<PAGE>
1997 Annual Report
AMERICAN MUNICIPAL INCOME PORTFOLIO
AMERICAN MUNICIPAL INCOME PORTFOLIO - 1997 ANNUAL REPORT
XAA
PIPER CAPITAL MANAGEMENT
<PAGE>
CONTENTS
President's Letter . . . . . . . . . . 1
Portfolio Managers' Letter . . . . . . 3
Financial Statements and Notes . . . . 7
Investments in Securities. . . . . . .16
Independent Auditors' Report . . . . .21
Federal Tax Information . . . . . . .22
Shareholder Update . . . . . . . . . .23
Directors and Officers . . . . . . . .27
Glossary . . . . . . . . . . . . . . .28
PIPER CAPITAL MANAGEMENT
AMERICAN MUNICIPAL INCOME PORTFOLIO
- --------------------------------------------------------------------------------
FUND OBJECTIVE
High current income exempt from regular federal income tax, consistent with
preservation of capital. The fund's income may be subject to state or local tax
and the federal alternative minimum tax. Investors should consult their tax
advisers. As with other investment companies, there can be no assurance this
fund will achieve its objective.
PRIMARY INVESTMENTS
A diverse range of municipal securities rated investment grade or of comparable
quality when purchased. These securities may include municipal derivative
securities, such as inverse floating rate and inverse interest-only municipal
securities, which may be more volatile than traditional municipal securities in
certain market conditions.
<PAGE>
[PHOTO]
WILLIAM H. ELLIS
President
Piper Capital Management
PRESIDENT'S LETTER
- --------------------------------------------------------------------------------
MARCH 18, 1997
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 annual 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
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1997 Annual Report 1 American Municipal Income Portfolio
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
- --------------------------------------------------------------------------------
Based on net asset value for the period ended January 31, 1997.
[GRAPH]
Average annualized total return figures are through January 31, 1997, and
are based on the change in net asset value (NAV). They reflect the
reinvestment of distributions but do not reflect sales charges. NAV-based
performance is used to measure investment management results.
Average annualized total return figures based on the change in market price
for the one-year, three-year and since inception periods ended January 31,
1997, were 3.29%, 0.60% and 0.61%, 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 Lipper General Municipal Bond Funds: Leveraged Average represents the
average total return, with distributions reinvested, of leveraged perpetual
and term trust national closed-end municipal funds as characterized by
Lipper Analytical Services. The Lehman Brothers Municipal Long Bond Index
is comprised of municipal bonds with more than 22 years to maturity and an
average credit quality of AA. The index is unmanaged and does not include
any fees or expenses in its total return figures.
The since inception numbers for the Lipper average and Lehman index are
calculated from the month end following the fund's inception through
January 31, 1997.
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1997 Annual Report 2 American Municipal Income Portfolio
<PAGE>
[PHOTO]
DOUG WHITE, CFA,
shares responsibility for the management of American Municipal Income Portfolio.
He has 14 years of financial experience.
PORTFOLIO MANAGERS' LETTER
- --------------------------------------------------------------------------------
MARCH 18, 1997
DEAR SHAREHOLDERS:
THE NET ASSET VALUE TOTAL RETURN FOR AMERICAN MUNICIPAL INCOME PORTFOLIO FOR THE
YEAR ENDED JANUARY 31, 1997, WAS 2.41%. This compares to total returns of 3.49%
for the Lipper General Municipal Bond Funds: Leveraged Average and 3.76% for the
Lehman Brothers Municipal Long Bond Index. Based on market price, the fund's
total return for the year was 3.29%.*
WE ATTRIBUTE THE FUND'S UNDERPERFORMANCE TO ITS EFFECTIVE DURATION,(***) WHICH
WE KEPT LONGER THAN THE DURATION OF THE FUND'S LEHMAN BROTHERS BENCHMARK.(***)
A long effective duration generally means that the fund is more sensitive to
changes in interest rates, which were plentiful during this reporting period.
During the first half of the year, rising rates had a negative effect on bonds
in general.
* 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.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
As a percentage of total assets on January 31, 1997.
[CHART]
Housing Revenue 17% Electric Revenue 14%
Water/Sewer/Pollution 5% Miscellaneous Revenue 3%
Other Assets 2% Leasing Revenue 10%
Health Service/HMO Revenue 1% Education Revenue 1%
Hospital Revenue 19% General Obligations 28%
Municipal floating rate trust certificates, municipal inverse floating rate
securities and municipal inverse interest-only securities account for 7% of
the fund's total assets.
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1997 Annual Report 3 American Municipal Income Portfolio
<PAGE>
[PHOTO]
RON REUSS, ISFA,
shares responsibility for the management of American Municipal Income Portfolio.
He has 28 years of financial experience.
PORTFOLIO MANAGERS' LETTER (continued)
- --------------------------------------------------------------------------------
However, municipal bonds, including those in this fund, performed better than
most of their taxable counterparts for three principal reasons: subsiding
concerns about tax reform, a decreased supply of new issues, and favorable
after-tax yields for municipal bonds in comparison to taxable bonds. This
favorable performance continued for most of the year, before making a sharp
reversal in October when a substantial drop in yields during September prompted
municipal issuers to flood the market with new bonds, which forced prices down.
Rates fell (and prices rose) in November, but then mixed signals about inflation
triggered rising municipal interest rates from early December through year-end,
with a corresponding drop in municipal bond prices.
WHILE WE GENERALLY MAINTAIN AN EFFECTIVE DURATION IN THIS FUND THAT IS LONGER
THAN THAT OF ITS BENCHMARK, WE TOOK STEPS THROUGHOUT THE YEAR TO SHORTEN IT
SOMEWHAT IN ORDER TO REDUCE THE FUND'S NET ASSET VALUE VOLATILITY. While this
strategy does help to reduce price volatility, it also decreases income and
thus, increases the likelihood of reduced common stock(***) dividends. For this
reason, we have been shortening the fund's duration at a managed pace, by
selling lower-quality, long-duration securities and replacing them with high-
quality, short-term variable rate assets. These help to offset some of the drop
in income since their incomes increase as short-term interest rates increase. As
of the end of this reporting period, the fund was earning its monthly dividend
of 6.275 cents per share. Keep in mind, however, that the fund also has
outstanding floating rate preferred stock.(***) During times of rising short-
term interest rates, the rates of preferred stock also rise, which could cause a
lower rate of return for common shareholders. For more discussion about
preferred stock, see the glossary at the back of this book.
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1997 Annual Report 4 American Municipal Income Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER (continued)
- --------------------------------------------------------------------------------
ANOTHER TOOL WE USED TO HELP MAINTAIN THE FUND'S INCOME WAS CALL
PROTECTION.(***) At year end, the average call protection of the securities in
this fund was more than 10 years, which means they cannot be redeemed by their
issuers within that time frame. Keeping long call protection allows the fund to
maximize the time it can earn income, since the bonds cannot be refinanced
during times of falling interest rates until their call dates. It also helps
increase the potential for price appreciation if interest rates fall (or price
depreciation if rates rise). Call protection has always been an important tool
in helping the fund meet its objective of high current income.
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GEOGRAPHICAL DISTRIBUTION
The fund remains well diversified across the United States, focusing on
municipal bonds in the central states. We have increased holdings in
California and Georgia, as those states' economies continue to grow. This map
shows the fund's geographical distribution, as a percentage of total assets, on
January 31, 1997.
[MAP]
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1997 Annual Report 5 American Municipal Income Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER (continued)
- --------------------------------------------------------------------------------
AS WE MADE THESE CHANGES, WE DID NOT COMPROMISE THE QUALITY OF THE BONDS THE
FUND HOLDS. As of January 31, 1997, 96% of the fund's total assets were invested
in bonds rated A or higher by Standard & Poor's or Moody's (or another
nationally recognized statistical rating organization). This exceeds the fund's
quality guidelines, which require at least 65% in bonds rated A or higher.
MIXED SIGNALS ABOUT THE DIRECTION OF INFLATION AND INTEREST RATES CALL FOR
MAINTAINING A LESS AGGRESSIVE POSITION OVER THE NEXT SEVERAL MONTHS. This means
keeping an effective duration that is closer to that of the fund's benchmark,
while continuing our usual focus on call protection and quality. In addition, we
continue to research all holdings, and watch for signs of financial weakness or
strength in state and local entities that could affect bond ratings.
We appreciate your investment in American Municipal Income Portfolio. We look
forward to continuing our relationship with you and helping you meet your
investment goals in the new fiscal year and beyond.
Sincerely,
/s/ Douglas J. White
Douglas J. White
Portfolio Manager
/s/ Ronald R. Reuss
Ronald R. Reuss
Portfolio Manager
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1997 Annual Report 6 American Municipal Income Portfolio
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES January 31, 1997
..................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2) ........ $122,372,865
Cash in bank on demand deposit ............................. 151,409
Accrued interest receivable ................................ 1,496,737
------------------
Total assets ............................................. 124,021,011
------------------
LIABILITIES:
Preferred stock dividends payable (note 3) ................. 7,776
Accrued investment management fee .......................... 36,589
Accrued remarketing agent fee .............................. 16,310
Accrued administrative fee ................................. 15,681
------------------
Total liabilities ........................................ 76,356
------------------
Net assets applicable to outstanding capital stock ......... $123,944,655
------------------
------------------
REPRESENTED BY:
Preferred stock - authorized 1 million shares of $25,000
liquidation preference per share; outstanding, 1,740
shares (note 3) .......................................... $ 43,500,000
------------------
Common stock - authorized 200 million shares of $0.01 par
value; outstanding, 5,756,267 shares ..................... 57,563
Additional paid-in capital ................................. 80,473,458
Undistributed net investment income ........................ 486,738
Accumulated net realized loss on investments ............... (4,362,321)
Unrealized appreciation of investments ..................... 3,789,217
------------------
Total - representing net assets applicable to outstanding
common stock ........................................... 80,444,655
------------------
Total net assets ......................................... $123,944,655
------------------
------------------
Net asset value per share of outstanding common stock (net
assets divided by 5,756,267 shares of common stock
outstanding) ............................................. $ 13.98
------------------
------------------
* Investments in securities at identified cost ............. $118,583,648
------------------
------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Annual Report 7 American Municipal Income Portfolio
<PAGE>
Financial Statements (continued)
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STATEMENT OF OPERATIONS For the Year Ended January 31, 1997
..................................................................
<TABLE>
<S> <C>
INCOME:
Interest ................................................... $ 7,083,372
-----------------
EXPENSES (NOTE 5):
Investment management fee .................................. 427,500
Administrative fee ......................................... 183,214
Remarketing agent fee ...................................... 110,561
Custodian and accounting fees .............................. 70,717
Transfer agent fees ........................................ 27,356
Reports to shareholders .................................... 36,740
Directors' fees ............................................ 11,703
Audit and legal fees ....................................... 43,855
Other expenses ............................................. 43,907
-----------------
Total expenses ........................................... 955,553
Less expenses paid indirectly .............................. (5,772)
-----------------
Total net expenses ....................................... 949,781
-----------------
Net investment income .................................... 6,133,591
-----------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 397,404
Net change in unrealized appreciation or depreciation of
investments .............................................. (3,270,332)
-----------------
Net loss on investments .................................. (2,872,928)
-----------------
Net increase in net assets resulting from operations ..... $ 3,260,663
-----------------
-----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Annual Report 8 American Municipal Income Portfolio
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
1/31/97 1/31/96
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 6,133,591 $ 6,184,840
Net realized gain (loss) on investments .................... 397,404 (786,229)
Net change in unrealized appreciation or depreciation of
investments .............................................. (3,270,332) 15,305,285
------------------ ------------------
Net increase in net assets resulting from operations ..... 3,260,663 20,703,896
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (4,334,469) (4,895,706)
Preferred stock dividends ................................ (1,493,104) (1,686,276)
------------------ ------------------
Total distributions ...................................... (5,827,573) (6,581,982)
------------------ ------------------
Total increase (decrease) in net assets ................ (2,566,910) 14,121,914
Net assets at beginning of year ............................ 126,511,565 112,389,651
------------------ ------------------
Net assets at end of year .................................. $123,944,655 $126,511,565
------------------ ------------------
------------------ ------------------
Undistributed net investment income ........................ $ 486,738 $ 180,801
------------------ ------------------
------------------ ------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Annual Report 9 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements
- ----------------------------------------
(1) ORGANIZATION
................................
American Municipal Income Portfolio Inc. (the fund) is registered
under the Investment Company Act of 1940 (as amended) as a
diversified, closed-end management investment company. The fund
invests in a diverse range of municipal securities rated
investment grade or of comparable quality when purchased. These
securities may include municipal derivative securities, such as
inverse floating rate and inverse interest-only municipal
securities. Fund shares are listed on the New York Stock Exchange
under the symbol XAA.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
The value of certain 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 dealer 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.
Financial futures contracts are valued at the last settlement
price established each day by the board of trade or exchange on
which they are traded. Such valuations are determined using
independent pricing services or prices quoted by independent
brokers.
Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are
calculated on
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1997 Annual Report 10 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
the identified-cost basis. Interest income, including
amortization of bond discount and premium computed on a
level-yield basis, is accrued daily.
FUTURES TRANSACTIONS
For hedging purposes, the fund may buy and sell financial futures
contracts and related options. Risks of entering into futures
contracts and related options include the possibility that 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 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.
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 January 31, 1997,
the fund had no outstanding when-issued or forward commitments.
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1997 Annual Report 11 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
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, in
amounts sufficient to avoid the payment of any federal excise
taxes.
Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
market discount amortization. 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.
On the statement of assets and liabilities, as a result of
permanent book-to-tax differences, a reclassification adjustment
has been made to decrease undistributed net investment income and
decrease accumulated net realized loss on investments by $81.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly for
common shareholders and weekly for preferred shareholders. Common
stock distributions are recorded as of the close of business on
the ex-dividend date and preferred stock dividends are accrued
daily. Realized capital gains, if any, will be distributed at
least annually. Distributions are payable in cash or, for common
shareholders pursuant to the fund's dividend reinvestment plan,
reinvested in additional shares of the fund's common stock. Under
the plan, common shares will be purchased in the open market.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
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1997 Annual Report 12 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
make estimates and assumptions that affect the reported amounts
in the financial statements. Actual results could differ from
these estimates.
(3) REMARKETED
PREFERRED
STOCK
................................
American Municipal Income Portfolio has issued and, as of January
31, 1997, has outstanding 1,740 shares of remarketed preferred
stock (RP) (870 shares in class "T" and 870 shares in class "TH")
with a liquidation preference of $25,000 per share. The dividend
rate on the RP is adjusted every seven days (on Tuesdays for
class "T" and on Thursdays for class "TH"), as determined by the
remarketing agent. On January 31, 1997, the dividend rates were
3.25% and 3.30% for class "T" and "TH," respectively.
RP is a registered trademark of Merrill Lynch & Company.
(4) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the year
ended January 31, 1997, aggregated $33,007,351 and $34,141,025,
respectively.
For the year ended January 31, 1997, no brokerage commissions
were paid to Piper Jaffray Inc., an affiliated broker.
(5) EXPENSES
................................
The fund has entered into the following agreements with Piper
Capital Management Incorporated (the adviser and administrator):
The investment advisory agreement provides the adviser with a
monthly investment management fee equal to an annualized rate of
0.35% of the fund's average weekly net assets (computed by
subtracting liabilities, which exclude preferred stock, from the
value of the total assets of the fund). For its fee, the adviser
provides investment advice and, in general, conducts the
management and investment activities of the fund.
The administration agreement provides the administrator with a
monthly fee in an amount equal to an annualized rate of 0.15% of
the fund's average weekly net assets (computed by subtracting
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1997 Annual Report 13 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
liabilities, which exclude preferred stock, from the value of the
total assets of the fund). For its fee, the administrator
provides reporting, regulatory and record-keeping services for
the fund.
The fund has entered into a remarketing agent agreement with
Merrill Lynch, Pierce, Fenner & Smith (the remarketing agent).
The remarketing agreement provides the remarketing agent with a
monthly fee in an amount equal to an annual rate of 0.25% of the
fund's average amount of RP outstanding. For its fee, the
remarketing agent remarkets shares of RP tendered to it, on
behalf of shareholders thereof, and determines the applicable
dividend rate for each seven-day dividend period.
In addition to the investment management, administrative and
remarketing agent 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; taxes and
other miscellaneous expenses.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on miscellaneous cash balances maintained by the
fund.
(6) CAPITAL LOSS
CARRYOVER
................................
For federal income tax purposes, the fund had capital loss
carryovers of $4,362,321 as of January 31, 1997, which, if not
offset by subsequent capital gains, will expire in 2003 through
2004. 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.
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1997 Annual Report 14 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
(7) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of common stock outstanding throughout
each period and selected information for each period are as
follows:
AMERICAN MUNICIPAL INCOME PORTFOLIO
<TABLE>
<CAPTION>
Fiscal year ended January 31,
Period
-------------------------------- ended
1997 1996 1995 1/31/94(f)
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net asset value, common stock, beginning of
period .................................... $ 14.42 $ 11.97 $ 14.88 $14.13
------- ------- -------- -------
Operations:
Net investment income ..................... 1.07 1.07 1.14 0.58
Net realized and unrealized gains (losses)
on investments .......................... (0.50) 2.52 (2.92) 0.83
------- ------- -------- -------
Total from operations ................... 0.57 3.59 (1.78) 1.41
------- ------- -------- -------
Distributions to shareholders:
From net investment income
Paid to common shareholders ............. (0.75) (0.85) (0.87) (0.44)
Paid to preferred shareholders .......... (0.26) (0.29) (0.23) (0.08)
From net realized gains
Paid to common shareholders ............. -- -- (0.02) --
Paid to preferred shareholders .......... -- -- (0.01) --
------- ------- -------- -------
Total distributions to shareholders ..... (1.01) (1.14) (1.13) (0.52)
------- ------- -------- -------
Offering costs and underwriting discounts
associated with the remarketed preferred
stock ..................................... -- -- -- (0.14)
------- ------- -------- -------
Net asset value, common stock, end of
period .................................... $ 13.98 $ 14.42 $ 11.97 $14.88
------- ------- -------- -------
------- ------- -------- -------
Market value, common stock, end of period ... $ 12.13 $ 12.50 $ 11.63 $14.63
------- ------- -------- -------
------- ------- -------- -------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ....................................... 2.41% 28.31% (13.46)% 8.49%
Total return, common stock, market value
(b) ....................................... 3.29% 15.21% (14.44)% 0.40%
Net assets at end of period (in millions) ... $ 124 $ 127 $ 112 $ 129
Ratio of expenses to average weekly net
assets (c) ................................ 0.78% 0.77% 0.74% 0.70%(g)
Ratio of expenses to average weekly net
assets applicable to common stock (c) ..... 1.22% 1.20% 1.20% 1.15%(g)
Ratio of net investment income to average
weekly net assets ......................... 5.02% 5.13% 5.72% 4.88%(g)
Ratio of net investment income to average
weekly net assets applicable to common
stock (d) ................................. 5.90% 5.81% 7.43% 6.92%(g)
Portfolio turnover rate (excluding short-term
securities) ............................... 28% 54% 52% 31%
Remarketed preferred stock outstanding end of
period (in millions) ...................... $ 44 $ 44 $ 44 $ 44
Asset coverage ratio (e) .................... 285% 291% 258% 297%
</TABLE>
(a) BASED ON THE CHANGE IN NET ASSET VALUE OF A COMMON SHARE DURING THE PERIOD
AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(b) BASED ON THE CHANGE IN MARKET PRICE OF A COMMON SHARE DURING THE PERIOD AND
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) 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) RATIO REFLECTS TOTAL NET INVESTMENT INCOME LESS DIVIDENDS PAID TO PREFERRED
SHAREHOLDERS FROM NET INVESTMENT INCOME DIVIDED BY AVERAGE WEEKLY NET
ASSETS APPLICABLE TO COMMON STOCK.
(e) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(f) COMMENCEMENT OF OPERATIONS WAS JUNE 25, 1993.
(g) ADJUSTED TO AN ANNUAL BASIS.
- ---------------------------------------------------------------------
1997 Annual Report 15 American Municipal Income Portfolio
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL INCOME PORTFOLIO January 31, 1997
............................................................................................
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- --------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (96.8%):
MUNICIPAL BONDS (90.0%):
ARIZONA (3.2%):
Pima County United School District (FGIC), 8.38%,
7/1/13 ............................................ $ 3,000,000 $ 3,952,050
--------------
CALIFORNIA (7.9%):
Duarte Redevelopment Agency, 6.88%, 11/1/11 ......... 6,800,000 7,830,132
General Obligation (Callable 6/1/06 at 101), 5.25%,
6/1/16 ............................................ 2,000,000 1,905,340
--------------
9,735,472
--------------
COLORADO (0.4%):
Water Reserve and Power Development (Callable 9/1/06
at 101), 5.90%, 9/1/16 ............................ 500,000 508,155
--------------
DISTRICT OF COLUMBIA (0.8%):
General Obligation (Callable 12/1/03 at 102), 5.75%,
12/1/05 1,000,000 999,220
--------------
GEORGIA (10.7%):
Municipal Electrical Authority (FGIC) (Callable
1/1/03 at 102), 6.50%, 1/1/12 ..................... 10,000,000(d) 11,209,400
Savannah Hospital Authority-St. Joseph's (Callable
7/1/03 at 102), 6.13%, 7/1/12 ..................... 2,000,000 2,075,700
--------------
13,285,100
--------------
HAWAII (2.1%):
State Department of Budget and Finance, 6.40%,
7/1/13 ............................................ 2,415,000 2,602,959
--------------
ILLINOIS (6.6%):
Chicago State University Revenue (MBIA) (Callable
12/1/04 at 102), 6.00%, 12/1/12 ................... 1,000,000 1,041,350
Health Facility Authority-Lutheran General Hospital
(Callable 1/1/02-4/1/15 at 100-102), 6.00%-7.00%,
4/1/08-1/1/22 5,205,000 5,486,806
Kane County School District (FGIC) (Callable 2/1/05
at 100), 5.75%, 2/1/15 ............................ 1,000,000 1,006,050
Rochelle Electric Systems (AMBAC) (Callable 5/1/06 at
102), 5.20%, 5/1/16 ............................... 750,000 709,372
--------------
8,243,578
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Annual Report 16 American Municipal Income Portfolio
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- --------------
<S> <C> <C>
INDIANA (15.0%):
Brownsburg School Building Corporation (FSA)
(Callable 2/1/05 at 102), 5.95%, 8/1/10 ........... $ 2,000,000 $ 2,091,840
Hamilton School Building Corporation (Callable 7/1/04
at 102), 6.00%, 7/1/10 ............................ 1,575,000 1,621,116
Health Facility Authority-Columbus Hospital (FSA),
7.00%, 8/15/15 .................................... 2,670,000 3,106,144
IPS School Building Corporation (Callable 7/15/04 at
102), 6.15%, 1/15/16 .............................. 2,800,000 2,937,956
Municipal Bond Bank (Callable 2/1/04 at 102), 6.00%,
2/1/16 1,000,000 1,018,780
Terre Haute School Building Corporation (Callable
7/1/03 at 102), 5.80%, 7/1/13 ..................... 2,150,000 2,150,581
Tippecanoe County School Building Corporation (MBIA)
(Callable 1/15/04 at 102), 5.95%-6.00%,
7/15/12-7/15/13 ................................... 3,920,000 4,055,500
Valparaiso-Porter County Public Library (FGIC)
(Callable 7/1/04 at 102), 6.25%, 1/1/16 ........... 1,500,000 1,593,630
--------------
18,575,547
--------------
IOWA (0.8%):
Sheldon Health Care Facilities (Callable 3/1/04 at
101), 6.15%, 3/1/16 ............................... 1,000,000 1,031,050
--------------
KANSAS (0.9%):
Kansas City Utility Systems Revenue (FGIC) (Callable
9/1/04 at 102), 6.25%, 9/1/14 ..................... 1,000,000 1,067,900
--------------
MICHIGAN (8.5%):
Comstock Park Public Schools (FGIC) (Callable 1/1/03
at 102), 7.88%, 5/1/11 ............................ 3,145,000(d) 3,895,523
Hospital Financing Authority-Daughters Charity
(Callable 11/1/05 at 101), 5.25%, 11/1/15 ......... 3,000,000 2,883,840
Kent Hospital Financial Authority-Michigan Hospitals
(MBIA) (Callable 1/15/08 at 100), 7.25%,
1/15/13 ........................................... 3,200,000 3,785,120
--------------
10,564,483
--------------
NEVADA (2.5%):
Washoe County School District (MBIA) (Callable 6/1/04
at 101), 5.75%, 6/1/12 ............................ 3,000,000 3,048,450
--------------
NEW MEXICO (8.2%):
Mortgage Finance Authority, 6.40%-6.88%,
7/1/15-7/1/25 ..................................... 9,575,000 10,204,446
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Annual Report 17 American Municipal Income Portfolio
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- --------------
<S> <C> <C>
NORTH DAKOTA (2.9%):
Mercer County Pollution Control Revenue, 7.20%,
6/30/13 ........................................... $ 3,000,000 $ 3,555,570
--------------
SOUTH CAROLINA (1.2%):
State Highway-Series B (Callable 7/1/06 at 102),
5.63%, 7/1/15 ..................................... 1,500,000 1,517,565
--------------
SOUTH DAKOTA (1.2%):
Housing and Development Authority (Callable 5/1/04 at
102), 5.80%, 5/1/14 ............................... 1,500,000 1,490,160
--------------
TEXAS (7.9%):
Arlington Independent School District (Callable
2/15/05 at 100), 6.00%, 2/15/15 ................... 2,275,000 2,344,319
Fort Bend Independent School District (Callable
2/15/08 at 100), 5.00%, 2/15/14 ................... 2,000,000 1,891,320
Houston Water Conveyance System (AMBAC), 7.50%,
12/15/16 .......................................... 745,000 907,738
Round Rock Independent School District (MBIA)
(Callable 6/1/05 at 100), 6.15%, 6/1/14 ........... 1,020,000 1,066,594
Spring Independent School District (Callable 8/15/05
at 100), 5.80%, 8/15/12-8/15/13 ................... 2,425,000 2,482,477
United Independent School District (Callable 8/15/06
at 100), 5.00%, 8/15/14 ........................... 1,150,000 1,086,417
--------------
9,778,865
--------------
UTAH (3.6%):
Municipal Power-San Juan Project (MBIA) (Callable
6/1/04 at 102), 6.25%, 6/1/14 ..................... 1,300,000 1,384,474
NEBO County School District (FGIC) (Callable 6/15/04
at 100), 5.75%, 6/15/14 ........................... 3,000,000 3,040,200
--------------
4,424,674
--------------
WASHINGTON (3.9%):
Chelan County Public Utilities District (Callable
7/1/03 at 102), 5.90%, 7/1/13 ..................... 1,830,000 1,821,326
Douglas County Public Utility District (MBIA)
(Callable 1/1/05 at 102), 6.00%, 1/1/15 ........... 1,000,000 1,030,070
Port of Seattle-Series A (FGIC) (Callable 9/1/06 at
101), 5.50%, 9/1/21 ............................... 2,000,000 1,923,080
--------------
4,774,476
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Annual Report 18 American Municipal Income Portfolio
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- --------------
<S> <C> <C>
WISCONSIN (1.7%):
Health and Education Facilities-Beloit Hospital
(Callable 7/1/03 at 102), 5.80%-5.90%,
7/1/09-7/1/11 ..................................... $ 1,180,000 $ 1,164,928
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Callable 8/15/06 at 102), 5.50%,
8/15/15 ........................................... 1,000,000 971,690
--------------
2,136,618
--------------
Total Municipal Bonds
(cost: $108,346,407) ............................ 111,496,338
--------------
MUNICIPAL DERIVATIVE SECURITIES (6.8%):
FLOATING RATE TRUST CERTIFICATES (3.2%):
Duarte, California, Redevelopment Agency, Series C1,
3.75%, 11/1/11 .................................... 1,655,000(c) 1,655,000
Minneapolis, Minnesota, Special School District #1
Trust Certificates, Series I-1, 3.60%, 2/1/15 ..... 2,285,000(c) 2,285,000
--------------
3,940,000
--------------
INVERSE FLOATER (2.1%):
Duluth, Minnesota, Health Care Trust Certificate,
Series F2, 10.19%, 5/1/18 ......................... 1,110,000(b)(d) 1,293,150
Minneapolis, Minnesota, Special School District #1
Trust Certificates, Series I-2, 7.62%, 2/1/15 ..... 1,345,000(b)(d) 1,319,781
--------------
2,612,931
--------------
INVERSE INTEREST-ONLY (1.5%):
Duarte, California, Redevelopment Agency, Series C2,
10.08%, 11/1/11 ................................... --(b)(d) 250,716
Desoto Parish, Louisiana, Municipal Security Trust
93-B, 18.75%, 1/1/19 .............................. --(b)(d) 1,526,600
Kent, Michigan, Hospital Finance Authority, Series
E2, 12.46%, 1/15/13 ............................... --(b)(d) 146,280
--------------
1,923,596
--------------
Total Municipal Derivative Securities
(cost: $7,837,241) ............................. 8,476,527
--------------
Total Municipal Long-Term Securities
(cost: $116,183,648) ........................... 119,972,865
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Annual Report 19 American Municipal Income Portfolio
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- --------------
<S> <C> <C>
MUNICIPAL SHORT-TERM SECURITIES (1.9%):
CALIFORNIA (0.2%):
Newport Beach-Hoag Memorial Presbyterian Hospital,
3.65%, 10/1/22 .................................... $ 300,000(c) $ 300,000
--------------
IDAHO (0.6%):
Health Facilities Authority-St.Luke's Regional
Medical Center, 3.70%, 5/1/22 ..................... 800,000(c) 800,000
--------------
NEW YORK (1.1%):
New York City General Obligation, 3.75%, 8/15/19 .... 1,300,000(c) 1,300,000
--------------
Total Municipal Short-Term Securities
(cost: $2,400,000) .............................. 2,400,000
--------------
Total Investments in Securities
(cost: $118,583,648) (e) ........................ $ 122,372,865
--------------
--------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) Securities are valued in accordance with procedures described in note 2 to
the financial statements.
(b) Portfolio definitions:
Inverse floater - represents securities that pay interest at rates that
increase (decrease) in the same magnitude as, or in a multiple of, a
decrease (increase) in the market rate paid on a related, floating
rate security. Interest rates disclosed are in effect on January 31,
1997.
Inverse interest-only - represents securities that entitle holders to
receive only interest payments. Interest is paid at a rate that
increases (decreases) with a decrease (increase) in the market rate
paid on a related, floating rate security. Interest rate represents
yield based upon current income and cost basis.
(c) Floating or variable rate obligation maturing in more than one year. The
interest rate, which is based on specific, or an index of, market interest
rates, is subject to change periodically and is the effective rate on
January 31, 1997. This instrument may also have a demand feature which
allows the recovery of principal at any time, or at specified intervals not
exceeding one year, on up to 30 days' notice. Maturity date shown
represents final maturity.
(d) Securities purchased as part of a private placement and are illiquid. On
January 31, 1997, the total market value of these investments was
$19,641,450 or 15.8% of total net assets.
(e) On January 31, 1997, the cost of investments in securities for federal
income tax purposes was $118,555,992. The aggregate gross unrealized
appreciation and depreciation of investments in securities based on this
cost were as follows:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 4,110,611
GROSS UNREALIZED DEPRECIATION ...... (293,738)
------------
NET UNREALIZED APPRECIATION ...... $ 3,816,873
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 20 American Municipal Income Portfolio
<PAGE>
Independent Auditors' Report
- ----------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
AMERICAN MUNICIPAL INCOME PORTFOLIO INC.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of American Municipal Income
Portfolio Inc. as of January 31, 1997, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period then ended and the financial highlights presented
in note 7 to the financial statements. These financial statements and the
financial highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
American Municipal Income Portfolio Inc. as of January 31, 1997, and the results
of its operations, the changes in its net assets and the financial highlights
for the periods stated in the first paragraph above, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 7, 1997
- ---------------------------------------------------------------------
1997 Annual Report 21 American Municipal Income Portfolio
<PAGE>
Federal Income Tax Information
- ----------------------------------------
The following per-share information describes the federal tax
treatment of distributions made during the fiscal year. Exempt-
interest dividends are exempt from federal income tax and should
not be included in your gross income, but need to be reported on
your income tax return for informational purposes. Please consult
a tax adviser on how to report these distributions at the state
and local levels.
COMMON STOCK INCOME DISTRIBUTIONS
99.38% QUALIFYING AS EXEMPT-INTEREST DIVIDENDS
<TABLE>
<CAPTION>
PAYABLE DATE AMOUNT
- --------------------------------------------- ---------
<S> <C>
February 21, 1996 ........................... $ 0.06275
March 27, 1996 .............................. 0.06275
April 24, 1996 .............................. 0.06275
May 29, 1996 ................................ 0.06275
June 26, 1996 ............................... 0.06275
July 24, 1996 ............................... 0.06275
August 28, 1996 ............................. 0.06275
September 25, 1996 .......................... 0.06275
October 23, 1996 ............................ 0.06275
November 27, 1996 ........................... 0.06275
December 18, 1996 ........................... 0.06275
January 10, 1997 ............................ 0.06275
---------
Total ................................... $ 0.75300
---------
---------
</TABLE>
PREFERRED STOCK INCOME DISTRIBUTIONS
(INCOME FROM TAX-EXEMPT SECURITIES, 99.38% QUALIFYING AS
EXEMPT-INTEREST DIVIDENDS)
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
Total class "T" ......................... $ 856.26
--------
--------
Total class "TH" ........................ $ 859.95
--------
--------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 22 American Municipal Income Portfolio
<PAGE>
Shareholder Update
- ----------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
20, 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 preferred shareholders elected the following
directors:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED AUTHORITY
"FOR" TO VOTE
---------- -------
<S> <C> <C>
David T. Bennett ............................ 1,707 13
William H. Ellis ............................ 1,707 13
</TABLE>
(2) The fund's preferred and common shareholders, voting as a
class, elected the following directors:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED AUTHORITY
"FOR" TO VOTE
---------- -------
<S> <C> <C>
Jaye F. Dyer ................................ 5,409,540 96,950
Karol D. Emmerich ........................... 5,414,352 92,138
Luella G. Goldberg .......................... 5,412,013 94,477
George Latimer .............................. 5,412,987 93,503
</TABLE>
(3) 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 January
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>
5,450,585 12,484 43,421 --
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 23 American Municipal Income Portfolio
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the Dividend
Reinvestment Plan. It's a convenient and economical way to buy
additional shares of the fund by automatically reinvesting
dividends and capital gains. The plan is administered by
Investors Fiduciary Trust Company (IFTC), the plan agent.
ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of distributions
will begin with the next distribution paid, provided your request
is received at least 10 days before the record date for that
distribution.
If your shares are in certificate form, you may join the plan
directly and have your distributions reinvested in additional
shares of the fund. To enroll in this plan, call IFTC at
1-800-543-1627. If your shares are registered in your brokerage
firm's name or another name, ask the holder of your shares how
you may participate.
Banks, brokers or nominees, on behalf of their beneficial owners
who wish to reinvest dividend and capital gains distributions,
may participate in the plan by informing IFTC at least 10 days
before each share's dividend and/or capital gains distribution.
PLAN ADMINISTRATION
Beginning no more than five business days before the dividend
payment date, IFTC will buy shares of the fund on the New York or
American Stock Exchange or elsewhere on the open market.
The fund will not issue any new shares in connection with the
plan. All reinvestments will be at a market price plus a pro rata
share of any brokerage commissions, which may be more or less
than the fund's net asset value per share. The number of shares
allocated to you is determined by dividing the amount of the
dividend or distribution by the applicable price per share.
- ---------------------------------------------------------------------
1997 Annual Report 24 American Municipal Income Portfolio
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
There is no direct charge for reinvestment of dividends and
capital gains, since IFTC fees are paid for by the fund. However,
each participant pays a pro rata portion of the brokerage
commissions. Brokerage charges are expected to be lower than
those for individual transactions because shares are purchased
for all participants in blocks. As long as you continue to
participate in the plan, distributions paid on the shares in your
account will be reinvested.
IFTC maintains accounts for plan participants holding shares in
certificate form and will furnish written confirmation of all
transactions, including information you need for tax records.
Reinvested shares in your account will be held by IFTC in
noncertificated form in your name.
TAX INFORMATION
Distributions invested in additional shares of the fund are
subject to income tax, just as they would be if received in cash.
In general, the tax basis of such shares will equal the price
paid by IFTC plus the pro rata share of any commission.
Shareholders, as required by the Internal Revenue Service, will
receive Form 1099 regarding the federal tax status of the prior
year's distributions.
PLAN WITHDRAWAL
If you hold your shares in certificate form, you may terminate
your participation in the plan at any time by giving written
notice to IFTC. If your shares are registered in your brokerage
firm's name, you may terminate your participation via verbal or
written instructions to your investment professional. Written
instructions should include your name and address as they appear
on the certificate or account.
If notice is received at least 10 days before the record date,
all future distributions will be paid directly to the shareholder
of record.
- ---------------------------------------------------------------------
1997 Annual Report 25 American Municipal Income Portfolio
<PAGE>
Shareholder Update (continued)
- ---------------------------------------------------------------------
If your shares are issued in certificate form and you discontinue
your participation in the plan, you (or your nominee) will
receive an additional certificate for all full shares and a check
for any fractional shares in your account.
PLAN AMENDMENT/TERMINATION
The fund reserves the right to amend or terminate the plan.
Should the plan be amended or terminated, participants will be
notified in writing at least 90 days before the record date for
such dividend or distribution. The plan may also be amended or
terminated by IFTC with at least 90 days written notice to
participants in the plan.
Any question about the plan should be directed to your investment
professional or to Investors Fiduciary Trust Company, P.O. Box
419432, Kansas City, Missouri 64141, 1-800-543-1627.
- ---------------------------------------------------------------------
1997 Annual Report 26 American Municipal Income Portfolio
<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
Robert H. Nelson,
VICE PRESIDENT AND TREASURER
Susan Sharp Miley,
SECRETARY
INVESTMENT ADVISER
Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
CUSTODIAN, ACCOUNTING AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
LEGAL COUNSEL
Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
4200 NORWEST CENTER, MINNEAPOLIS, MN 55402
- ---------------------------------------------------------------------
1997 Annual Report 27 American Municipal Income Portfolio
<PAGE>
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
BENCHMARK
An established basis of comparison for an investment's performance, a benchmark
may be an unmanaged index or a group of similar investments.
CALL PROTECTION
Call protection is the length of time during which a security cannot be redeemed
by the issuer. For bonds, a long call protection allows the security to maintain
its income stream for a longer period of time by keeping issuers from
refinancing their bonds during times of falling interest rates. At the same
time, a long call protection leaves more opportunity for a bond's price to
increase or decrease.
COMMON STOCK
Common stock is a share of ownership. Common stockholders share in profits (or
losses) in two ways: through dividends and through a potential rise (or fall) in
the price of stock.
EFFECTIVE DURATION
Effective duration estimates how much the value of a security is expected to
change with a given change in interest rates. Longer effective durations
indicate more sensitivity to changes in interest rates. For example, if interest
rates were to increase by 1%, the market value of a bond with an effective
duration of five years would decrease by about 5%, with all other factors being
constant. It is important to remember that effective duration is based on
certain assumptions and has several limitations. It is most effective as a
measure when interest rate changes are small, rapid and occur equally across all
the different points of the yield curve. In addition, effective duration is
difficult to calculate precisely, especially in the case of a bond that is
callable prior to maturity, and can be greatly affected by interest rate
changes.
- --------------------------------------------------------------------------------
1997 Annual Report 28 American Municipal Income Portfolio
<PAGE>
GLOSSARY OF TERMS (***)
- --------------------------------------------------------------------------------
PREFERRED STOCK
In this fund, preferred stock pays dividends at a specified rate and has
preference over common stock in the payments of dividends and the liquidation of
assets. Rates paid on preferred stock are reset every seven days and are based
on short-term, tax-exempt interest rates. Preferred shareholders accept these
short-term rates in exchange for low credit risk (shares of preferred stock are
rated AAA by Moody's and S&P) and high liquidity (shares of preferred stock
trade at par and are remarketed every seven days). The proceeds from the sale of
preferred stock are invested at intermediate- and long-term tax-exempt rates.
Because these intermediate- and long-term rates are normally higher than the
short-term rates paid on preferred stock, common shareholders benefit by
receiving higher dividends and/or an increase to the dividend reserve. However,
the risk of having preferred stock is that if short-term rates rise higher than
intermediate- and long-term rates, creating an inverted yield curve, common
shareholders may receive a lower rate of return than if their fund did not have
any preferred stock outstanding. This type of economic environment is unusual
and historically has been short term in nature. Investors should also be aware
that the issuance of preferred stock results in the leveraging of common stock,
which increases the volatility of both the net asset value of the fund and the
market value of shares of common stock.
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:
35 American Municipal
Income Portfolio
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/
29
<PAGE>
PIPER CAPITAL MANAGEMENT
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.
#11410 3/1997 110-97
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Bulk Rate
U.S. Postage
PAID
Permit No. 3008
Mpls., MN
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