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American Select Portfolio - 1998 Semiannual Report
1998 Semiannual Report
[LOGO]
AMERICAN SELECT
PORTFOLIO
SLA
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[LOGO]
CONTENTS
Portfolio Manager's Letter....................................................1
Financial Statements and Notes................................................4
Investments in Securities....................................................14
Glossary ***.................................................................20
*** This report includes a glossary to help you understand financial terms
used in the report. 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 May 31, 1998
[GRAPH]
<TABLE>
<CAPTION>
One Year Three Year Since Inception
9/21/93
<S> <C> <C> <C>
AMERICAN SELECT PORTFOLIO 13.20% 10.13% 6.99%
Lehman Brothers Mutual Fund Gov't/Mortgage Index 10.65% 7.72% 6.49%
</TABLE>
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 May 31, 1998, were
13.29%, 11.77% and 4.30%, respectively. These returns assume reinvestment of all
distributions and reflect sales charges on distributions as 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 May 31, 1998.
The fund uses the Lehman Brothers Mutual Fund Government/Mortgage Index as a
benchmark. Although we believe this is the most appropriate benchmark available,
it is not a perfect match. The benchmark index is comprised of U.S. government
securities while American Select Portfolio is comprised primarily of
non-securitized, illiquid whole loans. This limits the ability of the fund to
respond quickly to market changes.
***This report includes a glossary to help you understand financial terms
used in the report. When you see this symbol, it indicates a word that is
defined in the glossary.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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PORTFOLIO MANAGER'S LETTER
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[PHOTO]
JOHN WENKER
is primarily responsible for the management of American Select Portfolio. He has
12 years of financial experience.
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July 19, 1998
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DEAR SHAREHOLDERS:
FOR THE SIX-MONTH PERIOD ENDED MAY 31, 1998, AMERICAN SELECT PORTFOLIO HAD A NET
ASSET VALUE (NAV) TOTAL RETURN OF 5.07%.* This compares to a 3.99% return for
the Lehman Brothers Mutual Fund Government/Mortgage Index. Over the same period,
the fund's total return based on its market price was 5.00%. The fund continued
to trade at a discount to its net asset value, with a market price of $11.75 and
a net asset value of $12.94 as of May 31.
WE ARE PLEASED TO REPORT THAT THE FUND MAINTAINED ITS MONTHLY DIVIDEND AT 8.5
CENTS PER SHARE OVER THE REPORTING PERIOD. As you know, providing a high level
of income is a primary objective of the fund. Despite a generally declining
interest rate environment, the fund not only provided competitive and attractive
income, but was able to add to its dividend reserve as well. The fund has held
the dividend steady for the past 24 months. In addition, the fund paid a special
dividend of 7.0 cents per share.
THE MAJORITY OF THE FUND'S POSITIVE NAV PERFORMANCE IS ATTRIBUTABLE TO FALLING
TREASURY YIELDS. Intermediate-term interest rates declined over the reporting
period as inflation remained under control. During the six months ended May 31,
the yield on three- to five-year Treasury securities fell by about 0.30%.
Federal Reserve policymakers kept short-term interest rates steady despite
vigorous growth within the U.S. economy.
WE REMAIN CONCERNED ABOUT PREPAYMENTS***, ESPECIALLY IN LIGHT OF THE DECLINING
INTEREST RATE ENVIRONMENT IN WHICH THE FUND CURRENTLY OPERATES. Prepayments are
occurring, and over time will impact the fund's income and dividend levels. Our
first alternative for prepayments is to reinvest in additional mortgage
products. However, in the absence of attractive investment alternatives,
dollars received through prepayments will be used to pay down the fund's
leverage position.
* 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 distributions as 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 May 31, 1998
[CHART]
<TABLE>
<CAPTION>
<S> <C>
Multifamily Loans 62%
Single Family Loans 14%
U.S. Treasury Securities 13%
Commercial Loans 9%
Other Assets 2%
</TABLE>
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DELINQUENT LOAN PROFILE
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The chart below shows the percentage of single family loans** in the portfolio
that are 30, 60, 90 or 120 days delinquent as of May 31, 1998, based on
principal amounts outstanding.
<TABLE>
<CAPTION>
<S> <C>
CURRENT 95.5%
- ------------------------------
30 DAYS 2.8%
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60 DAYS 1.1%
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90 DAYS 0.0%
- ------------------------------
120+ DAYS 0.6%
- ------------------------------
</TABLE>
** As of May 31, 1998, there were no multifamily or commercial loans delinquent.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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1 1998 Semiannual Report - American Select Portfolio
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PORTFOLIO MANAGER'S LETTER (CONTINUED)
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[PHOTO]
DAVID STEELE
assists with the management of American Select Portfolio. He has 19 years of
financial experience.
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THE FUND CONTINUES TO BROADEN ITS LOAN PORTFOLIO. INITIALLY, THE FUND INVESTED
ENTIRELY IN MULTIFAMILY MORTGAGE LOANS. More recently, however, the fund has
diversified its loan portfolio to include single family and commercial
mortgages. The pace at which this reallocation process occurs will be a function
of the amount of prepayments which the fund encounters in coming months. As of
May 31, the fund held approximately 230 single family loans on properties with
an average remaining principal balance of approximately $128,000. On the same
date, the fund had 43 multifamily loans with an average principal value of
approximately $3,041,000 and seven commercial loans with an average principal
value of approximately $2,732,000.
ALTHOUGH CREDIT RISK IS INHERENT IN A FUND OF THIS NATURE, WE HAVE BEEN ABLE TO
MINIMIZE THE IMPACT OF SUCH RISK THROUGH EXTENSIVE RESEARCH. As of May 31, 95.5%
of the fund's single family loans were current, and only 0.6% of such mortgages
were 120 days or more overdue. As of the same date, none of the fund's
multifamily or commercial mortgages were delinquent. The chart on the previous
page displays delinquency rates. Since the fund's inception, we have experienced
no principal credit losses on single family, multifamily or commercial loans.
When loans are foreclosed, we attempt to complete 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. As of
May 31, the amount of reverse repurchase agreements was equal to 27% of total
assets. Please note that borrowing can potentially increase the fund's earnings,
but it can
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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 as of may 31, 1998. Shaded areas without values indicate states in
which the fund has invested less than 0.50% of its assets.
[CHART]
<TABLE>
<CAPTION>
<S> <C>
Arizona 7%
California 3%
Colorado 4%
Florida 5%
Georgia 2%
Idaho 2%
Illinois 4%
Kentucky 1%
Louisiana 6%
Maryland 1%
Massachusetts 1%
Michigan 6%
Minnesota 7%
Missouri 1%
Nebraska 1%
Nevada 1%
New Jersey 1%
New Mexico 2%
New York 1%
North Carolina 4%
Ohio 2%
Oklahoma 10%
South Dakota 1%
Tennessee 3%
Texas 19%
Washington 2%
</TABLE>
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2 1998 Semiannual Report - American Select Portfolio
<PAGE>
PORTFOLIO MANAGER'S LETTER (CONTINUED)
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[PHOTO]
RUSS KAPPENMAN
assists with the management of American Select Portfolio. He has 12 years of
financial experience.
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also increase the volatility of the fund's net asset value. We attempt to
moderate this potential volatility by purchasing short- to medium-term
Treasuries.
THANK YOU FOR YOUR INVESTMENT IN AMERICAN SELECT PORTFOLIO. During the last few
years the multifamily and commercial loans in the portfolio have performed well
and been positively impacted by positive trends in the real estate industry.
Most analysts would agree that real estate markets have returned to equilibrium.
The big question facing the real estate industry is whether it will maintain the
discipline required to stay in equilibrium or revisit the excesses of the late
1980s and early 1990s. Certainly the criteria we use for purchasing loans remain
intact and hopefully will hold up should industry trends turn negative. However,
we would like to remind you that the fund is exposed to the ups and downs of
real estate cycles. To the extent the real estate markets deteriorate, credit
risk and the potential for credit losses will increase.
We believe that the fund's strategy will continue to provide attractive returns
relative to other fixed-income investments, 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 are determined no less frequently than weekly.
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3 1998 Semiannual Report - American Select Portfolio
<PAGE>
Financial Statements (Unaudited)
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STATEMENT OF ASSETS AND LIABILITIES May 31, 1998
................................................................................
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $962,000) .......... $208,142,221
Cash in bank on demand deposit ............................ 2,015,829
Accrued interest receivable ............................... 1,759,380
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Total assets ............................................ 211,917,430
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LIABILITIES:
Reverse repurchase agreements payable ..................... 57,000,000
Accrued investment management fee ......................... 65,393
Accrued administrative fee ................................ 26,157
Accrued interest .......................................... 164,655
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Total liabilities ....................................... 57,256,205
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Net assets applicable to outstanding capital stock ...... $154,661,225
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COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital .............. $170,656,024
Undistributed net investment income ....................... 1,201,211
Accumulated net realized loss on investments .............. (21,614,089)
Unrealized appreciation of investments .................... 4,418,079
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Total - representing net assets applicable to capital
stock ................................................. $154,661,225
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* Investments in securities at identified cost ............ $203,724,142
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NET ASSET VALUE AND MARKET PRICE:
Net assets ................................................ $154,661,225
Shares outstanding (authorized 1 billion shares of $0.01 par
value) .................................................. 11,955,683
Net asset value ........................................... $ 12.94
Market price .............................................. $ 11.75
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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4 1998 Semiannual Report - American Select Portfolio
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF OPERATIONS For the Six Months Ended May 31,
1998
................................................................................
<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $1,978,504) ............... $ 7,201,198
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EXPENSES (NOTE 3):
Investment management fee ...................................... 384,905
Administrative fee ............................................. 153,962
Custodian and accounting fees .................................. 49,350
Transfer agent fees ............................................ 11,239
Reports to shareholders ........................................ 37,464
Mortgage servicing fees ........................................ 132,772
Directors' fees ................................................ 7,733
Audit and legal fees ........................................... 62,605
Other expenses ................................................. 37,181
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Total expenses ............................................... 877,211
Less expenses paid indirectly .............................. (2,401)
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Total net expenses ........................................... 874,810
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Net investment income ........................................ 6,326,388
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NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments in securities (note 4) ........ 844,430
Net change in unrealized appreciation or depreciation of
investments .................................................. 393,375
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Net gain on investments ...................................... 1,237,805
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Net increase in net assets resulting from operations ....... $ 7,564,193
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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5 1998 Semiannual Report - American Select Portfolio
<PAGE>
Financial Statements (Unaudited) (continued)
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STATEMENT OF CASH FLOWS For the Six Months Ended May 31,
1998
................................................................................
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest income ........................................... $ 7,201,198
Net expenses .............................................. (874,810)
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Net investment income ................................... 6,326,388
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Adjustments to reconcile net investment income to net cash
provided by operating activities:
Change in accrued interest receivable and mortgage
security paydowns receivable .......................... 1,474,821
Net amortization of bond discount and premium ........... 10,194
Change in accrued fees and expenses ..................... (2,300)
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Total adjustments ..................................... 1,482,715
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Net cash provided by operating activities ............. 7,809,103
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ........................ 46,175,882
Purchases of investments .................................. (21,870,110)
Net sales of short-term securities ........................ 2,117,000
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Net cash provided by investing activities ............. 26,422,772
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments for reverse repurchase agreements ............ (11,000,000)
Retirement of fund shares ................................. (17,108,297)
Distributions paid to shareholders ........................ (6,934,296)
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Net cash used by financing activities ................. (35,042,593)
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Net decrease in cash ...................................... (810,718)
Cash at beginning of period ............................... 2,826,547
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Cash at end of period ................................. $ 2,015,829
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Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ............................................. $ 1,973,896
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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6 1998 Semiannual Report - American Select Portfolio
<PAGE>
Financial Statements (continued)
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STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
SIX MONTHS ENDED
5/31/98 YEAR ENDED
(UNAUDITED) 11/30/97
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<S> <C> <C>
OPERATIONS:
Net investment income ..................................... $ 6,326,388 $13,978,103
Net realized gain on investments .......................... 844,430 1,488,784
Net change in unrealized appreciation or depreciation of
investments ............................................. 393,375 1,309,056
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Net increase in net assets resulting from operations .... 7,564,193 16,775,943
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ................................ (6,934,296) (13,815,326)
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CAPITAL SHARE TRANSACTIONS (NOTE 6):
Decrease in net assets from capital share transactions .... (17,108,297) --
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Total increase (decrease) in net assets ................. (16,478,400) 2,960,617
Net assets at beginning of period ......................... 171,139,625 168,179,008
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Net assets at end of period ............................... $154,661,225 $171,139,625
----------------- -----------------
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Undistributed net investment income ....................... $ 1,201,211 $ 1,809,119
----------------- -----------------
----------------- -----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
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7 1998 Semiannual Report - 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 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 funds' 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 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 once a
month. This information 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 whole loans,
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.
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8 1998 Semiannual Report - American Select Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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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 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, 1998, loans representing 0.32% 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 1.67% of total
single family principal outstanding at May 31, 1998. 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 May 31, 1998, 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, 1998, 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 six months ended May 31, 1998,
the fund earned no such fees.
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9 1998 Semiannual Report - American Select Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
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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 or losses were recorded by the fund.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income are made monthly
and realized capital gains, if any, will be distributed at
least annually. These distributions are recorded as of the
close of business on the ex-dividend date. Such
distributions are payable in cash or, pursuant to the
fund's dividend reinvestment plan, reinvested in
additional shares of the fund's capital stock. Under the
plan, fund shares will be purchased in the open market
unless the market price plus commissions exceeds the net
asset value by 5% or more. If, at the close of business on
the dividend payment date, the shares purchased in the
open market are insufficient to satisfy the dividend
reinvestment requirement, the fund will issue new shares
at a discount of up to 5% from the current market price.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain
broker-dealers, the fund, along with other affiliated
registered investment companies, may transfer uninvested
cash balances into a joint trading account, the daily
aggregate of which is invested in repurchase agreements
secured by U.S. government or agency obligations.
Securities pledged as collateral for all individual and
joint repurchase agreements are held by the fund's
custodian bank until maturity of the repurchase agreement.
Provisions for all agreements ensure that the daily market
value of the collateral is in excess of the repurchase
amount, including accrued interest, to protect the fund in
the event of a default.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts in the financial statements. Actual
results could differ from these estimates.
(3) EXPENSES
................................
INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES
The fund has entered into an investment advisory agreement
with Piper Capital Management Incorporated. In addition,
Piper Capital provided services under an administration
agreement through April 30, 1998. Effective May 1, 1998,
the fund entered into an administration agreement with
U.S. Bank, an affiliate of the advisor.
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10 1998 Semiannual Report - American Select Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
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.
During the six months ended May 31, 1998, the fund paid
$10,332 for custody services to U.S. Bank N.A., an
affiliate of the fund's advisor. 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
and dollar roll transactions, for the six months ended May
31, 1998 aggregated $21,859,916 and $46,175,882,
respectively. Included in net realized gain on investments
is $478,922 in prepayment penalties on multifamily loans.
(5) 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>
- --------------------------------------------------------------------------------
11 1998 Semiannual Report - American Select Portfolio
<PAGE>
Notes to Financial Statements (Unaudited) (continued)
- --------------------------------------------------------------------------------
(6) 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 on the New York Stock
Exchange (4 p.m. Eastern Time). The percentage of
outstanding shares tendered and the number of shares
accepted for tender, the repurchase price per share and
proceeds (including tender fees) paid by the fund were as
follows:
<TABLE>
<CAPTION>
PERCENTAGE SHARES REPURCHASE PROCEEDS
TENDERED TENDERED PRICE PAID
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
10% 1,328,284 $12.88 $ 17,108,297
</TABLE>
(7) ADVISOR
ACQUISITION
................................
On May 1, 1998, Piper Jaffray Companies Inc., the parent
company of the fund's investment advisor, was acquired by
U.S. Bancorp.
U.S. Bancorp is a multi-state bank holding company
headquartered in Minneapolis, Minnesota with a geographic
service area spanning 17 states. As of March 31, 1998,
U.S. Bancorp was the 15th largest U.S. commercial bank
holding company, with assets of nearly $70.9 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 March 31, 1998, U.S. Bank, acting through
its First American Asset Management group, managed more
than $65.3 billion in assets, including approximately
$23.3 billion in assets of the First American Funds.
Under the Investment Company Act of 1940, as amended,
consummation of the acquisition of Piper Jaffray Companies
by U.S. Bancorp resulted in the assignment and automatic
termination of the fund's investment advisory agreement
with Piper Capital Management Incorporated. The fund has
entered into a new investment advisory agreement with
Piper Capital Management, which shareholders will be asked
to approve at the fund's annual meeting in August.
Shareholders will also be asked to approve a new
investment advisory agreement with U.S. Bank which, if
approved, will replace the agreement between the fund and
Piper Capital Management.
- --------------------------------------------------------------------------------
12 1998 Semiannual Report - 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:
AMERICAN SELECT PORTFOLIO
<TABLE>
<CAPTION>
Six Months
Ended Year Year Year Year Period
5/31/98 Ended Ended Ended Ended Ended
(Unaudited) 11/30/97 11/30/96 11/30/95 11/30/94 11/30/93(f)
------------ --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $12.88 $12.66 $12.86 $11.62 $13.74 $14.07
------------ --------- --------- --------- --------- ---------------
Operations:
Net investment income ................ 0.54 1.05 1.02 1.09 1.22 0.22
Net realized and unrealized gains
(losses) on investments ............ 0.10 0.21 (0.14) 1.28 (2.21) (0.46)
------------ --------- --------- --------- --------- ---------------
Total from operations .............. 0.64 1.26 0.88 2.37 (0.99) (0.24)
------------ --------- --------- --------- --------- ---------------
Distributions to shareholders:
From net investment income ........... (0.58) (1.04) (1.08) (1.13) (1.13) (0.09)
------------ --------- --------- --------- --------- ---------------
Net asset value, end of period ......... $12.94 $12.88 $12.66 $12.86 $11.62 $13.74
------------ --------- --------- --------- --------- ---------------
------------ --------- --------- --------- --------- ---------------
Per-share market value, end of
period ............................... $11.75 $11.75 $11.00 $11.00 $10.38 $14.38
------------ --------- --------- --------- --------- ---------------
------------ --------- --------- --------- --------- ---------------
SELECTED INFORMATION
Total return, net asset value (a) ...... 5.07% 10.44% 7.27% 21.22% (7.48)% (1.75)%
Total return, market value (b) ......... 5.00% 16.97% 10.53% 17.36% (20.78)% (3.54)%
Net assets at end of period (in
millions) ............................ $ 155 $ 171 $ 168 $ 172 $ 157 $ 187
Ratio of expenses to average weekly net
assets including interest expense
(c) .................................. 3.71%(g) 3.56% 3.30% 3.76% 2.66% 0.79%(g)
Ratio of expenses to average weekly net
assets excluding interest expense
(c) .................................. 1.14%(g) 1.07% 1.03% 1.08% 1.12% 0.79%(g)
Ratio of net investment income to
average weekly net assets ............ 8.22%(g) 8.36% 8.11% 8.85% 9.61% 8.23%(g)
Portfolio turnover rate (excluding
short-term securities) ............... 10% 86% 30% 73% 110% 9%
Amount of borrowings outstanding at end
of period (in millions) (d) .......... $ 57 $ 68 $ 65 $ 65 $ 65 $ --
Per-share amount of borrowings
outstanding at end of period ......... $ 4.76 $ 5.12 $ 4.91 $ 4.87 $ 4.80 $ --
Per-share amount of net assets,
excluding borrowings, at end of
period ............................... $17.70 $18.00 $17.57 $17.73 $16.42 $ --
Asset coverage ratio (e) ............... 371% 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.
- --------------------------------------------------------------------------------
13 1998 Semiannual Report - American Select Portfolio
<PAGE>
Investments in Securities (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN SELECT PORTFOLIO May 31, 1998
......................................................................................................................
Date
Description of Security Acquired Par Value Cost Market Value
- ------------------------------------------------------------ -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
U.S. GOVERNMENT AND AGENCY SECURITIES (17.3%):
U.S. GOVERNMENT SECURITIES (17.3%):
6.50%, U.S. Treasury Note, 8/15/05 ..................... 9/8/97 $25,500,000(b) $ 25,688,547 $ 26,781,120
------------ ------------
WHOLE LOANS (c,d,e) (116.7%):
COMMERCIAL LOANS (12.8%):
Advance Circuits and Hopkins II Business Center, 8.71%,
11/1/01 .............................................. 10/11/96 3,362,219 3,361,696 3,488,013
Broadway Place, 9.00%, 6/1/01 .......................... 12/15/97 3,487,371 3,487,371 3,626,866
Community Coffee Office Building, 8.90%, 6/1/01 ........ 10/3/97 4,634,149 4,634,149 4,819,514
Oasis at the Waterfront, 9.50%, 5/1/00 ................. 4/30/97 1,639,826 1,639,826 1,639,825
Rodeo Shops, 9.15%, 6/1/07 ............................. 5/29/97 1,336,578 1,336,578 1,403,407
The Kislak Building, 8.45%, 7/1/02 ..................... 6/17/97 1,738,291 1,738,291 1,792,613
Victory Packaging Facility, 8.00%, 6/1/13 .............. 5/27/98 2,925,000 2,925,000 3,019,000
------------ ------------
19,122,911 19,789,238
------------ ------------
MULTIFAMILY LOANS (84.4%):
Aldrich Apartments, 8.75%, 5/31/01 ..................... 6/3/94 763,482 755,847 742,248
Bent Tree Oaks & Bent Tree Brook Apartments, 8.00%,
6/1/00 ............................................... 5/6/97 12,106,892 12,106,892 12,227,961
Bridge Court Apartments, 10.13%, 5/1/09 ................ 4/21/94 1,797,614 1,779,637 1,258,329
Bryant Square Apartments, 8.75%, 4/1/01 ................ 3/15/94 1,361,558 1,343,103 1,413,015
Candlelite Apartments, 8.75%, 3/1/01 ................... 2/28/94 1,504,058(b) 1,493,158 1,564,220
Cape Cod Apartments, 7.40%, 2/1/08 ..................... 1/16/98 1,845,772 1,845,772 1,877,928
Casa Del Vista Apartments, 8.75%, 1/1/01 ............... 12/30/93 2,072,124 2,059,354 2,145,382
Castle Arms Apartments, 8.13%, 1/1/03 .................. 12/28/95 774,682 771,293 799,661
Centre Court Apartments, 8.75%, 1/1/01 ................. 12/30/93 1,129,758 1,118,461 1,174,949
Chapel Hill Apartments, 9.38%, 8/1/01 .................. 7/29/94 900,458 892,184 945,481
</TABLE>
<TABLE>
<CAPTION>
Date
Description of Security Acquired Par Value Cost Market Value
- ------------------------------------------------------------ -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Continental Gardens Apartments, 8.90%, 3/1/04 .......... 2/14/94 $ 1,932,780(b) $ 1,921,666 $ 2,029,419
El Conquistador Apartments, 8.75%, 4/1/01 .............. 3/18/94 2,536,434(b) 2,509,138 2,637,892
Emerald Shores Apartments, 8.75%, 2/1/01 ............... 1/10/94 3,090,546(b) 3,090,546 3,214,168
Evergreen Square Apartments, 8.75%, 12/1/00 ............ 12/1/93 2,142,540 2,121,115 2,228,242
Fairway Hills Apartments, 8.50%, 12/1/98 ............... 12/14/93 1,611,474 1,599,448 1,128,032
Foothills West Apartments, 8.75%, 2/1/01 ............... 2/1/94 2,114,892(b) 2,100,938 2,192,962
Glen Hollow Apartments, 9.00%, 4/1/01 .................. 3/30/94 5,444,158(b) 5,416,840 5,661,925
Goose Creek Apartments, 8.63%, 5/1/01 .................. 5/18/94 3,138,896 3,093,270 2,734,763
Green Acres Apartments, 8.75%, 1/1/01 . ............... 12/30/93 1,318,051(b) 1,304,870 1,364,228
Greenwood Residences, 7.75%, 4/1/08 .................... 3/12/98 2,398,306 2,398,306 2,475,855
Hidden Colony Apartments, 9.00%, 4/1/01 ................ 3/22/94 3,232,448 3,209,742 3,361,746
Hunters Meadows Apartments, 8.25%, 2/1/03 .............. 1/18/96 5,190,366 5,135,067 5,408,006
La Arboleda Apartments, 8.75%, 1/1/01 .................. 12/29/93 4,021,849 3,998,366 4,164,037
La Maison Apartments, 9.13%, 5/1/03 .................... 4/15/96 2,810,232 2,810,232 2,933,422
Lakeville Apartments, 8.00%, 5/1/08 .................... 4/24/98 2,550,000(b) 2,550,000 2,677,500
Lasalle Crossing Apartments, 8.75%, 1/1/01 ............. 12/30/93 2,814,234 2,779,056 2,870,519
Meadow Glenn Apartments, 8.50%, 2/1/07 ................. 1/30/97 2,302,792 2,302,792 2,417,932
Old Orchard Apartments, 8.75%, 12/1/00 ................. 12/16/93 9,734,166 9,702,554 10,123,532
Parc Du Lac Apartments, 8.50%, 2/1/99 .................. 1/28/94 5,199,889(b) 5,139,947 5,251,888
Revere Apartments, 8.75%, 4/1/01 ....................... 3/18/94 792,334 784,991 822,279
Rush Creek Apartments, 7.73%, 4/1/99 ................... 4/5/94 2,507,137 2,479,289 2,176,152
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
14 1998 Semiannual Report - American Select Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- --------------------------------------------------------------------------------
AMERICAN SELECT PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Date
Description of Security Acquired Par Value Cost Market Value
- ------------------------------------------------------------ -------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Shadowood Apartments, 8.50%, 3/1/99 .................... 2/24/94 $ 5,108,165(b) $ 5,054,159 $ 5,159,246
Sheridan Ponds Apartments, 8.70%, 1/1/07 ............... 12/18/96 7,361,956 7,325,146 7,730,053
Sherwood Lake Apartments, 9.13%, 8/1/01 ................ 7/22/94 2,341,740 2,314,892 1,639,218
Sierra Vista Apartments, 9.50%, 2/1/01 ................. 1/18/94 1,344,823(b) 1,331,375 1,412,064
Skyline Place Apartments, 8.75%, 4/1/01 ................ 3/3/94 4,251,548 4,209,032 4,336,578
Somerset Place Apartments, 9.00%, 4/1/04 ............... 4/8/94 2,285,851 2,268,707 2,400,143
The Oaks of Lake Bluff Apartments, 8.75%, 4/1/01 ....... 3/8/94 2,705,530(b) 2,677,992 2,813,752
Timber Forest Apartments, 8.75%, 2/1/01 ................ 1/14/94 1,157,541 1,144,165 1,199,512
White Oaks Apartments, 8.75%, 1/1/01 ................... 12/30/93 800,245 792,243 828,281
Willow Brooke Apartments, 8.75%, 4/1/01 ................ 3/22/94 4,710,522(b) 4,683,587 4,888,546
Willow Creek Apartments, 8.50%, 2/1/07 ................. 1/30/97 5,818,884 5,818,884 6,109,826
------------ ------------
128,234,056 130,540,892
------------ ------------
SINGLE FAMILY LOANS (19.5%):
Norwest IX, 7.91%, 5/1/22 .............................. 8/29/97 11,142,009 11,023,868 11,223,099
Norwest VIII, 8.12%, 8/4/22 ............................ 6/4/97 10,391,686 10,184,672 10,457,277
Norwest X, 7.88%, 4/1/23 ............................... 3/12/98 8,489,411 8,508,088 8,388,595
------------ ------------
29,716,628 30,068,971
------------ ------------
Total Whole Loans . 177,073,595 180,399,101
------------ ------------
SHORT-TERM SECURITIES (0.6%):
Repurchase agreement with Goldman Sachs, interest of
$449, 5.60%, 6/1/98 .................................. 5/29/98 962,000(f) 962,000 962,000
------------ ------------
Total Investments in Securities (g) . $203,724,142 $208,142,221
------------ ------------
------------ ------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES (UNAUDITED)
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS
(b) ON MAY 31, 1998, SECURITIES VALUED AT $65,548,450 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>
$ 10,000,000 5/15/98 5.61% 6/15/98 $ 26,474 (1)
14,000,000 5/15/98 5.51% 6/15/98 36,402 (2)
33,000,000* 5/15/98 6.53% 6/15/98 101,779 (3)
- ------------ ---------
$ 57,000,000 $ 164,655
- ------------ ---------
- ------------ ---------
</TABLE>
* THE FUND HAS ENTERED INTO A LENDING COMMITMENT WITH MORGAN STANLEY. THE
AGREEMENT PERMITS THE FUND TO ENTER INTO REVERSE REPURCHASE AGREEMENTS UP
TO $75,000,000 USING WHOLE LOANS AS COLLATERAL.
** INTEREST RATE AS OF MAY 31, 1998. 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, $9,500,000 PAR
(2) MORGAN STANLEY;
U.S. TREASURY NOTE, 6.50%, 8/15/05, $14,000,000 PAR
(3) MORGAN STANLEY;
CANDLELITE APARTMENTS, 8.75%, 3/1/01, $1,504,058 PAR
CONTINENTAL GARDENS APARTMENTS, 8.90%, 3/1/04, $1,932,780 PAR
EL CONQUISTADOR APARTMENTS, 8.75%, 4/1/01, $2,536,434 PAR
EMERALD SHORES APARTMENTS, 8.75%, 2/1/01, $3,090,546 PAR
FOOTHILLS WEST APARTMENTS, 8.75%, 2/1/01, $2,114,892 PAR
GLEN HOLLOW APARTMENTS, 9.00%, 4/1/01, $5,444,158 PAR
GREEN ACRES APARTMENTS, 8.75%, 1/1/01, $1,318,051 PAR
LAKEVILLE APARTMENTS, 8.00%, 5/1/08, $2,550,000 PAR
PARC DU LAC APARTMENTS, 8.50%, 2/1/99, $5,199,889 PAR
SHADOWOOD APARTMENTS, 8.50%, 3/1/99, $5,108,165 PAR
SIERRA VISTA APARTMENTS, 9.50%, 2/1/01, $1,344,823 PAR
THE OAKS OF LAKE BLUFF APARTMENTS, 8.75%, 4/1/01, $2,705,530 PAR
WILLOW BROOKE APARTMENTS, 8.75%, 4/1/01, $4,710,522 PAR
(C) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT
ON MAY 31, 1998. 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, 1998.
(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
VICTORY PACKAGING FACILITY - PHEONIX, AZ
MULTIFAMILY LOANS:
ALDRICH APARTMENTS - MINNEAPOLIS, MN
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
CONTINENTAL GARDENS APARTMENTS - GRAND ISLAND, NE
EL CONQUISTADOR APARTMENTS - TUCSON, AZ
EMERALD SHORES APARTMENTS - PHOENIX, AZ
EVERGREEN SQUARE APARTMENTS - DENVER, CO
- --------------------------------------------------------------------------------
15 1998 Semiannual Report - American Select Portfolio
<PAGE>
Investments in Securities (Unaudited) (continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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
GREENWOOD RESIDENCES - MITON, WA
HIDDEN COLONY APARTMENTS - DORAVILLE, GA
HUNTERS MEADOWS 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 GLENN APARTMENTS - MIDWEST CITY, OK
OLD ORCHARD APARTMENTS - GRAND RAPIDS, MI
PARC DU LAC APARTMENTS - NEW ORLEANS, LA
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
THE OAKS OF LAKE BLUFF APARTMENTS - LAKE BLUFF, IL
TIMBER FOREST APARTMENTS - PLANO, TX
WHITE OAKS APARTMENTS - MASSILLON, OH
WILLOW BROOKE APARTMENTS - TAMPA, FL
WILLOW CREEK APARTMENTS - MIDWEST CITY, OK
SINGLE FAMILY LOANS:
NORWEST IX - 99 LOANS, UNITED STATES.
NORWEST VIII - 81 LOANS, UNITED STATES.
NORWEST X - 54 LOANS, UNITED STATES.
(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, 1998, THE TOTAL
MARKET VALUE OF THESE INVESTMENTS WAS $180,399,101 OR 116.7% 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) 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 ...... $ 6,881,213
GROSS UNREALIZED DEPRECIATION ...... (2,463,134)
------------
NET UNREALIZED APPRECIATION ...... $ 4,418,079
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
16 1998 Semiannual Report - American Select Portfolio
<PAGE>
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17 1998 Semiannual Report - American Select Portfolio
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18 1998 Semiannual Report - American Select Portfolio
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19 1998 Semiannual Report - American Select Portfolio
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GLOSSARY OF TERMS ***
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BENCHMARK INDEX
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.
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.
NET ASSET VALUE
Net asset value (or NAV) is the value of the fund's assets less its liabilities
divided by the number of shares outstanding.
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, 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.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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20 1998 Semiannual Report - American Select Portfolio
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FOR MORE INFORMATION
BY PHONE [GRAPHIC]
800 866-7778
FOR GENERAL INFORMATION
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questions.
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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
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BY MAIL [GRAPHIC]
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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 funds' 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 [GRAPHIC]
http://www.piperjaffray.com/
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American Select Portfolio
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NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
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[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM 100% TOTAL RECOVERED FIBER,
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#21540 7/1998 161-98
