<PAGE>
1999 SEMIANNUAL REPORT
American Strategic
Income Portfolio II
BSP
[LOGO]FIRST AMERICAN-Registered Trademark-
Asset Management
<PAGE>
[LOGO]FIRST AMERICAN-Registered Trademark-
Asset Management
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<TABLE>
<CAPTION>
Contents
<S><C>
1 FUND OVERVIEW
4 FINANCIAL STATEMENTS AND NOTES
14 INVESTMENTS IN SECURITIES
18 SHAREHOLDER UPDATE
</TABLE>
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.
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
<TABLE>
<CAPTION>
One Year Five Year Since Inception
7/30/92
<S> <C> <C> <C>
American Strategic 3.44% 9.6% 7.37%
Income Portfolio II
Lehman Brothers Mutual Fund 0.22% 7.92% 6.47%
Government/Mortgage Index
</TABLE>
The average annualized total returns 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, five-year, and since-inception periods ended November 30, 1999, were
4.61%, 10.14%, and 5.89%, respectively. These returns assume reinvestment of all
distributions and reflect sales charges on distributions as described in the
fund's dividend reinvestment plan, but not on initial purchases.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more
or less than their original cost. Closed-end funds, such as this fund, often
trade at discounts to net asset value.
Therefore, you may be unable to realize the full net asset value of your shares
when you sell.
The fund uses the Lehman Brothers Mutual Fund Government/
Mortgage Index as a benchmark. Although we believe this is the most appropriate
benchmark available, it is not a perfect match. The benchmark index is comprised
of U.S. government securities while American Strategic Income Portfolio II 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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<PAGE>
FUND
OVERVIEW
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FUND MANAGEMENT
JOHN WENKER
is primarily responsible for the management of American Strategic Income
Portfolio II. He has 14 years of financial experience.
DAVID STEELE
assists with the management of American Strategic Income Portfolio II. He has 21
years of financial experience.
RUSS KAPPENMAN
assists with the management of American Strategic Income Portfolio II. He has 14
years of financial experience.
JANUARY 15, 2000
AMERICAN STRATEGIC INCOME PORTFOLIO II HAD A TOTAL RETURN OF 1.22% BASED ON
ITS NET ASSET VALUE FOR THE SIX MONTHS ENDING NOVEMBER 30, 1999, COMPARED TO
0.80% FOR ITS BENCHMARK, THE LEHMAN BROTHERS MUTUAL FUND GOVERNMENT/MORTGAGE
INDEX.* During the period, the fund benefited from a lack of credit losses
and a low level of prepayments. The total return based on the fund's market
price was 0.70% over the same time frame.* At the end of the reporting
period, the fund's market price of $11.50 per share continued to trade at a
discount to its net asset value of $12.55 per share.
DURING THE PERIOD, THE FUND PAID OUT A HIGH LEVEL OF CURRENT INCOME AND
MAINTAINED A RELATIVELY STABLE NET ASSET VALUE. Dividends for the six months
totaled $0.523 per share, for an annualized distribution rate of 9.10% 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 8.53% based on the
November 30 market price. The net asset value of the fund did not experience
much volatility during the period, beginning at $12.92 and ending at $12.55 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 July, the fund was able to increase its dividend by $0.25 per share to
$0.0875 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 period from $0.1299 per share to $0.1133 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
<TABLE>
<S> <C>
Other Assets 1%
Short-term Securities 8%
U.S. Agency Mortgage-backed Securities 6%
U.S. Treasury Securities 7%
Private Fixed-rate Mortgage-backed Securities 3%
Commercial Loans 19%
Multifamily Loans 26%
Single-family Loans 30%
</TABLE>
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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.
<TABLE>
<S> <C>
Current 88.7%
- ----------------------------
30 Days 6.2%
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60 Days 1.3%
- ----------------------------
90 Days 0.7%
- ----------------------------
120+ Days 3.1%
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</TABLE>
** AS OF NOVEMBER 30, 1999, THERE WERE NO MULTIFAMILY OR COMMERCIAL LOANS
DELINQUENT.
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1 1999 SEMIANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO II
<PAGE>
FUND
OVERVIEW CONTINUED
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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
$12.60 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 18%
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 8% of total assets at
the period end. Single-family, multifamily, and commercial loans continued to
represent the majority of the portfolio at 75% 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]
<TABLE>
<S> <C>
Alabama less than 0.50%
Alaska less than 0.50%
Arizona 3%
Arkansas less than 0.50%
California 12%
Colorado 6%
Connecticut less than 0.50%
Delaware less than 0.50%
Florida 8%
Georgia 1%
Hawaii less than 0.50%
Idaho less than 0.50%
Illinois 1%
Indiana 2%
Iowa less than 0.50%
Kansas less than 0.50%
Kentucky 1%
Louisiana less than 0.50%
Maine less than 0.50%
Maryland 1%
Massachusetts 4%
Michigan less than 0.50%
Minnesota 14%
Mississippi less than 0.50%
Missouri 2%
Montana 1%
Nebraska less than 0.50%
Nevada 3%
New Hampshire less than 0.50%
New Jersey 2%
New Mexico 1%
New York 2%
North Carolina less than 0.50%
North Dakota 2%
Ohio 1%
Oklahoma 5%
Oregon 1%
Pennsylvania 1%
Rhode Island less than 0.50%
South Carolina less than 0.50%
South Dakota
Tennessee 4%
Texas 18%
Utah 1%
Vermont less than 0.50%
Virginia 1%
Washington 2%
West Virginia
Wisconsin less than 0.50%
Wyoming
</TABLE>
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2 1999 SEMIANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO II
<PAGE>
FUND
OVERVIEW CONTINUED
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AS WE STATED EARLIER, THE FUND HAD NO CREDIT LOSSES DURING THE SIX-MONTH PERIOD.
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 $0.21 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 $0.22 per share since inception and $0.00 per
share over the six-month period. Gains from discounted loans paying off at par
were $0.37 per share since inception and $0.02 per share over the six-month
period.
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 II. 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 SEMIANNUAL REPORT AMERICAN STRATEGIC INCOME PORTFOLIO II
<PAGE>
FINANCIAL STATEMENTS (Unaudited)
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STATEMENT OF ASSETS AND LIABILITIES November 30, 1999
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2) ....... $301,401,591
Real estate owned (identified cost: $552,868) (note 2) ..... 475,028
Accrued interest receivable ............................... 2,263,474
Other assets .............................................. 31,470
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Total assets ............................................ 304,171,563
------------
LIABILITIES:
Reverse repurchase agreements payable (note 2) ............ 80,425,000
Accrued investment management fee ......................... 108,995
Bank overdraft ............................................ 715,176
Accrued administrative fee ................................ 36,697
Accrued interest .......................................... 315,959
Other accrued expenses .................................... 22,002
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Total liabilities ....................................... 81,623,829
------------
Net assets applicable to outstanding capital stock ...... $222,547,734
============
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital .............. $253,408,338
Undistributed net investment income ....................... 2,009,702
Accumulated net realized loss on investments .............. (30,548,740)
Unrealized depreciation of investments .................... (2,321,566)
------------
Total - representing net assets applicable to capital
stock ................................................. $222,547,734
============
* Investments in securities at identified cost ............ $303,645,317
============
NET ASSET VALUE AND MARKET PRICE:
Net assets ................................................ $222,547,734
Shares outstanding (authorized 1 billion shares of $0.01 par
value) .................................................. 17,730,320
Net asset value ........................................... $ 12.55
Market price .............................................. $ 11.50
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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4 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF OPERATIONS For the Six Months Ended November
30, 1999
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $2,729,968) ........... $ 10,314,820
Rental income from real estate owned (note 2) .............. 290
------------
Total investment income .................................. 10,315,110
------------
EXPENSES (NOTE 3):
Investment management fee ................................. 686,583
Administrative fee ........................................ 224,976
Custodian and accounting fees ............................. 70,292
Transfer agent fees ....................................... 11,280
Reports to shareholders ................................... 36,148
Mortgage servicing fees ................................... 216,410
Directors' fees ........................................... 1,504
Audit and legal fees ...................................... 41,630
Other expenses ............................................ 63,524
------------
Total expenses .......................................... 1,352,347
Less expenses paid indirectly ......................... (11,575)
------------
Total net expenses ...................................... 1,340,772
------------
Net investment income ................................... 8,974,338
------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS (NOTE 4):
Net realized gain on investments in securities ............ 4,456
Net realized loss on real estate owned .................... (53,758)
------------
Net realized loss on investments ........................ (49,302)
Net change in unrealized appreciation or depreciation of
investments ............................................. (6,237,123)
------------
Net loss on investments ................................. (6,286,425)
------------
Net increase in net assets resulting from
operations .......................................... $ 2,687,913
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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5 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF CASH FLOWS For the Six Months Ended November
30, 1999
................................................................................
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and rental income ................................. $ 10,315,110
Net expenses ............................................... (1,340,772)
------------
Net investment income .................................... 8,974,338
------------
Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest receivable .................... 524,009
Net amortization of bond discount and premium ............ 193,042
Change in accrued fees and expenses ...................... (144,789)
Change in other assets ................................... 13,487
------------
Total adjustments ...................................... 585,749
------------
Net cash provided by operating activities .............. 9,560,087
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ......................... 50,851,308
Purchases of investments ................................... (4,225,000)
Net purchases of short-term securities ..................... (23,319,842)
------------
Net cash provided by investing activities .............. 23,306,466
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments for reverse repurchase agreements ............. (23,500,000)
Retirement of fund shares .................................. (707,912)
Distributions paid to shareholders ......................... (9,275,133)
------------
Net cash used by financing activities .................. (33,483,045)
------------
Net decrease in cash ....................................... (616,492)
Cash at beginning of period ................................ (98,684)
------------
Cash at end of period .................................. $ (715,176)
============
Supplemental disclosure of cash flow information:
Cash paid for interest on reverse
repurchase agreements .................................. $ 2,807,503
============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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6 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
Financial Statements (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
11/30/99 YEAR ENDED
(UNAUDITED) 5/31/99
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<S> <C> <C>
OPERATIONS:
Net investment income ..................................... $ 8,974,338 $ 18,910,977
Net realized gain (loss) on investments ................... (49,302) 766,651
Net change in unrealized appreciation or depreciation of
investments ............................................. (6,237,123) (4,169,354)
------------ ------------
Net increase in net assets resulting from operations .... 2,687,913 15,508,274
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................ (9,275,133) (18,286,254)
------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE 6):
Decrease in net assets from capital share transactions .... (707,912) (1,862,964)
------------ ------------
Total decrease in net assets ............................ (7,295,132) (4,640,944)
Net assets at beginning of period ......................... 229,842,866 234,483,810
------------ ------------
Net assets at end of period ............................... $222,547,734 $229,842,866
============ ============
Undistributed net investment income ....................... $ 2,009,702 $ 2,310,497
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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7 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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(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 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 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 readily available,
or if such quotations or valuations are believed to be
inaccurate, unreliable or not reflective of market value,
portfolio securities are valued according to procedures
adopted by the fund's board of directors in good faith at
"fair value", that is, a price that the fund might
reasonably expect to receive for the security or other
asset upon its current sale.
The current market value of certain fixed income
securities is provided by an independent pricing service.
Fixed income securities for which prices are not available
from an independent pricing service but where an active
market exists are valued using market quotations obtained
from one or more dealers that make markets in the
securities or from a widely-used quotation system.
Short-term securities with maturities of 60 days or less
are valued at amortized cost, which approximates market
value.
The fund's investments in whole loans (single family,
multifamily and commercial), participation mortgages and
mortgage servicing rights are generally not traded in any
organized market and therefore, market quotations are not
readily available. These investments are valued at "fair
value" according to procedures adopted by the fund's board
of directors. Pursuant to these procedures, whole loan
investments are initially valued at cost and their values
are subsequently monitored and adjusted pursuant to a
First American Asset Management pricing model designed to
incorporate, among other things, the present value of the
projected stream of cash flows on such investments. The
pricing model takes into account a number of relevant
factors including the projected rate of prepayments, the
delinquency profile, the historical payment record, the
expected yield at purchase, changes in prevailing interest
rates, and changes in the real or perceived liquidity of
whole loans, participation mortgages or mortgage servicing
rights, as the case may be. The results of the pricing
model may be further subject to price ceilings due to the
illiquid nature of the loans. Changes in prevailing
interest rates, real or perceived liquidity, yield
spreads, and creditworthiness are factored into the
pricing model each week. Certain mortgage loan information
is received once a month. This information includes, but
is not limited to, the projected rate of prepayments,
projected rate and severity of defaults, the delinquency
profile and the historical payment record. Valuations of
whole loans, mortgage participations and mortgage
servicing rights are determined no less frequently than
weekly.
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8 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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Securities transactions are accounted for on the date
securities are purchased or sold. Realized gains and
losses are calculated on the identified-cost basis.
Interest income, including amortization of bond discount
and premium, is recorded on an accrual basis.
WHOLE LOANS AND PARTICIPATION MORTGAGES
Whole loans and participation mortgages may bear a greater
risk of loss arising from a default on the part of the
borrower of the underlying loans than do traditional
mortgage-backed securities. This is because whole loans
and participation mortgages, unlike most mortgage-backed
securities, generally are not backed by any government
guarantee or private credit enhancement. Such risk may be
greater during a period of declining or stagnant real
estate values. In addition, the individual loans
underlying whole loans and participation mortgages may be
larger than the loans underlying mortgage-backed
securities. With respect to participation mortgages, the
fund generally will not be able to unilaterally enforce
its rights in the event of a default, but rather will be
dependent on the cooperation of the other participation
holders.
At November 30, 1999, loans representing 2.4% 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 5.1% 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 losses of $53,758
or $0.003 per share on real estate sold during the six
months 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 10 single family homes with an aggregate
value of $475,028, or 0.21% 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
volatility of the fund's net asset value and involve the
risk that 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 fund's
overall restriction on borrowing under which it must
maintain asset coverage of at least 300%. For the six
months ended November 30, 1999, the average borrowings
outstanding were $95,675,000 and the average coupon was
5.69%.
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
- --------------------------------------------------------------------------------
9 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
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.
FEDERAL TAXES
The fund intends to comply with the requirements of the
Internal Revenue Code applicable to regulated investment
companies and not be subject to federal income tax.
Therefore, no income tax provision is required. The fund
also intends to distribute its taxable net investment
income and realized gains, if any, to avoid the payment of
any federal excise taxes.
The character of distributions made during the year from
net investment income or net realized gains may differ
from its ultimate characterization for federal income tax
purposes. In addition, due to the timing of dividend
distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or
realized gains or losses were recorded by the fund.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly
and realized capital gains, if any, will be distributed at
least annually. These distributions are recorded as of the
close of business on the ex-dividend date. Such
distributions are payable in cash or, pursuant to the
fund's dividend reinvestment plan, reinvested in
additional shares of the fund's capital stock. Under the
plan, fund shares will be purchased in the open market
unless the market price plus commissions exceeds the net
asset value by 5% or more. If, at the close of business on
the dividend payment date, the shares purchased in the
open market are insufficient to satisfy the dividend
reinvestment requirement, the fund will issue new shares
at a discount of up to 5% from the current market price.
REPURCHASE AGREEMENTS AND OTHER SHORT-TERM SECURITIES
For repurchase agreements entered into with certain
broker-dealers, the fund, along with other affiliated
registered investment companies, may transfer uninvested
cash balances into a joint trading account, the daily
aggregate of which is invested in repurchase agreements
secured by U.S. government or agency obligations.
Securities pledged as collateral for all individual and
joint repurchase agreements are held by the fund's
custodian bank until maturity of the repurchase agreement.
Provisions for all agreements ensure that the daily market
value of the collateral is in excess of the repurchase
amount, including accrued interest, to protect the fund in
the event of a default. In addition to repurchase
agreements, the fund may invest in money market funds
advised by the fund's advisor.
- --------------------------------------------------------------------------------
10 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts in the financial statements. Actual
results could differ from these estimates.
(3) EXPENSES
............................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
On August 10, 1998, the fund entered into an investment
advisory agreement with U.S. Bank National Association
(U.S. Bank), acting through its division, First American
Asset Management. Prior thereto, Piper Capital Management
Incorported (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 six
months ended November 30, 1999, the annualized effective
investment management fee incurred by the fund was 0.61%.
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 owned; fees to outside parties retained to assist
in conducting due diligence; taxes and other miscellaneous
expenses.
During the six months ended November 30, 1999, the fund
paid $28,126 for custody services to U.S. Bank.
- --------------------------------------------------------------------------------
11 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
EXPENSES PAID INDIRECTLY
Expenses paid indirectly represent reimbursements of
custodian fees received from mortgage servicers of
$11,575.
(4) INVESTMENT
SECURITY
TRANSACTIONS
............................
Cost of purchases and proceeds from sales of securities,
other than temporary investments in short-term securities,
for the six months ended November 30, 1999, aggregated
$4,031,958 and $50,851,308, respectively. Included in
proceeds from sales are $751,578 from sales of real estate
owned.
(5) CAPITAL LOSS
CARRYOVER
............................
For federal income tax purposes, the fund had capital loss
carryovers at May 31, 1999, which, if not offset by
subsequent capital gains, will expire on the fund's fiscal
year-ends 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
------------ ----------
<S> <C> <C>
$ 5,344,866 2003
22,965,560 2004
922,669 2005
1,266,343 2006
-----------
$30,499,438
===========
</TABLE>
(6) CAPITAL SHARE
TRANSACTIONS
............................
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
897,341 (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 OUTSTANDING WEIGHTED AVERAGE
PERIOD ENDED SHARES SHARES COST DISCOUNT FROM NAV
------------ -------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
11/30/99 60,200 0.34% $ 707,912 7.13%
5/31/99 156,300 0.87% $1,862,964 8.85%
</TABLE>
(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, the 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> <C>
10% 1,773,031 $12.58 $22,304,730
</TABLE>
- --------------------------------------------------------------------------------
12 1999 Semiannual Report - 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:
AMERICAN STRATEGIC INCOME PORTFOLIO II
<TABLE>
<CAPTION>
Six Months Ended Year Ended May 31,
November 30, 1999 ----------------------------------------------
(Unaudited) 1999(e) 1998 1997 1996 1995
----------------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning
of period ............................ $12.92 $13.07 $12.63 $12.78 $13.00 $12.97
------ ------ ------ ------ ------ ------
Operations:
Net investment income ................ 0.51 1.06 1.03 0.98 0.99 1.21
Net realized and unrealized gains
(losses) on investments ............ (0.36) (0.19) 0.41 (0.13) -- 0.17
------ ------ ------ ------ ------ ------
Total from operations .............. 0.15 0.87 1.44 0.85 0.99 1.38
------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income ........... (0.52) (1.02) (1.00) (1.00) (1.21) (1.35)
------ ------ ------ ------ ------ ------
Total distributions to
shareholders ..................... (0.52) (1.02) (1.00) (1.00) (1.21) (1.35)
------ ------ ------ ------ ------ ------
Net asset value, end of period ......... $12.55 $12.92 $13.07 $12.63 $12.78 $13.00
====== ====== ====== ====== ====== ======
Per-share market value, end of
period ............................... $11.50 $11.94 $11.81 $11.38 $10.63 $11.50
====== ====== ====== ====== ====== ======
SELECTED INFORMATION
Total return, net asset value (a) ...... 1.22% 6.82% 11.74% 6.90% 7.84% 11.56%
Total return, market value (b) ......... 0.70% 10.06% 13.02% 17.19% 2.95% (5.38)%
Net assets at end of period
(in millions) ........................ $ 223 $ 230 $ 234 $ 252 $ 255 $ 262
Ratio of expenses to average weekly net
assets including interest
expense (c) .......................... 3.63%(f) 2.92% 3.39% 2.56% 2.39% 3.51%
Ratio of expenses to average weekly net
assets excluding interest
expense (c) .......................... 1.20%(f) 1.18% 1.38% 1.45% 1.26% 1.27%
Ratio of net investment income to
average weekly net assets ............ 7.98%(f) 8.06% 7.86% 7.73% 7.63% 9.60%
Portfolio turnover rate (excluding
short-term securities) ............... 1% 18% 48% 51% 105% 52%
Amount of borrowings outstanding at end
of period (in millions) .............. $ 80 $ 104 $ 76 $ 84 $ 53 $ 53
Per-share amount of borrowings
outstanding at end of period ......... $ 4.54 $ 5.84 $ 4.23 $ 4.21 $ 2.66 $ 2.61
Per-share amount of net assets,
excluding borrowings, at end
of period ............................ $17.09 $18.76 $17.30 $16.84 $15.44 $15.61
Asset coverage ratio (d) ............... 377% 321% 409% 400% 581% 598%
</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% AND 0.07% FROM FEDERAL EXCISE TAXES IN FISCAL YEARS 1996 AND
1995, RESPECTIVELY. FISCAL 1998 AND 1997 RATIOS INCLUDE 0.08% AND 0.18%,
RESPECTIVELY, OF OPERATING EXPENSES ASSOCIATED WITH REAL ESTATE OWNED.
(d) REPRESENTS NET ASSETS, EXCLUDING BORROWINGS, AT END OF PERIOD DIVIDED BY
BORROWINGS OUTSTANDING AT END OF PERIOD.
(e) EFFECTIVE AUGUST 10, 1998, THE ADVISOR WAS CHANGED FROM PIPER CAPITAL TO
U.S. BANK.
(f) ANNUALIZED.
- --------------------------------------------------------------------------------
13 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN STRATEGIC
INCOME PORTFOLIO II November 30, 1999
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Date
Acquired
Description of Security Par Value Cost Market
Value (a)
- --------------------------------------------------------- -------- ----------- ------------ ------------
<CAPTION>
<S> <C> <C> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (18.7%):
U.S. AGENCY MORTGAGE-BACKED SECURITIES (8.4%):
FIXED RATE (8.4%):
6.50%, FNMA, 6/1/29 ............................... 5/4/99 $19,659,405(b) $ 19,515,928 $ 18,737,772
------------ ------------
U.S. GOVERNMENT SECURITIES (10.3%):
6.63%, U.S. Treasury Note, 3/31/02 ................ 5/12/98 22,500,000(b) 22,951,529 22,784,850
------------ ------------
Total U.S. Government and Agency Securities .... 42,467,457 41,522,622
------------ ------------
PRIVATE MORTGAGE-BACKED SECURITIES (e) (3.9%):
FIXED RATE (3.9%):
8.72%, RFC 1997-NPC1, 8/27/23 ..................... 3/27/97 8,917,815 8,948,146 8,779,350
------------ ------------
WHOLE LOANS AND PARTICIPATION MORTGAGES (c,d,e) (101.6%):
COMMERCIAL LOANS (26.0%):
1336 and 1360 Energy Park Drive,
7.65%, 10/1/08 .................................. 9/29/98 2,954,903 2,954,903 2,750,082
Bigelow Office Building, 9.00%, 4/1/07 ............ 3/31/97 1,356,601 1,356,601 1,374,455
Canton Commerce Center, 9.25%, 7/1/01 ............. 6/27/96 3,293,388 3,293,389 3,339,404
Centre Point Commerce Park, 9.00%, 6/1/12 ......... 5/2/97 759,239 751,646 760,585
Cottonwood Square, 9.30%, 5/1/04 .................. 4/16/97 2,717,695 2,717,695 2,781,039
Doctors Medical Plaza, 8.00%, 2/1/08 .............. 1/27/98 865,681 865,681 832,996
Fortune Park V, VI, VII, 8.00%, 1/1/04 ............ 12/29/98 3,724,070 3,724,070 3,633,404
Hillside Crossing South Shopping Center,
8.05%, 1/1/05 ................................... 12/22/97 1,755,654 1,755,654 1,703,976
Hillside Office Park, 7.75%, 8/1/08 ............... 7/9/98 982,812 982,812 876,105
Hollywood Plaza, 7.95%, 11/1/03 ................... 11/4/98 1,332,187 1,332,187 1,302,772
Jamboree Building, 9.05%, 12/1/06 ................. 11/15/96 1,929,442 1,910,147 1,960,913
Minikahda MiniStorage III, 8.72%, 8/1/09 .......... 9/16/99 4,221,052 4,221,052 4,107,852
Minikahda MiniStorage V, 8.87%, 9/1/09 ............ 8/28/98 1,874,555 1,874,555 1,838,200
Oak Knoll Village Shopping Center,
8.80%, 7/1/05 ................................... 6/10/98 1,378,169 1,378,169 1,375,785
One Columbia, 8.00%, 1/1/08 ....................... 1/2/98 1,328,613 1,328,613 1,271,036
PennMont Office Building, 8.88%, 5/1/01 ........... 4/29/96 1,333,583 1,333,583 1,344,356
</TABLE>
<TABLE>
<CAPTION>
Date
Description of Security Acquired Par Value Cost Market Value (a)
- ----------------------- -------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
PMG Center, 9.05%, 9/1/03 ......................... 8/29/96 $ 2,331,014 $ 2,331,014 $ 1,728,289
Provident Bank Building, 8.80%, 11/1/01 ........... 10/4/96 2,694,069 2,667,129 2,715,331
Rapid Park Parking Lot, 9.00%, 9/1/07 ............. 8/7/97 3,654,370 3,654,370 3,712,690
Ridgehill Professional Building, 7.50%, 1/1/09 . 12/7/98 2,668,342 2,668,342 2,451,645
Ridgewood Estates Mobile Home Park,
8.55%, 12/1/00 .................................. 11/14/95 2,035,135 2,031,822 2,040,671
Rimrock Plaza, 7.75%, 12/1/08 ..................... 12/2/98 3,219,442 3,219,442 2,991,829
Rubin Center, 8.90%, 7/1/07 ....................... 6/13/97 3,207,244 3,207,245 3,243,502
Stevenson Office Building, Port Orchard Cinema and
Jensen Industrial Building, 8.00%, 2/1/09 . 1/21/99 3,428,966 3,428,966 3,262,882
Sundance Plaza, 7.25%, 11/1/08 .................... 10/29/98 1,115,160 1,115,160 1,056,266
Wellington Professional Center, 8.80%, 11/1/01 .... 11/1/96 2,656,780 2,656,780 2,677,720
Westwood Business Park II, 13.00%, 6/1/01 ......... 5/7/99 700,000 693,000 636,529
------------ ------------
59,454,027 57,770,314
------------ ------------
MULTIFAMILY LOANS (35.1%):
Arbor at Dairy Ashford Apartments I,
8.00%, 3/1/01 ................................... 2/6/98 3,998,946 3,998,946 4,038,935
Arbor at Dairy Ashford Apartments II,
10.00%, 3/1/01 .................................. 2/6/98 804,167 804,167 768,152
Autumnwood, Southern Woods, Hinton Hollow,
9.10%, 6/1/03 ................................... 5/31/96 6,260,440 6,260,440 6,398,702
Beverly Palms Apartments, 7.75%, 4/1/04 ........... 3/25/99 12,200,000 12,200,000 11,958,567
Casa Carranza Apartments, 8.35%, 12/1/02 .......... 12/1/95 3,874,544 3,835,799 3,895,746
Chardonnay Apartments, 8.70%, 1/1/07 .............. 12/18/96 4,252,896 4,231,631 4,303,841
Deering Manor, 9.50%, 12/8/22 ..................... 12/8/92 1,220,064 1,207,863 1,211,094
Fremont Plaza Apartments, 7.50%, 7/1/08 ........... 7/1/98 2,623,857 2,623,857 2,487,974
Harbor View Apartments, 9.50%, 1/25/18 ............ 1/22/93 736,467 729,103 731,069
Jaccard Apartments, 8.83%, 12/1/03 ................ 11/1/96 2,737,011 2,737,011 2,790,150
Kona Kai Apartments, 8.45%, 11/1/05 ............... 10/24/95 1,120,104 1,113,999 1,125,260
Newport Apartments, 9.75%, 4/1/02 ................. 3/10/95 1,324,040 1,307,489 1,363,761
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
14 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
- --------------------------------------------------------------------------------
AMERICAN STRATEGIC INCOME PORTFOLIO II
(CONTINUED)
<TABLE>
<CAPTION>
Date
Description of Security Acquired Par Value Cost Market Value (a)
- ----------------------- -------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
Normandale Lake Estates, 8.13%, 2/1/03 ............ 1/16/96 $ 2,390,160 $ 2,386,780 $ 2,386,796
Park Place of Venice Apartments,
10.75%, 4/1/02 .................................. 3/2/95 2,573,557 2,559,899 2,458,411
Park Terrace Apartments, 8.45%, 11/1/05 ........... 10/24/95 2,515,985 2,509,695 2,530,218
Primrose Apartments, 8.63%, 11/1/07 ............... 10/19/95 1,077,425 1,072,835 1,082,691
Rhode Island Chateau Apartments, 8.85%, 6/1/02 .... 5/21/97 2,766,070 2,766,070 2,811,804
Sierra Madre Apartments, 8.40%, 7/1/02 ............ 6/16/97 1,785,321 1,785,321 1,786,990
Skyline Apartments, 8.80%, 12/1/03 ................ 11/6/96 2,052,484 2,049,063 2,088,587
The Gables at Westlake Apartments,
7.40%, 2/1/08 ................................... 1/16/98 6,390,022 6,390,022 6,038,248
The Meadows, Fairfield Manor, Auburn Apartments,
8.63%, 11/1/07 .................................. 10/19/95 1,638,696 1,637,103 1,658,595
Vintage Apartments, 9.00%, 8/1/05 ................. 8/15/95 2,850,341 2,845,907 2,824,641
Westview Apartments, 7.80%, 3/1/03 ................ 2/16/96 1,060,996 1,047,010 1,044,613
Whispering Hills Apartments, 8.80%, 10/1/02 ....... 9/8/95 2,020,453 1,997,005 2,041,977
Whispering Hollow Apartments I, 8.00%, 3/1/01 ..... 2/6/98 5,536,365 5,536,365 5,591,729
Whispering Hollow Apartments II,
10.00%, 3/1/01 .................................. 2/6/98 1,113,333 1,113,333 1,063,472
Winterland Apartments I, 9.35%, 7/1/12 ............ 6/6/97 590,511 590,511 592,315
Winterland Apartments II, 9.35%, 7/1/12 ........... 6/6/97 1,131,812 1,131,812 1,081,383
------------ ------------
78,469,036 78,155,721
------------ ------------
SINGLE FAMILY LOANS (40.5%):
Aegis III, 8.81%, 6/13/11 . 5/13/97 1,405,244(b) 1,370,606 1,406,163
Amerivest Mortgage, 8.36%, 5/1/12 ................. 9/28/93 1,904,631(b) 1,409,427 1,875,945
CTX Mortgage, 9.23%, 11/23/22 ..................... 11/23/92 1,247,086(b) 1,110,791 1,247,474
Energy Park Loans, 12.20%, 12/1/22 ................ 12/1/92 162,352(b) 155,577 167,222
Fairbanks III, 10.04%, 1/1/07 ..................... 3/18/94 390,151(b) 358,594 348,617
Fairbanks IV, 8.63%, 7/3/11 ....................... 11/3/94 568,666(b) 488,577 545,056
First Federal of Delaware, 8.05%, 2/1/18 .......... 1/29/93 2,859,973(b) 2,621,720 2,785,764
Greenwich, 9.50%, 6/16/05 ......................... 2/16/96 384,471(b) 374,893 386,983
</TABLE>
<TABLE>
<CAPTION>
Date
Description of Security Acquired Par Value Cost Market Value (a)
- ----------------------- -------- ----------- ------------ ----------------
<S> <C> <C> <C> <C>
Heartland Federal Savings & Loan,
11.38%, 11/17/22 ................................ 11/17/92 $ 100,475 $ 96,708 $ 76,947
Kentucky Central Life, 9.43%, 5/1/22 .............. 2/12/93 2,213,678(b) 2,140,115 2,231,531
Kislak, 10.00%, 6/30/20 ........................... 4/14/93 3,487,647(b) 3,277,840 3,517,530
Maryland National Bank, 9.63%, 9/1/18 ............. 1/29/93 625,845(b) 600,966 625,667
McDowell, 9.80%, 12/1/20 12/11/92 1,982,624 1,983,493 2,036,851
Merchants Bank, 10.42%, 12/1/20 ................... 12/18/92 782,085 788,514 799,394
Meridian, 9.32%, 10/15/22 ......................... 10/15/92 621,064(b) 638,970 634,377
Meridian III, 9.18%, 12/1/20 ...................... 12/21/92 2,464,055(b) 2,349,619 2,464,162
Minneapolis Employees Retirement Fund,
7.83%, 2/10/14 .................................. 4/10/96 2,986,171(b) 2,770,902 2,867,633
NationsBank, 8.73%, 10/1/07 ....................... 12/10/92 45,206(b) 42,042 45,820
Neslund Properties, 9.87%, 2/1/23 ................. 1/27/93 2,580,922(b) 2,568,117 2,656,351
Nomura I, 9.89%, 12/16/23 ......................... 12/16/93 5,888,584(b) 6,103,866 5,901,930
Nomura II, 8.55%, 3/22/15 ......................... 8/22/94 7,102,570(b) 6,759,895 6,391,754
Nomura III, 8.23%, 8/29/17 ........................ 9/29/95 11,715,438(b) 10,126,174 11,040,176
Norwest II, 7.78%, 11/27/22 ....................... 2/27/96 1,953,609(b) 1,943,814 1,910,736
Norwest IV, 8.24%, 4/23/25 ........................ 5/23/96 3,826,812(b) 3,803,191 3,699,764
Norwest VII, 7.77%, 9/24/25 ....................... 2/24/97 3,958,819(b) 3,845,439 3,836,224
Norwest X, 7.88%, 4/1/25 3/12/98 1,174,811(b) 1,177,628 1,145,999
Norwest XIII, 7.61%, 11/1/25 ...................... 10/28/98 3,395,227(b) 3,378,251 3,277,805
Norwest XIV, 7.23%, 3/1/25 ........................ 12/3/98 10,594,584(b) 10,488,905 10,019,384
Norwest XV, 7.24%, 2/1/26 ......................... 12/23/98 3,593,627(b) 3,548,706 3,414,064
Norwest XVI, 7.14%, 1/27/27 ....................... 3/4/99 3,208,798(b) 3,118,952 3,062,344
Norwest XVII, 6.92%, 7/11/24 ...................... 5/20/99 4,545,838(b) 4,378,239 4,294,217
Old Hickory Credit Union, 10.25%, 10/15/22 ........ 10/28/92 848,066(b) 850,264 862,629
Paine Webber, 12.67%, 10/15/20 .................... 9/17/92 169,282 152,081 153,097
PHH U.S. Mortgage, 8.81%, 1/1/12 .................. 12/30/92 2,244,262 2,183,920 2,131,196
President Homes 92-4, Sales Inventory,
6.88%, 10/15/20 ................................. 12/1/92 65,233 63,949 63,216
President Homes 92-8, Sales Inventory,
8.00%, 11/24/22 ................................. 3/1/93 121,195 120,266 102,617
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
15 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
- --------------------------------------------------------------------------------
AMERICAN STRATEGIC INCOME PORTFOLIO II
(CONTINUED)
<TABLE>
<CAPTION>
Date Shares/
Description of Security Acquired Par Value Cost Market Value (a)
- --------------------------------------------------------- -------- ----------- ------------ -----------------
<S> <C> <C> <C> <C>
Progressive Consumers Federal Credit Union,
11.64%, 10/15/22 ................................ 11/5/92 $ 148,248(b) $ 139,673 $ 150,492
Salomon, 7.38%, 12/28/16 .......................... 7/28/94 2,065,794(b) 1,977,998 1,993,888
Sears Mortgage, 8.82%, 11/18/22 ................... 11/18/92 73,054(b) 69,767 74,363
------------ ------------
89,378,449 90,245,382
------------ ------------
Total Whole Loans and Participation Mortgages
.............................................. 227,301,512 226,171,417
------------ ------------
SHORT-TERM SECURITIES (11.2%):
First American Prime Obligations Fund ............. 11/30/99 24,928,202(f) 24,928,202 24,928,202
------------ ------------
Total Investments in Securities (g) ............ $303,645,317 $301,401,591
============ ============
</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 $120,602,539 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>
$ 5,000,000 11/1/99 6.28% 12/1/99 $ 26,177 (1)
17,925,000 11/15/99 5.42% 12/15/99 2,698 (2)
22,500,000 11/1/99 5.34% 12/1/99 100,125 (3)
35,000,000 11/1/99 6.41% 12/1/99 186,959 (4)
- ------------ --------
$ 80,425,000 $315,959
============ ========
</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;
NORWEST IV, 8.24%, 4/23/25, $1,426,560 PAR
NORWEST XIV, 7.23%, 3/1/25, $8,323,158 PAR
NORWEST XV, 7.24%, 2/1/26, $3,121,212 PAR
(2) MORGAN STANLEY DEAN WITTER;
FNMA, 6.50%, 6/1/29, $19,659,405 PAR
(3) NOMURA;
U.S. TREASURY NOTE, 6.63%, 3/31/02, $22,500,000 PAR
(4) NOMURA;
AEGIS III, 8.81%, 6/13/11, $1,333,167 PAR
AMERIVEST MORTGAGE, 8.36%, 5/1/12, $1,904,631 PAR
CTX MORTGAGE, 9.23%, 11/23/22, $1,178,621 PAR
ENERGY PARK LOANS, 12.20%, 12/1/22, $162,352 PAR
FAIRBANKS III, 10.04%, 1/1/07, $390,151 PAR
FAIRBANKS IV, 8.63%, 7/3/11, $568,666 PAR
FIRST FEDERAL OF DELAWARE, 8.05%, 2/1/18, $2,823,252 PAR
GREENWICH, 9.50%, 6/16/05, $384,471 PAR
KENTUCKY CENTRAL LIFE, 9.43%, 5/1/22, $2,187,225 PAR
KISLAK, 10.00%, 6/30/20, $3,234,236 PAR
MARYLAND NATIONAL BANK, 9.63%, 9/1/18, $625,845 PAR
MERIDIAN, 9.32%, 10/15/22, $535,595 PAR
MERIDIAN III, 9.18%, 12/1/20, $2,464,055 PAR
MINNEAPOLIS EMPLOYEES RETIREMENT FUND, 7.83%, 2/10/14,
$2,986,171 PAR
NATIONSBANK, 8.73%, 10/1/07, $42,647 PAR
NESLUND PROPERTIES, 9.87%, 2/1/23, $2,499,418 PAR
NOMURA I, 9.89%, 12/16/23, $5,837,809 PAR
NOMURA II, 8.55%, 3/22/15, $6,470,411 PAR
NOMURA III, 8.23%, 8/29/17, $11,498,725 PAR
NORWEST II, 7.78%, 11/27/22, $1,875,694 PAR
NORWEST IV, 8.24%, 4/23/25, $979,687 PAR
NORWEST VII, 7.77%, 9/24/25, $3,691,135 PAR
NORWEST X, 7.88%, 4/1/25, $1,174,811 PAR
NORWEST XIII, 7.61%, 11/1/25, $3,395,227 PAR
NORWEST XVI, 7.14%, 1/27/27, $3,208,798 PAR
NORWEST XVII, 6.92%, 7/11/24, $4,545,838 PAR
OLD HICKORY CREDIT UNION, 10.25%, 10/15/22, $808,923 PAR
PROGRESSIVE CONSUMERS FEDERAL CREDIT UNION, 11.64%, 10/15/22,
$148,248 PAR
SALOMON, 7.38%, 12/28/16, $2,065,794 PAR
SEARS MORTGAGE, 8.82%, 11/18/22, $73,054 PAR
THE FUND HAS ENTERED INTO A LENDING COMMITMENT WITH NOMURA. THE
AGREEMENT PERMITS THE FUND TO ENTER INTO REVERSE REPURCHASE AGREEMENTS
UP TO $40,000,000 USING WHOLE LOANS AS COLLATERAL. THE FUND PAYS A FEE
OF 0.25% TO NOMURA ON THE UNUSED PORTION OF A $40,000,000 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:
1336 AND 1360 ENERGY PARK DRIVE - ST. PAUL, MN
BIGELOW OFFICE BUILDING - LAS VEGAS, NV
CANTON COMMERCE CENTER - CANTON, MA
CENTRE POINT COMMERCE PARK - ORLANDO, FL
COTTONWOOD SQUARE - COLORADO SPRINGS, CO
DOCTORS MEDICAL PLAZA - COLORADO SPRINGS, CO
FORTUNE PARK V, VI, VII - INDIANAPOLIS, IN
HILLSIDE CROSSING SOUTH SHOPPING CENTER - ELK RIVER, MN
HILLSIDE OFFICE PARK - ELK RIVER, MN
HOLLYWOOD PLAZA - MILWAUKIE, OR
JAMBOREE BUILDING - COLORADO SPRINGS, CO
- --------------------------------------------------------------------------------
16 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
- --------------------------------------------------------------------------------
MINIKADHA MINISTORAGE III - ST. PAUL, MN
MINIKADHA MINISTORAGE V - ST. PAUL, MN
OAK KNOLL VILLAGE SHOPPING CENTER - AUSTIN, TX
ONE COLUMBIA - ALISO VIEJO, CA
PENNMONT OFFICE BUILDING - ALBUQUERQUE, NM
PMG CENTER - FORT LAUDERDALE, FL
PROVIDENT BANK BUILDING - DESOTO, TX
RAPID PARK PARKING LOT - MINNEAPOLIS, MN
RIDGEHILL PROFESSIONAL BUILDING - MINNETONKA, MN
RIDGEWOOD ESTATES MOBILE HOME PARK - LAYTON, UT
RIMROCK PLAZA - BILLINGS, MT
RUBIN CENTER - CLEARWATER, FL
STEVENSON OFFICE BUILDING, PORT ORCHARD CINEMA AND JENSEN INDUSTRIAL
BUILDING - STEVENSON, PORT ORCHARD AND ARLINGTON, WA
SUNDANCE PLAZA - COLORADO SPRINGS, CO
WELLINGTON PROFESSIONAL CENTER - WELLINGTON, FL
WESTWOOD BUSINESS PARK II - FARMERS BRANCH, TX
MULTIFAMILY LOANS:
ARBOR AT DAIRY ASHFORD APARTMENTS I - HOUSTON, TX
ARBOR AT DAIRY ASHFORD APARTMENTS II - HOUSTON, TX
AUTUMNWOOD, SOUTHERN WOODS, HINTON HOLLOW - KNOXVILLE, TN
BEVERLY PALMS APARTMENTS - HOUSTON, TX
CASA CARRANZA APARTMENTS - MESA, AZ
CHARDONNAY APARTMENTS - TULSA, OK
DEERING MANOR - NASHWAUK, MN
FREMONT PLAZA APARTMENTS - PHOENIX, AZ
HARBOR VIEW APARTMENTS - GRAND MARAIS, MN
JACCARD APARTMENTS - UNIVERSITY CITY, MO
KONA KAI APARTMENTS - PUEBLO, CO
NEWPORT APARTMENTS - WHITE SETTLEMENT, TX
NORMANDALE LAKE ESTATES - BLOOMINGTON, MN
PARK PLACE OF VENICE APARTMENTS - VENICE, FL
PARK TERRACE APARTMENTS - PUEBLO, CO
PRIMROSE APARTMENTS - GRAND FALLS, ND
RHODE ISLAND CHATEAU APARTMENTS - ST. LOUIS PARK, MN
SIERRA MADRE APARTMENTS - LAS VEGAS, NV
SKYLINE APARTMENTS - KANSAS CITY, KS
THE GABLES AT WESTLAKE APARTMENTS - OKLAHOMA CITY, OK
THE MEADOWS, FAIRFIELD MANOR, AUBURN APARTMENTS - WAHPETON, ND
VINTAGE APARTMENTS - KERMAN, CA
WESTVIEW APARTMENTS - AUSTIN, TX
WHISPERING HILLS APARTMENTS - NASHVILLE, TN
WHISPERING HOLLOW APARTMENTS I - DALLAS, TX
WHISPERING HOLLOW APARTMENTS II - DALLAS, TX
WINTERLAND APARTMENTS I - GRAND FORKS, ND
WINTERLAND APARTMENTS II - GRAND FORKS, ND
SINGLE FAMILY LOANS:
AEGIS III - 51 LOANS, TEXAS
AMERIVEST MORTGAGE - 30 LOANS, MASSACHUSETTS
CTX MORTGAGE - 16 LOANS, UNITED STATES
ENERGY PARK LOANS - 2 LOANS, MINNESOTA
FAIRBANKS III - 4 LOANS, WESTERN UNITED STATES
FAIRBANKS IV - 9 LOANS, UNITED STATES
FIRST FEDERAL OF DELAWARE - 65 LOANS, UNITED STATES
GREENWICH - 5 LOANS, COLORADO
HEARTLAND FEDERAL SAVINGS & LOAN - 2 LOANS, CALIFORNIA
KENTUCKY CENTRAL LIFE - 66 LOANS, KENTUCKY
KISLAK - 69 LOANS, CENTRAL AND SOUTHERN UNITED STATES
MARYLAND NATIONAL BANK - 11 LOANS, EASTERN UNITED STATES
MCDOWELL - 41 LOANS, GEORGIA
MERCHANTS BANK - 28 LOANS, VERMONT
MERIDIAN - 9 LOANS, CALIFORNIA AND FLORIDA
MERIDIAN III - 51 LOANS, CALIFORNIA
MINNEAPOLIS EMPLOYEES RETIREMENT FUND - 83 LOANS, MINNESOTA
NATIONSBANK - 6 LOANS, GEORGIA
NESLUND PROPERTIES - 101 LOANS, MINNESOTA
NOMURA I - 146 LOANS, CALIFORNIA AND TEXAS
NOMURA II - 131 LOANS, UNITED STATES
NOMURA III - 182 LOANS, MIDWESTERN UNITED STATES
NORWEST II - 23 LOANS, MIDWESTERN UNITED STATES
NORWEST IV - 28 LOANS, MIDWESTERN UNITED STATES
NORWEST VII - 32 LOANS, MIDWESTERN UNITED STATES
NORWEST X - 9 LOANS, MIDWESTERN UNITED STATES
NORWEST XIII - 28 LOANS, MIDWESTERN UNITED STATES
NORWEST XIV - 62 LOANS, MIDWESTERN UNITED STATES
NORWEST XV - 24 LOANS, MIDWESTERN UNITED STATES
NORWEST XVI - 26 LOANS, MIDWESTERN UNITED STATES
NORWEST XVII - 43 LOANS, MIDWESTERN UNITED STATES
OLD HICKORY CREDIT UNION - 28 LOANS, TENNESSEE
PAINE WEBBER - 7 LOANS, NEW JERSEY
PHH U.S. MORTGAGE - 20 LOANS, UNITED STATES
PRESIDENT HOMES 92-4, SALES INVENTORY - 1 LOAN, MICHIGAN
PRESIDENT HOMES 92-8, SALES INVENTORY - 2 LOANS, KANSAS
PROGRESSIVE CONSUMERS FEDERAL CREDIT UNION - 2 LOANS, MASSACHUSETTS
SALOMON - 28 LOANS, NEW JERSEY
SEARS MORTGAGE - 2 LOANS, FLORIDA
(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 $234,950,767 OR 105.6% OF TOTAL
NET ASSETS..
(f) THIS MONEY MARKET FUND IS ADVISED BY U.S. BANK WHICH ALSO SERVES AS ADVISOR
FOR THE FUND. SEE NOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
(g) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES,
INCLUDING REAL ESTATE OWNED, BASED ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 3,612,526
GROSS UNREALIZED DEPRECIATION ...... (5,934,092)
-----------
NET UNREALIZED DEPRECIATION ...... $(2,321,566)
===========
</TABLE>
- --------------------------------------------------------------------------------
17 1999 Semiannual Report - American Strategic Income Portfolio II
<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 ....................... 14,222,302 343,833
Robert J. Dayton ....................... 14,222,152 343,982
Roger A. Gibson ........................ 14,222,867 343,268
Andrew M. Hunter III ................... 14,222,867 343,268
Leonard W. Kedrowski ................... 14,222,123 344,012
John M. Murphy, Jr. .................... 14,222,302 343,833
Robert L. Spies ........................ 14,222,302 343,833
Joseph D. Strauss ...................... 14,222,016 344,118
Virginia L. Stringer ................... 14,221,558 344,577
</TABLE>
2. The fund's shareholders ratified the selection by a
majority of the independent members of the fund's
Board of Directors of Ernst and Young LLP as the
independent public accountants for the fund for the
fiscal year ending May 31, 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>
14,319,842 322,679 23,612 --
</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 upon six months notice to shareholders. Share
repurchases are not mandatory when fund shares are trading
at a
- --------------------------------------------------------------------------------
18 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
discount from net asset value; all repurchases will be at
the discretion of the fund's investment advisor. The board
of directors' decision whether to continue the share
repurchase program will be reported in the next
shareholder report.
HOW WILL SHARES BE REPURCHASED?
We expect to finance the repurchase of shares by
liquidating portfolio securities or using current cash
balances. We do not anticipate borrowing in order to
finance share repurchases.
- --------------------------------------------------------------------------------
19 1999 Semiannual Report - American Strategic Income Portfolio II
<PAGE>
[LOGO]FIRST AMERICAN-Registered Trademark-
ASSET MANAGEMENT
AMERICAN STRATEGIC INCOME PORTFOLIO II
1999 SEMIANNUAL REPORT
1/2000 3046-99
[LOGO] THIS DOCUMENT IS PRINTED ON PAPER
MADE FROM 100% TOTAL RECOVERED FIBER,
INCLUDING 15% POST-CONSUMER WASTE.
