<PAGE>
THE AMERICAS
INCOME TRUST
SEMIANNUAL REPORT
1995
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
LETTER TO SHAREHOLDERS ................ 1
FINANCIAL STATEMENTS AND NOTES ........ 7
INVESTMENTS IN SECURITIES ............. 20
SHAREHOLDER UPDATE .................... 24
</TABLE>
THE AMERICAS INCOME TRUST
The Americas Income Trust is a non-diversified, closed-end fund. The fund's
investment objective is to provide a high level of current income and, as a
secondary objective, the potential for long-term capital appreciation. To
realize its objectives, the fund primarily invests in debt securities that are
issued by issuers located in the United States, Canada and Mexico and are
denominated in the currencies of those countries.
Debt securities that the fund may invest in include: mortgage-related
securities, including derivative mortgage securities; asset-backed securities;
structured securities, including foreign linked index securities; municipal
obligations; Brady bonds; and obligations of foreign governments and/or
corporations.
Investments in securities issued by non-U.S. issuers involve risks not typically
associated with investments in securities issued by U.S. issuers, such as
currency exchange risk and the potential of political, economic and social
instability. As with other investment companies, no assurance can be given that
the fund's investment objectives will be achieved. Fund shares trade on the New
York Stock Exchange under the symbol XUS.
<PAGE>
THE AMERICAS INCOME TRUST
[GRAPH]
THE AMERICAS INCOME TRUST'S TOTAL RETURN FIGURE IS BASED ON THE CHANGE IN ITS
NET ASSET VALUE (NAV), ASSUMES ALL DISTRIBUTIONS WERE REINVESTED AND DOES NOT
REFLECT THE FUND'S SALES CHARGE. NAV-BASED PERFORMANCE IS USED TO MEASURE
INVESTMENT MANAGEMENT RESULTS.
TOTAL RETURN BASED ON THE CHANGE IN MARKET PRICE FOR THE YEAR ENDED APRIL 30,
1995, WAS -38.64%. THIS FIGURE ALSO INCLUDES REINVESTED DISTRIBUTIONS AND DOES
NOT REFLECT A SALES CHARGE.
THE LIPPER WORLD INCOME FUND AVERAGES REPRESENT THE AVERAGE TOTAL RETURNS,
WITH DISTRIBUTIONS REINVESTED, OF 16 DEVELOPED NATION CLOSED-END FUNDS AND
12 EMERGING NATION CLOSED-END FUNDS WHICH INVEST IN NON-U.S. DOLLAR AND
U.S. DOLLAR DEBT INSTRUMENTS WITH UNSPECIFIED MATURITIES OR OTHER INCOME-
PRODUCING SECURITIES AS CHARACTERIZED BY LIPPER ANALYTICAL SERVICES.
June 15, 1995
Dear Shareholders:
THE AMERICAS INCOME TRUST SHOWED A DISAPPOINTING -18.04%* NET ASSET VALUE TOTAL
RETURN FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1995. This negative return is
primarily a result of the significant devaluation of the Mexican peso in
December 1994 and the corresponding decline in value of the fund'
Mexican-related securities. The fund also suffered losses due to its holdings of
structured notes and other securities. In addition, the fund's use of the
sale-forward program and reverse repurchase agreements further contributed to
its negative performance during this six-month period. The fund's return
compares to the Lipper World Income Funds Average: Developed Nations return of
2.03% and the Lipper World Income Funds Average: Emerging Nations return of
- -7.90% for the same six-month period. The fund's return based on market price
for this same period was -23.55%.*
* 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.
1
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THE AMERICAS INCOME TRUST
[PHOTO]
[PHOTO]
IN JANUARY 1995, TOM MCGLINCH, CFA, AND BRAD STONE, CFA, ASSUMED PRIMARY
MANAGEMENT RESPONSIBILITIES OF THE AMERICAS INCOME TRUST. TOM HAS WORKED ON THE
FUND SINCE ITS INCEPTION IN JANUARY 1994 AS AN ASSISTANT PORTFOLIO MANAGER. HE
HAS 14 YEARS OF FINANCIAL EXPERIENCE. BRAD, WHO IS NEW TO THE FUND, IS A VICE
PRESIDENT AND FIXED INCOME PORTFOLIO MANAGER FOR PIPER CAPITAL MANAGEMENT. HE
ALSO MANAGES A WIDE RANGE OF INSTITUTIONAL TAXABLE FIXED INCOME PORTFOLIOS AS
WELL AS SEVERAL MUTUAL FUNDS. HE HAS SEVEN YEARS OF FINANCIAL EXPERIENCE. JEFF
GRIFFIN, WHO PREVIOUSLY MANAGED THE FUND, IS CURRENTLY CONCENTRATING ON PRIVATE
ACCOUNT MANAGEMENT AT PIPER CAPITAL. BEN RINKEY, WHO ASSISTED WITH THE
MANAGEMENT OF THE FUND IN THE PAST, HAS LEFT PIPER CAPITAL TO PURSUE OTHER
CAREER OPPORTUNITIES.
IT IS UNLIKELY THAT THE AMERICAS INCOME TRUST WILL RECOVER THE DECLINE IN ITS
NET ASSET VALUE IN THE FORESEEABLE FUTURE. The fund has realized significant
losses as a result of the devaluation of the Mexican peso. In order to reduce
the fund's exposure to further declines in the Mexican peso, we have sold many
of the fund's Mexican securities. In addition, many of the fund's derivative
structured notes, which were linked to a foreign currency or interest rate, were
either sold at significant losses or have incurred significant unrealized losses
which are not likely to be recovered. We feel that reducing our exposure to the
Mexican peso is an appropriate strategy since it will lessen the negative impact
on the fund should the peso decline further. However, the positive impact of any
potential appreciation in the value of the peso will not be as significant with
the fund's reduced exposure to Mexico.
THE REALIZED FOREIGN CURRENCY LOSSES EXPERIENCED BY THE FUND HAVE CAUSED ITS
DISTRIBUTIONS SO FAR IN 1995 TO BE CLASSIFIED AS RETURNS OF CAPITAL FOR TAX
PURPOSES. WE BELIEVE THIS SITUATION WILL CONTINUE THROUGHOUT THE REST OF 1995.
Tax regulations require that certain foreign currency gains or losses be treated
as ordinary income or loss. This means that certain foreign currency losses
incurred by the fund must be
2
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THE AMERICAS INCOME TRUST
[GRAPH]
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
offset against net investment income when determining taxable ordinary income.
Therefore, although the fund continues to earn interest income on its
investments, when this income is distributed to investors it will be classified
as a return of capital. For an investor, a return of capital means the
distribution is not reported as taxable income but can be used to reduce the
investor's cost basis in the fund. It will, therefore, affect the capital gain
or loss calculation upon the investor's sale of the fund's shares. Your tax
adviser can provide more information about how this will affect you in your tax
reporting, both now and in the future.
SIGNS OF A SLOWDOWN IN THE U.S. ECONOMY AND A GROWING BELIEF THAT THE FEDERAL
RESERVE HAS CEASED TIGHTENING HAVE HELPED PUSH U.S. BOND YIELDS LOWER THIS YEAR.
Falling U.S. interest rates have also spilled over into Canada to help the
Canadian bond market rebound with strong performance during the past six months.
In addition, our Canadian positions have been helped by an improvement in the
foreign exchange rate of the Canadian dollar. However, Mexico has only recently
begun to show initial signs of stabilization, both in terms of interest rates
and the foreign exchange value of the peso.
3
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THE AMERICAS INCOME TRUST
IN RESPONSE TO THE EVENTS IN MEXICO, WE HAVE MADE SOME SUBSTANTIAL CHANGES TO
THE AMERICAS INCOME TRUST. We have significantly overweighted the fund's
exposure to the U.S. bond market, moving from 38% of the portfolio on
October 31, 1994, to 63% as of April 30, 1995. This includes 21% in short-term
U.S. securities. We committed to this relatively large position in short-term
securities at April 30, 1995, in anticipation of several purchases of long-term
U.S. and Canadian securities in May 1995. The fund is slightly underweighted in
Canadian dollar-denominated bonds with this portion making up 23% of the
portfolio as of April 30, 1995, compared to 28% as of October 31, 1994. The fund
is also considerably underweighted in Mexican investments. We have reduced the
fund's holdings of these securities from 31% on October 31, 1994, to 13% as of
April 30, 1995. We did this by liquidating several peso-denominated positions
immediately following the peso devaluation in December and by reinvesting the
proceeds and those of several maturing positions into the U.S. bond market.
Until we are convinced that the developing stabilization in Mexico will
continue, we will maintain the fund's underweighting in this market.
WE HAVE RECENTLY REDUCED THE FUND'S PARTICIPATION IN THE SALE-FORWARD PROGRAM
AND SUSPENDED BORROWING THROUGH REVERSE REPURCHASE AGREEMENTS. While both of
these investment strategies can be used by the fund to increase income, they can
also increase the fund's net asset value volatility. In today's market
environment, the return and income characteristics of these strategies are less
attractive than they were six months ago. If market conditions warrant their
use, we may utilize these investment strategies again.
4
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THE AMERICAS INCOME TRUST
EFFECTIVE DURATION
Effective duration estimates the interest rate risk of a security, or how much
the value of the security is expected to change with a given change in interest
rates. The longer a security's effective duration, the more sensitive its price
is to changes in interest rates. For example, if interest rates were to increase
by 1%, the market value of a bond with an effective duration of five years would
decrease by about 5%, with all other factors being constant.
It is important to understand that, while a valuable measure, effective duration
is based upon certain assumptions and has several limitations. It is most
effective as a measure of interest rate risk when interest rate changes are
small, rapid and occur equally across all the different points of the yield
curve. In addition, effective duration is difficult to calculate precisely for
bonds with prepayment options, such as mortgage-backed securities, because the
calculation requires assumptions about prepayment rates. For example, when
interest rates go down, homeowners may prepay their mortgages at a higher rate
than assumed in the initial effective duration calculation, thereby shortening
the effective duration of the fund's mortgage-backed securities. Conversely, if
rates increase, prepayments may decrease to a greater extent than assumed,
extending the effective duration of such securities. For these reasons, the
effective durations of funds that invest a significant portion of their assets
in mortgage-backed securities can be greatly affected by changes in interest
rates. Effective duration applies only to movements in interest rates of the
currency in which the security is denominated. It is not a measure of
variability due to changes in foreign currency exchange rates.
THE RECENT DROP IN U.S. BOND YIELDS HAS LED US TO SHORTEN THE EFFECTIVE DURATION
OF THE U.S. AND CANADIAN PORTIONS OF THE FUND. As of April 30, 1995, the
estimated effective durations of the fund's U.S. and Canadian portions were
approximately 5.2 and 6.5 years, respectively. Effective duration estimates the
interest rate risk of a security. In other words, how much the value of the
security is expected to change with a given change in interest rates. The longer
a security's (or portfolio's) effective duration, the more sensitive its price
is to changes in interest rates. Please note that while effective duration is a
valuable measurement, it has several limitations. These are explained further in
the sidebar to the left. The step of shortening the fund's effective duration
was taken to reduce the fund's sensitivity to changes in market interest rates.
Keep in mind that effective duration does not measure the effect that changes in
foreign currency exchange rates will have on the fund's net asset value. Because
the value of the Mexican securities is more closely related to Mexico's
sovereign risk, effective duration is not as meaningful a measure for Mexico as
it is for the United States and Canada.
5
<PAGE>
THE AMERICAS INCOME TRUST
GOING FORWARD, WE WILL CONTINUE TO FOCUS ON THE U.S., CANADIAN AND MEXICAN BOND
MARKETS AND THEIR CURRENCY CHARACTERISTICS. However, we still view
opportunities in Mexico as being limited. While interest rates in Mexico appear
high, they must be measured against potential depreciation in the value of the
peso. Despite the Mexican government's commitment toward stabilizing the value
of the peso by allowing interest rates to rise as high as necessary, peso
depreciation remains a concern due to recent inflation rates of over 50%
annually and the country's social and political instability. The fund will
maintain its bias toward investment-grade securities with no more than 10% of
the total assets being invested in securities that are not investment-grade or
equivalent.
Thank you for your participation in The Americas Income Trust. As always, we
welcome your questions and comments.
Sincerely,
/s/ Tom McGlinch
Tom McGlinch
Portfolio Manager
/s/ Brad Stone
Brad Stone
Portfolio Manager
6
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FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $6,591,000) ..... $ 59,904,646
Cash in bank on demand deposit ........................... 368,698
Other assets ............................................. 9,907
Accrued interest receivable .............................. 774,769
----------------
Total assets ......................................... 61,058,020
----------------
LIABILITIES:
Payable for investment securities purchased on a
when-issued basis (note 2) ............................. 9,825,000
Payable for investment securities purchased .............. 1,017,863
Payable for fund shares retired .......................... 22,560
Accrued investment management fee ........................ 19,913
Accrued administrative fee ............................... 7,965
Other accrued expenses ................................... 11,948
----------------
Total liabilities .................................... 10,905,249
----------------
Net assets applicable to outstanding capital stock ....... $ 50,152,771
----------------
----------------
REPRESENTED BY:
Capital stock - authorized 2 billion shares of $0.01 par
value; outstanding, 6,339,005 shares (note 7) ........ $ 63,390
Additional paid-in capital ............................... 85,545,728
Accumulated net realized loss on investments and foreign
currency transactions .................................. (16,956,746)
Unrealized depreciation on investments and translation of
other assets and liabilities denominated in foreign
currencies ............................................. (18,499,601)
----------------
Total - representing net assets applicable to
outstanding capital stock ........................ $ 50,152,771
----------------
----------------
Net asset value per share of outstanding capital stock ... $ 7.91
----------------
----------------
* Investments in securities at identified cost ........... $ 78,392,908
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
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FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1995
<TABLE>
<S> <C>
INCOME:
Interest (net of interest expense of $132,909) ......... $ 2,790,304
Fee income (note 2) ...................................... 178,548
----------------
Total investment income .............................. 2,968,852
----------------
EXPENSES (NOTE 3):
Investment management fee ................................ 132,993
Administrative fee ....................................... 53,197
Custodian, accounting and transfer agent fees ............ 54,801
Reports to shareholders .................................. 13,080
Directors' fees .......................................... 5,833
Audit and legal fees ..................................... 20,383
Other expenses ........................................... 12,032
----------------
Total expenses ....................................... 292,319
----------------
Net investment income ................................ 2,676,533
----------------
NET REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized loss on investments and foreign currency
transactions (note 4) .................................. (14,600,557)
Net realized gain on closed or expired option contracts
written (note 5) ....................................... 16,689
----------------
Net realized loss ...................................... (14,583,868)
Net change in unrealized appreciation or depreciation on
investments and translation of assets and liabilities
denominated in foreign currencies ...................... 12,346
----------------
Net loss ............................................... (14,571,522)
----------------
Net decrease in net assets resulting from
operations ....................................... $ (11,894,989)
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
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FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest and fee income ................................ $ 2,968,852
Expenses ................................................. (292,319)
----------------
Net investment income ................................ 2,676,533
----------------
Adjustments to reconcile net investment income to cash
provided (used) by operating activities:
Change in accrued interest receivable .................. 1,455,029
Net amortization of bond discount and premium .......... (408,505)
Change in accrued fees and expenses .................... (43,332)
----------------
Total adjustments .................................... 1,003,192
----------------
Net cash provided by operating activities ............ 3,679,725
----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments ....................... 44,889,962
Purchases of investments ................................. (17,983,105)
Net purchases of short-term securities ................... (11,911,485)
----------------
Net cash provided by investing activities ............ 14,995,372
----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments for reverse repurchase agreements ........... (14,985,582)
Distributions paid to shareholders ....................... (3,241,200)
Retirement of fund shares (note 7) ....................... (684,343)
----------------
Net cash used by financing activities ................ (18,911,125)
----------------
Net decrease in cash ....................................... (236,028)
Cash at beginning of period ................................ 604,726
----------------
Cash at end of period .................................... $ 368,698
----------------
----------------
Supplemental disclosure of cash flow information:
Cash paid for interest on reverse repurchase
agreements ........................................... $ 147,223
----------------
----------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
9
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FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Period from
Ended 4/30/95 1/28/94*
(Unaudited) to 10/31/94
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 2,676,533 5,891,756
Net realized loss on investments and foreign currency
transactions ........................................... (14,583,868) (6,222,695)
Net change in unrealized appreciation or depreciation on
investments and translation of assets and liabilities
denominated in foreign currencies ...................... 12,346 (18,511,947)
---------------- ----------------
Net decrease in net assets resulting from operations ... (11,894,989) (18,842,886)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... -- (4,718,472)
Tax return of capital (note 2) ........................... (3,241,200) (754,642)
---------------- ----------------
Total distributions .................................... (3,241,200) (5,473,114)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from initial public offering of 5,750,000 shares,
net of underwriting discount and offering expenses of
$6,208,662 ............................................. -- 80,041,338
Proceeds from issuance of 675,000 shares in connection
with exercising of over-allotment options granted to
underwriters of the initial public offering ............ -- 10,125,000
Proceeds from issuance of 0 and 9,938 shares,
respectively, for the dividend reinvestment plan ....... -- 122,735
Payments for retirement of 92,600 and 10,000 shares,
respectively (note 7) .................................. (684,343) (99,775)
---------------- ----------------
Increase (decrease) in net assets from capital share
transactions ......................................... (684,343) 90,189,298
---------------- ----------------
Total increase (decrease) in net assets .............. (15,820,532) 65,873,298
Net assets at beginning of period (note 1) ................. 65,973,303 100,005
---------------- ----------------
Net assets at end of period .............................. $ 50,152,771 65,973,303
---------------- ----------------
---------------- ----------------
Distributions in excess of net investment income ......... $ -- (63,126)
---------------- ----------------
---------------- ----------------
</TABLE>
* COMMENCEMENT OF OPERATIONS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
10
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION
The Americas Income Trust Inc. (the fund) is registered under
the Investment Company Act of 1940 (as amended) as a
non-diversified, closed-end management investment company. The
Americas Income Trust commenced operations on January 28, 1994,
upon completion of its initial public offering of common stock.
The only transaction of The Americas Income Trust prior to
January 28, 1994, was the sale to Piper Jaffray Inc. of 6,667
shares of common stock for $100,005 on January 18, 1994. Shares
of the fund are listed on the New York Stock Exchange under the
symbol XUS.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
INVESTMENTS IN SECURITIES
The values of fixed income securities are determined using
pricing services or prices quoted by independent brokers.
Exchange-listed options are valued at the last sales price, and
open financial futures contracts are valued at the last
settlement price. When market quotations are not readily
available, securities are valued at fair value according to
methods selected in good faith by the board of directors.
Short-term securities with maturities less than 60 days are
valued at amortized cost which approximates market value.
Securities transactions are accounted for on the date the
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 computed on
a level-yield basis, is accrued daily.
FOREIGN TRANSACTIONS AND CURRENCY TRANSLATION
The books and records of the fund are maintained in U.S.
dollars. The market value of securities and other assets and
liabilities that are denominated in foreign currencies are
translated into U.S. dollar amounts at current exchange rates at
the end of the period. Purchases and sales of securities, in
addition to income and expenses, are translated at exchange
rates on the respective dates of such transactions. It is not
practical to identify the portion of each amount shown in the
fund's statement of operations under the caption "realized and
unrealized gains (losses)" that arises from changes in foreign
currency exchange rates.
The fund also may enter into forward foreign currency exchange
contracts for operational and hedging purposes. The net U.S.
dollar
11
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
value of foreign currency underlying all contractual commitments
held by the fund and the resulting unrealized appreciation or
depreciation are determined using foreign currency exchange
rates from an independent pricing service. The fund is subject
to the credit risk that the other party will not complete the
obligations of the contract.
OPTIONS TRANSACTIONS
In order to produce incremental earnings, protect gains, and
facilitate buying and selling of securities for investment
purposes, the fund may buy and sell put and call options, write
covered call options on portfolio securities, write cash-secured
puts, and write call options that are not covered for
cross-hedging purposes. The risk in writing a call option is
that the fund gives up the opportunity for profit if the market
price of the security increases. The risk in writing a put
option is that the fund may incur a loss if the market price of
the security decreases and the option is exercised. The risk in
buying an option is that the fund pays a premium whether or not
the option is exercised. The fund also has the additional risk
of not being able to enter into a closing transaction if a
liquid secondary market does not exist. The fund also may write
over-the-counter options where the completion of the obligation
is dependent upon the credit standing of another party.
Option contracts are valued daily and unrealized appreciation or
depreciation is recorded. The fund will realize a gain or loss
upon expiration or closing of the option transaction. When an
option is exercised, the proceeds on sales for a written call
option, the purchase cost for a written put option, or the cost
of a security for purchased put and call options is adjusted by
the amount of premium received or paid.
FUTURES TRANSACTIONS
In order to gain exposure to or protect against changes in the
market, the fund may buy and sell interest rate futures
contracts and related options. Risks of entering into futures
contracts and related options include the possibility of an
illiquid market and that a change in the value of the contract
or option may not correlate with changes in the value of the
underlying securities.
12
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Upon entering into a futures contract, the fund is required to
deposit either cash or securities in an amount (initial margin)
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the fund
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized
gains and losses. The fund recognizes a realized gain or loss
when the contract is closed or expires.
INTEREST RATE TRANSACTIONS
To preserve a return or spread on a particular investment or
portion of its portfolio or for other non-speculative purposes,
the fund may enter into interest rate swaps and the purchase or
sale of interest rate caps and floors. Interest rate swaps
involve the exchange of commitments to pay or receive interest,
e.g., an exchange of floating-rate payments for fixed-rate
payments. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a
predetermined interest rate, to receive payments of interest on
a contractually based notional principal amount from the party
selling such interest rate cap. The purchase of an interest rate
floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive
payments of interest on a contractually based notional principal
amount from the party selling such an interest rate floor.
If forecasts of interest rates and other market factors are
incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were
not used. Even if the forecasts are correct, there is risk that
the positions may correlate imperfectly with the asset or
liability being hedged. Other risks of entering into these
transactions are that a liquid secondary market may not always
exist, or that another party to a transaction may not perform.
For interest rate swaps, the fund accrues weekly, as an increase
or decrease to interest income, the net amount due or owed by
the fund. Interest rate swap, cap and floor valuations are based
on prices quoted by independent brokers. These valuations
represent the net present value of all future cash settlement
amounts based on implied forward interest rates.
13
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have been purchased by
the fund on a forward-commitment or when-issued basis can take
place one month or more after the transaction date. During this
period, such securities do not earn interest, are subject to
market fluctuations and may increase or decrease in value prior
to their delivery. The fund maintains, in a segregated account
with its custodian, securities 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 NAV to the extent the fund makes such
purchases, while remaining substantially fully invested. As of
April 30, 1995, the fund had entered into outstanding
when-issued or forward commitments of $9,825,000.
Consistent with its ability to purchase securities on a
when-issued or forward-commitment basis, the fund may enter into
mortgage "dollar rolls" in which the fund sells securities for
delivery in the current month and simultaneously contracts with
the same counterparty to repurchase similar (same type, coupon
and maturity) but not identical securities. As an inducement to
"roll over" its purchase commitments, the fund receives
negotiated fees. For the six months ended April 30, 1995, such
fees earned by the fund amounted to $178,548.
FEDERAL TAXES
The fund's policy is to comply with the requirements of the
Internal Revenue Code applicable to regulated investment
companies and not be subject to federal income tax. Therefore,
no income tax provision is required.
Net investment income and net realized gains (losses) may differ
for financial statement and tax purposes primarily because of
the recognition of certain foreign currency gains (losses) as
ordinary income for tax purposes and losses deferred due to
"wash sale" and "straddle" transactions. The character of
distributions made during the year from net investment income or
net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the
14
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
income or realized gains (losses) were recorded by the fund. Due
to the recognition of certain foreign currency losses as a
reduction of ordinary income for tax purposes, it is expected
that all, or a portion of, distributions in fiscal 1995 will
represent a tax return of capital.
On the statement of assets and liabilities, as a result of
expected permanent book to tax differences from foreign currency
exchange losses, a reclassification adjustment has been made to
decrease undistributed net investment income and accumulated net
realized loss on investments and foreign currency transactions
by $2,613,407.
DISTRIBUTIONS
The fund pays monthly distributions from net investment income
under normal circumstances. Monthly distributions may also
include short-term capital gains or a return of capital.
Remaining realized capital gains, if any, will be distributed on
an annual basis. 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. However, if the market price plus commissions
exceeds the net asset value by 10% or more, 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 and
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 the daily market
value of the collateral is in excess of the repurchase amount in
the event of default.
15
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(3) EXPENSES
The fund has entered into the following agreements with
Piper Capital Management Incorporated (the adviser and
the administrator):
The investment advisory agreement provides the adviser with a
monthly investment management fee based on the fund's average
weekly net assets computed at the per annum rate of 0.50%. For
its fee, the adviser provides investment advice and, in general,
will conduct 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 provides certain reporting, regulatory and
record-keeping services for the fund.
In addition to the investment management fee and the
administrative fee, 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, taxes and
other miscellaneous expenses.
(4) SECURITIES
TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other
than short-term securities) aggregated $13,944,062 and
$42,807,962, respectively, for the six months ended April 30,
1995.
(5) OPTION
CONTRACTS
WRITTEN
The number of contracts and premium amounts associated with
option contracts written during the six months ended April 30,
1995, were as follows:
<TABLE>
<CAPTION>
Call Options
---------------------
Number of Premium
Contracts Amount
--------- ---------
<S> <C> <C>
Balance at 10/31/94..................... 100 $ 16,689
Opened................................ -- --
Closed or expired..................... (100) (16,689)
--------- ---------
Balance at 4/30/95...................... -- $ --
--------- ---------
--------- ---------
</TABLE>
(6) CAPITAL LOSS
CARRYOVER
For federal income tax purposes, the fund had a capital loss
carryover of $4,986,285 on October 31, 1994. If this loss
carryover is not offset by subsequent capital gains, it will
expire in 2002. It is unlikely the board of directors will
authorize a distribution of any net realized capital gains until
the available capital loss carryover has been offset or expires.
16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(7) RETIREMENT OF
FUND SHARES
The fund's board of directors has approved a plan to repurchase
shares of the fund in the open market and retire those shares.
Repurchases may only be made when the previous day's closing
market price was at a discount from net asset value. Daily
repurchases are limited to 25% of the previous four weeks
average daily trading volume on the New York Stock Exchange.
Under the current plan, cumulative repurchases in the fund
cannot exceed 3% of the total shares originally issued. The
board of directors will review the plan every six months and may
change the amount which may be repurchased. The plan was last
reviewed and reapproved by the board of directors on February 9,
1995. Pursuant to the plan, the fund has cummulatively
repurchased and retired 102,600 shares as of April 30, 1995,
which represents 1.60% of the shares originally issued.
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(8) FINANCIAL
HIGHLIGHTS
Per share data for a share of capital stock outstanding
throughout the period and selected information for the period
are as follows:
<TABLE>
<CAPTION>
Six Period
Months from
Ended 1/28/94*
4/30/95 to
(Unaudited) 10/31/94
--------- ---------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period.............$ 10.26 14.04
--------- ---------
Operations:
Net investment income .......................... 0.42 0.92
Net realized and unrealized losses ............. (2.26) (3.85)
--------- ---------
Total from operations ........................ (1.84) (2.93)
--------- ---------
Distributions to shareholders:
From net investment income ..................... -- (0.73)
Tax return of capital .......................... (0.51) (0.12)
--------- ---------
Total distributions .......................... (0.51) (0.85)
--------- ---------
Net asset value, end of period...................$ 7.91 10.26
--------- ---------
--------- ---------
Per share market value, end of period............$ 7.00 9.75
--------- ---------
--------- ---------
SELECTED INFORMATION
Total investment return, market value** .......... (23.55%) (29.98%)
Total investment return, net asset value+ ........ (18.04%) (20.98%)
Net assets at end of period (in millions) ...... $ 50 66
Ratio of total expenses to average weekly net
assets ......................................... 1.10%+++ 0.93%+++
Ratio of net investment income to average weekly
net assets ..................................... 10.06%+++ 10.82%+++
Portfolio turnover rate (excluding short-term
securities) .................................... 22% 62%
Amount of borrowings outstanding at end of period
(in millions)*** ............................. $ -- 15
Per share amount of borrowings outstanding at end
of period .................................... $ -- 2.33
Per-share asset coverage of borrowings outstanding
at end of period++ $ -- 12.59
<FN>
* COMMENCEMENT OF OPERATIONS.
** BASED ON THE CHANGE IN MARKET PRICE OF A SHARE DURING THE PERIOD. ASSUMES
REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE FUND'S
DIVIDEND REINVESTMENT PLAN.
*** SECURITIES PURCHASED ON A WHEN-ISSUED BASIS FOR WHICH LIQUID, HIGH-GRADE
DEBT OBLIGATIONS ARE MAINTAINED IN A SEGREGATED ACCOUNT ARE NOT CONSIDERED
BORROWINGS. SEE FOOTNOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS.
+ BASED ON THE CHANGE IN NET ASSET VALUE OF A SHARE DURING THE PERIOD.
ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE.
++ REPRESENTS THE FUND'S NET ASSETS (EXCLUDING BORROWINGS) DIVIDED BY SHARES
OUTSTANDING.
+++ ADJUSTED TO AN ANNUAL BASIS.
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(9) QUARTERLY DATA (UNAUDITED)
DOLLAR AMOUNTS
<TABLE>
<CAPTION>
Net Increase
(Decrease) in
Net Assets
Total Net Net Realized Resulting Return of
Investment Investment and Unrealized from Capital
Quarter Ended Income Income Gains (Losses) Operations Distributions
- ------------------------- ---------- ---------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
January 31, 1995 $ 1,391,335 1,242,601 (15,691,558) (14,448,957) (2,047,173)
April 30, 1995 1,577,517 1,433,932 1,120,036 2,553,968 (1,194,027)
---------- ---------- -------------- ------------- -------------
$ 2,968,852 2,676,533 (14,571,522) (11,894,989) (3,241,200)
---------- ---------- -------------- ------------- -------------
---------- ---------- -------------- ------------- -------------
</TABLE>
PER SHARE AMOUNTS
<TABLE>
<CAPTION>
Net Increase
(Decrease) in Quarter
Net Net Realized Net Assets Return of End Net
Investment and Unrealized Resulting from Capital Asset
Quarter Ended Income Gains (Losses) Operations Distributions Value
- ------------------------- ---------- -------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
January 31, 1995 $ 0.19 (2.44) (2.25) (0.32) 7.69
April 30, 1995 0.23 0.18 0.41 (0.19) 7.91
--- ----- ----- -----
$ 0.42 (2.26) (1.84) (0.51)
--- ----- ----- -----
--- ----- ----- -----
</TABLE>
19
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
THE AMERICAS INCOME TRUST
APRIL 30, 1995
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------- ----------- ----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
UNITED STATES (49.8%):
MORTGAGE-BACKED SECURITIES (39.6%)
U.S. AGENCY FIXED RATE MORTGAGES (35.6%):
FNMA, 11.00%, 8/01/24 ................................... $ 866,073 957,556
FNMA, 8.00%, 3/01/25 ...................................... 4,991,218 4,981,785
GNMA, 7.00%, 8/15/23 ...................................... 1,993,968 1,887,410
FNMA 8.00% 1/01/21 ........................................ 5,000,000(b) 5,003,050
GNMA 8.00% 4/01/22 ........................................ 5,000,000(b) 4,999,950
----------
17,829,751
----------
COLLATERALIZED MORTGAGE OBLIGATIONS (4.0%) (C):
INVERSE FLOATER:
7.41%, FHLMC, Series 1686, Class SL, COFI, 2/15/24 ........ 1,899,826 1,230,137
----------
Z-TRANCHE:
7.91%, FHLMC, Series 1694, Class Z, 3/15/24 ............... 1,072,751 793,117
----------
Total Collateralized Mortgage Obligations ................ 2,023,254
----------
Total Mortgage-Backed Securities
(cost $20,185,790) ...................................... 19,853,005
----------
ASSET-BACKED ADJUSTABLE SECURITIES (2.5%):
First U.S.A Master Trust, Series 1995-1, 6.27%, Class A,
10/15/01
(cost $1,250,000) ....................................... 1,250,000 1,248,825
----------
CORPORATE SECURITIES: (4.1%)
General Motors Acceptance Corp., 9.38%, 4/01/00 ........... 1,000,000 1,073,720
Royal Caribbean Cruise, 8.13%, 7/28/04 .................... 1,000,000 997,760
----------
Total Corporate Securities
(cost $2,076,765) ....................................... 2,071,480
----------
MUNICIPAL SECURITIES (3.6%):
Municipal Electric Authority, Georgia Residual Trust
Certificate, inverse floating, interest only, 11.40%,
1/01/12 .................................................. --(h)(k) 301,400
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
20
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
THE AMERICAS INCOME TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Georgia Municipal Electric Authority, floater (weekly)
4.85%, 1/01/12 ......................................... $ 1,500,000(f)(h) 1,500,000
----------
Total Municipal Securities
(cost $2,221,577) ....................................... 1,801,400
----------
Total United States Securities
(cost $25,734,132) ...................................... 24,974,710
----------
CANADA (27.2%):
GOVERNMENT/MORTGAGE-BACKED SECURITIES 19.4% (G):
Canadian Government Real Return, 4.25% plus inflation
adjustment, 12/01/21 ..................................... 6,290,220(j) 4,376,034
Canadian Government Residual, 7.17%, 10/01/08 ............. 3,700,000(d) 879,102
Firstline Trust, 7.25%, 11/01/00 .......................... 4,344,782 3,061,689
Firstline Trust, 8.00%, 08/01/18 .......................... 2,034,915 1,436,666
----------
9,753,491
----------
PROVINCIAL SECURITIES (7.8%):
Saskatchewan Canada, 9.88%, 7/06/99 ....................... 5,000,000(g) 3,889,932
----------
Total Canadian Securities
(cost $15,146,422) ...................................... 13,643,423
----------
MEXICO (16.0%):
GOVERNMENT SECURITIES (10.4%):
Mexican Brady Par - Series A, 6.25%, 12/31/19 ............. 5,000,000(i) 2,650,000
United Mexican State Bondes, 15.40% (monthly), 1/25/96 .... 15,539,400(f)(g) 2,561,725
----------
5,211,725
----------
CORPORATE SECURITIES (5.6%):
Banamex SA, Medium-Term Note, 11.25%, 12/02/96 ............ 16,460,000(g) 1,680,437
Mexico-Cuernavaca Trust, 9.25%, 7/25/01 ................... 1,909,743(h)(i) 1,107,653
----------
2,788,090
----------
Total Mexican Securities (cost $16,355,306) .............. 7,999,815
----------
STRUCTURED SECURITIES (1.4%):
FOREIGN LINKED INDEX SECURUTIES (1.4%) (E):
Bayerische Vereinsbank, New York, 13.50% due 2/05/96 ...... 5,000,000(1) 256,500
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
21
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
THE AMERICAS INCOME TRUST
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- -------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Bayerische Vereinsbank, New York, 7.00% due 2/20/96 ..... $ 3,500,000(2) 458,150
----------
Total Structured Securities (cost: $8,500,000) ........... 714,650
----------
OTHER SECURITIES (--%):
OPTIONS:
Argentina Global vs U.S. Treasury spread, 50 call
contracts, strike price of 430 basis points expires
November 1995 (cost: 85,000) ............................. -- 0
----------
SHORT-TERM UNITED STATES SECURITIES (25.0%):
U.S. Treasury Bill, 5.72%, 10/19/95 ....................... 600,000 583,698
U.S. Treasury Bill, 5.80%, 5/04/95 ........................ 5,400,000 5,397,350
Repurchase with Morgan Stanley in a joint trading account
collateralized by U.S. Government agency securities,
acquired on 4/28/95, accrued interest at repurchase date
of $3,186, 5.80%, 05/01/95 ............................... 6,591,000 6,591,000
----------
Total Short-Term Securities
(cost: $12,572,048) ..................................... 12,572,048
----------
Total Investments in Securities
(cost $78,392,908)(l) ................................. $ 59,904,646
----------
----------
<FN>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) ON APRIL 30, 1995, THE TOTAL COST OF INVESTMENTS PURCHASED ON A WHEN-ISSUED
BASIS WAS $9,825,000.
(C) DESCRIPTIONS OF CERTAIN COLLATERALIZED MORTGAGE OBLIGATIONS ARE AS FOLLOWS:
COFI (11TH DISTRICT) - COST OF FUNDS INDEX OF THE FEDERAL RESERVE'S 11TH
DISTRICT
INVERSE FLOATER - REPRESENT SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) WITH A DECLINE (INCREASE) IN THE SPECIFIED INDEX. THE
INTEREST RATE PAID BY THE INVERSE FLOATER WILL GENERALLY CHANGE AT A
MULTIPLE OF ANY CHANGE IN THE INDEX. INTEREST RATES DISCLOSED ARE IN
EFFECT ON APRIL 30, 1995.
Z-TRANCHE - REPRESENT SECURITIES THAT PAY NO INTEREST OR PRINCIPAL DURING
THEIR INITIAL ACCRUAL PERIODS, BUT ACCRUE ADDITIONAL PRINCIPAL AT
SPECIFIED RATES. INTEREST RATE DISCLOSED REPRESENTS CURRENT YIELD BASED
UPON THE CURRENT COST BASIS AND ESTIMATED TIMING OF FUTURE CASH FLOWS.
(D) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
</TABLE>
22
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
<TABLE>
<S> <C>
(E) FOREIGN LINKED INDEX SECURITIES ARE ISSUED BY U.S. ISSUERS AND ARE
DENOMINATED IN U.S. DOLLARS. THESE SECURITIES WERE PURCHASED AS PART OF A
PRIVATE PLACEMENT, HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 AND ARE DEEMED TO BE
ILLIQUID BY THE ADVISER. THESE SECURITIES RETURN PRINCIPAL AND/OR INTEREST
IN AMOUNTS WHICH ARE LINKED TO THE INDICES INDICATED BELOW. THE RESULTANT
EFFECT ON PRINCIPAL OR INTEREST IS AT A MULTIPLE OF THE CHANGE IN THE
SPECIFIED INDEX.
(1) PRINCIPAL AMOUNT AT MATURITY IS LINKED INVERSELY, AND THE COUPON
VARIES INVERSELY WITH THE NUEVOS PESOS/U.S. DOLLAR EXCHANGE RATE.
(2) PRINCIPAL AMOUNT AT MATURITY IS LINKED INVERSELY WITH THE YIELD SPREAD
BETWEEN THE REPUBLIC OF VENEZUELA PAR BOND, DUE 3/31/20 AND THE U.S.
TREASURY BOND, 5.75%, DUE 8/15/03.
(F) INTEREST RATE RESETS AS INDICATED. RATE SHOWN IS THE EFFECTIVE RATE ON
APRIL 30, 1995.
(G) PAR VALUE IS STATED IN THE LOCAL CURRENCY.
(H) SECURITIES SOLD WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM AND MAY BE
SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS.
(I) REPRESENTS BONDS ISSUED BY FOREIGN ENTITIES AND DENOMINATED IN U.S.
DOLLARS, WHOSE VALUE DEPENDS UPON THE OVERALL LEVEL OF INTEREST RATES IN
THE UNITED STATES AND THE ECONOMIC CONDITIONS OF THE SPECIFIC COUNTRY.
(J) THE FINAL AMOUNT DUE AT MATURITY FOR CANADIAN REAL RETURN BONDS REFLECTS
ADJUSTMENTS FOR CHANGES IN THE CONSUMER PRICE INDEX OF CANADA. THE
PRINCIPAL AMOUNT SHOWN REPRESENTS CURRENT AMOUNT AFTER GIVING EFFECT TO
SUCH ADJUSTMENT.
(K) INVERSE INTEREST-ONLY - REPRESENT SECURITIES THAT ENTITLE HOLDERS TO
RECEIVE ONLY INTEREST PAYMENTS. INTEREST IS PAID AT A RATE THAT INCREASES
(DECREASES) WITH A DECLINE (INCREASE) IN THE MARKET RATE PAID ON A RELATED,
FLOATING RATE SECURITY. INTEREST RATES DISCLOSED REPRESENT CURRENT YIELDS
BASED UPON THE ORIGINAL COST BASIS AND ESTIMATED TIMING AND AMOUNT OF
FUTURE CASH FLOWS.
(L) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
</TABLE>
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 260,557
GROSS UNREALIZED DEPRECIATION ...... (18,748,819)
----------
NET UNREALIZED DEPRECIATION .... $ (18,488,262)
----------
----------
</TABLE>
23
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER UPDATE
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN
As a shareholder, you may choose to participate in the Dividend Reinvestment
Plan. It is a convenient and economical way to buy additional shares of the fund
by automatically reinvesting dividends and capital gains distributions. The plan
is administered by Investors Fiduciary Trust Company (IFTC), the plan agent.
ELIGIBILITY/PARTICIPATION
You may join the plan at any time. Reinvestment of distributions will begin with
the next distribution paid, provided your enrollment card 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 gain 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
Fund shares to cover reinvestments will generally be purchased by IFTC in the
open market. However, if the market price plus commissions of fund shares is at
a 10% or greater premium over net asset value, and in certain other
circumstances, the fund may issue new shares to cover such reinvestments at a
discount of up to 5% of the market price without brokerage commissions.
Beginning no more than five business days before the dividend payment date, IFTC
may purchase fund shares on behalf of participants in the plan to satisfy
dividend reinvestments. Such purchases are made on the New York Stock Exchange
(the Exchange) or elsewhere at any time when the price of the fund's common
stock on the Exchange plus commissions is at less than a 10% premium over the
fund's most recently calculated net asset value 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 requirements -- either
because the price of the fund's shares plus commissions has been at a 10% or
greater premium over net asset value or because IFTC, for any other reason, has
not been able to purchase a sufficient number of shares -- IFTC will accept
payment of the dividend, or the remaining portion therefore, in authorized but
unissued shares of the fund. Such shares will be issued at a price per share
equal to the higher of (1) the net asset value per share as of the close
24
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER UPDATE
of business on the payment date, or (2) 95% of the closing market price per
share on the payment date. The number of shares allocated to you will be
determined by dividing the amount of the dividend or distribution by the
applicable price per share.
There is no direct charge to you for reinvestment of dividends and capital
gains, since IFTC fees are paid by the fund. However, if fund shares are
purchased in the open market, each participant in the plan pays a pro rata
portion of the brokerage commissions. Brokerage charges are expected to be lower
than those for individual transactions because the plan purchases shares for all
participants in blocks. Distributions paid on the shares in your plan account
will also be reinvested as long as you continue to participate in the plan.
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 non-certificated form in your name.
TAX INFORMATION
Distributions reinvested in shares purchased in the open market are subject to
income tax, the same as if such distributions were received as 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 a Form 1099 information return 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 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 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.
25
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER UPDATE
PLAN AMENDMENT/TERMINATION
The fund reserves the right to amend or terminate the plan. Should the plan be
terminated, participants will be notified in writing at least 90 days before the
record date for the next 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 questions 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.
SHARE REPURCHASE PROGRAM
Your fund's board of directors has reapproved the fund's share repurchase
program, which enables the fund to "buy back" shares of its common stock in the
open market. Repurchases may only be made when the previous day's closing market
price per share was at a discount from net asset value. Repurchases cannot
exceed 3% of the fund's originally issued shares.
WHAT EFFECT WILL THIS PROGRAM HAVE ON SHAREHOLDERS?
- - We do not expect any adverse impact on the adviser's ability to manage the
fund.
- - Because repurchases will be at a price below net asset value, remaining shares
outstanding may experience a slight increase in net asset value.
- - Although the effect of share repurchases on market price is less certain, the
board of directors believes the program may have a favorable effect on the
market price of fund shares.
- - We do not anticipate any material increase in the fund's expense ratio.
WHEN WILL SHARES BE REPURCHASED?
Share repurchases may be made from time to time and may be discontinued at any
time. Share repurchases are not mandatory when fund shares are trading at a
discount from net asset value; all repurchases will be at the discretion of the
fund's investment adviser. The board of directors will consider whether to
continue the share repurchase program on at least a semiannual basis and will
notify shareholders of its determination in the next semiannual or annual
report.
HOW WILL SHARES BE REPURCHASED?
We expect to finance the repurchase of shares by liquidating portfolio
securities or using current cash balances. We do not anticipate borrowing in
order to finance share repurchases.
26
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
DIRECTORS David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC., USL
PRODUCTS, INC., AND KIEFER BUILT, INC., OF COUNSEL,
GRAY, PLANT, MOOTY, MOOTY & BENNETT, P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY COMPANIES INC.,
PIPER CAPITAL MANAGEMENT INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL,
RELIASTAR FINANCIAL CORP., HORMEL FOODS CORP.
George Latimer, DIRECTOR, SPECIAL ACTIONS OFFICE, OFFICE
OF THE SECRETARY, DEPARTMENT OF HOUSING AND URBAN
DEVELOPMENT
OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD, PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT
Thomas S. McGlinch, VICE PRESIDENT
J. Bradley Stone, VICE PRESIDENT
David E. Rosedahl, SECRETARY
Charles N. Hayssen, TREASURER
INVESTMENT Piper Capital Management Incorporated
ADVISER 222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402
CUSTODIAN Morgan Stanley Trust Company
1 PIERREPONT PLAZA, BROOKLYN, NY 11201
TRANSFER AND Investors Fiduciary Trust Company
RECORD KEEPING 127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
AGENT
LEGAL COUNSEL Dorsey & Whitney P.L.L.P.
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
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PIPER CAPITAL MANAGEMENT Bulk Rate
PIPER CAPITAL MANAGEMENT INCORPORATED U.S. Postage
222 SOUTH NINTH STREET PAID
MINNEAPOLIS, MN 55402-3804 Permit No. 3008
Mpls., MN
PIPER JAFFRAY INC., FUND SPONSOR AND NASD MEMBER
[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
210-95 XUS-02
