AMERICAN STRATEGIC INCOME PORTFOLIO INC II, N-30D, 1997-07-29

AMERICAN STRATEGIC INCOME PORTFOLIO INC II
N-30D, 1997-07-29

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<PAGE>

American Strategic Income Portfolio II - 1997 Annual Report

1997 Annual Report

AMERICAN
STRATEGIC
INCOME
PORTFOLIO II

PIPER CAPITAL
MANAGEMENT

[LOGO]

<PAGE>

PIPER CAPITAL
MANAGEMENT

AMERICAN STRATEGIC INCOME PORTFOLIO II

PRIMARY INVESTMENTS

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, mortgage-backed
securities and mortgage servicing rights. The fund may borrow, including
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.

CONTENTS

Average Annualized Total Returns.........................................1
Portfolio Managers' Letter...............................................2
Financial Statements and Notes...........................................7
Investments in Securities...............................................20
Independent Auditors' Report............................................26
Federal Tax Information.................................................27
Shareholder Update......................................................28
Glossary^...............................................................34

^This report includes a glossary to help you understand financial terms used
in the portfolio managers' letter. When you see this symbol, it indicates a
word that is defined in the glossary.

<PAGE>

Average Annualized Total Returns

Based on net asset value for the periods ended May 31, 1997

[EDGAR REPRESENTATION OF GRAPHICS CHART]

<TABLE>
<CAPTION>
SINCE
ONE THREE INCEPTION
YEAR YEAR 7/30/92
---- ------ ---------
<S> <C> <C> <C>
AMERICAN STRATEGIC INCOME PORTFOLIO II........................ 6.90% 8.74% 7.13%
Lehman Brothers Mutual Funds Gov't/Mortgage Index............. 8.21% 7.85% 6.52%
</TABLE>

The average annualized total return figures for American Strategic Income
Portfolio II 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, three-year and since inception periods ended May 31, 1997, were
17.19%, 4.51% and 4.12%, respectively. These figures also assume reinvested
distributions and do not reflect sales charges.

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 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 figures.

The since inception number for the Lehman index is calculated from the month
end following the fund's inception through May 31, 1997.

1997 Annual Report 1 American Strategic Income Portfolio II

<PAGE>

Portfolio Managers' Letter

July 18, 1997

[PHOTO]
JOHN WENKER is primarily responsible for the management of American Strategic
Income Portfolio II. He has 11 years of financial experience.

DEAR SHAREHOLDERS:

FOR THE YEAR ENDED MAY 31, 1997, AMERICAN STRATEGIC INCOME PORTFOLIO II HAD A
NET ASSET VALUE TOTAL RETURN OF 6.90%.* This compares to an 8.21% return for
the fund's benchmark,^ the Lehman Brothers Mutual Fund Government/Mortgage
Index. The fund's total return based on market price was 17.19% for the year,
and it continued to trade at a discount^ to net asset value (NAV), with a
market price of $11.38 and an NAV of $12.63 per share as of May 31.

UNDERPERFORMANCE OF THE FUND CAN BE LARGELY ATTRIBUTED TO MORTGAGE LOSSES IN
THE PORTFOLIO, PRIMARILY LOSSES INCURRED WHEN WE SOLD TWO MULTIFAMILY
PROPERTIES THAT WENT THROUGH FORECLOSURE. For the most recent fiscal year of
the fund, mortgage losses were approximately $0.12 per share. Another
contributing factor to the fund's underperformance was its emphasis on
short-term Treasury securities. During a declining interest rate environment,
short-

*All returns include reinvested distributions, but not sales charges. 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.

[EDGAR REPRESENTATION OF PIE CHART]

PORTFOLIO COMPOSITION

As a percentage of total assets on May 31, 1997

Commercial Loans.............................................. 7%
Other Assets.................................................. 2%
U.S. Agency Fixed Rate Mortgage-Backed Securities............. 1%
Multifamily Loans............................................. 28%
Single Family Loans........................................... 38%
Private Fixed Rate Mortgage-Backed Securities................. 7%
U.S. Treasury Securities...................................... 17%

1997 Annual Report 2 American Strategic Income Portfolio II

<PAGE>

Portfolio Managers' Letter (continued)

[PHOTO]
DAVID STEELE assists with the management of American Strategic Income
Portfolio II. He has 18 years of financial experience.

term securities generally do not go up in value as much as longer term
issues. Finally, mortgage loans are generally less sensitive to interest rate
changes than securities in the index, so when interest rates fall, as they
have over the last year, these loans tend not to go up in value as much as
the index.

ALTHOUGH THE FUND'S PERFORMANCE SLIGHTLY LAGGED ITS BENCHMARK, WE ARE PLEASED
THAT WE HAVE MET OUR GOAL TO KEEP THE FUND'S DIVIDEND STEADY. One year ago,
the fund's dividend was reduced. At that time, we set a goal of maintaining
the dividend at 8.25 cents per share for 12 months, which we have done. The
loans in the fund's portfolio have provided high relative income for the fund
over the past year. The fund also continues to maintain a dividend reserve.

DURING THE REPORTING PERIOD, PREPAYMENT LEVELS REMAINED STABLE. We were
somewhat concerned about prepayments at the end of 1996, and indicated to
shareholders at that time that borrowers prepaying on their mortgages due to
a lower interest rate

GEOGRAPHICAL DISTRIBUTION

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 and real estate owned as of May 31, 1997. Shaded areas
without values indicate states in which the fund has invested less that 0.50%
of its assets.

[EDGAR REPRESENTATION OF GRAPHIC]

Arizona............................................. 3%
California.......................................... 14%
Colorado............................................ 7%
Florida............................................. 7%
Georgia............................................. 4%
Illinois............................................ 1%
Kentucky............................................ 3%
Maryland............................................ 1%
Massachusetts....................................... 5%
Minnesota........................................... 9%
Missouri............................................ 2%
Nevada.............................................. 1%
New Jersey.......................................... 5%
New Mexico.......................................... 1%
New York............................................ 2%
North Dakota........................................ 1%
Ohio................................................ 1%
Oklahoma............................................ 7%
Pennsylvania........................................ 1%
Tennessee........................................... 4%
Texas............................................... 15%
Utah................................................ 1%
Vermont............................................. 1%
Virginia............................................ 1%

1997 Annual Report 3 American Strategic Income Portfolio II

<PAGE>

Portfolio Managers Letter (continued)

[PHOTO]
RUSS KAPPENMAN assists with the management of American Strategic Income
Portfolio II. He has 11 years of financial experience.

environment might force the fund to reinvest at lower rates and ultimately
decrease the fund's income. To date, the higher level of prepayments has not
materialized, and we have continued to add mortgages at historically
attractive interest rates. However, prepayment risk^ remains a concern in the
current lower interest rate environment.

IN OUR LAST REPORT TO YOU, WE SAID WE ANTICIPATED INCREASING THE FUND'S
HOLDINGS IN COMMERCIAL LOANS,^ AND WE HAVE DONE SO. Commercial loans are
currently available at attractive prices compared to single family and
multifamily loans. The market for multifamily and commercial loans is
approximately $1 trillion in size, providing us with a large number of loans
to search through for the credit quality, price and yield we want for the
fund. (For more information about the specific risks associated with mortgage
loans, see the glossary at the back of this report.)

ALTHOUGH WE CONDUCT EXTENSIVE RISK ANALYSIS ON LOANS WE PURCHASE, DELINQUENT^
LOANS AND CREDIT LOSSES ARE INHERENT RISKS IN THE FUND. As of May 31, the
fund held approximately 2,200 single family loans on properties with an
average principal balance remaining of approximately $59,000. The chart below
shows the percentage of those single family loans in delinquency. On the same
date, we

DELINQUENT LOAN PROFILE

The chart below shows what percentage of single family loans* in the
portfolio are 30, 60, 90 or 120 days delinquent as of May 31, 1997, based on
principal amounts outstanding.

Current................................. 86.4%
30 Days................................. 4.9%
60 Days................................. 2.1%
90 Days................................. 1.2%
120+ Days............................... 5.4%

*As of May 31, 1997, there were no multifamily or commercial loans delinquent.

1997 Annual Report 4 American Strategic Income Portfolio II

<PAGE>

Portfolio Managers' Letter (continued)

had 47 multifamily loans with an average principal balance of approximately
$2,048,000 and 12 commercial loans with an average principal balance of
approximately $2,065,000. There were no multifamily or commercial loans
delinquent. Since the fund's inception, we have kept principal losses due to
foreclosure to 9 cents per share on single family loans and 9 cents per share
on multifamily loans for a total of 18 cents per share. There have been no
losses from commercial loans.

THE FUND CONTINUES TO BORROW THROUGH REVERSE REPURCHASE AGREEMENTS^ AND
INVEST THE PROCEEDS IN TREASURY SECURITIES AND NEW MORTGAGE LOANS. The
Treasuries and mortgage loans act as collateral for the reverse repurchase
agreements. The amount of reverse repurchase agreements was equal to 25% of
the fund's total assets as of May 31. It is important to note that borrowing
can potentially increase the fund's earnings, but it can also increase the
fund's net asset value volatility. We attempt to moderate this potential
volatility by purchasing short- to medium-term Treasuries.

IN THE COMING MONTHS, WE ANTICIPATE MODERATE ECONOMIC GROWTH, WITH INFLATION
REMAINING FAIRLY WELL CONTAINED. We believe the mortgage portfolio will
continue to perform well in this type of environment, and we continue to
watch for opportunities to add high-quality loans to the fund's holdings. In
addition to focusing on the details of individual loan purchases, we remain
vigilant for changes in the broader real estate market environment. Real
estate markets are cyclical in nature. Since the fund's inception, it has
been a favorable time to be active in real estate. We believe that, in
general, the real estate markets are in equilibrium, and that this situation
could exist for some time. It is too soon to tell whether increased
competition for real estate investments will lead to relaxed underwriting
standards and oversupply of new properties.

1997 Annual Report 5 American Strategic Income Portfolio II

<PAGE>

Portfolio Managers Letter (continued)

ON FEBRUARY 28, 1997, THE COURT GRANTED PRELIMINARY APPROVAL OF THE
SETTLEMENT AGREEMENT IN THE CLASS ACTION LAWSUIT AGAINST THE FUND, AND A
FINAL ORDER OF JUDGMENT IS NOW UNDER ADVISEMENT. In addition to cash payments
over the next four years, the settlement includes an offer by the fund to
repurchase up to 10% of its outstanding shares at net asset value. Class
members will receive notices regarding this offer within 45 days of the
effective date of the settlement. A repurchase fee of approximately 1 to 2
cents per share will be charged on all shares that are repurchased. This fee
will be paid to the fund and used to pay for repurchase offer costs, which
include legal, printing, mailing and other miscellaneous expenses.

Thank you for your investment in American Strategic Income Portfolio II. We
look forward to continuing our relationship with you and helping you meet
your investment goals.

Sincerely,

/s/ John Wenker

John Wenker
Portfolio Manager

1997 Annual Report 6 American Strategic Income Portfolio II

<PAGE>
Financial Statements

- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES May 31, 1997
..................................................................

<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $1,252,000) ......... $330,071,378
Real estate owned (identified cost: $1,924,363) (note 2) ... 1,477,647
Cash in bank on demand deposit ............................. 777,237
Other assets ............................................... 100,166
Accrued interest receivable ................................ 4,102,580
------------------
Total assets ............................................. 336,529,008
------------------

LIABILITIES:
Reverse repurchase agreements payable ...................... 84,000,000
Accrued investment management fee .......................... 130,150
Accrued administrative fee ................................. 42,761
Accrued interest ........................................... 422,859
Other accrued expenses ..................................... 13,645
------------------
Total liabilities ........................................ 84,609,415
------------------
Net assets applicable to outstanding capital stock ....... $251,919,593
------------------
------------------

COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital ............... $281,880,170
Undistributed net investment income ........................ 1,329,680
Accumulated net realized loss on investments ............... (32,218,363)
Unrealized appreciation of investments ..................... 928,106
------------------

Total - representing net assets applicable to capital
stock .................................................. $251,919,593
------------------
------------------

* Investments in securities at identified cost ............. $328,696,556
------------------
------------------

NET ASSET VALUE AND MARKET PRICE:
Net assets ................................................. $251,919,593
Shares outstanding ......................................... 19,940,735
Net asset value ............................................ $ 12.63
Market price ............................................... $ 11.38
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1997 Annual Report 7 American Strategic Income Portfolio II
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

STATEMENT OF OPERATIONS For the Year Ended May 31, 1997
..................................................................

<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $2,797,802) ........... $23,056,096
Rental income from real estate owned (note 2) .............. 206,890
-----------------

Total income ............................................. 23,262,986
-----------------

EXPENSES (NOTE 3):
Investment management fee .................................. 1,536,995
Administrative fee ......................................... 506,878
Custodian and accounting fees .............................. 196,594
Transfer agent fees ........................................ 11,118
Reports to shareholders .................................... 57,798
Mortgage servicing fees .................................... 770,610
Directors' fees ............................................ 13,343
Audit and legal fees ....................................... 52,115
Operating expenses on real estate owned (note 2) ........... 466,307
Other expenses ............................................. 71,488
-----------------
Total expenses ........................................... 3,683,246
Less expenses paid indirectly .......................... (8,215)
-----------------

Total net expenses ....................................... 3,675,031
-----------------

Net investment income .................................... 19,587,955
-----------------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
(NOTE 4):
Net realized gain on investments in securities ............. 44,679
Net realized loss on real estate owned ..................... (2,418,556)
-----------------

Net realized loss on investments ......................... (2,373,877)
Net change in unrealized appreciation or depreciation of
investments .............................................. (167,692)
-----------------

Net loss on investments .................................. (2,541,569)
-----------------

Net increase in net assets resulting from operations ... $17,046,386
-----------------
-----------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1997 Annual Report 8 American Strategic Income Portfolio II
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

STATEMENT OF CASH FLOWS For the Year Ended May 31, 1997
..................................................................

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income ..................................................... $23,262,986
Net expenses ............................................... (3,675,031)
-----------------
Net investment income .................................... 19,587,955
-----------------

Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest receivable and principal
receivable on mortgage securities ...................... (1,500,421)
Net amortization of bond discount and premium ............ (201,270)
Change in accrued fees and expenses ...................... 211,145
Change in other assets ................................... (100,166)
-----------------
Total adjustments ...................................... (1,590,712)
-----------------

Net cash provided by operating activities .............. 17,997,243
-----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ......................... 148,662,233
Purchases of investments ................................... (178,692,638)
Net sales of short-term securities ......................... 125,000
-----------------

Net cash used by investing activities .................. (29,905,405)
-----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from reverse repurchase agreements ............ 31,000,000
Distributions paid to shareholders ......................... (19,990,588)
-----------------

Net cash provided by financing activities .............. 11,009,412
-----------------
Net decrease in cash ....................................... (898,750)
Cash at beginning of year .................................. 1,675,987
-----------------

Cash at end of year .................................... $ 777,237
-----------------
-----------------

Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ............................................. $ 2,607,946
-----------------
-----------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1997 Annual Report 9 American Strategic Income Portfolio II
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

STATEMENTS OF CHANGES IN NET ASSETS
..................................................................

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
5/31/97 5/31/96
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $19,587,955 $19,897,041
Net realized gain (loss) on investments .................... (2,373,877) 4,450,724
Net change in unrealized appreciation or depreciation of
investments .............................................. (167,692) (4,821,939)
----------------- -----------------

Net increase in net assets resulting from operations ..... 17,046,386 19,525,826
----------------- -----------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................. (19,990,588) (24,290,403)
----------------- -----------------

CAPITAL SHARE TRANSACTIONS (NOTE 5):
Decrease in net assets from capital share transactions ..... -- (2,827,026)
----------------- -----------------
Total decrease in net assets ............................. (2,944,202) (7,591,603)

Net assets at beginning of year ............................ 254,863,795 262,455,398
----------------- -----------------

Net assets at end of year .................................. $251,919,593 $254,863,795
----------------- -----------------
----------------- -----------------

Undistributed net investment income ........................ $ 1,329,680 $ 1,732,313
----------------- -----------------
----------------- -----------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1997 Annual Report 10 American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements
- ----------------------------------------

(1) ORGANIZATION
................................
American Strategic Income Portfolio Inc. II (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 purchase securities
through the dollar-roll program. In addition, the fund may borrow
through the use of reverse repurchase agreements. Fund shares are
listed on the New York Stock Exchange under the symbol BSP.

(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 available, or if Piper Capital
Management Incorporated believes such quotations or valuations
are 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. These
investments are initially valued at cost and their values are

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1997 Annual Report 11 American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
subsequently monitored and adjusted pursuant to a 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 theron, 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 changes in 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 thereon. Valuations of whole
loans, mortgage participations and mortgage servicing rights are
determined no less frequently than weekly.

Securities transactions are accounted for on the date the
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

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1997 Annual Report 12 American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
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, 1997, loans representing 4.6% 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 8.7% of total single family principal
outstanding at May 31, 1997. 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.

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, 1997, the fund owned 22 homes with an aggregate value
of $1,477,647, or 0.6% of net assets. The fund recognized net
realized losses of $2,418,556, or $0.12 per share on real estate
sold during the year ended May 31, 1997, including a loss of
$1,744,545, or $0.09 per share, on two multifamily properties.

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

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1997 Annual Report 13 American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
value if the fund makes such purchases while remaining
substantially fully invested. As of May 31, 1997, the fund had no
outstanding when-issued or forward commitments.

In connection with its ability to purchase securities on a when-
issued or forward-commitment basis, the fund may enter into
mortgage dollar rolls in which the fund sells securities
purchased on a forward commitment basis and simultaneously
contracts with a counterparty to repurchase similar (same type,
coupon and maturity) but not identical securities on a specified
future date. As an inducement to "roll over" its purchase
commitments, the fund receives negotiated fees. For the year
ended May 31, 1997, the fund earned no such fees.

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 (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

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1997 Annual Report 14 American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
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
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.

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
The fund has entered into the following agreements with Piper
Capital Management Incorporated (the adviser and the
administrator):

The investment advisory agreement provides the adviser 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

- ---------------------------------------------------------------------

1997 Annual Report 15 American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
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 May
31, 1997, the effective investment management fee incurred by the
fund was 0.61%. For its fee, the adviser 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; real
estate owned; fees to outside parties retained to assist in
conducting due diligence; taxes and other miscellaneous expenses.

Expenses paid indirectly represent a reduction of custodian fees
for earnings on miscellaneous cash balances maintained by the
fund.

- ---------------------------------------------------------------------

1997 Annual Report 16 American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------

(4) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the year
ended May 31, 1997, aggregated $178,893,908 and $148,662,233,
respectively. Included in proceeds from sales are $3,768,086 from
sales of real estate owned.

(5) CAPITAL SHARE
TRANSACTIONS
................................
Capital share transactions for the fund were as follows:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
MAY 31, 1997 MAY 31, 1996
------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------- ------- -------- ------------
<S> <C> <C> <C> <C>
Authorized one billion shares of $0.01 par
value:
Payments for retirement of shares ......... -- -- 250,800 $ (2,827,026)
</TABLE>

(6) CAPITAL LOSS
CARRYOVER
................................
For federal income tax purposes, the fund had capital loss
carryovers at May 31, 1997, which, if not offset by subsequent
capital gains, will expire as indicated below. 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.

<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRATION DATE
------------- ----------------
<S> <C> <C>
$ 6,075,218 2003
22,965,560 2004
922,669 2005
2,254,916 2006
-------------
$ 32,218,363
-------------
-------------
</TABLE>

(7) PENDING
LITIGATION
................................
An amended complaint purporting to be a class action was filed on
September 7, 1995, in the United States District Court for the
Western District of Washington against the fund, seven other
closed-end investment companies for which Piper Capital
Management Incorporated acts as investment adviser, Piper Jaffray

- ---------------------------------------------------------------------

1997 Annual Report 17 American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
Companies Inc., Piper Jaffray Inc., Piper Capital Management
Incorporated and certain individuals. The named plaintiffs and
defendants have executed a settlement agreement which the Court
has preliminarily approved. If approved by a sufficiently large
percentage of the class and granted final approval by the Court,
the settlement agreement will provide $15.5 million to class
members in payments by Piper Jaffray Companies Inc. and Piper
Capital Management Incorporated scheduled during the next four
years. The settlement also includes an agreement that BSP will
offer to repurchase up to 10 percent of its outstanding shares
from current shareholders at net asset value. The repurchase
offer will occur after the effective date of the settlement
following final Court approval.

- ---------------------------------------------------------------------

1997 Annual Report 18 American Strategic Income Portfolio II
<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:

<TABLE>
<CAPTION>
Year Year Year Year Period
Ended Ended Ended Ended Ended
5/31/97 5/31/96 5/31/95 5/31/94 5/31/93(f)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ........ $12.78 $13.00 $12.97 $14.54 $14.07
------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.98 0.99 1.21 1.56 1.07
Net realized and unrealized gains (losses)
on investments .......................... (0.13) -- 0.17 (1.78) 0.41
------- ------- ------- ------- -------
Total from operations ................... 0.85 0.99 1.38 (0.22) 1.48
------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income ................ (1.00) (1.21) (1.35) (1.31) (1.01)
In excess of net realized gains on
investments ............................. -- -- -- (0.04) --
------- ------- ------- ------- -------
Total distributions to shareholders ..... (1.00) (1.21) (1.35) (1.35) (1.01)
------- ------- ------- ------- -------
Net asset value, end of period .............. $12.63 $12.78 $13.00 $12.97 $14.54
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Per-share market value, end of period ....... $11.38 $10.63 $11.50 $13.63 $15.75
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SELECTED INFORMATION
Total return, net asset value (a) ........... 6.90% 7.84% 11.56% (2.15)% 10.97%
Total return, market value (b) .............. 17.19% 2.95% (5.38)% (5.38)% 12.57%
Net assets at end of period (in millions) ... $ 252 $ 255 $ 262 $ 265 $ 297
Ratio of expenses to average weekly net
assets (c) . 1.45% 1.26% 1.27% 1.20% 1.09%(g)
Ratio of expenses to average weekly net
assets including interest expense (c) ..... 2.56% 2.39% 3.51% 2.33% 1.74%(g)
Ratio of net investment income to average
weekly net assets ......................... 7.73% 7.63% 9.60% 10.68% 9.08%(g)
Portfolio turnover rate (excluding short-term
securities) ............................... 51% 105% 52% 117% 64%
Amount of borrowings outstanding at end of
period (in millions) (d) .................. $ 84 $ 53 $ 53 $ 85 $ 76
Per-share amount of borrowings outstanding at
end of period ............................. $ 4.21 $ 2.66 $ 2.61 $ 4.16 $ 3.71
Per-share amount of net assets, excluding
borrowings, at end of period .............. $16.84 $15.44 $15.61 $17.13 $18.25
Asset coverage ratio (e) .................... 400% 581% 598% 412% 491%
</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 0.01%, 0.07% AND 0.04% FROM FEDERAL EXCISE TAXES IN FISCAL YEARS
1996, 1995 AND 1994, RESPECTIVELY. FISCAL 1997 RATIO INCLUDES 0.18% OF
OPERATING EXPENSES ASSOCIATED WITH REAL ESTATE OWNED.
(d) SECURITIES PURCHASED ON A WHEN-ISSUED BASIS FOR WHICH LIQUID ASSETS ARE
SEGREGATED ARE NOT CONSIDERED BORROWINGS. SEE NOTE 2 IN THE NOTES TO
FINANCIAL STATEMENTS.
(e) REPRESENTS NET ASSETS, EXCLUDING BORROWINGS, AT END OF PERIOD DIVIDED BY
BORROWINGS OUTSTANDING AT END OF PERIOD.
(f) COMMENCEMENT OF OPERATIONS WAS JULY 30, 1992.
(g) ANNUALIZED.

- ---------------------------------------------------------------------

1997 Annual Report 19 American Strategic Income Portfolio II
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------

<TABLE>
<CAPTION>
AMERICAN STRATEGIC INCOME PORTFOLIO II May 31, 1997
.......................................................................................

Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

U.S. GOVERNMENT AND AGENCY SECURITIES (24.3%):
U.S. AGENCY MORTGAGE-BACKED SECURITIES (1.7%):
FIXED RATE (1.7%):
6.50%, FNMA, 1/1/11 ............................... $ 4,390,207 $ 4,289,935
------------

U.S. GOVERNMENT SECURITIES (22.6%):
6.13%, U. S. Treasury Note, 7/31/00 ............... 57,250,000(b) 56,866,425
------------

Total U.S. Government and Agency Securities
(cost: $61,060,350) .......................... 61,156,360
------------

PRIVATE MORTGAGE-BACKED SECURITIES (E) (8.3%):
FIXED RATE (7.6%):
8.79%, RFC 1997-NPC1, 8/27/23 ..................... 19,314,801 19,162,214
------------

SUBORDINATED FIXED RATE (0.7%):
6.00%, CMI Trust 1, Series 1991-1, 3/1/22 ......... 1,837,618 1,727,360
------------

Total Private Mortgage-Backed Securities
(cost: $20,992,953) .......................... 20,889,574
------------

WHOLE LOANS AND PARTICIPATION MORTGAGES (C,D,E) (97.9%):
COMMERCIAL LOANS (9.8%):
Bigelow Office Building, 9.00%, 4/1/07 ............ 1,400,000 1,391,136
Canton Commerce Center, 9.25%, 7/1/01 ............. 3,358,759 3,402,853
Centre Point Commerce Park, 9.00%, 6/1/12 ......... 830,000 830,000
Cottonwood Square, 9.30%, 5/1/04 .................. 2,975,000 3,007,485
Jamboree Building, 9.05%, 12/1/06 ................. 1,992,843 1,975,920
New York Warehouse, 10.03%, 12/31/99 .............. 1,300,000 1,300,000
Oak Knoll Village Shopping Center, 8.80%,
12/1/03 ......................................... 1,145,711 1,134,258
PennMont Office Building, 8.88%, 5/1/01 ........... 1,682,326 1,676,169
PMG Center, 9.05%, 9/1/03 ......................... 2,409,640 2,411,318
Provident Bank Building, 8.80%, 11/1/01 ........... 2,786,900 2,767,702
Ridgewood Estates Mobile Home Park, 8.55%,
12/1/00 ......................................... 2,115,115 2,120,056
Wellington Professional Center, 8.80%, 11/1/01 .... 2,782,288 2,749,525
------------
24,766,422
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- ---------------------------------------------------------------------

1997 Annual Report 20 American Strategic Income Portfolio II
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------

AMERICAN STRATEGIC INCOME PORTFOLIO II
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
MULTIFAMILY LOANS (37.9%):
Aldrich, Colfax, Dupont, Girard & Oak Grove, 9.88%,
12/1/22 ......................................... $ 1,698,662 $ 1,758,115
Autumnwood, Southern Woods & Hilton Hollow, 9.10%,
6/1/03 .......................................... 6,389,433 6,505,720
Bent Tree Fountains Apartments & Windsong
Apartments, 8.00%, 6/1/00 ....................... 11,800,000 11,800,000
Casa Carranza Apartments, 8.35%, 12/1/02 .......... 4,031,339 3,985,382
Chardonnay Apartments, 8.70%, 1/1/07 .............. 4,342,359 4,338,016
Chase Hill Apartments, 9.00%, 4/1/01 .............. 3,046,934 3,092,638
Colony Square Apartments, 10.25%, 12/1/01 ......... 1,333,967 1,365,182
Crows Landing Apartments, 9.13%, 8/1/02 ........... 4,103,208 3,914,050
Deering Manor, 9.50%, 12/8/22 ..................... 1,285,495 1,330,487
Gables Apartments, 8.50%, 8/1/00 .................. 5,549,597 5,577,900
Green Acres Apartments, 9.97%, 10/1/01 ............ 1,070,878 809,691
Harbor View Apartments, 9.50%, 1/25/18 ............ 775,611 802,757
Jaccard Apartments, 8.83%, 12/1/03 ................ 2,793,592 2,814,823
Kenyon Place Apartments, 8.13%, 2/1/03 ............ 2,304,720 2,269,458
Kona Kai Apartments, 8.45%, 11/1/05 ............... 1,165,153 1,156,415
Lexington Apartments, 9.13%, 6/1/02 ............... 1,447,283 1,470,584
Newport Apartments, 9.75%, 4/1/02 ................. 1,370,956 1,418,939
Normandale Lake Estates, 8.13%, 2/1/03 ............ 2,451,309 2,400,812
Park Place of Venice Apartments, 10.75%, 4/1/02 ... 2,652,336 2,745,168
Park Terrace Apartments, 8.45%, 11/1/05 ........... 2,617,174 2,597,545
Partridge Court Apartments, 7.96%, 3/1/03 ......... 2,316,349 2,265,621
Pine Village East Apartments & Pine Village North
Apartments, 8.75%, 10/1/02 ...................... 3,065,827 3,091,886
Pingry Arms & Cornell Arms, 8.05%, 1/1/01 ......... 2,465,863 2,434,300
Primrose Apartments, 8.63%, 11/1/07 ............... 1,103,142 1,097,736
Railview Apartments, 9.50%, 12/8/22 ............... 1,491,838 1,544,052
Rhode Island Chateau Apartments, 8.85%, 6/1/02 .... 2,850,000 2,850,000
Rockwell Plaza Apartments, 9.44%, 8/1/01 .......... 4,248,418 3,582,691
Skyline Apartments, 8.80%, 12/1/03 ................ 2,095,164 2,122,820
Somerset Apartments, 10.25%, 1/20/18 .............. 1,076,248 992,193
Sunland Manor Apartments, 9.75%, 11/1/01 .......... 1,279,690 1,324,479
The Meadows, Fairfield Manor & Auburn Apartments,
8.63%, 11/1/07 .................................. 1,749,093 1,749,968
Vintage Apartments, 9.00%, 8/1/05 ................. 2,915,370 2,953,561
Westview Apartments, 7.80%, 3/1/03 ................ 1,089,609 1,052,998
Whispering Hills Apartments, 8.80%, 10/1/02 ....... 2,127,907 2,149,825
Windgate Apartments, 9.00%, 6/1/04 ................ 2,310,000 2,310,000
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- ---------------------------------------------------------------------

1997 Annual Report 21 American Strategic Income Portfolio II
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------

AMERICAN STRATEGIC INCOME PORTFOLIO II
(CONTINUED)

SINGLE FAMILY LOANS (50.2%):
Aegis III, 8.99%, 6/13/11 ......................... 2,362,162 2,291,298
Amerivest Mortgage, 9.28%, 5/1/12 ................. 2,736,006(b) 2,730,056
CTX Mortgage, 9.52%, 11/23/22 ..................... 2,527,199 2,407,423
Energy Park Loans, 12.20%, 12/1/22 ................ 262,616 270,494
Fairbanks III, 9.62%, 1/1/07 ...................... 1,487,626 1,319,531
Fairbanks IV, 9.15%, 7/3/11 ....................... 1,111,324 1,044,110
First Federal of Delaware, 8.59%, 2/1/18 .......... 5,325,849(b) 5,088,534
Greenwich, 9.29%, 6/16/05 ......................... 2,089,602 2,046,565
Heartland Federal Savings & Loan, 11.38%,
11/17/22 ........................................ 213,928 216,890
Kentucky Central Life, 9.39%, 5/1/22 .............. 5,702,011(b) 5,601,533
Kislak, 10.00%, 6/30/20 ........................... 6,379,632(b) 6,321,008
Maryland National Bank, 9.95%, 9/1/18 ............. 1,036,457 1,058,027
McDowell, 9.93%, 12/1/20 .......................... 3,436,637 3,480,712
Merchants Bank, 10.24%, 12/1/20 ................... 1,846,309(b) 1,884,635
Meridian, 9.45%, 10/15/22 ......................... 879,691 892,633
Meridian III, 9.52%, 12/1/20 ...................... 4,398,357(b) 4,396,103
Minneapolis Employees Retirement Fund, 8.44%,
2/10/14 ......................................... 5,332,888 5,130,045
NationsBank, 8.28%, 10/1/07 ....................... 134,427 135,515
Neslund Properties, 9.87%, 2/1/23 ................. 5,739,576 5,901,030
Nomura I, 9.96%, 12/16/23 ......................... 10,414,978(b) 10,356,755
Nomura II, 8.79%, 3/22/15 ......................... 12,489,605(b) 11,231,227
Nomura III, 8.53%, 8/29/17 ........................ 18,937,756 17,227,037
Norwest IV, 8.24%, 4/23/25 ........................ 7,701,204(b) 7,279,246
Norwest II, 7.80%, 11/27/22 ....................... 4,700,293 4,407,370
Norwest VII, 8.03%, 9/24/25 ....................... 8,178,819(b) 7,845,978
Old Hickory Credit Union, 10.04%, 10/15/22 ........ 1,962,270(b) 1,991,652
Paine Webber, 12.32%, 10/15/20 .................... 622,806 603,757
PHH U.S. Mortgage, 8.83%, 1/1/12 .................. 6,894,162 6,940,389
President Homes 92-4, Sales Inventory, 8.38%,
10/15/20 ........................................ 173,411 144,809
President Homes 92-5, Sales Inventory, 9.38%,
10/15/20 ........................................ 104,212 73,578
President Homes 92-6, Sales Inventory, 8.43%,
10/15/20 ........................................ 171,286 154,836
President Homes 92-8, Sales Inventory, 8.63%,
11/24/22 ........................................ 125,725 122,836
President Homes 94-1A, Sales Inventory, 9.38%,
12/28/22 ........................................ 94,658 97,498
Progressive Consumers Federal Credit Union, 11.14%,
10/15/22 ........................................ 608,921(b) 612,022
Salomon, 8.13%, 12/28/16 .......................... 4,567,502 4,347,457
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

- ---------------------------------------------------------------------

1997 Annual Report 22 American Strategic Income Portfolio II
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------

AMERICAN STRATEGIC INCOME PORTFOLIO II
(CONTINUED)

Total Whole Loans and Participation Mortgages
(cost: $245,391,253) ......................... 246,773,444
------------

SHORT-TERM SECURITIES (0.5%):
Repurchase agreement with Goldman Sachs, acquired
on 5/30/97, interest of $579, 5.55%, 6/2/97
(cost: $1,252,000) .............................. 1,252,000(f) 1,252,000
------------

Total Investments in Securities
(cost: $328,696,556) (g) ..................... $330,071,378
------------
------------
</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, 1997, SECURITIES VALUED AT $105,531,415 WERE SEGREGATED OR
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>
$ 53,000,000 5/1/97 5.64% 6/2/97 $ 257,289 (1)
20,000,000 5/1/97 6.50% 6/2/97 111,945 (2)
11,000,000 5/5/97 6.50% 6/2/97 53,625 (2)
- ------------ ---------
$ 84,000,000 $ 422,859
- ------------ ---------
- ------------ ---------
</TABLE>

* INTEREST RATE AS OF MAY 31, 1997. RATES ARE BASED ON THE LONDON INTERBANK
OFFERED RATE (LIBOR) AND RESET MONTHLY.
NAME OF BROKER AND DESCRIPTION OF COLLATERAL
(1) NOMURA;
U. S. TREASURY NOTE, 6.13%, 7/31/00, $53,150,000 PAR
(2) NOMURA;
AMERIVEST MORTGAGE, 9.28%, 5/1/12, $2,679,723 PAR
FIRST FEDERAL OF DELAWARE, 8.59%, 2/1/18, $4,225,660 PAR
KENTUCKY CENTRAL LIFE, 9.39%, 5/1/22, $5,611,041 PAR
KISLAK, 10.00%, 6/30/20, $4,358,269 PAR
MERCHANTS BANK, 10.24%, 12/1/20, $1,761,976 PAR
MERIDIAN III, 9.52%, 12/1/20, $3,539,938 PAR
NOMURA I, 9.96%, 12/16/23, $9,872,783 PAR
NOMURA II, 8.79%, 3/22/15, $4,626,027 PAR
NORWEST IV, 8.24%, 4/23/25, $7,057,542 PAR
NORWEST VII, 8.03%, 9/24/25, $7,343,086 PAR
OLD HICKORY CREDIT UNION, 10.04%, 10/15/22, $1,912,473 PAR
PROGRESSIVE CONSUMERS FEDERAL CREDIT UNION, 11.14%, 10/15/22,
$608,921 PAR
SEARS MORTGAGE, 8.65%, 11/18/22, $594,795 PAR

- ---------------------------------------------------------------------

1997 Annual Report 23 American Strategic Income Portfolio II
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
(C) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT
ON MAY 31, 1997. 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, 1997.
(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:
BIGELOW OFFICE BUILDING - LAS VEGAS, NV
CANTON COMMERCE CENTER - CANTON, MA
CENTRE POINT COMMERCE PARK - ORLANDO, FL
COTTONWOOD SQUARE - COLORADO SPRINGS, CO
JAMBOREE BUILDING - COLORADO SPRINGS, CO
NEW YORK WAREHOUSE - NEW YORK CITY, NY
OAK KNOLL VILLAGE SHOPPING CENTER - AUSTIN, TX
PENNMONT OFFICE BUILDING - ALBUQUERQUE, NM
PMG CENTER - FORT LAUDERDALE, FL
PROVIDENT BANK BUILDING - DESOTO, TX
RIDGEWOOD ESTATES MOBILE HOME PARK - LAYTON, UT
WELLINGTON PROFESSIONAL CENTER - WELLINGTON, FL
MULTIFAMILY LOANS:
ALDRICH, COLFAX, DUPONT, GIRARD & OAK GROVE - MINNEAPOLIS, MN
AUTUMNWOOD, SOUTHERN WOODS & HINTON HOLLOW - KNOXVILLE, TN
BENT TREE FOUNTAINS APARTMENTS & WINDSONG APARTMENTS - ADDISON, TX AND
DALLAS, TX
CASA CARRANZA APARTMENTS - MESA, AZ
CHARDONNAY APARTMENTS - TULSA, OK
CHASE HILL APARTMENTS - SAN ANTONIO, TX
COLONY SQUARE APARTMENTS - FORT WORTH, TX
CROWS LANDING APARTMENTS - FRESNO, CA
DEERING MANOR - NASHWAUK, MN
GABLES APARTMENTS - OKLAHOMA CITY, OK
GREEN ACRES APARTMENTS - YOUNGSTOWN, OH
HARBOR VIEW APARTMENTS - GRAND MARAIS, MN
JACCARD APARTMENTS - UNIVERSITY CITY, MO
KENYON PLACE APARTMENTS - ENGLEWOOD, CO
KONA KAI APARTMENTS - PUEBLO, CO
LEXINGTON APARTMENTS - EAST POINT, GA
NEWPORT APARTMENTS - WHITE SETTLEMENT, TX
NORMANDALE LAKE ESTATES - BLOOMINGTON, MN
PARK PLACE OF VENICE APARTMENTS - VENICE, FL
PARK TERRACE APARTMENTS - PUEBLO, CO
PARTRIDGE COURT APARTMENTS - BROOMFIELD, CO
PINE VILLAGE EAST APARTMENTS & PINE VILLAGE NORTH APARTMENTS - ATLANTA,
GA AND SMYRNA, GA
PINGRY ARMS & CORNELL ARMS - PLAINFIELD, NJ
PRIMROSE APARTMENTS - GRAND FALLS, ND
RAILVIEW APARTMENTS - PROCTOR, MN
RHODE ISLAND CHATEAU APARTMENTS - ST. LOUIS PARK, MN
ROCKWELL PLAZA APARTMENTS - OKLAHOMA CITY, OK
SKYLINE APARTMENTS - KANSAS CITY, KS
SOMERSET APARTMENTS - WILMAR, MN
SUNLAND MANOR APARTMENTS - MESA, AZ
THE MEADOWS, FAIRFIELD MANOR & AUBURN APARTMENTS - WAHPETON, ND
VINTAGE APARTMENTS - KERMAN, CA
WESTVIEW APARTMENTS - AUSTIN, TX
WHISPERING HILLS APARTMENTS - NASHVILLE, TN
WINDGATE APARTMENTS - LOUISVILLE, KY
WOODOAKS APARTMENTS - YUKON, OK
</TABLE>

- ---------------------------------------------------------------------

1997 Annual Report 24 American Strategic Income Portfolio II
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
SINGLE FAMILY LOANS:
AEGIS III - 78 LOANS, TEXAS
AMERIVEST MORTGAGE - 42 LOANS, MASSACHUSETTS
CTX MORTGAGE - 24 LOANS, UNITED STATES
ENERGY PARK LOANS - 4 LOANS, ST. PAUL, MINNESOTA
FAIRBANKS III - 25 LOANS, THE WESTERN UNITED STATES
FAIRBANKS IV - 19 LOANS, UNITED STATES
FIRST FEDERAL OF DELAWARE - 112 LOANS, UNITED STATES
GREENWICH - 23 LOANS, COLORADO
HEARTLAND FEDERAL SAVINGS & LOAN - 3 LOANS, CALIFORNIA
KENTUCKY CENTRAL LIFE - 120 LOANS, KENTUCKY
KISLAK - 121 LOANS, THE CENTRAL AND SOUTHERN UNITED STATES
MARYLAND NATIONAL BANK - 21 LOANS, THE EASTERN UNITED STATES
MCDOWELL - 69 LOANS, GEORGIA
MERCHANTS BANK - 64 LOANS, VERMONT
MERIDIAN - 11 LOANS, CALIFORNIA AND FLORIDA
MERIDIAN III - 77 LOANS, CALIFORNIA
MINNEAPOLIS EMPLOYEES RETIREMENT FUND -142 LOANS, MINNESOTA
NATIONSBANK - 13 LOANS, GEORGIA
NESLUND PROPERTIES - 154 LOANS, MINNESOTA
NOMURA I - 233 LOANS,CALIFORNIA AND TEXAS
NOMURA II - 213 LOANS, UNITED STATES
NOMURA III - 294 LOANS, THE MIDWESTERN UNITED STATES
NORWEST IV - 53 LOANS, THE MIDWESTERN UNITED STATES
NORWEST II - 39 LOANS, THE MIDWESTERN UNITED STATES
NORWEST VII - 58 LOANS, THE MIDWESTERN UNITED STATES
OLD HICKORY CREDIT UNION - 63 LOANS, TENNESSEE
PAINE WEBBER - 17 LOANS, NEW JERSEY
PHH U.S. MORTGAGE - 53 LOANS, UNITED STATES
PRESIDENT HOMES, SALES INVENTORY - 8 LOANS, THE MIDWESTERN UNITED
STATES
PROGRESSIVE CONSUMERS FEDERAL CREDIT UNION - 6 LOANS, MASSACHUSETTS
SALOMON - 55 LOANS, NEW JERSEY
SEARS MORTGAGE - 10 LOANS, UNITED STATES
(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, 1997, THE TOTAL
MARKET VALUE OF THESE INVESTMENTS WAS $267,663,018 OR 106.2% OF TOTAL NET
ASSETS.
(F) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(G) ON MAY 31, 1997, THE COST OF INVESTMENTS IN SECURITIES, INCLUDING REAL
ESTATE OWNED, FOR FEDERAL INCOME TAX PURPOSES WAS $330,620,919. THE
AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN
SECURITIES BASED ON THIS COST WERE AS FOLLOWS:
</TABLE>

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 5,147,616
GROSS UNREALIZED DEPRECIATION ...... (4,219,510)
------------
NET UNREALIZED APPRECIATION ...... $ 928,106
------------
------------
</TABLE>

- ---------------------------------------------------------------------

1997 Annual Report 25 American Strategic Income Portfolio II
<PAGE>
Independent Auditors' Report
- ----------------------------------------

THE BOARD OF DIRECTORS AND SHAREHOLDERS
AMERICAN STRATEGIC INCOME PORTFOLIO INC. II:

We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of American Strategic Income
Portfolio Inc. II as of May 31, 1997, and the related statements of operations
and cash flows for the year then ended, the statements of changes in net assets
for each of the years in the two-year period ended May 31, 1997, and the
financial highlights presented in note 8 to the financial statements. These
financial statements and the financial highlights are the responsibility of the
fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and 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. Investment securities held in custody are confirmed to us by the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
American Strategic Income Portfolio Inc. II as of May 31, 1997, and the results
of its operations and cash flows, the changes in its net assets and the
financial highlights for the periods stated in the first paragraph above, in
conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 11, 1997

- ---------------------------------------------------------------------

1997 Annual Report 26 American Strategic Income Portfolio II
<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 adviser 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>
June 26, 1996 ............................... $ 0.0950
July 24, 1996 ............................... 0.0825
August 28, 1996 ............................. 0.0825
September 25, 1996 .......................... 0.0825
October 23, 1996 ............................ 0.0825
November 27, 1996 ........................... 0.0825
December 18, 1996 ........................... 0.0825
January 10, 1997 ............................ 0.0825
February 26, 1997 ........................... 0.0825
March 26, 1997 .............................. 0.0825
April 23, 1997 .............................. 0.0825
May 28, 1997 ................................ 0.0825
--------
Total ................................... $ 1.0025
--------
--------
</TABLE>

- ---------------------------------------------------------------------

1997 Annual Report 27 American Strategic Income Portfolio II
<PAGE>
Shareholder Update
- ----------------------------------------

CLARIFICATION OF CREDIT QUALITY CRITERIA
The fund's board of directors has approved a clarification of the
credit quality criteria that must be met by individual whole
mortgage loans purchased for the fund.

As you know, rather than focusing on traditional mortgage-backed
securities, we make direct investments in single-family,
multifamily (apartment) and/or commercial mortgage loans. We do
this so we can pass along to investors the higher rates, or
"spread", we may earn on these mortgage loans compared to
traditional mortgage-backed securities. Unlike most
mortgage-backed securities, however, these loans are not backed
by any government guarantee or private credit enhancement and, as
a result, are subject to greater credit risk. Credit risk is the
risk that the borrower will default, or fail to make payments on
the loan. We attempt to manage credit risk in the fund through
the use of an extensive risk analysis process. Among other
things, we review each loan's legal documents and the borrower's
mortgage payment history; assess the local market and property
value; and obtain a physical assessment of the property. In
addition, for multifamily and commercial properties we perform a
detailed inspection of each property; study competing properties
in the area; interview property managers; and obtain engineering
and environmental reports from experts. We also perform a
significant financial analysis of each property.

The fund's prospectus requires that each security in which the
fund invests (other than certain corporate debt securities and
subordinated derivative mortgage-backed securities) be rated A or
higher by Standard & Poor's Ratings Group (S&P) or, if unrated,
be determined by the fund's investment adviser to be of
comparable quality. S&P has quantitative criteria for rating
mortgage loans pooled to form A-rated mortgage-backed securities.
Loans which we believe would be appropriate investments for the
fund, and of suitable credit quality using our risk analysis
process outlined above, may not always meet these quantitative
criteria. Therefore, in order to avoid confusion as to whether
S&P's

- ---------------------------------------------------------------------

1997 Annual Report 28 American Strategic Income Portfolio II
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
quantitative rating criteria are applied to individual whole
loans in which the fund invests, we have requested, and your
fund's board of directors has approved, clarification that the
rating requirements do not apply to individual whole loans in the
fund. (Other mortgage-related securities in which the fund
invests, with the exceptions noted above, will continue to be
rated A or higher by S&P or determined to be of equivalent
quality.)

This clarification does not represent a change in our investment
strategy. When selecting individual mortgage loan investments for
the fund, we will continue to utilize the risk analysis process
outlined above in an attempt to manage the credit risk inherent
in these investments. In addition, we intend to maintain the
fund's current S&P rating.

Since inception, the fund has been rated AF by S&P's Ratings
Group, which means the fund's investments have an overall credit
quality of A. S&P does not evaluate the market risk (the risk of
price volatility and a decline in value) of the fund when
assigning a credit rating. S&P has also given the fund a market
risk rating, which we cannot publish due to NASD regulations.
This rating, and a definition of AF, are available by calling S&P
at
1 800 424-FUND.

- ---------------------------------------------------------------------

1997 Annual Report 29 American Strategic Income Portfolio II
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------

ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
23, 1996. 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
WITHHOLDING
SHARES AUTHORITY
VOTED "FOR" TO VOTE
----------- --------
<S> <C> <C>
David T. Bennett ............................ 17,515,114 810,247
Jaye F. Dyer ................................ 17,515,685 809,676
William H. Ellis ............................ 17,502,475 822,886
Karol D. Emmerich ........................... 17,514,036 811,325
Luella G. Goldberg .......................... 17,495,405 829,956
George Latimer .............................. 17,513,676 811,685
</TABLE>

(2) The fund's shareholders ratified the selection by a majority
of the independent members of the fund's board of directors
of KPMG Peat Marwick LLP as the independent public
accountants for the fund for the fiscal year ended May 31,
1997. The following votes were cast regarding this matter:

<TABLE>
<CAPTION>
SHARES
SHARES VOTED BROKER
VOTED "FOR" "AGAINST" ABSTENTIONS NON-VOTES
----------- -------- -------- ----------
<S> <C> <C> <C>
17,595,395 545,948 184,018 --
</TABLE>

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
Investors Fiduciary Trust Company (IFTC), the plan agent.

- ---------------------------------------------------------------------

1997 Annual Report 30 American Strategic Income Portfolio II
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------

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 IFTC 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 IFTC 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, IFTC 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, IFTC 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

- ---------------------------------------------------------------------

1997 Annual Report 31 American Strategic Income Portfolio II
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
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.

There is no direct charge for reinvestment of dividends and
capital gains, since IFTC 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.

IFTC 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 IFTC in
noncertified 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 IFTC. If your shares are registered in your brokerage
firm's name, you may terminate your participation via verbal or
written

- ---------------------------------------------------------------------

1997 Annual Report 32 American Strategic Income Portfolio II
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
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 IFTC with at least 90 days written notice to
participants in the plan.

Any question about the plan should be directed to your investment
professional or to Investors Fiduciary Trust Company,
P.O. Box 419432, Kansas City, Missouri 64141, 1-800-543-1627.

- ---------------------------------------------------------------------

1997 Annual Report 33 American Strategic Income Portfolio II
<PAGE>

Glossary of Terms^

BENCHMARK

A benchmark is an established basis of comparison for an investment's
performance. A benchmark may be an unmanaged market index or a group of
similar investments.

COMMERCIAL LOANS

Mortgage loan secured by commercial developments such as shopping centers,
office buildings and warehouses.

DELINQUENT

When there is failure to make payment on a loan when due, the loan is said to
be delinquent.

DISCOUNT

Closed-end fund shares may trade in the market at prices that are equal to,
above or below their net asset value (NAV). When investors purchase or sell
shares at a price that is below current NAV, the shares are said to be
trading at a discount.

REVERSE REPURCHASE AGREEMENTS

A reverse repurchase agreement is an agreement between a seller of securities
(the fund) and a buyer, whereby the fund receives cash and pays interest and
agrees to buy back the same securities at an agreed on price at a stated
date. Reverse repurchase agreements are considered a form of borrowing.

RISK

All funds that invest in mortgage-related securities are subject to certain
risks. Following is a brief summary of some of the primary risks associated
with mortgage-related assets. It does not include all risks related to
mortgage securities.

Among these risks is PREPAYMENT RISK in which principal payments are prepaid
at unexpected rates. Prepayment rates are influenced by changes in interest
rates and a variety of other factors. If the fund buys a mortgage loan at a
premium, a faster-than-anticipated prepayment rate will reduce the fund's
yield and a slower-than-anticipated prepayment rate will increase its yield.
If a mortgage loan is purchased at a discount, the opposite will occur. There
is also the chance that proceeds from prepaid loans will have to be
reinvested in lower-yielding investments (REINVESTMENT RISK).

Like all fixed income investments, the prices of securities in the fund are
sensitive to changing interest rates - otherwise known as INTEREST RATE RISK.
When rates increase, the value of these securities decreases. Conversely,
when rates decline,

1997 Annual Report 34 American Strategic Income Portfolio II

<PAGE>

Glossary of Terms (continued)

the value of these securities rises. However, mortgage-related assets may
benefit less from declining interest rates than other fixed income securities
because of prepayment risk.

This particular fund's mortgage loans are subject to real estate risk and
credit risk. Since the fund's mortgage loans generally aren't backed by any
government guarantee or private credit enhancement, they face more
significant CREDIT RISK than other mortgage-related securities. Credit risk
is the risk of loss arising from default if the borrower fails to make
payments on the loan. This risk may be greater during periods of declining or
stagnant real estate values and could also occur following natural disasters
such as flood or earthquake, for which a property may be uninsured. Mortgage
loans are also subject to REAL ESTATE RISKS including property risk (the risk
that the physical condition and value of the property will decline) and the
legal risk of holding any mortgage loan.

SPREAD

The difference in yield on an investment and the corresponding term Treasury
security.

YIELD CURVE

A graph that shows the relationship between the interest rates paid on bonds
and their maturities, ranging from the shortest maturities to the longest
available (assuming the bonds are all of the same quality). The resulting
curve indicates whether short-term interest rates are higher or lower than
long-term rates.

1997 Annual Report 35 American Strategic Income Portfolio II

<PAGE>

THIS PAGE WAS INTENTIONALLY LEFT BLANK.

1997 Annual Report 36 American Strategic Income Portfolio II
<PAGE>

DIRECTORS
- -------------------------------------------------------------------------------
DAVID T. BENNETT, Chairman, Highland Homes, Inc., USL Products, Inc., Kiefer
Built, Inc., of Counsel, Gray, Plant, Mooty, Mooty & Bennett, P.A.

JAYE F. DYER, President, Dyer Management Company

WILLIAM H. ELLIS, President, Piper Jaffray Companies Inc., Piper Capital
Management Incorporated

KAROL D. EMMERICH, President, The Paraclete Group

LUELLA G. GOLDBERG, Director, TCF Financial, ReliaStar Financial Corp.,
Hormel Foods Corp.

DAVID A. HUGHEY, Retired Executive Vice President and Chief Administrative
Officer of Dean Witter InterCapital Inc. and Dean Witter Trust Co.

GEORGE LATIMER, Chief Executive Officer, National Equity Funds

OFFICERS
- -------------------------------------------------------------------------------
WILLIAM H. ELLIS, Chairman of the Board

PAUL A. DOW, President

JOHN G. WENKER, Senior Vice President

RUSS J. KAPPENMAN, Vice President and Assistant Secretary

AMY AYD, Vice President

JULENE R. MELQUIST, Vice President

WILLIAM T. NIMMO, Vice President

ROBERT H. NELSON, Vice President and Treasurer

DANIEL W. SCHROER, Vice President and Assistant Secretary

SUSAN S. MILEY, Secretary

INVESTMENT ADVISER
- -------------------------------------------------------------------------------
PIPER CAPITAL MANAGEMENT INCORPORATED
222 South Ninth Street, Minneapolis, MN 55402-3804

ACCOUNTING AND TRANSFER AGENT
- -------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street, Kansas City, MO 64105-1716

CUSTODIAN
- -------------------------------------------------------------------------------
FIRST TRUST NATIONAL ASSOCIATION
180 East Fifth Street, St. Paul, MN 55101

INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
KPMG PEAT MARWICK LLP
4200 Norwest Center, Minneapolis, MN 55402

LEGAL COUNSEL
- -------------------------------------------------------------------------------
DORSEY & WHITNEY LLP
220 South Sixth Street, Minneapolis, MN 55402

FOR MORE INFORMATION
By Phone [LOGO]
1 800 866-7778

FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer your
questions.

TO LISTEN TO MONTHLY FUND UPDATES
press 3, press 2, then press:

31 American Strategic
Income Portfolio II

TO ORDER LITERATURE
press 5, ask a service representative to mail you additional literature,
including a Quarterly Update. You can also request to be put on a mailing
list to receive this information automatically each quarter.

BY MAIL [LOGO]
Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804

In an effort to reduce costs to our shareholders, we have implemented a
process to reduce duplicate mailings of the fund's shareholder reports. This
householding process should allow us to mail one report to each address where
one or more registered shareholders with the same last name reside. If you
would like to have additional reports mailed to your address, please call our
Mutual Fund Services area at 1 800 866-7778, or mail a request to us.

On-Line [LOGO]
http://www.piperjaffray.com/

<PAGE>

PIPER CAPITAL Bulk Rate
MANAGEMENT U.S. Postage
PAID
Permit No. 3008
PIPER CAPITAL MANAGEMENT INCORPORATED Mpls., MN
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804

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THIS DOCUMENT IS PRINTED ON PAPER MADE FROM 100% TOTAL RECOVERED FIBER,
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#11520 7/1997 200-97

STAPLES