<PAGE>
AMERICAN
SELECT
PORTFOLIO
* * *
SEMIANNUAL
REPORT
1996
<PAGE>
TABLE OF CONTENTS
AVERAGE ANNUALIZED TOTAL RETURNS . . . . 1
PRESIDENT'S LETTER . . . . . . . . . . . 2
PORTFOLIO MANAGERS' LETTER . . . . . . . 5
MANAGING RISK. . . . . . . . . . . . . . 10
FINANCIAL STATEMENTS AND NOTES . . . . . 11
INVESTMENTS IN SECURITIES. . . . . . . . 24
AMERICAN SELECT PORTFOLIO
American Select Portfolio is a diversified, closed-end investment management
company. The fund's primary objective is to provide a high level of current
income; its secondary objective is to seek capital appreciation. To realize its
objectives, the fund emphasizes investments in mortgage-related assets that
directly or indirectly represent a participation in or are secured by and
payable from mortgage loans. It may also invest in asset-backed securities,
U.S. government securities, corporate debt securities, municipal obligations,
unregistered securities, mortgage-backed securities and mortgage servicing
rights. The fund may borrow, including through the use of reverse repurchase
agreements, and may purchase securities through the dollar-roll program. Use of
certain of these investments and investment techniques may cause the fund's net
asset value to fluctuate to a greater extent than would be expected from
interest rate movements alone. As with other mutual funds, there can be no
assurance the fund will achieve its objectives. The fund's credit rating was
downgraded from Af to BBBf by Standard & Poor's Ratings Group (S&P) on Dec. 29,
1994.* Fund shares trade on the New York Stock Exchange under the symbol SLA.
* THE FUND IS RATED BBBf, WHICH MEANS THE FUND'S INVESTMENTS HAVE AN OVERALL
CREDIT QUALITY OF BBB. CREDIT QUALITIES ARE ASSESSED BY STANDARD & POOR'S MUTUAL
FUNDS RATING GROUP. S&P DOES NOT EVALUATE THE MARKET RISK OF AN INVESTMENT WHEN
ASSIGNING A CREDIT RATING. SEE STANDARD & POOR'S CORPORATE AND MUNICIPAL RATING
DEFINITIONS FOR AN EXPLANATION OF BBB.
THE FUND HAS ALSO BEEN GIVEN A MARKET RISK RATING BY S&P, WHICH WE CANNOT
PUBLISH DUE TO NASD REGULATIONS. RISK RATINGS EVALUATE VARIOUS INVESTMENT RISKS
THAT CAN AFFECT THE PERFORMANCE OF A BOND FUND AND INDICATE THE FUND'S OVERALL
STABILITY AND SENSITIVITY TO CHANGING MARKET CONDITIONS. THESE RATINGS ARE
AVAILABLE BY CALLING S&P AT 1-800-424-FUND.
CALL FOR MORE INFORMATION
If you would like to be put on our mailing list to receive quarterly fund
summaries for American Select Portfolio (SLA), call our Mutual Fund Services
Department at 1 800 866-7778. In addition, beginning in August, you can call
that same number and listen to portfolio manager commentaries for the fund,
which will be updated monthly.
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
PERIODS ENDED MAY 31, 1996
[GRAPH]
THE AVERAGE ANNUALIZED TOTAL RETURN FIGURES FOR AMERICAN SELECT PORTFOLIO ARE
BASED ON THE CHANGE IN ITS NET ASSET VALUE (NAV), ASSUME ALL DISTRIBUTIONS WERE
REINVESTED AND DO NOT REFLECT SALES CHARGES. NAV-BASED PERFORMANCE IS USED TO
MEASURE INVESTMENT MANAGEMENT RESULTS.
TOTAL RETURNS BASED ON THE CHANGE IN MARKET PRICE FOR THE ONE-YEAR AND SINCE
INCEPTION PERIODS ENDED MAY 31, 1996, WERE 0.95% AND -4.64%, RESPECTIVELY. THESE
FIGURES ALSO ASSUME REINVESTED DISTRIBUTIONS AND DO NOT REFLECT SALES CHARGES.
PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND
MARKET VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES, WHEN SOLD, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
THE LEHMAN BROTHERS MUTUAL FUND GOVERNMENT/MORTGAGE INDEX IS COMPRISED OF ALL
U.S. GOVERNMENT AGENCY AND TREASURY SECURITIES AND AGENCY MORTGAGE-BACKED
SECURITIES. DEVELOPED BY LEHMAN BROTHERS FOR COMPARATIVE USE BY THE MUTUAL
FUND INDUSTRY, THIS INDEX IS UNMANAGED AND DOES NOT INCLUDE ANY FEES OR
EXPENSES IN ITS TOTAL RETURN FIGURES.
THE LIPPER CLOSED-END U.S. MORTGAGE FUNDS AVERAGE REPRESENTS THE AVERAGE
ANNUALIZED TOTAL RETURN, WITH DIVIDENDS REINVESTED, OF SIMILAR CLOSED-END MUTUAL
FUNDS AS CHARACTERIZED BY LIPPER ANALYTICAL SERVICES.
THE SINCE INCEPTION NUMBERS FOR THE LEHMAN INDEX AND LIPPER AVERAGE ARE
CALCULATED FROM THE MONTH END CLOSEST TO THE FUND'S INCEPTION THROUGH
MAY 31, 1996.
1
<PAGE>
PRESIDENT'S LETTER
[PHOTO]
WILLIAM H. ELLIS
PRESIDENT, PIPER CAPITAL MANAGEMENT
July 19, 1996
Dear Shareholders:
On June 21, 1996, Piper Jaffray Companies announced it had reached an agreement
in principle to settle a class action lawsuit brought on behalf of shareholders
of American Select Portfolio and seven other Piper Capital closed-end funds. We
believe this settlement is a timely and reasonable resolution to this issue that
will benefit shareholders. The settlement, if approved by the court, would
result in payment to eligible fund investors by Piper Jaffray Companies and
Piper Capital Management of $15.5 million, less attorney's fees, over a four-
year schedule. Investors who acquired shares during the alleged class period
(the fund's inception through May 1, 1995) would be eligible to submit claims to
recover losses regardless of whether they are current shareholders in the funds.
Under the agreement in principle, American Select Portfolio would also offer to
repurchase up to 10% of its outstanding shares from current shareholders at net
asset value. The repurchase offer would be made as soon as possible after the
effective date of the settlement, which follows final court approval. This could
take many months.
The repurchase offer was considered carefully by the fund's board of directors
and was approved because they considered it to be in shareholders' best
interest. Existing shareholders, many of whom we believe are class members,
would have an opportunity to sell at least a portion of their shares at net
asset value less a small repurchase fee. Currently, the fund is trading at a
significant discount to net asset value. Shares that are repurchased by the fund
would be retired, reducing the number of fund shares outstanding. In the event
2
<PAGE>
PRESIDENT'S LETTER
that holders of more than 10% of shares subscribe to the offer, the fund may
only be able to accept a prorated portion of shares tendered for repurchase.
We expect that the settlement agreement will be presented to the court for
preliminary approval this fall. If preliminary court approval is given, notices
of the settlement will be mailed to all known class members. Legal notices also
will be published in major newspapers at approximately the same time. The next
step is for final court approval to be given and an effective date to be
established.
Class members can expect to learn more about the settlement proposal via mail
and/or newspaper advertising in late 1996 or early 1997 or by contacting Steve
Berman, Hagens & Berman, counsel for the plaintiffs, at 206 623-7292.
Unrelated to the settlement, since we last reported to you the fund's Dividend
Committee reduced the monthly dividend from 9.375 cents per share to 8.5 cents
per share. This reduction was part of Piper Capital's effort to bring the fund's
dividends in line with its earnings. Because the fund's dividends exceeded
earnings by 6 cents per share during the six-month period, it was necessary to
rely on the fund's dividend reserve to pay these dividends, which reduced the
fund's net asset value by that same amount. As of June 30, the dividend reserve
for this fund was 12 cents per share. We do not currently anticipate any need
for further dividend reductions in the next 12 months based on current fund
earnings.
PREMIUM VS. DISCOUNT
The underlying value of a fund's securities and other assets, minus its
liabilities, is the fund's "net asset value." Closed-end funds may trade in the
market at a price that is equal to, above, or below this net asset value. Shares
are trading at a "premium" when investors purchase or sell shares in the market
at a price that is greater than the shares' net asset value. Conversely, when
investors purchase or sell shares in the market at a price that is lower than
the shares' net asset value, they are said to be trading at a "discount."
3
<PAGE>
PRESIDENT'S LETTER
Despite the dividend cuts, the fund continues to generate an attractive income
stream, especially given market conditions and yields on comparable investments.
For example, you are receiving a 9.60% current annualized yield (based on the
fund's July dividend rate) at the June 30 market price of $10.625 compared to a
6.89% yield for the Lehman Brothers Mutual Fund Government/Mortgage Index, the
fund's unmanaged benchmark which excludes any fees or expenses. Keep in mind
that past performance does not guarantee future results, and these rates will
fluctuate.
Thank you for your investment in the fund. We remain committed to providing you
with quality service and look forward to helping you achieve your financial
goals.
Sincerely,
/s/ William H. Ellis
William H. Ellis
President, Piper Capital Management
4
<PAGE>
AMERICAN SELECT PORTFOLIO
[PHOTO]
JOHN WENKER
[PHOTO]
DAVID STEELE
JOHN WENKER, (TOP)
IS PRIMARILY RESPONSIBLE FOR THE MANAGEMENT OF AMERICAN SELECT PORTFOLIO. HE HAS
10 YEARS OF FINANCIAL EXPERIENCE.
DAVID STEELE, (BOTTOM)
ASSISTS WITH THE MANAGEMENT OF AMERICAN SELECT PORTFOLIO. HE HAS 17 YEARS OF
FINANCIAL EXPERIENCE.
RUSS KAPPENMAN,
(NOT PICTURED)
ASSISTS WITH THE MANAGEMENT OF AMERICAN SELECT PORTFOLIO. HE HAS 10 YEARS OF
FINANCIAL EXPERIENCE.
July 19, 1996
Dear Shareholders:
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1996, AMERICAN SELECT PORTFOLIO HAD A NET
ASSET VALUE TOTAL RETURN OF 1.11%.* This compares to a -1.01% return for the
Lehman Brothers Mutual Fund Government/Mortgage Index and a -0.79% return for
the Lipper Closed-End U.S. Mortgage Funds Average during this same period. As of
May 31, the fund's market price was $10.25 and its net asset value was $12.44
per share. For the six-month period ended May 31, the fund's total return based
on its market price was -1.88%.* While the fund continues to trade at a discount
to net asset value, we believe its reduced net asset value volatility and
stability of earnings could help improve the fund's market price over time.
THE FUND'S FAVORABLE NET ASSET VALUE PERFORMANCE COMPARED TO THE BENCHMARKS WAS
PRIMARILY DUE TO THE PRICE STABILITY OF OUR MORTGAGE LOANS AS INTEREST RATES
INCREASED. After falling sharply in 1995, interest rates began to rise in 1996
due to signs of stronger economic growth and fears of renewed inflationary
pressures. The most significant inflationary sign was the government's release
of a higher-than-expected employment report in early March. While bonds, in
general, were negatively affected by the increase in rates, the higher rate
environment gave us the opportunity to purchase mortgages at historically
attractive yields.
* ALL RETURNS ABOVE 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.
5
<PAGE>
AMERICAN SELECT PORTFOLIO
DURING THE PERIOD, WE REMAINED FOCUSED ON STABILIZING THE FUND'S INCOME STREAM.
Our most significant strategic move to help us work toward this goal was to
reduce our allocation to subordinated mortgages and use the proceeds to purchase
higher-yielding mortgage loan products. On balance, the higher-yielding
mortgages produced more income than the subordinated mortgages and performed
relatively well compared to other mortgage products.
PORTFOLIO COMPOSITION
MAY 31, 1996
[PIE CHART]
THE FUND'S TOTAL ASSETS ARE LARGELY CONCENTRATED IN MORTGAGE LOANS. As of May
31, 76% of the fund's total assets were invested in multifamily (apartment)
loans and 18% in Treasury securities. (See portfolio composition chart on this
page.) We intend to maintain the fund's investments in mortgage loans and
Treasuries near these levels. The greater concentration in mortgage loans is
consistent with our strategy of focusing on securities that may involve more
credit risk and moving away from those that are more sensitive to changing
interest rates. During the six-month period, we also began making investments in
commercial mortgage loans due to the opportunities in this market sector. As of
May 31, 3% of the fund's total assets were invested in commercial loans.
6
<PAGE>
AMERICAN SELECT PORTFOLIO
WE CONTINUED TO BORROW IN THE FUND THROUGH REVERSE REPURCHASE AGREEMENTS AND
INVESTED THE PROCEEDS IN TREASURY SECURITIES OR NEW MORTGAGE LOANS. The
Treasuries and mortgage loans acted as collateral for the reverse repurchase
agreements, which were 29% of the fund's total assets as of May 31. While
borrowing can potentially increase the fund's earnings, it can also increase the
fund's net asset value volatility.
DURING THE SIX MONTHS, WE SUCCESSFULLY MANAGED THE RISKS INVOLVED WITH MORTGAGE
LOANS. We believe that smaller multifamily loans spread out in several states
are less likely to cause losses in the fund. On May 31, we had 70 multifamily
loans with an average loan balance of approximately $2,600,000. Through May 31,
there have been no realized foreclosure losses to the fund from our investments
in multifamily loans. Although we conduct extensive risk analysis on loans we
purchase, delinquent loans are an inherent risk in the fund. We consider a loan
delinquent when a borrower has missed two or more payments. As of May 31,
mortgage loans representing 0.1% of total net assets were delinquent. Because
delinquent loans require a high level of attention, we place them with loan
servicers who work hard to convey to borrowers that their first responsibility
each month is to make their payments. If it becomes necessary to put a loan in
foreclosure, our loan servicers will proceed with the process as quickly as
possible.
7
<PAGE>
AMERICAN SELECT PORTFOLIO
GEOGRAPHICAL DISTRIBUTION
MAY 31, 1996
[MAP]
PERCENTAGES REFLECT PRINCIPAL VALUE OF WHOLE LOANS. SHADED AREAS WITHOUT VALUES
INDICATE STATES IN WHICH THE FUND HAS INVESTED LESS THAN 0.50% OF ITS ASSETS.
THE FUND IS INVESTED IN MORTGAGE LOANS BACKED BY PROPERTIES LOCATED THROUGHOUT
THE COUNTRY. We attempt to buy mortgage loans in many parts of the country to
diversify the risks presented by any one area. The greatest concentration of
loans is in Texas, which has more loans available due to its large population.
Moreover, improving economic conditions experienced by this state over the last
couple of years have increased rental rates and occupancy levels in many of the
markets where our investments are located.
8
<PAGE>
AMERICAN SELECT PORTFOLIO
LOOKING AHEAD, WE BELIEVE THE FUND'S NET ASSET VALUE AND EARNINGS SHOULD BE MORE
CONSISTENT THAN IN THE PAST. We believe we have reduced interest rate risk and
focused the fund's investments where we feel we can currently add the most value
- -- in the mortgage loan area. We feel this increased focus on mortgage loans
will allow the fund to provide more consistent income levels. We hope this will
attract more investors to the fund, which, in turn, could reduce the current
discount of market price to net asset value. The efforts of the fund's
management team continue to be dedicated to reaching the fund's objectives and
helping you achieve your financial goals.
We would like to express our sincere appreciation to you, our valued
shareholders, for your investment in American Select Portfolio. We look forward
to continuing our relationship with you and helping you meet your investment
goals.
Sincerely,
/s/ John Wenker
John Wenker
Portfolio Manager
9
<PAGE>
MANAGING RISK
MANAGING THE RISKS OF MORTGAGE-RELATED ASSETS
All funds that invest in mortgage-related securities are subject to certain
risks. Following is a brief summary of some of the primary risks associated with
mortgage-related assets. It does not include all risks related to mortgage
securities.
Among these risks is PREPAYMENT RISK in which principal payments are prepaid at
unexpected rates. Prepayment rates are influenced by changes in interest rates
and a variety of other factors. If the fund buys a mortgage loan at a premium, a
faster-than-anticipated prepayment rate will reduce the fund's yield and a
slower-than-anticipated prepayment rate will increase its yield. If a mortgage
loan is purchased at a discount, the opposite will occur. There is also the
chance that proceeds from prepaid loans will have to be reinvested in lower-
yielding investments (REINVESTMENT RISK).
Like all fixed income investments, the prices of securities in the fund are
sensitive to changing interest rates - otherwise known as INTEREST RATE RISK.
When rates increase, the value of these securities decreases. Conversely, when
rates decline, the value of these securities rises. However, mortgage-related
assets may benefit less from declining interest rates than other fixed income
securities because of prepayment risk.
The fund's mortgage loans are subject to some unique risks such as credit risk
and real estate risk. Since the fund's mortgage loans generally aren't backed by
any government guarantee or private credit enhancement, they face CREDIT RISK.
This is the risk of loss arising from default if the borrower fails to make
payments on the loan. This risk may be greater during periods of declining or
stagnant real estate values.
Mortgage loans are also subject to REAL ESTATE RISKS including property risk
(the risk that the physical condition and value of the property will decline)
and the legal risk of holding any mortgage loan. Because the fund invests
primarily in multifamily loans, it is also subject to certain risks inherent in
these types of loans. Multifamily loans generally involve large loans to single
borrowers or groups of related borrowers. These loans are dependent on the
success of the underlying real estate project. Additional risks include the
ability of tenants to make rent payments and the ability of property to attract
and retain tenants.
To date, we have successfully managed the unique risks of mortgage loans through
extensive risk analysis. We review the loan's legal documents and the borrower's
mortgage payment history; assess the local market and property value; and obtain
a physical assessment of the property. As part of our strategy to manage the
real estate risk of the fund's multifamily (apartment) loans, we perform a
detailed inspection of each property; study the competing properties in the
area; interview property managers; and obtain engineering and environmental
reports from experts.
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (Unaudited)
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $411,000) ....... $ 230,107,253
Open interest rate swap transactions at market value (note
2) ..................................................... 126,395
Cash in bank on demand deposit ........................... 435,144
Other assets ............................................. 13,661
Mortgage security paydowns receivable .................... 13,067
Accrued interest receivable .............................. 1,588,581
----------------
Total assets ......................................... 232,284,101
----------------
LIABILITIES:
Reverse repurchase agreements payable .................... 66,750,000
Accrued investment management fee ........................ 69,944
Accrued administrative fee ............................... 27,978
Accrued interest ......................................... 171,286
----------------
Total liabilities .................................... 67,019,208
----------------
Net assets applicable to outstanding capital stock ....... $ 165,264,893
----------------
----------------
REPRESENTED BY:
Capital stock - authorized 1 billion shares of $0.01 par
value; outstanding, 13,283,967 shares ................ $ 132,840
Additional paid-in capital ............................... 187,628,195
Undistributed net investment income ...................... 1,712,878
Accumulated net realized loss on investments ............. (24,369,996)
Unrealized appreciation of investments ................... 160,976
----------------
Total - representing net assets applicable to
outstanding capital stock ........................ $ 165,264,893
----------------
----------------
Net asset value per share of outstanding capital stock ... $ 12.44
----------------
----------------
* Investments in securities at identified cost ........... $ 230,072,672
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MAY 31, 1996
<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $1,819,026) ....... $ 7,536,139
----------------
EXPENSES (NOTE 3):
Investment management fee ................................ 421,704
Administrative fee ....................................... 168,681
Custodian, accounting and transfer agent fees ............ 73,774
Reports to shareholders .................................. 28,502
Mortgage servicing fees .................................. 108,376
Directors' fees .......................................... 8,448
Audit and legal fees ..................................... 56,000
Other expenses ........................................... 10,325
----------------
Total expenses ....................................... 875,810
Less expenses paid indirectly ............................ (3,633)
----------------
Total net expenses ................................... 872,177
----------------
Net investment income ................................ 6,663,962
----------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) ................ 954,891
Net change in unrealized appreciation or depreciation of
investments ............................................ (5,894,863)
----------------
Net loss on investments ................................ (4,939,972)
----------------
Net increase in net assets resulting from
operations ....................................... $ 1,723,990
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MAY 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest income ........................................ $ 7,536,139
Net expenses ............................................. (872,177)
----------------
Net investment income ................................ 6,663,962
----------------
Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest and mortgage security
paydowns receivable .................................. 11,619
Net amortization of bond discount and premium .......... (42,064)
Change in accrued fees and expenses .................... (45,141)
Change in other assets ................................. (13,661)
----------------
Total adjustments .................................... (89,247)
----------------
Net cash provided by operating activities ............ 6,574,715
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ....................... 57,085,010
Purchases of investments ................................. (63,528,563)
Net sales of short-term securities ....................... 5,773,000
----------------
Net cash used by investing activities ................ (670,553)
----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from reverse repurchase agreements .......... 1,750,000
Retirement of fund shares ................................ (895,389)
Distributions paid to shareholders ....................... (7,483,978)
----------------
Net cash used by financing activities ................ (6,629,367)
----------------
Net decrease in cash ..................................... (725,205)
Cash at beginning of period .............................. 1,160,349
----------------
Cash at end of period .............................. $ 435,144
----------------
----------------
Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ........................................... $ 1,825,101
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
5/31/96 Year Ended
(Unaudited) 11/30/95
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 6,663,962 14,558,098
Net realized gain (loss) on investments .................. 954,891 (13,470,555)
Net change in unrealized appreciation or depreciation of
investments ............................................ (5,894,863) 30,594,300
---------------- ----------------
Net increase in net assets resulting from operations ... 1,723,990 31,681,843
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... (7,483,978) (15,141,310)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Payments for retirement of 74,500 and 188,300 shares,
respectively (note 6) .................................. (818,039) (2,050,601)
---------------- ----------------
Total increase (decrease) in net assets .............. (6,578,027) 14,489,932
Net assets at beginning of period .......................... 171,842,920 157,352,988
---------------- ----------------
Net assets at end of period .............................. $ 165,264,893 171,842,920
---------------- ----------------
---------------- ----------------
Undistributed net investment income ...................... $ 1,712,878 2,532,894
---------------- ----------------
---------------- ----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION
American Select Portfolio Inc. (the fund) is registered under
the Investment Company Act of 1940 (as amended) as a
diversified, closed-end investment management company. The fund
emphasizes investments in mortgage-related assets that directly
or indirectly represent a participation in or are secured by and
payable from mortgage loans. It may also invest in asset-backed
securities, U.S. government securities, corporate debt
securities, municipal obligations, unregistered securities and
mortgage servicing rights. The fund may borrow, including
through the use of reverse repurchase agreements, and may
purchase securities through the sale-forward (dollar-roll)
program. Fund shares are listed on the New York Stock Exchange
under the symbol SLA.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS IN SECURITIES
The fund's mortgage related investments such as whole loans,
participation mortgages and mortgage servicing rights are
initially valued at cost and their values are subsequently
monitored and adjusted pursuant to a pricing model designed to
reflect the present value of the projected stream of cash flows
on such investments. The pricing model takes into account a
number of relevant factors including the projected rate of
prepayments, the projected rate and severity of defaults, the
delinquency profile, the expected yield at purchase, changes in
prevailing interest rates and changes in the real or perceived
liquidity of whole loans, participation mortgages or mortgage
servicing rights as the case may be. Certain elements of the
pricing model involve subjective judgment. Additionally, certain
other factors will be considered in the determination of the
valuation of investments in multifamily properties, including
but not limited to, results of annual inspections of the
multifamily property by the adviser or a servicing agent
retained by the adviser, reviews of annual unaudited financial
statements of the multifamily property, monitoring of local and
other economic conditions and their impact on local real estate
values and analyses of rental vacancy rates at the multifamily
property. Subjective adjustments to the valuation of such
investments in multifamily properties may be made based upon the
adviser's analysis of such information. The actual values that
may be realized upon the sale of whole loans, participation
mortgages and mortgage servicing rights can only be determined
in negotiations between the fund and third parties.
15
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The values of other fixed income securities are determined using
pricing services or prices quoted by independent brokers.
Exchange-listed options are valued at the last sales price and
open financial futures contracts are valued at the last
settlement price. When market quotations for other fixed income
securities are not readily available, such securities are valued
at fair value according to methods selected in good faith by the
board of directors.
Securities transactions are accounted for on the date the
securities are purchased and sold. Realized gains and losses are
calculated on the identified-cost basis. Interest income,
including amortization of bond discount and premium, is accrued
daily. Costs associated with acquiring whole loans,
participation mortgages and mortgage servicing rights are
capitalized and included in the cost basis of the loans
purchased.
OPTIONS TRANSACTIONS
For hedging purposes, the fund may buy and sell put and call
options, write covered call options on portfolio securities, and
write cash-secured puts. The risk in writing a call option is
that the fund gives up the opportunity for profit if the market
price of the security increases. The risk in writing a put
option is that the fund may incur a loss if the market price of
the security decreases and the option is exercised. The risk of
buying an option is that the fund pays a premium whether or not
the option is exercised. The fund also has the additional risk
of not being able to enter into a closing transaction if a
liquid secondary market does not exist.
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The fund will realize a gain or loss
upon expiration or closing of the option transaction. When an
option is exercised, the proceeds on the sale of a written call
option, the purchase cost of a written put option, or the cost
of a security for purchased put and call options is adjusted by
the amount of premium received or paid.
FUTURES TRANSACTIONS
In order to gain exposure to or protect against changes in the
market, the fund may buy and sell financial futures contracts
and related options. Risks of entering into futures contracts
and related
16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
options include the possibility there may be an illiquid market
and that a change in the value of the contract or option may not
correlate with changes in the value of the underlying
securities.
Upon entering into a futures contract, the fund is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the fund
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized
gains and losses. The fund recognizes a realized gain or loss
when the contract is closed or expires.
INTEREST RATE TRANSACTIONS
To preserve a return or spread on a particular investment or
portion of its portfolio or for other non-speculative purposes,
the fund may enter into various hedging transactions, such as
interest rate swaps and the purchase of interest rate caps and
floors. Interest rate swaps involve the exchange of commitments
to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The purchase of an interest
rate cap entitles the purchaser, to the extent that a specified
index exceeds a predetermined interest rate, to receive payments
of interest on a contractually based notional principal amount
from the party selling the interest rate cap. The purchase of an
interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to
receive payments of interest on a contractually based notional
principal amount from the party selling the interest rate floor.
If forecasts of interest rates and other market factors are
incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were
not used. Even if the forecasts are correct, there is risk that
the positions may correlate imperfectly with the asset or
liability being hedged. Other risks of entering into these
transactions are that a liquid secondary market may not always
exist or that the other party to the transaction may not
perform.
For interest rate swaps, caps and floors, the fund accrues
weekly, as an increase or decrease to interest income, the
current net amount due to or owed by the fund. Interest rate
swaps, caps and floors are
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
valued from prices quoted by independent brokers. These
valuations represent the present value of all future cash
settlement amounts based on implied forward interest rates.
As of May 31, 1996, the fund had entered into the following
interest rate swap agreement. The terms of the agreement provide
for the interest rate differential to be settled on a monthly
basis.
<TABLE>
<CAPTION>
Swap Rate Paid by Rate Received Floating Net
Counter- Notional the Fund at by the Fund Rate Termination Unrealized
Party Principal 5/31/96 at 5/31/96 Index Date Gain
- --------- ------------ ------------- ------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Morgan 1-Month
Stanley $ 15,000,000 6.08%(a) 5.43%(b) LIBOR 3/15/99 $ 126,395
-----------
-----------
</TABLE>
(a) Fixed Rate
(b) Floating Rate
WHOLE LOANS AND PARTICIPATION MORTGAGES
Whole loans and participation mortgages may bear a greater risk
of loss arising from a default on the part of the borrower of
the underlying loans than do traditional mortgage-backed
securities. This is because whole loans and participation
mortgages, unlike most mortgage-backed securities, generally are
not backed by any government guarantee or private credit
enhancement. Such risk may be greater during a period of
declining or stagnant real estate values. In addition, the
individual loans underlying whole loans and participation
mortgages may be larger than the loans underlying
mortgage-backed securities.
At May 31, 1996, loans representing 0.06% of net assets were
considered by the fund to be delinquent as to the timely monthly
payment of principal and interest. A loan is considered
delinquent when a borrower has missed two or more payments. The
fund does not record past due interest as income until received.
The fund may incur certain costs and delays in the event of
foreclosure and there is no assurance that the subsequent sale
of the property will produce an amount equal to the sum of the
unpaid principal balance of the loan as of the date the borrower
went into default, the accrued unpaid interest and all of the
foreclosure expenses. In this case, the fund may suffer a loss.
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Real estate acquired through foreclosure, if any, is recorded at
estimated fair value. At May 31, 1996, the fund owned no real
estate. Additionally, with respect to participation mortgages,
the fund generally will not be able to unilaterally enforce its
rights in the event of a default, but rather will be dependent
on the cooperation of the other participation holders.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the fund on a forward-commitment or when-issued 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 maintains, in a segregated account
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
May 31, 1996, the fund had no outstanding when-issued or forward
commitments.
In connection with its ability to purchase securities on a
when-issued or forward-commitment basis, the fund may enter into
mortgage "dollar rolls" in which the fund sells securities for
delivery in the current month and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities on a specified future
date. As an inducement to "roll over" its purchase commitments,
the fund receives negotiated fees. For the six months ended May
31, 1996, the fund earned no such fees.
FEDERAL TAXES
The fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and
not be subject to federal income tax. Therefore, no income tax
provision is required.
Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
losses deferred due to "wash sale" and "straddle" transactions.
The character of distributions made during the year from net
investment
19
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
income or net realized gains may differ from its ultimate
characterization for federal income tax purposes. In addition,
due to the timing of dividend distributions, the fiscal year in
which amounts are distributed may differ from the year that the
income or realized gains (losses) were recorded by the fund.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly and
realized capital gains, if any, will be distributed at least
annually. These distributions are recorded as of the close of
business on the ex-dividend date. Such distributions are payable
in cash or, pursuant to the fund's dividend reinvestment plan,
reinvested in additional shares of the fund's capital stock.
Under the plan, fund shares will be purchased in the open market
unless the market price plus commissions exceeds the net asset
value by 5% or more. If, at the close of business on the
dividend payment date, the shares purchased in the open market
are insufficient to satisfy the dividend reinvestment
requirement, the fund will issue new shares at a discount of up
to 5% from the current market price.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain
broker-dealers, the fund, along with other affiliated registered
investment companies, may transfer uninvested cash balances into
a joint trading account, the daily aggregate of which is
invested in repurchase agreements secured by U.S. government or
agency obligations. Securities pledged as collateral for all
individual and joint repurchase agreements are held by the
fund's custodian bank until maturity of the repurchase
agreement. Provisions for all agreements ensure that the daily
market value of the collateral is in excess of the repurchase
amount, including accrued interest, to protect the fund in the
event of a default.
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
of assets and liabilities. Management is also required to make
disclosures of contingent assets and liabilities at the date of
the financial statements and the reported results of operations
during the reporting period. Actual results could differ from
those estimates.
20
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(3) EXPENSES
The fund has entered into the following agreements with Piper
Capital Management Incorporated (the adviser and the
administrator):
The investment advisory agreement provides the adviser with a
monthly investment management fee in an amount equal to an
annualized rate of 0.50% of the fund's average weekly net
assets. For its fee, the adviser provides investment advice and
conducts the management and investment activity of the fund.
The administration agreement provides the administrator with a
monthly fee in an amount equal to an annualized rate of 0.20% of
the fund's average weekly net assets. For its fee, the
administrator will provide regulatory, reporting and
record-keeping services for the fund.
When acquiring whole loans and participation mortgages, the fund
enters into mortgage servicing agreements with mortgage
services. For a fee, mortgage servicers maintain loan records,
such as insurance and taxes and the proper allocation of
payments between principal and interest.
In addition to the investment management, administrative and
mortgage servicing fees, the fund is responsible for paying most
other operating expenses, including: outside directors' fees and
expenses; custodian fees; registration fees; printing and
shareholder reports; transfer agent fees and expenses; legal,
auditing and accounting services; insurance; interest; fees to
outside parties retained to assist in conducting due diligence;
taxes and other miscellaneous expenses.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on cash balances maintained by the fund.
(4) INVESTMENT SECURITY TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the six
months ended May 31, 1996 aggregated $63,570,627 and
$57,085,010, respectively.
During the six months ended May 31, 1996, no brokerage
commissions were paid to Piper Jaffray Inc., an affiliated
broker.
21
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(5) CAPITAL LOSS CARRYOVER (AUDITED)
For federal income tax purposes, the fund had capital loss
carryovers of $25,324,887 as of November 30, 1995, which, if not
offset by subsequent capital gains, will expire in 2001 through
2003. It is unlikely the board of directors will authorize a
distribution of any net realized capital gains until the
available capital loss carryover has been offset or expires.
(6) RETIREMENT OF FUND SHARES
The fund's board of directors has approved a plan to discontinue
the share repurchase plan effective February 6, 1996. Pursuant
to the plan, the fund has cumulatively repurchased and retired
322,700 shares as of February 5, 1996, which represents 2.4% of
the shares originally issued.
(7) PENDING LITIGATION
An amended complaint purporting to be a class action was filed
on September 7, 1995, in the United States District Court for
the Western District of Washington against the fund, seven other
closed-end investment companies for which Piper Capital
Management Incorporated acts as investment adviser, Piper
Jaffray Companies Inc., Piper Jaffray Inc., Piper Capital
Management Incorporated and certain individuals. The named
plaintiffs and defendants in this putative class action have
reached an agreement-in-principle on a proposed settlement and
are negotiating the terms of a definitive settlement agreement.
If approved by the Court, a definitive settlement agreement
consistent with the terms of the agreement-in-principle would
provide $15.5 million to class members in payments by Piper
Jaffray Companies Inc. and Piper Capital Management Incorporated
scheduled during the next four years. The agreement stipulates,
among other things, that SLA offer to repurchase up to 10
percent of its outstanding shares from current shareholders at
net asset value. The repurchase offer would occur after the
effective date of the settlement following Court approval.
22
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(8) FINANCIAL HIGHLIGHTS
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
<TABLE>
<CAPTION>
Six
months
ended Year Year Period
5/31/96 Ended Ended Ended
(Unaudited) 11/30/95 11/30/94 11/30/93(f)
------- ------- -------- -------
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ...... $ 12.86 11.62 13.74 14.07
------- ------- -------- -------
Operations:
Net investment income ..................... 0.50 1.09 1.22 0.22
Net realized and unrealized gain (loss) on
investments ............................. (0.36) 1.28 (2.21) (0.46)
------- ------- -------- -------
Total from operations .................. 0.14 2.37 (0.99) (0.24)
------- ------- -------- -------
Distributions to shareholders:
From net investment income ................ (0.56) (1.13) (1.13) (0.09)
------- ------- -------- -------
Net asset value, end of period ........ $ 12.44 12.86 11.62 13.74
------- ------- -------- -------
------- ------- -------- -------
Per-share market value, end of
period .............................. $ 10.25 11.00 10.38 14.38
------- ------- -------- -------
------- ------- -------- -------
SELECTED INFORMATION
Total return, net asset value (a) ........... 1.11% 21.22% (7.48)% (1.75)%
Total return, market value (b) .............. (1.88)% 17.36% (20.78)% (3.54)%
Net assets at end of period (in
millions) ............................... $ 165 172 157 187
Ratio of expenses to average weekly net
assets (c)(h) ............................. 1.04%(g) 1.08% 1.12% 0.79%(g)
Ratio of net investment income to average
weekly net assets ......................... 7.90%(g) 8.85% 9.61% 8.23%(g)
Portfolio turnover rate (excluding short-term
securities) ............................... 25% 73% 110% 9%
Amount of borrowings outstanding at end of
period (in millions) (d) ................ $ 67 65 65 --
Per-share amount of borrowings outstanding at
end of period ........................... $ 5.02 4.87 4.80 --
Per-share amount of net assets, excluding
borrowings, at end of period ............ $ 17.47 17.73 16.42 --
Asset coverage ratio (e) .................... 348% 364% 342% --
</TABLE>
(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A SHARE DURING THE PERIOD AND
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
(B) BASED ON THE CHANGE IN MARKET PRICE OF A SHARE DURING THE PERIOD AND
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE
FUND'S DIVIDEND REINVESTMENT PLAN.
(C) INCLUDES 0.02% AND 0.05% FROM FEDERAL EXCISE TAXES IN FISCAL YEARS 1995 AND
1994, RESPECTIVELY. BEGINNING IN FISCAL 1995, THE EXPENSE RATIOS REFLECT
THE EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD
EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.
(D) SECURITIES PURCHASED ON A WHEN-ISSUED BASIS FOR WHICH LIQUID, HIGH-GRADE
DEBT OBLIGATIONS ARE MAINTAINED IN A SEGREGATED ACCOUNT ARE NOT CONSIDERED
BORROWINGS. SEE NOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
(E) REPRESENTS NET ASSETS, EXCLUDING BORROWINGS, AT END OF PERIOD DIVIDED BY
BORROWINGS OUTSTANDING AT END OF PERIOD.
(F) COMMENCEMENT OF OPERATIONS WAS SEPTEMBER 21, 1993.
(G) ADJUSTED TO AN ANNUAL BASIS.
(H) THE RATIO OF EXPENSES TO AVERAGE WEEKLY NET ASSETS EXCLUDES INTEREST
EXPENSE THAT HAS BEEN PRESENTED NET OF THE RELATED INTEREST INCOME IN THE
FINANCIAL STATEMENTS. IF INTEREST EXPENSE HAD BEEN INCLUDED IN TOTAL
EXPENSES, THE RATIOS OF EXPENSES TO AVERAGE WEEKLY NET ASSETS WOULD HAVE
BEEN: 3.20%, 3.76% AND 2.66% FOR THE SIX MONTHS ENDED 5/31/96 AND THE
FISCAL YEARS 1995 AND 1994, RESPECTIVELY.
23
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (Unaudited)
AMERICAN SELECT PORTFOLIO
MAY 31, 1996
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (27.5%):
U.S. Government Treasury Securities (25.8%):
U.S. Treasury Note, 5.13%, 4/30/98 ................. $ 43,500,000(b) 42,658,275
-----------
U.S. Agency Mortgage-Backed Securities (1.7%):
Fixed Rate (1.7%):
6.50%, FNMA, 1/1/11 .................................. 2,905,517 2,791,069
-----------
Total U.S. Government and Agency Securities
(cost: $46,236,532) ............................... 45,449,344
-----------
WHOLE LOANS (C,D,E) (111.5%):
Commercial Loans (4.6%):
Broadway Place, 9.00%, 6/1/01 ........................ 3,300,000 3,300,000
Community Coffee Office Building, 8.90%, 6/1/01 ...... 4,350,000 4,350,000
-----------
7,650,000
-----------
Multifamily Loans (106.8%):
Aldrich Apartments, 9.26%, 5/31/01 ................... 784,800 809,835
Allumbaugh Square Apartments, 9.25%, 4/1/99 .......... 1,758,461 1,790,817
Ashewood Apartments, 8.50%, 4/1/99 ................... 1,295,944 1,335,082
Autumn Chase Apartments, 9.98%, 5/1/09 ............... 3,041,593 3,148,048
Braesforest Apartments, 9.00%, 4/1/01 ................ 986,347 679,297
Brandywine II Apartments, 9.31%, 7/1/01 .............. 3,563,818 3,688,552
Brentwood Highlands Apartments, 8.63%, 4/1/01 ........ 4,427,523(b) 4,420,882
Bridge Court Apartments, 10.13%, 5/1/09 .............. 1,829,867 1,168,187
Bryant Square Apartments, 8.75%, 4/1/01 .............. 1,387,921 1,380,981
Candlelite Apartments, 8.75%, 3/1/01 ................. 1,533,417(b) 1,533,417
Cape Cod Apartments, 8.75%, 1/1/01 ................... 1,523,495(b) 1,523,799
Casa Del Vista Apartments, 8.75%, 1/1/01 ............. 2,113,235 2,103,091
Castle Arms Apartments, 8.13%, 1/1/03 ................ 797,510 771,193
Centre Court Apartments, 8.75%, 1/1/01 ............... 1,166,839 1,169,756
Chapel Hill Apartments, 8.98%, 8/1/01 ................ 914,977 945,171
Chouteau Trace/Bay Apartments, 8.75%, 4/1/01 ......... 2,479,315(b) 2,466,918
Collegeview Apartments, 9.00%, 8/1/01 ................ 1,178,684 1,219,938
Collegeview Towers, 9.00%, 8/1/01 .................... 4,550,922 4,710,205
Continental Gardens Apartments, 8.90%, 3/1/04 ........ 1,969,485(b) 1,970,864
Country Club Apartments, 8.75%, 1/1/01 ............... 2,064,090(b) 2,064,503
Country Village Apartments, 8.75%, 4/1/01 ............ 1,334,240(b) 1,327,569
El Conquistador Apartments, 8.75%, 4/1/01 ............ 2,585,545(b) 2,585,545
El Portal Apartments, 9.51%, 7/1/01 .................. 2,306,854 2,387,594
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
24
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
AMERICAN SELECT PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Emerald Shores Apartments, 8.75%, 2/1/01 ........... $ 3,151,365(b) 3,089,599
Evergreen Square Apartments, 8.75%, 12/1/00 .......... 2,185,395 2,090,549
Evergreen Village Apartments, 8.75%, 11/1/00 ......... 3,982,060 4,011,527
Evergreen Village II Apartments, 13.00%, 12/1/00 ..... 750,000 772,275
Fairway Hills Apartments, 8.50%, 12/1/98 ............. 1,644,924 1,638,509
Foothills West Apartments, 8.75%, 2/1/01 ............. 2,156,174(b) 2,156,174
Garcia Apartments, 9.51%, 6/1/01 ..................... 1,384,529 1,432,987
Glen Hollow Apartments, 9.00%, 4/1/01 ................ 5,517,543(b) 5,537,602
Goose Creek Apartments, 8.43%, 5/1/01 ................ 3,190,742 3,285,826
Green Acres Apartments, 8.75%, 1/1/01 ................ 1,361,311(b) 1,371,521
Heritage Green Apartments, 8.75%, 3/1/01 ............. 1,410,477(b) 1,410,477
Hickory Ridge Apartments, 9.06%, 8/1/99 .............. 1,212,225 1,254,652
Hidden Colony Apartments, 9.00%, 4/1/01 .............. 3,292,222 3,304,074
High Vista Apartments, 9.00%, 4/1/01 ................. 4,213,847(b) 4,250,086
Hunters Meadows Apartments, 8.25%, 2/1/03 ............ 5,339,161 5,216,894
Kingston Square Apartments, 8.75%, 4/1/01 ............ 4,133,996 4,133,996
La Arboleda Apartments, 8.75%, 1/1/01 ................ 4,101,641 4,102,461
La Maison Apartments, 9.13%, 5/1/03 .................. 2,850,000 2,879,640
Lakeville Apartments, 8.50%, 2/1/99 .................. 2,211,238 2,036,329
Lasalle Crossing Apartments, 8.75%, 1/1/01 ........... 2,870,068(b) 2,870,642
Meadow Glen Apartments, 9.00%, 1/1/01 ................ 1,406,720(b) 1,418,677
Old Orchard Apartments, 8.75%, 12/1/00 ............... 9,878,842 9,831,361
Parc Du Lac Apartments, 8.50%, 2/1/99 ................ 5,281,050(b) 5,259,915
Park Apartments, 8.75%, 2/1/01 ....................... 1,327,853(b) 1,327,986
Philippe Landing Apartments, 8.35%, 5/1/99 ........... 3,256,287 3,352,348
Quail Bluff Apartments, 9.25%, 4/1/99 ................ 2,858,087(b) 2,909,247
Quail Bluff II Apartments, 13.00%, 4/1/99 ............ 399,628 398,749
Revere Apartments, 8.75%, 4/1/01 ..................... 807,675(b) 807,675
Rush Creek Apartments, 8.35%, 4/1/99 ................. 2,549,087 2,608,481
Shadowood Apartments, 8.50%, 3/1/99 .................. 5,187,070(b) 5,165,268
Sherwood Lake Apartments, 9.13%, 8/1/01 .............. 2,407,084 2,491,332
Sierra Vista Apartments, 9.50%, 2/1/01 ............... 1,367,883(b) 1,395,925
Skyline Place Apartments, 8.75%, 4/1/01 .............. 4,333,867(b) 4,311,764
Somerset Place Apartments, 9.00%, 4/1/04 ............. 2,327,771 2,328,237
Sunset Rill Apartments, 9.60%, 5/1/99 ................ 3,065,992 3,173,302
Sunview Apartments, 9.51%, 2/1/01 .................... 1,829,556 1,893,590
The Oaks of Lake Bluff Apartments, 8.75%, 4/1/01 ..... 2,757,915(b) 2,744,126
Timber Forest Apartments, 8.75%, 2/1/01 .............. 1,180,319 1,174,535
Tralee Terrace Apartments, 10.13%, 5/1/09 ............ 2,077,146 1,201,629
Trinity Place Apartments, 8.75%, 4/1/01 .............. 605,756 605,756
Waterford Apartments, 9.80%, 1/1/19 .................. 4,588,103(b) 4,748,686
Westmont Apartments, 9.31%, 7/1/01 ................... 2,174,797 2,244,173
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
25
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
AMERICAN SELECT PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
White Oaks Apartments, 8.75%, 1/1/01 ............... $ 826,511 832,709
Willow Brooke Apartments, 8.75%, 4/1/01 .............. 4,801,727(b) 4,777,719
Willow Creek Apartments, 9.00%, 1/1/01 ............... 2,469,015 2,477,657
Willow Creek Apartments, 8.75%, 4/1/01 ............... 1,283,876(b) 1,288,370
Willows Apartments, 9.49%, 6/1/01 .................... 3,559,185 3,683,756
-----------
176,500,037
-----------
Single Family Loans (0.1%):
President Homes 94-1B, Sales Inventory, 9.00%,
3/29/24 ............................................. 94,051 96,872
-----------
Total Whole Loans
(cost: $183,425,140) .............................. 184,246,909
-----------
SHORT-TERM SECURITIES (0.2%):
Repurchase agreement with State Street in a joint
trading account, collateralized by U.S. government
agency securities, acquired on 5/31/96, accrued
interest at repurchase date of $181, 5.28%, 6/3/96
(cost: $411,000) .................................... 411,000 411,000
-----------
Total Investments in Securities
(cost: $230,072,672) (e) ......................... $ 230,107,253
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
26
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
<TABLE>
<S> <C> <C>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) ON MAY 31, 1996, SECURITIES VALUED AT $115,027,507 WERE PLEDGED AS
COLLATERAL FOR THE FOLLOWING OUTSTANDING REVERSE REPURCHASE AGREEMENTS:
</TABLE>
<TABLE>
<CAPTION>
NAME
OF BROKER AND
ACQUISITION ACCRUED DESCRIPTION
AMOUNT DATE RATE* DUE INTEREST OF COLLATERAL
----------- ----------- ----- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
$26,750,000 5/30/96 6.44% 3/17/97 $ 68,577 (1)
40,000,000 5/15/96 5.44% 3/17/97 102,709 (2)
----------- --------
$66,750,000 $171,286
----------- --------
----------- --------
</TABLE>
*INTEREST RATE IS AS OF MAY 31, 1996. RATES ARE BASED ON THE LONDON INTERBANK
OFFERED RATE (LIBOR) AND RESET MONTHLY.
<TABLE>
<S> <C>
NAME OF BROKER AND DESCRIPTION OF COLLATERAL:
(1) MORGAN; BRENTWOOD HIGHLANDS APARTMENTS, 8.63%, 4/1/01, $4,427,523 PAR
CANDLELITE APARTMENTS, 8.75%, 3/1/01, $1,533,417 PAR
CAPE COD APARTMENTS, 8.75%, 1/1/01, $1,523,495 PAR
CHOUTEAU TRACE/BAY APARTMENTS, 8.75%, 4/1/01, $2,479,315 PAR
CONTINENTAL GARDENS APARTMENTS, 8.90%, 3/1/04, $1,969,485 PAR
COUNTRY CLUB APARTMENTS, 8.75%, 1/1/01, $2,064,090 PAR
COUNTRY VILLAGE APARTMENTS, 8.75%, 4/1/01, $1,334,240 PAR
EL CONQUISTADOR APARTMENTS, 8.75%, 4/1/01, $2,585,545 PAR
EMERALD SHORES APARTMENTS, 8.75%, 2/1/01, $3,151,365 PAR
FOOTHILLS WEST APARTMENTS, 8.75%, 2/1/01, $2,156,174 PAR
GLEN HOLLOW APARTMENTS, 9.00%, 4/1/01, $5,517,543 PAR
GREEN ACRES APARTMENTS, 8.75%, 1/1/01, $1,361,311 PAR
HERITAGE GREEN APARTMENTS, 8.75%, 3/1/01, $1,410,477 PAR
HIGH VISTA APARTMENTS, 9.00%, 4/1/01, $4,213,847 PAR
LASALLE CROSSING APARTMENTS, 8.75%, 1/1/01, $2,870,068 PAR
MEADOW GLEN APARTMENTS, 9.00%, 1/1/01, $1,406,720 PAR
PARC DU LAC APARTMENTS, 8.50%, 2/1/99, $5,281,050 PAR
PARK APARTMENTS, 8.75%, 2/1/01, $1,327,853 PAR
QUAIL BLUFF APARTMNETS, 9.25%, 4/1/99, $2,858,087 PAR
REVERE APARTMENTS, 8.75%, 4/1/01, $807,675 PAR
SHADOWOOD APARTMENTS, 8.50%, 3/1/99, $5,187,070 PAR
SIERRA VISTA APARTMENTS, 9.50%, 2/1/01, $1,367,883 PAR
SKYLINE PLACE APARTMENTS, 8.75%, 4/1/01, $4,333,867 PAR
THE OAKS OF LAKE BLUFF APARTMENTS, 8.75%, 4/1/01, $2,757,915 PAR
WATERFORD APARTMENTS, 9.80%, 1/1/19, $4,588,103 PAR
WILLOW BROOKE APARTMENTS, 8.75%, 4/1/01, $4,801,727 PAR
WILLOW CREEK APARTMENTS, 9.00%, 4/1/01, $1,283,876 PAR
(2) MORGAN; U.S. TREASURY NOTE, 5.13%, 4/30/98, $41,000,000 PAR
</TABLE>
(C) INTEREST RATE AND MATURITY DATE DISCLOSED ON SINGLE FAMILY LOANS REPRESENT
THE WEIGHTED AVERAGE COUPON AND WEIGHTED AVERAGE MATURITY FOR THE
UNDERLYING LOANS AS OF MAY 31, 1996. INTEREST RATES ON MULTIFAMILY AND
COMMERCIAL LOANS ARE THE RATES IN EFFECT ON MAY 31, 1996.
27
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
<TABLE>
<S> <C>
(D) FOR INVESTMENT SCHEDULE PRESENTATION, DIRECT MORTGAGE PURCHASES ARE
SUMMARIZED BY THE INSTITUTION FROM WHICH THEY WERE PURCHASED FOR SINGLE
FAMILY LOANS AND BY THE NAME OF PROPERTY FOR MULTIFAMILY AND COMMERCIAL
LOANS. TOTAL NUMBER OF LOANS AND GENERAL GEOGRAPHICAL LOCATION ASSOCIATED
WITH EACH LOAN GROUP ARE AS FOLLOWS:
COMMERCIAL LOANS:
BROADWAY PLACE - 1 COMMERCIAL LOAN LOCATED IN ALBUQUERQUE, NEW MEXICO.
COMMUNITY COFFEE OFFICE BUILDING - 1 COMMERCIAL LOAN LOCATED IN
BATON ROUGE, LOUISIANA.
MULTIFAMILY LOANS:
ALDRICH APARTMENTS - MINNEAPOLIS, MN
ALLUMBAUGH SQUARE - BOISE, ID
ASHEWOOD APARTMENTS - DENVER, CO
AUTUMN CHASE APARTMENTS - JACKSONVILLE, FL
BRAESFOREST APARTMENTS - HOUSTON, TX
BRANDYWINE II APARTMENTS - WILMINGTON, DE
BRENTWOOD HIGHLANDS APARTMENTS - BRENTWOOD, TN
BRIDGE COURT APARTMENTS - OWATONNA, MN
BRYANT SQUARE APARTMENTS - EDMUND, OK
CANDLELITE APARTMENTS - GRANDVIEW, MO
CAPE COD APARTMENTS - OKLAHOMA CITY, OK
CASA DEL VISTA APARTMENTS - CARSON CITY, NV
CASTLE ARMS APARTMENTS - AUSTIN, TX
CENTRE COURT APARTMENTS - NORTH CANTON, OH
CHAPEL HILL APARTMENTS - KANSAS CITY, MO
CHOUTEAU TRACE/BAY APARTMENTS -- PONTOON BEACH, IL
COLLEGEVIEW APARTMENTS - POUGHKEEPSIE, NY
COLLEGEVIEW TOWERS - POUGHKEEPSIE, NY
CONTINENTAL GARDENS APARTMENTS - GRAND ISLAND, NE
COUNTRY CLUB APARTMENTS - EL RENO, OK
COUNTRY VILLAGE APARTMENTS - MORTON, IL
EL CONQUISTADOR APARTMENTS - TUCSON, AZ
EL PORTAL APARTMENTS - SWEETWATER, FL
EMERALD SHORES APARTMENTS - PHOENIX, AZ
EVERGREEN SQUARE APARTMENTS - BUFFALO, MN
EVERGREEN VILLAGE APARTMENTS - DENVER, CO
EVERGREEN VILLAGE APARTMENTS II - DENVER, CO
FAIRWAY HILLS APARTMENTS - RAPID CITY, SD
FOOTHILLS WEST APARTMENTS - EL PASO, TX
GARCIA APARTMENTS - MIAMI, FL
GLEN HOLLOW APARTMENTS - CHARLOTTE, NC
GOOSE CREEK APARTMENTS - BLOOMINGTON, IL
GREEN ACRES APARTMENTS - MASSILLON, OH
HERITAGE GREEN APARTMENTS - NEWARK, OH
HICKORY RIDGE APARTMENTS - HOPKINSVILLE, TN
HIDDEN COLONY APARTMENTS - DORAVILLE, GA
HIGH VISTA APARTMENTS - EL PASO, TX
HUNTERS MEADOW APARTMENTS - COLORADO SPRINGS, CO
KINGSTON SQUARE APARTMENTS - KNOXVILLE, TN
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
<TABLE>
<S> <C>
LAARBOLEDA APARTMENTS - SAN ANTONIO, TX
LA MAISON APARTMENTS - SEABROOK, TX
LAKEVILLE APARTMENTS - LAKEVILLE, MN
LASALLE CROSSING APARTMENTS - SHERMAN, TX
MEADOW GLEN APARTMENTS - MIDWEST CITY, OK
OLD ORCHARD APARTMENTS - GRAND RAPIDS, MI
PARC DU LAC APARTMENTS - NEW ORLEANS, LA
PARK APARTMENTS - COLORADO SPRINGS, CO
PHILIPPE LANDING APARTMENTS - SAFETY HARBOR, FL
QUAIL BLUFF APARTMENTS - OKLAHOMA CITY, OK
QUAIL BLUFF II APARTMENTS - OKLAHOMA CITY, OK
REVERE APARTMENTS - REVERE, MA
RUSH CREEK APARTMENTS - HOUSTON, TX
SHADOWOOD APARTMENTS - NASHVILLE, TN
SHERWOOD LAKE APARTMENTS - TAMPA, FL
SIERRA VISTA APARTMENTS - BOISE, ID
SKYLINE PLACE APARTMENTS - DALLAS, TX
SOMERSET PLACE APARTMENTS - TUCSON, AZ
SUNSET RILL APARTMENTS - KNOXVILLE, TN
SUNVIEW APARTMENTS - RAYMOND, NH
THE OAKS OF LAKE BLUFF APARTMENTS - LAKE BLUFF, IL
TIMBER FOREST APARTMENTS - PLANO, TX
TRALEE TERRACE APARTMENTS - COON RAPIDS, MN
TRINITY PLACE APARTMENTS - DEL CITY, OK
WATERFORD APARTMENTS - ZION, IL
WESTMONT APARTMENTS - NASHVILLE, TN
WHITE OAKS APARTMENTS - MASSILLON, OH
WILLOW BROOKE APARTMENTS - TAMPA, FL
WILLOW CREEK APARTMENTS - LITTLE ROCK, AR
WILLOW CREEK APARTMENTS - MIDWEST CITY, OK
WILLOWS APARTMENTS - BAKERSFIELD, CA
SINGLE FAMILY LOANS:
PRESIDENT HOMES, SALES INVENTORY - 4 SINGLE FAMILY LOANS LOCATED
THROUGHOUT THE MIDWESTERN UNITED STATES.
(E) ON MAY 31, 1996, THE COST OF INVESTMENT IN SECURITIES FOR FEDERAL INCOME
TAX PURPOSES WAS $230,072,672. THE AGGREGATE GROSS UNREALIZED APPRECIATION
AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS
FOLLOWS:
</TABLE>
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 3,144,465
GROSS UNREALIZED DEPRECIATION ...... (2,983,489)
-----------
NET UNREALIZED APPRECIATION .... $ 160,976
-----------
-----------
</TABLE>
29
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
DIRECTORS David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC.,
USL PRODUCTS, INC., KIEFER BUILT, INC., OF
COUNSEL, GRAY, PLANT, MOOTY, MOOTY & BENNETT,
P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY
COMPANIES INC., PIPER CAPITAL MANAGEMENT
INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL,
RELIASTAR FINANCIAL CORP., HORMEL FOODS CORP.
George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL
EQUITY FUNDS
OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
John G. Wenker, PRESIDENT
Russ K. Kappenman, SENIOR VICE PRESIDENT AND
ASSISTANT SECRETARY
Robert H. Nelson, SENIOR VICE PRESIDENT AND
TREASURER
David M. Steele, SENIOR VICE PRESIDENT
Amy K. Johnson, VICE PRESIDENT
Amy Konicke, VICE PRESIDENT
Julene R. Melquist, VICE PRESIDENT
Daniel W. Schroer, VICE PRESIDENT AND ASSISTANT
SECRETARY
Susan S. Miley, SECRETARY
INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
TRANSFER AND Investors Fiduciary Trust Company
RECORD KEEPING 127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
AGENT
CUSTODIAN First Trust
180 EAST FIFTH STREET, ST. PAUL, MN 55101
LEGAL COUNSEL Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
30
<PAGE>
PIPER CAPITAL ----------------
MANAGEMENT Bulk Rate
U.S. Postage
PIPER CAPITAL MANAGEMENT INCORPORATED PAID
222 SOUTH NINTH STREET Permit No. 3008
MINNEAPOLIS, MN 55402-3804 Mpls., MN
----------------
THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
[LOGO] 100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
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
Shareholder Services area at 1 800 866-7778, or mail
your request to:
Piper Capital Management
Attn: Communications Department
222 South Ninth Street
Minneapolis, MN 55402-3804
#21540 8/96 159-96
