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1997 Semiannual Report
American
Select
Portfolio
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American Select Portfolio - 1997 Semiannual Report
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CONTENTS
Average Annualized Total Returns................. 1
Portfolio Managers' Letter....................... 2
Financial Statements and Notes................... 6
Investments in Securities........................ 18
Shareholder Update............................... 24
Glossary -symbol-................................ 26
- -symbol- This report includes a glossary to help you understand financial
terms used in the portfolio managers' letter. When you see this symbol, it
indicates a word that is defined in the glossary.
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AMERICAN SELECT PORTFOLIO
PRIMARY INVESTMENTS
Mortgage-related assets that directly or indirectly represent a participation in
or are secured by and payable from mortgage loans. The fund will focus primarily
on multifamily 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. Use of certain of these investments and investment techniques may
cause the fund's net asset value to fluctuate to a greater extent than would be
expected from interest rate movements alone.
FUND OBJECTIVE
High level of current income. Its secondary objective is to seek capital
appreciation. As with other investment companies, there can be no assurance this
fund will achieve its objective.
<PAGE>
AVERAGE ANNUALIZED TOTAL RETURNS
Based on net asset value for the periods ended May 31, 1997
[EDGAR REPRESENTATION OF CHART]
SINCE
ONE THREE INCEPTION
YEAR YEAR 9/21/93
----- ------ ---------
AMERICAN SELECT PORTFOLIO.............................. 8.76% 10.37% 5.37%
Lehman Brothers Mutual Fund Gov't/Mortgage Index....... 8.21% 7.85% 6.99%
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.
Average annualized total returns based on the change in market price for the
one-year, three-year and since inception periods ended May 31, 1997, were
22.12%, 9.31% and 1.98%, respectively. These figures also assume reinvested
distributions and do not reflect sales charges.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more or
less than their original cost. 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 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 since inception number for the Lehman index is calculated from the month end
following the fund's inception through May 31, 1997.
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1997 Semiannual Report 1 American Select Portfolio
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[photo]
JOHN WENKER
is primarily responsible for the management of American Select Portfolio. He has
11 years of financial experience.
Portfolio Managers' Letter
July 18, 1997
DEAR SHAREHOLDERS:
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1997, AMERICAN SELECT PORTFOLIO HAD A
NET ASSET VALUE TOTAL RETURN OF 2.51%.* This compares to a 1.08% return for
the fund's benchmark,-Symbol- the Lehman Brothers Mutual Fund
Government/Mortgage Index. The fund's total return based on market price was
8.41% for the six-month period, and it continued to trade at a
discount-Symbol- to net asset value (NAV), with a market price of $11.38 and
an NAV of $12.44 per share as of May 31.
WE ATTRIBUTE THE FUND'S POSITIVE NAV PERFORMANCE TO LOWER TREASURY YIELDS AND
MORTGAGE SPREADS.-Symbol- During this reporting period, yields on Treasuries
in the medium-term portion of the yield curve-Symbol- decreased approximately
0.60%. At the same time, mortgage market spreads moved lower on a wide range
of mortgage products. The combined effect, along with the attractive level of
income the fund paid, caused the fund's positive performance relative to its
benchmark.
* All returns include reinvested distributions, but not sales charges. Past
performance does not guarantee future results. The investment return and
principal value of an investment will fluctuate so that fund shares, when sold,
may be worth more or less than their original cost.
PORTFOLIO COMPOSITION
As a percentage of total assets on May 31, 1997
[EDGAR REPRESENTATION OF CHART]
Multifamily Loans..................................................... 77%
Commercial Loans...................................................... 6%
Other Assets.......................................................... 3%
U.S. Treasury Securities............................................. 11%
U.S. Agency Fixed Rate Mortgage-Backed Securities..................... 1%
Short-Term Securities................................................. 2%
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1997 Semiannual Report 2 American Select Portfolio
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[photo]
DAVID STEELE
assists with the management of American Select Portfolio. He has 18 years of
financial experience.
Portfolio Managers' Letter (continued)
THE FUND'S MONTHLY DIVIDEND HAS REMAINED STEADY SINCE JULY 1996. One year ago,
the fund's dividend was reduced. At that time, we set a goal of maintaining the
dividend at 8.5 cents per share for 12 months, and we are pleased that we have
met that goal. The loans in the fund's portfolio have provided high relative
income for the fund over the past year. The fund also continues to maintain a
dividend reserve.
DURING THE REPORTING PERIOD, PREPAYMENT LEVELS REMAINED STABLE. We were
somewhat concerned about prepayments at the end of 1996, and indicated to
shareholders at that time that borrowers prepaying on their mortgages due to
a lower interest rate environment might force the fund to reinvest at lower
rates and ultimately decrease the fund's income. To date, the higher level of
prepayments has not materialized, and we have continued to add mortgages at
historically attractive interest rates. However, prepayment risk-symbol-
remains a concern in the current lower interest rate environment.
GEOGRAPHICAL DISTRIBUTION
We attempt to buy mortgage loans in many parts of the country to help avoid the
risks of concentrating in one area. These percentages reflect principal value of
whole loans and real estate owned as of May 31, 1997. Shaded areas without
values indicate states in which the fund has invested less than 0.50% of its
assets.
[EDGAR REPRESENTATION OF MAP]
Arizona................................................ 5%
California............................................. 2%
Colorado............................................... 4%
Delaware............................................... 2%
Florida................................................ 8%
Georgia................................................ 2%
Idaho.................................................. 1%
Illinois............................................... 5%
Kentucky............................................... 1%
Louisiana.............................................. 5%
Michigan............................................... 5%
Minnesota.............................................. 7%
Missouri............................................... 1%
Nebraska............................................... 1%
Oklahoma............................................... 11%
Nevada................................................. 1%
New Hampshire.......................................... 1%
New Mexico............................................. 1%
New York............................................... 3%
North Carolina......................................... 3%
Ohio................................................... 2%
South Dakota........................................... 1%
Tennessee.............................................. 9%
Texas.................................................. 19%
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1997 Semiannual Report 3 American Select Portfolio
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[photo]
RUSS KAPPENMAN
assists with the management of American Select Portfolio. He has 11 years of
financial experience.
Portfolio Managers' Letter (continued)
IN OUR LAST REPORT TO YOU, WE SAID WE ANTICIPATED INCREASING THE FUND'S
HOLDINGS IN COMMERCIAL LOANS,-symbol- AND WE HAVE DONE SO. Commercial loans
are currently available at attractive prices compared to single family and
multifamily loans. The market for multifamily and commercial loans is
approximately $1 trillion in size, providing us with a large number of loans
to search through for the credit quality, price and yield we want for the
fund. (For more information about the specific risks associated with mortgage
loans, see the glossary at the back of this report.)
ALTHOUGH WE CONDUCT EXTENSIVE RISK ANALYSIS ON LOANS WE PURCHASE,
DELINQUENT-symbol- LOANS AND CREDIT LOSSES ARE INHERENT RISKS IN THE FUND.
Our strategy in managing the risks involved with mortgage loans is to focus
on moderately valued properties. These loans carry less credit risk than do
mortgages for higher valued properties and are less likely to cause losses in
the fund. In addition, diversifying among these smaller loans and loans of
various property types helps minimize risk. As of May 31, the fund held 69
loans on multifamily and commercial properties, which had an average
principal loan balance of approximately $2,801,000.
THE FUND CONTINUES TO BORROW THROUGH REVERSE REPURCHASE AGREEMENTS-symbol-
AND INVEST THE PROCEEDS IN TREASURY SECURITIES AND NEW MORTGAGE LOANS. The
Treasuries and mortgage loans act as collateral for the reverse repurchase
agreements. The amount of reverse repurchase agreements was equal to 29% of
the fund's total assets as of May 31. It is important to note that borrowing
can potentially increase the fund's earnings, but it can also increase the
fund's net asset value volatility. We attempt to moderate this potential
volatility by purchasing short- to medium-term Treasuries.
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1997 Semiannual Report 4 American Select Portfolio
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Portfolio Managers' Letter (continued)
IN THE COMING MONTHS, WE ANTICIPATE MODERATE ECONOMIC GROWTH, WITH INFLATION
REMAINING FAIRLY WELL CONTAINED. We believe the mortgage portfolio will continue
to perform well in this type of environment, and we continue to watch for
opportunities to add high-quality loans to the fund's holdings. In addition to
focusing on the details of individual loan purchases, we remain vigilant for
changes in the broader real estate market environment. Real estate markets are
cyclical in nature. Since the fund's inception, it has been a favorable time to
be active in real estate. We believe that, in general, the real estate markets
are in equilibrium, and that this situation could exist for some time. It is too
soon to tell whether increased competition for real estate investments will lead
to relaxed underwriting standards and oversupply of new properties.
ON FEBRUARY 28, 1997, THE COURT GRANTED PRELIMINARY APPROVAL OF THE SETTLEMENT
AGREEMENT IN THE CLASS ACTION LAWSUIT AGAINST THE FUND, AND A FINAL ORDER OF
JUDGMENT IS NOW UNDER ADVISEMENT. In addition to cash payments over the next
four years, the settlement includes an offer by the fund to repurchase up to 10%
of its outstanding shares at net asset value. Class members will receive notices
regarding this offer within 45 days of the effective date of the settlement. A
repurchase fee of approximately 1 to 2 cents per share will be charged on all
shares that are repurchased. This fee will be paid to the fund and used to pay
for repurchase offer costs, which include legal, printing, mailing and other
miscellaneous expenses.
Thank you 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
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1997 Semiannual Report 5 American Select Portfolio
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FINANCIAL STATEMENTS (Unaudited)
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STATEMENT OF ASSETS AND LIABILITIES May 31, 1997
..................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $4,633,000) ......... $ 224,878,048
Cash in bank on demand deposit ............................. 373,437
Receivable for investment securities sold .................. 5,547,619
Other assets ............................................... 34,378
Accrued interest receivable ................................ 1,961,727
--------------
Total assets ............................................. 232,795,209
--------------
LIABILITIES:
Reverse repurchase agreements payable ...................... 67,250,000
Accrued investment management fee .......................... 70,149
Accrued administrative fee ................................. 28,059
Accrued interest ........................................... 196,175
--------------
Total liabilities ........................................ 67,544,383
--------------
Net assets applicable to outstanding capital stock ....... $ 165,250,826
--------------
--------------
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital ............... $ 187,761,035
Undistributed net investment income ........................ 1,671,033
Accumulated net realized loss on investments ............... (24,070,682)
Unrealized depreciation of investments ..................... (110,560)
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Total - representing net assets applicable to capital
stock .................................................. $ 165,250,826
--------------
--------------
* Investments in securities at identified cost ............. $ 224,988,608
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NET ASSET VALUE AND MARKET PRICE:
Net assets ................................................. $ 165,250,826
Shares outstanding ......................................... 13,283,967
Net asset value ............................................ $ 12.44
Market price ............................................... $ 11.38
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 6 American Select Portfolio
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FINANCIAL STATEMENTS (Unaudited) (continued)
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STATEMENT OF OPERATIONS For the Six Months Ended May 31, 1997
..................................................................
<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $1,977,808) ........... $ 7,880,574
--------------
EXPENSES (NOTE 3):
Investment management fee .................................. 413,152
Administrative fee ......................................... 165,261
Custodian and accounting fees .............................. 59,090
Transfer agent fees ........................................ 11,174
Reports to shareholders .................................... 17,879
Mortgage servicing fees .................................... 112,418
Directors' fees ............................................ 6,023
Audit and legal fees ....................................... 29,388
Other expenses ............................................. 7,384
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Total expenses ........................................... 821,769
Less expenses paid indirectly .............................. (3,103)
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Total net expenses ....................................... 818,666
--------------
Net investment income .................................... 7,061,908
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NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized loss on investments (note 4) .................. (123,379)
Net change in unrealized appreciation or depreciation of
investments .............................................. (2,826,208)
--------------
Net loss on investments .................................. (2,949,587)
--------------
Net increase in net assets resulting from operations ... $ 4,112,321
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 7 American Select Portfolio
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FINANCIAL STATEMENTS (Unaudited) (continued)
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STATEMENT OF CASH FLOWS For the Six Months Ended May 31, 1997
..................................................................
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income ..................................................... $ 7,880,574
Net expenses ............................................... (818,666)
--------------
Net investment income .................................... 7,061,908
--------------
Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest receivable .................... (534,505)
Net amortization of bond discount and premium ............ (114,339)
Change in accrued fees and expenses ...................... 31,526
Change in other assets ................................... (34,378)
--------------
Total adjustments ...................................... (651,696)
--------------
Net cash provided by operating activities .............. 6,410,212
--------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ......................... 110,245,775
Purchases of investments ................................... (116,088,411)
Net sales of short-term securities ......................... 4,410,000
--------------
Net cash used by investing activities .................. (1,432,636)
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from reverse repurchase agreements ............ 2,000,000
Distributions paid to shareholders ......................... (7,040,503)
--------------
Net cash used by financing activities .................. (5,040,503)
--------------
Net decrease in cash ....................................... (62,927)
Cash at beginning of period ................................ 436,364
--------------
Cash at end of period .................................. $ 373,437
--------------
--------------
Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ............................................. $ 1,948,730
--------------
--------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 8 American Select Portfolio
<PAGE>
FINANCIAL STATEMENTS (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
..................................................................
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
5/31/97 YEAR ENDED
(UNAUDITED) 11/30/96
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<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $ 7,061,908 $ 13,491,770
Net realized gain (loss) on investments .................... (123,379) 1,377,584
Net change in unrealized appreciation or depreciation of
investments .............................................. (2,826,208) (3,340,191)
-------------- --------------
Net increase in net assets resulting from operations ..... 4,112,321 11,529,163
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................. (7,040,503) (14,375,036)
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Decrease in net assets from capital share transactions (note
5) ....................................................... -- (818,039)
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Total decrease in net assets ............................. (2,928,182) (3,663,912)
Net assets at beginning of period .......................... 168,179,008 171,842,920
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Net assets at end of period ................................ $ 165,250,826 $ 168,179,008
-------------- --------------
-------------- --------------
Undistributed net investment income ........................ $ 1,671,033 $ 1,649,628
-------------- --------------
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Semiannual Report 9 American Select Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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(1) ORGANIZATION
................................
American Select 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 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 purchase securities
through the dollar-roll program. In addition, the fund may borrow
through the use of reverse repurchase agreements. Fund shares are
listed on the New York Stock Exchange under the symbol SLA.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
Portfolio securities for which market quotations are readily
available are valued at current market value. If market
quotations or valuations are not available, or if Piper Capital
Management Incorporated believes such quotations or valuations
are inaccurate, unreliable or not reflective of market value,
portfolio securities will be 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.
The fund's investments in whole loans (single family, multifamily
and commercial), participation mortgages and mortgage servicing
rights are generally not traded in any organized market. These
investments are initially valued at cost and their values are
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1997 Semiannual Report 10 American Select Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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subsequently monitored and adjusted pursuant to a pricing model
designed to incorporate, among other things, 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 delinquency
profile, the historical payment record theron, 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.
Changes in prevailing interest rates, real or perceived
liquidity, yield spreads, and creditworthiness are factored into
the pricing model each week. Certain mortgage loan information is
received once a month. This information includes, but is not
limited to, projected rate of prepayments, projected rate and
severity of defaults, the delinquency profile and the historical
payment record thereon. Valuations of whole loans, mortgage
participations and mortgage servicing rights are determined no
less frequently than weekly.
Security 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.
WHOLE LOANS AND PARTICIPATION MORTGAGES
Whole loans and participation mortgages may bear a greater risk
of loss arising from a default on the part of the borrower of the
underlying loans than do traditional mortgage-backed securities.
This is because whole loans and participation mortgages, unlike
most mortgage-backed securities, generally are not backed by any
government guarantee or private credit enhancement. Such risk may
be greater during a period of declining or stagnant real estate
values. In addition, the individual loans underlying whole loans
and participation mortgages may be larger than the loans
underlying mortgage-backed securities. With respect to
participation mortgages, the fund generally will not be able to
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1997 Semiannual Report 11 American Select Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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unilaterally enforce its rights in the event of a default, but
rather will be dependent on the cooperation of the other
participation holders.
At May 31, 1997, no loans were over 60 days or more delinquent as
to the timely monthly payment of principal. A loan is considered
delinquent when a borrower has missed two or more payments. The
fund does not record past due interest as income until received.
The fund may incur certain costs and delays in the event of a
foreclosure. Also, there is no assurance that the subsequent sale
of the property will produce an amount equal to the sum of the
unpaid principal balance of the loan as of the date the borrower
went into default, the accrued unpaid interest and all of the
foreclosure expenses. In this case, the fund may suffer a loss.
Real estate acquired through foreclosure, if any, is recorded at
estimated fair value. On May 31, 1997, the fund owned no real
estate.
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 May 31, 1997, the
fund had no outstanding when-issued or forward commitments.
In connection with its ability to purchase securities on a when-
issued or forward-commitment basis, the fund may enter into
mortgage dollar rolls in which the fund sells securities
purchased on a forward commitment basis and simultaneously
contracts with
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1997 Semiannual Report 12 American Select Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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a counterparty to repurchase similar (same type, coupon and
maturity) but not identical securities on a specified future
date. As an inducement to "roll over" its purchase commitments,
the fund receives negotiated fees. For six months ended May 31,
1997, 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. The fund also intends to distribute its
taxable net investment income and realized gains, if any, to
avoid the payment of any federal excise taxes.
The character of distributions made during the year from net
investment income or net realized gains may differ from its
ultimate characterization for federal income tax purposes. In
addition, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains (losses) were recorded by the
funds.
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.
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1997 Semiannual Report 13 American Select Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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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
in the financial statements. Actual results could differ from
these estimates.
(3) EXPENSES
................................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
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.
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1997 Semiannual Report 14 American Select Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
- ---------------------------------------------------------------------
MORTGAGE SERVICING FEES
The fund enters into mortgage servicing agreements with mortgage
servicers for whole loans and participation mortgages. For a fee,
mortgage servicers maintain loan records, such as insurance and
taxes and the proper allocation of payments between principal and
interest.
OTHER FEES AND EXPENSES
In addition to the investment management, administrative and
mortgage servicing fees, the fund is responsible for paying most
other operating expenses, including: outside directors' fees and
expenses; custodian fees; registration fees; printing and
shareholder reports; transfer agent fees and expenses; legal,
auditing and accounting services; insurance; interest; fees to
outside parties retained to assist in conducting due diligence;
taxes and other miscellaneous expenses.
Expenses paid indirectly represent a reduction of custodian fees
for earnings on miscellaneous cash balances maintained by the
fund.
(4) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the six
months ended May 31, 1997 aggregated $116,202,750 and
$115,793,394, respectively.
(5) CAPITAL SHARE
TRANSACTIONS
................................
Capital share transactions for the fund were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996
------------------ -----------------
SHARES AMOUNT SHARES AMOUNT
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Authorized one billion shares of
$0.01 par value:
Payments for retirement of
shares......................... -- -- 74,500 $(818,039)
</TABLE>
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1997 Semiannual Report 15 American Select Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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(6) CAPITAL LOSS
CARRYOVER
................................
For federal income tax purposes, the fund had capital loss
carryovers at November 30, 1996, which, if not offset by
subsequent capital gains, will expire as indicated below. It is
unlikely the board of directors will authorize a distribution of
any net realized capital gains until the available capital loss
carryovers have been offset or expire.
<TABLE>
<CAPTION>
CAPITAL LOSS EXPIRATION
CARRYOVER DATE
--------------- ----------
<S> <C>
$ 10,457,618 2002
13,489,685 2003
---------------
$ 23,947,303
---------------
---------------
</TABLE>
(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 have executed a settlement agreement which the Court
has preliminarily approved. If approved by a sufficiently large
percentage of the Class and granted final approval by the Court,
the settlement agreement will 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 settlement also includes an agreement that SLA will
offer to repurchase up to 10 percent of its outstanding shares
from current shareholders at net asset value. The repurchase
offer will occur after the effective date of the settlement
following final Court approval.
- ---------------------------------------------------------------------
1997 Semiannual Report 16 American Select Portfolio
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- ---------------------------------------------------------------------
(8) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:
<TABLE>
<CAPTION>
Six
Months
Ended Year Year Year Period
5/31/97 Ended Ended Ended Ended
(Unaudited) 11/30/96 11/30/95 11/30/94 11/30/93(f)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ........ $12.66 $12.86 $11.62 $13.74 $14.07
------- ------- ------- ------- -------
Operations:
Net investment income ..................... 0.53 1.02 1.09 1.22 0.22
Net realized and unrealized gain (loss) on
investments ............................. (0.22) (0.14) 1.28 (2.21) (0.46)
------- ------- ------- ------- -------
Total from operations ................... 0.31 0.88 2.37 (0.99) (0.24)
------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income ................ (0.53) (1.08) (1.13) (1.13) (0.09)
------- ------- ------- ------- -------
Net asset value, end of period .............. $12.44 $12.66 $12.86 $11.62 $13.74
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Per-share market value, end of period ....... $11.38 $11.00 $11.00 $10.38 $14.38
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SELECTED INFORMATION
Total return, net asset value (a) ........... 2.51% 7.27% 21.22% (7.48)% (1.75)%
Total return, market value (b) .............. 8.41% 10.53% 17.36% (20.78)% (3.54)%
Net assets at end of period (in millions) ... $ 165 $ 168 $ 172 $ 157 $ 187
Ratio of expenses to average weekly net
assets (c) ................................ 0.99%(g) 1.03% 1.08% 1.12% 0.79%(g)
Ratio of expenses to average weekly net
assets including interest expense (c) ..... 3.39%(g) 3.30% 3.76% 2.66% --
Ratio of net investment income to average
weekly net assets ......................... 8.55%(g) 8.11% 8.85% 9.61% 8.23%(g)
Portfolio turnover rate (excluding short-term
securities) ............................... 51% 30% 73% 110% 9%
Amount of borrowings outstanding at end of
period (in millions) (d) .................. $ 67 $ 65 $ 65 $ 65 --
Per-share amount of borrowings outstanding at
end of period ............................. $ 5.06 $ 4.91 $ 4.87 $ 4.80 --
Per-share amount of net assets, excluding
borrowings, at end of period .............. $17.50 $17.57 $17.73 $16.42 --
Asset coverage ratio (e) .................... 346% 358% 364% 342% --
</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) INCLUDES 0.02% AND 0.05% FROM FEDERAL EXCISE TAXES IN FISCAL YEARS 1995 AND
1994, RESPECTIVELY.
(d) SECURITIES PURCHASED ON A WHEN-ISSUED BASIS FOR WHICH LIQUID ASSETS ARE
SEGREGATED ARE NOT CONSIDERED BORROWINGS. SEE NOTE 2 IN THE NOTES TO
FINANCIAL STATEMENTS.
(e) REPRESENTS NET ASSETS, EXCLUDING BORROWINGS, AT END OF PERIOD DIVIDED BY
BORROWINGS OUTSTANDING AT END OF PERIOD.
(f) COMMENCEMENT OF OPERATIONS WAS SEPTEMBER 21, 1993.
(e) ANNUALIZED.
- ---------------------------------------------------------------------
1997 Semiannual Report 17 American Select Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited)
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN SELECT PORTFOLIO May 31, 1997
.......................................................................................
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (17.2%):
U.S. AGENCY MORTGAGE-BACKED SECURITIES (1.6%):
FIXED RATE (1.6%):
6.50%, FNMA, 1/1/11 ............................... $ 2,711,991 $ 2,650,049
------------
U.S. GOVERNMENT SECURITIES (15.6%):
6.25%, U. S. Treasury Note, 1/31/02 ............... 26,000,000(b) 25,742,340
------------
Total U.S. Government and Agency Securities
(cost: $28,199,641) .......................... 28,392,389
------------
WHOLE LOANS (C,D,E) (116.1%):
COMMERCIAL LOANS (8.5%):
Advance Circuits and Hopkins II Business Center,
8.71%, 11/1/01 .................................. 3,389,994 3,386,193
Broadway Place, 9.00%, 6/1/01 ..................... 3,269,552 3,286,407
Community Coffee Office Building, 8.90%, 6/1/01 ... 4,324,914 4,312,170
Oasis at the Waterfront, 9.50%, 5/1/00 ............ 1,650,000 1,650,000
Rodeo Shops, 9.15%, 6/1/07 ........................ 1,350,000 1,350,000
------------
13,984,770
------------
MULTIFAMILY LOANS (107.6%):
Aldrich Apartments, 8.75%, 5/31/01 ................ 774,952 741,834
Allumbaugh Square Apartments, 7.81%, 4/1/99 ....... 1,744,871 1,773,481
Ashewood Apartments, 8.25%, 4/1/99 ................ 1,279,788 1,320,243
Autumn Chase Apartments, 9.24%, 5/1/09 ............ 2,755,112 2,841,820
Bent Tree Oaks & Bent Tree Brook Apartments, 8.00%,
6/1/00 .......................................... 12,200,000 12,200,000
Brandywine II Apartments, 9.31%, 7/1/01 ........... 3,538,496 3,399,536
Brentwood Highlands Apartments, 8.63%, 4/1/01 ..... 4,387,846(b) 4,423,454
Bridge Court Apartments, 10.13%, 5/1/09 ........... 1,815,524 1,270,866
Bryant Square Apartments, 8.75%, 4/1/01 ........... 1,375,863 1,386,304
Candlelite Apartments, 8.75%, 3/1/01 .............. 1,519,989(b) 1,538,949
Cape Cod Apartments, 8.75%, 1/1/01 ................ 1,509,939 1,528,418
Cape Cod Apartments, 13.00%, 1/1/01 ............... 149,825 153,681
Casa Del Vista Apartments, 8.75%, 1/1/01 .......... 2,094,432 2,109,592
Castle Arms Apartments, 8.13%, 1/1/03 ............. 787,033 771,230
Centre Court Apartments, 8.75%, 1/1/01 ............ 1,149,879 1,163,857
Chapel Hill Apartments, 9.38%, 8/1/01 ............. 908,117 939,901
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 18 American Select Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
- ---------------------------------------------------------------------
AMERICAN SELECT PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Chouteau Trace/Bay Apartments, 8.75%, 4/1/01 ...... $ 2,457,603(b) $ 2,475,970
Collegeview Apartments, 9.00%, 8/1/01 ............. 1,163,947 1,204,685
Collegeview Towers, 9.00%, 8/1/01 ................. 4,516,855 4,674,945
Continental Gardens Apartments, 8.90%, 3/1/04 ..... 1,952,711(b) 1,982,590
Country Club Apartments, 8.75%, 1/1/01 ............ 2,047,316 2,072,372
Country Village Apartments, 8.75%, 4/1/01 ......... 1,322,649(b) 1,332,686
El Conquistador Apartments, 8.75%, 4/1/01 ......... 2,563,083(b) 2,595,350
El Portal Apartments, 8.94%, 7/1/01 ............... 2,278,969 2,212,677
Emerald Shores Apartments, 8.75%, 2/1/01 .......... 3,123,548(b) 3,162,145
Evergreen Square Apartments, 8.75%, 12/1/00 ....... 2,165,794 2,061,720
Fairway Hills Apartments, 8.50%, 12/1/98 .......... 1,629,604 1,633,476
Foothills West Apartments, 8.75%, 2/1/01 .......... 2,137,293(b) 2,153,266
Garcia Apartments, 8.88%, 6/1/01 .................. 1,374,632 1,422,744
Glen Hollow Apartments, 9.00%, 4/1/01 ............. 5,468,561(b) 5,579,023
Goose Creek Apartments, 8.63%, 5/1/01 ............. 3,166,418 2,706,669
Green Acres Apartments, 8.75%, 1/1/01 ............. 1,341,525(b) 1,351,125
Heritage Green Apartments, 8.75%, 3/1/01 .......... 1,398,223(b) 1,408,834
Hickory Ridge Apartments, 9.06%, 8/1/99 ........... 1,186,135 1,227,650
Hidden Colony Apartments, 9.00%, 4/1/01 ........... 3,264,921 3,330,352
High Vista Apartments, 9.00%, 4/1/01 .............. 4,178,903(b) 4,241,757
Hunters Meadows Apartments, 8.25%, 2/1/03 ......... 5,270,915 5,215,441
Kingston Square Apartments, 8.75%, 4/1/01 ......... 4,097,794 4,128,893
La Arboleda Apartments, 8.75%, 1/1/01 ............. 4,065,146 4,094,571
La Maison Apartments, 9.13%, 5/1/03 ............... 2,832,668 2,786,881
Lakeville Apartments, 8.50%, 2/1/99 ............... 2,190,802 2,196,223
Lasalle Crossing Apartments, 8.75%, 1/1/01 ........ 2,844,531(b) 2,879,343
Meadow Glenn Apartments, 8.50%, 2/1/07 ............ 2,322,173 2,322,173
Old Orchard Apartments, 8.75%, 12/1/00 ............ 9,785,178 9,906,054
Parc Du Lac Apartments, 8.50%, 2/1/99 ............. 5,229,462(b) 5,242,718
Park Apartments, 8.75%, 2/1/01 .................... 1,316,132(b) 1,332,395
Revere Apartments, 8.75%, 4/1/01 .................. 800,659(b) 806,735
Rush Creek Apartments, 7.73%, 4/1/99 .............. 2,529,474 2,163,061
Shadowood Apartments, 8.50%, 3/1/99 ............... 5,136,761(b) 5,150,776
Sheridan Ponds Apartments, 8.70%, 1/1/07 .......... 7,421,939 7,414,435
Sherwood Lake Apartments, 9.13%, 8/1/01 ........... 2,377,181 1,664,027
Sierra Vista Apartments, 9.50%, 2/1/01 ............ 1,357,380(b) 1,396,836
Skyline Place Apartments, 8.75%, 4/1/01 ........... 4,296,216(b) 4,350,805
Somerset Place Apartments, 9.00%, 4/1/04 .......... 2,308,625 2,276,950
Sunset Rill Apartments, 9.25%, 5/1/99 ............. 3,043,495 3,150,017
Sunview Apartments, 8.88%, 2/1/01 ................. 1,816,478 1,746,799
The Oaks of Lake Bluff Apartments, 8.75%,
4/1/01 .......................................... 2,733,956(b) 2,768,373
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Semiannual Report 19 American Select Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
- ---------------------------------------------------------------------
AMERICAN SELECT PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Timber Forest Apartments, 8.75%, 2/1/01 ........... $ 1,169,901 $ 1,178,511
Tralee Terrace Apartments, 10.13%, 5/1/09 ......... 2,063,349 1,721,473
Trinity Place Apartments, 8.75%, 4/1/01 ........... 600,494 420,346
White Oaks Apartments, 8.75%, 1/1/01 .............. 814,498 820,331
Willow Brooke Apartments, 8.75%, 4/1/01 ........... 4,760,012(b) 4,796,152
Willow Creek Apartments, 8.50%, 2/1/07 ............ 5,867,857 5,799,316
Willows Apartments, 9.00%, 6/1/01 ................. 3,533,229 3,656,892
------------
177,779,729
------------
SINGLE FAMILY LOANS (0.0%):
President Homes 94-1B, Sales Inventory, 10.00%,
3/29/24 ......................................... 93,203 88,160
------------
Total Whole Loans
(cost: $192,155,967) ......................... 191,852,659
------------
SHORT-TERM SECURITIES (2.8%):
Repurchase agreement with Goldman Sachs, acquired
on 5/30/97, interest of $2,143, 5.55%, 6/2/97
(cost: $4,633,000) .............................. 4,633,000(f) 4,633,000
------------
Total Investments in Securities
(cost: $224,988,608) (g) ..................... $224,878,048
------------
------------
</TABLE>
<TABLE>
<S> <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, 1997, SECURITIES VALUED AT $86,711,622 WERE PLEDGED AS
COLLATERAL FOR THE FOLLOWING OUTSTANDING REVERSE REPURCHASE AGREEMENTS:
</TABLE>
<TABLE>
<CAPTION>
NAME OF BROKER
ACQUISITION ACCRUED AND DESCRIPTION
AMOUNT DATE RATE* DUE INTEREST OF COLLATERAL
- ------------ ----------- ---------- --------- --------- -------------------
<S> <C> <C> <C> <C> <C>
$ 28,000,000 3/15/96 5.64% 3/16/98 $ 74,540 (1)
1,000,000 3/15/96 6.56% 3/16/98 3,099 (2)
26,250,000 4/23/96 6.56% 3/16/98 81,348 (2)
12,000,000 5/15/96 6.56% 3/16/98 37,188 (2)
- ------------ ---------
$ 67,250,000 $ 196,175
- ------------ ---------
- ------------ ---------
</TABLE>
<TABLE>
<S> <C>
* INTEREST RATE AS OF MAY 31, 1997. RATES ARE BASED ON THE LONDON INTERBANK
OFFERED RATE (LIBOR) AND RESET MONTHLY.
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 20 American Select Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
NAME OF BROKER AND DESCRIPTION OF COLLATERAL:
(1) MORGAN STANLEY;
U.S. TREASURY NOTE, 6.25%, 1/31/02, $26,000,000
(2) MORGAN STANLEY;
BRENTWOOD HIGHLANDS APARTMENTS, 8.63%, 4/1/01 $4,387,846 PAR
CANDLELITE APARTMENTS, 8.75%, 3/1/01, $1,519,989 PAR
CHOUTEAU TRACE/BAY APARTMENTS, 8.75%, 4/1/01, $2,457,603 PAR
CONTINENTAL GARDENS APARTMENTS, 8.90%, 3/1/04, $1,952,711 PAR
COUNTRY VILLAGE APARTMENTS, 8.75%, 4/1/01, $1,322,649 PAR
EL CONQUISTADOR APARTMENTS, 8.75%, 4/1/01, $2,563,083 PAR
EMERALD SHORES APARTMENTS, 8.75%, 2/1/01, $3,123,548 PAR
FOOTHILLS WEST APARTMENTS, 8.75%, 2/1/01, $2,137,293 PAR
GLEN HOLLOW APARTMENTS, 9.00%, 4/1/01, $5,468,561 PAR
GREEN ACRES APARTMENTS, 8.75%, 1/1/01, $1,341,525 PAR
HERITAGE GREEN APARTMENTS, 8.75%, 3/1/01, $1,398,223 PAR
HIGH VISTA APARTMENTS, 9.00%, 4/1/01, $4,178,903 PAR
LASALLE CROSSING APARTMENTS, 8.75%, 1/1/01 $2,844,531 PAR
PARC DU LAC APARTMENTS, 8.50%, 2/1/99, $5,229,462 PAR
PARK APARTMENTS, 8.75%, 2/1/01, $1,316,132 PAR
REVERE APARTMENTS, 8.75%, 4/1/01, $800,659 PAR
SHADOWOOD APARTMENTS, 8.50%, 3/1/99, $5,136,761 PAR
SIERRA VISTA APARTMENTS, 9.50%, 2/1/01, $1,357,380 PAR
SKYLINE PLACE APARTMENTS, 8.75%, 4/1/01, $4,296,216 PAR
THE OAKS OF LAKE BLUFF APARTMENTS, 8.75%, 4/1/01, $2,733,956 PAR
WILLOW BROOKE APARTMENTS, 8.75%, 4/1/01, $4,760,012 PAR
(c) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT
ON MAY 31, 1997. INTEREST RATES AND MATURITY DATES DISCLOSED ON SINGLE
FAMILY LOANS REPRESENT THE WEIGHTED AVERAGE COUPON AND WEIGHTED AVERAGE
MATURITY FOR THE UNDERLYING MORTGAGE LOANS AS OF MAY 31, 1997.
(d) COMMERCIAL AND MULTIFAMILY LOANS ARE DESCRIBED BY THE NAME OF THE MORTGAGED
PROPERTY. POOLS OF SINGLE FAMILY LOANS ARE DESCRIBED BY THE NAME OF THE
INSTITUTION FROM WHICH THE LOANS WERE PURCHASED. THE GEOGRAPHICAL LOCATION
OF THE MORTGAGED PROPERTIES AND, IN THE CASE OF SINGLE FAMILY, THE NUMBER
OF LOANS, IS PRESENTED BELOW.
COMMERCIAL LOANS:
ADVANCE CIRCUITS AND HOPKINS II BUSINESS CENTER - HOPKINS, MN
BROADWAY PLACE - ALBUQUERQUE, NM
COMMUNITY COFFEE OFFICE BUILDING - BATON ROUGE, LA
OASIS AT THE WATERFRONT - SCOTTSDALE, AZ
RODEO SHOPS - MIAMI, FL
MULTIFAMILY LOANS:
ALDRICH APARTMENTS - MINNEAPOLIS, MN
ALLUMBAUGH SQUARE APARTMENTS - BOISE, ID
ASHEWOOD APARTMENTS - DENVER, CO
AUTUMN CHASE APARTMENTS - JACKSONVILLE, FL
BENT TREE OAKS & BENT TREE BROOK APARTMENTS - EDDISON, TX
BRANDYWINE II APARTMENTS - WILMINGTON, DE
BRENTWOOD HIGHLANDS APARTMENTS - BRENTWOOD, TN
BRIDGE COURT APARTMENTS - OWATONNA, MN
BRYANT SQUARE APARTMENTS - EDMUND, OK
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 21 American Select Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
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 - 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
LA ARBOLEDA APARTMENTS - SAN ANTONIO, TX
LA MAISON APARTMENTS - SEABROOK, TX
LAKEVILLE APARTMENTS - LAKEVILLE, MN
LASALLE CROSSING APARTMENTS - SHERMAN, TX
MEADOW GLENN APARTMENTS - MIDWEST CITY, OK
OLD ORCHARD APARTMENTS - GRAND RAPIDS, MI
PARC DU LAC APARTMENTS - NEW ORLEANS, LA
PARK APARTMENTS - COLORADO SPRINGS, CO
REVERE APARTMENTS - REVERE, MA
RUSH CREEK APARTMENTS - HOUSTON, TX
SHADOWOOD APARTMENTS - NASHVILLE, TN
SHERIDAN PONDS APARTMENTS - TULSA, OK
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
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 22 American Select Portfolio
<PAGE>
INVESTMENTS IN SECURITIES (Unaudited) (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
TRINITY PLACE APARTMENTS - DEL CITY, OK
WHITE OAKS APARTMENTS - MASSILLON, OH
WILLOW BROOKE APARTMENTS - TAMPA, FL
WILLOW CREEK APARTMENTS - MIDWEST CITY, OK
WILLOWS APARTMENTS - BAKERSFIELD, CA
SINGLE FAMILY LOANS:
PRESIDENT HOMES, SALES INVENTORY - 1 SINGLE FAMILY LOAN, AURORA, IL
(e) SECURITIES PURCHASED AS PART OF A PRIVATE PLACEMENT WHICH HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933 AND ARE CONSIDERED TO BE ILLIQUID. ON MAY 31, 1997, THE TOTAL
MARKET VALUE OF THESE INVESTMENTS WAS $191,852,659.
(f) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(g) 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>
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 2,908,452
GROSS UNREALIZED DEPRECIATION ...... (3,019,012)
------------
NET UNREALIZED DEPRECIATION ...... $ (110,560)
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1997 Semiannual Report 23 American Select Portfolio
<PAGE>
SHAREHOLDER UPDATE
- ---------------------------------------------------------------------
CLARIFICATION OF CREDIT QUALITY CRITERIA
The fund's board of directors has approved a clarification of the
credit quality criteria that must be met by individual whole
mortgage loans purchased for the fund.
As you know, rather than focusing on traditional mortgage-backed
securities, we make direct investments in single-family,
multifamily (apartment) and/or commercial mortgage loans. We do
this so we can pass along to investors the higher rates, or
"spread", we may earn on these mortgage loans compared to
traditional mortgage-backed securities. Unlike most
mortgage-backed securities, however, these loans are not backed
by any government guarantee or private credit enhancement and, as
a result, are subject to greater credit risk. Credit risk is the
risk that the borrower will default, or fail to make payments on
the loan. We attempt to manage credit risk in the fund through
the use of an extensive risk analysis process. Among other
things, we review each 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. In
addition, for multifamily and commercial properties we perform a
detailed inspection of each property; study competing properties
in the area; interview property managers; and obtain engineering
and environmental reports from experts. We also perform a
significant financial analysis of each property.
The fund's prospectus requires that each security in which the
fund invests (other than certain corporate debt securities and
subordinated derivative mortgage-backed securities) be rated A or
higher by Standard & Poor's Ratings Group (S&P) or, if unrated,
be determined by the fund's investment adviser to be of
comparable quality. S&P has quantitative criteria for rating
mortgage loans pooled to form A-rated mortgage-backed securities.
Loans which we believe would be appropriate investments for the
fund, and of suitable credit quality using our risk analysis
process outlined above, may not always meet these quantitative
criteria. Therefore, in order to avoid confusion as to whether
S&P's
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1997 Semiannual Report 24 American Select Portfolio
<PAGE>
SHAREHOLDER UPDATE (continued)
- ---------------------------------------------------------------------
quantitative rating criteria are applied to individual whole
loans in which the fund invests, we have requested, and your
fund's board of directors has approved, clarification that the
rating requirements do not apply to individual whole loans in the
fund. (Other mortgage-related securities in which the fund
invests, with the exceptions noted above, will continue to be
rated A or higher by S&P or determined to be of equivalent
quality.)
This clarification does not represent a change in our investment
strategy. When selecting individual mortgage loan investments for
the fund, we will continue to utilize the risk analysis process
outlined above in an attempt to manage the credit risk inherent
in these investments. In addition, we intend to maintain the
fund's current S&P rating.
The fund is rated BBBF by S&P's Ratings Group, which means the
fund's investments have an overall credit quality of BBB. S&P
does not evaluate the market risk (the risk of price volatility
and a decline in value) of the fund when assigning a credit
rating. S&P has also given the fund a market risk rating, which
we cannot publish due to NASD regulations. This rating, and a
definition of BBBF, are available by calling S&P at 1 800
424-FUND.
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1997 Semiannual Report 25 American Select Portfolio
<PAGE>
GLOSSARY OF TERMS-symbol-
BENCHMARK
A benchmark is an established basis of comparison for an investment's
performance. A benchmark may be an unmanaged market index or a group of similar
investments.
COMMERCIAL LOANS
Mortgage loan secured by commercial developments such as shopping centers,
office buildings and warehouses.
DELINQUENT
When there is failure to make payment on a loan when due, the loan is said to be
delinquent.
DISCOUNT
Closed-end fund shares may trade in the market at prices that are equal to,
above or below their net asset value (NAV). When investors purchase or sell
shares at a price that is below current NAV, the shares are said to be trading
at a discount.
REVERSE REPURCHASE AGREEMENTS
A reverse repurchase agreement is an agreement between a seller of securities
(the fund) and a buyer, whereby the fund receives cash and pays interest and
agrees to buy back the same securities at an agreed on price at a stated date.
Reverse repurchase agreements are considered a form of borrowing.
RISK
All funds that invest in mortgage-related securities are subject to certain
risks. Following is a brief summary of some of the primary risks associated with
mortgage-related assets. It does not include all risks related to mortgage
securities.
Among these risks is PREPAYMENT RISK in which principal payments are prepaid at
unexpected rates. Prepayment rates are influenced by changes in interest rates
and a variety of other factors. If the fund buys a mortgage loan at a premium, a
faster-than-anticipated prepayment rate will reduce the fund's yield and a
slower-than-anticipated prepayment rate will increase its yield. If a mortgage
loan is purchased at a discount, the opposite will occur. There is also the
chance that proceeds from prepaid loans will have to be reinvested in lower-
yielding investments (REINVESTMENT RISK).
Like all fixed income investments, the prices of securities in the fund are
sensitive to changing interest rates - otherwise known as INTEREST RATE RISK.
When rates increase, the value of these securities decreases. Conversely, when
rates decline, the value of these securities rises. However, mortgage-related
assets may benefit less from declining interest rates than other fixed income
securities because of prepayment risk.
- ---------------------------------------------------------------------
1997 Semiannual Report 26 American Select Portfolio
<PAGE>
GLOSSARY OF TERMS (continued)
This particular fund's mortgage loans are subject to real estate risk and credit
risk. Since the fund's mortgage loans generally aren't backed by any government
guarantee or private credit enhancement, they face more significant credit risk
than other mortgage-related securities. Credit risk 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 and could
also occur following natural disasters such as flood or earthquake, for which a
property may be uninsured. 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.
SPREAD
The difference in yield on an investment and the corresponding term Treasury
security.
YIELD CURVE
A graph that shows the relationship between the interest rates paid on bonds and
their maturities, ranging from the shortest maturities to the longest available
(assuming the bonds are all of the same quality). The resulting curve indicates
whether short-term interest rates are higher or lower than long-term rates.
- ---------------------------------------------------------------------
1997 Semiannual Report 27 American Select Portfolio
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- ---------------------------------------------------------------------
1997 Semiannual Report 28 American Select Portfolio
<PAGE>
DIRECTORS
- --------------------------------------------------------------------------------
DAVID T. BENNETT, Chairman, Highland Homes, Inc., USL Products, Inc., Kiefer
Built, Inc., of Counsel, Gray, Plant, Mooty, Mooty & Bennett, P.A.
JAYE F. DYER, President, Dyer Management Company
WILLIAM H. ELLIS, President, Piper Jaffray Companies Inc., Piper Capital
Management Incorporated
KAROL D. EMMERICH, President, The Paraclete Group
LUELLA G. GOLDBERG, Director, TCF Financial, ReliaStar Financial Corp., Hormel
Foods Corp.
DAVID A. HUGHEY, Retired Executive Vice President and Chief Administrative
Officer of Dean Witter InterCapital Inc. and Dean Witter Trust Co.
GEORGE LATIMER, Chief Executive Officer, National Equity Funds
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM H. ELLIS, Chairman of the Board
PAUL A. DOW, President
JOHN G. WENKER, Senior Vice President
RUSS J. KAPPENMAN, Vice President and Assistant Secretary
AMY AYD, Vice President
JULENE R. MELQUIST, Vice President
WILLIAM T. NIMMO, Vice President
ROBERT H. NELSON, Vice President and Treasurer
DANIEL W. SCHROER, Vice President and Assistant Secretary
SUSAN S. MILEY, Secretary
INVESTMENT ADVISER
- --------------------------------------------------------------------------------
PIPER CAPITAL MANAGEMENT INCORPORATED
222 South Ninth Street, Minneapolis, MN 55402-3804
ACCOUNTING AND TRANSFER AGENT
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY
127 West 10th Street, Kansas City, MO 64105-1716
CUSTODIAN
- --------------------------------------------------------------------------------
FIRST TRUST NATIONAL ASSOCIATION
180 East Fifth Street, St. Paul, MN 55101
LEGAL COUNSEL
- --------------------------------------------------------------------------------
DORSEY & WHITNEY LLP
220 South Sixth Street, Minneapolis, MN 55402
FOR MORE INFORMATION
By Phone -phone-
1 800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer your
questions.
TO LISTEN TO MONTHLY FUND UPDATES
press 3, press 2, then press:
32 American Select Portfolio
TO ORDER LITERATURE
press 5, ask a service
representative to mail you additional literature, including a Quarterly Update.
You can also request to be put on a mailing list to receive this information
automatically each quarter.
BY MAIL-envelope-
Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804
In an effort to reduce costs to our shareholders, we have implemented a process
to reduce duplicate mailings of the fund's shareholder reports. This
householding process should allow us to mail one report to each address where
one or more registered shareholders with the same last name reside. If you would
like to have additional reports mailed to your address, please call our Mutual
Fund Services area at
1 800 866-7778, or mail a
request to us.
ON-LINE-symbol-
http://www.piperjaffray.com/
<PAGE>
PIPER CAPITAL
MANAGEMENT
PIPER CAPITAL MANAGEMENT INCORPORATED
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
- -symbol-THIS DOCUMENT IS PRINTED ON PAPER MADE FROM 100% TOTAL RECOVERRED FIBER,
INCLUDING 15% POST-CONSUMER WASTE.
#21540 7/1997 202-97
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