<PAGE>
1997 Annual Report
PIPER CAPITAL
MANAGEMENT
AMERICAN SELECT
PORTFOLIO
American Select Portfolio - 1997 Annual Report
SLA
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[LOGO]
CONTENTS
Average Annualized Total Returns . . . . . . . . . . . . . . . . . . . . . . 1
Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . . . . . 2
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . . 7
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . .20
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . .25
Federal Income Tax Information . . . . . . . . . . . . . . . . . . . . . . .26
Shareholder Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Glossary***. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
*** This report includes a glossary to help you understand financial terms used
in the portfolio managers' letter. When you see this symbol, it indicates a word
that is defined in the glossary.
AMERICAN SELECT PORTFOLIO
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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.
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AVERAGE ANNUALIZED TOTAL RETURNS
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Based on net asset value for the periods ended November 30, 1997
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GRAPH
American Select Lehman Brothers Mutual Fund
Portfolio Gov't/Mortgage Index
One Year 10.44% 7.56%
Three Year 12.81% 10.09%
Since Inception 6.59% 6.30%
9/21/93
The average annualized total returns 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 November 30, 1997, were
16.97%, 14.89% and 3.61%, respectively. These returns assume reinvestment of all
distributions and reflect sales charges on those distributions described in the
fund's dividend reinvestment plan, but not on initial purchases.
PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. NEITHER SAFETY OF
PRINCIPAL NOR STABILITY OF INCOME IS GUARANTEED. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more or
less than their original cost. Closed-end funds, such as this fund, often trade
at discounts to net asset value. Therefore, you may be unable to realize the
full net asset value of your shares when you sell.
The 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 calculations.
The since inception number for the lehman index is calculated from the month end
following the fund's inception through November 30, 1997.
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1997 Annual Report 1 American Select Portfolio
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PORTFOLIO MANAGERS' LETTER
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[PHOTO]
JOHN WENKER
Is primarily responsible for the management of American Select Portfolio. He has
11 years of financial experience.
January 18, 1998
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DEAR SHAREHOLDERS:
FOR THE ONE-YEAR PERIOD ENDED NOVEMBER 30, 1997, AMERICAN SELECT PORTFOLIO HAD A
NET ASSET VALUE TOTAL RETURN OF 10.44%.* This compares to a 7.56% return for
the Lehman Brothers Mutual Fund Government/Mortgage Index. For the year ended
November 30, the fund's total return based on its market price was 16.97%. The
fund continued to trade at a discount*** to net asset value, with a market price
of $11.75 and a net asset value of $12.88 per share as of November 30.
IN ADDITION TO ITS STRONG NAV PERFORMANCE, THE FUND PAID AN ATTRACTIVE LEVEL OF
CURRENT INCOME TO SHAREHOLDERS DURING THE YEAR. The fund paid $1.04 per share in
dividends, an annualized distribution rate of 8.85% on the November 30 market
price of $11.75 per share. Current monthly earnings of 8.44 cents per share
(based on an
* All returns assume reinvestment of distributions and do not reflect sales
charges, except the fund's total return based on market price, which does
reflect sales charges on those distributions described in the fund's dividend
reinvestment plan, but not on initial purchases. Past performance does not
guarantee future results. The investment return and principal value of an
investment will fluctuate so that fund shares, when sold, may be worth more or
less than their original cost.
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PORTFOLIO COMPOSITION
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As a Percentage of Total Assets on November 30, 1997
[CHART]
Multifamily Loans 62%
U.S. Treasury Securities 16%
Single Family Loans 11%
Commercial Loans 7%
Other Assets 3%
Short-Term 1%
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1997 Annual Report 2 American Select Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
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[PHOTO]
DAVID STEELE
assists with the management of American Select Portfolio. He has 18 years of
financial experience.
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average of the three months ended November 30) would result in an annualized
earnings rate of 8.62% on the November 30 market price. Keep in mind that past
performance does not guarantee future results, and these rates will fluctuate.
THE FUND'S MONTHLY DIVIDEND REMAINED UNCHANGED AT 8.5 CENTS PER SHARE. The
loans in the fund's portfolio have provided relatively high income for the fund,
allowing us to hold the dividend steady for the past 18 months. In addition,
the fund paid a special dividend of 7 cents per share in December 1997.
THE FUND'S POSITIVE NAV PERFORMANCE OVER THE PAST YEAR CAN BE PRIMARILY
ATTRIBUTED TO DECLINING YIELD SPREADS*** IN COMMERCIAL AND MULTIFAMILY MORTGAGE
MARKETS. Yields on U.S. Treasury securities in the medium-term portion of the
yield curve*** are about where they were a year ago, although yields have gone
up and down by as much as 1%. Over the same time period, spreads on a wide range
of mortgage products, particularly multifamily and commercial loans, have
decreased approximately 0.50% to
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GEOGRAPHICAL DISTRIBUTION
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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 as of November 30, 1997. Shaded areas without values indicate states
in which the fund has invested less than 0.50% of its assets.
[MAP]
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1997 Annual Report 3 American Select Portfolio
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PORTFOLIO MANAGERS' LETTER (CONTINUED)
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[PHOTO]
RUSS KAPPENMAN
assists with the management of American Select Portfolio. He has 11 years of
financial experience.
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0.75%. This effect, along with the attractive level of income earned by the
fund, caused the fund's positive performance relative to its benchmark.***
AS WE HAVE TOLD SHAREHOLDERS IN THE PAST, PREPAYMENTS ARE A CONCERN FOR THIS
FUND, ESPECIALLY IN THE LOWER INTEREST RATE ENVIRONMENT WE CURRENTLY FACE. Lower
rates are expected to continue, and the fund is likely to experience prepayments
as borrowers prepay or refinance their loans. Over time, prepayments invested at
lower interest rates will impact the fund's income and dividend levels.
Prepayments are sometimes positive, since the fund can collect prepayment
penalties on multifamily and commercial loans.
DURING THE PERIOD, WE CONTINUED TO INCREASE THE FUND'S HOLDINGS IN COMMERCIAL
LOANS.*** While commercial loans are subject to more credit risk*** than
other mortgage loans, their price and supply have been attractive in recent
months. 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.
SINCE OUR LAST REPORT, WE HAVE INCREASED THE FUND'S HOLDINGS IN SINGLE FAMILY
LOANS. Although single family loans provide lower yields, they generally provide
better credit quality than commercial and
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DELINQUENT LOAN PROFILE
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The chart below shows what percentage of single family loans* in the portfolio
are 30, 60, 90 or 120 days delinquent as of November 30, 1997, based on
principal amounts outstanding.
Current 94.8%
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30 Days 3.8%
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60 Days 0.6%
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90 Days 0.5%
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120+ Days 0.3%
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* As of November 30, 1997, there were no multifamily or commercial
loans delinquent.
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1997 Annual Report 4 American Select Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
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multifamily loans. We anticipate further diversification in single family and
commercial loans as the fund's initial investments in multifamily loans mature
over the next couple of years.
DELINQUENT LOANS AND CREDIT LOSSES ARE INHERENT RISKS IN THIS FUND, EVEN THOUGH
WE CONDUCT EXTENSIVE RISK ANALYSIS ON THE LOANS WE BUY. As of November 30, the
fund held approximately 208 single family loans on properties with an average
remaining principal balance of approximately $123,000. On the same date, the
fund had 52 multifamily loans with an average principal balance of approximately
$2,843,000 and six commercial loans with an average principal balance of
approximately $2,668,000. The chart on the previous page shows the percentage of
single family loans in delinquency. No multifamily or commercial loans were
delinquent. Since the fund's inception, we have experienced no foreclosure
losses on single family, multifamily or commercial loans. When loans are
foreclosed, we expedite the process as quickly as possible. Any losses will
first go against the borrower's investment, or equity. Although we would hope to
receive all of the principal and interest owed to us on a foreclosed loan, it is
likely that we may not be repaid in full.
THE FUND CONTINUES TO BORROW THROUGH REVERSE REPURCHASE AGREEMENTS*** 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 28% of the fund's total
assets as of November 30. Please 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.
SETTLEMENT OF THE CLASS ACTION LAWSUIT AGAINST THE FUND AND SEVEN OTHER
CLOSED-END MANAGEMENT COMPANIES MANAGED BY PIPER CAPITAL MANAGEMENT BECAME
EFFECTIVE IN SEPTEMBER, AND THE FUND COMPLETED A SHARE REPURCHASE. The
settlement included payments by Piper Jaffray Companies totaling $15.5 million
over a four-year period. It also included an agreement by the fund to
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1997 Annual Report 5 American Select Portfolio
<PAGE>
PORTFOLIO MANAGERS' LETTER (CONTINUED)
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repurchase up to 10% of its outstanding shares. Proceeds of this repurchase were
paid out on December 5. We funded the repurchase by using loan prepayments and
selling some of the fund's less attractive mortgage assets.
Thank you for your investment in American Select Portfolio. We are pleased that
the fund provided you with a competitive return for the period, and we
appreciate the opportunity to serve your investment needs.
Sincerely,
/s/ John Wenker
John Wenker
Portfolio Manager
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VALUATION OF WHOLE LOAN INVESTMENTS
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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 and therefore, market quotations are not
readily available. these investments are valued at "fair value" according to
procedures adopted by the fund's board of directors. Pursuant to these
procedures, whole loan investments are initially valued at cost and their values
are subsequently monitored and adjusted pursuant to a Piper Capital 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, 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 on a monthly basis and includes, but is not limited to, the projected
rate of prepayments, projected rate and severity of defaults, the delinquency
profile and the historical payment record. Valuations of mortgage
participations and mortgage servicing rights are determined no less frequently
than weekly.
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1997 Annual Report 6 American Select Portfolio
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Financial Statements
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STATEMENT OF ASSETS AND LIABILITIES November 30, 1997
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $3,079,000) ......... $233,337,382
Cash in bank on demand deposit ............................. 2,826,547
Accrued interest and mortgage security paydowns
receivable ............................................... 3,234,201
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Total assets ............................................. 239,398,130
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LIABILITIES:
Reverse repurchase agreements payable ...................... 68,000,000
Accrued investment management fee .......................... 70,327
Accrued administrative fee ................................. 28,131
Accrued interest ........................................... 160,047
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Total liabilities ........................................ 68,258,505
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Net assets applicable to outstanding capital stock ....... $171,139,625
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COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital ............... $187,764,321
Undistributed net investment income ........................ 1,809,119
Accumulated net realized loss on investments ............... (22,458,519)
Unrealized appreciation of investments ..................... 4,024,704
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Total - representing net assets applicable to capital
stock .................................................. $171,139,625
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* Investments in securities at identified cost ............. $229,312,678
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NET ASSET VALUE AND MARKET PRICE:
Net assets ................................................. $171,139,625
Shares outstanding (authorized 1 billion shares of $0.01 par
value) ................................................... 13,283,967
Net asset value ............................................ $ 12.88
Market price ............................................... $ 11.75
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Annual Report 7 American Select Portfolio
<PAGE>
Financial Statements (continued)
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STATEMENT OF OPERATIONS For the Year Ended November 30, 1997
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $4,163,435) ........... $15,759,117
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EXPENSES (NOTE 3):
Investment management fee .................................. 836,051
Administrative fee ......................................... 334,420
Custodian and accounting fees .............................. 129,307
Transfer agent fees ........................................ 22,264
Reports to shareholders .................................... 61,266
Mortgage servicing fees .................................... 278,086
Directors' fees ............................................ 14,936
Audit and legal fees ....................................... 69,827
Other expenses ............................................. 39,140
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Total expenses ........................................... 1,785,297
Less expenses paid indirectly .......................... (4,283)
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Total net expenses ....................................... 1,781,014
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Net investment income .................................... 13,978,103
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NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 4) .................. 1,488,784
Net change in unrealized appreciation or depreciation of
investments .............................................. 1,309,056
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Net gain on investments .................................. 2,797,840
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Net increase in net assets resulting from operations ... $16,775,943
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Annual Report 8 American Select Portfolio
<PAGE>
Financial Statements (continued)
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STATEMENT OF CASH FLOWS For the Year Ended November 30, 1997
................................................................................
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest income ............................................ $15,759,117
Net expenses ............................................... (1,781,014)
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Net investment income .................................... 13,978,103
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Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest and mortgage security paydowns
receivable ............................................. (1,806,979)
Net amortization of bond discount and premium ............ (131,444)
Change in accrued fees and expenses ...................... (4,352)
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Total adjustments ...................................... (1,942,775)
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Net cash provided by operating activities .............. 12,035,328
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ......................... 197,147,927
Purchases of investments ................................... (201,691,746)
Net sales of short-term securities ......................... 5,964,000
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Net cash provided by investing activities .............. 1,420,181
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from reverse repurchase agreements ............ 2,750,000
Distributions paid to shareholders ......................... (13,815,326)
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Net cash used by financing activities .................. (11,065,326)
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Net increase in cash ....................................... 2,390,183
Cash at beginning of year .................................. 436,364
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Cash at end of year .................................... $ 2,826,547
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Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ............................................. $ 4,170,485
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Annual Report 9 American Select Portfolio
<PAGE>
Financial Statements (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
11/30/97 11/30/96
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<S> <C> <C>
OPERATIONS:
Net investment income ...................................... $13,978,103 $13,491,770
Net realized gain on investments ........................... 1,488,784 1,377,584
Net change in unrealized appreciation or depreciation of
investments .............................................. 1,309,056 (3,340,191)
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Net increase in net assets resulting from operations ..... 16,775,943 11,529,163
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................. (13,815,326) (14,375,036)
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CAPITAL SHARE TRANSACTIONS (NOTE 5):
Decrease in net assets from capital share transactions ..... -- (818,039)
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Total increase (decrease) in net assets .................. 2,960,617 (3,663,912)
Net assets at beginning of year ............................ 168,179,008 171,842,920
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Net assets at end of year .................................. $171,139,625 $168,179,008
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Undistributed net investment income ........................ $ 1,809,119 $ 1,649,628
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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1997 Annual Report 10 American Select Portfolio
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Notes to Financial Statements
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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 enter into dollar roll
transactions. 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 readily available, or if such
quotations or valuations are believed to be inaccurate,
unreliable or not reflective of market value, portfolio
securities are valued according to procedures adopted by the
fund's board of directors in good faith at "fair value", that is,
a price that the fund might reasonably expect to receive for the
security or other asset upon its current sale.
The current market values of certain fixed income securities are
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 and
therefore, market quotations are not readily available. These
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1997 Annual Report 11 American Select Portfolio
<PAGE>
Notes to Financial Statements (continued)
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investments are valued at "fair value" according to procedures
adopted by the fund's board of directors. Pursuant to these
procedures, whole loan investments are initially valued at cost
and their values are subsequently monitored and adjusted pursuant
to a Piper Capital 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, 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 on a monthly basis and includes, but
is not limited to, the projected rate of prepayments, projected
rate and severity of defaults, the delinquency profile and the
historical payment record. Valuations of mortgage participations
and mortgage servicing rights are determined no less frequently
than weekly.
Securities transactions are accounted for on the date securities
are purchased or sold. Realized gains and losses are calculated
on the identified-cost basis. Interest income, including
amortization of bond discount and premium, is recorded on an
accrual basis.
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
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1997 Annual Report 12 American Select Portfolio
<PAGE>
Notes to Financial Statements (continued)
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underlying mortgage-backed securities. 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.
At November 30, 1997, loans representing 0.22% of net assets were
60 days or more delinquent as to the timely monthly payment of
principal. Such delinquencies relate solely to single family
whole loans and represent 1.45% of total single family principal
outstanding at November 30, 1997. 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. The fund may receive rental or other income
as a result of holding real estate. In addition, the fund may
incur expenses associated with maintaining any real estate owned.
On November 30, 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
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1997 Annual Report 13 American Select Portfolio
<PAGE>
Notes to Financial Statements (continued)
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value if the fund makes such purchases while remaining
substantially fully invested. As of November 30, 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 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 the year
ended November 30, 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
fund.
On the statements of assets and liabilities, as a result of
permanent book-to-tax differences, reclassification adjustments
have been made to decrease undistributed net investment income
and increase additional paid-in capital by $3,286.
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1997 Annual Report 14 American Select Portfolio
<PAGE>
Notes to Financial Statements (continued)
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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
in the financial statements. Actual results could differ from
these estimates.
- ---------------------------------------------------------------------
1997 Annual Report 15 American Select Portfolio
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(3) EXPENSES
................................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The fund has entered into the following agreements with Piper
Capital Management Incorporated (the advisor and the
administrator):
The investment advisory agreement provides the advisor 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 advisor 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.
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; real
estate owned; 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.
- ---------------------------------------------------------------------
1997 Annual Report 16 American Select Portfolio
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(4) INVESTMENT
SECURITY
TRANSACTIONS
................................
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities, for the year
ended November 30, 1997, aggregated $201,823,190 and
$197,147,927, respectively. Included in net realized gain on
investments is $740,079 in prepayment penalties on multifamily
loans.
(5) CAPITAL SHARE
TRANSACTIONS
................................
The fund's board of directors voted to discontinue the share
repurchase program effective February 6, 1996. Pursuant to the
plan, the fund repurchased and retired 74,500 shares during the
year ended November 30, 1996. Cumulatively, the fund has
repurchased and retired 322,700 shares, which represents 2.4% of
the shares originally issued.
(6) CAPITAL LOSS
CARRYOVER
................................
For federal income tax purposes, the fund had capital loss
carryovers at November 30, 1997, which, if not offset by
subsequent capital gains, will expire on the fund's fiscal
year-ends as indicated below. It is unlikely the board of
directors will authorize a distribution of any net realized
capital gains until the available capital loss carryovers have
been offset or expire.
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYOVER EXPIRATION
------------- ----------
<S> <C> <C>
$ 8,968,833 2002
13,489,686 2003
-------------
$ 22,458,519
-------------
-------------
</TABLE>
(7) SUBSEQUENT
EVENT -
REPURCHASE
OFFER
................................
The fund's board of directors concluded that an offer to
repurchase up to 10% of the fund's outstanding shares would be in
the best interests of shareholders. Accordingly, the board
authorized such an offer as part of a settlement agreement
reached in connection with class action litigation involving the
fund and seven other closed-end investment companies managed by
Piper Capital Management Incorporated.
The repurchase offer was sent to shareholders in October 1997,
and the deadline for submitting shares for repurchase was 5 p.m.
Central Time on November 17, 1997. The repurchase price was
determined on December 1, 1997, at the close of regular trading
- ---------------------------------------------------------------------
1997 Annual Report 17 American Select Portfolio
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
on the New York Stock Exchange (4 p.m. Eastern Time). The
percentage of outstanding shares tendered, the number of shares
tendered, the repurchase price per share (net asset value less
two cents per share repurchase fee) and proceeds paid on December
5, 1997, by the fund were as follows:
<TABLE>
<CAPTION>
PERCENTAGE SHARES REPURCHASE PROCEEDS
TENDERED TENDERED PRICE PAID
---------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
10.00% 1,328,284 $12.88 $ 17,108,297
</TABLE>
(8) SUBSEQUENT
EVENT -
PENDING
ACQUISITION
................................
On December 15,1997, Piper Jaffray Companies, Inc., the parent
company of the fund's investment advisor, announced that it had
entered into an agreement to be acquired by U.S. Bancorp. It is
anticipated that this acquisition will be completed in the second
quarter of 1998, subject to regulatory approval, the approval of
Piper Jaffray Companies shareholders and the satisfaction of
customary closing conditions.
U.S. Bancorp is a multi-state bank holding company headquartered
in Minneapolis, Minnesota with a geographic service area spanning
17 states. As of September 30, 1997, U.S. Bancorp was the 15th
largest U.S. commercial bank holding company, with assets of
approximately $70 billion. U.S. Bank National Association ("U.S.
Bank"), a wholly owned subsidiary of U.S. Bancorp, currently acts
as the investment advisor to 32 mutual funds (the "First American
Funds"). As of December 31, 1997, U.S. Bank, acting through its
First American Asset Management group, managed more than $55
billion in assets, including approximately $20.5 billion in
assets of the First American Funds.
Under the Investment Company Act of 1940, as amended (the "1940
Act"), consummation of the acquisition of Piper Jaffray Companies
by U.S. Bancorp will result in the assignment and automatic
termination of the fund's investment advisory agreement with
Piper Capital Management Incorporated. The 1940 Act requires that
any new investment advisory agreement for the fund be approved by
the fund's board of directors and shareholders.
- ---------------------------------------------------------------------
1997 Annual Report 18 American Select Portfolio
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(9) 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>
Year Year Year Year Period
Ended Ended Ended Ended Ended
11/30/97 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 .......................... 1.05 1.02 1.09 1.22 0.22
Net realized and unrealized gain (loss) on
investments .................................. 0.21 (0.14) 1.28 (2.21) (0.46)
--------- --------- --------- --------- -------
Total from operations ........................ 1.26 0.88 2.37 (0.99) (0.24)
--------- --------- --------- --------- -------
Distributions to shareholders:
From net investment income ..................... (1.04) (1.08) (1.13) (1.13) (0.09)
--------- --------- --------- --------- -------
Net asset value, end of period ................... $12.88 $12.66 $12.86 $11.62 $13.74
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
Per-share market value, end of period ............ $11.75 $11.00 $11.00 $10.38 $14.38
--------- --------- --------- --------- -------
--------- --------- --------- --------- -------
SELECTED INFORMATION
Total return, net asset value (a) ................ 10.44% 7.27% 21.22% (7.48)% (1.75)%
Total return, market value (b) ................... 16.97% 10.53% 17.36% (20.78)% (3.54)%
Net assets at end of period (in millions) ........ $ 171 $ 168 $ 172 $ 157 $ 187
Ratio of expenses to average weekly net assets
including interest expense (c) ................. 3.56% 3.30% 3.76% 2.66% 0.79%(g)
Ratio of expenses to average weekly net assets
excluding interest expense (c) ................. 1.07% 1.03% 1.08% 1.12% 0.79%(g)
Ratio of net investment income to average weekly
net assets ..................................... 8.36% 8.11% 8.85% 9.61% 8.23%(g)
Portfolio turnover rate (excluding short-term
securities) .................................... 86% 30% 73% 110% 9%
Amount of borrowings outstanding at end of period
(in millions) (d) .............................. $ 68 $ 65 $ 65 $ 65 --
Per-share amount of borrowings outstanding at end
of period ...................................... $ 5.12 $ 4.91 $ 4.87 $ 4.80 --
Per-share amount of net assets, excluding
borrowings, at end of period ................... $18.00 $17.57 $17.73 $16.42 --
Asset coverage ratio (e) ......................... 352% 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.
(g) ANNUALIZED.
- ---------------------------------------------------------------------
1997 Annual Report 19 American Select Portfolio
<PAGE>
Investments in Securities
- ---------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN SELECT PORTFOLIO November 30, 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 (23.0%):
U.S. GOVERNMENT SECURITIES (23.0%):
6.50%, U. S. Treasury Note, 8/15/05
(cost: $38,296,123) ............................... $38,000,000(b) $ 39,375,220
------------
WHOLE LOANS (C,D,E) (111.5%):
COMMERCIAL LOANS (9.7%):
Advance Circuits and Hopkins II Business Center,
8.71%, 11/1/01 .................................... 3,375,363 3,491,099
Broadway Place, 9.00%, 6/1/01 ....................... 3,246,843 3,376,717
Community Coffee Office Building, 8.90%, 6/1/01 ..... 4,650,000 4,836,000
Oasis at the Waterfront, 9.50%, 5/1/00 .............. 1,645,033 1,677,934
Rodeo Shops, 9.15%, 6/1/07 .......................... 1,344,038 1,411,240
The Kislak Building, 8.45%, 7/1/02 .................. 1,749,065 1,796,550
------------
16,589,540
------------
MULTIFAMILY LOANS (86.9%):
Aldrich Apartments, 9.69%, 5/31/01 .................. 768,890 745,072
Allumbaugh Square Apartments, 9.59%, 4/1/99 ......... 1,736,830 1,754,198
Bent Tree Oaks & Bent Tree Brook Apartments, 8.00%,
6/1/00 12,158,521 12,401,691
Bridge Court Apartments, 10.13%, 5/1/09 ............. 1,806,096 1,264,267
Bryant Square Apartments, 8.75%, 4/1/01 ............. 1,368,328 1,412,263
Candlelite Apartments, 8.75%, 3/1/01 ................ 1,511,598(b) 1,566,769
Cape Cod Apartments, 8.75%, 1/1/01 .................. 1,501,468 1,554,406
Cape Cod Apartments, 13.00%, 1/1/01 ................. 149,563 154,443
Casa Del Vista Apartments, 8.75%, 1/1/01 ............ 2,082,682 2,145,699
Castle Arms Apartments, 8.13%, 1/1/03 ............... 780,517 795,342
Centre Court Apartments, 8.75%, 1/1/01 .............. 1,139,281 1,179,097
Chapel Hill Apartments, 9.53%, 8/1/01 ............... 903,904 921,982
Chouteau Trace/Bay Apartments, 8.75%, 4/1/01 ........ 2,444,036 2,521,020
Collegeview Apartments, 9.53%, 8/1/01 ............... 1,154,839 1,177,936
Collegeview Towers, 9.53%, 8/1/01 ................... 4,495,899 4,585,817
Continental Gardens Apartments, 8.90%, 3/1/04 ....... 1,942,217(b) 2,039,328
Country Club Apartments, 8.75%, 1/1/01 .............. 2,034,248 2,105,970
El Conquistador Apartments, 8.75%, 4/1/01 ........... 2,549,047(b) 2,643,637
Emerald Shores Apartments, 8.75%, 2/1/01 ............ 3,106,166(b) 3,217,620
Evergreen Square Apartments, 8.75%, 12/1/00 ......... 2,153,546 2,191,332
Fairway Hills Apartments, 8.50%, 12/1/98 ............ 1,620,049 1,134,034
Foothills West Apartments, 8.75%, 2/1/01 ............ 2,125,494(b) 2,192,443
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Annual Report 20 American Select Portfolio
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN SELECT PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
Glen Hollow Apartments, 9.00%, 4/1/01 ............... $ 5,470,062(b) $ 5,709,934
Goose Creek Apartments, 9.75%, 5/1/01 ............... 3,151,854 2,735,096
Green Acres Apartments, 8.75%, 1/1/01 ............... 1,329,161(b) 1,368,967
Hidden Colony Apartments, 9.00%, 4/1/01 ............. 3,247,828 3,390,251
Hunters Meadow Apartments, 8.25%, 2/1/03 ............ 5,228,435 5,378,857
La Arboleda Apartments, 8.75%, 1/1/01 ............... 4,042,341 4,164,651
La Maison Apartments, 9.13%, 5/1/03 ................. 2,820,862 2,901,436
Lakeville Apartments, 8.50%, 2/1/99 ................. 2,178,057 2,208,835
LaSalle Crossing Apartments, 8.75%, 1/1/01 .......... 2,828,573(b) 2,913,430
Meadow Glen Apartments, 8.50%, 2/1/07 ............... 2,311,958 2,247,273
Old Orchard Apartments, 8.75%, 12/1/00 .............. 9,783,763 10,128,713
Parc Du Lac Apartments, 8.50%, 2/1/99 ............... 5,227,337 5,301,204
Park Apartments, 8.75%, 2/1/01 ...................... 1,308,808(b) 1,355,770
Revere Apartments, 8.75%, 4/1/01 .................... 796,274 821,841
Rush Creek Apartments, 9.75%, 4/1/99 ................ 2,517,888 2,182,125
Shadowood Apartments, 8.50%, 3/1/99 ................. 5,134,915(b) 5,211,867
Sheridan Ponds Apartments, 8.70%, 1/1/07 ............ 7,390,341 7,759,858
Sherwood Lake Apartments, 9.53%, 8/1/01 ............. 2,358,580 1,651,006
Sierra Vista Apartments, 9.50%, 2/1/01 .............. 1,350,779(b) 1,418,318
Skyline Place Apartments, 8.75%, 4/1/01 ............. 4,272,688(b) 4,400,869
Somerset Place Apartments, 9.00%, 4/1/04 ............ 2,296,637 2,379,856
Sunview Apartments, 9.94%, 2/1/01 ................... 1,808,460 1,760,352
The Oaks of Lake Bluff Apartments, 8.75%, 4/1/01 .... 2,718,984(b) 2,819,880
Timber Forest Apartments, 8.75%, 2/1/01 ............. 1,163,391 1,199,318
Tralee Terrace Apartments, 10.13%, 5/1/09 ........... 2,054,634 1,877,992
Trinity Place Apartments, 8.75%, 4/1/01 ............. 597,205 418,044
White Oaks Apartments, 8.75%, 1/1/01 ................ 806,991 831,159
Willow Brooke Apartments, 8.75%, 4/1/01 ............. 4,733,945(b) 4,885,943
Willow Creek Apartments, 8.50%, 2/1/07 .............. 5,842,045 6,114,851
Willows Apartments, 10.00%, 6/1/01 .................. 3,517,715 3,588,069
------------
148,830,131
------------
SINGLE FAMILY LOANS (14.9%):
Norwest IX, 7.99%, 5/1/22 ........................... 13,075,437 13,032,600
Norwest VIII, 8.14%, 8/4/22 ......................... 12,334,602 12,343,030
President Homes 94-1B, Sales Inventory, 9.00%,
3/29/24 ........................................... 92,782 87,861
------------
25,463,491
------------
Total Whole Loans
(cost: $187,937,556) ........................... 190,883,162
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- ---------------------------------------------------------------------
1997 Annual Report 21 American Select Portfolio
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
AMERICAN SELECT PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
SHORT-TERM SECURITIES (1.8%):
Repurchase agreement with Credit Suisse First Boston,
acquired on 11/28/97, interest of $1,457, 5.68%,
12/1/97
(cost: $3,079,000) ................................ $ 3,079,000(f) $ 3,079,000
------------
Total Investments in Securities
(cost: $229,312,678) (g) ....................... $233,337,382
------------
------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) ON NOVEMBER 30, 1997, SECURITIES VALUED AT $79,047,615 WERE PLEDGED AS
COLLATERAL FOR THE FOLLOWING OUTSTANDING REVERSE REPURCHASE AGREEMENTS:
<TABLE>
<CAPTION>
NAME OF BROKER
ACQUISITION ACCRUED AND DESCRIPTION
AMOUNT DATE RATE* DUE INTEREST OF COLLATERAL
- ------------ ----------- ---------- --------- --------- -------------------
<S> <C> <C> <C> <C> <C>
$ 14,000,000 11/17/97 5.64% 3/16/98 $ 30,148 (1)
22,000,000 11/17/97 5.64% 3/16/98 48,232 (2)
32,000,000 11/17/97 6.56% 3/16/98 81,667 (3)
- ------------ ---------
$ 68,000,000 $ 160,047
- ------------ ---------
- ------------ ---------
</TABLE>
* INTEREST RATE AS OF NOVEMBER 30, 1997. RATES ARE BASED ON THE LONDON
INTERBANK OFFERED RATE (LIBOR) AND RESET MONTHLY.
NAME OF BROKER AND DESCRIPTION OF COLLATERAL:
(1) MORGAN STANLEY;
U.S. TREASURY NOTE, 6.50%, 8/15/05, $14,000,000 PAR
(2) MORGAN STANLEY;
U.S. TREASURY NOTE, 6.50%, 8/15/05, $22,000,000 PAR
(3) MORGAN STANLEY;
CANDLELITE APARTMENTS, 8.75%, 3/1/01, $1,511,598 PAR
CONTINENTAL GARDENS APARTMENTS, 8.90%, 3/1/04, $1,942,217 PAR
EL CONQUISTADOR APARTMENTS, 8.75%, 4/1/01, $2,549,047 PAR
EMERALD SHORES APARTMENTS, 8.75%, 2/1/01, $3,106,166 PAR
FOOTHILLS WEST APARTMENTS, 8.75%, 2/1/01, $2,125,494 PAR
GLEN HOLLOW APARTMENTS, 9.00%, 4/1/01, $5,470,062 PAR
GREEN ACRES APARTMENTS, 8.75%, 1/1/01, $1,329,161 PAR
LASALLE CROSSING APARTMENTS, 8.75%, 1/1/01, $2,828,573 PAR
PARK APARTMENTS, 8.75%, 2/1/01, $1,308,808 PAR
SHADOWOOD APARTMENTS, 8.50%, 3/1/99, $5,134,915 PAR
SIERRA VISTA APARTMENTS, 9.50%, 2/1/01, $1,350,779 PAR
SKYLINE PLACE APARTMENTS, 8.75%, 4/1/01, $4,272,688 PAR
THE OAKS OF LAKE BLUFF APARTMENTS, 8.75%, 4/1/01, $2,718,984 PAR
WILLOW BROOKE APARTMENTS, 8.75%, 4/1/01, $4,733,945 PAR
- ---------------------------------------------------------------------
1997 Annual Report 22 American Select Portfolio
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
(C) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT
ON NOVEMBER 30, 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 NOVEMBER 30, 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
THE KISLAK BUILDING - WOODBRIDGE TOWNSHIP, NJ
MULTIFAMILY LOANS:
ALDRICH APARTMENTS - MINNEAPOLIS, MN
ALLUMBAUGH SQUARE APARTMENTS - BOISE, ID
BENT TREE OAKS & BENT TREE BROOK APARTMENTS - EDDISON, TX
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
EL CONQUISTADOR APARTMENTS - TUCSON, AZ
EMERALD SHORES APARTMENTS - PHOENIX, AZ
EVERGREEN SQUARE APARTMENTS - BUFFALO, MN
FAIRWAY HILLS APARTMENTS - RAPID CITY, SD
FOOTHILLS WEST APARTMENTS - EL PASO, TX
GLEN HOLLOW APARTMENTS - CHARLOTTE, NC
GOOSE CREEK APARTMENTS - BLOOMINGTON, IL
GREEN ACRES APARTMENTS - MASSILLON, OH
HIDDEN COLONY APARTMENTS - DORAVILLE, GA
HUNTERS MEADOW APARTMENTS - COLORADO SPRINGS, CO
LA ARBOLEDA 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
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 23 American Select Portfolio
<PAGE>
Investments in Securities (continued)
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
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
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
WHITE OAKS APARTMENTS - MASSILLON, OH
WILLOW BROOKE APARTMENTS - TAMPA, FL
WILLOW CREEK APARTMENTS - MIDWEST CITY, OK
WILLOWS APARTMENTS - BAKERSFIELD, CA
SINGLE FAMILY LOANS:
NORWEST IX - 113 LOANS THROUGHOUT THE UNITED STATES.
NORWEST VIII - 94 LOANS THROUGHOUT THE UNITED STATES.
PRESIDENT HOMES, SALES INVENTORY - 1 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 NOVEMBER 30, 1997, THE
TOTAL MARKET VALUE OF THESE INVESTMENTS WAS $190,883,162, OR 111.5% OF
TOTAL NET ASSETS.
(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) ON NOVEMBER 30, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $229,312,678. 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 ...... $ 6,838,115
GROSS UNREALIZED DEPRECIATION ...... (2,813,411)
------------
NET UNREALIZED APPRECIATION ...... $ 4,024,704
------------
------------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 24 American Select Portfolio
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
AMERICAN SELECT PORTFOLIO INC.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments in securities, of American Select Portfolio Inc. as
of November 30, 1997, the related statements of operations and cash flows for
the year then ended, the statements of changes in net assets for each of the
years in the two-year period ended November 30, 1997, and the financial
highlights presented in note 9 to the financial statements. These financial
statements and the financial highlights are the responsibility of the fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
American Select Portfolio Inc. as of November 30, 1997, and the results of its
operations and cash flows, the changes in its net assets and the financial
highlights for the periods stated in the first paragraph above, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
January 16, 1998
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1997 Annual Report 25 American Select Portfolio
<PAGE>
Federal Income Tax Information
- --------------------------------------------------------------------------------
The following per-share information describes the federal tax
treatment of distributions made during the fiscal year.
Distributions for the calendar year will be reported to you on
Form 1099-DIV. Please consult a tax advisor on how to report
these distributions at the state and local levels.
INCOME DISTRIBUTIONS
(TAXABLE AS ORDINARY DIVIDENDS, NONE QUALIFYING FOR DEDUCTION
BY CORPORATIONS)
<TABLE>
<CAPTION>
PAYABLE DATE AMOUNT
- ---------------------------------------- -------
<S> <C>
December 18, 1996 ...................... $0.1050
January 10, 1997 ....................... 0.0850
February 26, 1997 ...................... 0.0850
March 26, 1997 ......................... 0.0850
April 23, 1997 ......................... 0.0850
May 28, 1997 ........................... 0.0850
June 25, 1997 .......................... 0.0850
July 23, 1997 .......................... 0.0850
August 27, 1997 ........................ 0.0850
September 24, 1997 ..................... 0.0850
October 15, 1997 ....................... 0.0850
November 24, 1997 ...................... 0.0850
-------
Total .............................. $1.0400
-------
-------
</TABLE>
- ---------------------------------------------------------------------
1997 Annual Report 26 American Select Portfolio
<PAGE>
Shareholder Update
- --------------------------------------------------------------------------------
ANNUAL MEETING RESULTS
An annual meeting of the fund's shareholders was held on August
20, 1997. Each matter voted upon at that meeting, as well as the
number of votes cast for, against or withheld, the number of
abstentions, and the number of broker non-votes with respect to
such matters, are set forth below.
1. The fund's shareholders elected the following directors:
<TABLE>
<CAPTION>
SHARES SHARES WITHHOLDING
VOTED "FOR" AUTHORITY TO VOTE
------------- ------------------
<S> <C> <C>
David Bennett .......................... 7,536,784 208,721
Jaye F. Dyer ........................... 7,534,784 210,721
William H. Ellis ....................... 7,532,313 213,192
Karol D. Emmerich ...................... 7,534,242 211,263
Luella G. Goldberg ..................... 7,533,366 212,139
David A. Hughey ........................ 7,535,084 210,421
George Latimer ......................... 7,530,164 215,342
</TABLE>
2. The fund's shareholders ratified the selection by a majority
of the independent members of the fund's board of directors
of KPMG Peat Marwick LLP as the independent public
accountants for the fund for the fiscal year ending November
30, 1997. The following votes were cast regarding this
matter:
<TABLE>
<CAPTION>
SHARES SHARES BROKER
VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES
------------- ----------------- ----------- -----------
<S> <C> <C> <C>
7,566,661 57,008 121,835 --
</TABLE>
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the Dividend
Reinvestment Plan. It's a convenient and economical way to buy
additional shares of the fund by automatically reinvesting
dividends and capital gains. The plan is administered by
Investors Fiduciary Trust Company (IFTC), the plan agent.
- ---------------------------------------------------------------------
1997 Annual Report 27 American Select Portfolio
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of distributions
will begin with the next distribution paid, provided your request
is received at least 10 days before the record date for that
distribution.
If your shares are in certificate form, you may join the plan
directly and have your distributions reinvested in additional
shares of the fund. To enroll in this plan, call IFTC at
1-800-543-1627. If your shares are registered in your brokerage
firm's name or another name, ask the holder of your shares how
you may participate.
Banks, brokers or nominees, on behalf of their beneficial owners
who wish to reinvest dividend and capital gains distributions,
may participate in the plan by informing IFTC at least 10 days
before each share's dividend and/or capital gains distribution.
PLAN ADMINISTRATION
Beginning no more than 5 business days before the dividend
payment date, IFTC will buy shares of the fund on the New York
Stock Exchange (NYSE) or elsewhere on the open market only when
the price of the fund's shares on the NYSE plus commissions is at
less than a 5% premium over the fund's most recently calculated
net asset value (NAV) per share. 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, IFTC will accept payment of the dividend, or the
remaining portion, in authorized but unissued shares of the fund.
These shares will be issued at a per-share price equal to the
higher of (a) the NAV per share as of the close of business on
the payment date or (b) 95% of the closing market price per share
on the payment date.
By participating in the dividend reinvestment plan, you may
receive benefits not available to shareholders who elect not to
participate. For example, if the market price plus commissions of
the fund's shares is 5% or more above the NAV, you will receive
- ---------------------------------------------------------------------
1997 Annual Report 28 American Select Portfolio
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
shares at a discount of up to 5% from the current market value.
However, if the market price plus commissions is below the NAV,
you will receive distributions in shares with an NAV greater than
the value of any cash distributions you would have received.
There is no direct charge for reinvestment of dividends and
capital gains, since IFTC fees are paid for by the fund. However,
if fund shares are purchased in the open market, each participant
pays a pro rata portion of the brokerage commissions. Brokerage
charges are expected to be lower than those for individual
transactions because shares are purchased for all participants in
blocks. As long as you continue to participate in the plan,
distributions paid on the shares in your account will be
reinvested.
IFTC maintains accounts for plan participants holding shares in
certificate form and will furnish written confirmation of all
transactions, including information you need for tax records.
Reinvested shares in your account will be held by IFTC in
noncertified form in your name.
TAX INFORMATION
Distributions invested in additional shares of the fund are
subject to income tax, just as they would be if received in cash.
When shares are issued by the fund at a discount from market
value, shareholders will be treated as having received
distributions of an amount equal to the full market value of
those shares. Shareholders, as required by the Internal Revenue
Service, will receive Form 1099 regarding the federal tax status
of the prior year's distributions.
PLAN WITHDRAWAL
If you hold your shares in certificate form, you may terminate
your participation in the plan at any time by giving written
notice to IFTC. If your shares are registered in your brokerage
firm's name, you may terminate your participation via verbal or
written
- ---------------------------------------------------------------------
1997 Annual Report 29 American Select Portfolio
<PAGE>
Shareholder Update (continued)
- --------------------------------------------------------------------------------
instructions to your investment professional. Written
instructions should include your name and address as they appear
on the certificate or account.
If notice is received at least 10 days before the record date,
all future distributions will be paid directly to the shareholder
of record.
If your shares are issued in certificate form and you discontinue
your participation in the plan, you (or your nominee) will
receive an additional certificate for all full shares and a check
for any fractional shares in your account.
PLAN AMENDMENT/TERMINATION
The fund reserves the right to amend or terminate the plan.
Should the plan be amended or terminated, participants will be
notified in writing at least 90 days before the record date for
such dividend or distribution. The plan may also be amended or
terminated by IFTC with at least 90 days written notice to
participants in the plan.
Any question about the plan should be directed to your investment
professional or to Investors Fiduciary Trust Company, P.O. Box
419432, Kansas City, Missouri 64141, 1-800-543-1627.
- ---------------------------------------------------------------------
1997 Annual Report 30 American Select Portfolio
<PAGE>
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
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. This particular fund carries more credit risk than the securities
in its benchmark index. Therefore, during favorable real estate markets, the
fund should outperform its benchmark (barring foreclosures). At the same time,
unfavorable real estate markets could cause underperformance.
COMMERCIAL LOANS
Mortgage loans secured by commercial developments such as shopping centers,
office buildings and warehouses.
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 upon price on 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,
- --------------------------------------------------------------------------------
1997 Annual Report 31 American Select Portfolio
<PAGE>
GLOSSARY OF TERMS (CONTINUED)
- --------------------------------------------------------------------------------
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.
This particular fund's mortgage loans are also 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 a 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.
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.
YIELD SPREADS
The difference between the yields of an investment and the corresponding term
treasury security.
- --------------------------------------------------------------------------------
1997 Annual Report 32 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, Retired 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
JULENE R. MELQUIST, Vice President
WILLIAM T. NIMMO, Vice President
ROBERT H. NELSON, Vice President and Treasurer
SUSAN S. MILEY, Secretary
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
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
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
KPMG PEAT MARWICK LLP
4200 Norwest Center, Minneapolis, MN 55402
LEGAL COUNSEL
- --------------------------------------------------------------------------------
DORSEY & WHITNEY LLP
220 South Sixth Street, Minneapolis, MN 55402
FOR MORE INFORMATION
BY PHONE
800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund services representatives are ready to answer your
questions.
TO ORDER LITERATURE
press 5, ask a service
representative to mail you additional literature, including a Quarterly Update.
You can also request to be put on a mailing list to receive this information
automatically each quarter.
BY MAIL
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 800 866-7778, or mail a request to us.
ON-LINE
http://www.piperjaffray.com/
<PAGE>
PIPER CAPITAL
MANAGEMENT
