<PAGE>
1999 Annual Report
AMERICAN STRATEGIC
INCOME PORTFOLIO
ASP
[LOGO]FIRST AMERICAN-Registered Trademark-
Asset Management
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[LOGO] FIRST AMERICAN-Registered Trademark-
Asset Management
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CONTENTS
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1 FUND OVERVIEW
4 FINANCIAL STATEMENTS AND NOTES
15 INVESTMENTS IN SECURITIES
18 INDEPENDENT AUDITORS' REPORT
19 FEDERAL INCOME TAX
INFORMATION
20 SHAREHOLDER UPDATE
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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 borrows through the use of reverse
repurchase agreements. 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.
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AVERAGE ANNUALIZED TOTAL RETURNS
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Based on net asset value for the periods ended November 30, 1999
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One Year Five Year Since Inception
12/27/91
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American Strategic Income Portfolio 3.03% 9.25% 8.03%
Lehman Brothers Mutual Fund Government/ 0.22% 7.92% 6.57%
Mortgage Index
</TABLE>
The average annualized 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 annualized total returns based on the change in market price for the
one-year, five-year, and since-inception periods ended November 30, 1999, were
2.76%, 7.82%, and 6.52%, 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 nonsecuritized, 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 November 30, 1999.
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NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
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FUND
OVERVIEW
FUND MANAGEMENT
JOHN WENKER
is primarily responsible for the management of American Strategic
Income Portfolio. He has 14 years of financial experience.
DAVID STEELE
assists with the management of American Strategic Income Portfolio.
He has 21 years of financial experience.
RUSS KAPPENMAN
assists with the management of American Strategic Income Portfolio. He has 14
years of financial experience.
JANUARY 15, 2000
AMERICAN STRATEGIC INCOME PORTFOLIO HAD A TOTAL RETURN OF 3.03% BASED ON ITS NET
ASSET VALUE FOR THE YEAR ENDING NOVEMBER 30, 1999, COMPARED TO 0.22% FOR ITS
BENCHMARK, THE LEHMAN BROTHERS MUTUAL FUND GOVERNMENT/MORTGAGE INDEX.* During
the year, the fund benefited from a lack of credit losses and a low level of
loan prepayments. The total return based on the fund's market price was 2.76%
over the same time frame.* At the end of the reporting period, the fund's market
price of $11.438 per share continued to trade at a discount to its net asset
value of $12.35 per share.
DURING THE YEAR, THE FUND PAID OUT A HIGH LEVEL OF CURRENT INCOME AND MAINTAINED
A RELATIVELY STABLE NET ASSET VALUE. Dividends for the year totaled $1.0125 per
share, for an annualized distribution rate of 8.85% based on the November 30
market price. The fund's average monthly earnings over the past three months
would result in an annualized earnings rate of 7.75% based on the November 30
market price. The net asset value of the fund did not experience much volatility
during the period, beginning the year at $12.98 and ending at $12.35 per share.
Keep in mind that past performance is no guarantee of future results, and the
fund's distribution rate and net asset value will fluctuate.
THE RISING INTEREST RATE ENVIRONMENT IN 1999 IS BENEFITING THE FUND'S INCOME
LEVEL. In March, the fund was able to increase its dividend by $0.25 per share
to $0.0850 per share. Currently we can find new mortgage investments that pay
income equal to or higher than the average coupon in the fund. In addition,
rising rates have slowed the level of refinancings and loan prepayments. The
dividend reserve continues to support the level that the fund currently pays.
The reserve fell during the year from $0.0948 per share to $0.0807 per share.
*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.
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PORTFOLIO COMPOSITION
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As a percentage of total assets on November 30, 1999
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Short-term Securities 9%
Commercial Loans 19%
Mortgage Servicing Rights 1%
U.S. Agency Fixed-rate Mortgage-backed Securities 3%
Single Family Loans 40%
Private Fixed-rate Mortgage-backed Securities 1%
Other Assets 1%
U.S. Treasury Securities 4%
Multifamily Loans 22%
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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 November 30, 1999, based on
principal amounts outstanding.
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Current 94.3%
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30 Days 3.0%
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60 Days 0.5%
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90 Days 0.0%
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120+ Days 2.2%
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** As of November 30, 1999 there were no multifamily or commercial loans
delinquent.
1 1999 ANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO
<PAGE>
FUND
OVERVIEW CONTINUED
ON DECEMBER 10, 1999, THE FUND PAID OUT PROCEEDS TO SHAREHOLDERS FROM ITS
REPURCHASE OFFER. Shares were repurchased at the fund's net asset value of
$12.40 at the close of business on December 6, 1999, minus a $0.02 per share
fee. Because shareholders collectively submitted more than the 10% limit of
outstanding shares, repurchases were made on a pro rata basis. Approximately 20%
of shares were repurchased from each shareholder who submitted a claim.
TO PREPARE FOR THE REPURCHASE OFFER, THE FUND BEGAN INCREASING ITS PERCENTAGE OF
TOTAL ASSETS IN CASH DURING THE SUMMER MONTHS. As loans came due in the
portfolio, the proceeds were reinvested in short-term securities rather than in
new mortgage investments. Short-term securities equaled 9% of total assets at
the period end. Single-family, multifamily, and commercial loans continued to
represent the majority of the portfolio at 81% of total assets. The remainder of
the fund was invested in U.S. Treasury securities and U.S. government agency
securities.
WE CONTINUE TO SPREAD OUR LOANS OUT ACROSS THE COUNTRY TO HELP AVOID THE RISK OF
BEING TOO HEAVILY CONCENTRATED IN ONE REGION. We are currently invested in
states such as Texas, California, Florida, Minnesota, and Colorado, where the
economies are strong and employment and population growth continue. All segments
of the mortgage loan market continue to perform well. Most real estate markets
are in equilibrium, with demand keeping pace with new supply.
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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 November 30, 1999. Shaded areas without values indicate
states in which the fund has invested less than 0.50% of its assets.
[MAP]
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Alabama Less than 0.50%
Alaska Less than 0.50%
Arizona 6%
Arkansas Less than 0.50%
California 12%
Colorado 4%
Connecticut Less than 0.50%
Delaware
Florida 6%
Georgia 1%
Hawaii Less than 0.50%
Idaho Less than 0.50%
Illinois 2%
Indiana
Iowa 1%
Kansas
Kentucky
Louisiana Less than 0.50%
Maine Less than 0.50%
Maryland Less than 0.50%
Massachusetts 1%
Michigan 1%
Minnesota 10%
Mississippi Less than 0.50%
Missouri 1%
Montana 2%
Nebraska Less than 0.50%
Nevada 3%
New Hampshire 2%
New Jersey 3%
New Mexico 1%
New York 3%
North Carolina 2%
North Dakota
Ohio Less than 0.50%
Oklahoma 1%
Oregon 4%
Pennsylvania 1%
Rhode Island
South Carolina
South Dakota
Tennessee 5%
Texas 13%
Utah 3%
Vermont
Virginia 1%
Washington 5%
West Virginia
Wisconsin Less than 0.50%
Wyoming
</TABLE>
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2 1999 ANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO
<PAGE>
FUND
OVERVIEW CONTINUED
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AS WE STATED EARLIER, THE FUND HAD NO CREDIT LOSSES DURING THE YEAR. However,
the risk of a loan defaulting is the primary risk of investing in mortgage loan
products. If the proceeds from the sale of the foreclosed property are less than
the loan price that the fund paid, the fund would suffer a loss. Since
inception, the fund has had net credit losses of $0.05 per share.
THE FUND BENEFITED FROM PREPAYMENT PENALTIES ON ITS MULTIFAMILY AND COMMERCIAL
LOANS AND FROM LOANS PURCHASED AT A DISCOUNT THAT PAID OFF AT PAR. Gains from
prepayment penalties have equaled $0.19 per share since inception and $0.02 per
share this year. Gains from discounted loans paying off at par were $0.65 per
share since inception and $0.07 per share this year.
WE BELIEVE INTEREST RATES WILL CONTINUE TO INCREASE IN THE FIRST HALF OF 2000 AS
THE FEDERAL RESERVE STAYS VIGILANT ABOUT MAINTAINING THE STATE OF THE U.S.
ECONOMY. This should be favorable for the fund as we anticipate higher rates
will slow the rate of new construction across the country. Although the fund
only invests in existing properties, a slowdown in new construction could
increase the demand for established properties. Also, higher rates should
further slow the rate of loan prepayments and refinancings as well.
WE APPRECIATE YOUR INVESTMENT IN AMERICAN STRATEGIC INCOME PORTFOLIO. We hope
the fund's attractive income level and return, along with the recent repurchase
offer, have helped you stay on track with your financial goals. We will continue
to remain diligent in our monitoring of the fund's credit risk and look forward
to managing the fund in the year 2000.
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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. Changes in
prevailing interest rates, real or perceived liquidity, yield spreads, and
credit worthiness 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.
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3 1999 ANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO
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FINANCIAL STATEMENTS
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STATEMENT OF ASSETS AND LIABILITIES November 30, 1999
................................................................................
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ASSETS:
Investments in securities at market value* (note 2) ....... $78,791,720
Real estate owned (identified cost: $211,140) (note 2) ..... 211,982
Accrued interest receivable ............................... 522,414
Other assets .............................................. 11,532
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Total assets ............................................ 79,537,648
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LIABILITIES:
Reverse repurchase agreements payable (note 2) ............ 21,125,000
Accrued investment management fee ......................... 28,550
Bank overdraft ............................................ 196,816
Accrued administrative fee ................................ 9,565
Accrued interest .......................................... 94,865
Other accrued expenses .................................... 28,570
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Total liabilities ....................................... 21,483,366
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Net assets applicable to outstanding capital stock ...... $58,054,282
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COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital .............. $66,345,823
Undistributed net investment income ....................... 379,197
Accumulated net realized loss on investments .............. (8,166,919)
Unrealized depreciation of investments .................... (503,819)
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Total - representing net assets applicable to capital
stock ................................................. $58,054,282
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* Investments in securities at identified cost ............ $79,296,381
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NET ASSET VALUE AND MARKET PRICE:
Net assets ................................................ $58,054,282
Shares outstanding (authorized 1 billion shares of $0.01 par
value) .................................................. 4,700,326
Net asset value ........................................... $ 12.35
Market price .............................................. $ 11.44
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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4 1999 Annual Report - American Strategic Income Portfolio
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Financial Statements (continued)
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STATEMENT OF OPERATIONS For the Year Ended November 30,
1999
................................................................................
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INCOME:
Interest (net of interest expense of $1,381,627) ........... $ 5,589,169
Rental income from real estate owned ....................... 461
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Total investment income .................................. 5,589,630
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EXPENSES (NOTE 3):
Investment management fee ................................. 370,056
Administrative fee ........................................ 119,492
Custodian and accounting fees ............................. 70,500
Transfer agent fees ....................................... 22,499
Reports to shareholders ................................... 47,804
Mortgage servicing fees ................................... 145,378
Directors' fees ........................................... 4,060
Audit and legal fees ...................................... 79,838
Other expenses ............................................ 47,412
-----------
Total expenses .......................................... 907,039
Less expenses paid indirectly ......................... (15,595)
-----------
Total net expenses ...................................... 891,444
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Net investment income ................................... 4,698,186
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NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS (NOTE 4):
Net realized gain on investments in securities ............ 64,108
Net realized gain on real estate owned .................... 12,940
-----------
Net realized gain on investments ........................ 77,048
Net change in unrealized appreciation or depreciation of
investments ............................................. (2,991,354)
-----------
Net loss on investments ................................. (2,914,306)
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Net increase in net assets resulting from
operations .......................................... $ 1,783,880
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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5 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
Financial Statements (continued)
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STATEMENT OF CASH FLOWS For the Year Ended November 30,
1999
................................................................................
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CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and rental income ................................. $ 5,589,630
Net expenses ............................................... (891,444)
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Net investment income .................................... 4,698,186
-----------
Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest receivable .................... 102,769
Net amortization of bond discount and premium ............ 75,297
Change in accrued fees and expenses ...................... 46,018
Change in other assets ................................... (11,532)
-----------
Total adjustments ...................................... 212,552
-----------
Net cash provided by operating activities .............. 4,910,738
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ........................ 19,881,906
Purchases of investments ................................... (17,932,066)
Net purchases of short-term securities ..................... (7,391,554)
-----------
Net cash used by investing activities .................. (5,441,714)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from reverse repurchase agreements ............ 4,625,000
Retirement of fund shares .................................. (248,648)
Distributions paid to shareholders ......................... (4,766,526)
-----------
Net cash used by financing activities .................. (390,174)
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Net decrease in cash ....................................... (921,150)
Cash at beginning of year .................................. 724,334
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Cash at end of year .................................... $ (196,816)
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Supplemental disclosure of cash flow information:
Cash paid for interest on reverse
repurchase agreements .................................. $ 1,357,009
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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6 1999 Annual Report - American Strategic Income Portfolio
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Financial Statements (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
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Year Ended Year Ended
11/30/99 11/30/98
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OPERATIONS:
Net investment income ..................................... $ 4,698,186 $ 4,741,226
Net realized gain on investments .......................... 77,048 414,549
Net change in unrealized appreciation or depreciation of
investments ............................................. (2,991,354) (128,532)
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Net increase in net assets resulting from operations .... 1,783,880 5,027,243
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................ (4,766,526) (4,581,335)
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CAPITAL SHARE TRANSACTIONS (NOTE 6):
Decrease in net assets from capital share transactions .... (248,648) (6,773,276)
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Total decrease in net assets ............................ (3,231,294) (6,327,368)
Net assets at beginning of year ........................... 61,285,576 67,612,944
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Net assets at end of year ................................. $58,054,282 $61,285,576
=========== ===========
Undistributed net investment income ....................... $ 379,197 $ 447,537
=========== ===========
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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7 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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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 subject to price ceilings due to the illiquid
nature of the funds. 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 Annual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (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 November 30, 1999, loans representing 1.54% 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 2.69% of
total single family principal outstanding at November 30,
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 net realized gains of $12,940 or
$0.003 per share on real estate sold during the year ended
November 30, 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 November 30, 1999,
the fund owned two single family homes with an aggregate
value of $211,982, or 0.37% of net assets.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve the sale of a
portfolio-eligible security by the fund, coupled with an
agreement to repurchase the security at a specified date
and price. Reverse repurchase agreements may increase the
volatility of the fund's net asset value and involve the
risk of interest costs on money borrowed may exceed the
return on securities purchased with that borrowed money.
Reverse repurchase agreements are considered to be
borrowings by the fund, and are subject to the funds
overall restriction on borrowing under which it must
maintain asset coverage of at least 300%. For the year
ended November 30, 1999, the average borrowings
outstanding were $24,306,250 and the average coupon was
5.68%.
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
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9 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
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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 November 30, 1999, the
fund had 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 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
- --------------------------------------------------------------------------------
10 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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.
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 acquired by U.S.
Bancorp 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 year
ended November 30, 1999, the annualized effective
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 provides 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
- --------------------------------------------------------------------------------
11 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
owned; fees to outside parties retained to assist in
conducting due diligence; taxes and other miscellaneous
expenses. During the year ended November 30, 1999, the
fund paid $28,486 for custody services to U.S. Bank.
EXPENSES PAID INDIRECTLY
Expenses paid indirectly represent reimbursements of
custodian fees received from mortgage servicers of
$15,595.
(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 year ended November 30,
1999 aggregated $17,856,769 and $19,881,906, respectively.
Included in proceeds from sales is $104,717 from sales of
real estate owned. Included in net realized gains are
$99,872 from prepayment penalties on multifamily loans.
(5) CAPITAL LOSS
CARRYOVER
............................
For federal income tax purposes, the fund had capital loss
carryovers of $8,166,919 as of November 30, 1999, 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
oustanding shares at net asset value. The percentage of
outstanding shares repurchased, the number of shares
repurchased, the repurchase price per share and proceeds
(including repurchase fees) paid by the fund were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE SHARES REPURCHASE PROCEEDS
REPURCHASED REPURCHASED 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 (NAV). 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 (5% of the outstanding shares as of September 9,
1998). The board of directors will review the plan every
year. The plan was last reviewed and reapproved by the
board of directors on June 3, 1999.
Pursuant to the plan, the fund repurchased and retired the
following:
<TABLE>
<CAPTION>
% OF WEIGHTED
OUTSTANDING AVERAGE
YEAR ENDED SHARES SHARES COST DISCOUNT TO NAV
- ---------- -------- ----------- ---------- ---------------
<S> <C> <C> <C> <C>
11/30/99 21,000 0.45% $248,648 7.82%
11/30/98 1,700 0.04% $ 20,451 6.76%
</TABLE>
- --------------------------------------------------------------------------------
12 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) SUBSEQUENT EVENT
REPURCHASE OFFER
............................
The fund's board of directors concluded that an additional
offer to purchase up to 10% of its outstanding shares at
net asset value would be in the best interests of
shareholders. Accordingly, another repurchase offer was
sent to shareholders in November 1999, and the deadline
for submitting shares for repurchase was 5:00 p.m. Eastern
Time on November 29, 1999. The repurchase price was
determined on December 6, 1999, at the close of regular
trading on the New York Stock Exchange (4 p.m. Eastern
Time). The percentage of outstanding shares repurchased,
the number of shares repurchased, the repurchase price per
share (net asset value less two cents per share repurchase
fee) and proceeds paid on December 10, 1999, by the fund
were as follows:
<TABLE>
<CAPTION>
PERCENTAGE SHARES REPURCHASE PROCEEDS
REPURCHASED REPURCHASED PRICE PAID
----------- ----------- ---------- -----------
<S> <C> <C> <C>
10% 470,032 $12.38 $5,818,996
</TABLE>
- --------------------------------------------------------------------------------
13 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
(8) FINANCIAL
HIGHLIGHTS
............................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
AMERICAN STRATEGIC INCOME PORTFOLIO
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
11/30/99 11/30/98 (e) 11/30/97 11/30/96 11/30/95
-------- ---------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning
of period ............................ $12.98 $12.88 $12.65 $13.13 $12.63
------ ------ ------ ------ ------
Operations:
Net investment income ................ 1.00 1.01 0.97 0.97 1.09
Net realized and unrealized gains
(losses) on investments ............ (0.62) 0.06 0.22 (0.10) 1.11
------ ------ ------ ------ ------
Total from operations .............. 0.38 1.07 1.19 0.87 2.20
------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income ........... (1.01) (0.97) (0.96) (1.35) (1.70)
------ ------ ------ ------ ------
Total distributions to
shareholders ..................... (1.01) (0.97) (0.96) (1.35) (1.70)
------ ------ ------ ------ ------
Net asset value, end of period ......... $12.35 $12.98 $12.88 $12.65 $13.13
====== ====== ====== ====== ======
Per-share market value, end of
period ............................... $11.44 $12.13 $11.88 $11.00 $12.25
====== ====== ====== ====== ======
SELECTED INFORMATION
Total return, net asset value (a) ...... 3.03% 8.56% 9.83% 7.12% 18.27%
Total return, market value (b) ......... 2.76% 10.69% 17.41% 1.29% 7.75%
Net assets at end of period
(in millions) ........................ $ 58 $ 61 $ 68 $ 66 $ 69
Ratio of expenses to average weekly net
assets including interest
expense (c) .......................... 3.83% 2.89% 2.56% 2.94% 3.29%
Ratio of expenses to average weekly net
assets excluding interest
expense (c) .......................... 1.52% 1.47% 1.47% 1.50% 1.72%
Ratio of net investment income to
average weekly net assets ............ 7.86% 7.74% 7.68% 7.67% 8.26%
Portfolio turnover rate (excluding
short-term securities) . 22% 38% 61% 63% 120%
Amount of borrowings outstanding at end
of period (in millions) .............. $ 21 $ 17 $ 11 $ 14 $ 15
Per-share amount of borrowings
outstanding at end of period ......... $ 4.50 $ 3.49 $ 2.10 $ 2.67 $ 2.84
Per-share amount of net assets,
excluding borrowings, at end
of period ............................ $16.85 $16.47 $14.98 $15.32 $15.97
Asset coverage ratio (d) ............... 375% 471% 715% 574% 563%
</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% FROM FEDERAL EXCISE TAXES IN FISCAL YEAR 1995.
(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.
- --------------------------------------------------------------------------------
14 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN STRATEGIC
INCOME PORTFOLIO November 30, 1999
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Date Market
Description of Security Acquired Par Value Cost Value (a)
- ------------------------------------------------------------ ---------- ----------- ------------ ------------
<CAPTION>
<S> <C> <C> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (10.1%):
U.S. AGENCY MORTGAGE-BACKED SECURITIES (4.9%):
FIXED RATE (4.9%):
6.50%, FNMA, 6/1/29 .................................. 5/4/99 $ 2,948,911(b) $ 2,927,389 $ 2,810,666
------------ ------------
U.S. GOVERNMENT SECURITIES (5.2%):
6.63%, U.S. Treasury Note, 3/31/02 ................... 3/1/99 3,000,000(b) 3,060,204 3,037,980
------------ ------------
Total U.S. Government and Agency Securities ....... 5,987,593 5,848,646
------------ ------------
PRIVATE MORTGAGE-BACKED
SECURITIES (e) (1.9%):
FIXED RATE (1.9%):
10.10%, First Boston, Series 1992-1,
Class B-2, 1/15/01 ................................. 5/1/92 1,000,000 989,153 1,000,000
13.04%, Minnesota Mortgage Corporation, 7/25/14 5/18/92 37,073 37,905 37,629
12.26%, Minnesota Mortgage Corporation, 10/25/14 5/18/92 52,362 53,530 53,148
------------ ------------
Total Private Mortgage-Backed Securities .......... 1,080,588 1,090,777
------------ ------------
WHOLE LOANS AND PARTICIPATION
MORTGAGES (c,d,e) (110.6%):
COMMERCIAL LOANS (26.5%):
Bekins Building, 8.50%, 10/1/04 ...................... 9/2/97 1,119,642 1,119,641 1,109,783
El Centro Market Place, 9.75%, 9/1/01 ................ 8/5/99 748,816 748,816 759,685
James Plaza, 8.55%, 12/1/01 .......................... 11/15/96 1,154,344 1,154,344 1,158,089
Main Street Office Building, 8.50%, 11/1/07 .......... 10/21/97 877,274 875,812 864,811
One Eastern Heights Office Building,
8.33%, 12/1/07 ..................................... 11/7/97 1,072,770 1,072,770 1,042,271
Pacific Periodicals Building, 8.15%, 1/1/08 .......... 12/9/97 1,346,521 1,346,521 1,298,443
Pine Island Office Building, 8.15%, 11/2/02 .......... 10/8/97 1,584,614 1,584,614 1,571,825
Rice Street Convention Center, 9.10%, 2/1/04 ......... 1/23/97 822,161 822,161 827,178
Schendel Office Building, 8.32%, 10/1/07 ............. 9/30/97 1,167,431 1,167,431 1,145,404
Schendel Retail Center, 8.70%, 9/1/07 ................ 8/28/97 799,426 799,426 792,114
Shallowford Business Park, 9.25%, 7/1/01 6/25/96 1,584,160 1,583,984 1,607,754
Sherwin Williams, 8.63%, 1/1/04 ...................... 12/20/96 1,397,205 1,397,205 1,400,274
Stephens Retail Center, 9.35%, 8/1/03 ................ 9/6/96 1,156,900 1,152,080 1,178,658
Union Hill Village Office Buliding,
8.00%, 10/1/08 ..................................... 9/30/98 669,862 669,862 633,525
------------ ------------
15,494,667 15,389,814
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Date Market
Description of Security Acquired Par Value Cost Value
- ----------------------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
MULTIFAMILY LOANS (29.2%):
Applewood Manor, 8.75%, 1/1/01 ....................... 12/23/93 $ 663,387 $ 660,070 $ 560,797
Charleston Plaza Apartments, 7.50%, 7/1/08 ........... 7/1/98 1,569,410 1,569,410 1,485,967
Franklin Woods Apartments, 9.90%, 3/1/10 ............. 2/24/95 1,225,290 1,221,977 1,286,554
Garden Oaks Apartments, 8.55%, 4/1/06 ................ 3/7/96 1,775,194 1,771,863 1,790,127
Mark Twain Apartments, 8.00%, 2/1/03 ................. 1/9/98 976,383 976,382 915,130
Royal Knight Apartments, 8.50%, 4/1/06 ............... 3/4/96 1,551,476 1,548,082 1,560,623
Rush Oaks Apartments, 7.90%, 12/1/07 ................. 11/26/97 540,323 540,323 522,645
Sadletree Apartments, 9.00%, 12/1/01 ................. 11/18/98 2,375,000 2,351,250 2,377,772
Stanley Court Apartments, 8.50%, 11/1/02 ............. 10/31/95 1,062,062 1,058,682 1,071,168
Union Hill Village Townhomes, 8.00%, 10/1/08 ......... 9/30/98 949,301 949,301 916,381
Vanderbilt Condominiums, 8.16%, 10/1/09 .............. 9/29/99 1,199,221 1,199,221 1,167,319
Westgate Apartments, 10.00%, 2/1/08 .................. 1/28/93 1,352,489 1,338,964 1,359,408
Westhollow Place Apartments, 8.58%, 4/1/03 ........... 3/20/96 970,125 960,423 980,420
Woodland Garden Apartments, 7.50%, 9/1/08 ............ 8/26/98 1,053,474 1,053,474 987,707
------------ ------------
17,199,422 16,982,018
------------ ------------
SINGLE FAMILY LOANS (54.9%):
Aegis, 8.96%, 3/26/10 . 10/26/95 175,367 165,669 175,849
Aegis II, 9.65%, 1/28/14 ............................. 12/28/95 324,223 297,069 330,464
American Bank, Mankato, 10.00%, 12/10/12 ............. 12/15/92 40,089 32,728 35,046
American Portfolio, 6.93%, 10/18/15 .................. 7/18/95 209,195 199,272 202,504
Anivan, 7.77%, 4/14/12 ............................... 6/14/96 244,084 245,663 241,765
Bank of New Mexico, 8.68%, 3/31/10 ................... 5/31/96 469,125(b) 460,392 468,346
Bluebonnet Savings and Loan, 7.68%, 8/31/10 .......... 5/12/92 32,411 31,757 30,890
Bluebonnet Savings and Loan, 11.74%, 8/31/10 ......... 5/12/92 949,882(b) 870,258 931,519
CLSI Allison Williams, 9.62%, 8/1/17 ................. 2/28/92 441,204(b) 405,798 446,327
Crossroads Savings and Loan, 8.88%, 1/1/21 ........... 12/23/91 267,285 251,367 267,228
Crossroads Savings and Loan, 9.03%, 1/1/21 ........... 12/23/91 208,704 197,374 211,125
Fairbanks, Utah, 9.54%, 9/23/15 ...................... 5/21/92 88,043 74,726 87,318
First Boston Mortgage Pool #5, 9.11%, 6/29/03 ........ 6/23/92 307,791 251,561 307,912
Hamilton Financial, 7.27%, 6/29/10 ................... 7/8/92 117,243 107,571 115,019
Huntington MEWS, 9.00%, 8/1/17 ....................... 1/17/92 $ 606,625(b) $ 523,711 $ 572,465
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
15 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
AMERICAN STRATEGIC INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Date Shares/ Market
Description of Security Acquired Par Value Cost Value (a)
- ----------------------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Knutson Mortgage Portfolio #1, 8.38%, 8/1/17 ......... 2/19/92 748,327(b) 714,073 745,240
Knutson Mortgage Portfolio #2, 9.31%, 9/25/17 ........ 5/26/92 475,184(b) 438,120 488,516
McClemore, Matrix Funding Corporation,
10.88%, 9/30/12 .................................... 9/9/92 539,798(b) 512,808 523,406
Meridian, 9.71%, 12/1/20 ............................. 12/21/92 535,588(b) 510,817 546,682
Nomura III, 8.76%, 4/29/17 ........................... 9/29/95 1,611,321(b) 1,456,544 1,544,442
Norwest II, 7.53%, 11/27/22 .......................... 2/27/96 1,266,768(b) 1,260,459 1,232,082
Norwest III, 7.45%, 11/27/22 ......................... 2/27/96 1,284,115(b) 1,284,162 1,247,621
Norwest V, 8.63%, 2/3/25 ............................. 9/3/96 1,337,155(b) 1,313,097 1,299,817
Norwest X, 7.69%, 2/1/22 ............................. 3/12/98 4,478,472(b) 4,486,085 4,321,332
Norwest XIII, 7.56%, 12/1/25 ......................... 10/28/98 3,353,439(b) 3,336,672 3,248,594
Norwest XIV, 7.34%, 7/12/24 .......................... 12/3/98 3,471,395(b) 3,436,681 3,278,241
Norwest XV, 7.28%, 1/1/25 ............................ 12/23/98 3,059,160(b) 3,020,921 2,935,897
Norwest XVI, 7.15%, 4/30/26 .......................... 3/4/99 3,414,430(b) 3,315,572 3,240,818
Norwest XVII, 6.99%, 10/4/23 ......................... 5/20/99 1,962,106(b) 1,897,265 1,863,485
Rand Mortgage Corporation, 9.58%, 8/1/17 ............. 2/21/92 196,957(b) 161,431 201,247
Salomon II, 9.20%, 11/23/14 .......................... 12/23/94 492,494(b) 428,687 497,862
Valley Bank of Commerce, N.M., 7.95%, 8/31/10 ........ 5/6/92 214,797 182,720 212,246
------------ ------------
31,871,030 31,851,306
------------ ------------
Total Whole Loans and Participation Mortgages ..... 64,565,119 64,223,138
------------ ------------
MORTGAGE SERVICING RIGHTS (e,f) (0.4%):
Matrix Servicing Rights, 14.00%, 7/10/22 ............. 7/10/92 32,048,513 271,527 237,605
------------ ------------
SHORT-TERM SECURITIES (12.7%):
First American Prime Obligations Fund ................ 11/30/99 7,391,554(g) 7,391,554 7,391,554
------------ ------------
Total Investments in Securities (h) ............... $ 79,296,381 $ 78,791,720
============ ============
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) ON NOVEMBER 30, 1999, SECURITIES VALUED AT $34,250,602 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> <C>
$ 2,625,000 11/15/99 5.42% 12/15/99 $ 395 (1)
1,500,000 11/1/99 6.28% 12/1/99 7,853 (2)
3,000,000 11/2/99 5.34% 12/1/99 13,350 (3)
10,700,000 11/1/99 6.28% 12/1/99 55,997 (4)
3,300,000 11/1/99 6.28% 12/1/99 17,270 (4)
----------- --------
$21,125,000 $ 94,865
=========== ========
</TABLE>
* INTEREST RATE AS OF NOVEMBER 30, 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%, 6/1/29, $2,948,911 PAR
(2) MORGAN STANLEY DEAN WITTER;
NORWEST X, 7.69%, 2/1/22, $1,015,090 PAR
(3) NOMURA;
U.S. TREASURY NOTE, 6.63%, 3/31/02, $3,000,000 PAR
(4) NOMURA;
BANK OF NEW MEXICO, 8.68%, 3/31/10, $422,265 PAR
BLUEBONNET SAVINGS AND LOAN, 11.74%, 8/31/10, $949,882 PAR
CLSI ALLISON WILLIAMS, 9.62%, 8/1/17, $441,204 PAR
HUNTINGTON MEWS, 9.00% , 8/1/17, $606,625 PAR
KNUTSON MORTGAGE PORTFOLIO #1, 8.38%, 8/1/17, $621,004 PAR
KNUTSON MORTGAGE PORTFOLIO #2, 9.31%, 9/25/17, $470,612 PAR
MCCLEMORE, 10.88%, 9/30/12, $539,798 PAR
MERIDIAN, 9.71%, 12/1/20, $535,588 PAR
NOMURA III, 8.76%, 4/29/17, $1,611,321 PAR
NORWEST II, 7.53%, 11/27/22, $1,249,462 PAR
NORWEST III, 7.45%, 11/27/22, $1,284,115 PAR
NORWEST V, 8.63%, 2/3/25, $1,155,900 PAR
NORWEST X, 7.69%, 2/1/22, $3,322,052 PAR
NORWEST XIII, 7.56%, 12/1/25, $3,353,439 PAR
NORWEST XIV, 7.34%, 7/12/24, $3,471,395 PAR
NORWEST XV, 7.28%, 1/1/25, $3,019,959 PAR
NORWEST XVI, 7.15%, 4/30/26, $3,414,430 PAR
NORWEST XVII, 6.99%, 10/4/23, $1,366,101 PAR
SALOMON II, 9.20%, 11/23/14, $492,494 PAR
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 NOVEMBER 30, 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
NOVEMBER 30, 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
EL CENTRO MARKET PLACE - TX
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
MARK TWAIN APARTMENTS - MESA, AZ
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 - 10 LOANS, MIDWESTERN UNITED STATES
AEGIS II - 4 LOANS, MIDWESTERN UNITED STATES
AMERICAN BANK, MANKATO - 1 LOAN, MINNESOTA
AMERICAN PORTFOLIO - 5 LOANS, TEXAS AND CALIFORNIA
ANIVAN - 3 LOANS, MARYLAND, NEW JERSEY, VIRGINIA
BANK OF NEW MEXICO - 10 LOANS, NEW MEXICO
BLUEBONNET SAVINGS AND LOAN - 27 LOANS, TEXAS
CLSI ALLISON WILLIAMS - 25 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 - 8 LOANS, MIDWESTERN UNITED STATES
MCCLEMORE, MATRIX FUNDING CORPORATION - 7 LOANS, NORTH CAROLINA
MERIDIAN - 9 LOANS, CALIFORNIA
NOMURA III - 29 LOANS, MIDWESTERN UNITED STATES
NORWEST II - 15 LOANS, MIDWESTERN UNITED STATES
NORWEST III - 11 LOANS, MIDWESTERN UNITED STATES
NORWEST V - 14 LOANS, MIDWESTERN UNITED STATES
NORWEST X - 37 LOANS, MIDWESTERN UNITED STATES
NORWEST XIII - 29 LOANS, MIDWESTERN UNITED STATES
- --------------------------------------------------------------------------------
16 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (continued)
- --------------------------------------------------------------------------------
NORWEST XIV - 23 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 - 5 LOANS, TEXAS
SALOMON II - 12 LOANS, MIDWESTERN UNITED STATES
VALLEY BANK OF COMMERCE, N.M. - 14 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 NOVEMBER
30, 1999, THE TOTAL MARKET VALUE OF THESE INVESTMENTS WAS $65,551,520
OR 112.9% 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 THE
ADVISOR FOR THIS FUND. SEE NOTE 2 IN THE NOTES TO FINANCIAL
STATEMENTS.
(h) ON NOVEMBER 30, 1999. THE COST OF INVESTMENTS IN SECURITIES FOR INCOME
TAX PURPOSES WAS $79,296,381. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES, INCLUDING
REAL ESTATE OWNED, BASED ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 929,771
GROSS UNREALIZED DEPRECIATION ...... (1,433,590)
-----------
NET UNREALIZED DEPRECIATION ...... $ (503,819)
===========
</TABLE>
- --------------------------------------------------------------------------------
17 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
AMERICAN STRATEGIC INCOME PORTFOLIO INC.
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments in
securities, of American Strategic Income Portfolio Inc. as
of November 30, 1999, and the related statements of
operations, cash flows, changes in net assets and the
financial highlights for the year then ended. These
financial statements and financial highlights are the
responsibility of the fund's management. Our
responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
The statement of changes in net assets for the year ended
November 30, 1998 and the financial highlights for each of
the four years in the period ended November 30, 1998, were
audited by other auditors whose report dated January 8,
1999, expressed an unqualified opinion.
We conducted our audit in accordance with auditing
standards generally accepted in the United States. Those
standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements and the financial highlights are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements and financial
highlights. Our procedures included examination or
confirmation of securities owned as of November 30, 1999,
with the custodians. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the 1999 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of American
Strategic Income Portfolio Inc. at November 30, 1999, and
the results of its operations, its cash flows, changes in
its net assets and financial highlights for the year then
ended, in conformity with accounting principles generally
accepted in the United States.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
January 7, 2000
- --------------------------------------------------------------------------------
18 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
FEDERAL INCOME TAX INFORMATION
- --------------------------------------------------------------------------------
The following per-share information describes the federal
tax treatment of distributions made during the fiscal
year. Distributions for the calendar year will be reported
to you on Form 1099-DIV. Please consult a tax advisor on
how to report these distributions at the state and local
levels.
INCOME DISTRIBUTIONS (TAXABLE AS ORDINARY DIVIDENDS, NONE
QUALIFYING FOR DEDUCTION BY CORPORATIONS)
<TABLE>
<CAPTION>
PAYABLE DATE AMOUNT
------------ -------
<S> <C>
December 16, 1998 ....................... $0.0825
January 13, 1999 ........................ 0.0825
February 24, 1999 ....................... 0.0825
March 24, 1999 .......................... 0.0850
April 28, 1999 .......................... 0.0850
May 26, 1999 ............................ 0.0850
June 23, 1999 ........................... 0.0850
July 28, 1999 ........................... 0.0850
August 25, 1999 ......................... 0.0850
September 22, 1999 ...................... 0.0850
October 27, 1999 ........................ 0.0850
November 23,1999 ........................ 0.0850
-------
Total ................................. $1.0125
=======
</TABLE>
- --------------------------------------------------------------------------------
19 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
SHAREHOLDER UPDATE
- --------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on
August 16, 1999. Each matter voted upon at that meeting,
as well as the number of votes cast for, against or
withheld, the number of abstentions, and the number of
broker non-votes with respect to such matters, are set
forth below.
(1) The fund's shareholders elected the following
directors:
<TABLE>
<CAPTION>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- ------------------
<S> <C> <C>
David T. Bennett ....................... 3,790,522 204,532
Robert J. Dayton ....................... 3,790,522 204,532
Roger A. Gibson ........................ 3,790,522 204,532
Andrew M. Hunter III ................... 3,790,522 204,532
Leonard W. Kedrowski ................... 3,790,522 204,532
John M. Murphy, Jr. .................... 3,790,522 204,532
Robert L. Spies ........................ 3,790,522 204,532
Joseph D. Strauss ...................... 3,790,522 204,532
Virginia L. Stringer ................... 3,790,522 10,984
</TABLE>
(2) The fund's shareholders ratified the selection by a
majority of the independent members of the fund's
Boards of Directors of Ernst & Young as the
independent public accountants for the fund for the
fiscal year ending November 30, 2000. The following
votes were cast regarding this matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON VOTES
------------- ----------------- ----------- ---------
<S> <C> <C> <C>
3,775,773 23,946 49,136 --
</TABLE>
SHARE REPURCHASE PROGRAM
Your fund's board of directors has approved the
continuation of the fund's 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 outstanding shares as of September 9,
1998.
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 per share, remaining shares
outstanding may experience a slight increase in net asset
value per share. 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;
- --------------------------------------------------------------------------------
20 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
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.
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the
Dividend Reinvestment Plan. It's a convenient and
economical way to buy additional shares of the fund by
automatically reinvesting dividends and capital gains. The
plan is administered by Equiserve, the plan agent.
ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of
distributions will begin with the next distribution paid,
provided your request is received at least 10 days before
the record date for that distribution.
If your shares are in certificate form, you may join the
plan directly and have your distributions reinvested in
additional shares of the fund. To enroll in this plan,
call Equiserve at 1-800-543-1627. If your shares are
registered in your brokerage firm's name or another name,
ask the holder of your shares how you may participate.
Banks, brokers or nominees, on behalf of their beneficial
owners who wish to reinvest dividend and capital gains
distributions, may participate in the plan by informing
Equiserve at least 10 days before each share's dividend
and/or capital gains distribution.
PLAN ADMINISTRATION
Beginning no more than 5 business days before the dividend
payment date, Equiserve will buy shares of the fund on the
New York Stock Exchange (NYSE) or elsewhere on the open
market only when the price of the fund's shares on the
NYSE plus commissions is at less than a 5% premium over
the fund's most recently calculated net asset value (NAV)
per share. 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, Equiserve will accept payment of the
dividend, or the remaining portion, in authorized but
unissued shares of the fund. These shares will be issued
at a per-share price equal to the higher of (a) the NAV
per share as of the close of business on the payment date
or (b) 95% of the closing market price per share on the
payment date.
By participating in the dividend reinvestment plan, you
may receive benefits not available to shareholders who
elect not to participate. For example, if the market price
plus commissions of the fund's shares is 5% or more above
the NAV, you will receive shares at a discount of up to 5%
from the current market value. However, if the market
price plus commissions is below the NAV, you will receive
distributions in shares with an NAV greater than the value
of any cash distributions you would have received.
- --------------------------------------------------------------------------------
21 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
There is no direct charge for reinvestment of dividends
and capital gains, since Equiserve fees are paid for by
the fund. However, if fund shares are purchased in the
open market, each participant pays a pro rata portion of
the brokerage commissions. Brokerage charges are expected
to be lower than those for individual transactions because
shares are purchased for all participants in blocks. As
long as you continue to participate in the plan,
distributions paid on the shares in your account will be
reinvested.
Equiserve maintains accounts for plan participants holding
shares in certificate form and will furnish written
confirmation of all transactions, including information
you need for tax records. Reinvested shares in your
account will be held by Equiserve in noncertificated form
in your name.
TAX INFORMATION
Distributions invested in additional shares of the fund
are subject to income tax, just as they would be if
received in cash. When shares are issued by the fund at a
discount from market value, shareholders will be treated
as having received distributions of an amount equal to the
full market value of those shares. Shareholders, as
required by the Internal Revenue Service, will receive
Form 1099 regarding the federal tax status of the prior
year's distributions.
PLAN WITHDRAWAL
If you hold your shares in certificate form, you may
terminate your participation in the plan at any time by
giving written notice to Equiserve. If your shares are
registered in your brokerage firm's name, you may
terminate your participation via verbal or written
instructions to your investment professional. Written
instructions should include your name and address as they
appear on the certificate or account.
If notice is received at least 10 days before the record
date, all future distributions will be paid directly to
the shareholder of record.
If your shares are issued in certificate form and you
discontinue your participation in the plan, you (or your
nominee) will receive an additional certificate for all
full shares and a check for any fractional shares in your
account.
PLAN AMENDMENT/TERMINATION
The fund reserves the right to amend or terminate the
plan. Should the plan be amended or terminated,
participants will be notified in writing at least 90 days
before the record date for such dividend or distribution.
The plan may also be amended or terminated by Equiserve
with at least 90 days written notice to participants in
the plan.
Any questions about the plan should be directed to your
investment professional or to Equiserve LP, P.O. Box 8218,
Boston, Massachusetts 02266, 1-800-543-1627.
- --------------------------------------------------------------------------------
22 1999 Annual Report - American Strategic Income Portfolio
<PAGE>
[LOGO] FIRST AMERICAN-Registered Trademark-
ASSET MANAGEMENT
AMERICAN STRATEGIC INCOME PORTFOLIO
1999 ANNUAL REPORT
1/2000 3044 09
[LOGO]This document is printed on paper mad from 100% total recovered fiber,
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