<PAGE>
1999
SEMIANNUAL REPORT
AMERICAN MUNICIPAL
INCOME PORTFOLIO
XAA
[LOGO] FIRST AMERICAN
Asset Management
<PAGE>
CONTENTS
2 Fund Overview
6 Financial Statements and Notes
15 Investments in Securities
21 Shareholder Update
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 advisors. 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.
- ------------------------------------------------------
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
- ------------------------------------------------------
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
Based on net asset value for the periods ended July 31, 1999
<TABLE>
<CAPTION>
Since
Inception
One Year Five Year 6/25/93
-------- --------- ---------
<S> <C> <C> <C>
AMERICAN MUNICIPAL INCOME PORTFOLIO 1.52% 8.61% 6.18%
Lipper General Municipal Bond Funds: Leveraged Average 1.05% 7.08% 5.73%
Lehman Brothers Municipal Long Bond Index 1.71% 7.56% 6.23%
</TABLE>
Average annual total returns are through July 31,1999, 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 annual total returns based on the change in market price for the
one-year, five-year and since-inception periods ended July 31, 1999, were
- -0.23%%, 7.01% and 3.65%, respectively. These returns assume reinvestment of
all distributions and reflect sales charges on those distributions described
in the fund's dividend reinvestment plan, but not on initial purchases.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more
or less than their original cost. Closed-end funds, such as this fund, often
trade at discounts to net asset value. Therefore, you may be unable to
realize the full net asset value of your shares when you sell.
The Lipper General Municipal Bond Funds: Leveraged Average represents the
average annual total return, with distributions reinvested, of leveraged
perpetual and term-trust national closed-end municipal funds as characterized
by Lipper Inc. 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 July 31,
1999.
1 1999 SEMIANNUAL REPORT American Municipal Income Portfolio
<PAGE>
FUND
OVERVIEW
FUND MANAGEMENT
DOUGLAS WHITE, CFA, has primary responsibility for the management of American
Municipal Income Portfolio. He has 16 years of financial experience
September 15, 1999
AMERICAN MUNICIPAL INCOME PORTFOLIO PROVIDED A NET ASSET VALUE TOTAL RETURN
OF -4.41%* FOR THE SIX MONTHS ENDED JULY 31, 1999. The fund's market price
return was -5.90% over the same period.
This compares to a -2.68% total return for the fund's benchmark, the Lehman
Brothers Municipal Long Bond Index. Over the same period, the Lipper General
Municipal Bond Funds: Leveraged Average had a total return of -3.54%.
INTEREST RATES HAVE RISEN ALMOST STEADILY THROUGHOUT 1999. This trend has had
a negative impact on returns for American Municipal Income Portfolio because
the fund has been positioned to benefit from stable or declining
intermediate- and long-term interest rates.
*All returns assume reinvestment of all distributions and do not reflect
sales charges, except the fund's total return based on market price, which
does reflect sales charges on those distributions described in the fund's
dividend reinvestment plan, but not on initial purchases. Past performance
does not guarantee future results. The investment return and principal value
of an investment will fluctuate so that fund shares, when sold, may be worth
more or less than their original cost.
Portfolio Composition
As a percentage of total assets on July 31, 1999
Housing Revenue 19%
IDR Pollution Control 6%
Other Assets 1%
Certificates of Participation 4%
Water/Sewer/Pollution Control Revenue 10%
Building 2%
Health Care Revenue 23%
Investment Company 4%
Municipal Bond Bank 1%
Educational Revenue 3%
General Obligations 6%
Electric Revenue 10%
Housing Revenue 20%
2 1999 SEMIANNUAL REPORT American Municipal Income Portfolio
<PAGE>
FUND
OVERVIEW CONTINUED
THE FUND'S STRATEGY FOR LONGER DURATION ENABLED IT TO CONTINUE ADDING TO IT'S
DIVIDEND RESERVE. Our duration is still beyond our benchmark, which has
allowed the fund to continue increasing income. In addition, while the
general level of interest rates has risen over the past six months, municipal
yields have risen more than Treasury yields, which puts the municipal market
in an attractive position. A change in interest rates provides opportunities
to realize tax losses, to help offset potential future capital gains and to
purchase new bonds at relatively higher yields. Therefore, we are not
currently considering a shift in the fund's strategy.
AS INTEREST RATES HAVE RISEN, THE SUPPLY OF NEW MUNICIPAL BONDS HAS FALLEN.
Many government entities slowed debt issuance either because higher yields
made refunding issues unattractive or because
Geographical Distribution
As a percentage of total assets on July 31, 1999
Alaska 2%
Arizona 3%
California 5%
Colorado 1%
Georgia 9%
Hawaii 2%
Illinois 7%
Indiana 5%
Iowa 1%
Kansas 1%
Louisiana 4%
Maryland 2%
Michigan 9%
Minnesota 7%
Nebraska 2%
Nevada 3%
New Mexico 8%
North Dakota 3%
Ohio 1%
South Carolina 1%
South Dakota 2%
Tennessee 1%
Texas 6%
Utah 4%
Washington 2%
Wisconsin 4%
3 1999 SEMIANNUAL REPORT American Municipal Income Portfolio
<PAGE>
FUND
OVERVIEW CONTINUED
increasing tax revenues decreased the need to take on new debt. The total
supply of municipal bonds has gone down more than 23% from a year ago.
WHILE THE STRONG U.S. ECONOMY SEEMED TO BE DRIVING INTEREST RATES UP, IT ALSO
HELPED TO IMPROVE THE BUDGET OUTLOOK FOR MOST STATES AND MUNICIPALITIES THAT
ISSUE TAX-FREE BONDS. This positive trend has improved credit quality in the
market as shown by the number of credit rating upgrades, which outpaced
downgrades in the second quarter by four-to-one.
AMERICAN MUNICIPAL INCOME PORTFOLIO EMPHASIZES BONDS WITH LONGER MATURITIES.
History tells us that a bond portfolio that takes an aggressive stance in
bond maturities ultimately benefits from that position, even though it may be
more volatile in the short term. Bonds with longer maturities usually offer
higher yields. What's more, in a low-inflation environment such as we've
enjoyed for a number of years, bond yields tend to move favorably. Downward
interest-rate trends will reward longer-term bonds the most.
GOING FORWARD, THERE ARE A NUMBER OF REASONS FOR OPTIMISM IN THE
MUNICIPAL-BOND MARKETPLACE. The glut of corporate bond offerings is expected
to taper off as the new year approaches. In addition, yields on municipal
bonds are attractive again when compared to Treasury bonds. Finally, it seems
likely that the rise in interest rates we experienced will subside.
Thank you for your investment in American Municipal Income Portfolio. We
remain committed to providing you with quality service and look forward to
helping you achieve your investment goals.
4 1999 SEMIANNUAL REPORT American Municipal Income Portfolio
<PAGE>
FUND
OVERVIEW CONTINUED
Preferred Stock The preferred stock issued by XAA 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.
5 1999 SEMIANNUAL REPORT American Municipal Income Portfolio
<PAGE>
FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES July 31, 1999
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2) ....... $125,053,633
Cash in bank on demand deposit ............................ 18,307
Accrued interest receivable ............................... 1,283,395
Other assets .............................................. 7,693
-----------------
Total assets ............................................ 126,363,028
-----------------
LIABILITIES:
Preferred stock dividends payable (note 3) ................ 11,203
Accrued investment management fee ......................... 37,593
Accrued remarketing agent fee ............................. 3,347
Accrued administrative fee ................................ 16,111
-----------------
Total liabilities ....................................... 68,254
-----------------
Net assets applicable to outstanding capital stock ...... $126,294,774
-----------------
-----------------
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital (common and
preferred stock) ........................................ $124,031,021
Undistributed net investment income ....................... 441,613
Accumulated net realized loss on investments .............. (2,479,301)
Unrealized appreciation of investments .................... 4,301,441
-----------------
Total - representing net assets applicable to capital
stock ................................................. $126,294,774
-----------------
-----------------
* Investments in securities at identified cost ............ $120,752,192
-----------------
-----------------
NET ASSET VALUE AND MARKET PRICE OF COMMON STOCK:
Net assets applicable to outstanding common stock ......... $82,794,774
Shares of common stock outstanding (authorized 200 million
shares of $0.01 par value) .............................. 5,756,267
Net asset value ........................................... $ 14.38
Market price .............................................. $ 12.81
LIQUIDATION PREFERENCE OF PREFERRED STOCK:
Net assets applicable to outstanding preferred stock ...... $43,500,000
Shares of preferred stock outstanding (authorized 1 million
shares) ................................................. 1,740
Liquidation preference per share .......................... $ 25,000
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1999 Semiannual Report 6 American Municipal Income Portfolio
<PAGE>
FINANCIAL STATEMENTS (Unaudited) (continued)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Six Months Ended July 31, 1999
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest ................................................... $ 3,268,975
Exempt-interest dividends from investment companies ........ 150,922
-----------------
Total investment income .................................. 3,419,897
-----------------
EXPENSES (NOTE 5):
Investment management fee ................................. 224,298
Administrative fee ........................................ 96,128
Remarketing agent fee ..................................... 53,929
Custodian and accounting fees ............................. 39,681
Transfer agent fees ....................................... 10,909
Reports to shareholders ................................... 11,754
Directors' fees ........................................... 1,488
Audit and legal fees ...................................... 20,234
Other expenses ............................................ 25,944
-----------------
Total expenses .......................................... 484,365
Less expenses paid indirectly ......................... (3,534)
-----------------
Total net expenses ...................................... 480,831
-----------------
Net investment income ................................... 2,939,066
-----------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) ................. 21,052
Net change in unrealized appreciation or depreciation of
investments ............................................. (6,154,429)
-----------------
Net loss on investments ................................. (6,133,377)
-----------------
Net decrease in net assets resulting from operations
..................................................... $(3,194,311)
-----------------
-----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1999 Semiannual Report 7 American Municipal Income Portfolio
<PAGE>
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
SIX MONTHS ENDED
7/31/99 YEAR ENDED
(UNAUDITED) 1/31/99
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment income ..................................... $ 2,939,066 $ 5,878,972
Net realized gain on investments .......................... 21,052 912,077
Net change in unrealized appreciation or depreciation of
investments ............................................. (6,154,429) 1,158,526
----------------- -----------------
Net increase (decrease) in net assets resulting from
operations ............................................ (3,194,311) 7,949,575
----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income:
Common stock dividends .................................. (2,167,235) (4,339,248)
Preferred stock dividends ............................... (659,498) (1,528,693)
----------------- -----------------
Total distributions ..................................... (2,826,733) (5,867,941)
----------------- -----------------
Total increase (decrease) in net assets ................. (6,021,044) 2,081,634
Net assets at beginning of period ......................... 132,315,818 130,234,184
----------------- -----------------
Net assets at end of period ............................... $126,294,774 $132,315,818
----------------- -----------------
----------------- -----------------
Undistributed net investment income ....................... $ 441,613 $ 329,280
----------------- -----------------
----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1999 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 readily available, or if such
quotations or valuations are believed to be inaccurate,
unreliable or not reflective of market value, portfolio
securities are valued according to procedures adopted by the
fund's board of directors in good faith at "fair value", that
is, a price that the fund might reasonably expect to receive for
the security or other asset upon its current sale.
The current market value of certain fixed income securities is
provided by an independent pricing service. Fixed income
securities for which prices are not available from an
independent pricing service but where an active market exists
are valued using market quotations obtained from one or more
dealers that make markets in the securities or from a
widely-used quotation system. Short-term securities with
maturities of 60 days or less are valued at amortized cost,
which approximates market value.
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.
- --------------------------------------------------------------------------------
1999 Semiannual Report 9 American Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
- --------------------------------------------------------------------------------
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 July 31, 1999, the
fund had no outstanding when-issued or forward commitments.
FEDERAL TAXES
The fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and
not be subject to federal income tax. Therefore, no income tax
provision is required. The fund 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 and 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 or 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
- --------------------------------------------------------------------------------
1999 Semiannual Report 10 American Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
- --------------------------------------------------------------------------------
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 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 has issued and, as of July
31, 1999, 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, 1999, the
dividend rates were 3.25% and 2.90% 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, 1999, aggregated $2,306,560 and
$3,537,407, respectively.
(5) EXPENSES
............................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
On August 10, 1998, the fund entered into an investment advisory
agreement with U.S. Bank National Association (U.S. Bank),
acting through its division, First American Asset
- --------------------------------------------------------------------------------
1999 Semiannual Report 11 American Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
- --------------------------------------------------------------------------------
Management. Prior thereto, Piper Capital Management Incorporated
(Piper Capital), which was acquired by U.S. Bancorp on May 1,
1998, had served as the fund's advisor. U.S. Bank also serves as
the fund's administrator under an administration agreement
effective May 1, 1998. Prior thereto, Piper Capital provided
services under an administration agreement through April 30,
1998.
The investment advisory agreement provides the advisor with a
monthly investment management fee equal to an annual 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 advisor
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
- --------------------------------------------------------------------------------
1999 Semiannual Report 12 American Municipal Income Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
- --------------------------------------------------------------------------------
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 at January 31, 1999, which, if not offset by
subsequent capital gains, will expire on the fund's fiscal year-
ends as indicated below. It is unlikely the board of directors
will authorize a distribution of any net realized capital gains
until the available capital loss carryovers have been offset or
expire.
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRATION
----------- ----------
<S> <C> <C>
$ 942,779 2003
1,557,574 2004
-----------
$2,500,353
-----------
-----------
</TABLE>
- --------------------------------------------------------------------------------
1999 Semiannual Report 13 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:
<TABLE>
<CAPTION>
Six Months Year Ended January 31,
Ended ------------------------------------------------------
7/31/99
(Unaudited) 1999(g) 1998 1997 1996 1995
----------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, common stock, beginning
of period ............................ $15.43 $ 15.07 $ 13.98 $ 14.42 $ 11.97 $ 14.88
----------- ---------- -------- -------- -------- --------
Operations:
Net investment income ................ 0.51 1.02 1.00 1.07 1.07 1.14
Net realized and unrealized gains
(losses) on investments ............ (1.06) 0.36 1.12 (0.50) 2.52 (2.92)
----------- ---------- -------- -------- -------- --------
Total from operations .............. (0.55) 1.38 2.12 0.57 3.59 (1.78)
----------- ---------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income
Paid to common shareholders ........ (0.38) (0.75) (0.76) (0.75) (0.85) (0.87)
Paid to preferred shareholders ..... (0.12) (0.27) (0.27) (0.26) (0.29) (0.23)
From net realized gains
Paid to common shareholders ........ -- -- -- -- -- (0.02)
Paid to preferred shareholders ..... -- -- -- -- -- (0.01)
----------- ---------- -------- -------- -------- --------
Total distributions to
shareholders ..................... (0.50) (1.02) (1.03) (1.01) (1.14) (1.13)
----------- ---------- -------- -------- -------- --------
Net asset value, common stock, end of
period ............................... $14.38 $ 15.43 $ 15.07 $ 13.98 $ 14.42 $ 11.97
----------- ---------- -------- -------- -------- --------
----------- ---------- -------- -------- -------- --------
Market value, common stock, end of
period ............................... $12.81 $ 14.00 $ 13.44 $ 12.13 $ 12.50 $ 11.63
----------- ---------- -------- -------- -------- --------
----------- ---------- -------- -------- -------- --------
SELECTED INFORMATION
Total return, common stock, net asset
value (a) ............................ (4.41)% 7.62% 13.63% 2.41% 28.31% (13.46)%
Total return, common stock, market value
(b) .................................. (5.90)% 10.07% 17.53% 3.29% 15.21% (14.44)%
Net assets at end of period (in
millions) ............................ $ 126 $ 132 $ 130 $ 124 $ 127 $ 122
Ratio of expenses to average weekly net
assets applicable to common stock
(c) .................................. 1.14%(h) 1.13% 1.19% 1.22% 1.20% 1.20%
Ratio of net investment income to
average weekly net assets applicable
to common stock (d)(e) ............... 5.38%(h) 5.02% 5.10% 5.90% 5.81% 7.43%
Portfolio turnover rate (excluding
short-term securities) ............... 2% 19% 46% 28% 54% 52%
Remarketed preferred stock outstanding
end of period (in millions) .......... $ 44 $ 44 $ 44 $ 44 $ 44 $ 44
Asset coverage ratio (f) ............... 290% 304% 299% 285% 291% 258%
</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 OF EXPENSES TO TOTAL AVERAGE WEEKLY NET ASSETS IS 0.76%, 0.75%,
0.78%, 0.78%, 0.77% AND 0.74% FOR THE SIX MONTHS ENDED JULY 31, 1999 AND
FISCAL YEARS 1999, 1998, 1997, 1996 AND 1995, RESPECTIVELY. DIVIDENDS PAID
TO SHAREHOLDERS ARE NOT CONSIDERED AN EXPENSE.
(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) RATIO OF NET INVESTMENT INCOME TO TOTAL AVERAGE WEEKLY NET ASSETS IS 4.60%,
4.52%, 4.58%, 5.02%, 5.13% AND 5.72% FOR THE SIX MONTHS ENDED JULY 31, 1999
AND FISCAL YEARS 1999, 1998, 1997, 1996 AND 1995, RESPECTIVELY.
(f) REPRESENTS TOTAL NET ASSETS DIVIDED BY REMARKETED PREFERRED STOCK.
(g) EFFECTIVE AUGUST 10, 1998, THE ADVISOR CHANGED FROM PIPER CAPITAL TO U.S.
BANK.
(h) ANNUALIZED.
- --------------------------------------------------------------------------------
1999 Semiannual Report 14 American Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN MUNICIPAL INCOME PORTFOLIO July 31, 1999
.......................................................................................
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 (93.8%):
MUNICIPAL BONDS (92.8%)
ALASKA (2.4%):
State Housing Finance Corp., (Callable 12/1/07 at
101.5), 5.50%, 12/1/17 .......................... $ 3,000,000 $ 3,020,910
------------
ARIZONA (3.1%):
Pima County United School District (FGIC), 8.38%,
7/1/13 .......................................... 3,000,000(b) 3,953,460
------------
CALIFORNIA (4.7%):
Duarte Redevelopment Agency (Escrowed to maturity),
6.88%, 11/1/11 .................................. 5,000,000(d) 5,877,150
------------
COLORADO (0.4%):
Water Reserve and Power Development (Callable
9/1/06 at 101), 5.90%, 9/1/16 ................... 500,000 522,460
------------
GEORGIA (8.9%):
Municipal Electrical Authority (FGIC) (Callable
1/1/03 at 102), 6.50%, 1/1/12 ................... 10,000,000(b)(d) 11,255,300
------------
HAWAII (2.1%):
State Department of Budget and Finance, 6.40%,
7/1/13 .......................................... 2,415,000 2,619,430
------------
ILLINOIS (6.6%):
Augustana College Revenue (Callable 10/01/07 at
100), 5.70%, 10/1/11 ............................ 500,000 513,280
Chicago State University Revenue (MBIA)
(Prerefunded to 12/1/04), 6.00%, 12/1/12 ........ 1,000,000(b) 1,091,150
Health Facility Authority-Lutheran General
Hospital, 7.00%, 4/1/08-4/1/14 .................. 1,500,000 1,710,275
Health Facility Authority-Lutheran General Hospital
(Prerefunded to 1/01/02), 6.80%, 1/1/22 ......... 1,000,000 1,073,900
Kane County School District (FGIC) (Prerefunded to
2/01/05), 5.75%, 2/1/15 ......................... 1,000,000(b)(e) 1,060,330
Rochelle Electric Systems (AMBAC) (Callable 5/1/06
at 102), 5.20%, 5/1/16 .......................... 750,000(b) 730,312
Rockford Multifamily Housing Revenue (Callable
1/20/08 at 102), AMT, 5.88%, 1/20/38 ............ 2,215,000(b) 2,268,005
------------
8,447,252
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 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 (5.0%):
Health Facility Authority-Columbus Hospital (FSA),
7.00%, 8/15/15 .................................. $ 2,670,000(b) $ 3,110,443
Health Facility Authority-Greenwood Village South
(Callable 5/15/08 at 101), 5.50%, 5/15/18 ....... 2,280,000 2,121,996
Municipal Bond Bank (Callable 2/1/04 at 102),
6.00%, 2/1/16 ................................... 1,000,000 1,040,870
------------
6,273,309
------------
IOWA (0.8%):
Sheldon Health Care Facilities (Callable 3/1/04 at
101), 6.15%, 3/1/16 ............................. 1,000,000 1,039,600
------------
KANSAS (0.9%):
Kansas City Utility Systems Revenue (FGIC)
(Callable 9/1/04 at 102), 6.25%, 9/1/14 ......... 1,000,000(b) 1,080,410
------------
LOUISIANA (4.4%):
De Soto Parish Pollution Control (MBIA) (Callable
1/1/03 at 102), 7.60%, 1/1/19 ................... 5,000,000(b) 5,516,400
------------
MARYLAND (2.1%):
Baltimore Parking Revenue-Series A (FGIC), 5.90%,
7/1/13 .......................................... 2,500,000(b) 2,705,275
------------
MICHIGAN (9.1%):
Comstock Park Public Schools (FGIC) (Callable
1/1/03 at 102), 7.88%, 5/1/11 ................... 3,145,000(b)(d) 3,916,594
Hospital Financing Authority-Daughters Charity
(Callable 11/1/05 at 101), 5.25%, 11/1/15 ....... 3,000,000 2,897,940
Kent Hospital Financial Authority-Michigan
Hospitals (MBIA) (Callable 1/15/08 at 100),
7.25%, 1/15/13 .................................. 4,000,000(b)(d) 4,746,880
------------
11,561,414
------------
MINNESOTA (7.0%):
Eden Prairie Multifamily Housing Revenue (Callable
1/20/08 at 102), 5.50%-5.60%, 1/20/18-7/20/28 ... 1,400,000 1,413,250
Minneapolis Special School District #1 (MBIA)
(Callable 2/1/03 at 100), 5.45%, 2/1/15 ......... 3,630,000(b) 3,653,414
Moorhead Golf Course Revenue (Callable 12/1/08 at
100), 5.88%, 12/1/21 ............................ 2,890,000 2,842,113
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 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>
State Housing and Finance Agency (Callable 7/1/02
at 102), AMT, 6.85%, 1/1/24 ..................... $ 875,000(b) $ 915,303
------------
8,824,080
------------
NEBRASKA (1.5%):
Educational Financial Authority Revenue (Callable
12/15/08 at 100), 5.35%, 12/15/18 ............... 2,040,000 1,892,018
------------
NEVADA (2.5%):
Washoe County School District (MBIA) (Callable
6/1/04 at 101), 5.75%, 6/1/12 ................... 3,000,000(b) 3,130,830
------------
NEW MEXICO (7.6%):
Mortgage Finance Authority, 6.40%-6.88%,
7/1/15-7/1/25 ................................... 8,655,000 9,540,187
------------
NORTH DAKOTA (2.8%):
Mercer County Pollution Control Revenue (AMBAC),
7.20%, 6/30/13 .................................. 3,000,000(b) 3,543,660
------------
OHIO (0.8%):
Franklin County Health Care Facility Revenue
(Callable 8/15/08 at 101), 5.25%, 8/15/12 ....... 1,000,000 949,780
------------
SOUTH CAROLINA (1.2%):
State Highway-Series B (Callable 7/1/06 at 102),
5.63%, 7/1/15 1,500,000 1,553,625
------------
SOUTH DAKOTA (2.0%):
Housing and Development Authority (Callable 5/1/04
at 102), 5.80%, 5/1/14 .......................... 1,270,000 1,307,706
Sioux Falls Health Facilities-Evangelical Lutheran
(AMBAC) (Callable 6/1/08 at 102), 5.35%,
6/1/23 .......................................... 1,250,000(b) 1,197,963
------------
2,505,669
------------
TENNESSEE (0.8%):
Shelby County Tennessee Health and Education
Facilities-St. Judes Childrens Research (Callable
07/01/09 at 102), 5.50%, 7/1/20 ................. 1,000,000 974,500
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 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>
TEXAS (6.0%):
Abilene Health Facility Development (Callable
8/15/08 at 101), 5.88%, 11/15/18 ................ $ 1,150,000 $ 1,099,446
Arlington Independent School District (Callable
2/15/05 at 100), 6.00%, 2/15/15 ................. 670,000 702,723
Arlington Independent School District (PSF)
(Prerefunded to 2/15/05), 6.00%, 2/15/15 ........ 1,605,000(b)(e) 1,723,513
Fort Bend Independent School District (Prerefunded
to 2/15/08), 5.00%, 2/15/14 ..................... 2,000,000 2,031,920
Houston Water Conveyance System (AMBAC), 7.50%,
12/15/16 ........................................ 745,000(b) 923,241
United Independent School District (Callable
8/15/06 at 100), 5.00%, 8/15/14 ................. 1,150,000 1,119,157
------------
7,600,000
------------
UTAH (3.6%):
Municipal Power-San Juan Project (MBIA)
(Prerefunded to 6/01/04), 6.25%, 6/1/14 ......... 1,300,000(b)(e) 1,425,307
NEBO County School District (FGIC) (Prerefunded to
6/15/04), 5.75%, 6/15/14 ........................ 3,000,000(b) 3,177,150
------------
4,602,457
------------
WASHINGTON (2.4%):
Douglas County Public Utility District (MBIA)
(Callable 1/1/05 at 102), 6.00%, 1/1/15 ......... 1,000,000(b) 1,047,420
State Public Power (FSA) (Callable 7/1/07 at 102),
5.25%, 7/1/16 ................................... 1,000,000(b) 979,110
State Public Power Supply (Callable 7/1/08 at 102),
5.13%, 7/1/18 ................................... 1,000,000 948,320
------------
2,974,850
------------
WISCONSIN (4.1%):
Amery Apple River Hospital Project (Callable 6/1/08
at 100), 5.70%, 6/1/13 .......................... 1,440,000 1,375,171
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 1,201,662
Health and Education Facilities-Waukesha Hospital
(AMBAC) (Callable 8/15/06 at 102), 5.50%,
8/15/15 ......................................... 1,000,000(b) 1,002,090
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 Semiannual Report 18 American Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (UNAUDITED) (continued)
- --------------------------------------------------------------------------------
AMERICAN MUNICIPAL INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Shares/
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
State Health & Educational Facility Authority
Revenue (Callable 11/15/08 at 102), 5.75%,
11/15/27 ........................................ $ 1,800,000 $ 1,645,560
------------
5,224,483
------------
Total Municipal Bonds
(cost: $112,703,213) ......................... 117,188,509
------------
MUNICIPAL DERIVATIVE SECURITIES (1.0%):
INVERSE FLOATER (1.0%):
Duluth, Minnesota, Health Care Trust Certificate,
Series F2, 10.61%, 5/1/18 (cost: $1,148,421) .... 1,110,000(b)(d) 1,291,762
------------
Total Municapal Long-Term Securities
(cost: $113,851,634) ......................... 118,480,271
------------
COMMON STOCK (4.0%):
CLOSED-END INVESTMENT COMPANIES (4.0%):
Blackrock Investment Quality Municipal Trust ...... 113,000 1,638,500
Morgan Stanley Dean Witter Insured Municipal Income
Trust ........................................... 6,600 90,750
Van Kampen Advantage Municipal Income Trust ....... 5,000 75,312
Van Kampen Municipal Opportunity Trust ............ 19,400 278,875
Van Kampen Municipal Opportunity Trust II ......... 20,900 273,006
Van Kampen Municipal Trust ........................ 168,700 2,541,044
Van Kampen Strategic Sector Municipal Trust ....... 14,000 175,875
------------
Total Common Stock
(cost: $5,400,558) ........................... 5,073,362
------------
MUNICIPAL SHORT-TERM SECURITIES (1.2%):
NEW YORK (1.2%):
New York City, NY, Subseries A-10, VRDN, 3.70%,
8/1/16-8/1/17 $ 1,300,000(b) 1,300,000
New York City, Series C, 3.70%, 10/1/23 ........... 200,000(c) 200,000
------------
1,500,000
------------
Total Municipal Short-Term Securities
(cost: $1,500,000) ........................... 1,500,000
------------
Total Investments in Securities
(cost: $120,752,192)(f) ...................... $125,053,633
------------
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
1999 Semiannual Report 19 American Municipal Income Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (UNAUDITED) (continued)
- --------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) PORTFOLIO ABBREVIATIONS AND DEFINITIONS:
AMBAC - AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
AMT - ALTERNATIVE MINIMUM TAX. AS OF JULY 31, 1999, THE AGGREGATE MARKET
VALUE OF SECURITIES SUBJECT TO THE ALTERNATIVE MINIMUM TAX IS $3,183,308,
WHICH REPRESENTS 2.5% OF NET ASSETS.
FGIC - FINANCIAL GUARANTY INSURANCE CORPORATION
FSA - FINANCIAL SECURITY ASSURANCE
MBIA - MUNICIPAL BOND INSURANCE ASSOCIATION
PSF - PERMANENT SCHOOL FUNDING
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, 1999.
(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, 1999. 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 MAY NOT BE SOLD TO
THE PUBLIC. THESE SECURITIES ARE CONSIDERED ILLIQUID. THE FUND IS NOT
LIMITED IN ITS ABILITY TO INVEST IN THESE ILLIQUID SECURITIES. ON JULY 31,
1999, THE AGGREGATE VALUE OF THESE INVESTMENTS WAS $27,087,686 OR 21.4% OF
TOTAL NET ASSETS. INFORMATION REGARDING THESE SECURITIES IS AS FOLLOWS:
<TABLE>
<CAPTION>
DATE
SECURITY PAR ACQUIRED COST BASIS
- --------------------------------------------------- ---------- --------- ----------
<S> <C> <C> <C>
DUARTE CA REDEVELOPMENT AGENCY $5,000,000 9/96-2/97 $5,788,293
GEORGIA MUNICIPAL ELECTRICAL AUTHORITY 10,000,000 10/95 10,688,478
COMSTOCK, MI, PARK PUBLIC SCHOOLS 3,145,000 10/95-7/96 3,591,233
KENT, MI, HOSPITAL FINANCIAL AUTHORITY-MICHIGAN
HOSPITALS 4,000,000 9/96-2/97 4,659,142
DULUTH, MN HEALTH CARE TRUST CERTIFICATE 1,110,000 5/94 1,148,393
</TABLE>
(E) PREREFUNDED ISSUES ARE BACKED BY U.S. GOVERNMENT OBLIGATIONS. THESE BONDS
ARE CALLED AND MATURE AT THE CALL DATE INDICATED.
(F) 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 ...... $ 5,236,641
GROSS UNREALIZED DEPRECIATION ...... (935,200)
------------
NET UNREALIZED APPRECIATION ...... $ 4,301,441
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
1999 Semiannual Report 20 American Municipal Income Portfolio
<PAGE>
SHAREHOLDER UPDATE
- --------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
16, 1999. Each matter voted upon at that meeting, as well as the
number of votes cast for, against or withheld, the number of
abstentions, and the number of broker non-votes with respect to
such matters, are set forth below.
(1) The fund's preferred shareholders elected the following
directors:
<TABLE>
<CAPTION>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- ------------------
<S> <C> <C>
David T. Bennett ....................... 1,660 0
Leonard W. Kedrowski ................... 1,660 0
</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>
Robert J. Dayton ....................... 5,459,217 17,710
Roger A. Gibson ........................ 5,459,217 17,710
Andrew M. Hunter III ................... 5,459,217 17,710
John M. Murphy ......................... 5,459,217 17,710
Robert L. Spies ........................ 5,459,217 17,710
Joseph D. Strauss ...................... 5,459,217 17,710
Virginia L. Stringer ................... 5,459,217 17,710
</TABLE>
(3) The fund's preferred and common shareholders, voting as a
class, ratified the selection by a majority of the
independent members of the fund's Board of Directors of
Ernst & Young LLP as the independent public accountants for
the fund for the fiscal year ending January 31, 2000. The
following votes were cast regarding this matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
----------- ----------------- ----------- ---------
<S> <C> <C> <C>
5,455,297 7,837 13,793 --
</TABLE>
- --------------------------------------------------------------------------------
1999 Semiannual Report 21 American Municipal Income Portfolio
<PAGE>
[LOGO] FIRST AMERICAN
Asset Management
[LOGO] American Income Portfolio
1999 SEMIANNUAL REPORT
This document is printed on paper made from 100% total recovered
fiber, including 15% post-consumer waste.
9/1999 371-99