-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U/XwvkVj81iOPOavInzNdkANIYx3w0rWdjV0B9/dOXsFAvwnZB2lnoY0n6EHPbzo dbU/MJ4EDhY/NySCYZTHRg== 0001047469-04-003390.txt : 20040206 0001047469-04-003390.hdr.sgml : 20040206 20040205183142 ACCESSION NUMBER: 0001047469-04-003390 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031130 FILED AS OF DATE: 20040206 EFFECTIVENESS DATE: 20040206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN STRATEGIC INCOME PORTFOLIO INC II CENTRAL INDEX KEY: 0000886984 IRS NUMBER: 411719822 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-06640 FILM NUMBER: 04571214 BUSINESS ADDRESS: STREET 1: 800 NICOLLET AVE STREET 2: USBANK CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123033381 MAIL ADDRESS: STREET 1: 800 NICOLLET AVE STREET 2: USBANK CITY: MINNEAPOLIS STATE: MN ZIP: 55402 N-CSRS 1 a2127008zn-csrs.txt N-CSRS ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response....... 5.0 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-6640 --------------------------------------------- American Strategic Income Portfolio Inc. II - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 800 Nicollet Mall Minneapolis, MN 55402 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Joseph M. Ulrey III 800 Nicollet Mall Minneapolis, MN 55402 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 800-677-3863 ---------------------------- Date of fiscal year end: May 31, 2003 -------------------------- Date of reporting period: November 30, 2003 ------------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. Item 1. Report to Shareholders [FIRST AMERICAN (TM) LOGO] AMERICAN STRATEGIC INCOME PORTFOLIO INC. II BSP NOVEMBER 30, 2003 SEMIANNUAL REPORT [FIRST AMERICAN(TM) LOGO] AMERICAN STRATEGIC INCOME PORTFOLIO INC. II TABLE OF CONTENTS 1 Financial Statements 5 Notes to Financial Statements 18 Schedule of Investments 27 Shareholder Update
As you are probably aware, the board of directors for American Strategic Income Portfolio Inc. II (the "Fund"), as well as American Strategic Income Portfolio Inc., American Strategic Income Portfolio Inc. III, and American Select Portfolio Inc. (collectively, the "Existing Funds"), 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 the Existing Funds 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 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 Existing Funds. 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. OUR IMAGE-GEORGE WASHINGTON HIS RICH LEGACY AS PATRIOT AND LEADER IS WIDELY RECOGNIZED AS EMBODYING THE SOUND JUDGMENT, RELIABILITY, AND STRATEGIC VISION THAT ARE CENTRAL TO OUR BRAND. FASHIONED IN A STYLE REMINISCENT OF AN 18TH CENTURY ENGRAVING, THE ILLUSTRATION CONVEYS THE SYMBOLIC STRENGTH AND VITALITY OF WASHINGTON, WHICH ARE ATTRIBUTES THAT WE VALUE AT FIRST AMERICAN. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE FINANCIAL STATEMENTS (Unaudited) STATEMENT OF ASSETS AND LIABILITIES November 30, 2003 ASSETS: Investments in unaffiliated securities, at value* (note 2) $ 253,853,388 Investments in affiliated money market fund, at value** (note 3) 2,473,406 Cash in bank on demand deposit 141,568 Accrued interest receivable 706,632 Other assets 362,603 ---------------- Total assets 257,537,597 ---------------- LIABILITIES: Reverse repurchase agreements payable (note 2) 48,765,000 Payable for investment management fees 105,301 Payable for administrative fees 42,709 Payable for interest expense 56,440 Payable for reorganization expenses (notes 3 and 6) 94,639 Payable for other expenses 75,166 ---------------- Total liabilities 49,139,255 ---------------- Net assets applicable to outstanding capital stock $ 208,398,342 ================ COMPOSITION OF NET ASSETS: Capital stock and additional paid-in capital $ 231,168,442 Undistributed net investment income 1,438,112 Accumulated net realized loss on investments (27,287,103) Unrealized appreciation of investments 3,078,891 ---------------- Total-representing net assets applicable to capital stock $ 208,398,342 ================ *Investments in unaffiliated securities, at cost $ 250,774,497 ================ **Investments in affiliated money market fund, at cost $ 2,473,406 ================ NET ASSET VALUE AND MARKET PRICE OF CAPITAL STOCK: Net assets outstanding $ 208,398,342 Shares outstanding (authorized 1 billion shares of $0.01 par value) 15,964,968 Net asset value per share $ 13.05 Market price per share $ 13.71
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 1 STATEMENT OF OPERATIONS For the Six Months Ended November 30, 2003 INVESTMENT INCOME: Interest (net of interest expense of $635,551) $ 10,159,468 Dividends 15,883 Interest from affiliated money market fund 16,635 ---------------- Total investment income 10,191,986 ---------------- EXPENSES (NOTE 3): Investment management fees 666,256 Administrative fees 259,829 Custodian fees 20,786 Transfer agent fees 11,056 Exchange listing and registration fees 13,416 Reports to shareholders 29,520 Mortgage servicing fees 104,085 Directors' fees 18,363 Audit and legal fees 57,502 Financial advisory and accounting fees 27,834 Other expenses 41,849 ---------------- Total expenses 1,250,496 ---------------- Net investment income 8,941,490 ---------------- NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (NOTE 4): Net realized gain on investments in securities 400,820 Net change in unrealized appreciation or depreciation of investments (1,335,180) ---------------- Net loss on investments (934,360) ---------------- Net increase in net assets resulting from operations $ 8,007,130 ================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 2 STATEMENT OF CASH FLOWS For the Six Months Ended November 30, 2003 CASH FLOWS FROM OPERATING ACTIVITIES: Investment income $ 10,191,986 Expenses (1,250,496) ---------------- Net investment income 8,941,490 ---------------- Adjustments to reconcile net investment income to net cash provided by operating activities: Change in accrued interest receivable 466,850 Net amortization of bond discount and premium 7,193 Change in accrued fees and expenses (53,500) Change in other assets (147,199) ---------------- Total adjustments 273,344 ---------------- Net cash provided by operating activities 9,214,834 ---------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of investments 62,115,216 Purchases of investments (38,351,013) Net purchases of short-term securities (552,455) ---------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net payments for reverse repurchase agreements (23,878,221) Distributions paid to shareholders (8,998,280) ---------------- Net cash used by financing activities (32,876,501) ---------------- Net decrease in cash (449,919) Cash at beginning of period 591,487 ---------------- Cash at end of period $ 141,568 ================ Supplemental disclosure of cash flow information: Cash paid for interest $ 680,054 ================ Noncash financing activities resulting from reinvested dividends $ 100,295 ================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 3 STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED 11/30/03 YEAR ENDED (UNAUDITED) 5/31/03 ---------------- --------------- OPERATIONS: Net investment income $ 8,941,490 $ 17,925,479 Net realized gain on investments 400,820 802,647 Net change in unrealized appreciation or depreciation of investments (1,335,180) (3,163,181) ---------------- --------------- Net increase in net assets resulting from operations 8,007,130 15,564,945 ---------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2): From net investment income (9,098,575) (18,191,315) ---------------- --------------- CAPITAL SHARE TRANSACTIONS (NOTE 2): Proceeds from 7,679 shares issued from reinvested dividends 100,295 -- ---------------- --------------- Total decrease in net assets (991,150) (2,626,370) Net assets at beginning of period 209,389,492 212,015,862 ---------------- --------------- Net assets at end of period $ 208,398,342 $ 209,389,492 ================ =============== Undistributed net investment income $ 1,438,112 $ 1,595,197 ================ ===============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 4 NOTES TO FINANCIAL STATEMENTS (Unaudited) (1) ORGANIZATION American Strategic Income Portfolio Inc. II (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 and corporate debt securities. 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 BSP. (2) SUMMARY OF SECURITY VALUATIONS SIGNIFICANT Security valuations for the Fund's investments are ACCOUNTING furnished by one or more independent pricing services that POLICIES 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. For securities traded on the Nasdaq national market system, the Fund utilizes the Nasdaq Official Closing Price which compares the last trade to the bid/ask price of a security. If the last trade is within the bid/ask range, then that price will be the closing price. If the last trade is outside the bid/ask range, and falls above the ask, the ask price will be the closing price. If the last trade is below the bid, the bid will be the closing price. Other equity securities traded in 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 60 days to maturity are valued by an independent pricing service. The pricing service may employ methodologies that utilize actual market transactions, broker-dealer supplied 5 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. If events occur that materially affect the value of securities (including non-U.S. securities) between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities will be valued at fair value. As of November 30, 2003, the Fund held fair valued securities with a value of $230,119,470 or 110.4% of net assets. Debt obligations with 60 days or less remaining until maturity may be valued at their amortized cost which approximates market value. Security valuations are performed once a week and at the end of each month. The Fund's investments in whole loans (single family, multifamily, and commercial) and participation mortgages 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 and participation mortgage investments are initially valued at cost and their values are subsequently monitored and adjusted using a U.S. Bancorp Asset Management, Inc. ("USBAM") pricing model designed to incorporate, among other things, the 6 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 investments. 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 and participation mortgages are determined no less frequently than weekly. Although we believe the pricing model to be reasonable and appropriate, the actual values that may be realized upon the sale of whole loans and participation mortgages can only be determined in a negotiation between the Fund and third parties. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security transactions are accounted for on the date securities are purchased or sold. Realized gains and losses are calculated on the identified-cost basis. Dividend income is recorded on the ex-dividend date. Interest income, including accretion of bond discounts and amortization of premiums, is recorded on an accrual basis. 7 WHOLE LOANS AND PARTICIPATION MORTGAGES Whole loans and participation mortgages may bear a greater risk of loss arising from a default on the part of the borrower of the underlying loans than do traditional mortgage-backed securities. This is because whole loans and participation mortgages, unlike most mortgage-backed securities, generally are not backed by any government guarantee or private credit enhancement. Such risk may be greater during a period of declining or stagnant real estate values. In addition, the individual loans underlying whole loans and participation mortgages may be larger than the loans underlying mortgage-backed securities. With respect to participation mortgages, the Fund generally will not be able to unilaterally enforce its rights in the event of a default, but rather will be dependent on the cooperation of the other participation holders. 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, 2003, loans representing 0.2% of net assets were 120 days or more delinquent as to the timely monthly payment of principal and interest. Such delinquencies relate solely to single family whole loans and represent 24.4% of total single family value outstanding at November 30, 2003. At November 30, 2003, no multifamily or commercial loans were deliquent. Real estate acquired through foreclosure, if any, is recorded at estimated fair value. The Fund may receive rental or other income as a result of holding real estate. In addition, 8 the Fund may incur expenses associated with maintaining any real estate owned. As of and for the six months ended November 30, 2003, the Fund owned no real estate. 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 six months ended November 30, 2003, the weighted average borrowings outstanding were $66,570,704 and the weighted average interest rate was 1.72%. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS Delivery and payment for securities that have been purchased by the Fund on a when-issued or forward-commitment basis can take place a month or more after the transaction date. During this period, such securities do not earn interest, are subject to market fluctuation, and may increase or decrease in value prior to their delivery. The Fund segregates, with its custodian, assets with a market value equal to the amount of its purchase commitments. The purchase of securities on a when-issued or forward-commitment basis may increase the volatility of the Fund's net asset value if the Fund makes such purchases while remaining substantially fully invested. As of November 30, 2003, the Fund had no outstanding when-issued or forward-commitment securities. 9 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 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. The tax character of distributions paid during the six months ended November 30, 2003 (estimated) and the fiscal year ended May 31, 2003 was as follows:
11/30/03 5/31/03 --------------- --------------- Distributions paid from: Ordinary income $ 9,098,575 $ 18,191,315 =============== ===============
At May 31, 2003, the Fund's most recently completed fiscal year end, the components of accumulated deficit on a tax basis were as follows: Undistributed ordinary income $ 1,595,197 Accumulated realized losses on investments (25,029,480) Unrealized appreciation of investments 1,755,628 --------------- Accumulated deficit $ (21,678,655) ===============
10 The difference between book basis and tax basis unrealized appreciation and accumulated realized losses at May 31, 2003 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 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 balance 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 11 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 USBAM. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from these estimates. (3) EXPENSES INVESTMENT MANAGEMENT AND ADMINISTRATIVE FEES Pursuant to an investment advisory agreement (the "Agreement"), USBAM, 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 USBAM with a monthly investment management fee 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 accretion of bond discounts and amortization of premiums, 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 six months ended November 30, 2003, the annualized investment management fee incurred by the Fund was 0.64%. For its fee, USBAM provides investment advice, and in general, conducts the management and investment activities of the Fund. 12 Pursuant to a co-administration agreement (the "Co-Administration Agreement"), USBAM serves as co-administrator for the Fund (U.S. Bancorp Fund Services, LLC, a subsidiary of U.S. Bancorp, is also co-administrator but currently has no functional responsibilities related to the Fund) and provides administrative services, including legal and shareholder services, to the Fund. Under this agreement, USBAM receives a monthly administrative fee equal to an annualized rate of 0.25% of the Fund's average weekly net assets. For its fee, USBAM provides numerous services to the Fund including, but not limited to, handling the general business affairs, financial and regulatory reporting, and various other services. Separate from the Co-Administration Agreement, USBAM (from its own resources) has retained SEI Investments, Inc. as a sub-administrator to perform, among other services, net asset value calculations. The Fund may invest in money market funds that are series of First American Funds, Inc. ("FAF"), subject to certain limitations. The terms of such investments are identical to those of investments by non-related entities except that, to avoid duplicative investment advisory fees, USBAM reimburses the Fund an amount equal to the investment advisory fee paid by FAF to USBAM related to such investments. For financial statement purposes, this reimbursement is recorded as investment income. CUSTODIAN FEES U.S. Bank serves as the Fund's custodian pursuant to a custodian agreement with the Fund. The fee for the Fund is equal to an annual rate of 0.02% of average weekly net assets. These fees are computed weekly and paid monthly. 13 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. PROPOSED REORGANIZATION EXPENSES As discussed in Note 6, the Fund has taken certain steps to reorganize along with certain other similar entities managed by USBAM. As set forth below, certain costs and expenses incurred in connection with the proposed reorganization of the Fund (including, but not 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 Strategic Income Portfolio Inc., American Strategic Income Portfolio Inc. III, and American Select Portfolio Inc., (collectively, 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, 2003, 14 the Fund would bear approximately 31% of the total expenses of the reorganization allocated to the Existing Funds. During the six months ended November 30, 2003, the Fund incurred $94,639 in reorganization expenses. OTHER FEES AND EXPENSES In addition to the investment management and administrative fees, the Fund is responsible for paying most other operating expenses, including: outside directors' fees and expenses, custodian fees, registration fees, printing and shareholder reports, transfer agent fees and expenses, legal, auditing and accounting services, insurance, interest, expenses related to real estate owned, taxes, and other miscellaneous expenses. During the six months ended November 30, 2003, fees for custody services were paid to U.S. Bank. (4) INVESTMENT Cost of purchases and proceeds from sales of securities and SECURITY real estate, other than temporary investments in short-term TRANSACTIONS securities, for the six months ended November 30, 2003, aggregated $38,343,820 and $62,115,216, respectively. Included in proceeds from sales are $355,995 from prepayment penalties. (5) CAPITAL LOSS For federal income tax purposes, the Fund had capital loss CARRYOVER carryovers at May 31, 2003, the Fund's most recently completed fiscal year end, which, if not offset by subsequent capital gains, will expire on the Fund's fiscal year-ends as indicated below.
CAPITAL LOSS CARRYOVER EXPIRATION -------------- ---------- $ 22,840,468 2004 922,669 2005 1,266,343 2006 -------------- $ 25,029,480 ==============
15 (6) PROPOSED A combined proxy statement/registration statement, last REORGANIZATION amended on April 22, 2003, has been filed with the Securities and Exchange Commission ("SEC") in which it is proposed that the Fund, along with American Strategic Income Portfolio Inc. ("ASP"), American Strategic Income Portfolio Inc. III ("CSP"), and American Select Portfolio Inc. ("SLA"), reorganize into First American Strategic Real Estate Portfolio, Inc., a specialty real estate finance company that would elect to be taxed as a real estate investment trust ("REIT"). Shareholders of the Fund, ASP, 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, ASP, 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. 16 (7) FINANCIAL Per-share data for a share of capital stock outstanding HIGHLIGHTS throughout each period and selected information for each period are as follows: AMERICAN STRATEGIC INCOME PORTFOLIO II
SIX MONTHS ENDED YEAR ENDED MAY 31, 11/30/03 --------------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ----------- ----------- ----------- ----------- ----------- PER-SHARE DATA Net asset value, beginning of period $ 13.12 $ 13.29 $ 13.06 $ 12.20 $ 12.92 $ 13.07 ----------- ----------- ----------- ----------- ----------- ----------- Operations: Net investment income 0.56 1.12 1.13 1.06 1.02 1.06 Net realized and unrealized gains (losses) on investments (0.06) (0.15) 0.23 0.83 (0.68) (0.19) ----------- ----------- ----------- ----------- ----------- ----------- Total from operations 0.50 0.97 1.36 1.89 0.34 0.87 ----------- ----------- ----------- ----------- ----------- ----------- Distributions to shareholders: From net investment income (0.57) (1.14) (1.13) (1.03) (1.06) (1.02) ----------- ----------- ----------- ----------- ----------- ----------- Net asset value, end of period $ 13.05 $ 13.12 $ 13.29 $ 13.06 $ 12.20 $ 12.92 =========== =========== =========== =========== =========== =========== Market value, end of period $ 13.71 $ 13.70 $ 13.17 $ 12.30 $ 11.00 $ 11.94 =========== =========== =========== =========== =========== =========== SELECTED INFORMATION Total return, net asset value (a) 3.91% 7.59% 10.66% 15.97% 2.77% 6.82% Total return, market value (b) 4.47% 13.51% 16.94% 21.98% 1.09% 10.06% Net assets at end of period (in millions) $ 208 $ 209 $ 212 $ 208 $ 195 $ 230 Ratio of expenses to average weekly net assets including interest expense 1.81%(d) 2.99% 2.30% 3.37% 3.62% 2.92% Ratio of expenses to average weekly net assets excluding interest expense 1.20%(d) 1.68% 1.15% 1.19% 1.21% 1.18% Ratio of net investment income to average weekly net assets 8.60%(d) 8.52% 8.55% 8.45% 8.07% 8.06% Portfolio turnover rate (excluding short-term securities) 14% 24% 46% 21% 24% 18% Amount of borrowings outstanding at end of period (in millions) $ 49 $ 73 $ 83 $ 70 $ 67 $ 104 Per-share amount of borrowings outstanding at end of period $ 3.06 $ 4.55 $ 5.18 $ 4.37 $ 4.18 $ 5.84 Per-share amount of net assets, excluding borrowings, at end of period $ 16.11 $ 17.67 $ 18.47 $ 17.43 $ 16.38 $ 18.76 Asset coverage ratio (c) 527% 388% 356% 399% 392% 321%
(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. (d) ANNUALIZED. 17 SCHEDULE OF INVESTMENTS (Unaudited) AMERICAN STRATEGIC INCOME PORTFOLIO II November 30, 2003
DATE PAR DESCRIPTION OF SECURITY ACQUIRED VALUE COST VALUE (a) - ------------------------------------------- ---------- ---------------- --------------- --------------- (PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO NET ASSETS) U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (b) (11.3%): FIXED RATE (11.3%): FHLMC, 5.50%, 1/1/18 $ 9,849,137 $ 10,184,327 $ 10,166,181 FHLMC, 9.00%, 7/1/30 1,055,414 1,083,818 1,144,132 FNMA, 6.00%, 10/1/16 1,048,006 1,054,373 1,095,397 FNMA, 5.50%, 6/1/17 1,029,204 1,034,921 1,062,015 FNMA, 5.00%, 9/1/17 1,249,426 1,253,104 1,269,342 FNMA, 5.00%, 11/1/17 2,210,057 2,223,001 2,245,285 FNMA, 6.50%, 6/1/29 4,038,833 4,010,859 4,220,580 FNMA, 7.50%, 4/1/30 654,128 631,729 698,896 FNMA, 7.50%, 5/1/30 615,970 594,918 658,127 FNMA, 8.00%, 5/1/30 224,939 222,049 242,934 FNMA, 8.00%, 6/1/30 761,747 751,958 822,686 --------------- --------------- Total U.S. Government Agency Mortgage-Backed Securities 23,045,057 23,625,575 --------------- --------------- CORPORATE NOTES (e) (5.3%): FIXED RATE (5.3%): Oly Holigan II, LP, 9.25%, 1/1/05 01/31/02 6,000,000 6,000,000 6,000,000 Stratus Properties, 9.25%, 7/1/06 06/14/01 5,000,000 5,000,000 5,050,000 --------------- --------------- Total Corporate Notes 11,000,000 11,050,000 --------------- --------------- PRIVATE MORTGAGE-BACKED SECURITY (e) (0.3%): FIXED RATE (0.3%): RFC 1997-NPC1, 8.31%, 8/27/23 03/27/97 733,556 736,051 720,958 --------------- ---------------
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS 18
DATE PAR DESCRIPTION OF SECURITY ACQUIRED VALUE COST VALUE (a) - ------------------------------------------- ---------- ---------------- --------------- --------------- WHOLE LOANS AND PARTICIPATION MORTGAGES (c,d,e) (104.8%): COMMERCIAL LOANS (37.7%): 1336 and 1360 Energy Park Drive, 7.55%, 10/1/08 09/29/98 $ 2,752,052(b) $ 2,752,052 $ 2,889,654 Bigelow Office Building, 8.88%, 4/1/07 03/31/97 1,266,049(b) 1,266,049 1,316,691 Gardenswartz Plaza, 7.40%, 5/1/07 04/02/02 2,568,173(b) 2,568,173 2,670,900 Hadley Avenue Business Center, 8.38%, 1/1/11 12/14/00 2,383,173(b) 2,383,173 2,502,332 Harbor Corporate Center, 7.43%, 4/1/05 03/07/02 5,400,000(b) 5,400,000 5,562,000 Hillside Office Park, 7.63%, 8/1/08 07/09/98 915,203 915,203 960,963 Ina Corporate Land, 7.88%, 11/1/04 11/02/01 2,085,000 2,085,000 2,105,850 Jamboree Building, 8.93%, 12/1/06 11/15/96 1,796,935(b) 1,778,966 1,868,813 Katy Plaza I, 7.43%, 1/1/05 12/21/01 6,275,000(b) 6,275,000 6,400,500 Katy Plaza II, 9.88%, 1/1/05 12/21/01 1,880,000 1,880,000 1,821,133 La Posada & Casitas I, 7.93%, 11/1/04 11/02/01 5,680,000 5,680,000 5,736,800 La Posada & Casitas II, 11.88%, 11/1/04 09/23/02 830,000 830,000 818,336 Lincoln Industrial, 7.40%, 12/1/05 11/20/02 3,000,000(b) 3,000,000 3,090,000 Minikahda Mini Storage III, 8.62%, 8/1/09 09/16/99 3,993,636(b) 3,993,636 4,193,318 Minikahda Mini Storage V, 8.75%, 9/1/09 07/02/01 2,204,649(b) 2,204,649 2,314,881 Oak Knoll Village Shopping Center, 6.73%, 10/1/13 09/17/03 1,648,228 1,648,228 1,730,640 PennMont Office Plaza, 6.88%, 5/1/06 04/30/01 1,317,464(b) 1,317,464 1,356,987 Plaza Colonial I, 7.88%, 11/1/04 11/02/01 2,310,000 2,310,000 2,333,100 Plaza Colonial II, 11.88%, 11/1/04 09/23/02 390,000 390,000 384,519
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS 19
DATE PAR DESCRIPTION OF SECURITY ACQUIRED VALUE COST VALUE (a) - ------------------------------------------- ---------- ---------------- --------------- --------------- Pyramid Plaza Office Building, 7.71%, 4/30/07 03/30/01 $ 4,503,801 $ 4,503,801 $ 4,638,915 Rapid Park Parking Lot, 8.90%, 9/1/07 08/07/97 3,420,715(b) 3,420,715 3,557,544 Redwood Dental Building, 7.40%, 7/1/12 06/28/02 2,687,455(b) 2,687,455 2,821,828 Ridgehill Professional Building, 7.38%, 1/1/09 12/07/98 2,485,642(b) 2,485,642 2,609,924 Rimrock Plaza, 7.65%, 12/1/08 12/02/98 3,004,641(b) 3,004,641 3,154,873 Rubin Center, 8.78%, 7/1/12 06/13/97 2,995,959(b) 2,995,959 3,115,797 Stevenson Office Building, Port Orchard Cinema, and Jensen Industrial Building, 7.88%, 2/1/09 01/21/99 2,969,258(b) 2,969,259 3,117,721 Sundance Plaza, 7.13%, 11/1/08 10/29/98 707,258 707,258 742,621 Villa Ricca Industrial Park, 14.88%, 6/1/05 06/27/02 2,500,000 2,500,000 2,550,000 Xtra Self Storage, 6.88%, 11/1/05 10/15/02 2,105,461(b) 2,105,461 2,147,571 --------------- --------------- 76,057,784 78,514,211 --------------- --------------- MULTIFAMILY LOANS (66.4%): Adelphi Springs Apartments, 9.93%, 3/1/09 06/27/03 5,084,592 5,084,592 4,938,242 Autumnwood, Southern Woods, and Hinton Hollow, 7.68%, 6/1/09 05/24/02 7,171,421(b) 7,171,421 7,529,993 Cameron Lakes Apartments I, 6.93%, 1/1/05 12/18/01 10,125,000(b) 10,125,000 9,951,186 Cameron Lakes Apartments II, 14.88%, 1/1/05 12/18/01 1,260,000 1,260,000 979,644 Chardonnay Apartments, 6.40%, 7/1/13 06/05/03 4,137,137(b) 4,137,137 4,343,994 Crown Cove Senior Care Community, 7.93%, 11/1/04 11/01/01 13,000,000 13,000,000 13,130,000 Dakotah Hills Condominiums, 8.90%, 4/1/05 04/01/02 1,135,172 1,135,172 1,135,172 Deering Manor, 7.98%, 12/8/22 12/08/92 1,080,598 1,069,792 1,080,598
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS 20
DATE PAR DESCRIPTION OF SECURITY ACQUIRED VALUE COST VALUE (a) - ------------------------------------------- ---------- ---------------- --------------- --------------- Eagles Landing Apartments, 9.01%, 2/1/06 12/11/01 $ 1,100,000 $ 1,100,000 $ 1,108,169 Forest Estate Apartments, 9.88%, 3/15/05 09/20/02 2,150,000 2,150,000 2,114,009 Forestree Apartments, 5.43%, 12/31/04 06/01/01 7,725,000(b) 7,725,000 7,802,250 Forestree Apartments II, 5.38%, 12/31/04 06/11/03 1,375,000 1,375,000 1,375,000 Fremont Plaza Apartments, 7.40%, 7/1/08 07/01/98 2,435,953(b) 2,435,953 2,557,751 Harbor View Apartments, 7.98%, 1/25/18 01/22/93 653,014 646,484 653,014 Hidden Woods Apartments I, 6.68%, 1/1/06 12/18/02 12,000,000 12,000,000 10,819,000 Hidden Woods Apartments II, 11.88%, 1/1/06 12/18/02 750,000 750,000 625,075 Home Park Village Apartments I, 5.43%, 10/1/06 09/25/03 6,645,000 6,645,000 6,844,350 Home Park Village Apartments II, 11.88%, 10/1/06 09/25/03 592,000 592,000 583,095 Misty Woods/Riverfall Square I, 5.43%, 8/1/06 07/23/03 7,430,000(b) 7,430,000 7,652,900 Misty Woods/Riverfall Square II, 9.88%, 8/1/06 07/23/03 1,486,000 1,486,000 1,217,561 Oakton Terrace Apartments, 9.88%, 8/1/11 06/27/03 670,141 670,141 670,141 Park Hampshire Apartments, 9.90%, 1/1/13 06/27/03 3,111,280 3,111,280 3,055,579 Primrose Apartments, 8.50%, 11/1/07 10/19/95 1,024,436 1,020,072 1,075,658 Scottsdale Courtyards, 7.93%, 3/1/05 02/21/02 9,146,376 9,146,376 9,146,376 Southridge Apartments, 8.43%, 4/1/09 03/22/02 7,664,361(b) 7,664,361 8,047,579 Stone Oak Place Apartments, 9.88%, 8/1/06 07/22/03 1,000,000 1,000,000 1,000,000 Sussex Club Apartments I, 6.68%, 5/1/06 04/08/03 9,798,000(b) 9,798,000 9,993,960 Sussex Club Apartments II, 11.88%, 5/1/06 04/08/03 612,000 612,000 624,240 The Meadows, Fairfield Manor, and Auburn Apartments, 8.50%, 11/1/07 10/19/95 1,411,218 1,409,846 1,481,779
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS 21
DATE PAR VALUE/ DESCRIPTION OF SECURITY ACQUIRED SHARES COST VALUE (a) - ------------------------------------------- ---------- ---------------- --------------- --------------- The Ridge Apartments, 9.88%, 3/1/08 02/07/03 $ 2,050,000 $ 2,050,000 $ 1,937,182 Timber Ridge Apartments, 9.88%, 5/1/05 04/23/02 500,000 500,000 487,118 Willowbook Apartments I, 5.93%, 4/1/06 03/11/03 7,100,000 7,100,000 7,313,000 Willowbrook Apartments II, 11.88%, 4/1/06 03/11/03 200,000 200,000 206,000 Winterland Apartments I, 9.23%, 7/1/12 06/06/97 568,580 568,580 597,009 Winterland Apartments II, 9.23%, 7/1/12 06/06/97 1,089,777 1,089,777 1,144,266 Woodside Village Apartments I, 5.40%, 10/1/06 09/22/03 4,210,000 4,210,000 4,336,300 Woodside Village Apartments II, 9.88%, 10/1/06 09/22/03 947,000 947,000 905,622 --------------- --------------- 138,415,984 138,462,812 --------------- --------------- SINGLE FAMILY LOANS (0.7%): Merchants Bank, 10.48%, 12/1/20 12/18/92 282,168 284,487 290,633 Neslund Properties, 9.88%, 2/1/23 01/27/93 562,122 559,330 578,985 Nomura II, 5.00%, 3/22/15 08/22/94 76,449 72,761 53,047 PHH U.S. Mortgage, 8.65%, 1/1/12 12/30/92 509,371 495,675 448,824 --------------- --------------- 1,412,253 1,371,489 --------------- --------------- Total Whole Loans and Participation Mortgages 215,886,021 218,348,512 --------------- --------------- PREFERRED STOCKS (0.1%): REAL ESTATE INVESTMENT TRUSTS (0.1%): Archstone Community Trust, Series D 04/23/01 3,525 91,862 92,355 Duke Realty Investments, Series E 04/30/01 625 15,506 15,988 --------------- --------------- Total Preferred Stocks 107,368 108,343 --------------- ---------------
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS 22
DATE DESCRIPTION OF SECURITY ACQUIRED SHARES COST VALUE (a) - ------------------------------------------- ---------- ---------------- --------------- --------------- RELATED PARTY MONEY MARKET FUND (f) (1.2%): First American Prime Obligations Fund 2,473,406 $ 2,473,406 $ 2,473,406 --------------- --------------- Total Investments in Securities (g) (123.0%): $ 253,247,903 $ 256,326,794 =============== ===============
NOTES TO SCHEDULE OF INVESTMENTS: (a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 IN NOTES TO FINANCIAL STATEMENTS. (b) ON NOVEMBER 30, 2003, SECURITIES VALUED AT $136,196,522 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 - ------------- ----------- -------- ---------- --------- ---------------- $ 21,265,000 11/10/03 1.11%* 12/10/03 $ 13,769 (1) 27,500,000 11/3/03 2.00%** 12/1/03 42,671 (2) - ------------- --------- $ 48,765,000 $ 56,440 ============= =========
*RATE IS A NEGOTIATED FIXED RATE. **INTEREST RATE AS OF NOVEMBER 30, 2003. RATES ARE BASED ON THE LONDON INTERBANK OFFERED RATE (LIBOR) AND RESET MONTHLY. NAME OF BROKER AND DESCRIPTION OF COLLATERAL: (1) MORGAN STANLEY; FHLMC, 5.50%, 1/1/18, $9,849,137 PAR FHLMC, 9.00%, 7/1/30, $1,055,414 PAR FNMA, 6.00%, 10/1/16, $1,048,006 PAR FNMA, 5.50%, 6/1/17, $1,029,204 PAR FNMA, 5.00%, 9/1/17, $1,249,426 PAR FNMA, 5.00%, 11/1/17, $2,210,057 PAR FNMA, 6.50%, 6/1/29, $4,038,833 PAR FNMA, 7.50%, 4/1/30, $654,128 PAR FNMA, 7.50%, 5/1/30, $615,970 PAR FNMA, 8.00%, 5/1/30, $224,939 PAR FNMA, 8.00%, 6/1/30, $761,747 PAR 23 (2) MORGAN STANLEY; 1336 AND 1360 ENERGY PARK DRIVE, 7.55%, 10/1/08, $2,752,052 PAR AUTUMNWOOD, SOUTHERN WOODS, AND HINTON HOLLOW, 7.68%, 6/1/09, $7,171,421 PAR BIGELOW OFFICE BUILDING, 8.88%, 4/1/07, $1,266,049 PAR CAMERON LAKES APARTMENTS I, 6.93%, 1/1/05, $10,125,000 PAR CHARDONNAY APARTMENTS, 6.40%, 7/1/13, $4,137,137 PAR FORESTREE APARTMENTS, 5.43%, 12/31/04, $7,725,000 PAR FREMONT PLAZA APARTMENTS, 7.40%, 7/1/08, $2,435,953 PAR GARDENSWARTZ PLAZA, 7.40%, 5/1/07, $2,568,173 PAR HADLEY AVENUE BUSINESS CENTER, 8.38%, 1/1/11, $2,383,173 PAR HARBOR CORPORATE CENTER, 7.43%, 4/1/05, $5,400,000 PAR MISTY WOODS/RIVERFALL SQUARE I, 5.43%, 8/1/06, $7,430,000 PAR JAMBOREE BUILDING, 8.93%, 12/1/06, $1,796,935 PAR KATY PLAZA I, 7.43%, 1/1/05, $6,275,000 PAR LINCOLN INDUSTRIAL, 7.40%, 12/1/05, $3,000,000 PAR MINIKAHDA MINI STORAGE III, 8.62%, 8/1/09, $3,993,636 PAR MINIKAHDA MINI STORAGE V, 8.75%, 9/1/09, $2,204,649 PAR PENNMONT OFFICE PLAZA, 6.88%, 5/1/06, $1,317,464 PAR RAPID PARK PARKING LOT, 8.90%, 9/1/07, $3,420,715 PAR REDWOOD DENTAL BUILDING, 7.40%, 7/1/12, $2,687,455 PAR RIDGEHILL PROFESSIONAL BUILDING, 7.38%, 1/1/09, $2,485,642 PAR RIMROCK PLAZA, 7.65%, 12/1/08, $3,004,641 PAR RUBIN CENTER, 8.78%, 7/1/12, $2,995,959 PAR SOUTHRIDGE APARTMENTS, 8.43%, 4/1/09, $7,664,361 PAR STEVENSON OFFICE BUILDING, PORT ORCHARD CINEMA, AND JENSEN INDUSTRIAL BUILDING, 7.88%, 2/1/09, $2,969,258 PAR SUSSEX CLUB APARTMENTS I, 6.68%, 5/1/06, $9,798,000 PAR XTRA SELF STORAGE, 6.88%, 11/1/05, $2,105,461 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 $60,000,000 USING WHOLE LOANS AS COLLATERAL. THE FUND PAYS A FEE OF 0.15% TO MORGAN STANLEY ON ANY UNUSED PORTION OF THE $60,000,000 LENDING COMMITMENT. (c) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT ON NOVEMBER 30, 2003. 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, 2003. (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: 1336 AND 1360 ENERGY PARK DRIVE - ST. PAUL, MN BIGELOW OFFICE BUILDING - LAS VEGAS, NV GARDENSWARTZ PLAZA - SANTA FE, NM HADLEY AVENUE BUSINESS CENTER - OAKDALE, MN HARBOR CORPORATE CENTER - LOS ANGELES, CA HILLSIDE OFFICE PARK - ELK RIVER, MN INA CORPORATE LAND - TUSCON, AZ JAMBOREE BUILDING - COLORADO SPRINGS, CO KATY PLAZA I - HOUSTON, TX KATY PLAZA II - HOUSTON, TX LA POSADA & CASITAS I - TUSCON, AZ 24 LA POSADA & CASITAS II - TUSCON, AZ LINCOLN INDUSTRIAL - LAUDERHILL, FL MINIKAHDA MINI STORAGE III - ST.PAUL, MN MINIKAHDA MINI STORAGE V - ST.PAUL, MN OAK KNOLL VILLAGE SHOPPING CENTER - AUSTIN, TX PENNMONT OFFICE PLAZA - ALBUQUERQUE, NM PLAZA COLONIAL I - TUSCON, AZ PLAZA COLONIAL II - TUSCON, AZ PYRAMID PLAZA OFFICE BUILDING - LUBBOCK, TX RAPID PARK PARKING LOT - MINNEAPOLIS, MN REDWOOD DENTAL BUILDING - TAYLORSVILLE, UT RIDGEHILL PROFESSIONAL BUILDING - MINNETONKA, MN RIMROCK PLAZA - BILLINGS, MT RUBIN CENTER - CLEARWATER, FL STEVENSON OFFICE BUILDING, PORT ORCHARD CINEMA, AND JENSEN INDUSTRIAL BUILDING - STEVENSON, PORT ORCHARD, AND ARLINGTON, WA SUNDANCE PLAZA - COLORADO SPRINGS, CO VILLA RICCA INDUSTRIAL PARK - VILLA RICCA, GA XTRA SELF STORAGE - SAN CLEMENTE, CA MULTIFAMILY LOANS: ADELPHI SPRINGS APARTMENTS - ADELPHI, MD AUTUMNWOOD, SOUTHERN WOODS, AND HINTON HOLLOW - KNOXVILLE, TN CAMERON LAKES APARTMENTS I - CLEARWATER, FL CAMERON LAKES APARTMENTS II - CLEARWATER, FL CHARDONNAY APARTMENTS - TULSA, OK CROWN COVE SENIOR CARE COMMUNITY - CORONA DEL MAR, CA DAKOTAH HILLS CONDOMINIUMS - TUCSON, AZ DEERING MANOR - NASHWAUK, MN EAGLES LANDING APARTMENTS - WESTMINISTER, CO FOREST ESTATE APARTMENTS, DALLAS, TX FORESTREE APARTMENTS - HOUSTON, TX FORESTREE APARTMENTS II - HOUSTON, TX FREMONT PLAZA APARTMENTS - PHOENIX, AZ HARBOR VIEW APARTMENTS - GRAND MARAIS, MN HIDDEN WOODS APARTMENTS I - COLLEGE PARK, GA HIDDEN WOODS APARTMENTS II - COLLEGE PARK, GA HOME PARK VILLAGE APARTMENTS I - SAN DIEGO, CA HOME PARK VILLAGE APARTMENTS II - SAN DIEGO, CA MISTY WOODS/RIVERFALL SQUARE I - ARLINGTON AND DALLAS, TX MISTY WOODS/RIVERFALL SQUARE II - ARLINGTON AND DALLAS, TX OAKTON TERRACE APARTMENTS - ADELPHI, MD PARK HAMPSHIRE APARTMENTS - ADELPHI, MD PRIMROSE APARTMENTS - GRAND FALLS, ND SCOTTSDALE COURTYARDS - SCOTTSDALE, AZ SOUTHRIDGE APARTMENTS - AUSTIN, TX STONE OAK PLACE APARTMENTS - SAN ANTONIO, TX SUSSEX CLUB APARTMENTS I - ATHENS, GA SUSSEX CLUB APARTMENTS II - ATHENS, GA THE MEADOWS, FAIRFIELD MANOR, AND AUBURN APARTMENTS - WAHPETON, ND THE RIDGE APARTMENTS - COLLEGE STATION, TX TIMBER RIDGE APARTMENTS - HOUSTON, TX WILLOWBROOK APARTMENTS I - RENO, NV WILLOWBROOK APARTMENTS II - RENO, NV 25 WINTERLAND APARTMENTS I - GRAND FORKS, ND WINTERLAND APARTMENTS II - GRAND FORKS, ND WOODSIDE VILLAGE APARTMENTS I - MIDWEST CITY, OK WOODSIDE VILLAGE APARTMENTS II - MIDWEST CITY, OK SINGLE FAMILY LOANS: MERCHANTS BANK - 11 LOANS, VERMONT NESLUND PROPERTIES - 38 LOANS, MINNESOTA NOMURA II - 1 LOAN, NEW JERSEY PHH U.S. MORTGAGE - 7 LOANS, UNITED STATES (e) SECURITIES PURCHASED AS PART OF A PRIVATE PLACEMENT WHICH HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 AND ARE CONSIDERED TO BE ILLIQUID AND ARE VALUED AT FAIR VALUE. THESE SECURITIES ARE FAIR VALUED IN ACCORDANCE WITH THE BOARD APPROVED VALUATION PROCEDURES. ON NOVEMBER 30, 2003, THE TOTAL VALUE OF FAIR VALUED SECURITIES WAS $230,119,470 OR 110.4% OF NET ASSETS. SEE NOTE 2 IN NOTES TO FINANCIAL STATEMENTS. (f) THIS MONEY MARKET FUND IS ADVISED BY U.S. BANCORP ASSET MANAGEMENT, INC., WHICH ALSO SERVES AS ADVISOR FOR THE FUND. SEE NOTE 3 IN NOTES TO FINANCIAL STATEMENTS. (g) ON NOVEMBER 30, 2003, THE COST OF INVESTMENTS IN SECURITIES WAS $253,247,903. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES, BASED ON THIS COST WERE AS FOLLOWS: GROSS UNREALIZED APPRECIATION $ 5,697,264 GROSS UNREALIZED DEPRECIATION (2,618,373) -------------- NET UNREALIZED APPRECIATION $ 3,078,891 ==============
ABBREVIATIONS: FHLMC-FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA-FEDERAL NATIONAL MORTGAGE ASSOCIATION 26 SHAREHOLDER UPDATE (Unaudited) ANNUAL MEETING RESULTS An annual meeting of the Fund's shareholders was held on October 28, 2003. 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 nine directors:
SHARES SHARES WITHHOLDING VOTED "FOR" AUTHORITY TO VOTE ----------- ------------------ Benjamin R. Field III 14,989,680 214,821 Mickey P. Foret 14,986,817 217,684 Robert A. Gibson 14,990,023 214,478 Victoria J. Herget 14,993,587 210,914 Leonard W. Kedrowski 14,993,575 210,926 Richard K. Riederer 14,990,182 214,319 Joseph D. Strauss 14,994,575 209,926 Virginia L. Stringer 14,993,575 210,926 James M. Wade 14,991,236 213,265
2. The Fund's shareholders ratified the selection by the Fund's board of directors of Ernst & Young as the independent public accountants for the Fund for the fiscal year ending May 31, 2004. The following votes were cast regarding this matter:
SHARES SHARES BROKER VOTED "FOR" VOTED "AGAINST" ABSTENTIONS NON-VOTES ----------- --------------- ----------- --------- 14,590,939 533,062 80,500 --
HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICY A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge upon request by calling 800.677.FUND; and (2) at www.firstamericanfunds.com; and (3) on the U.S. Securities and Exchange Commission's website at http:/www.sec.gov. 27 BOARD OF DIRECTORS VIRGINIA STRINGER Chairperson of American Strategic Income Portfolio Inc. II Owner and President of Strategic Management Resources, Inc. BENJAMIN FIELD III Director of American Strategic Income Portfolio Inc. II Senior Financial Advisor to, and formerly Senior Vice President, Chief Financial Officer, and Treasurer of, Bemis Company, Inc. MICKEY FORET Director of American Strategic Income Portfolio Inc. II Consultant to, and formerly Executive Vice President and Chief Financial Officer of, Northwest Airlines, Inc. ROGER GIBSON Director of American Strategic Income Portfolio Inc. II Vice President, Cargo-United Airlines VICTORIA HERGET Director of American Strategic Income Portfolio Inc. II Investment Consultant; former Managing Director of Zurich Scudder Investments LEONARD KEDROWSKI Director of American Strategic Income Portfolio Inc. II Owner and President of Executive and Management Consulting, Inc. RICHARD RIEDERER Director of American Strategic Income Portfolio Inc. II Retired; former President and Chief Executive Officer of Weirton Steel JOSEPH STRAUSS Director of American Strategic Income Portfolio Inc. II Owner and President of Strauss Management Company JAMES WADE Director of American Strategic Income Portfolio Inc. II Owner and President of Jim Wade Homes AMERICAN STRATEGIC INCOME PORTFOLIO INC. II'S BOARD OF DIRECTORS IS COMPRISED ENTIRELY OF INDEPENDENT DIRECTORS. [FIRST AMERICAN(TM) LOGO] AMERICAN STRATEGIC INCOME PORTFOLIO INC. II 2003 SEMIANNUAL REPORT U.S. Bancorp Asset Management, Inc., is a wholly owned subsidiary of U.S. Bank National Association, which is a wholly owned subsidiary of U.S. Bancorp. [RECYCLED SYMBOL] This document is printed on paper containing 10% postconsumer waste. 1/2004 0312-03 BSP-SAR ITEM 2--CODE OF ETHICS - Did registrant adopt a code of ethics, as of the end of the period covered by this report, that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party? If not, why not? Briefly describe any amendments or waivers that occurred during the period. State here if code of ethics/amendments/waivers are on website and give website address. State here if fund will send code of ethics to shareholders without charge upon request. RESPONSE: Not applicable to semi-annual report. ITEM 3--AUDIT COMMITTEE FINANCIAL EXPERT - Did the registrant's board of directors determine that the registrant either: (i) has at least one audit committee financial expert serving on its audit committee; or (ii) does not have an audit committee financial expert serving on its audit committee? If yes, disclose name of financial expert and whether he/she is "independent," (fund may, but is not required, to disclose name/independence of more than one financial expert) If no, explain why not. RESPONSE: Not applicable to semi-annual report. ITEM 4--PRINCIPAL ACCOUNTANT FEES AND SERVICES - Disclose annually only (not answered until December 15, 2003). RESPONSE: Not applicable to semi-annual report. (a) Audit Fees - Disclose aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Audit-Related Fees - Disclose aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Tax Fees - Disclose aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) All Other Fees - Disclose aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e)(1) Disclose the audit committee's pre-approval policies and procedures pursuant to paragraph (c)(7) of Rule 2-01 of Regulation S-X. (e)(2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50%, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5--AUDIT COMMITTEE OF LISTED REGISTRANTS RESPONSE: Not applicable. ITEM 6 - Reserved. ITEM 7--DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES - For closed-end funds that contain voting securities in their portfolio, describe the policies and procedures that it uses to determine how to vote proxies relating to those portfolio securities. RESPONSE: Not applicable to semi-annual report. ITEM 8 - Reserved. ITEM 9--CONTROLS AND PROCEDURES (a) Disclose the conclusions of the registrant's principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, about the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph. RESPONSE: The registrant's Principal Executive Officer and Principal Financial Officer have evaluated the registrant's disclosure controls and procedures within 90 days of the date of this filing and have concluded that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized and reported timely. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. RESPONSE: There were no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10 - EXHIBITS 10(a) - Attach code of ethics or amendments/waivers, unless code of ethics or amendments/waivers is on website or offered to shareholders upon request without charge. RESPONSE: Not applicable to semi-annual report. 10(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for PEO/PFO). RESPONSE: Attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. American Strategic Income Portfolio Inc. II By: /s/ Thomas S. Schreier, Jr. --------------------------- Thomas S. Schreier, Jr. President Date: February 5, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ Thomas S. Schreier, Jr. --------------------------- Thomas S. Schreier, Jr. President Date: February 5, 2004 By: /s/ Joseph M. Ulrey III --------------------------- Joseph M. Ulrey III Treasurer Date: February 5, 2004 EX-99.CERT 3 a2127008zex-99_cert.txt EX-99.CERT EXHIBIT 99.CERT CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Thomas S. Schreier, Jr., certify that: 1. I have reviewed this report on Form N-CSR of American Strategic Income Portfolio Inc. II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 5, 2004 /s/ Thomas S. Schreier, Jr. - --------------------------- Thomas S. Schreier, Jr. President I, Joseph M. Ulrey III, certify that: 1. I have reviewed this report on Form N-CSR of American Strategic Income Portfolio Inc. II; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half- year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 5, 2004 /s/ Joseph M. Ulrey III - ------------------------- Joseph M. Ulrey III Treasurer EX-99.906CERT 4 a2127008zex-99_906cert.txt EX-99.906CERT EXHIBIT 99.906CERT CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), the undersigned officers of American Strategic Income Portfolio Inc. II (the "Fund") do hereby certify, to the best of each such officer's knowledge, that: 1. The N-CSR of the Fund (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of the operations of the Fund. By: /s/ Thomas S. Schreier, Jr. --------------------------- Thomas S. Schreier, Jr. President Date: February 5, 2004 By: /s/ Joseph M. Ulrey III --------------------------- Joseph M. Ulrey III Treasurer Date: February 5, 2004 -----END PRIVACY-ENHANCED MESSAGE-----