N-30D 1 a2096953zn-30d.txt N-30D [FIRST AMERICAN(TM) LOGO] AMERICAN STRATEGIC INCOME PORTFOLIO ASP NOVEMBER 30, 2002 ANNUAL REPORT [FIRST AMERICAN(TM) LOGO] AMERICAN STRATEGIC INCOME PORTFOLIO INC. PRIMARY INVESTMENTS American Strategic Income Portfolio Inc. (the "Fund") invests in mortgage-related assets that directly or indirectly represent a participation in or are secured by and payable from mortgage loans. The Fund may also invest in U.S. government securities, corporate debt securities, unregistered securities, and mortgage servicing rights. The Fund borrows through the use of reverse repurchase agreements. Use of certain of these investments and investment techniques may cause the Fund's net asset value ("NAV") 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 objectives. [SIDENOTE] TABLE OF CONTENTS 1 Fund Overview 7 Financial Statements 18 Notes to Financial Statements 25 Investments in Securities 32 Independent Auditors' Report 33 Federal Income Tax Information 34 Shareholder Update NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE FUND OVERVIEW AVERAGE ANNUALIZED TOTAL RETURNS Based on NAV for the period ended November 30, 2002 [CHART]
SINCE INCEPTION ONE YEAR FIVE YEAR 12/27/1991 American Strategic Income Portfolio Inc. 8.32% 7.81% 8.35% Lehman Brothers Mutual Fund Government/Mortgage Index 7.53% 7.40% 7.29%
The average annualized total returns for the Fund are based on the change in its 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, five-year, and since-inception periods ended November 30, 2002, were 2.32%, 9.14%, and 7.68%, respectively. These returns assume reinvestment of all distributions and reflect commissions on reinvestment of 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 NAV; therefore, you may be unable to realize the full NAV of your shares when you sell. - 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 the Fund is comprised primarily of nonsecuritized, illiquid whole loans. This limits the ability of the Fund to respond quickly to market changes. - The Lehman Brothers Mutual Fund Government/Mortgage Index is comprised of all U.S. government agency and Treasury securities and agency mortgage-backed securities. Developed by Lehman Brothers for comparative use by the mutual fund industry, this index is unmanaged and does not include any fees or expenses in its total return calculations. - The since inception number for the Lehman Index is calculated from the month end following the Fund's inception through November 30, 2002. 1 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 2002 THE FUND HAD A TOTAL RETURN OF 8.32%, AFTER FEES AND EXPENSES, BASED ON ITS NAV. We are pleased that the Fund outperformed its benchmark, the Lehman Brothers Mutual Fund Government/Mortgage Index, which had a return of 7.53% during the period. We believe that the performance was mainly a result of the higher income levels paid by our mortgage investments. Over the same period, the Fund returned 2.32% based on its market price. The Fund's market price of $12.05 was at a 4.44% discount to its NAV of $12.61 as of November 30, 2002. As always, past performance is no guarantee of future results, and the Fund's NAV and market price will fluctuate. DURING THE REPORTING PERIOD THE U.S. ECONOMY SHOWED GRADUAL IMPROVEMENT WITH THE EMPLOYMENT PICTURE, LOW INTEREST RATES, STABLE ENERGY PRICES, AND AN IMPROVING LEVEL OF CORPORATE EARNINGS PROVIDING SUPPORT FOR ECONOMIC GROWTH TO MOVE FORWARD AT A MODERATE PACE. The Federal Reserve unexpectedly cut its target lending rate 0.50% to 1.25% at its November 6 Federal Open Market Committee ("FOMC") meeting and at the same time adopted a neutral risk assessment between economic growth and inflationary risks. Inflationary pressures remain low and provide the Fed with the flexibility to maintain an accommodative monetary policy stance designed to ensure that a sustainable economic recovery continues to develop. THE PERIOD SAW STRENGTH IN THE FIXED-INCOME MARKETS, AS INVESTORS SOUGHT STABLE, INCOME-ORIENTED INVESTMENTS. Every fixed-income product type, except high yield, experienced positive returns during the period. Treasury bonds came under pressure in November as the Fed eased and a number of economic indicators signaled better-than-expected growth. ALTHOUGH THE FIXED-INCOME SECTOR SHOWED STRENGTH OVERALL, REAL ESTATE MARKETS WERE FUNDAMENTALLY WEAKER WITH DEMAND FOR MULTIFAMILY UNITS AND COMMERCIAL SPACE DECREASING OVER THE LAST 12 MONTHS. Typically real estate markets are a lagging indicator of the economy, taking longer to weaken and longer to recover than the overall economy. Most estimates do not see an appreciable increase in demand for apartments [SIDENOTE] FUND MANAGEMENT JOHN WENKER is primarily responsible for the management of the Fund. He has 20 years of financial experience. CHRIS NEUHARTH, CFA is responsible for the management of the mortgage-backed securities portion of the Fund. He has 22 years of financial experience. RUSS KAPPENMAN is responsible for acquisition and management of the whole loans portion of the Fund. He has 17 years of financial experience. 2 or commercial space until well into 2003. We are optimistic because the current decrease in demand is not accompanied by an oversupply in new construction, as was the case in the recession of the early 1990s. The property type and geographic diversification of the Fund should prove helpful in this weaker economic environment. IN SPITE OF THE WEAKNESS IN REAL ESTATE MARKETS, THE FUND CURRENTLY HAS NO MULTIFAMILY OR COMMERCIAL LOANS IN DEFAULT. In January 2002, the Fund sold two loans that were in the process of foreclosure. This sale resulted in a capital loss of 11.63 cents per share. IN JULY 2002 THE FUND DECREASED ITS MONTHLY DIVIDEND FROM 9.5 CENTS TO 7.25 CENTS PER SHARE. The dividend reserve for this Fund was at 0.21 cents per share as of the period end. The lower interest-rate environment makes it more likely that loans will prepay and that reinvestment will be at lower rates. During the reporting period eight loans in the portfolio paid off with a weighted average coupon of 8.48%. We added four loans with a weighted average coupon of 7.49%. The appreciated value of properties in the current real estate environment makes it difficult to find commercial and multifamily loans of the appropriate size PORTFOLIO COMPOSITION As a percentage of total assets on November 30, 2002 [CHART] Short-Term Securities 6% Commercial Loans 27% Corporate Notes 9% Other Assets 1% Multifamily Loans 18% Single-family Loans 5% U.S. Agency Mortgage-backed Securities 28% Preferred Stock 6%
3 and credit quality for this Fund. During this annual period the Fund paid out $1.0275 per share in dividends resulting in an annualized distribution rate of 8.53% based on the November 30, 2002, market price. Please keep in mind that the Fund's distribution rate and dividend reserve levels will fluctuate. THE FUND CONTINUED TO BENEFIT FROM THE USE OF LEVERAGE (OR BORROWING) DURING THE PERIOD. Low short-term interest rates allowed the Fund to borrow at attractive rates. The borrowed money was then invested in higher-yielding mortgage investments, which added to the income levels in the Fund. While the use of leverage has resulted in more income for shareholders, it does increase interest-rate risk in the Fund and may increase the volatility of the Fund's NAV and market price. WE BELIEVE THAT THE REAL ESTATE MARKETS WILL CONTINUE TO POSE CHALLENGES. The low interest-rate environment will likely mean continued loan prepayments. The weaker real estate markets could lead to increased levels of default. We continue to diligently manage the risk in the Fund and believe it should hold up well based on its current credit profile. As the U.S. economy improves there should be increased demand for space and occupancy levels should rise. Increased demand should lead to increases in rental rates and an improved environment for our real estate investments. DELINQUENT LOAN PROFILE The chart below shows the percentage of single family loans* in the portfolio that are 30, 60, 90, or 120 days delinquent as of November 30, 2002, based on principal amounts outstanding. Current 94.7% 30 Days 4.1% 60 Days 1.2% 90 Days 0.0% 120+ Days 0.0%
*As of November 30, 2002, there were no multifamily or commercial loans delinquent. 4 As you are probably aware, the board of directors for this Fund, as well as American Strategic Income Portfolio Inc. II ("BSP"), American Strategic Income Portfolio Inc. III ("CSP"), and American Select Portfolio Inc. ("SLA")-has approved a proposal to reorganize these four funds into the First American Strategic Real Estate Portfolio Inc., a specialty finance company that would elect to be taxed as a real estate investment trust ("REIT"). Shareholders of ASP, BSP, CSP, and SLA who do not wish to receive shares of the REIT will have the option, subject to certain limitations, of electing to exchange their shares for shares of American Strategic Income Portfolio Inc., a newly formed closed-end management investment company with investment policies, restrictions, and strategies substantially similar to those of ASP, BSP, CSP, and SLA. This transaction is subject to review by the Securities and Exchange Commission, approval by the Fund's shareholders, and certain other conditions. There is no assurance that the transaction will be completed. THANK YOU FOR YOUR INVESTMENT IN THE FUND AND YOUR TRUST DURING THIS DIFFICULT ENVIRONMENT IN THE ECONOMY AND THE REAL ESTATE MARKETS. We will continue to closely monitor the credit profiles of the Fund's whole loan investments as we seek to achieve the Fund's goal of paying attractive monthly income while minimizing losses. If you have any questions about the Fund, please call us at 800.677.FUND. Sincerely, /s/ Mark Jordahl Mark Jordahl Vice President, Investments First American Funds 5 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 November 30, 2002. Shaded areas without values indicate states in which the Fund has invested less than 0.50% of its assets. [MAP OF THE UNITED STATES] Alabama Alaska Arizona 8% Arkansas Less than 0.50% California 10% Colorado 8% Connecticut Delaware Less than 0.50% Florida 4% Georgia Hawaii Idaho Illinois Less than 0.50% Indiana Iowa Kansas Less than 0.50% Kentucky Louisiana Less than 0.50% Maine Less than 0.50% Maryland Less than 0.50% Massachusetts Less than 0.50% Michigan Less than 0.50% Minnesota 13% Mississippi Missouri Montana 3% Nebraska 4% Nevada 4% New Hampshire 3% New Jersey 2% New Mexico 7% New York Less than 0.50% North Carolina Less than 0.50% North Dakota Ohio Less than 0.50% Oklahoma 1% Oregon 7% Pennsylvania Rhode Island South Carolina South Dakota Tennessee 4% Texas 10% Utah 3% Vermont Virginia Less than 0.50% Washington 7% West Virginia Wisconsin Wyoming
VALUATION OF WHOLE LOAN INVESTMENTS The Fund's investments in whole loans (single family, multifamily, and commercial) and participation mortgages are generally not traded in any organized market; 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 pricing model designed by U.S. Bancorp Asset Management, Inc., 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 or participation mortgages, as the case may be. The results of the pricing model may be further subject to price ceilings due to the illiquid nature of the loans. Changes in prevailing interest rates, real or perceived liquidity, yield spreads, and credit worthiness 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 whole loans, mortgage participations, and mortgage servicing rights are determined no less frequently than weekly. 6 FINANCIAL Statements STATEMENT OF ASSETS AND LIABILITIES November 30, 2002 ................................................................................ ASSETS: Investments in securities at value* (note 2)..................... $69,656,374 Cash in bank on demand deposit................................... 21,199 Accrued interest receivable...................................... 397,593 Other assets..................................................... 31,537 ----------- Total assets................................................... 70,106,703 ----------- LIABILITIES: Reverse repurchase agreements payable (note 2)................... 16,600,000 Accrued investment management fee................................ 24,914 Accrued administrative fee....................................... 10,965 Accrued interest expense......................................... 24,870 Accrued reorganization expenses (notes 3 and 6).................. 86,542 Other accrued expenses........................................... 7,265 ----------- Total liabilities.............................................. 16,754,556 ----------- Net assets applicable to outstanding capital stock............. $53,352,147 =========== COMPOSITION OF NET ASSETS: Capital stock and additional paid-in capital..................... $60,517,426 Undistributed net investment income.............................. 8,967 Accumulated net realized loss on investments..................... (9,173,201) Unrealized appreciation of investments........................... 1,998,955 ----------- Total-representing net assets applicable to capital stock...... $53,352,147 =========== *Investments in securities at identified cost.................. $67,657,419 =========== NET ASSET VALUE AND MARKET PRICE OF CAPITAL STOCK: Net assets outstanding........................................... $53,352,147 Shares outstanding (authorized 1 billion shares of $0.01 par value)......................................................... 4,230,294 Net asset value per share........................................ $ 12.61 Market price per share........................................... $ 12.05
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 2002 ANNUAL REPORT 7 American Strategic Income Portfolio FINANCIAL Statements continued STATEMENT OF OPERATIONS For the Year Ended November 30, 2002 ................................................................................ INCOME: Interest (net of interest expense of $624,078)................... $4,596,487 Dividends........................................................ 299,389 ---------- Total investment income........................................ 4,895,876 ---------- EXPENSES (NOTE 3): Investment management fee........................................ 326,423 Administrative fee............................................... 132,636 Custodian fees................................................... 10,611 Transfer agent fees.............................................. 47,264 Exchange listing and registration fees........................... 58,129 Reports to shareholders.......................................... 35,460 Mortgage servicing fees.......................................... 45,060 Directors' fees.................................................. 13,543 Audit and legal fees............................................. 118,688 Financial advisory and accounting fees........................... 70,079 Other expenses................................................... 8,921 ---------- Total expenses................................................. 866,814 ---------- Net investment income.......................................... 4,029,062 ---------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE 4): Net realized loss on investments in securities................... (491,966) Net change in unrealized appreciation or depreciation of investments.................................................... 734,941 ---------- Net gain on investments........................................ 242,975 ---------- Net increase in net assets resulting from operations......... $4,272,037 ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 2002 ANNUAL REPORT 8 American Strategic Income Portfolio STATEMENT OF CASH FLOWS For the Year Ended November 30, 2002 ................................................................................ CASH FLOWS FROM OPERATING ACTIVITIES: Investment income.................................... $ 4,895,876 Net expenses......................................... (866,814) ------------ Net investment income.............................. 4,029,062 ------------ Adjustments to reconcile net investment income to net cash provided by operating activities: Change in accrued interest receivable.............. 26,581 Net amortization of bond discount and premium...... 4,976 Change in accrued fees and expenses................ (3,709) Change in other assets............................. 30,580 ------------ Total adjustments................................ 58,428 ------------ Net cash provided by operating activities........ 4,087,490 ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of investments................... 19,391,904 Purchases of investments............................. (12,287,398) Net purchases of short-term securities............... (1,446,465) ------------ Net cash provided by investing activities........ 5,658,041 ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net payments for reverse repurchase agreements....... (5,351,256) Distributions paid to shareholders................... (4,346,628) ------------ Net cash used by financing activities............ (9,697,884) ------------ Net increase in cash................................. 47,647 Bank overdraft at beginning of year.................. (26,448) ------------ Cash at end of year.............................. $ 21,199 ============ Supplemental disclosure of cash flow information: Cash paid for interest............................. $ 632,582 ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 2002 ANNUAL REPORT 9 American Strategic Income Portfolio FINANCIAL Statements continued STATEMENTS OF CHANGES IN NET ASSETS ................................................................................
YEAR ENDED YEAR ENDED 11/30/02 11/30/01 ----------- ----------- OPERATIONS: Net investment income................... $ 4,029,062 $ 4,424,489 Net realized gain (loss) on investments........................... (491,966) 450,178 Net change in unrealized appreciation or depreciation of investments........... 734,941 115,963 ----------- ----------- Net increase in net assets resulting from operations..................... 4,272,037 4,990,630 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2): From net investment income.............. (4,346,628) (4,473,537) ----------- ----------- Total increase (decrease) in net assets.............................. (74,591) 517,093 Net assets at beginning of year......... 53,426,738 52,909,645 ----------- ----------- Net assets at end of year............... $53,352,147 $53,426,738 =========== =========== Undistributed net investment income..... $ 8,967 $ 326,533 =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 2002 ANNUAL REPORT 10 American Strategic Income Portfolio NOTES TO FINANCIAL Statements (1) ORGANIZATION ............................ American Strategic Income 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 U.S. government securities, corporate debt securities, unregistered securities, and mortgage servicing rights. In addition, the Fund may borrow using reverse repurchase agreements and revolving credit facilities. Fund shares are listed on the New York Stock Exchange under the symbol ASP. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ............................ INVESTMENTS IN SECURITIES Portfolio securities for which market quotations are readily available are valued at current market value. If market quotations or valuations are not readily available, or if such quotations or valuations are believed to be inaccurate, unreliable, or not reflective of market value, portfolio securities are valued according to procedures adopted by the Fund's board of directors in good faith at "fair value," that is, a price that the Fund might reasonably expect to receive for the security or other asset upon its current sale. Security valuations for the Fund's investments are furnished by one or more independent pricing services that have been approved by the Fund's board of directors. Investments in equity securities that are traded on a national securities exchange (or reported on the NASDAQ national market system) are stated at the last quoted sales price if readily available for such securities on each business day. Other equity securities traded in 2002 ANNUAL REPORT 11 American Strategic Income Portfolio NOTES TO FINANCIAL Statements continued the over-the-counter market and listed equity securities for which no sale was reported on that date are stated at the last quoted bid price. Debt obligations exceeding sixty days to maturity are valued by an independent pricing service. The pricing service may employ methodologies that utilize actual market transactions, broker-dealer supplied valuations, or other formula driven valuation techniques. These techniques generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings, and general market conditions. 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. When market quotations are not readily available, securities are valued at fair value as determined in good faith by procedures established and approved by the Fund's board of directors. Debt obligations with sixty days or less remaining until maturity may be valued at their 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 pricing model designed by U.S. Bancorp Asset Management, Inc. (the "Advisor") to incorporate, among other things, the 2002 ANNUAL REPORT 12 American Strategic Income Portfolio 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. The results of the pricing model may be further subject to price ceilings due to the illiquid nature of the loans. 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. As of November 30, 2002, the Fund held fair valued securities with a fair value of $41,510,118 or 77.8% of total net assets. Securities transactions are accounted for on the date securities are purchased or sold. Realized gains and losses are calculated on the identified-cost basis. Interest income, including amortization of bond discount and premium, is recorded on an accrual basis. WHOLE LOANS AND PARTICIPATION MORTGAGES Whole loans and participation mortgages may bear a greater risk of loss arising from a default on the part of the borrower of the underlying loans than do traditional mortgage-backed securities. This is because whole loans 2002 ANNUAL REPORT 13 American Strategic Income Portfolio NOTES TO FINANCIAL Statements continued 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. 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. At November 30, 2002, a loan representing 0.1% of net assets was 60 days or more delinquent as to the timely monthly payment of principal. Such delinquency relates solely to a single family whole loan and represents 1.2% of the total single family principal outstanding or 0.01% of total net assets. During the fiscal year ended November 30, 2002, the Fund sold two loans that were in the foreclosure process. The sale was for less than the purchase price of the loans and resulted in a capital loss to the Fund of $11.63 cents per share. 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. 2002 ANNUAL REPORT 14 American Strategic Income Portfolio In addition, the Fund may incur expenses associated with maintaining any real estate owned. On November 30, 2002, the Fund owned no real estate. SECURITY TRANSACTIONS AND INVESTMENT INCOME The Fund records security transactions on the trade date of the security purchase or sale. Dividend income is recorded on the ex-dividend date. Interest income, including amortization of bond premium and discount, is recorded on an accrual basis. Security gains and losses are determined on the basis of identified cost, which is the same basis used for federal income tax purposes. REVERSE REPURCHASE AGREEMENTS Reverse repurchase agreements involve the sale of a portfolio-eligible security by the Fund, coupled with an agreement to repurchase the security at a specified date and price. Reverse repurchase agreements may increase volatility of the Fund's net asset value and involve the risk that interest costs on money borrowed may exceed the return on securities purchased with that borrowed money. Reverse repurchase agreements are considered to be borrowings by the Fund, and are subject to the Fund's overall restriction on borrowing under which it must maintain asset coverage of at least 300%. For the fiscal year ended November 30, 2002, the average borrowings outstanding were $19,014,583 and the average interest rate was 3.09%. 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 2002 ANNUAL REPORT 15 American Strategic Income Portfolio NOTES TO FINANCIAL Statements continued fluctuation, and may increase or decrease in value prior to their delivery. The Fund segregates, on the books of 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 November 30, 2002, the Fund had no outstanding when-issued or forward commitments. MORTGAGE SERVICING RIGHTS The Fund may acquire interests in the cash flow from servicing fees through contractual arrangements with mortgage servicers. Mortgage servicing rights, similar to interest-only securities, generate no further cash flow when a mortgage is prepaid or goes into default. Mortgage servicing rights are accounted for on a level-yield basis with recognized income based on the estimated amounts and timing of cash flows. Such estimates are adjusted periodically as the underlying market conditions change. 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. Net investment income and net realized gains and losses may differ for financial statement and tax purposes primarily because of the timing of recognition of income on certain collateralized mortgage-backed securities. The 2002 ANNUAL REPORT 16 American Strategic Income Portfolio 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. There were no material differences between the book basis and tax basis dividends paid during the fiscal years ended November 30, 2002 and 2001. All distributions made during these periods were ordinary income distributions. At November 30, 2002, the components of accumulated earnings (deficit) on a tax basis were as follows: Undistributed ordinary income............................... $ 8,967 Accumulated capital losses.................................. (7,941,527) Unrealized appreciation..................................... 767,281 ------------ Accumulated deficit......................................... $ (7,165,279) ============
The difference between book basis and tax basis unrealized appreciation and accumulated realized losses is attributable to a one time tax election whereby the Fund marked appreciated securities to market creating capital gains that were used to reduce capital loss carryovers and increase tax cost basis. 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 2002 ANNUAL REPORT 17 American Strategic Income Portfolio NOTES TO FINANCIAL Statements continued 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 AND OTHER SHORT-TERM SECURITIES 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. In addition to repurchase agreements, the Fund may invest in money market funds advised by the Advisor. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates 2002 ANNUAL REPORT 18 American Strategic Income Portfolio 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 Pursuant to an investment advisory agreement (the "Agreement"), the Advisor, formerly known as U.S. Bancorp Piper Jaffray Asset Management, Inc., a subsidiary of U.S. Bank National Association ("U.S. Bank"), manages the Fund's assets and furnishes related office facilities, equipment, research, and personnel. The Agreement provides the Advisor with a monthly investment management fee in an amount equal to an annualized rate of 0.20% of the Fund's average weekly net assets and 4.50% of the daily gross income accrued by the Fund during the month (i.e., investment income, including amortization of discount and premium, other than gains from the sale of securities or gains from options and futures contracts less interest on money borrowed by the Fund). The monthly investment management fee shall not exceed in the aggregate 1/12 of 0.725% of the Fund's average weekly net assets during the month (approximately 0.725% on an annual basis). For the fiscal year ended November 30, 2002, the effective investment management fee incurred by the Fund was 0.62%. For its fee, the Advisor provides investment advice and, in general, conducts the management and investment activities of the Fund. Pursuant to a co-administration agreement (the "Co-Administration Agreement"), U.S. Bancorp Asset Management, Inc. ("USBAM") and U.S. Bancorp Fund Services, Inc., an affiliate and a subsidiary of U.S. Bancorp, (collectively the "Administrators") provide or supervise others who provide administrative services, including certain legal and shareholder services, to the Fund. Under the Co-Administration Agreement, the 2002 ANNUAL REPORT 19 American Strategic Income Portfolio NOTES TO FINANCIAL Statements continued Administrators receive a monthly fee in an amount equal to an annualized rate of 0.25% of the Fund's average weekly net assets (computed by subtracting liabilities from the value of the total assets of the Fund). For its fee, the Administrators provide numerous services to the Fund including but not limited to handling the general business affairs, financial and regulatory reporting, and various record-keeping functions. As a part of its co-administrator duties, USBAM has retained SEI Investments Inc. to perform net asset value calculations and retained EquiServe to perform transfer agent functions. The Fund may invest in First American Funds, Inc. (FAF), subject to certain limitations. The terms of such transactions are identical to those of non-related entities except that, to avoid duplicative investment advisory fees, USBAM reimburses the Fund an amount equal to the investment advisory fee earned by FAF related to such investments. For financial statement purposes this reimbursement is recorded as investment income. 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. REORGANIZATION EXPENSES As discussed in Note 6, the Fund has taken certain steps to reorganize along with certain other similar entities managed by the Advisor. As set forth below, certain costs and expenses incurred in connection with the proposed reorganization of the Fund (including, but not 2002 ANNUAL REPORT 20 American Strategic Income Portfolio limited to, the preparation of all necessary registration statements, proxy materials and other documents, preparation for and attendance at board and committee, shareholder, planning, organizational and other meetings and costs and expenses of accountants, attorneys, financial advisors and other experts engaged in connection with the reorganization) shall be borne by the Fund, American Select Portfolio Inc., American Strategic Income Portfolio Inc. II, and American Strategic Income Portfolio Inc. III, collectively referred to as the "Existing Funds". The Existing Funds as a group will bear the first $3,400,000 of such expenses and will, subject to certain exceptions, equally share all transaction expenses in excess of $3,400,000 with USBAM. Such costs and expenses will be allocated among the Existing Funds based on their relative net asset values whether or not an Existing Fund participates in the reorganization. Additionally, costs and expenses incurred in connection with the legal representation of USBAM's interests with respect to the reorganization and related matters will be borne by USBAM. The current estimated costs and expenses related to the reorganization are $4,500,000. Based on the net asset values of the Existing Funds as of November 30, 2002, the Fund would bear approximately 8% of the total expenses of the reorganization. During the fiscal year ended November 30, 2002, the Fund incurred $194,448 of reorganization expenses. 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, 2002 ANNUAL REPORT 21 American Strategic Income Portfolio NOTES TO FINANCIAL Statements continued transfer agent fees and expenses, legal, auditing and accounting services, insurance, interest, expenses related to real estate owned, fees to outside parties retained to assist in conducting due diligence, taxes, and other miscellaneous expenses. During the fiscal year ended November 30, 2002, the fees for custody services were paid to U.S. Bank. (4) INVESTMENT SECURITY TRANSACTIONS ............................ Cost of purchases and proceeds from sales of securities and real estate, other than temporary investments in short-term securities, for the fiscal year ended November 30, 2002, aggregated $12,282,422 and $19,391,904, respectively. Included in proceeds from sales are $55,923 from prepayment penalties. (5) CAPITAL LOSS CARRYOVERS ............................ For federal income tax purposes, the Fund had capital loss carryovers at November 30, 2002, which, if not offset by subsequent capital gains, will expire on the Fund's fiscal year-ends as indicated below.
CAPITAL LOSS CARRYOVER EXPIRATION ---------------------- ---------- $6,239,966 2003 964,494 2008 737,527 2010 ---------------------- $7,941,987 ======================
(6) PROPOSED REORGANIZATION ............................ On December 26, 2002, an amended combined proxy statement/registration statement was filed with the Securities and Exchange Commission ("SEC") in which it is proposed that the Fund, along with American Strategic Income Portfolio Inc. II ("BSP"), American Strategic Income Portfolio Inc. III ("CSP"), and American Select Porfolio Inc. ("SLA"), reorganize into First American Strategic Real Estate Portfolio Inc., a specialty real estate finance company that would elect to 2002 ANNUAL REPORT 22 American Strategic Income Portfolio be taxed as a real estate investment trust ("REIT"). Shareholders of the Fund, BSP, CSP, and SLA who do not wish to receive shares of the REIT will have the option, subject to certain limitations, of electing to exchange their shares for shares in First American Strategic Income Portfolio Inc., a newly formed closed-end management investment company with investment policies, restrictions and strategies substantially similar to those of the Fund, BSP, CSP, and SLA. This transaction is subject to review by the SEC, approval by the Fund's shareholders, and certain other conditions. There is no assurance that the transaction will be completed. 2002 ANNUAL REPORT 23 American Strategic Income Portfolio NOTES TO FINANCIAL Statements continued (7) 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 STRATEGIC INCOME PORTFOLIO
YEAR ENDED NOVEMBER 30, -------------------------------------- 2002 2001 2000 1999 1998 ------ ------ ------ ------ ------ PER-SHARE DATA Net asset value, beginning of period.... $12.63 $12.51 $12.35 $12.98 $12.88 ------ ------ ------ ------ ------ Operations: Net investment income................. 0.96 1.05 0.97 1.00 1.01 Net realized and unrealized gains (losses) on investments............. 0.05 0.13 0.15 (0.62) 0.06 ------ ------ ------ ------ ------ Total from operations............... 1.01 1.18 1.12 0.38 1.07 ------ ------ ------ ------ ------ Distributions to shareholders: From net investment income............ (1.03) (1.06) (0.96) (1.01) (0.97) ------ ------ ------ ------ ------ Net asset value, end of period.......... $12.61 $12.63 $12.51 $12.35 $12.98 ====== ====== ====== ====== ====== Per-share market value, end of period... $12.05 $12.79 $11.19 $11.44 $12.13 ====== ====== ====== ====== ====== SELECTED INFORMATION Total return, net asset value (a)....... 8.32% 9.85% 9.55% 3.03% 8.56% Total return, market value (b).......... 2.32% 24.73% 6.68% 2.76% 10.69% Net assets at end of period (in millions)............................. $ 53 $ 53 $ 53 $ 58 $ 61 Ratio of expenses to average weekly net assets including interest expense..... 2.81% 2.70% 3.92% 3.83% 2.89% Ratio of expenses to average weekly net assets excluding interest expense..... 1.63% 1.34% 1.56% 1.52% 1.47% Ratio of net investment income to average weekly net assets............. 7.56% 8.25% 7.85% 7.86% 7.74% Portfolio turnover rate (excluding short-term securities)................ 18% 30% 32% 22% 38% Amount of borrowings outstanding at end of period (in millions)............... $ 17 $ 22 $ 12 $ 21 $ 17 Per-share amount of borrowings outstanding at end of period.......... $ 3.92 $ 5.19 $ 2.77 $ 4.50 $ 3.49 Per-share amount of net assets, excluding borrowings, at end of period................................ $16.53 $17.82 $15.28 $16.85 $16.47 Asset coverage ratio (c)................ 421% 343% 552% 375% 471%
(a) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE. (b) ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE FUND'S DIVIDEND REINVESTMENT PLAN. (c) REPRESENTS NET ASSETS, EXCLUDING BORROWINGS, AT END OF PERIOD DIVIDED BY BORROWINGS OUTSTANDING AT END OF PERIOD. 2002 ANNUAL REPORT 24 American Strategic Income Portfolio INVESTMENTS IN Securities
AMERICAN STRATEGIC INCOME PORTFOLIO November 30, 2002 Date Par Description of Security Acquired Value Cost Value (a) ------------------------------ -------- -------------- ----------- ----------- (PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS) U.S. GOVERNMENT AND AGENCY SECURITIES (36.6%): U.S. AGENCY MORTGAGE-BACKED SECURITIES (36.6%): FIXED RATE (36.6%): 9.00%, FHLMC, 7/1/30.............. $1,322,279 $ 1,358,191 $ 1,424,755 6.50%, FNMA, 11/1/31............. 3,306,802(b) 3,382,100 3,417,284 7.50%, FNMA, 3/1/30... 4,008,154(b) 3,941,047 4,247,808 7.50%, FNMA, 5/1/30... 551,135(b) 532,092 583,343 8.00%, FNMA, 5/1/30... 189,131(b) 186,676 202,785 6.00%, FNMA, 5/1/31... 3,905,534(b) 3,928,422 3,995,380 6.00%, FNMA, 10/1/16............. 3,795,418(b) 3,880,636 3,943,647 6.50%, FNMA, 6/1/29... 1,662,628(b) 1,650,943 1,722,383 ----------- ----------- Total U.S. Government and Agency Securities.......... 18,860,107 19,537,385 ----------- ----------- CORPORATE NOTES (E) (12.3%): FIXED RATE (12.3%): 9.25%, Oly Holigan, LP, 1/1/04.......... 12/26/00 2,500,000 2,500,000 2,525,000 8.00%, Value Enhancement Fund IV, 6/27/04............. 06/27/01 4,000,000 4,000,000 4,040,000 ----------- ----------- Total Corporate Notes............... 6,500,000 6,565,000 ----------- ----------- PRIVATE MORTGAGE-BACKED SECURITIES (E) (0.0%): FIXED RATE (0.0%): 13.04%, Minnesota Mortgage Corporation, 7/25/14............. 05/19/92 33,957 34,654 34,466 ----------- ----------- WHOLE LOANS AND PARTICIPATION MORTGAGES (C,D,E) (65.3%): COMMERCIAL LOANS (35.1%): Advance Self Storage, 9.13%, 12/1/05........ 11/29/00 1,275,631 1,275,631 1,339,412 Buca Restaurant, 8.63%, 1/1/11................ 12/27/00 931,196 931,196 977,756 Dietzgen Industrial Building, 9.00%, 1/1/06................ 12/14/00 1,460,367 1,460,367 1,533,385 Hampden Medical Office, 7.38%, 10/1/12........ 09/09/02 1,798,323 1,798,323 1,888,239
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES. 2002 ANNUAL REPORT 25 American Strategic Income Portfolio INVESTMENTS IN Securities continued
AMERICAN STRATEGIC INCOME PORTFOLIO (CONTINUED) Date Par Description of Security Acquired Value Cost Value (a) ------------------------------ -------- -------------- ----------- ----------- Integrity Plaza Shopping Center, 8.00%, 7/1/12................ 06/11/02 $2,142,314 $ 2,142,314 $ 2,249,430 Main Street Office Building, 8.38%, 11/1/07............... 10/21/97 835,083 833,691 876,838 One Eastern Heights Office Building, 8.21%, 12/1/07........ 11/07/97 1,020,421 1,020,421 807,239 Orchard Commons, 8.75%, 4/1/11................ 03/28/01 1,010,455 1,010,455 1,060,978 Pacific Periodicals Building, 8.03%, 1/1/08................ 12/09/97 1,279,753 1,279,753 1,343,741 Schendel Office Building, 8.20%, 10/1/07............... 09/30/97 1,088,785 1,088,785 1,051,719 Shallowford Business Park, 9.13%, 7/1/03... 06/25/96 1,504,885 1,504,718 1,519,934 Sherwin Williams, 8.50%, 1/1/04................ 12/20/96 1,325,359 1,325,359 1,351,867 Stephens Retail Center, 9.23%, 8/1/03......... 09/06/96 1,101,242 1,096,653 1,112,254 Voit Office Building, 8.13%, 9/1/08......... 08/17/01 1,536,000 1,536,000 1,612,800 ----------- ----------- 18,303,666 18,725,592 ----------- ----------- MULTIFAMILY LOANS (23.9%): Applewood Manor, 8.63%, 1/1/08................ 12/23/93 639,110 635,914 671,065 Charleston Plaza Apartments, 7.38%, 7/1/08................ 07/01/98 1,488,341 1,488,341 1,562,759 El Dorado Apartments I, 7.13%, 10/1/05........ 09/04/02 2,090,000 2,090,000 2,152,700 El Dorado Apartments II, 9.88%, 10/1/05........ 09/04/02 468,000 468,000 424,492 Franklin Woods Apartments, 9.78%, 3/1/10................ 02/24/95 1,107,234 1,104,240 1,162,595 Garden Oaks Apartments, 8.43%, 4/1/06......... 03/07/96 1,675,785 1,672,640 1,742,817 Park Hollywood, 7.50%, 6/1/12................ 05/31/02 1,172,323 1,172,323 1,230,939 Rush Oaks Apartments, 7.78%, 12/1/07........ 11/26/97 512,406 512,406 538,026 Vanderbilt Condominiums, 8.16%, 10/1/09........ 09/29/99 1,167,336 1,167,336 1,225,703
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES. 2002 ANNUAL REPORT 26 American Strategic Income Portfolio
AMERICAN STRATEGIC INCOME PORTFOLIO (CONTINUED) Date Par Description of Security Acquired Value Cost Value (a) ------------------------------ -------- -------------- ----------- ----------- Westhollow Place Apartments, 8.46%, 4/1/03................ 03/20/96 $ 938,061 $ 928,680 $ 938,061 Woodland Garden Apartments, 7.38%, 9/1/08................ 08/26/98 1,018,777 1,018,777 1,069,716 ----------- ----------- 12,258,657 12,718,873 ----------- ----------- SINGLE FAMILY LOANS (6.3%): Aegis, 9.21%, 3/26/10... 10/26/95 49,943 47,181 51,441 Aegis II, 9.65%, 1/28/14............... 12/28/95 281,747 258,151 290,199 American Bank, Mankato, 10.00%, 12/10/12...... 12/15/92 33,160 27,071 34,154 American Portfolio, 7.32%, 10/18/15....... 07/18/95 29,724 28,314 30,616 Anivan, 7.77%, 4/14/12............... 06/14/96 129,718 130,557 133,608 Bank of New Mexico, 9.29%, 3/31/10........ 05/31/96 96,706 94,907 99,478 Bluebonnet Savings and Loan, 8.06%, 8/31/10............... 05/22/92 258,303 236,651 263,608 Bluebonnet Savings and Loan II, 11.63%, 8/31/10............... 05/22/92 15,545 15,231 15,368 CLSI Allison Williams, 10.27%, 8/1/17........ 02/28/92 163,443 150,327 168,020 Cross Roads Savings and Loan, 9.44%, 1/1/21... 01/07/92 100,372 94,923 103,364 Cross Roads Savings and Loan II, 9.20%, 1/1/21................ 01/07/92 72,866 68,527 74,805 Fairbanks, Utah, 10.02%, 9/23/15............... 05/21/92 25,776 21,877 26,549 First Boston Mortgage Pool, 9.12%, 6/29/03............... 06/23/92 98,884 80,819 101,850 Hamilton Financial, 8.68%, 6/29/10........ 07/08/92 101,850 93,447 102,557 Huntington MEWS, 9.66%, 8/1/17................ 01/22/92 434,912 375,468 447,959 Knutson Mortgage Portfolio I, 8.78%, 8/1/17................ 02/26/92 204,179 194,833 210,304 McClemore, Matrix Funding Corporation, 10.50%, 9/30/12....... 09/09/92 135,467 128,694 139,531 Meridian, 9.59%, 12/1/20............... 12/21/92 237,651 226,660 244,781
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES. 2002 ANNUAL REPORT 27 American Strategic Income Portfolio INVESTMENTS IN Securities continued
AMERICAN STRATEGIC INCOME PORTFOLIO (CONTINUED) Date Par Value/ Description of Security Acquired Shares Cost Value (a) ------------------------------ -------- -------------- ----------- ----------- Nomura III, 9.39%, 4/29/17............... 09/29/95 $ 483,372 $ 436,941 $ 484,921 Rand Mortgage Corporation, 9.50%, 8/1/17................ 02/01/92 121,778 99,897 125,431 Salomon II, 9.21%, 11/23/14.............. 12/23/94 174,633 152,008 179,872 Valley Bank of Commerce, N.M., 8.34%, 8/31/10............... 05/07/92 51,612 43,905 53,161 ----------- ----------- 3,006,389 3,381,577 ----------- ----------- Total Whole Loans and Participation Mortgages........... 33,568,712 34,826,041 ----------- ----------- MORTGAGE SERVICING RIGHTS (E,F) (0.2%): Matrix Servicing Rights, 0.12%, 7/10/22........ 07/10/92 11,028,533 92,361 84,611 ----------- ----------- PREFERRED STOCKS (7.6%): REAL ESTATE INVESTMENT TRUSTS (7.6%): AMB Property............ 5,000 125,399 129,250 Archstone Community Trust, Series D....... 13,125 342,037 343,875 Avalonbay Communities, Series D.............. 8,900 223,546 222,055 Avalonbay Communities, Series H.............. 9,200 250,053 242,236 CarrAmerica Realty Trust, Series B....... 5,128 128,251 128,303 CarrAmerica Realty Trust, Series C....... 2,800 70,168 70,140 CarrAmerica Realty Trust, Series D....... 11,800 293,483 295,590 Centerpoint Properties, Series A.............. 14,700 370,891 369,705 Duke Realty Investments, Series E.............. 625 15,506 16,125 Equity Office Properties Trust, Series C....... 9,400 244,929 238,760 Equity Office Properties Trust, Series E....... 3,000 74,730 74,850 Equity Office Properties Trust, Series G....... 13,200 325,875 332,640 Equity Residential Properties, Series D.............. 1,600 42,553 42,640 Equity Residential Properties, Series L.............. 11,700 286,543 289,926
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES. 2002 ANNUAL REPORT 28 American Strategic Income Portfolio
AMERICAN STRATEGIC INCOME PORTFOLIO (CONTINUED) Description of Security Shares Cost Value (a) ------------------------------ -------------- ----------- ----------- New Plan Excel Realty Trust, Series B....... 24,800 $ 619,393 $ 631,408 Prologis Trust, Series D.............. 15,900 401,377 403,542 Prologis Trust, Series E.............. 9,400 248,914 239,888 ----------- ----------- Total Preferred Stocks.............. 4,063,648 4,070,933 ----------- ----------- RELATED PARTY MONEY MARKET FUND (G) (8.5%): First American Prime Obligations Fund...... 4,537,937 4,537,937 4,537,937 ----------- ----------- Total Investments in Securities (h)........ $67,657,419 $69,656,374 =========== ===========
NOTES TO INVESTMENTS IN SECURITIES: (A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS. (B) ON NOVEMBER 30, 2002, SECURITIES VALUED AT $17,690,403 WERE PLEDGED AS COLLATERAL FOR THE FOLLOWING OUTSTANDING REVERSE REPURCHASE AGREEMENTS:
NAME OF BROKER ACQUISITION ACCRUED AND DESCRIPTION AMOUNT DATE RATE DUE INTEREST OF COLLATERAL --------------------- ----------- -------- -------- -------- --------------- $ 8,000,000 4/12/01 4.65%* 4/17/03 $19,633 (1) 8,600,000 11/15/02 1.37%** 12/16/02 5,237 (2) ----------- ------- $16,600,000 $24,870 =========== =======
*RATE IS A NEGOTIATED FIXED RATE. **INTEREST RATE AS OF NOVEMBER 30, 2002. RATE IS BASED ON THE LONDON INTERBANK OFFERED RATE (LIBOR) AND RESET MONTHLY. NAME OF BROKER AND DESCRIPTION OF COLLATERAL: (1) MORGAN STANLEY; FNMA, 7.50%, 3/1/30, $3,933,004 PAR FNMA, 7.50%, 5/1/30, $551,135 PAR FNMA, 8.00%, 5/1/30, $189,131 PAR FNMA, 6.50%, 6/1/29, $1,662,628 FNMA, 6.00%, 10/1/16, $1,947,567 PAR 2002 ANNUAL REPORT 29 American Strategic Income Portfolio INVESTMENTS IN Securities continued (2) MORGAN STANLEY; FNMA, 6.00%, 10/1/16, $1,518,167 PAR FNMA, 6.00%, 5/1/31, $3,905,534 PAR FNMA, 6.50%, 11/1/31, $3,306,802 PAR THE FUND HAS ENTERED INTO A LENDING COMMITMENT WITH MORGAN STANLEY. THE AGREEMENT PERMITS THE FUND TO ENTER INTO REVERSE REPURCHASE AGREEMENTS UP TO $10,000,000 USING WHOLE LOANS AS COLLATERAL. THE FUND PAYS A FEE OF 0.15% TO MORGAN STANLEY ON ANY UNUSED PORTION OF THE $10,000,000 LENDING COMMITMENT. (C) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT ON NOVEMBER 30, 2002. INTEREST RATES AND MATURITY DATES DISCLOSED ON SINGLE FAMILY LOANS REPRESENT THE WEIGHTED AVERAGE COUPON AND WEIGHTED AVERAGE MATURITY FOR THE UNDERLYING MORTGAGE LOANS AS OF NOVEMBER 30, 2002. (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 SELF STORAGE - LINCOLN, NE BUCA RESTAURANT - MAPLE GROVE, MN DIETZGEN INDUSTRIAL BUILDING - GARDENA, CA HAMPDEN MEDICAL OFFICE - ENGLEWOOD, CO INTEGRITY PLAZA SHOPPING CENTER - ALBUQUERQUE, NM MAIN STREET OFFICE BUILDING - PARK CITY, UT ONE EASTERN HEIGHTS OFFICE BUILDING - WOODBURY, MN ORCHARD COMMONS - ENGLEWOOD, CO PACIFIC PERIODICALS BUILDING - LAKEWOOD, WA SCHENDEL OFFICE BUILDING - BEAVERTON, OR SHALLOWFORD BUSINESS PARK - CHATANOOGA, TN SHERWIN WILLIAMS - ORLANDO, FL STEPHENS RETAIL CENTER - MISSOULA, MT VOIT OFFICE BUILDING - ORANGE, CA MULTIFAMILY LOANS: APPLEWOOD MANOR - DULUTH, MN CHARLESTON PLAZA APARTMENTS - LAS VEGAS, NV EL DORADO APARTMENTS I - TUCSON, AZ EL DORADO APARTMENTS II - TUCSON, AZ FRANKLIN WOODS APARTMENTS - FRANKLIN, NH GARDEN OAKS APARTMENTS - COON RAPIDS, MN PARK HOLLYWOOD - PORTLAND, OR RUSH OAKS APARTMENTS - LAPORTE, TX VANDERBILT CONDOMINIUMS - AUSTIN, TX WESTHOLLOW PLACE APARTMENTS - HOUSTON, TX WOODLAND GARDEN APARTMENTS - ARLINGTON, WA 2002 ANNUAL REPORT 30 American Strategic Income Portfolio SINGLE FAMILY LOANS: AEGIS - 1 LOAN, MIDWESTERN UNITED STATES AEGIS II - 3 LOANS, MIDWESTERN UNITED STATES AMERICAN BANK, MANKATO - 1 LOAN, MINNESOTA AMERICAN PORTFOLIO - 1 LOAN, TEXAS AND CALIFORNIA ANIVAN - 2 LOANS, MARYLAND, NEW JERSEY, VIRGINIA BANK OF NEW MEXICO - 4 LOANS, NEW MEXICO BLUEBONNET SAVINGS AND LOAN - 9 LOANS, TEXAS BLUEBONNET SAVINGS AND LOAN II - 2 LOANS, TEXAS CLSI ALLISON WILLIAMS - 12 LOANS, TEXAS CROSS ROADS SAVINGS AND LOAN - 4 LOANS, OKLAHOMA CROSS ROADS SAVINGS AND LOAN II - 5 LOANS, OKLAHOMA FAIRBANKS - 1 LOAN, UTAH FIRST BOSTON MORTGAGE POOL - 5 LOANS, UNITED STATES HAMILTON FINANCIAL - 1 LOAN, CALIFORNIA HUNTINGTON MEWS - 10 LOANS, NEW JERSEY KNUTSON MORTGAGE PORTFOLIO I - 3 LOANS, MIDWESTERN UNITED STATES MCCLEMORE, MATRIX FUNDING CORPORATION - 2 LOANS, NORTH CAROLINA MERIDIAN - 4 LOANS, CALIFORNIA NOMURA III - 9 LOANS, MIDWESTERN UNITED STATES RAND MORTGAGE CORPORATION - 3 LOANS, TEXAS SALOMON II - 4 LOANS, MIDWESTERN UNITED STATES VALLEY BANK OF COMMERCE, N.M. - 5 LOANS, NEW MEXICO (E) SECURITIES PURCHASED AS PART OF A PRIVATE PLACEMENT WHICH HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 AND ARE CONSIDERED TO BE ILLIQUID. ON NOVEMBER 30, 2002, THE TOTAL VALUE OF THESE INVESTMENTS WAS $41,510,118 OR 77.8% OF TOTAL NET ASSETS. (F) INTEREST RATE DISCLOSED REPRESENTS THE CURRENT YIELD BASED ON THE CURRENT COST BASIS AND ESTIMATED FUTURE CASH FLOWS. (G) THIS MONEY MARKET FUND IS ADVISED BY U.S. BANCORP ASSET MANAGEMENT, INC., WHICH ALSO SERVES AS ADVISOR FOR THE FUND. SEE ALSO NOTE 2 AND NOTE 3 IN THE NOTES TO FINANCIAL STATEMENTS. (H) ON NOVEMBER 30, 2002, THE COST OF INVESTMENTS IN SECURITIES FOR INCOME TAX PURPOSES WAS $68,889,093. COST BASIS FOR FEDERAL INCOME TAX PURPOSES WAS $1,231,674 GREATER THAN THE COST BASIS FOR BOOK PURPOSES DUE TO A ONE-TIME MARK TO MARKET ELECTION MADE PURSUANT TO SECTION 311 OF THE TAX PAYER RELIEF ACT OF 1997. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS:
GROSS UNREALIZED APPRECIATION..................................... $1,094,691 GROSS UNREALIZED DEPRECIATION..................................... (327,410) ---------- NET UNREALIZED APPRECIATION....................................... $ 767,281 ==========
FHLMC-FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA-FEDERAL NATIONAL MORTGAGE ASSOCIATION 2002 ANNUAL REPORT 31 American Strategic Income Portfolio INDEPENDENT Auditors' Report THE BOARD OF DIRECTORS AND SHAREHOLDERS AMERICAN STRATEGIC INCOME PORTFOLIO INC. We have audited the accompanying statement of assets and liabilities of American Strategic Income Portfolio Inc., including the schedule of investments in securities, as of November 30, 2002, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the year ended November 30, 1998, were audited by other auditors whose report dated January 8, 1999, expressed an unqualified opinion. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included examination or confirmation of securities owned as of November 30, 2002, with the custodians. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of American Strategic Income Portfolio Inc. at November 30, 2002, the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP Minneapolis, Minnesota January 3, 2003 2002 ANNUAL REPORT 32 American Strategic Income Portfolio FEDERAL INCOME TAX Information The following per-share information describes the federal tax treatment of distributions made during the fiscal year. Distributions for the calendar year will be reported to you on Form 1099-DIV. Please consult a tax advisor on how to report these distributions at the state and local levels. INCOME DISTRIBUTIONS (TAXABLE AS ORDINARY DIVIDENDS, NONE QUALIFYING FOR THE DIVIDENDS RECEIVED DEDUCTION)
PAYABLE DATE AMOUNT ------------ ------- December 18, 2001................................. $0.0950 January 10, 2002.................................. 0.0950 February 20, 2002................................. 0.0950 March 27, 2002.................................... 0.0950 April 24, 2002.................................... 0.0950 May 22, 2002...................................... 0.0950 June 26, 2002..................................... 0.0950 July 24, 2002..................................... 0.0725 August 28, 2002................................... 0.0725 September 25, 2002................................ 0.0725 October 23, 2002.................................. 0.0725 November 20, 2002................................. 0.0725 ------- Total....................................... $1.0275 =======
2002 ANNUAL REPORT 33 American Strategic Income Portfolio SHAREHOLDER Update ANNUAL MEETING RESULTS An annual meeting of the Fund's shareholders was held on October 1, 2002. Each matter voted upon at that meeting, as well as the number of votes cast for, against or withheld, the number of abstentions, and the number of broker non-votes with respect to such matters, are set forth below. (1) The Fund's shareholders elected the following eight directors:
SHARES SHARES WITHHOLDING VOTED "FOR" AUTHORITY TO VOTE ------------- ------------------ Roger A. Gibson......................... 3,710,619 348,044 Andrew M. Hunter III*................... 3,961,805 96,858 Leonard W. Kedrowski.................... 3,961,805 96,858 John M. Murphy, Jr...................... 3,712,225 346,438 Richard K. Riederer..................... 3,968,705 89,958 Joseph D. Strauss....................... 3,958,614 100,049 Virginia L. Stringer.................... 3,959,748 98,915 James M. Wade........................... 3,964,005 94,658
* ANDREW M. HUNTER III TENDERED HIS RESIGNATION FROM THE BOARD OF DIRECTORS, EFFECTIVE DECEMBER 2002. (2) The Fund's shareholders ratified the selection by the Fund's Board of Directors of Ernst & Young LLP as the independent public accountants for the Fund for the fiscal year ending November 30, 2002. The following votes were cast regarding this matter:
SHARES SHARES BROKER VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON VOTES ------------- ----------------- ----------- --------- 3,767,149 268,338 23,176 --
TERMS AND CONDITIONS OF THE DIVIDEND REINVESTMENT PLAN As a shareholder, you may choose to participate in the Dividend Reinvestment Plan, which is a convenient and economical way to buy additional shares of the Fund by automatically reinvesting dividends and capital gains. The plan is administered by EquiServe, the plan agent. 2002 ANNUAL REPORT 34 American Strategic Income Portfolio ELIGIBILITY/PARTICIPATION You may join the plan at any time. Reinvestment of distributions will begin with the next distribution paid, provided your request is received at least 10 days before the record date for that distribution. If your shares are in certificate form, you may join the plan directly and have your distributions reinvested in additional shares of the Fund. To enroll in this plan, call EquiServe at 800-426-5523. If your shares are registered in your brokerage firm's name or another name, ask the holder of your shares how you may participate. Banks, brokers, or nominees, on behalf of their beneficial owners who wish to reinvest dividend and capital gains distributions, may participate in the plan by informing EquiServe at least 10 days before each share's dividend and/or capital gains distribution. PLAN ADMINISTRATION Beginning no more than 5 business days before the dividend payment date, EquiServe will buy shares of the Fund on the New York Stock Exchange (NYSE) or elsewhere on the open market only when the price of the Fund's shares on the NYSE plus commissions is at a premium of less than a 5% over the Fund's most recently calculated net asset value (NAV) per share. If, at the close of business on the dividend payment date, the shares purchased in the open market are insufficient to satisfy the dividend reinvestment requirement, EquiServe will accept payment of the dividend, or the remaining portion, in authorized but unissued shares of the Fund. These shares will be issued at a per-share price equal to the higher of (a) the NAV per share as of the close of business on the payment date or (b) 95% of the closing market price per share on the payment date. 2002 ANNUAL REPORT 35 American Strategic Income Portfolio SHAREHOLDER Update continued By participating in the dividend reinvestment plan, you may receive benefits not available to shareholders who elect not to participate. For example, if the market price plus commissions of the Fund's shares is 5% or more above the NAV, you will receive shares at a discount of up to 5% from the current market value. However, if the market price plus commissions is below the NAV, you will receive distributions in shares with an NAV greater than the value of any cash distributions you would have received. There is no direct charge for reinvestment of dividends and capital gains, since EquiServe fees are paid for by the Fund. However, if Fund shares are purchased in the open market, each participant pays a pro rata portion of the brokerage commissions. Brokerage charges are expected to be lower than those for individual transactions because shares are purchased for all participants in blocks. As long as you continue to participate in the plan, distributions paid on the shares in your account will be reinvested. EquiServe 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 EquiServe in noncertificated form in your name. TAX INFORMATION Distributions invested in additional shares of the Fund are subject to income tax, to the same extent as if received in cash. When shares are issued by the Fund at a discount from market value, shareholders will be treated as having received distributions of an amount equal to the full market value of those shares. 2002 ANNUAL REPORT 36 American Strategic Income Portfolio Shareholders, as required by the Internal Revenue Service, will receive Form 1099 regarding the federal tax status of the prior year's distributions. PLAN WITHDRAWAL If you hold your shares in certificate form, you may terminate your participation in the plan at any time by giving written notice to EquiServe. 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 issued in certificate form and you discontinue your participation in the plan, you (or your nominee) will receive an additional certificate for all full shares and a check for any fractional shares in your account. PLAN AMENDMENT/TERMINATION The Fund reserves the right to amend or terminate the plan. Should the plan be amended or terminated, participants will be notified in writing at least 90 days before such amendment or termination is effected. The plan may also be amended or terminated by EquiServe 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 EquiServe LP, P.O. Box 43011, Providence, RI 02940-3011, 800-426-5523. 2002 ANNUAL REPORT 37 American Strategic Income Portfolio SHAREHOLDER Update continued DIRECTORS AND OFFICERS OF THE FUND INDEPENDENT DIRECTORS
POSITION(S) HELD WITH NAME, ADDRESS, AND AGE FUND TERM OF OFFICE AND LENGTH OF TIME SERVED --------------------------------------------------------------------------------------- Roger A. Gibson (56) Director Term expiring earlier of death, 1200 Algonquin Road resignation, removal, disqualification, Elk Grove Village, Illinois or successor duly elected and qualified. 60007 Director of ASP since August 1998. --------------------------------------------------------------------------------------- Leonard W. Kedrowski (61) Director Term expiring earlier of death, 6288 Claude Way resignation, removal, disqualification, Inver Grove Heights, Minnesota or successor duly elected and qualified. 55076 Director of ASP since August 1998. --------------------------------------------------------------------------------------- Richard K. Riederer (58) Director Term expiring earlier of death, 741 Chestnut Road resignation, removal, disqualification, Sewickley, Pennsylvania 15143 or successor duly elected and qualified. Director of ASP since August 2001. --------------------------------------------------------------------------------------- Joseph D. Strauss (62) Director Term expiring earlier of death, 8525 Edinbrook Crossing, resignation, removal, disqualification, Suite 5 or successor duly elected and qualified. Brooklyn Park, Minnesota 55443 Director of ASP since August 1998. --------------------------------------------------------------------------------------- Virginia L. Stringer (58) Chair; Chair term three years. Director term 712 Linwood Avenue Director expiring earlier of death, resignation, St. Paul, Minnesota 55105 removal, disqualification, or successor duly elected and qualified. Chair of ASP's board since 1998; Director of ASP since August 1998. --------------------------------------------------------------------------------------- James M. Wade (59) Director Term expiring earlier of death, 2802 Wind Bluff Circle resignation, removal, disqualification, Wilmington, North Carolina or successor duly elected and qualified. 28409 Director of ASP since August 2001.
2002 ANNUAL REPORT 38 American Strategic Income Portfolio
OTHER NUMBER OF PORTFOLIOS IN DIRECTORSHIPS PRINCIPAL OCCUPATION(S) FUND COMPLEX HELD BY DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR+ ------------------------------------------------------------------------------------------------- Vice President, Cargo-United Airlines, since July 2001; First American Funds None Vice President, North America-Mountain Region for Complex: fourteen United Airlines from 1995 to 2001. registered investment companies, including seventy portfolios. ------------------------------------------------------------------------------------------------- Owner, Executive and Management Consulting, Inc., a First American Funds None management consulting firm, since 1992; Chief Executive Complex: fourteen Officer, Creative Promotions International, LLC, a registered investment promotional award programs and products company, since companies, including 1999; Board member, GC McGuiggan Corporation (DBA Smyth seventy portfolios. Companies), a label printer, since 1993; Advisory Board member, Designer Doors, manufacturer of designer doors from 1998 to 2002; acted as CEO of Graphics Unlimited from 1996 to 1998. ------------------------------------------------------------------------------------------------- Retired; President and Chief Executive Officer, Weirton First American Funds None Steel from 1995 to 2001; Director, Weirton Steel from Complex: fourteen 1993 to 2001. registered investment companies, including seventy portfolios. ------------------------------------------------------------------------------------------------- Chairman of FAF's and FAIF's Boards from 1993 to First American Funds None September 1997 and of FASF's Board from June 1996 to Complex: fourteen September 1997; President of FAF and FAIF from June registered investment 1989 to November 1989; Owner and Executive Officer, companies, including Excensus-TM- LLC, a consulting firm, since 2001; Owner seventy portfolios. and President, Strauss Management Company, a Minnesota holding company for various organizational management business ventures, since 1993; Owner, Chairman and Chief Executive Officer, Community Resource Partnerships, Inc., a strategic planning, operations management, government relations, transportation planning and public relations organization, since 1993; attorney at law. ------------------------------------------------------------------------------------------------- Owner and President, Strategic Management First American Funds None Resources, Inc., a management consulting firm, since Complex: fourteen 1993; Executive Consultant for State Farm Insurance registered investment Company since 1997; formerly President and Director, companies, including The Inventure Group, a management consulting and seventy portfolios. training company; President, Scott's, Inc., a transportation company, and Vice President of Human Resources, The Pillsbury Company. ------------------------------------------------------------------------------------------------- Owner and President, Jim Wade Homes, a homebuilding First American Funds None company, since 1999. Complex: fourteen registered investment companies, including seventy portfolios.
2002 ANNUAL REPORT 39 American Strategic Income Portfolio SHAREHOLDER Update continued INTERESTED DIRECTOR
POSITION(S) HELD WITH TERM OF OFFICE AND NAME, ADDRESS, AND AGE FUND LENGTH OF TIME SERVED ---------------------------------------------------------------------------------- John M. Murphy, Jr. (61)* Director Term expiring earlier of death, 800 Nicollet Mall resignation, removal, Minneapolis, Minnesota 55402 disqualification, or successor duly elected and qualified. Director of ASP since August 1999. ----------------------------------------------------------------------------------
OFFICERS
POSITION(S) HELD WITH TERM OF OFFICE AND NAME, ADDRESS, AND AGE FUND LENGTH OF TIME SERVED ---------------------------------------------------------------------------------- Thomas S. Schreier, Jr. (40)** President Re-elected by the board annually; U.S. Bancorp Asset President of ASP since February Management, Inc. 2001. 800 Nicollet Mall Minneapolis, Minnesota 55402 ---------------------------------------------------------------------------------- Mark S. Jordahl (42)** Vice Re-elected by the board annually; U.S. Bancorp Asset President- Vice President-Investments of ASP Management, Inc. Investments since September 2001. 800 Nicollet Mall Minneapolis, Minnesota 55402 ---------------------------------------------------------------------------------- Jeffery M. Wilson (46)** Vice Re-elected by the board annually; U.S. Bancorp Asset President- Vice President-Administration of Management, Inc. Administration ASP since March 2000. 800 Nicollet Mall Minneapolis, Minnesota 55402 ---------------------------------------------------------------------------------- Robert H. Nelson (39)** Treasurer Re-elected by the board annually; U.S. Bancorp Asset Treasurer of ASP since March 2000. Management, Inc. 800 Nicollet Mall Minneapolis, Minnesota 55402 ---------------------------------------------------------------------------------- James D. Alt (51) Secretary Re-elected by the board annually; 50 South Sixth Street, Secretary of ASP since June 2002; Suite 1500 Assistant Secretary of ASP from Minneapolis, Minnesota 55402 September 1999 to June 2002. ---------------------------------------------------------------------------------- Michael J. Radmer (57) Assistant Re-elected by the board annually; 50 South Sixth Street, Secretary Assistant Secretary of ASP since Suite 1500 March 2000; Secretary of ASP from Minneapolis, Minnesota 55402 September 1999 to March 2000. ---------------------------------------------------------------------------------- Kathleen L. Prudhomme (49) Assistant Re-elected by the board annually; 50 South Sixth Street, Secretary Assistant Secretary of ASP since Suite 1500 September 1999. Minneapolis, Minnesota 55402
2002 ANNUAL REPORT 40 American Strategic Income Portfolio
OTHER NUMBER OF PORTFOLIOS IN DIRECTORSHIPS PRINCIPAL OCCUPATION(S) FUND COMPLEX HELD BY DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR+ ------------------------------------------------------------------------------------------------- Retired; Executive Vice President, U.S. Bancorp from First American Funds None January 1999 to December 2002; Minnesota State Complex: fourteen Chairman-U.S. Bancorp from 2000 to December 2002; registered investment Chairman and Chief Investment Officer, First American companies, including Asset Management and U.S. Bank Trust, N.A., and seventy portfolios. Executive Vice President, U.S. Bancorp from 1991 to 1999. -------------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS -------------------------------------------------------------------------------- Chief Executive Officer of U.S. Bancorp Asset Management, Inc. since May 2001; Chief Executive Officer of First American Asset Management from December 2000 to May 2001 and of Firstar Investment & Research Management Company from February 2001 to May 2001; Senior Managing Director and Head of Equity Research of U.S. Bancorp Piper Jaffray from October 1998 to December 2000; Senior Airline Analyst and Director, Equity Research of Credit Suisse First Boston through 1998. -------------------------------------------------------------------------------- Chief Investment Officer of U.S. Bancorp Asset Management, Inc. since September 2001; President and Chief Investment Officer, ING Investment Management-Americas from September 2000 to June 2001; Senior Vice President and Chief Investment Officer, ReliaStar Financial Corp. from January 1998 to September 2000; Executive Vice President and Managing Director, Washington Square Advisers from January 1996 to December 1997. -------------------------------------------------------------------------------- Senior Managing Director of U.S. Bancorp Asset Management, Inc. since May 2001; Senior Vice President of First American Asset Management through May 2001. -------------------------------------------------------------------------------- Chief Operating Officer and Senior Vice President of U.S. Bancorp Asset Management, Inc. since May 2001; Senior Vice President of First American Asset Management from 1998 to May 2001 and of Firstar Investment & Research Management Company from February 2001 to May 2001; Senior Vice President of Piper Capital Management Inc. through 1998. -------------------------------------------------------------------------------- Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm. -------------------------------------------------------------------------------- Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm. -------------------------------------------------------------------------------- Partner, Dorsey & Whitney LLP, a Minneapolis-based law firm. 2002 ANNUAL REPORT 41 American Strategic Income Portfolio SHAREHOLDER Update continued *Mr. Murphy is considered an "interested" Director because of his ownership of securities issued by U.S. Bancorp. **Messrs. Schreier, Jordahl, Wilson, and Nelson are each officers of U.S. Bancorp Asset Management, Inc., which serves as investment advisor for ASP. +Includes only directorships in a company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act or subject to the requirements of Section 15(d) of the Securities Exchange Act, or any company registered as an investment company under the Investment Company Act. FAF First American Funds, Inc. FAIF First American Investment Funds, Inc. FASF First American Strategy Funds, Inc. 2002 ANNUAL REPORT 42 American Strategic Income Portfolio BOARD OF DIRECTORS ROGER GIBSON Director of American Strategic Income Portfolio Inc. Vice President-Cargo, United Airlines LEONARD KEDROWSKI Director of American Strategic Income Portfolio Inc. Owner and President of Executive and Management Consulting, Inc. JOHN MURPHY JR. Director of American Strategic Income Portfolio Inc. Retired; former Executive Vice President of U.S. Bancorp RICHARD RIEDERER Director of American Strategic Income Portfolio Inc. Retired; former President and Chief Executive Officer of Weirton Steel JOSEPH STRAUSS Director of American Strategic Income Portfolio Inc. Former Chairman of First American Investment Funds, Inc. Owner and President of Strauss Management Company VIRGINIA STRINGER Chairperson of American Strategic Income Portfolio Inc. Owner and President of Strategic Management Resources, Inc. JAMES WADE Director of American Strategic Income Portfolio Inc. Owner and President of Jim Wade Homes [FIRST AMERICAN(TM) LOGO] AMERICAN STRATEGIC INCOME PORTFOLIO INC. 2002 ANNUAL REPORT U.S. Bancorp Asset Management, Inc., ("USBAM") is a subsidiary of U.S. Bank National Association, a separate entity and wholly owned subsidiary of U.S. Bancorp. [RECYCLED LOGO] This document is printed on paper containing 10% postconsumer waste. 1/2002 2283-02 ASP-AR