AMERICAN STRATEGIC INCOME PORTFOLIO INC III, N-30D, 1997-01-30

AMERICAN STRATEGIC INCOME PORTFOLIO INC III
N-30D, 1997-01-30

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American Strategic Income Portfolio III - 1996 Semiannual Report

1996 Semiannual Report

AMERICAN
STRATEGIC
INCOME
PORTFOLIO III

CSP

[LOGO]

<PAGE>

[LOGO]

CONTENTS

President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . .9

Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 24

Shareholder Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

AMERICAN STRATEGIC INCOME PORTFOLIO III
- ---------------------------------------

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, and may purchase securities through the
dollar-roll program. 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, 1996.
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[CHART]

THE AVERAGE ANNUALIZED TOTAL RETURN FIGURES FOR AMERICAN STRATEGIC INCOME
PORTFOLIO III 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.

TOTAL RETURNS BASED ON THE CHANGE IN MARKET PRICE FOR THE ONE-YEAR, THREE-YEAR
AND SINCE INCEPTION PERIODS ENDED NOVEMBER 30, 1996, WERE 7.20%, -1.13% AND
0.64%, 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.

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 LIPPER CLOSED-END U.S. MORTGAGE FUNDS AVERAGE REPRESENTS THE AVERAGE
ANNUALIZED TOTAL RETURN, WITH DISTRIBUTIONS REINVESTED, OF SIMILAR CLOSED-END
FUNDS AS CHARACTERIZED BY LIPPER ANALYTICAL SERVICES.

THE SINCE INCEPTION NUMBERS FOR THE LEHMAN INDEX AND LIPPER AVERAGE ARE
CALCULATED FROM THE MONTH END FOLLOWING THE FUND'S INCEPTION THROUGH NOVEMBER
30, 1996.

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1996 Semiannual Report 1 American Strategic Income Portfolio III

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PRESIDENT'S LETTER
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[PHOTO]
WILLIAM H. ELLIS
President
Piper Capital
Management
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January 16, 1997
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DEAR SHAREHOLDERS:

Check out the best sellers' list at your local bookstore. You'll notice a
number of books about companies that have gone through dramatic changes in
recent years. Surprising? Not really. Every company experiences change
periodically. And we're no exception. At Piper Capital Management, we've made
significant changes to enhance our ability to achieve consistent, competitive
performance and provide a higher level of quality service.

We've upgraded our toll-free telephone system so you spend less time
listening to voice response and more time receiving information you can put to
use. Also, when calling our toll-free number, you now have the option to listen
to our portfolio managers talk about their current investment strategies. Find
out the many ways to reach us on the back page of this report.

Take a close look at the semiannual report in your hand. We've made our
portfolio managers' commentaries simpler and more inviting, and added a glossary
of terms at the back to help you understand commonly used financial terms.
Whenever you see this symbol***, it indicates a term defined in the glossary.

You'll hear the word "team" more often when we talk about our portfolio
managers. We've enhanced our approach, allowing managers to interact more
frequently and share their best ideas to improve the investment capabilities of
Piper Capital.

The recent changes we have made represent a new way of doing business at
Piper Capital -- an approach we believe will enable us to establish an
unparalleled reputation for prudent investing and high-quality service.

That said, we look forward to serving your future financial needs and
exceeding your expectations in every way we can. Thank you for your investment.

Sincerely,

/s/ William H. Ellis

William H. Ellis

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

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1996 Semiannual Report 2 American Strategic Income Portfolio III

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AMERICAN STRATEGIC INCOME PORTFOLIO III
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[PHOTO]
JOHN WENKER
is primarily responsible for the management of American Strategic Income
Portfolio III. He has 11 years of financial experience.

January 16, 1997
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DEAR SHAREHOLDERS:

AMERICAN STRATEGIC INCOME PORTFOLIO III PAID AN ATTRACTIVE LEVEL OF CURRENT
INCOME FOR SHAREHOLDERS DURING THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 1996. The
fund paid $0.50875 per share in dividends, which is an annualized distribution
rate of 9.58% on the November 30 market price of $10.625 per share, and 6.78% on
the initial public offering price of $15 per share. As discussed below, the
fund's dividend was reduced to bring it in line with the fund's earnings.
Current monthly earnings of 8.25 cents per share (based on an average of the
three months ended November 30) would result in an annualized earnings rate of
9.32% on the November 30 market price and 6.60% on the initial public offering
price. Keep in mind that past performance does not guarantee future results, and
these rates will fluctuate.

FOR THE SIX-MONTH PERIOD, THE FUND HAD A NET ASSET VALUE TOTAL RETURN OF 4.60%.*
This compares to a 7.06% return for the Lehman

* 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.

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PORTFOLIO COMPOSITION
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As a percentage of total assets on November 30, 1996.

[CHART]

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1996 Semiannual Report 3 American Strategic Income Portfolio III

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AMERICAN STRATEGIC INCOME PORTFOLIO III (CONTINUED)
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[PHOTO]
DAVID STEELE
assists with the management of American Strategic Income Portfolio III. He has
18 years of financial experience.
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Brothers Mutual Fund Government/Mortgage Index and an 8.28% return for the
Lipper Closed-End U.S. Mortgage Funds Average during this same period. For
the six-month period ended November 30, the fund's total return based on its
market price was 8.81%*. The fund continued to trade at a discount*** to net
asset value during the year, with a market price of $10.625 and a net asset
value of $12.29 per share as of November 30. Reducing the difference between
the fund's market price and net asset value has been challenging, but we
believe the fund's reduced net asset value volatility and earnings stability
could help improve the fund's market price over time.

THE FUND'S NET ASSET VALUE UNDERPERFORMANCE WAS DUE LARGELY TO HAVING MORTGAGE
LOANS IN THE PORTFOLIO. These loans are generally less sensitive to interest
rate changes than securities in the index and securities held by other U.S.
mortgage funds. So when interest rates fall, as they did during the last six
months, these loans tend not to go up in value as much as the index or other
U.S.

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GEOGRAPHICAL DISTRIBUTION
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Percentages reflect principal value of whole loans and real estate owned as of
November 30, 1996.

[MAP]

SHADED AREAS WITHOUT VALUES INDICATE STATES IN WHICH THE FUND HAS INVESTED LESS
THAN 0.50% OF ITS ASSETS. THE FUND ALSO INVESTS LESS THAN 0.50% IN THE U.S.
VIRGIN ISLANDS, WHICH IS NOT REPRESENTED ON THIS MAP.

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

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1996 Semiannual Report 4 American Strategic Income Portfolio III

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AMERICAN STRATEGIC INCOME PORTFOLIO III (CONTINUED)
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[PHOTO]
RUSS KAPPENMAN
assists with the management of American Strategic Income Portfolio III. He has
11 years of financial experience.
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mortgage funds. However, when rates increase, our loans generally do not
decline as much, giving the fund downside protection in a rising-rate
environment. Another contributing factor to our underperformance was our
emphasis on short-term Treasury securities. During a declining interest rate
environment, short-term securities generally do not go up in value as much as
long-term issues.

DURING THE PERIOD, WE REMAINED FOCUSED ON STABILIZING THE FUND'S INCOME STREAM.
When the dividend was reduced in July 1996, we stated that we felt we could
maintain an 8.25 cents per share monthly dividend for 12 months. As of November
30, 1996, we were on track to accomplish this goal. While unexpected credit
problems or severe prepayments could adversely affect the fund's ability to
maintain its 8.25 cents per share monthly dividend, we remain optimistic we will
achieve this objective.

THE FUND'S ASSETS ARE LARGELY CONCENTRATED IN MORTGAGE LOANS. As of November 30,
43% of the fund's total assets were invested in single family (home) loans, 38%
in multifamily (apartment), 5% in commercial loans and 10% in Treasury
securities. (See portfolio composition chart on page 3.) Assuming a market
environment that is similar to the past year, we intend to maintain the fund's
investments in mortgage loans and Treasuries near these levels. The greater
concentration in mortgage loans is consistent with our strategy of focusing on
securities subject to more credit risk and reducing our exposure to securities
more sensitive to changing interest rates. General improvements in housing
markets and a continued strong market for rental housing should have a positive
impact on the credit worthiness of our single and multifamily portfolios. To
date, we have experienced loan prepayments at expected levels and have been able
to reinvest these funds at historically attractive rates. If we experience
heavier prepayments, we may have to reinvest the proceeds at lower interest
rates, which would ultimately decrease the fund's income.

WE CONTINUED TO BORROW IN THE FUND THROUGH REVERSE REPURCHASE AGREEMENTS*** AND
INVESTED THE PROCEEDS IN TREASURY SECURITIES OR NEW MORTGAGE LOANS. The
Treasuries and mortgage loans acted as

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

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1996 Semiannual Report 5 American Strategic Income Portfolio III

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AMERICAN STRATEGIC INCOME PORTFOLIO III (CONTINUED)
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collateral for the reverse repurchase agreements. These reverse repurchase
agreements, expressed as a percentage of total assets, were approximately 10% as
of November 30. While borrowing can potentially increase the fund's income, it
can also increase the fund's net asset value volatility.

WE SUCCESSFULLY MANAGED THE RISKS*** INVOLVED WITH MORTGAGE LOANS DURING THE
PERIOD. (See the glossary for more on the specific risks associated with
mortgage loans.) One of the ways we did this was by focusing on moderately
valued homes, which have less credit risk than do higher valued homes. As of
November 30, the fund held 2,690 single family loans on properties which, on
average, had a value of approximately $73,000. The average balance remaining on
these loans was approximately $59,000. Since the fund's inception, we have kept
its principal losses from foreclosed single family loans to 2 cents per share.
We followed a similar philosophy when purchasing multifamily and commercial
loans. We believe that smaller loans spread out in several states are less
likely to cause losses in the fund. On November 30, we had 53 multifamily loans
with an average loan balance of approximately $2,596,000 and eight commercial
loans with an average balance of approximately $2,439,000. Through November,
there were no realized foreclosure losses to the fund from our investments in
multifamily or commercial loans. However, in June 1996 we

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DELINQUENCY PROFILE
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The chart below shows what percentage of loans in the portfolio are 30, 60, 90
or 120 days delinquent as of November 30, 1996.

CURRENT 91.5%
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30 Days 3.7%
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60 Days 0.8%
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90 Days 0.4%
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120+ Days 3.6%
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*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

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1996 Semiannual Report 6 American Strategic Income Portfolio III

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AMERICAN STRATEGIC INCOME PORTFOLIO III (CONTINUED)
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took possession of one multifamily property. Going forward, we will continue to
focus on moderately valued home loans and smaller multifamily and commercial
loans.

ALTHOUGH WE CONDUCT EXTENSIVE RISK ANALYSIS ON EVERY LOAN PURCHASED, DELINQUENT
LOANS ARE LIKELY. Because delinquent loans require a high level of attention, we
place them with loan servicers who work hard to convey to borrowers that their
first responsibility each month is to make their payments. If a loan forecloses,
our loan servicers will proceed with the process as quickly as possible.
Although we would hope to receive all of the principal and interest owed to us
on a foreclosed loan, it is likely that we may not be repaid in full.

WE BELIEVE GEOGRAPHIC DIVERSIFICATION IS ESSENTIAL TO THE FUND. The mortgage
loans in which the fund invests are backed by properties located throughout the
country. (See map on page 4.) Our largest concentrations of loans are in Texas
and California. Because these states have large populations, they offer more
loans. In addition, the strong economic recovery that many areas of Texas and
California are currently experiencing has helped the rental market stabilize and
increase in value.

LOOKING AHEAD, WE BELIEVE THE FUND'S NET ASSET VALUE AND EARNINGS SHOULD BE
FAIRLY STABLE RELATIVE TO CHANGES IN THE INTEREST RATE ENVIRONMENT. We believe
we have reduced interest rate risk and focused our investments where we feel we
can currently add the most value -- in the mortgage loan area. This focus on
mortgage loans should allow the fund to provide more consistent income levels.
We hope this will attract more investors to the fund, which, in turn, could
reduce the current discount of market price to net asset value. We anticipate
more investments in commercial mortgage loans in the future. Commercial loans
may involve more risk than multifamily or single family mortgage loans. (For
more on the specific risks associated with mortgage loans, see the glossary.)

THE PROPOSED SETTLEMENT OF A CLASS ACTION LAWSUIT AGAINST THE FUND SHOULD BE
PRESENTED TO THE COURT FOR PRELIMINARY APPROVAL EARLY THIS YEAR. Shareholders
received details of the proposed settlement in

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1996 Semiannual Report 7 American Strategic Income Portfolio III

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AMERICAN STRATEGIC INCOME PORTFOLIO III (CONTINUED)
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the annual report that was mailed in July. At that time, we anticipated
preliminary court approval in late 1996. Due to delays in the process, we now
expect the approval early this year. There can, however, be no assurance as to
the timing of preliminary court approval or the settlement itself.

The efforts of the fund's management team continue to be dedicated to reaching
the fund's objectives and helping you achieve your financial goals. Thank you
for your investment in American Strategic Income Portfolio III.

Sincerely,

/s/ John Wenker

John Wenker
Portfolio Manager

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1996 Semiannual Report 8 American Strategic Income Portfolio III

<PAGE>
Financial Statements (Unaudited)

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STATEMENT OF ASSETS AND LIABILITIES November 30, 1996
..................................................................

<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $1,652,000) ......... $358,278,062
Real estate owned (identified cost: $4,048,231) (note 2) ... 3,640,317
Cash in bank on demand deposit ............................. 1,442,360
Accrued interest receivable ................................ 3,172,543
------------------
Total assets ............................................. 366,533,282
------------------

LIABILITIES:
Reverse repurchase agreements payable ...................... 37,500,000
Accrued investment management fee .......................... 169,867
Accrued administrative fee ................................. 53,756
Accrued interest ........................................... 171,802
Other accrued expenses ..................................... 29,768
------------------
Total liabilities ........................................ 37,925,193
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Net assets applicable to outstanding capital stock ......... $328,608,089
------------------
------------------

REPRESENTED BY:
Capital stock - authorized 1 billion shares of $0.01 par
value; outstanding, 26,742,546 shares .................... $ 267,425
Additional paid-in capital ................................. 377,887,728
Undistributed net investment income ........................ 2,599,147
Accumulated net realized loss on investments ............... (57,782,469)
Unrealized appreciation of investments ..................... 5,636,258
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Total - representing net assets applicable to outstanding
capital stock .......................................... $328,608,089
------------------
------------------

Net asset value per share of outstanding capital stock ..... $ 12.29
------------------
------------------

* Investments in securities at identified cost ............. $352,233,890
------------------
------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1996 Semiannual Report 9 American Strategic Income Portfolio III
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF OPERATIONS For the Six Months Ended November 30, 1996
..................................................................

<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $1,963,278) ........... $15,122,969
-----------------

EXPENSES (NOTE 3):
Investment management fee .................................. 1,005,786
Administrative fee ......................................... 325,173
Custodian and accounting fees .............................. 89,812
Transfer agent fees ........................................ 21,965
Reports to shareholders .................................... 44,489
Mortgage servicing fees .................................... 487,295
Directors' fees ............................................ 4,320
Audit and legal fees ....................................... 54,713
Other expenses ............................................. 58,927
-----------------
Total expenses ........................................... 2,092,480
Less expenses paid indirectly .............................. (4,961)
-----------------

Total net expenses ....................................... 2,087,519
-----------------

Net investment income .................................... 13,035,450
-----------------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized loss on investments (note 4) .................. (372,620)
Net change in unrealized appreciation or depreciation of
investments .............................................. 1,949,780
-----------------

Net gain on investments .................................. 1,577,160
-----------------

Net increase in net assets resulting from operations ..... $14,612,610
-----------------
-----------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1996 Semiannual Report 10 American Strategic Income Portfolio III
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF CASH FLOWS For the Six Months Ended November 30, 1996
..................................................................

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest income ............................................ $15,122,969
Net expenses ............................................... (2,087,519)
-----------------
Net investment income .................................... 13,035,450
-----------------

Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest receivable and principal
receivable on mortgage securities ...................... 557,097
Net amortization of bond discount and premium ............ (143,535)
Change in accrued fees and expenses ...................... (160,292)
-----------------
Total adjustments ...................................... 253,270
-----------------

Net cash provided by operating activities .............. 13,288,720
-----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ......................... 61,719,695
Purchases of investments ................................... (18,437,125)
Net purchases of short-term securities ..................... (227,000)
-----------------

Net cash provided by investing activities .............. 43,055,570
-----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments for reverse repurchase agreements ............. (43,500,000)
Distributions paid to shareholders ......................... (13,605,271)
-----------------

Net cash used by financing activities .................. (57,105,271)
-----------------
Net decrease in cash ....................................... (760,981)
Cash at beginning of period ................................ 2,203,341
-----------------

Cash at end of period .................................. $ 1,442,360
-----------------
-----------------

Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ............................................. $ 2,144,453
-----------------
-----------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1996 Semiannual Report 11 American Strategic Income Portfolio III
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------

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

<TABLE>
<CAPTION>
SIX MONTHS ENDED
11/30/96 YEAR ENDED
(UNAUDITED) 5/31/96
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 13,035,450 $ 26,475,079
Net realized loss on investments ........................... (372,620) (1,456,249)
Net change in unrealized appreciation or depreciation of
investments .............................................. 1,949,780 1,032,738
------------------ ------------------

Net increase in net assets resulting from operations ..... 14,612,610 26,051,568
------------------ ------------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................. (13,605,271) (33,239,613)
------------------ ------------------

CAPITAL SHARE TRANSACTIONS:
Payments for retirement of 326,200 shares (note 6) ......... -- (3,576,221)
------------------ ------------------
Total increase (decrease) in net assets .................. 1,007,339 (10,764,266)

Net assets at beginning of period .......................... 327,600,750 338,365,016
------------------ ------------------

Net assets at end of period ................................ $328,608,089 $327,600,750
------------------ ------------------
------------------ ------------------

Undistributed net investment income ........................ $ 2,599,147 $ 3,168,968
------------------ ------------------
------------------ ------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

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1996 Semiannual Report 12 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited)
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(1) ORGANIZATION
................................................................................
American Strategic Income Portfolio Inc. III (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 borrow, including
through the use of reverse repurchase agreements, and may
purchase securities through the sale-forward (dollar-roll)
program. Fund shares are listed on the New York Stock Exchange
under the symbol CSP.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
................................................................................
INVESTMENTS IN SECURITIES
The fund's mortgage related investments such as whole loans,
participation mortgages and mortgage servicing rights are
initially valued at cost and their values are subsequently
monitored and adjusted pursuant to a pricing model approved by
the board of directors and implemented by Piper Capital
Management. The pricing model is designed to reflect 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 projected rate
and severity of defaults, the delinquency profile, 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. Certain elements of the pricing model involve subjective
judgment. Additionally, certain other factors will be considered
in the determination of the valuation of investments in
multifamily properties, including but not limited to, results of
annual inspections of the multifamily property by the adviser or
a servicing agent retained by the adviser, reviews of annual
unaudited financial statements of the multifamily property,
monitoring of local and other economic conditions and their
impact on local real estate values and analyses

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1996 Semiannual Report 13 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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of rental vacancy rates at the multifamily property. Subjective
adjustments to the valuation of such investments in multifamily
properties may be made based upon the adviser's analysis of such
information. The actual values that may be realized upon the sale
of whole loans, participation mortgages and mortgage servicing
rights can only be determined in negotiations between the fund
and third parties.

The values of other fixed income securities will be provided by
an independent pricing service, which determines these valuations
at a time earlier than the close of the New York Stock Exchange.
Fixed income securities for which prices are not available from
an independent pricing service but where an active market exists
will be valued using market quotations obtained from one or more
dealers that make markets in the securities.

Occasionally, events affecting the value of such securities may
occur between the time valuations are determined and the close of
the New York Stock Exchange. If events materially affecting the
value of such securities occur, if the fund's management
determines for any other reason that valuations provided by the
pricing service or market quotations from dealers are inaccurate
or when market quotations are not readily available, securities
will be valued at their fair value according to procedures
decided upon in good faith by the board of directors. Short-term
securities with maturities of 60 days or less are valued at
amortized cost, which approximates market value.

Exchange-traded options are valued at the last sales price on the
exchange prior to the time when assets are valued. If no sales
were reported that day, the options will be valued at the mean
between the current closing bid and asked prices.
Over-the-counter options are valued using market quotations
obtained from independent dealers that make markets in the
securities. Financial futures are valued at the last settlement
price established each day by the board of trade or exchange on
which they are traded.

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1996 Semiannual Report 14 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------

Securities transactions are accounted for on the date the
securities are purchased and sold. Realized gains and losses are
calculated on the identified-cost basis. Interest income,
including amortization of bond discount and premium computed on a
level-yield basis, is accrued weekly. Costs associated with
acquiring whole loans, participation mortgages and mortgage
servicing rights are capitalized and included in the cost basis
of the loans purchased.

OPTIONS TRANSACTIONS
For hedging purposes, the fund may buy and sell put and call
options, write covered call options on portfolio securities, and
write cash-secured puts. The risk in writing a call option is
that the fund gives up the opportunity for profit if the market
price of the security increases and the option is exercised. The
risk in writing a put option is that the fund may incur a loss if
the market price of the security decreases and the option is
exercised. The risk of buying an option is that the fund pays a
premium whether or not the option is exercised. The fund also has
the additional risk of not being able to enter into a closing
transaction if a liquid secondary market does not exist.

The fund will realize a gain or loss upon expiration or closing
of the option transaction. When an option is exercised, the
proceeds on the sale of a written call option, the purchase cost
of a written put option, or the cost of a security for purchased
put and call options is adjusted by the amount of premium
received or paid.

FUTURES TRANSACTIONS
In order to gain exposure to or protect against changes in the
market, the fund may buy and sell financial futures contracts and
related options. Risks of entering into futures contracts and
related options include the possibility there may be an illiquid
market and that a change in the value of the contract or option
may not correlate with changes in the value of the underlying
securities.

Upon entering into a futures contract, the fund is required to
deposit either cash or securities in an amount (initial margin)
equal

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

1996 Semiannual Report 15 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the fund each
day. The variation margin payments are equal to the daily changes
in the contract value and are recorded as unrealized gains and
losses. The fund recognizes a realized gain or loss when the
contract is closed or expires.

INTEREST RATE TRANSACTIONS
To preserve a return or spread on a particular investment or
portion of its portfolio or for other non-speculative purposes,
the fund may enter into various hedging transactions, such as
interest rate swaps and the purchase of interest rate caps and
floors. Interest rate swaps involve the exchange of commitments
to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payments
of interest on a contractually based notional principal amount
from the party selling the interest rate cap. The purchase of an
interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to
receive payments of interest on a contractually based notional
principal amount from the party selling the interest rate floor.

If forecasts of interest rates and other market factors are
incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were
not used. Even if the forecasts are correct, there is risk that
the positions may correlate imperfectly with the asset or
liability being hedged. Other risks of entering into these
transactions are that a liquid secondary market may not always
exist or that the other party to the transaction may not perform.

For interest rate swaps, caps and floors, the fund accrues
weekly, as an increase or decrease to interest income, the
current net amount due to or owed by the fund. Interest rate
swaps, caps and floors are

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

1996 Semiannual Report 16 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
valued from prices quoted by independent brokers. These
valuations represent the present value of all future cash
settlement amounts based on implied forward interest rates.

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, 1996, loans representing 4.8% of the outstanding
principal value of whole loans, or 4.6% of net assets were
considered by the fund to be delinquent as to the timely monthly
payment of principal and interest. A loan is considered
delinquent when a borrower has missed two or more payments. 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. On November 30, 1996, the fund owned 30
homes with an aggregate value of $2,140,266 and one apartment
building with a value of $1,500,051, for a total of 1.1% of net

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

1996 Semiannual Report 17 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
assets. The fund recognized net realized losses of $222,291, or
$0.008 per share, on real estate sold during the six months ended
November 30, 1996.

SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the fund on a when-issued or forward-commitment basis can take
place a month or more after the transaction date. During this
period, such securities do not earn interest, are subject to
market fluctuation and may increase or decrease in value prior to
their delivery. The fund segregates, with its custodian, assets
with a market value equal to the amount of its purchase
commitments. The purchase of securities on a when-issued or
forward-commitment basis may increase the volatility of the
fund's net asset value if the fund makes such purchases while
remaining substantially fully invested. As of November 30, 1996,
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 six
months ended November 30, 1996, 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. For calendar year 1996, the fund intends
to distribute substantially all of its taxable net investment
income and realized gains, if any, to avoid the payment of any
federal excise taxes.

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

1996 Semiannual Report 18 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------

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 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.

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

1996 Semiannual Report 19 American Strategic Income Portfolio III
<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
................................................................................
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
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, 1996, the effective investment management fee
incurred by the fund was 0.62% on an annual basis. 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.

When acquiring whole loans and participation mortgages, the fund
enters into mortgage servicing agreements with mortgage
servicers.

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

1996 Semiannual Report 20 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
For a fee, mortgage servicers maintain loan records, such as
insurance and taxes and the proper allocation of payments between
principal and interest.

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; 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.

(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, 1996 aggregated $18,580,660 and
$61,719,695, respectively. Included in proceeds from sales are
$902,536 from sales of real estate owned. For the six months
ended November 30, 1996, no brokerage commissions were paid to
Piper Jaffray Inc., an affiliated broker.

(5) CAPITAL LOSS CARRYOVER
................................................................................
For federal income tax purposes, the fund had capital loss
carryovers of $57,409,849 as of May 31, 1996, which, if not
offset by subsequent capital gains, will expire in 2003 through
2005. It is unlikely the board of directors will authorize a
distribution of any net realized capital gains until the
available capital loss carryover has been offset or expires.

(6) RETIREMENT OF FUND SHARES
................................................................................
The fund's board of directors voted to discontinue the share
repurchase program effective February 6, 1996. Pursuant to the
plan, the fund had cumulatively repurchased and retired 707,200
shares as of February 5, 1996 which represents 2.6% of the shares
originally issued.

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

1996 Semiannual Report 21 American Strategic Income Portfolio III
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------

(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
Companies Inc., Piper Jaffray Inc., Piper Capital Management
Incorporated and certain individuals. The named plaintiffs and
defendants in this putative class action have reached an
agreement-in-principle on a proposed settlement and are
negotiating the terms of a definitive settlement agreement. If
approved by the Court, a definitive settlement agreement
consistent with the terms of the agreement-in-principle would
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 agreement stipulates,
among other things, that CSP would offer to repurchase up to 10
percent of its outstanding shares from current shareholders at
net asset value. The repurchase offer would occur after the
effective date of the settlement following Court approval.

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

1996 Semiannual Report 22 American Strategic Income Portfolio III
<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>
Six Months
Ended Year Year Year Period
11/30/96 Ended Ended Ended Ended
(Unaudited) 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 ........ $ 12.25 $12.50 $12.61 $14.04 $14.07
----------- ------- ------- ------- ----------
Operations:
Net investment income ..................... 0.49 0.99 1.18 1.37 0.19
Net realized and unrealized gain (loss) on
investments ............................. 0.06 -- (0.01) (1.52) (0.11)
----------- ------- ------- ------- ----------
Total from operations ................... 0.55 0.99 1.17 (0.15) 0.08
----------- ------- ------- ------- ----------
Distributions to shareholders:
From net investment income ................ (0.51) (1.24) (1.28) (1.07) (0.11)
In excess of net realized gains on
investments ............................. -- -- (0.21) --
----------- ------- ------- ------- ----------
Total distributions to shareholders ..... (0.51) (1.24) (1.28) (1.28) (0.11)
----------- ------- ------- ------- ----------
Net asset value, end of period .............. $ 12.29 $12.25 $12.50 $12.61 $14.04
----------- ------- ------- ------- ----------
----------- ------- ------- ------- ----------
Per-share market value, end of period ....... $ 10.63 $10.25 $11.13 $12.75 $15.38
----------- ------- ------- ------- ----------
----------- ------- ------- ------- ----------
SELECTED INFORMATION
Total return, net asset value (a) ........... 4.60% 8.17% 10.03% (1.78)% 0.54%
Total return, market value (b) .............. 8.81% 3.20% (2.42)% (9.52)% 3.23%
Net assets at end of period (in millions) ... $ 329 $ 328 $ 338 $ 346 $ 384
Ratio of expenses to average weekly net
assets (c)(h) ............................. 1.29%(g) 1.29% 1.29% 1.19% 1.01%(g)
Ratio of net investment income to average
weekly net assets ......................... 8.02%(g) 7.92% 9.48% 9.57% 7.46%(g)
Portfolio turnover rate (excluding short-term
securities) ............................... 5% 121% 49% 155% 2%
Amount of borrowings outstanding at end of
period (in millions) (d) .................. $ 38 $ 81 $ 75 $ 159 $ 15
Per-share amount of borrowings outstanding at
end of period ............................. $ 1.40 $ 3.03 $ 2.77 $ 5.79 $ 0.55
Per-share amount of net assets, excluding
borrowings, at end of period .............. $ 13.69 $15.28 $15.27 $18.40 $14.59
Asset coverage ratio (e) .................... 976% 504% 551% 317% 2,659%
</TABLE>

(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A SHARE DURING THE PERIOD AND
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(B) BASED ON THE CHANGE IN MARKET PRICE OF A SHARE DURING THE PERIOD AND
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(C) INCLUDES 0.02%, 0.09%, AND 0.06% FROM FEDERAL EXCISE TAXES IN FISCAL YEARS
1996, 1995 AND 1994, RESPECTIVELY. BEGINNING IN FISCAL 1995, THE EXPENSE
RATIOS REFLECT THE EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE FUND.
PRIOR PERIOD EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.
(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 MARCH 25, 1993.
(G) ADJUSTED TO AN ANNUAL BASIS.
(H) THE RATIO OF EXPENSES TO AVERAGE WEEKLY NET ASSETS EXCLUDES INTEREST
EXPENSE THAT HAS BEEN PRESENTED NET OF THE RELATED INTEREST INCOME IN THE
FINANCIAL STATEMENTS. IF INTEREST EXPENSE HAD BEEN INCLUDED IN TOTAL
EXPENSES, THE RATIOS OF EXPENSES TO AVERAGE WEEKLY NET ASSETS WOULD HAVE
BEEN: 2.49%, 2.66%, 3.55%, 2.13% AND 1.06% FOR THE SIX MONTHS ENDED
11/30/96 AND FISCAL 1996, 1995, 1994 AND 1993, RESPECTIVELY.

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

1996 Semiannual Report 23 American Strategic Income Portfolio III
<PAGE>
Investments in Securities (Unaudited)
- ---------------------------------------------------------------------

<TABLE>
<CAPTION>
AMERICAN STRATEGIC INCOME PORTFOLIO III November 30, 1996
.......................................................................................

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 (12.6%):
U.S. AGENCY MORTGAGE-BACKED SECURITIES (1.4%):
FIXED RATE (1.4%):
6.50%, FNMA, 1/1/11 ............................... $ 4,633,975 $ 4,607,701
------------

U.S. GOVERNMENT SECURITIES (11.2%):
5.13%, U.S. Treasury Note, 4/30/98 ................ 37,000,000(b) 36,818,330
------------

Total U.S. Government and Agency Securities
(cost: $41,532,489) .......................... 41,426,031
------------

PRIVATE MORTGAGE-BACKED SECURITIES (0.0%):
FIXED RATE (0.0%):
0.00%, First Gibralter, Series 1992-MM, Class B,
Subordinated, 10/25/21
(cost: $810,833) ................................ 2,340,890(e)(f) 23,409
------------

WHOLE LOANS AND PARTICIPATION MORTGAGES (c,d,e) (95.9%):
COMMERCIAL LOANS (6.0%):
Airport Plaza Offices, 8.88%, 5/1/01 .............. 746,534 758,852
Commerce Center, 8.88%, 5/1/01 .................... 1,940,988 1,973,015
John Brown Office Building, 8.90%, 6/1/03 ......... 4,109,868 4,194,943
Merrill Lynch / Northern Trust Building, 9.05%,
6/1/03 .......................................... 3,791,690 3,889,516
Pacific Shores Mobile Home Park II, 11.12%,
10/1/06 ......................................... 2,996,589 3,101,470
Parkside Office Building, 8.30%, 12/1/01 .......... 1,725,000 1,707,750
Paseo Verde Plaza, 8.63%, 5/1/01 .................. 1,841,093 1,846,800
Turf Manor, 8.25%, 1/1/06 ......................... 2,377,585 2,363,081
------------
19,835,427
------------

MULTIFAMILY LOANS (42.5%):
Ambassador House Apartments, 10.13%, 12/1/01 ...... 2,375,125 2,458,254
Ashley Square Apartments, 9.38%, 6/1/99 ........... 959,166 978,350
Berryhill Apartments, 9.52%, 9/1/01 ............... 1,578,105 1,633,339
Boardwalk Apartments, 9.00%, 9/1/01 ............... 4,747,405 4,880,808
Briarwood Apartments, 10.24%, 12/1/01 ............. 989,877 1,024,523
Champlin Drive Apartments, 10.00%, 7/15/08 ........ 2,205,717 1,820,599
Concord Apartments, 9.63%, 5/1/01 ................. 2,069,150 2,054,046
Crane Zion I, 10.00%, 9/1/08 ...................... 2,648,484 2,383,636
Crestridge Apartments, 8.00%, 1/1/03 .............. 1,832,018 1,814,431
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1996 Semiannual Report 24 American Strategic Income Portfolio III
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------

AMERICAN STRATEGIC INCOME PORTFOLIO III
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
El Camino Apartments, 10.65%, 2/1/02 .............. $ 4,759,780 $ 4,771,680
El Toro Blanco Apartments, 10.05%, 1/1/02 ......... 1,337,193 1,383,995
Essex II, 10.00%, 8/1/08 .......................... 2,058,669 1,350,693
Everhard Road Apartments, 9.77%, 9/1/01 ........... 489,065 506,182
Falls Apartments, 10.00%, 7/1/03 .................. 3,916,403 4,053,478
Faronia Square Apartments, 10.40%, 1/1/02 ......... 3,566,491 3,691,318
Geneva Village Apartments, 9.50%, 11/1/04 ......... 1,353,330 1,400,696
Grand Forks Multifamily, 9.94%, 12/1/01 ........... 2,405,289 2,489,474
Harpers Ferry Apartments, 10.56%, 12/1/01 ......... 1,822,572 1,886,362
Hidden Pines Apartments, 9.38%, 6/1/99 ............ 2,124,922 2,167,421
Huntington Hills Apartments, 8.75%, 11/1/05 ....... 1,388,937 1,423,243
Jeanne Manor Apartments, 10.32%, 8/1/01 ........... 1,568,309 1,623,200
Johanson Arms Apartments, 9.35%, 6/1/04 ........... 2,045,788 2,117,391
Johnson/Wilson Apartments, 10.00%, 9/1/18 ......... 794,178 821,974
Karrington of Bexley Apartments, 9.42%, 11/1/01 ... 3,951,929 4,090,246
Kingstown Colony Apartments, 9.98%, 11/1/01 ....... 1,779,822 1,842,116
Lake Conway Woods, 10.07%, 8/1/01 ................. 2,963,033 3,066,739
Maple Village Apartments, 9.50%, 11/1/04 .......... 1,414,208 1,463,705
Mapleview Apartments, 9.63%, 5/1/02 ............... 3,717,419 3,847,529
Marina Del Ray Apartments, 10.00%, 1/1/02 ......... 3,840,786 3,975,214
Meadowview Apartments, 9.50%, 11/1/04 ............. 1,003,525 1,017,474
Mission Village Apartments, 9.52%, 9/1/01 ......... 2,199,126 2,276,095
Oak Grove Apartments, 10.05%, 12/2/01 ............. 898,558 930,007
Ocean Cove Apartments, 9.50%, 10/1/04 ............. 3,061,387 3,168,536
Palm Court Apartments, 10.00%, 9/1/98 ............. 6,870,615 7,111,087
Parkway Village Apartments, 9.50%, 11/1/04 ........ 974,024 1,008,115
Quail Lakes Apartments, 8.95%, 11/1/03 ............ 9,000,000 9,000,000
Regency Manor Apartments, 10.30%, 1/1/00 .......... 5,274,400 5,459,004
Riverbrook Apartments, 10.38%, 1/1/02 ............. 2,065,979 2,138,289
Rose Park Apartments, 9.50%, 11/1/04 .............. 875,986 906,645
Shelter Island Apartments, 10.00%, 10/1/01 ........ 12,847,908 13,297,585
Shenandoah Woods Apartments, 9.38%, 6/1/99 ........ 2,897,174 2,955,117
Southlake Villa Apartments, 9.50%, 11/1/04 ........ 1,472,054 1,523,576
Studio One Apartments, 9.38%, 6/1/99 .............. 885,384 903,092
The Timbers Apartments, 9.38%, 6/1/99 ............. 2,705,341 2,790,288
Timberlea Terrace Apartments, 10.00%, 11/1/08 ..... 883,897 730,099
Twin Lakes Apartments, 9.80%, 11/1/01 ............. 3,239,689 3,070,901
Valley Manor Apartments, 8.45%, 11/1/02 ........... 3,386,870 3,432,932
Victoria Gardens Apartments, 9.52%, 9/1/01 ........ 1,380,842 1,429,171
Village Green Apartments, 10.00%, 8/1/08 .......... 931,303 963,898
Westree Apartments, 10.00%, 9/1/03 ................ 3,301,210 3,416,752
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1996 Semiannual Report 25 American Strategic Income Portfolio III
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------

AMERICAN STRATEGIC INCOME PORTFOLIO III
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Westree Apartments II, 13.00%, 10/1/96 ............ $ 1,000,000 $ 1,000,000
Winchester House Apartments, 8.17%, 2/1/03 ........ 1,834,497 1,829,544
Windswept Village Apartments, 9.38%, 6/1/99 ....... 2,036,384 2,077,110
------------
139,455,959
------------

SINGLE FAMILY LOANS (47.4%):
Arbor, 9.27%, 8/16/17 ............................. 5,036,596 5,036,596
Barclays, 8.89%, 6/7/25 ........................... 3,600,107 3,497,504
Bayview Financial, 6.54%, 2/21/20 ................. 1,160,351 1,081,911
Delaware II, 8.79%, 11/27/07 ...................... 8,519,943(b) 8,416,528
Delta Funding, 10.50%, 5/1/22 ..................... 1,261,158 1,273,770
Fairbanks IV, 7.98%, 4/3/19 ....................... 3,207,083 2,808,817
Federal Mortgage, 8.30%, 12/15/20 ................. 3,917,326(b) 3,570,965
First Boston II, 9.52%, 7/31/09 ................... 3,672,270(b) 3,501,510
First Boston III, 9.00%, 2/1/13 ................... 4,204,314 3,987,792
First Boston IV, 9.24%, 3/1/12 .................... 3,666,353(b) 3,540,963
First Boston V, 8.34%, 5/26/16 .................... 4,227,278 4,248,837
Greenwich, 9.29%, 4/16/05 ......................... 3,023,736 3,028,574
Kidder Peabody I, 9.95%, 9/1/10 ................... 5,621,900(b) 5,448,746
Kidder Peabody II, 10.04%, 5/1/13 ................. 1,291,148(b) 1,287,791
Knutson III, 8.97%, 4/1/15 ........................ 2,088,762 2,107,143
Maryland National, 9.61%, 9/1/19 .................. 1,981,471(b) 1,917,668
Meridian IV, 8.18%, 8/16/16 ....................... 8,643,440 8,365,534
Meridian V, 8.15%, 10/6/17 ........................ 5,705,587 5,661,084
Minneapolis Employees Retirement Fund, 8.45%,
2/10/14 ......................................... 5,583,299 5,429,200
Mortgage Access, 9.25%, 9/30/19 ................... 1,078,955(b) 1,018,425
Nomura, 10.06%, 12/16/23 .......................... 37,097,063(b) 37,055,523
Nomura III, 8.44%, 12/29/17 ....................... 21,487,425 19,838,185
Norwest II, 7.77%, 11/27/22 ....................... 8,623,183 8,355,675
Norwest IV, 8.31%, 2/23/25 ........................ 8,543,211 8,438,984
President Homes 93-6A, Sales Inventory, 8.88%,
11/1/22 ......................................... 144,934 108,657
President Homes 93-6C, Sales Inventory, 8.63%,
8/1/23 .......................................... 109,965 111,263
President Homes 93-6E, Sales Inventory, 9.07%,
11/1/22 ......................................... 171,381 176,042
President Homes 94-1B, Sales Inventory, 8.72%,
11/18/23 ........................................ 189,872 166,159
Sears Mortgage, 8.03%, 10/1/17 .................... 934,196(b) 903,928
Shearson Lehman, 9.64%, 6/1/17 .................... 4,873,536(b) 4,942,475
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

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

1996 Semiannual Report 26 American Strategic Income Portfolio III
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------

AMERICAN STRATEGIC INCOME PORTFOLIO III
(CONTINUED)

Total Whole Loans and Participation Mortgages
(cost: $308,238,568) ......................... 315,176,622
------------

SHORT-TERM SECURITIES (0.5%):
Repurchase agreement with Goldman Sachs, acquired
on 11/29/96, accrued interest of $776, 5.64%,
12/2/96
(cost: $1,652,000) .............................. 1,652,000(g) 1,652,000
------------

Total Investments in Securities
(cost: $352,233,890) (h) ..................... $358,278,062
------------
------------
</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, 1996, SECURITIES VALUED AT $41,751,214 WERE PLEDGED AS
COLLATERAL FOR THE FOLLOWING OUTSTANDING REVERSE REPURCHASE AGREEMENTS:

<TABLE>
<CAPTION>
NAME OF BROKER AND
ACQUISITION ACCRUED DESCRIPTION OF
AMOUNT DATE RATE* DUE INTEREST COLLATERAL
- ------------ ----------- --------- ---------- --------- -------------------
<S> <C> <C> <C> <C> <C>
$ 1,500,000 11/1/96 6.25% 12/2/96 $ 7,812 (1)
2,000,000 11/1/96 6.25% 12/2/96 10,417 (1)
3,500,000 11/1/96 6.25% 12/2/96 18,229 (1)
30,500,000 11/1/96 5.33% 12/2/96 135,344 (2)
- ------------ ---------
$ 37,500,000 $ 171,802
- ------------ ---------
- ------------ ---------
</TABLE>

* INTEREST RATE AS OF NOVEMBER 30, 1996. RATES ARE BASED ON THE LONDON
INTERBANK OFFERED RATE (LIBOR) AND RESET MONTHLY.
NAME OF BROKER AND DESCRIPTION OF COLLATERAL:

(1) NOMURA;
DELAWARE II, 8.79%, 11/27/07, $488,264 PAR
FEDERAL MORTGAGE, 8.30%, 12/15/20, $1,855,943 PAR
FIRST BOSTON II, 9.52%, 7/31/09, $401,567 PAR
FIRST BOSTON IV, 9.24%, 3/1/12, $193,573 PAR
KIDDER PEABODY I, 9.95%, 9/1/10, $408,105 PAR
KIDDER PEABODY II, 10.78%, 5/1/13, $215,429 PAR
MARYLAND NATIONAL, 9.61%, 9/1/19, $483,705 PAR
MORTGAGE ACCESS, 9.25%, 9/30/19, $381,146 PAR
NOMURA, 10.06%, 12/16/23, $6,389,828 PAR
SEARS MORTGAGE, 8.03%, 10/1/17, $71,489 PAR
SHEARSON LEHMAN, 9.64%, 6/1/17, $365,045 PAR
THE CROSSINGS, 10.75%, 10/1/11, $85,088 PAR

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

1996 Semiannual Report 27 American Strategic Income Portfolio III
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C> <C>
(2) NOMURA;
U.S. TREASURY NOTE, 5.13%, 4/30/98, $30,810,000 PAR
</TABLE>

(C) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT
ON NOVEMBER 30, 1996. 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, 1996.
(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:

AIRPORT PLAZA OFFICES - ALBUQUERQUE, NM
COMMERCE CENTER - ALBUQUERQUE, NM
JOHN BROWN OFFICE BUILDING - HOUSTON, TX
MERRILL LYNCH / NORTHERN TRUST BUILDING - FORT LAUDERDALE, FL
PACIFIC SHORES MOBILE HOME PARK II - NEWPORT, OR
PARKSIDE OFFICE BUILDING - SAN ANTONIO, TX
PASEO VERDE PLAZA - PHOENIX, AZ
TURF MANOR - PHOENIX, AZ

MULTIFAMILY LOANS:

AMBASSADOR HOUSE APARTMENTS - OKLAHOMA CITY, OK
ASHLEY SQUARE APARTMENTS - HOUSTON, TX
BERRYHILL APARTMENTS - OREGON CITY, OR
BOARDWALK APARTMENTS - OKLAHOMA CITY, OK
BRIARWOOD APARTMENTS - GREELEY, CO
CHAMPLIN DRIVE APARTMENTS - CHAMPLIN, MN
CONCORD APARTMENTS - MIDWEST CITY, OK
CRANE ZION I - ZION, IL
CRESTRIDGE APARTMENTS - KNOXVILLE, TN
EL CAMINO APARTMENTS - PHOENIX, AZ
EL TORO BLANCO APARTMENTS - COLORADO SPRINGS, CO
ESSEX II - ROCHESTER, MN
EVERHARD ROAD APARTMENTS - NORTH CANTON, OH
FALLS APARTMENTS - COLORADO SPRINGS, CO
FARONIA SQUARE APARTMENTS - MEMPHIS, TN
GENEVA VILLAGE APARTMENTS - WEST JORDAN, UT
GRAND FORKS MULTIFAMILY - GRAND FORKS, ND
HARPERS FERRY APARTMENTS - LAFAYETTE, LA
HIDDEN PINES APARTMENTS - HOUSTON, TX
HUNTINGTON HILLS APARTMENTS - MANKATO, MN
JEANNE MANOR APARTMENTS - PORTLAND, OR
JOHANSON ARMS APARTMENTS - KINGSBURG, CA.
JOHNSON/WILSON APARTMENTS - ST. PAUL, MN
KARRINGTON OF BEXLEY APARTMENTS - BEXLEY, OH.
KINGSTOWN COLONY APARTMENTS - MARYVILLE, TN
LAKE CONWAY WOODS - ORLANDO, FL
MAPLE VILLAGE APARTMENTS - AMERICAN FORK, UT
MAPLEVIEW APARTMENTS - MERCHANTVILLE, NJ
MARINA DEL RAY APARTMENTS - GRAPEVINE, TX
MEADOWVIEW APARTMENTS - WEST JORDAN, UT
MISSION VILLAGE APARTMENTS - TUCSON, AZ
OAK GROVE APARTMENTS - MINNEAPOLIS, MN
OCEAN COVE APARTMENTS - PINNELLAS CITY, FL

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

1996 Semiannual Report 28 American Strategic Income Portfolio III
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PALM COURT APARTMENTS - LOS ANGELES, CA
PARKWAY VILLAGE APARTMENTS - WEST JORDAN, UT
QUAIL LAKES APARTMENTS - OKLAHOMA CITY, OK
REGENCY MANOR APARTMENTS - GRAND ISLAND, NY
RIVERBROOK APARTMENTS - TAMPA, FL
ROSE PARK APARTMENTS - VERNAL, UT
SHELTER ISLAND APARTMENTS - LAS VEGAS, NV
SHENANDOAH WOODS APARTMENTS - HOUSTON, TX
SOUTHLAKE VILLA APARTMENTS - SALT LAKE CITY, UT
STUDIO ONE APARTMENTS - HOUSTON, TX
THE TIMBERS APARTMENTS - HOUSTON, TX
TIMBERLEA TERRACE APARTMENTS - WACONIA, MN
TWIN LAKES APARTMENTS - WARR ACRES, OK
VALLEY MANOR APARTMENTS - HASTINGS, MN
VICTORIA GARDENS APARTMENTS - VICTORIA, TX
VILLAGE GREEN APARTMENTS - FAIRBAULT, MN
WESTREE APARTMENTS - COLORADO SPRINGS, CO
WESTREE APARTMENTS II - COLORADO SPRINGS, CO
WINCHESTER HOUSE APARTMENTS - VIRGINIA GARDENS, FL
WINDSWEPT VILLAGE APARTMENTS - HOUSTON, TX
</TABLE>

SINGLE FAMILY LOANS:

ARBOR - 56 LOANS, NEW YORK
BARCLAYS - 22 LOANS, MIDWESTERN UNITED STATES
BAYVIEW FINANCIAL - 11 LOANS, MARYLAND
DELAWARE II - 222 LOANS, TEXAS
DELTA FUNDING - SENIOR DEBT SECURITY COLLATERALIZED BY A POOL
OF NON-PERFORMING WHOLE LOANS LOCATED THROUGHOUT THE UNITED STATES
FAIRBANKS IV - 35 LOANS, UNITED STATES
FEDERAL MORTGAGE - 48 LOANS, CONNECTICUT
FIRST BOSTON II - 85 LOANS, UNITED STATES, PRIMARILY IN TEXAS
FIRST BOSTON III - 104 LOANS, TEXAS AND FLORIDA
FIRST BOSTON IV - 90 LOANS, TEXAS, OKLAHOMA, AND MASSACHUSETTS
FIRST BOSTON V - 39 LOANS, UNITED STATES
GREENWICH - 33 LOANS, COLORADO
KIDDER PEABODY I - 149 LOANS, UNITED STATES
KIDDER PEABODY II - 17 LOANS, ARIZONA AND COLORADO
KNUTSON III - 29 LOANS, UNITED STATES
MARYLAND NATIONAL - 28 LOANS, UNITED STATES
MERIDIAN IV - 110 LOANS, MIDWESTERN UNITED STATES
MERIDIAN V - 78 LOANS, UNITED STATES
MINNEAPOLIS EMPLOYEES RETIREMENT FUND - 142 LOANS, MINNESOTA
MORTGAGE ACCESS - 7 LOANS, NEW JERSEY
NOMURA - 822 LOANS, CALIFORNIA AND TEXAS
NOMURA III - 298 LOANS, MIDWESTERN UNITED STATES
NORWEST II - 72 LOANS, MIDWESTERN UNITED STATES
NORWEST IV - 56 LOANS, MIDWESTERN UNITED STATES
PRESIDENT HOMES, SALES INVENTORY - 6 LOANS, MIDWESTERN UNITED
STATES
SEARS MORTGAGE - 14 LOANS, MIDWESTERN UNITED STATES
SHEARSON LEHMAN - 107 LOANS, UNITED STATES
THE CROSSINGS - 10 LOANS, MINNESOTA
(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.

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

1996 Semiannual Report 29 American Strategic Income Portfolio III
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C> <C>
(F) BASED UPON ESTIMATED TIMING AND AMOUNT OF FUTURE CASH FLOWS, INCOME IS
CURRENTLY NOT BEING RECOGNIZED ON THIS SECURITY WITH AN AGGREGATE MARKET
VALUE OF $23,409.
(G) 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.
(H) ON NOVEMBER 30, 1996, THE COST OF INVESTMENTS IN SECURITIES, INCLUDING REAL
ESTATE OWNED, FOR FEDERAL INCOME TAX PURPOSES WAS $356,282,121. 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 ...... $ 9,935,122
GROSS UNREALIZED DEPRECIATION ...... (4,298,864)
------------
NET UNREALIZED APPRECIATION ...... $ 5,636,258
------------
------------
</TABLE>

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

1996 Semiannual Report 30 American Strategic Income Portfolio III
<PAGE>
Shareholder Update
- ----------------------------------------

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 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 ............................ 24,241,940 847,169
Jaye F. Dyer ................................ 24,251,663 837,445
William H. Ellis ............................ 24,236,598 852,510
Karol D. Emmerich ........................... 24,262,642 826,466
Luella G. Goldberg .......................... 24,253,518 835,590
George Latimer .............................. 24,248,592 840,516
</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 ending 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>
24,528,318 294,223 266,566 --
</TABLE>

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

1996 Semiannual Report 31 American Strategic Income Portfolio III
<PAGE>
Directors and Officers
- ----------------------------------------

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 K. Kappenman, VICE PRESIDENT AND ASSISTANT SECRETARY
Amy Ayd, VICE PRESIDENT
Julene R. Melquist, 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

LEGAL COUNSEL
Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402

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

1996 Semiannual Report 32 American Strategic Income Portfolio III
<PAGE>

GLOSSARY OF TERMS ***
- --------------------------------------------------------------------------------

DISCOUNT
Closed-end funds 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, 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.

The fund's mortgage loans are subject to some unique risks such as credit risk
and real estate risk. Since the fund's mortgage loans generally aren't backed by
any government guarantee or private credit enhancement, they face CREDIT RISK.
This 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. 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.

FOR MORE INFORMATION

BY PHONE [GRAPHIC]

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 III

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 [GRAPHIC]

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 [GRAPHIC]

http://www.piperjaffray.com/
money_management/

*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.

<PAGE>

[LOGO]

PIPER CAPITAL MANAGEMENT INCORPORATED
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804

[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.

#21530 1/1997 059-97

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