<PAGE>
1997 Semiannual Report
AMERICAN
MUNICIPAL
INCOME
PORTFOLIO
XAA
PIPER CAPITAL
MANAGEMENT
American Municipal Income Portfolio - 1997 Semiannual Report
<PAGE>
CONTENTS
Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . 2
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . 6
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . 15
Shareholder Update . . . . . . . . . . . . . . . . . . . . . . . . . 20
Glossary*** . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
*** This report includes a glossary to help you understand financial terms
used in the portfolio managers' letter. When you see this symbol, it indicates
a word that is defined in the glossary.
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>
AVERAGE ANNUALIZED TOTAL RETURNS
- -------------------------------------------------------------------------------
Based on net asset value for the periods ended July 31, 1997
- -------------------------------------------------------------------------------
Since
One Three Inception
Year Year (6/25/93)
---- ----- ---------
American Municipal Income Portfolio 14.24% 11.75% 7.23%
Lipper General Municipal Bond Funds: 12.83% 9.40% 6.73%
Leveraged Average
Lehman Brothers Municipal Long Bond Index 12.61% 9.73% 7.15%
Average annualized total returns are through July 31, 1997, and are based on
changes 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 returns based on changes in market price for the
one-year, three-year and since inception periods ended July 31, 1997, were
23.44%, 9.76% and 3.97%, respectively. These returns also assume reinvested
distributions and do not reflect sales charges.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more
or less than their original cost. Closed-end funds, such as this fund, often
trade at discounts to net asset value. Therefore, you may be unable to
realize the full net asset value of your shares when you sell.
The 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 returns.
The since inception numbers for the Lipper average and Lehman index are
calculated from the month end following the fund's inception through July 31,
1997.
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1997 Semiannual Report 1 American Municipal Income Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER
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September 17, 1997
- -------------------------------------------------------------------------------
DOUG WHITE, CFA,
shares responsibility for the management of American Municipal Income
Portfolio. He has 14 years of financial experience.
DEAR SHAREHOLDERS:
AMERICAN MUNICIPAL INCOME PORTFOLIO CONTINUED TO PAY HIGH CURRENT INCOME
EXEMPT FROM REGULAR FEDERAL INCOME TAX DURING THE SIX MONTHS ENDED JULY 31,
1997. The fund's monthly dividend remained stable at 6.275 cents per share.
During the same period, the fund's net asset value (NAV) total return was
7.93%, compared to 7.62% for the Lipper General Municipal Bond Funds:
Leveraged Average and 7.53% for the Lehman Brothers Municipal Long Bond
Index. One-year NAV total returns for the fund and its benchmarks were
14.24%, 12.83% and 12.61%, respectively. We attribute the fund's positive NAV
total return primarily to its effective duration,*** which was longer than
the duration of the Lehman index. (See page 3 for further discussion about
effective duration.) Based on market price, the fund's total return for the
six months was 14.75%.*
* 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
- -------------------------------------------------------------------------------
As a percentage of total assets on July 31, 1997
[CHART]
Housing Revenue 14%
Water/Sewer/Pollution Control Revenue 12%
Other Assets 2%
Health Service/HMO Revenue 1%
Hospital Revenue 20%
Eletric Revenue 12%
Miscellaneous Revenue 1%
Leasing Revenue 5%
Education Revenue 5%
Parking Revenue 4%
General Obligations 24%
Municipal inverse floating rate securities account for 1% of the fund's total
assets.
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1997 Semiannual Report 2 American Municipal Income Portfolio
<PAGE>
Portfolio Managers' Letter (continued)
- -------------------------------------------------------------------------------
RON REUSS, ISFA,
shares responsibility for the management of American Municipal Income
Portfolio. He has 28 years of financial experience.
WE ARE PLEASED THAT THE DISCOUNT*** BETWEEN THE FUND'S NET ASSET VALUE AND
MARKET PRICE HAS BEEN REDUCED OVER THE PAST YEAR. As of July 31, 1997, the
fund's NAV was $14.69, and its market price was $13.50, a discount of 8.10%,
which is down from 14.33% a year ago. We attribute this reduction primarily
to an increased level of interest in the fund from the investment community.
In addition, we believe some investors have become concerned about the high
levels of the stock market and are beginning to move back into bonds.
DURING THE REPORTING PERIOD, INTEREST RATES AND, IN TURN, BOND PRICES WERE
VOLATILE. The economy showed signs of strength early in the period,
prompting the Federal Reserve Board (the Fed) to raise the federal funds rate
in March from 5.25% to 5.50%. That caused bond yields to rise and prices to
fall. Beginning in mid-April, however, we began to see signs that the economy
and inflation were beginning to slow. As a result, interest rates began to
fall, and bond prices increased throughout the rest of the period.
WHILE THE FUND'S DURATION HELPED ITS PERFORMANCE DURING THE PERIOD, WE HAVE
TAKEN STEPS TO SHORTEN IT SLIGHTLY TO HELP REDUCE THE FUND'S NAV VOLATILITY.
This fund generally maintains an effective duration that is longer than that
of its benchmark to help meet its objective of high current income. However,
to make the fund less sensitive to changes in interest rates, we have been
broadening the fund's focus in the past year to include shorter duration
securities in addition to longer duration bonds. Since reducing duration can
negatively affect a fund's income, we have done this selectively, following a
process whereby we consider such things as a bond's call protection,***
coupon*** rate and maturity -- in addition to duration. Recently, our efforts
to shorten duration have caused the fund to earn slightly less than its
dividend. This is primarily due to the purchase of some seven-day floating
rate bonds. We are exploring opportunities that will allow us to close this
gap in earnings.
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1997 Semiannual Report 3 American Municipal Income Portfolio
<PAGE>
Portfolio Managers' Letter (continued)
- -------------------------------------------------------------------------------
OUR STRATEGY CONTINUES TO INCLUDE CHOOSING HIGHER QUALITY BONDS AND
MAXIMIZING THE FUND'S CALL PROTECTION. The difference between yields of
higher and lower quality bonds narrowed during the period, allowing us to
keep the fund's quality fairly high. Ninety-eight percent of the bonds in the
fund are rated A or higher, up from 96% the last time we reported to you. The
fund's call protection is about 11 years. Keeping long call protection
enhances our ability to maintain the fund's income for a longer period, since
it helps protect against bond refinancings during times of falling interest
rates.
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GEOGRAPHICAL DISTRIBUTION
- -------------------------------------------------------------------------------
DURING THE REPORTING PERIOD, THE FUND MADE PURCHASES OF SCHOOL BONDS IN
MICHIGAN, BECAUSE A TEMPORARY INCREASE IN THE SUPPLY OF MICHIGAN ISSUES MADE
THEM UNUSUALLY ATTRACTIVE. THIS CAUSED AN INCREASE IN THE FUND'S ALLOCATION
OF INVESTMENTS IN THAT STATE (FROM 9% TO 12%). THE FUND IS WELL DIVERSIFIED
ACROSS THE UNITED STATES, FOCUSING ON THE CENTRAL STATES. THIS MAP SHOWS ITS
GEOGRAPHICAL DISTRIBUTION, AS A PERCENTAGE OF TOTAL ASSETS, ON JULY 31, 1997.
Alabama -- Montana --
Alaska -- Nebraska --
Arizona 3% Nevada 2%
Arkansas -- New Hampshire --
California 5% New Jersey --
Colorado -- New Mexico 8%
Connecticut -- New York 4%
Delaware -- North Carolina --
Florida -- North Dakota 5%
Georgia 9% Ohio --
Hawaii 2% Oklahoma --
Idaho -- Oregon --
Illinois 5% Pennsylvania --
Indiana 10% Rhode Island --
Iowa 1% South Carolina 1%
Kansas 1% South Dakota 1%
Kentucky -- Tennessee --
Louisiana 4% Texas 9%
Maine -- Utah 4%
Maryland 4% Vermont --
Massachusetts -- Virginia --
Michigan 12% Washington 2%
Minnesota 4% West Virginia --
Mississippi -- Wisconsin 2%
Missouri -- Wyoming --
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1997 SEMIANNUAL REPORT 4 AMERICAN MUNICIPAL INCOME PORTFOLIO
<PAGE>
Portfolio Managers' Letter (continued)
- -------------------------------------------------------------------------------
WE DO NOT ANTICIPATE MAKING MAJOR STRATEGY CHANGES IN THE COMING MONTHS. We
believe the economy will continue to grow at the moderate pace it has
recently experienced, which should help keep inflation under control and keep
the Fed from raising short-term interest rates. However, if inflation does
become a concern and interest rates do rise, we would look to add income to
the fund's portfolio by purchasing bonds at the higher interest rates. If, on
the other hand, interest rates were to fall from current levels, we feel the
fund is positioned appropriately.
Thank you for investing in American Municipal Income Portfolio. We remain
committed to providing you with top-quality management and helping you meet
your investment goals.
Sincerely,
/s/ Douglas J. White /s/ Ronald R. Reuss
Douglas J. White Ronald R. Reuss
Portfolio Manager Portfolio Manager
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WHAT IS PREFERRED STOCK?
- -------------------------------------------------------------------------------
This fund holds preferred stock, which 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, potentially, the market value of shares of common stock.
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1997 Semiannual Report 5 American Municipal Income Portfolio
<PAGE>
Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES July 31, 1997
..................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2) ........ $ 128,790,393
Cash in bank on demand deposit ............................. 22,881
Other assets ............................................... 15,835
Accrued interest receivable ................................ 1,312,680
-----------------
Total assets ............................................. 130,141,789
-----------------
LIABILITIES:
Preferred stock dividends payable (note 3) ................. 18,353
Payable for investment securities purchased ................ 2,000,775
Accrued investment management fee .......................... 37,578
Accrued remarketing agent fee .............................. 9,665
Accrued administrative fee ................................. 16,105
-----------------
Total liabilities ........................................ 2,082,476
-----------------
Net assets applicable to outstanding capital stock ....... $ 128,059,313
-----------------
-----------------
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock)(note 3) ................................. $ 124,031,021
Undistributed net investment income ........................ 432,003
Accumulated net realized loss on investments ............... (4,229,562)
Unrealized appreciation of investments ..................... 7,825,851
-----------------
Total - representing net assets applicable to capital
stock .................................................. $ 128,059,313
-----------------
-----------------
* Investments in securities at identified cost ............. $ 120,964,542
-----------------
-----------------
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to common stock ...................... $ 84,559,313
Shares of capital stock outstanding ........................ 5,756,267
Net asset value ............................................ $ 14.69
Market price ............................................... $ 13.50
LIQUIDATION PREFERENCE OF PREFERRED STOCK:
Net assets applicable to preferred stock ................... $ 43,500,000
Shares of preferred stock outstanding ...................... 1,740
Liquidation preference per share ........................... $ 25,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 6 American Municipal Income Portfolio
<PAGE>
Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Six Months Ended July 31, 1997
..................................................................
<TABLE>
<S> <C>
INCOME:
Interest ................................................... $ 3,367,186
-------------------
EXPENSES (NOTE 5):
Investment management fee .................................. 215,224
Administrative fee ......................................... 92,239
Remarketing agent fee ...................................... 54,977
Custodian and accounting fees .............................. 37,709
Transfer agent fees ........................................ 12,971
Reports to shareholders .................................... 14,426
Directors' fees ............................................ 6,096
Audit and legal fees ....................................... 20,923
Other expenses ............................................. 31,536
-------------------
Total expenses ........................................... 486,101
Less expenses paid indirectly .......................... (3,486)
-------------------
Total net expenses ....................................... 482,615
-------------------
Net investment income .................................... 2,884,571
-------------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 132,759
Net change in unrealized appreciation or depreciation of
investments .............................................. 4,036,634
-------------------
Net gain on investments .................................. 4,169,393
-------------------
Net increase in net assets resulting from operations ... $ 7,053,964
-------------------
-------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 7 American Municipal Income Portfolio
<PAGE>
Financial Statements (continued)
- ---------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
SIX MONTHS ENDED
7/31/97 YEAR ENDED
(UNAUDITED) 1/31/97
------------------- -------------------
<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 2,884,571 $ 6,133,591
Net realized gain on investments ........................... 132,759 397,404
Net change in unrealized appreciation or depreciation of
investments .............................................. 4,036,634 (3,270,332)
------------------- -------------------
Net increase in net assets resulting from operations ..... 7,053,964 3,260,663
------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends ................................... (2,167,234) (4,334,469)
Preferred stock dividends ................................ (772,072) (1,493,104)
------------------- -------------------
Total distributions ...................................... (2,939,306) (5,827,573)
------------------- -------------------
Total increase (decrease) in net assets .................. 4,114,658 (2,566,910)
Net assets at beginning of period .......................... 123,944,655 126,511,565
------------------- -------------------
Net assets at end of period ................................ $ 128,059,313 $ 123,944,655
------------------- -------------------
------------------- -------------------
Undistributed net investment income ........................ $ 432,003 $ 486,738
------------------- -------------------
------------------- -------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- ---------------------------------------------------------------------
1997 Semiannual Report 8 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited)
- ---------------------------------------------------------------------
(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
Portfolio securities for which market quotations are readily
available are valued at current market value. If market
quotations or valuations are not available, or if such quotations
or valuations are believed to be inaccurate, unreliable or not
reflective of market value, portfolio securities are valued
according to procedures adopted by the fund's board of directors
in good faith at "fair value", that is, a price that the fund
might reasonably expect to receive for the security or other
asset upon its current sale.
The current market value of certain fixed income securities is
provided by an independent pricing service. Fixed income
securities for which prices are not available from an independent
pricing service but where an active market exists are valued
using market quotations obtained from one or more dealers that
make markets in the securities or from a widely-used quotation
system. Short-term securities with maturites of 60 days or less
are valued at amortized cost, which approximates market value.
Securities transactions are accounted for on the date securities
are purchased or sold. Realized gains and losses are calculated
on the identified-cost basis. Interest income, including
amortization of bond discount and premium, is recorded on an
accrual basis.
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
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1997 Semiannual Report 9 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
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 July 31, 1997, the
fund had no outstanding when-issued or forward commitments.
FEDERAL TAXES
The fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and not
be subject to federal income tax. Therefore, no income tax
provision is required. The fund also intends to distribute its
taxable net investment income and realized gains, if any, to
avoid the payment of any federal excise taxes.
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.
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. Net realized gains distributions, if any, will be made at
least annually. Distributions are payable in cash or, for common
- ---------------------------------------------------------------------
1997 Semiannual Report 10 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
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
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 Inc. has issued and, as of
July 31, 1997, has outstanding 1,740 shares of remarketed
preferred stock (870 shares in class "T" and 870 shares in class
"TH") (RP) 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 July 31, 1997, the
dividend rates were 3.50% and 3.40% 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 six
months ended July 31, 1997, aggregated $31,756,189 and
$35,658,054, respectively.
(5) EXPENSES
................................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
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 in an amount equal to an annual
rate of 0.35% of the fund's average weekly net assets (computed
by subtracting liabilities, which exclude preferred stock,
- ---------------------------------------------------------------------
1997 Semiannual Report 11 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
from the value of the total assets of the fund). For its fee, the
adviser provides investment advice and 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 annual rate of 0.15% 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 administrator
provides reporting, regulatory and record-keeping services for
the fund.
REMARKETING AGENT FEE
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 will remarket shares of RP tendered to it on
behalf of shareholders and will determine the applicable dividend
rate for each seven-day dividend period.
OTHER FEES AND EXPENSES
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.
- ---------------------------------------------------------------------
1997 Semiannual Report 12 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- ---------------------------------------------------------------------
(6) CAPITAL LOSS
CARRYOVER
................................
For federal income tax purposes, the fund had capital loss
carryovers at January 31, 1997, which, if not offset by
subsequent capital gains, will expire as indicated below. It is
unlikely the board of directors will authorize a distribution of
any net realized capital gains until the available capital loss
carryovers have been offset or expire.
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYOVER DATE
------------- -----
<S> <C>
$2,804,747 2003
1,557,574 2004
-------------
$4,362,321
-------------
-------------
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 13 American Municipal Income Portfolio
<PAGE>
Notes to Financial Statements (continued)
- ---------------------------------------------------------------------
(7) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
AMERICAN MUNICIPAL INCOME PORTFOLIO
<TABLE>
<CAPTION>
Six Months
Ended Year Ended January 31, Period
7/31/97 --------------------------- Ended
(Unaudited) 1997 1996 1995 1/31/94(e)
----------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, common stock, beginning of
period ......................................... $ 13.98 $ 14.42 $ 11.97 $ 14.88 $ 14.13
----------- ------- ------- ------- -----------
Operations:
Net investment income .......................... 0.50 1.07 1.07 1.14 $ 0.58
Net realized and unrealized gains (losses) on
investments .................................. 0.72 (0.50) 2.52 (2.92) 0.83
----------- ------- ------- ------- -----------
Total from operations ........................ 1.22 0.57 3.59 (1.78) 1.41
----------- ------- ------- ------- -----------
Distributions to shareholders:
From net investment income
Paid to common shareholders .................. (0.38) (0.75) (0.85) (0.87) (0.44)
Paid to preferred shareholders ............... (0.13) (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 .......... (0.51) (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 ..... $ 14.69 $ 13.98 $ 14.42 $ 11.97 $ 14.88
----------- ------- ------- ------- -----------
----------- ------- ------- ------- -----------
Market value, common stock, end of period ........ $ 13.50 $ 12.13 $ 12.50 $ 11.63 $ 14.63
----------- ------- ------- ------- -----------
----------- ------- ------- ------- -----------
SELECTED INFORMATION
Total return, common stock, net asset value
(a) ............................................ 7.93% 2.41% 28.31% (13.46)% 8.49%
Total return, common stock, market value (b) ..... 14.75% 3.29% 15.21% (14.44)% 0.40%
Net assets at end of period (in millions) ........ $ 128 $ 124 $ 127 $ 112 $ 129
Ratio of expenses to average weekly net assets ... 0.79%(f) 0.78% 0.77% 0.74% 0.70%(f)
Ratio of expenses to average weekly net assets
applicable to common stock ..................... 1.22%(f) 1.22% 1.20% 1.20% 1.15%(f)
Ratio of net investment income to average weekly
net assets ..................................... 4.68%(f) 5.02% 5.13% 5.72% 4.88%(f)
Ratio of net investment income to average weekly
net assets applicable to common stock (c) ...... 5.27%(f) 5.90% 5.81% 7.43% 6.92%(f)
Portfolio turnover rate (excluding short-term
securities) .................................... 28% 28% 54% 52% 31%
Remarketed preferred stock outstanding end of
period (in millions) ........................... $ 44 $ 44 $ 44 $ 44 $ 44
Asset coverage ratio (d) ......................... 294% 285% 291% 258% 297%
</TABLE>
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE AND DOES NOT
REFLECT A SALES CHARGE.
(b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(c) 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.
(d) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(e) COMMENCEMENT OF OPERATIONS WAS JUNE 25, 1993.
(f) ANNUALIZED.
- ---------------------------------------------------------------------
1997 Semiannual Report 14 American Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited)
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL INCOME PORTFOLIO July 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 (93.9%):
MUNICIPAL BONDS (92.8%):
ARIZONA (3.2%):
Pima County United School District (FGIC), 8.38%,
7/1/13 ............................................ $ 3,000,000 $ 4,138,680
--------------
CALIFORNIA (4.6%):
Duarte Redevelopment Agency, 6.88%, 11/1/11 ......... 5,000,000 5,963,450
--------------
COLORADO (0.4%):
Water Reserve and Power Development (Callable 9/1/06
at 101), 5.90%, 9/1/16 ............................ 500,000 527,080
--------------
GEORGIA (9.1%):
Municipal Electrical Authority (FGIC) (Callable
1/1/03 at 102), 6.50%, 1/1/12 ..................... 10,000,000(d) 11,684,300
--------------
HAWAII (2.1%):
State Department of Budget and Finance, 6.40%,
7/1/13 ............................................ 2,415,000 2,762,857
--------------
ILLINOIS (4.9%):
Augustana College Revenue (Callable 10/01/07 at 100),
5.70%, 10/1/11 .................................... 500,000 520,110
Chicago State University Revenue (MBIA) (Callable
12/1/04 at 102), 6.00%, 12/1/12 ................... 1,000,000 1,074,550
Rochelle Electric Systems (AMBAC) (Callable 5/1/06 at
102), 5.20%, 5/1/16 ............................... 750,000 747,270
Kane County School District (FGIC) (Callable 2/1/05
at 100), 5.75%, 2/1/15 ............................ 1,000,000 1,040,720
Health Facility Authority-Lutheran General Hospital
(Callable 1/1/02-4/1/15 at 100-102), 6.80%-7.00%,
4/1/08-1/1/22 ..................................... 2,500,000 2,860,815
--------------
6,243,465
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 15 American Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------ --------------
<S> <C> <C>
INDIANA (10.1%):
Valparaiso-Porter County Public Library (FGIC)
(Callable 7/1/04 at 102), 6.25%, 1/1/16 ........... $ 1,500,000 $ 1,639,905
Health Facility Authority-Columbus Hospital (FSA),
7.00%, 8/15/15 .................................... 2,670,000 3,277,986
Brownsburg School Building Corporation (FSA)
(Callable 2/1/05 at 102), 5.95%, 8/1/10 ........... 2,000,000 2,167,240
IPS School Building Corporation (Callable 7/15/04 at
102), 6.15%, 1/15/16 .............................. 2,800,000 3,047,576
Tippecanoe County School Building Corporation (MBIA)
(Callable 1/15/04 at 102), 5.95%, 7/15/12 ......... 1,635,000 1,740,768
Municipal Bond Bank (Callable 2/1/04 at 102), 6.00%,
2/1/16 ............................................ 1,000,000 1,046,710
--------------
12,920,185
--------------
IOWA (0.8%):
Sheldon Health Care Facilities (Callable 3/1/04 at
101), 6.15%, 3/1/16 ............................... 1,000,000 1,066,950
--------------
KANSAS (0.9%):
Kansas City Utility Systems Revenue (FGIC) (Callable
9/1/04 at 102), 6.25%, 9/1/14 ..................... 1,000,000 1,110,660
--------------
LOUISIANA (4.5%):
Desoto Parish Pollution Control (Callable 1/1/03 at
102), 7.23%, 1/1/19 ............................... 5,000,000 5,762,900
--------------
MARYLAND (4.3%):
Baltimore Parking Revenue - Series A (FGIC), 5.90%,
7/1/13 ............................................ 4,865,000 5,444,081
--------------
MICHIGAN (12.4%):
Clarkston Community Schools (MBIA) (Callable 05/01/07
at 100), 5.25%, 5/1/17 ............................ 1,000,000 998,700
Comstock Park Public Schools (FGIC) (Callable 1/1/03
at 102), 7.88%, 5/1/11 ............................ 3,145,000(d) 4,035,601
Hospital Financing Authority-Daughters Charity
(Callable 11/1/05 at 101), 5.25%, 11/1/15 ......... 3,000,000 2,992,770
Kent Hospital Financial Authority-Michigan Hospitals
(MBIA) (Callable 1/15/08 at 100), 7.25%,
1/15/13 ........................................... 4,000,000 4,817,000
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 16 American Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------ --------------
<S> <C> <C>
Royal Oak Hospital Financial Authority-William
Beaumont Hospital, 5.50%, 1/1/18 .................. $ 3,000,000 $ 3,042,600
--------------
15,886,671
--------------
MINNESOTA (2.9%):
Minneapolis Special School District (FGIC), 5.41%,
2/1/15 ............................................ 3,630,000(d) 3,691,891
--------------
NEVADA (2.5%):
Washoe County School District (MBIA) (Callable 6/1/04
at 101), 5.75%, 6/1/12 ............................ 3,000,000 3,157,170
--------------
NEW MEXICO (8.2%):
Mortgage Finance Authority, 6.40%-6.88%,
7/1/15-7/1/25 ..................................... 9,575,000 10,519,710
--------------
NORTH DAKOTA (2.9%):
Mercer County Pollution Control Revenue, 7.20%,
6/30/13 ........................................... 3,000,000 3,701,460
--------------
SOUTH CAROLINA (1.2%):
State Highway-Series B (Callable 7/1/06 at 102),
5.63%, 7/1/15 ..................................... 1,500,000 1,585,830
--------------
SOUTH DAKOTA (1.2%):
Housing and Development Authority (Callable 5/1/04 at
102), 5.80%, 5/1/14 ............................... 1,500,000 1,525,575
--------------
TEXAS (8.9%):
Arlington Independent School District (Callable
2/15/05 at 100), 6.00%, 2/15/15 ................... 2,275,000 2,403,219
El Paso General Obligation, 7.00%, 8/15/07 .......... 1,000,000 1,195,660
Fort Bend Independent School District (Callable
2/15/08 at 100), 5.00%, 2/15/14 ................... 2,000,000 1,988,840
Round Rock Independent School District (MBIA)
(Callable 6/1/05 at 100), 6.15%, 6/1/14 ........... 1,020,000 1,096,541
Spring Independent School District (Callable 8/15/05
at 100), 5.80%, 8/15/12-8/15/13 ................... 2,425,000 2,556,852
United Independent School District (Callable 8/15/06
at 100), 5.00%, 8/15/14 ........................... 1,150,000 1,143,457
Houston Water Conveyance System (AMBAC), 7.50%,
12/15/16 .......................................... 745,000 969,923
--------------
11,354,492
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 17 American Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------ --------------
<S> <C> <C>
UTAH (3.6%):
Municipal Power-San Juan Project (MBIA) (Callable
6/1/04 at 102), 6.25%, 6/1/14 ..................... $ 1,300,000 $ 1,431,417
NEBO County School District (FGIC) (Callable 6/15/04
at 100), 5.75%, 6/15/14 ........................... 3,000,000 3,132,840
--------------
4,564,257
--------------
WASHINGTON (2.4%):
Douglas County Public Utility District (MBIA)
(Callable 1/1/05 at 102), 6.00%, 1/1/15 ........... 1,000,000 1,062,750
Clark County Industrial Revenue (AMT) (Callable
08/01/02 at 100), 4.65%, 8/1/07 ................... 2,000,000(b) 2,000,000
--------------
3,062,750
--------------
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 1,188,284
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Callable 8/15/06 at 102), 5.50%,
8/15/15 ........................................... 1,000,000 1,020,720
--------------
2,209,004
--------------
Total Municipal Bonds
(cost: $111,256,927) ............................ 118,883,418
--------------
MUNICIPAL DERIVATIVE SECURITIES (1.1%):
INVERSE FLOATER (1.1%):
Duluth, Minnesota, Health Care Trust Certificate,
Series F2, 10.02%, 5/1/18
(cost: $1,157,615) ................................ 1,110,000(b)(d) 1,356,975
--------------
Total Municipal Long-Term Securities
(cost: $112,414,542) ............................ 120,240,393
--------------
MUNICIPAL SHORT-TERM SECURITIES (6.7%):
ILLINOIS (0.2%):
Health Facilities Authority, 3.65%, 1/1/16 .......... 200,000(c) 200,000
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 18 American Municipal Income Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- ---------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ------------ --------------
<S> <C> <C>
NEW YORK (3.9%):
New York City General Obligation, 3.60%, 8/15/20 .... $ 350,000(c) $ 350,000
New York City Municipal Water Authority, 3.60%,
6/15/25 ........................................... 3,100,000(c) 3,100,000
New York City, NY, Series B, VRDN, 3.60%, 10/1/20 ... 1,600,000(b)(c) 1,600,000
--------------
5,050,000
--------------
NORTH DAKOTA (2.3%):
Grand Forks Health Care-United Hospital, 3.70%,
12/1/25 ........................................... 2,900,000(c) 2,900,000
--------------
WISCONSIN (0.3%):
Health and Education Facilities-Wheaton Franciscan
Services, 3.55%, 8/15/16 .......................... 400,000(c) 400,000
--------------
Total Municipal Short-Term Securities
(cost: $8,550,000) .............................. 8,550,000
--------------
Total Investments in Securities
(cost: $120,964,542) (e) ........................ $ 128,790,393
--------------
--------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES (UNAUDITED):
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) PORTFOLIO ABBREVIATIONS AND DEFINITIONS:
AMT - ALTERNATIVE MINIMUM TAX. AS OF JULY 31, 1997, THE AGGREGATE
MARKET VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS
$2,000,000, WHICH REPRESENTS 1.6% OF NET ASSETS.
VRDN - VARIABLE RATE DEMAND NOTE
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 JULY 31,
1997.
(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 JULY
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 WHICH HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933 AND ARE CONSIDERED TO BE ILLIQUID. ON JULY 31, 1997, THE TOTAL
MARKET VALUE OF THESE INVESTMENTS WAS $20,768,767 OR 16.2% OF TOTAL NET
ASSETS.
(e) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 7,825,851
GROSS UNREALIZED DEPRECIATION ...... --
-----------
NET UNREALIZED APPRECIATION ...... $ 7,825,851
-----------
-----------
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 19 American Municipal Income Portfolio
<PAGE>
Shareholder Update
- ----------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
20, 1997. Each matter voted upon at that meeting, as well as the
number of votes cast for, against or withheld, the number of
abstentions, and the number of broker non-votes with respect to
such matters, are set forth below.
(1) The fund's preferred shareholders elected the following
directors:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- -----------------
<S> <C> <C>
David T. Bennett ................................. 1,125 16
William H. Ellis ................................. 1,125 16
</TABLE>
(2) The fund's preferred and common shareholders, voting as a
class, elected the following directors:
<TABLE>
<CAPTION>
SHARES
SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- -----------------
<S> <C> <C>
Jaye F. Dyer ..................................... 3,594,544 47,731
Karol D Emmerich ................................. 3,593,617 48,658
Luella G. Goldberg ............................... 3,593,150 49,125
David A. Hughey .................................. 3,594,544 47,731
George Latimer ................................... 3,593,368 48,907
</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, 1998. The following votes were cast regarding this
matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
------------- --------------- ----------- ---------
<S> <C> <C> <C>
3,591,527 25,489 25,258 --
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 20 American Municipal Income Portfolio
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
1997 Semiannual Report 21 American Municipal Income Portfolio
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
1997 Semiannual Report 22 American Municipal Income Portfolio
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
1997 Semiannual Report 23 American Municipal Income Portfolio
<PAGE>
GLOSSARY OF TERMS***
CALL PROTECTION
Call protection is the length of time during which a security cannot be
redeemed by the issuer. For bonds, long call protection allows a 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, long call protection leaves more opportunity for a bond's price to
increase in times of decreasing interest rates.
COUPON
Coupon is the interest rate on a bond that the issuer promises to pay to the
holder until the bond matures or resets its rate. It is expressed as an
annual percentage of face value.
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.
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 Semiannual Report 24 American Municipal Income Portfolio
<PAGE>
DIRECTORS
- --------------------------------------------------------------------------------
DAVID T. BENNETT, Chairman, Highland Homes, Inc., USL Products, Inc., Kiefer
Built, Inc., of Counsel, Gray, Plant, Mooty, Mooty & Bennett, P.A.
JAYE F. DYER, President, Dyer Management Company
WILLIAM H. ELLIS, President, Piper Jaffray Companies Inc., Piper Capital
Management Incorporated
KAROL D. EMMERICH, President, The Paraclete Group
LUELLA G. GOLDBERG, Director, TCF Financial, ReliaStar Financial Corp., Hormel
Foods Corp.
DAVID A. HUGHEY, Retired Executive Vice President and Chief Administrative
Officer of Dean Witter InterCapital Inc. and Dean Witter Trust Co.
GEORGE LATIMER, Chief Executive Officer, National Equity Funds
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM H. ELLIS, Chairman of the Board
PAUL A. DOW, President
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
FOR MORE INFORMATION
BY PHONE [LOGO]
1 800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer your
questions.
TO ORDER LITERATURE
press 5, ask a service representative to mail you additional literature,
including a Quarterly Update. You can also request to be put on a mailing
list to receive this information automatically each quarter.
BY MAIL [LOGO]
Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804
In an effort to reduce costs to our shareholders, we have implemented a
process to reduce duplicate mailings of the fund's shareholder reports. This
householding process should allow us to mail one report to each address where
one or more registered shareholders with the same last name reside. If you
would like to have additional reports mailed to your address, please call our
Mutual Fund Services area at 1 800 866-7778, or mail a request to us.
ON-LINE [LOGO]
http://www.piperjaffray.com/
<PAGE>
PIPER CAPITAL Bulk Rate
MANAGEMENT U.S. Postage
PAID
PIPER CAPITAL MANAGEMENT INCORPORATED Permit No. 3008
222 SOUTH NINTH STREET Mpls., MN
MINNEAPOLIS, MN 55402-3804
THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
#21410 9/1997 236-97
