05%
Idaho Less then 0.05%
Illinois 2%
Indiana
Iowa 1%
Kansas Less then 0.05%
Kentucky Less then 0.05%
Louisiana Less then 0.05%
Maine Less then 0.05%
Maryland Less then 0.05%
Massachusetts 2%
Michigan 1%
Minnesota 9%
Mississippi Less then 0.05%
Missouri Less then 0.05%
Montana 2%
Nebraska Less then 0.05%
New Hampshire 2%
New Jersey 3%
New Mexico 1%
New York 4%
Nevada 3%
North Carolina 2%
North Dakota
Ohio Less then 0.05%
Oklahoma 1%
Oregon 4%
Pennsylvania 1%
Rhode Island Less then 0.05%
South Carolina
South Dakota
Tennessee 5%
Texas 14%
Utah 3%
Vermont
Virginia 1%
Washington 5%
West Virginia
Wisconsin Less then 0.05%
Wyoming
</TABLE>
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2 1999 SEMIANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO III
<PAGE>
FUND OVERVIEW CONTINUED
THE FUND ACCEPTS CREDIT RISK THROUGH ITS INVESTMENT IN WHOLE LOANS. The fund
bears the risk of loss that could arise from defaults on the underlying loans.
To the extent that proceeds from the sale are less than the fund paid for the
loan, the fund could suffer a loss. Net credit losses since the fund's inception
have amounted to $0.05 per share. Over the past six months, net gains due to
foreclosure amounted to $0.003 per share. One advantage of the fund's
investments in whole loans is that it can benefit from prepayment penalties on
multifamily and commercial loans and from mortgage discount paydowns (loans
purchased at a discount paying off at par). Since-inception gains from
prepayment penalties have amounted to $0.17 per share and gains from mortgage
discount paydowns have amounted to $0.62 per share. Through the reporting
period, there were no gains from prepayment penalties and gains from mortgage
discount paydowns amounted to $0.04 per share.
THANK YOU FOR YOUR INVESTMENT IN AMERICAN STRATEGIC INCOME PORTFOLIO. We are
pleased that the fund continues to generate a competitive return and stable
income. Our attempts to control the credit risk inherent in this fund will
continue. We appreciate your faith in our abilities and look forward to serving
you in the coming year.
VALUATION OF WHOLE LOAN INVESTMENTS
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The fund's investments in whole loans (single family, multifamily and
commercial), participation mortgages and mortgage servicing rights are generally
not traded in any organized market and therefore, market quotations are not
readily available. These investments are valued at "fair value" according to
procedures adopted by the fund's board of directors. Pursuant to these
procedures, whole loan investments are initially valued at cost and their values
are subsequently monitored and adjusted pursuant to a First American Asset
Management pricing model designed to incorporate, among other things, the
present value of the projected stream of cash flows on such investments. The
pricing model takes into account a number of relevant factors including the
projected rate of prepayments, the delinquency profile, the historical payment
record, the expected yield at purchase, changes in prevailing interest rates and
changes in the real or perceived liquidity of whole loans, participation
mortgages or mortgage servicing rights, as the case may be. The results of the
pricing model may be further subject to price ceilings due to the illiquid
nature of the loans. Changes in prevailing interest rates, real or perceived
liquidity, yield spreads and creditworthiness are factored into the pricing
model each week. Certain mortgage loan information is received on a monthly
basis and includes, but is not limited to, the projected rate of prepayments,
projected rate and severity of defaults, the delinquency profile and the
historical payment record. Valuations of whole loans are determined no less
frequently than weekly.
POSSIBLE REPURCHASE OFFER
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First American Asset Management intends to recommend that the fund's board of
directors authorize the repurchase by the fund of up to 10% of its outstanding
shares at net asset value if the average discount between the fund's net asset
value and market price exceeds 5% during the 12 weeks preceding October 1. If
the recommendation is approved by the fund's board, repurchase offers are
expected to be mailed to shareholders in October, with share repurchases
occurring in December.
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3 1999 SEMIANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO III
<PAGE>
FINANCIAL STATEMENTS (Unaudited)
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STATEMENT OF ASSETS AND LIABILITIES May 31, 1999
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2) ....... $87,096,976
Real estate owned (identified cost: $61,373) (note 2) ..... 64,349
Cash in bank on demand deposit ............................ 16,541
Accrued interest receivable ............................... 647,282
Other assets .............................................. 9,521
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Total assets ............................................ 87,834,669
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LIABILITIES:
Reverse repurchase agreements payable ..................... 27,825,000
Accrued investment management fee ......................... 31,196
Accrued administrative fee ................................ 10,262
Accrued interest .......................................... 112,382
Other accrued expenses .................................... 9,318
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Total liabilities ....................................... 27,988,158
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Net assets applicable to outstanding capital stock ...... $59,846,511
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COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital .............. $66,382,040
Undistributed net investment income ....................... 486,708
Accumulated net realized loss on investments .............. (8,231,026)
Net unrealized appreciation of investments ................ 1,208,789
-----------------
Total - representing net assets applicable to capital
stock ................................................. $59,846,511
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-----------------
* Investments in securities at identified cost ............ $85,891,163
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NET ASSET VALUE AND MARKET PRICE:
Net assets ................................................ $59,846,511
Shares outstanding (authorized 1 billion shares of $0.01 par
value) .................................................. 4,703,426
Net asset value ........................................... $ 12.72
Market price .............................................. $ 11.88
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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4 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF OPERATIONS For the Six Months Ended May 31,
1999
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $659,520) ............. $ 2,837,185
-----------------
EXPENSES (NOTE 3):
Investment management fee ................................. 187,706
Administrative fee ........................................ 60,806
Custodian and accounting fees ............................. 35,153
Transfer agent fees ....................................... 11,218
Reports to shareholders ................................... 23,837
Mortgage servicing fees ................................... 72,746
Directors' fees ........................................... 1,496
Audit and legal fees ...................................... 28,210
Other expenses ............................................ 15,648
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Total expenses .......................................... 436,820
Less expenses paid indirectly ......................... (7,493)
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Total net expenses ...................................... 429,327
-----------------
Net investment income ................................... 2,407,858
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NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 4):
Net realized gain on real estate owned .................... 12,941
Net change in unrealized appreciation or depreciation of
investments ............................................. (1,278,746)
-----------------
Net loss on investments ................................. (1,265,805)
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Net increase in net assets resulting from operations
..................................................... $ 1,142,053
-----------------
-----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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5 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF CASH FLOWS For the Six Months Ended May 31,
1999
................................................................................
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest income ............................................ $ 2,837,185
Net expenses ............................................... (429,327)
-----------------
Net investment income .................................... 2,407,858
-----------------
Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest receivable .................... (22,099)
Net amortization of bond discount and premium ............ 40,128
Change in accrued fees and expenses ...................... 47,626
Change in other assets ................................... (9,521)
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Total adjustments ...................................... 56,134
-----------------
Net cash provided by operating activities .............. 2,463,992
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ......................... 4,678,504
Purchases of investments ................................... (15,982,066)
Net purchases of short-term securities ..................... (612,105)
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Net cash used by investing activities .................. (11,915,667)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from reverse repurchase agreements ............ 11,325,000
Retirement of fund shares .................................. (212,431)
Distributions paid to shareholders ......................... (2,368,687)
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Net cash provided by financing activities .............. 8,743,882
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Net decrease in cash ....................................... (707,793)
Cash at beginning of period ................................ 724,334
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Cash at end of period .................................. $ 16,541
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Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ............................................. $ 617,385
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-----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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6 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
Financial Statements (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
SIX MONTHS ENDED
5/31/99 YEAR ENDED
(UNAUDITED) 11/30/98
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................... $ 2,407,858 $ 4,741,226
Net realized gain on investments .......................... 12,941 414,549
Net change in unrealized appreciation or depreciation of
investments ............................................. (1,278,746) (128,532)
----------------- -----------------
Net increase in net assets resulting from operations .... 1,142,053 5,027,243
----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................ (2,368,687) (4,581,335)
----------------- -----------------
CAPITAL SHARE TRANSACTIONS (NOTE 6):
Decrease in net assets from capital share transactions .... (212,431) (6,773,276)
----------------- -----------------
Total decrease in net assets ............................ (1,439,065) (6,327,368)
Net assets at beginning of period ......................... 61,285,576 67,612,944
----------------- -----------------
Net assets at end of period ............................... $59,846,511 $61,285,576
----------------- -----------------
----------------- -----------------
Undistributed net investment income ....................... $ 486,708 $ 447,537
----------------- -----------------
----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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7 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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(1) ORGANIZATION
............................
American Strategic Income Portfolio Inc. (the fund) is
registered under the Investment Company Act of 1940 (as
amended) as a diversified, closed-end management
investment company. The fund emphasizes investments in
mortgage-related assets that directly or indirectly
represent a participation in or are secured by and payable
from mortgage loans. It may also invest in asset-backed
securities, U.S. government securities, corporate debt
securities, municipal obligations, unregistered securities
and mortgage servicing rights. The fund may enter into
dollar roll transactions. In addition, the fund may borrow
using reverse repurchase agreements and revolving credit
facilities. Fund shares are listed on the New York Stock
Exchange under the symbol ASP.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
............................
INVESTMENTS IN SECURITIES
Portfolio securities for which market quotations are
readily available are valued at current market value. If
market quotations or valuations are not readily available,
or if such quotations or valuations are believed to be
inaccurate, unreliable or not reflective of market value,
portfolio securities are valued according to procedures
adopted by the fund's board of directors in good faith at
"fair value", that is, a price that the fund might
reasonably expect to receive for the security or other
asset upon its current sale.
The current market value of certain fixed income
securities is provided by an independent pricing service.
Fixed income securities for which prices are not available
from an independent pricing service but where an active
market exists are valued using market quotations obtained
from one or more dealers that make markets in the
securities or from a widely-used quotation system.
Short-term securities with maturities of 60 days or less
are valued at amortized cost, which approximates market
value.
The fund's investments in whole loans (single family,
multifamily and commercial), participation mortgages and
mortgage servicing rights are generally not traded in any
organized market and therefore, market quotations are not
readily available. These investments are valued at "fair
value" according to procedures adopted by the fund's board
of directors. Pursuant to these procedures, whole loan
investments are initially valued at cost and their values
are subsequently monitored and adjusted pursuant to a
First American Asset Management pricing model designed to
incorporate, among other things, the present value of the
projected stream of cash flows on such investments. The
pricing model takes into account a number of relevant
factors including the projected rate of prepayments, the
delinquency profile, the historical payment record, the
expected yield at purchase, changes in prevailing interest
rates, and changes in the real or perceived liquidity of
whole loans, participation mortgages or mortgage servicing
rights, as the case may be. The results of the pricing
model may be further subject to price ceilings due to the
illiquid nature of the loans. Changes in prevailing
interest rates, real or perceived liquidity, yield
spreads, and creditworthiness are factored into the
pricing model each week. Certain mortgage loan information
is received once a month. This information includes, but
is not limited to, the projected rate of prepayments,
projected rate and severity of defaults, the delinquency
profile and the historical payment record. Valuations of
whole loans, mortgage participations and mortgage
servicing rights are determined no less frequently than
weekly.
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8 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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Securities transactions are accounted for on the date
securities are purchased or sold. Realized gains and
losses are calculated on the identified-cost basis.
Interest income, including amortization of bond discount
and premium, is recorded on an accrual basis.
WHOLE LOANS AND PARTICIPATION MORTGAGES
Whole loans and participation mortgages may bear a greater
risk of loss arising from a default on the part of the
borrower of the underlying loans than do traditional
mortgage-backed securities. This is because whole loans
and participation mortgages, unlike most mortgage-backed
securities, generally are not backed by any government
guarantee or private credit enhancement. Such risk may be
greater during a period of declining or stagnant real
estate values. In addition, the individual loans
underlying whole loans and participation mortgages may be
larger than the loans underlying mortgage-backed
securities. With respect to participation mortgages, the
fund generally will not be able to unilaterally enforce
its rights in the event of a default, but rather will be
dependent on the cooperation of the other participation
holders.
At May 31, 1999, loans representing 2.11% of net assets
were 60 days or more delinquent as to the timely monthly
payment of principal. Such delinquencies relate solely to
single family whole loans and represent 3.53% of total
single family principal outstanding at May 31, 1999. The
fund does not record past due interest as income until
received. The fund may incur certain costs and delays in
the event of a foreclosure. Also, there is no assurance
that the subsequent sale of the property will produce an
amount equal to the sum of the unpaid principal balance of
the loan as of the date the borrower went into default,
the accrued unpaid interest and all of the foreclosure
expenses. In this case, the fund may suffer a loss. The
fund recognized a net realized gain of $12,941, or $0.003
per share, on real estate sold during the six months ended
May 31, 1999.
Real estate acquired through foreclosure, if any, is
recorded at estimated fair value. The fund may receive
rental or other income as a result of holding real estate.
In addition, the fund may incur expenses associated with
maintaining any real estate owned. On May 31, 1999, the
fund owned 1 home with an aggregate value of $64,349, or
0.11% of net assets.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been
purchased by the fund on a when-issued or
forward-commitment basis can take place a month or more
after the transaction date. During this period, such
securities do not earn interest, are subject to market
fluctuation and may increase or decrease in value prior to
their delivery. The fund segregates, with its custodian,
assets with a market value equal to the amount of its
purchase commitments. The purchase of securities on a
when-issued or forward-commitment basis may increase the
volatility of the fund's net asset value if the fund makes
such purchases while remaining substantially fully
invested. As of May 31, 1999, the fund and no outstanding
when-issued or forward commitments.
MORTGAGE SERVICING RIGHTS
The fund may acquire interests in the cash flow from
servicing fees through contractual arrangements with
mortgage servicers. Mortgage servicing rights, similar to
interest-only securities, generate no further cash flow
when a mortgage is prepaid or goes into default. Mortgage
servicing
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9 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
rights are accounted for on a level-yield basis with
recognized income based on the estimated amounts and
timing of cash flows. Such estimates are adjusted
periodically as the underlying market conditions change.
FEDERAL TAXES
The fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment
companies and not be subject to federal income tax.
Therefore, no income tax provision is required. The fund
also intends to distribute its taxable net investment
income and realized gains, if any, to avoid the payment of
any federal excise taxes.
The character of distributions made during the year from
net investment income or net realized gains may differ
from its ultimate characterization for federal income tax
purposes. In addition, due to the timing of dividend
distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or
realized gains or losses were recorded by the fund.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly
and realized capital gains, if any, will be distributed at
least annually. These distributions are recorded as of the
close of business on the ex-dividend date. Such
distributions are payable in cash or, pursuant to the
fund's dividend reinvestment plan, reinvested in
additional shares of the fund's capital stock. Under the
plan, fund shares will be purchased in the open market
unless the market price plus commissions exceeds the net
asset value by 5% or more. If, at the close of business on
the dividend payment date, the shares purchased in the
open market are insufficient to satisfy the dividend
reinvestment requirement, the fund will issue new shares
at a discount of up to 5% from the current market price.
REPURCHASE AGREEMENTS AND OTHER SHORT-TERM SECURITIES
For repurchase agreements entered into with certain
broker-dealers, the fund, along with other affiliated
registered investment companies, may transfer uninvested
cash balances into a joint trading account, the daily
aggregate of which is invested in repurchase agreements
secured by U.S. government or agency obligations.
Securities pledged as collateral for all individual and
joint repurchase agreements are held by the fund's
custodian bank until maturity of the repurchase agreement.
Provisions for all agreements ensure that the daily market
value of the collateral is in excess of the repurchase
amount, including accrued interest, to protect the fund in
the event of a default. In addition to repurchase
agreements, the fund may invest in money market funds
advised by the fund's advisor.
- --------------------------------------------------------------------------------
10 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts in the financial statements. Actual
results could differ from these estimates.
(3) EXPENSES
............................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
On August 10, 1998, the fund entered into an investment
advisory agreement with U.S. Bank National Association
(U.S. Bank), acting through its division, First American
Asset Management. Prior thereto, Piper Capital Management
Incorporated (Piper Capital), which was aquired by U.S.
Bank on May 1, 1998, had served as the fund's advisor.
U.S. Bank also serves as the fund's administrator under an
administration agreement effective May 1, 1998. Prior
thereto, Piper Capital provided services under an
administration agreement through April 30, 1998.
The investment advisory agreement provides the advisor
with a monthly investment management fee in an amount
equal to an annualized rate of 0.20% of the fund's average
weekly net assets and 4.50% of the daily gross income
accrued by the fund during the month (i.e., investment
income, including amortization of discount and premium,
other than gains from the sale of securities or gains from
options and futures contracts less interest on money
borrowed by the fund). The monthly investment management
fee shall not exceed in the aggregate 1/12 of 0.725% of
the fund's average weekly net assets during the month
(approximately 0.725% on an annual basis). For the six
months ended May 31, 1999, the effective annualized
investment management fee incurred by the fund was 0.62%.
For its fee, the advisor provides investment advice and
conducts the management and investment activity of the
fund.
The administration agreement provides the administrator
with a monthly fee in an amount equal to an annualized
rate of 0.20% of the fund's average weekly net assets. For
its fee, the administrator will provide regulatory,
reporting and record-keeping services for the fund.
MORTGAGE SERVICING FEES
The fund enters into mortgage servicing agreements with
mortgage servicers for whole loans and participation
mortgages. For a fee, mortgage servicers maintain loan
records, such as insurance and taxes and the proper
allocation of payments between principal and interest.
OTHER FEES AND EXPENSES
In addition to the investment management, administrative
and mortgage servicing fees, the fund is responsible for
paying most other operating expenses, including: outside
directors' fees and expenses; custodian fees; registration
fees; printing and shareholder reports; transfer agent
fees and expenses; legal, auditing and accounting
services; insurance; interest; expenses related to real
estate owned; fees to outside parties retained to assist
in conducting due diligence; taxes and other miscellaneous
expenses. During the six months ended May 31, 1999, the
fund paid $17,550 for custody services to U.S. Bank.
- --------------------------------------------------------------------------------
11 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
EXPENSES PAID INDIRECTLY
Expenses paid indirectly represent a reimbursement of
custodian fees received from mortgage servicers of $7,493.
(4) INVESTMENT
SECURITY
TRANSACTIONS
............................
Cost of purchases and proceeds from sales of securities
and real estate, other than temporary investments in
short-term securities, for the six months ended May 31,
1999, aggregated $15,941,938 and $4,678,504, respectively.
Included in proceeds from sales are $104,718 from sales of
real estate owned.
(5) CAPITAL LOSS
CARRYOVER
............................
For federal income tax purposes, the fund had capital loss
carryovers of $8,231,026 as of November 30, 1998, which if
not offset by subsequent capital gains, will expire in
2003. It is unlikely the board of directors will authorize
a distribution of any net realized capital gains until the
available capital loss carryovers have been offset or
expire.
(6) CAPITAL SHARE
TRANSACTIONS
............................
REPURCHASE OFFER
In 1997, the fund offered to purchase up to 10% of its
outstanding shares at net asset value. The percentage of
outstanding shares tendered and the number of shares
accepted for tender, the repurchase price per share and
proceeds (including tender fees) paid by the fund were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE SHARES REPURCHASE PROCEEDS
TENDERED TENDERED PRICE PAID
---------- ----------- ----------- ------------
<S> <C> <C> <C>
10% 524,695 $12.87 $ 6,752,825
</TABLE>
RETIREMENT OF FUND SHARES
The fund's board of directors has approved a plan to
repurchase shares of the fund in the open market and
retire those shares. Repurchases may only be made when the
previous day's closing market value was at a discount from
net asset value. Daily repurchases are limited to 25% of
the previous four weeks average daily trading volume on
the New York Stock Exchange. Under the current plan,
cumulative repurchases in the fund cannot exceed 236,151
shares (5% of the outstanding shares as of September 9,
1998). The board of directors will review the plan every
six months. The plan was last reviewed and approved by the
board of directors on June 3, 1999.
Pursuant to the plan, the fund repurchased and retired the
following:
<TABLE>
<CAPTION>
% OF OUTSTANDING WEIGHTED AVERAGE
PERIOD ENDED SHARES SHARES COST DISCOUNT TO NAV
------------ -------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
5/31/99 17,900 0.38% $ 212,431 8.19%
11/30/98 1,700 0.04% $ 20,451 6.76%
</TABLE>
- --------------------------------------------------------------------------------
12 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(7) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Year Year Year Year
5/31/99 Ended Ended Ended Ended Ended
(Unaudited) 11/30/98(e) 11/30/97 11/30/96 11/30/95 11/30/94
------------ --------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $12.98 $12.88 $12.65 $13.13 $12.63 $ 15.79
------ ------ --------- --------- --------- ---------
Operations:
Net investment income ................ 0.51 1.01 0.97 0.97 1.09 1.41
Net realized and unrealized gains
(losses) on investments ............ (0.27) 0.06 0.22 (0.10) 1.11 (3.22)
------ ------ --------- --------- --------- ---------
Total from operations .............. 0.24 1.07 1.19 0.87 2.20 (1.81)
------ ------ --------- --------- --------- ---------
Distributions to shareholders:
From net investment income ........... (0.50) (0.97) (0.96) (1.35) (1.70) (1.15)
From net realized gains on
investments ........................ -- -- -- -- -- (0.20)
------ ------ --------- --------- --------- ---------
Total distributions to
shareholders ..................... (0.50) (0.97) (0.96) (1.35) (1.70) (1.35)
------ ------ --------- --------- --------- ---------
Net asset value, end of period ......... $12.72 $12.98 $12.88 $12.65 $13.13 $ 12.63
------ ------ --------- --------- --------- ---------
------ ------ --------- --------- --------- ---------
Per-share market value, end of
period ............................... $11.88 $12.13 $11.88 $11.00 $12.25 $ 13.00
------ ------ --------- --------- --------- ---------
------ ------ --------- --------- --------- ---------
SELECTED INFORMATION
Total return, net asset value (a) ...... 1.90% 8.56% 9.83% 7.12% 18.27% (11.87)%
Total return, market value (b) ......... 2.13% 10.69% 17.41% 1.29% 7.75% (12.59)%
Net assets at end of period (in
millions) ............................ $ 60 $ 61 $ 68 $ 66 $ 69 $ 67
Ratio of expenses to average weekly net
assets including interest expense
(c) .................................. 3.61%(f) 2.89% 2.56% 2.94% 3.29% 3.34%
Ratio of expenses to average weekly net
assets excluding interest expense
(c) .................................. 1.44%(f) 1.47% 1.47% 1.50% 1.72% 1.69%
Ratio of net investment income to
average weekly net assets ............ 7.92%(f) 7.74% 7.68% 7.67% 8.26% 10.00%
Portfolio turnover rate (excluding
short-term securities) ............... 6% 38% 61% 63% 120% 74%
Amount of borrowings outstanding at end
of period (in millions) .............. $ 28 $ 17 $ 11 $ 14 $ 15 $ 28
Per-share amount of borrowings
outstanding at end of period ......... $ 5.92 $ 3.49 $ 2.10 $ 2.67 $ 2.84 $ 5.16
Per-share amount of net assets,
excluding borrowings, at end of period $18.64 $16.47 $14.98 $15.32 $15.97 $ 17.79
Asset coverage ratio(d) ................ 315% 471% 715% 574% 563% 345%
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) INCLUDES 0.02% AND 0.23% FROM FEDERAL EXCISE TAXES IN FISCAL 1995 AND 1994,
RESPECTIVELY.
(d) REPRESENTS NET ASSETS, EXCLUDING BORROWINGS, AT END OF PERIOD DIVIDED BY
BORROWINGS OUTSTANDING AT END OF PERIOD.
(e) EFFECTIVE AUGUST 10, 1998, THE ADVISOR WAS CHANGED FROM PIPER CAPITAL TO
U.S. BANK.
(f) ANNUALIZED.
- --------------------------------------------------------------------------------
13 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN STRATEGIC INCOME PORTFOLIO May 31, 1999
...................................................................................................................
Date Market Value
Description of Security Acquired Par Value Cost (a)
- --------------------------------------------------------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (24.6%):
U.S. AGENCY MORTGAGE-BACKED SECURITIES (4.9%):
FIXED RATE (4.9%):
6.50%, FNMA, 5/17/29 .............................. 5/4/99 $ 3,000,000(b) $ 2,977,986 $ 2,929,680
------------ ------------
U.S. GOVERNMENT SECURITIES (19.7%):
6.63%, U.S. Treasury Note, 3/31/02 ................ 9/22/98 11,500,000(b) 11,776,422 11,813,605
------------ ------------
Total U.S. Government and Agency Securities .... 14,754,408 14,743,285
------------ ------------
PRIVATE MORTGAGE-BACKED SECURITIES (E) (1.8%):
FIXED RATE (1.8%):
10.10%, First Boston, Series 1992-1, Class B-2,
1/15/01 ......................................... 5/1/92 1,000,000 984,745 1,000,000
13.04%, Minnesota Mortgage Corporation, 7/25/14 ... 5/18/92 37,403 38,251 37,963
12.26%, Minnesota Mortgage Corporation,
10/25/14 ........................................ 5/18/92 52,829 54,021 53,622
------------ ------------
Total Private Mortgage-Backed Securities ....... 1,077,017 1,091,585
------------ ------------
WHOLE LOANS AND PARTICIPATION MORTGAGES (C,D,E) (117.6%):
COMMERCIAL LOANS (25.2%):
Bekins Building, 8.50%, 10/1/04 ................... 9/2/97 1,127,423 1,127,423 1,135,481
James Plaza, 8.55%, 12/1/01 ....................... 11/15/96 1,162,997 1,162,997 1,175,601
Main Street Office Building, 8.50%, 11/1/07 ....... 10/21/97 883,322 881,849 897,073
One Eastern Heights Office Building, 8.33%,
12/1/07 ......................................... 11/7/97 1,080,296 1,080,296 1,081,431
Pacific Periodicals Building, 8.15%, 1/1/08 12/9/97 1,356,152 1,356,152 1,339,990
Pine Island Office Building, 8.15%, 11/2/02 ....... 10/8/97 1,596,130 1,596,130 1,602,934
Rice Street Convention Center, 9.10%, 2/1/04 ...... 1/23/97 827,752 827,752 853,828
Schendel Office Building, 8.32%, 10/1/07 .......... 9/30/97 1,175,768 1,175,769 1,177,494
Schendel Retail Center, 8.70%, 9/1/07 ............. 8/28/97 809,305 809,305 820,384
Shallowford Business Park, 9.25%, 7/1/01 .......... 6/25/96 1,595,370 1,595,193 1,653,963
Sherwin Williams, 8.63%, 1/1/04 ................... 12/20/96 1,407,480 1,407,480 1,429,457
</TABLE>
<TABLE>
<CAPTION>
Date Market Value
Description of Security Acquired Par Value Cost (a)
- --------------------------------------------------------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Stephens Retail Center, 9.35%, 8/1/03 ............. 9/6/96 $ 1,164,756 $ 1,159,903 $ 1,209,463
Union Hill Village Office Buliding, 8.00%,
10/1/08 ......................................... 9/30/98 672,761 672,761 658,815
------------ ------------
14,853,010 15,035,914
------------ ------------
MULTIFAMILY LOANS (33.4%):
Applewood Manor, 8.75%, 1/1/01 .................... 12/23/93 667,304 663,967 678,145
Charleston Plaza Apartments, 7.50%, 7/1/08 ........ 7/1/98 1,581,240 1,581,240 1,540,677
Franklin Woods Apartments, 9.90%, 3/1/10 .......... 2/24/95 1,239,096 1,235,745 1,301,050
Garden Oaks Apartments, 8.55%, 4/1/06 ............. 3/7/96 1,789,430 1,786,072 1,848,657
Kings Creek Apartments, 10.00%, 5/1/97 ............ 10/14/94 1,300,000 1,283,100 1,300,000
Mark Twain Apartments, 8.00%, 2/1/03 .............. 1/9/98 983,470 983,470 985,691
Park Place Apartments, 8.38%, 7/1/02 .............. 6/13/95 1,522,164 1,507,788 1,543,481
Royal Knight Apartments, 8.50%, 4/1/06 ............ 3/4/96 1,559,162 1,555,751 1,606,957
Rush Oaks Apartments, 7.90%, 12/1/07 .............. 11/26/97 544,368 544,368 543,725
Sadletree Apartments, 9.00%, 12/1/01 .............. 11/18/98 2,375,000 2,351,250 2,398,750
Stanley Court Apartments, 8.50%, 11/1/02 .......... 10/31/95 1,067,536 1,064,139 1,091,338
Union Hill Village Townhomes, 8.00%, 10/1/08 ...... 9/30/98 953,409 953,409 951,039
Vanderbilt Condominiums, 8.50%, 8/1/00 ............ 7/13/95 798,621 795,233 810,809
Westgate Apartments, 10.00%, 2/1/08 ............... 1/28/93 1,359,685 1,346,089 1,373,282
Westhollow Place Apartments, 8.58%, 4/1/03 ........ 3/20/96 974,862 965,114 993,896
Woodland Garden Apartments, 7.50%, 9/1/08 ......... 8/26/98 1,058,537 1,058,537 1,023,893
------------ ------------
19,675,272 19,991,390
------------ ------------
SINGLE FAMILY LOANS (59.0%):
Aegis, 8.97%, 3/26/10 ............................. 10/26/95 191,843 181,234 193,577
Aegis II, 9.62%, 1/28/14 . 12/28/95 344,383 315,541 353,412
American Bank, Mankato, 9.10%, 12/10/12 ........... 12/15/92 74,892 61,142 66,264
American Portfolio, 7.13%, 10/18/15 ............... 7/18/95 213,261 203,145 211,659
Anivan, 8.42%, 4/14/12 ............................ 6/14/96 248,508 250,115 253,891
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
14 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (UNAUDITED) (continued)
- --------------------------------------------------------------------------------
AMERICAN STRATEGIC INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Date Market Value
Description of Security Acquired Par Value Cost (a)
- --------------------------------------------------------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Bank of New Mexico, 8.71%, 3/31/10 ................ 5/31/96 $ 519,894(b) $ 510,216 $ 521,719
Bluebonnet Savings and Loan, 11.26%, 8/31/10 5/12/92 41,062 40,234 39,286
Bluebonnet Savings and Loan, 7.94%, 8/31/10 ....... 5/12/92 1,057,806 969,136 1,063,681
CLSI Allison Williams, 9.71%, 8/1/17 .............. 2/28/92 494,630 454,938 505,953
Crossroads Savings and Loan, 8.78%, 1/1/21 ........ 12/23/91 272,730 256,488 277,395
Crossroads Savings and Loan, 8.99%, 1/1/21 ........ 12/23/91 212,448 200,915 217,203
Fairbanks, Utah, 9.99%, 9/23/15 ................... 5/21/92 106,952 90,776 107,724
First Boston Mortgage Pool #5, 9.11%, 6/29/03 ..... 6/23/92 316,100 258,352 317,869
Hamilton Financial, 7.27%, 6/29/10 ................ 7/8/92 119,486 109,629 119,677
Huntington MEWS, 9.09%, 8/1/17 .................... 1/17/92 621,919(b) 536,914 596,465
Knutson Mortgage Portfolio #1, 8.49%, 8/1/17 ...... 2/19/92 765,491 730,451 767,506
Knutson Mortgage Portfolio #2, 9.35%, 9/25/17 ..... 5/26/92 853,470(b) 786,899 878,738
McClemore, Matrix Funding Corporation, 10.82%,
9/30/12 ......................................... 9/9/92 716,736 680,899 694,410
Meridian, 9.81%, 12/1/20 .......................... 12/21/92 613,930 585,536 631,877
Nomura III, 8.70%, 4/29/17 ........................ 9/29/95 1,692,431 1,529,863 1,659,549
Norwest II, 7.53%, 11/27/22 ....................... 2/27/96 1,286,894(b) 1,280,485 1,276,420
Norwest III, 7.44%, 11/27/22 ...................... 2/27/96 1,335,905(b) 1,335,953 1,324,854
Norwest V, 8.67%, 2/3/25 .......................... 9/3/96 1,727,242(b) 1,696,165 1,709,926
Norwest X, 7.70%, 2/1/22 .......................... 3/12/98 4,861,580(b) 4,869,844 4,807,935
Norwest XIII, 7.57%, 12/1/25 ...................... 10/28/98 3,457,578 3,440,290 3,418,076
Norwest XIV, 7.31%, 7/12/24 ....................... 12/3/98 3,973,233(b) 3,933,501 3,822,826
Norwest XV, 7.27%, 1/1/25 ......................... 12/23/98 3,101,299(b) 3,062,534 3,040,151
Norwest XVI, 7.15%, 4/30/26 ....................... 3/4/99 3,445,351(b) 3,345,598 3,353,930
Norwest XVII, 6.98%, 10/4/23 ...................... 5/20/99 1,986,644 1,920,992 1,930,524
Rand Mortgage Corporation, 9.58%, 8/1/17 .......... 2/21/92 241,539 197,972 248,198
Salomon II, 9.22%, 11/23/14 ....................... 12/23/94 640,177 557,237 653,320
</TABLE>
<TABLE>
<CAPTION>
Date Shares/ Market Value
Description of Security Acquired Par Value Cost (a)
- --------------------------------------------------------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Valley Bank of Commerce, N.M., 8.07%, 8/31/10 ..... 5/6/92 $ 251,353 $ 213,817 $ 251,956
------------ ------------
34,606,811 35,315,971
------------ ------------
Total Whole Loans and Participation Mortgages
.............................................. 69,135,093 70,343,275
------------ ------------
MORTGAGE SERVICING RIGHTS (E,F) (0.5%):
Matrix Servicing Rights, 13.74%, 7/10/22 .......... 7/10/92 -- 312,540 306,726
------------ ------------
SHORT-TERM SECURITIES (1.0%):
First American Prime Obligations Fund, ............ 5/31/99 612,105(g) 612,105(g) 612,105
------------ ------------
Total Investments in Securities (h) ............ $ 85,891,163 $ 87,096,976
------------ ------------
------------ ------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS
(b) ON MAY 31, 1999, SECURITIES VALUED AT $33,495,504 WERE PLEDGED AS
COLLATERAL FOR THE FOLLOWING OUTSTANDING REVERSE REPURCHASE AGREEMENTS:
<TABLE>
<CAPTION>
NAME OF BROKER
ACQUISITION ACCRUED AND DESCRIPTION
AMOUNT DATE RATE* DUE INTEREST OF COLLATERAL
- ----------- --------- ---------- --------- --------- -------------------
<S> <C> <C> <C> <C> <C>
$ 2,825,000 5/17/99 4.87% 5/15/00 $ 5,734 (1)
11,000,000 5/3/99 4.83% 6/1/99 42,799 (2)
12,000,000 5/3/99 5.78% 6/1/99 55,825 (3)
2,000,000 5/7/99 5.78% 6/1/99 8,024 (3)
- ----------- ---------
$27,825,000 $ 112,382
- ----------- ---------
- ----------- ---------
</TABLE>
* INTEREST RATE AS OF MAY 31, 1999. RATES ARE BASED ON THE LONDON INTERBANK
OFFERED RATE (LIBOR) AND RESET MONTHLY.
Name of broker and description of collateral:
(1) MORGAN STANLEY DEAN WITTER;
FNMA, 6.50%, 5/17/29, $3,000,000 PAR
(2) NOMURA;
U.S. TREASURY NOTE, 6.63%, 3/31/02, $10,550,000 PAR
(3) NOMURA;
BANK OF NEW MEXICO, 8.71%, 3/31/10, $469,802 PAR
HUNTINGTON MEWS, 9.09% , 8/1/17, $621,919 PAR
KNUTSON MORTGAGE PORTFOLIO #2, 9.35%, 9/25/17, $848,525 PAR
NORWEST II, 7.53%, 11/27/22, $1,268,903 PAR
NORWEST III, 7.44%, 11/27/22, $1,335,905 PAR
NORWEST V, 8.67%, 2/3/25, $1,545,171 PAR
NORWEST X, 7.70%, 2/1/22, $3,534,829 PAR
NORWEST XIV, 7.31%, 7/12/24, $3,973,233 PAR
NORWEST XV, 7.27%, 1/1/25, $3,062,068 PAR
NORWEST XVI, 7.15%, 4/30/26, $3,062,068 PAR
- --------------------------------------------------------------------------------
15 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (UNAUDITED) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The fund has entered into a lending commitment with Nomura. The agreement
permits the fund to enter into reverse repurchase agreements up to $15,000,000
using whole loans as collateral. The fund pays a fee of 0.25% to Nomura on any
unused portion of the $15,000,000 lending commitment.
(c) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT
ON MAY 31, 1999. INTEREST RATES AND MATURITY DATES DISCLOSED ON SINGLE
FAMILY LOANS REPRESENT THE WEIGHTED AVERAGE COUPON AND WEIGHTED AVERAGE
MATURITY FOR THE UNDERLYING MORTGAGE LOANS AS OF MAY 31, 1999.
(d) COMMERCIAL AND MULTIFAMILY LOANS ARE DESCRIBED BY THE NAME OF THE MORTGAGED
PROPERTY. POOLS OF SINGLE FAMILY LOANS ARE DESCRIBED BY THE NAME OF THE
INSTITUTION FROM WHICH THE LOANS WERE PURCHASED. THE GEOGRAPHICAL LOCATION
OF THE MORTGAGED PROPERTIES AND, IN THE CASE OF SINGLE FAMILY, THE NUMBER
OF LOANS, IS PRESENTED BELOW.
Commercial Loans:
BEKINS BUILDING -- COLORADO SPRINGS, CO
JAMES PLAZA -- HOUSTON, TX
MAIN STREET OFFICE BUILDING -- PARK CITY, UT
ONE EASTERN HEIGHTS OFFICE BUILDING -- WOODBURY, MN
PACIFIC PERIODICALS BUILDING -- LAKEWOOD, WA
PINE ISLAND OFFICE BUILDING -- PLANTATION, FL
RICE STREET CONVENTION CENTER -- ROSEVILLE, MN
SCHENDEL OFFICE BUILDING -- BEAVERTON, OR
SCHENDEL RETAIL CENTER -- BEAVERTON, OR
SHALLOWFORD BUSINESS PARK -- CHATANOOGA, TN
SHERWIN WILLIAMS -- ORLANDO, FL
STEPHENS RETAIL CENTER -- MISSOULA, MT
UNION HILL VILLAGE OFFICE BUILDING -- SPENCERPORT, NY
Multifamily Loans:
APPLEWOOD MANOR -- DULUTH, MN
CHARLESTON PLAZA APARTMENTS -- LAS VEGAS, NV
FRANKLIN WOODS APARTMENTS -- FRANKLIN, NH
GARDEN OAKS APARTMENTS -- COON RAPIDS, MN
KINGS CREEK APARTMENTS -- DALLAS, TX
MARK TWAIN APARTMENTS -- MESA, AZ
PARK PLACE APARTMENTS -- GRAND FORKS, ND
ROYAL KNIGHT APARTMENTS -- MEMPHIS, TN
RUSH OAKS APARTMENTS -- LAPORTE, TX
SADLETREE APARTMENTS -- SCOTTSDALE, AZ
STANLEY COURT APARTMENTS -- BLOOMINGTON, MN
UNION HILL VILLAGE TOWNHOMES -- SPENCERPORT, NY
VANDERBILT CONDOMINIUMS -- AUSTIN, TX
WESTGATE APARTMENTS -- BISMARCK, ND
WESTHOLLOW PLACE APARTMENTS -- HOUSTON, TX
WOODLAND GARDEN APARTMENTS -- ARLINGTON, WA
Single Family Loans:
AEGIS - 11 LOANS, MIDWESTERN UNITED STATES
AEGIS II - 5 LOANS, MIDWESTERN UNITED STATES
AMERICAN BANK, MANKATO - 2 LOANS, MINNESOTA
AMERICAN PORTFOLIO - 5 LOANS, TEXAS AND CALIFORNIA
ANIVAN 3 LOANS, MARYLAND, NEW JERSEY, VIRGINIA
BANK OF NEW MEXICO - 12 LOANS, NEW MEXICO
BLUEBONNET SAVINGS AND LOAN - 34 LOANS, TEXAS
CLSI ALLISON WILLIAMS - 27 LOANS, TEXAS
CROSSROADS SAVINGS AND LOAN - 16 LOANS, OKLAHOMA
FAIRBANKS, UTAH - 3 LOANS, UTAH
FIRST BOSTON MORTGAGE POOL #5 - 10 LOANS, UNITED STATES
HAMILTON FINANCIAL - 1 LOAN, CALIFORNIA
HUNTINGTON MEWS - 14 LOANS, NEW JERSEY
KNUTSON MORTGAGE PORTFOLIO #1 - 15 LOANS, MIDWESTERN UNITED STATES
KNUTSON MORTGAGE PORTFOLIO #2 - 12 LOANS, MIDWESTERN UNITED STATES
MCCLEMORE, MATRIX FUNDING CORPORATION - 9 LOANS, NORTH CAROLINA
MERIDIAN - 10 LOANS, CALIFORNIA
NOMURA III - 31 LOANS, MIDWESTERN UNITED STATES
NORWEST II - 15 LOANS, MIDWESTERN UNITED STATES
NORWEST III - 12 LOANS, MIDWESTERN UNITED STATE
NORWEST V - 16 LOANS, MIDWESTERN UNITED STATES
NORWEST X - 39 LOANS, MIDWESTERN UNITED STATES
NORWEST XIII - 30 LOANS, MIDWESTERN UNITED STATES
NORWEST XIV - 24 LOANS, MIDWESTERN UNITED STATES
NORWEST XV - 25 LOANS, MIDWESTERN UNITED STATES
NORWEST XVI - 28 LOANS, MIDWESTERN UNITED STATES
NORWEST XVII - 18 LOANS, MIDWESTERN UNITED STATES
RAND MORTGAGE CORPORATION - 6 LOANS, TEXAS
SALOMON II - 16 LOANS, MIDWESTERN UNITED STATES
VALLEY BANK OF COMMERCE, N.M. - 18 LOANS, NEW MEXICO
(e) SECURITIES PURCHASED AS PART OF A PRIVATE PLACEMENT WHICH HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933 AND ARE CONSIDERED TO BE ILLIQUID. ON MAY 31, 1999, THE TOTAL
MARKET VALUE OF THESE INVESTMENTS WAS $71,741,586 OR 119.9% OF TOTAL NET
ASSETS.
(f) INTEREST RATE DISCLOSED REPRESENTS THE CURRENT YIELD BASED ON THE CURRENT
COST BASIS AND ESTIMATED FUTURE CASH FLOWS.
(g) THIS MONEY MARKET FUND IS ADVISED BY U.S. BANK WHO ALSO SERVES AS ADVISOR
FOR THIS FUND. SEE NOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
(h) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES,
INCLUDING REAL ESTATE OWNED, BASED ON THIS COST WERE AS FOLLOWS:
</TABLE>
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... 1,602,240
GROSS UNREALIZED DEPRECIATION ...... (393,451)
------------
NET UNREALIZED APPRECIATION ...... 1,208,789
------------
------------
</TABLE>
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16 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
SHAREHOLDER UPDATE
- --------------------------------------------------------------------------------
SHARE REPURCHASE PROGRAM
Your fund's board of directors has approved a share
repurchase program, which enables the fund to "buy back"
shares of its common stock in the open market. Repurchases
may only be made when the previous day's closing market
price per share was at a discount from net asset value.
Repurchases cannot exceed 5% of the fund's current
outstanding shares.
WHAT EFFECT WILL THIS PROGRAM HAVE ON SHAREHOLDERS?
We do not expect any adverse impact on the advisor's
ability to manage the fund. Because repurchases will be at
a price below net asset value, remaining shares
outstanding may experience a slight increase in net asset
value. Although the effect of share repurchases on the
market price is less certain, the board of directors
believes the program may have a favorable effect on the
market price of fund shares. We do not anticipate any
material increase in the fund's expense ratio.
WHEN WILL SHARES BE REPURCHASED?
Share repurchases may be made from time to time and may be
discontinued at any time. Share repurchases are not
mandatory when fund shares are trading at a discount from
net asset value; all repurchases will be at the discretion
of the fund's investment advisor. The board of directors'
decision whether to continue the share repurchase program
will be reported in the next shareholder report.
HOW WILL SHARES BE REPURCHASED?
We expect to finance the repurchase of shares by
liquidating portfolio securities or using current cash
balances. We do not anticipate borrowing in order to
finance share repurchases.
CHANGE OF ACCOUNTANTS
On September 9, 1998, the fund's board of directors, upon
the recommendation of the audit committee, appointed Ernst
& Young LLP as the independent accountants for the fund
for the fiscal year ending November 30, 1999, and
dismissed KPMG LLP ("KPMG"). KPMG's reports on the fund's
financial statements for the past two years have not
contained an adverse opinion or a disclaimer of opinion,
and have not been qualified as to uncertainty, audit
scope, or accounting principles. In addition, there have
not been any disagreements with KPMG during the fund's two
most recent fiscal years on any matter of accounting
principles or practices, financial statement disclosure,
or auditing scope or procedure which, if not resolved to
the satisfaction of KPMG, would have caused it to make a
reference to the subject matter of the disagreement in
connection with its reports.
YEAR 2000 UPDATE
Like other mutual funds and business and financial
organizations, the fund could be adversely affected if the
computer systems used by the fund's advisor, other service
providers and entities with computer systems that are
linked to fund records do not properly process and
calculate date-related information from and after January
1, 2000. While year 2000-related computer problems could
have a negative effect on the fund, the fund's
administrator has undertaken a program designed to assess
and monitor the steps being taken by the fund's service
providers to address
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17 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
year 2000 issues. This program includes seeking assurances
from service providers that their systems are or will be
year 2000 compliant and reviewing service providers' test
results for year 2000 compliance. The administrator and
the advisor also report regularly to the fund's board of
directors concerning their own and other service
providers' progress toward year 2000 readiness. Although
these reports indicate that service providers are or
expect to be year 2000 compliant, there can be no
assurance that this will be the case in all instances or
that year 2000 difficulties experienced by others in the
financial services industry will not impact the fund. In
addition, there can be no assurance that year 2000
difficulties will not have an adverse effect on the fund's
investments or on global markets or economies, generally.
The fund is not bearing any of the expenses incurred by
its service providers in preparing for the year 2000 or in
reporting on these matters to the fund's board of
directors.
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18 1999 Semiannual Report - American Strategic Income Portfolio
<PAGE>
[LOGO]- SM- FIRST AMERICAN
ASSET MANAGEMENT
AMERICAN STRATEGIC INCOME PORTFOLIO
1999 SEMIANNUAL REPORT
7/1999 295-99
[LOGO] This document is printed on paper made from 100% total recovered fiber,
including 15% post-consumer waste.
