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OMB Number: 3235-0570
Expires: November 30, 2005
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hours per response....... 5.0
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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 811-6404
---------------------------------------------
American Strategic Income Portfolio Inc.
- -------------------------------------------------------------------------------
(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
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(Name and address of agent for service)
Registrant's telephone number, including area code: 800-677-3863
----------------------------
Date of fiscal year end: November 30, 2004
--------------------------
Date of reporting period: May 31, 2004
-------------------------
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.
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Item 1. Report to Shareholders
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[FIRST AMERICAN (TM) LOGO]
[GRAPHIC]
AMERICAN STRATEGIC INCOME PORTFOLIO INC.
MAY 31, 2004
SEMIANNUAL REPORT
<Page>
[FIRST AMERICAN (TM) LOGO]
AMERICAN STRATEGIC INCOME PORTFOLIO INC.
As you are probably aware, the board of directors for American Strategic Income
Portfolio Inc. (the "Fund"), as well as American Strategic Income Portfolio Inc.
II, 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
Securites 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
TABLE OF CONTENTS
<Table>
1 Financial Statements
5 Notes to Financial Statements
19 Schedule of Investments
25 Shareholder Update
</Table>
<Page>
FINANCIAL STATEMENTS (Unaudited)
STATEMENT OF ASSETS AND LIABILITIES May 31, 2004
<Table>
ASSETS:
Investments in unaffiliated securities, at value* (note 2) $ 57,380,777
Investment in affiliated money market fund, at value** (note 3) 3,806,508
Receivable for accrued interest 256,633
Other assets 18,467
---------------
Total assets 61,462,385
---------------
LIABILITIES:
Payable for reverse repurchase agreements (note 2) 8,191,087
Payable for investment management fees (note 3) 23,603
Bank overdraft 6,415
Payable for administrative fees (note 3) 11,252
Payable for interest expense 5,006
Payable for reorganization expenses (notes 3 and 6) 35,447
Payable for other expenses 37,835
---------------
Total liabilities 8,310,645
---------------
Net assets applicable to outstanding capital stock $ 53,151,740
===============
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital $ 54,290,747
Undistributed net investment income 200,268
Accumulated net realized loss on investments (2,548,962)
Unrealized appreciation of investments 1,209,687
---------------
Total-representing net assets applicable to capital stock $ 53,151,740
===============
*Investments in unaffiliated securities, at cost $ 56,171,090
===============
**Investment in affiliated money market fund, at cost $ 3,806,508
===============
NET ASSET VALUE AND MARKET PRICE OF CAPITAL STOCK:
Net assets outstanding $ 53,151,740
Shares outstanding (authorized 1 billion shares of $0.01
par value) 4,231,331
Net asset value per share $ 12.56
Market price per share $ 12.13
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
1
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STATEMENT OF OPERATIONS For the Six Months Ended May 31, 2004
<Table>
INVESTMENT INCOME:
Interest $ 2,189,836
Dividends 136,888
Dividends from affiliated money market fund 9,486
---------------
Total investment income 2,336,210
---------------
EXPENSES (NOTE 3):
Investment management fees 155,023
Administrative fees 66,975
Interest expense 86,032
Custodian fees 5,358
Transfer agent fees 13,209
Registration fees 6,660
Reports to shareholders 17,281
Mortgage servicing fees and other expenses 16,400
Directors' fees 4,183
Audit and legal fees 14,874
---------------
Total expenses 385,995
---------------
Net investment income 1,950,215
---------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON
INVESTMENTS (NOTE 4):
Net realized gain on investments 104,497
Net change in unrealized appreciation or depreciation of
investments (669,357)
---------------
Net loss on investments (564,860)
---------------
Net increase in net assets resulting from operations $ 1,385,355
===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
2
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STATEMENT OF CASH FLOWS For the Six Months Ended May 31, 2004
<Table>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 1,385,355
Adjustments to reconcile net increase in net assets from
operations to net cash provided by operating activities:
Purchases of investments (5,280,470)
Proceeds from paydowns and sales of investments 14,753,968
Net purchases of short-term securities (2,276,802)
Net amortization of bond discount and premium 276
Net unrealized depreciation of investments 669,357
Net realized gain on investments (104,497)
Decrease in accrued interest receivable 79,256
Increase in other assets (5,402)
Decrease in accrued fees and expenses (37,087)
---------------
Net cash provided by operating activities 9,183,954
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments for reverse repurchase agreements (7,413,913)
Distributions paid to shareholders (1,827,042)
---------------
Net cash used in financing activities (9,240,955)
---------------
Net decrease in cash (57,001)
Cash at beginning of period 50,586
---------------
Bank overdraft at end of period $ (6,415)
===============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 92,034
===============
Noncash financing activities resulting from reinvested
dividends $ 13,287
===============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
3
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STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS
ENDED
5/31/04 YEAR ENDED
(UNAUDITED) 11/30/03
------------ ------------
OPERATIONS:
Net investment income $ 1,950,215 $ 3,761,689
Net realized gain on investments 104,497 279,776
Net change in unrealized appreciation or depreciation of investments (669,357) (119,911)
------------ ------------
Net increase in net assets resulting from operations 1,385,355 3,921,554
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income (1,840,329) (3,680,357)
------------ ------------
CAPITAL SHARE TRANSACTIONS (NOTE 2):
Proceeds from 1,037 shares issued from reinvested dividends 13,287 --
------------ ------------
Total increase (decrease) in net assets (441,687) 241,197
Net assets at beginning of period 53,593,427 53,352,147
------------ ------------
Net assets at end of period $ 53,151,740 $ 53,593,427
============ ============
Undistributed net investment income $ 200,268 $ 90,382
============ ============
</Table>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
4
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NOTES TO FINANCIAL STATEMENTS (Unaudited)
(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,
preferred stock issued by real estate investment trusts,
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 SECURITY VALUATIONS
SIGNIFICANT Security valuations for the Fund's investments (other
ACCOUNTING than whole loans) are furnished by one or more
POLICIES 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 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
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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. Some of the
factors which may be considered by the board of
directors in determining fair value are fundamental
analytical data relating to the investment; the nature
and duration of any restrictions on disposition; trading
in similar securities of the same issuer or comparable
companies; information from broker-dealers; and an
evaluation of the forces that influence the market in
which the securities are purchased or sold. 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 May 31, 2004, the
Fund held fair valued securities with a value of
$39,447,947 or 74.2% 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), participation mortgages and
mortgage servicing rights are generally not traded in
any
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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 using a
U.S. Bancorp Asset Management, Inc. ("USBAM") pricing
model designed to incorporate, among other things, the
present value of the projected stream of cash flows on
such investments. The pricing model takes into account a
number of relevant factors including the projected rate
of prepayments, the delinquency profile, the historical
payment record, the expected yield at purchase, changes
in prevailing interest rates, and changes in the real or
perceived liquidity of whole loans, participation
mortgages, or mortgage servicing rights, as the case may
be. 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,
participation mortgages, and mortgage servicing rights
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, participation mortgages, and
mortgage servicing rights can only be determined in a
negotiation between the Fund and third parties.
7
<Page>
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 accretion of bond discounts and amortization
of premiums, 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.
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
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suffer a loss. At May 31, 2004, loans representing 0.02%
of net assets were 60 days or more delinquent as to the
timely monthly payment of principal. Such delinquencies
relate solely to single family whole loans and represent
0.7% of total single family principal outstanding at May
31, 2004. At May 31, 2004, no multifamily or commercial
loans were delinquent.
Real estate acquired through foreclosure, if any, is
recorded at estimated fair value. The Fund may receive
rental or other income as a result of holding real
estate. In addition, the Fund may incur expenses
associated with maintaining any real estate owned. The
Fund did not own any real estate during the six months
ended May 31, 2004.
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 May 31, 2004, the weighted average
borrowings outstanding were $11,571,525 and the weighted
average interest rate was 1.22%.
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
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the transaction date. During this period, such
securities do not earn interest, are subject to market
fluctuation, and may increase or decrease in value prior
to their delivery. The Fund segregates, with its
custodian, assets with a market value equal to the
amount of its purchase commitments. The purchase of
securities on a when-issued or forward-commitment basis
may increase the volatility of the Fund's net asset
value if the Fund makes such purchases while remaining
substantially fully invested. As of May 31, 2004, the
Fund had no outstanding when-issued or
forward-commitment securities.
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 (losses)
may differ for financial statement and tax purposes
10
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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 May 31, 2004 (estimated), and the fiscal
year ended November 30, 2003, were as follows:
<Table>
<Caption>
2004 2003
----------- -----------
Distributions paid from ordinary income $ 1,840,329 $ 3,680,357
=========== ===========
</Table>
At November 30, 2003, the Fund's most recently completed
fiscal year-end, the components of accumulated deficit
on a tax basis were as follows:
<Table>
Undistributed ordinary income $ 90,382
Accumulated capital losses (1,968,946)
Unrealized appreciation 1,194,531
-----------
Accumulated deficit $ (684,033)
===========
</Table>
The difference between book basis and tax basis
unrealized appreciation and accumulated realized losses
at November 30, 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 declared
and paid on a monthly basis. Any net realized capital
gains on sales of securities for the Fund are
distributed to
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shareholders at least annually. These distributions are
recorded as of the close of business on the ex-dividend
date. Such distributions are payable in cash or,
pursuant to the Fund's dividend reinvestment plan,
reinvested in additional shares of the Fund's capital
stock. Under the plan, Fund shares will be purchased in
the open market unless the market price plus commissions
exceeds the net asset value by 5% or more. If, at the
close of business on the dividend payment date, the
shares purchased in the open market are insufficient to
satisfy the dividend reinvestment requirement, the Fund
will issue new shares at a discount of up to 5% from the
current market price.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain
broker-dealers, the Fund, along with other affiliated
registered investment companies, may transfer uninvested
cash balances into a joint trading account, the daily
aggregate of which is invested in repurchase agreements
secured by U.S. government or agency obligations.
Securities pledged as collateral for all individual and
joint repurchase agreements are held by the Fund's
custodian bank until maturity of the repurchase
agreement. Provisions for all agreements ensure that the
daily market value of the collateral is in excess of the
repurchase amount, including accrued interest, to
protect the Fund in the event of a default.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL
STATEMENTS
The preparation of financial statements in conformity
with U.S. generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amount of assets and
liabilities in the financial statements. Actual results
could differ from these estimates.
12
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(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 May 31,
2004, the effective investment management fee incurred
by the Fund was 0.58%. For its fee, USBAM 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"), 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
13
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services to the Fund including, but not limited to,
handling the general business affairs, financial and
regulatory reporting, and 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. In order to avoid the payment of
duplicative investment advisory fees to USBAM, which
acts as the investment adviser to both the Fund and the
related money market funds, USBAM will reimburse the
Fund an amount equal to that portion of the investment
advisory fee received from the related money market
funds that is attributable to the assets of the Fund.
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.
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.
14
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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. II,
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 $6,500,000. Based on the net asset
values of the Existing Funds as of May 31, 2004, the
Fund would bear approximately 8% of the total expenses
of the reorganization.
OTHER FEES AND EXPENSES
In addition to the investment management,
administrative, custodian and mortgage servicing fees,
15
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the Fund is responsible for paying most other operating
expenses, including: outside directors' fees and
expenses, 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.
(4) INVESTMENT Cost of purchases and proceeds from paydowns and sales
SECURITY of securities and real estate, other than temporary
TRANSACTIONS investments in short-term securities, for the six months
ended May 31, 2004, aggregated $5,280,194 and
$14,753,968, respectively. Included in proceeds from
paydowns and sales are $104,358 from prepayment
penalties.
(5) CAPITAL LOSS For federal income tax purposes, the Fund had capital
CARRYOVER loss carryovers at November 30, 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.
<Table>
<Caption>
CAPITAL LOSS
CARRYOVER EXPIRATION
------------ ----------
$ 964,494 2008
737,067 2010
267,385 2011
------------
$ 1,968,946
============
</Table>
(6) PROPOSED A combined proxy statement/registration statement, last
REORGANIZATION amended on April 23, 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. II ("BSP"), 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
16
<Page>
finance company that would elect to 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.
(7) INDEMNIFICATIONS The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under
these arrangements is unknown. However, the Fund has not
had prior claims or losses pursuant to these contracts
and expects the risk of loss to be remote.
17
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(8) FINANCIAL Per-share data for a share of capital stock outstanding
HIGHLIGHTS throughout each period and selected information for each
period are as follows:
<Table>
<Caption>
SIX MONTHS
ENDED YEAR ENDED NOVEMBER 30,
5/31/04 ------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------- -------- -------- -------- -------- --------
PER-SHARE DATA
Net asset value, beginning of period $ 12.67 $ 12.61 $ 12.63 $ 12.51 $ 12.35 $ 12.98
----------- -------- -------- -------- -------- --------
Operations:
Net investment income 0.46 0.89 0.96 1.05 0.97 1.00
Net realized and unrealized gains
(losses) on investments (0.13) 0.04 0.05 0.13 0.15 (0.62)
----------- -------- -------- -------- -------- --------
Total from operations 0.33 0.93 1.01 1.18 1.12 0.38
----------- -------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income (0.44) (0.87) (1.03) (1.06) (0.96) (1.01)
----------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.56 $ 12.67 $ 12.61 $ 12.63 $ 12.51 $ 12.35
=========== ======== ======== ======== ======== ========
Market value, end of period $ 12.13 $ 12.80 $ 12.05 $ 12.79 $ 11.19 $ 11.44
=========== ======== ======== ======== ======== ========
SELECTED INFORMATION
Total return, net asset value (a) 2.59% 7.56% 8.32% 9.85% 9.55% 3.03%
Total return, market value (b) (1.90)% 13.92% 2.32% 24.73% 6.68% 2.76%
Net assets at end of period (in millions) $ 53 $ 54 $ 53 $ 53 $ 53 $ 58
Ratio of expenses to average weekly
net assets including interest expense 1.44%(d) 2.00% 2.81% 2.70% 3.92% 3.83%
Ratio of expenses to average weekly
net assets excluding interest expense 1.12%(d) 1.39% 1.63% 1.34% 1.56% 1.52%
Ratio of net investment income to
average weekly net assets 7.28%(d) 7.08% 7.56% 8.25% 7.85% 7.86%
Portfolio turnover rate (excluding
short-term securities) 8% 50% 18% 30% 32% 22%
Amount of borrowings outstanding
at end of period (in millions) $ 8 $ 16 $ 17 $ 22 $ 12 $ 21
Per-share amount of borrowings
outstanding at end of period $ 1.94 $ 3.69 $ 3.92 $ 5.19 $ 2.77 $ 4.50
Per-share amount of net assets,
excluding borrowings, at end of period $ 14.50 $ 16.36 $ 16.53 $ 17.82 $ 15.28 $ 16.85
Asset coverage ratio (c) 749% 443% 421% 343% 552% 375%
</Table>
(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.
18
<Page>
SCHEDULE OF INVESTMENTS (Unaudited)
AMERICAN STRATEGIC INCOME PORTFOLIO May 31, 2004
<Table>
<Caption>
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 -- 28.1%
FIXED RATE -- 28.1%
FHLMC, 5.50%, 1/1/18 $ 1,505,985 $ 1,555,982 $ 1,536,104
FHLMC, 9.00%, 7/1/30 413,145 424,209 448,778
FNMA, 6.00%, 10/1/16 1,084,099 (b) 1,106,636 1,127,463
FNMA, 5.00%, 7/1/18 3,896,746 (b) 3,890,887 3,895,538
FNMA, 6.50%, 6/1/29 464,027 (b) 460,838 481,716
FNMA, 7.50%, 3/1/30 1,201,532 (b) 1,181,764 1,279,488
FNMA, 7.50%, 5/1/30 125,104 (b) 120,853 133,431
FNMA, 8.00%, 5/1/30 33,840 (b) 33,407 36,473
FNMA, 6.00%, 5/1/31 877,390 (b) 882,423 894,797
FNMA, 6.50%, 11/1/31 621,208 (b) 635,083 643,726
FNMA, 5.50%, 7/1/33 4,500,936 4,446,676 4,455,927
------------- -------------
Total U.S. Government Agency
Mortgage-Backed Securities 14,738,758 14,933,441
------------- -------------
WHOLE LOANS AND PARTICIPATION MORTGAGES (c,d,e) -- 74.1%
COMMERCIAL LOANS -- 31.5%
Advance Self Storage,
9.13%, 12/1/05 11/29/00 1,234,644 1,234,644 1,259,336
Buca Restaurant,
8.63%, 1/1/11 12/27/00 913,309 913,309 958,975
Hampden Medical Office,
7.38%, 10/1/12 09/09/02 1,761,892 1,761,892 1,849,987
Integrity Plaza Shopping Center,
7.88%, 6/11/02 05/11/04 2,101,734 2,101,734 2,206,821
Metro Center,
5.20%, 5/1/09 04/07/04 2,650,000 2,650,000 2,679,227
Orchard Commons,
8.75%, 4/1/11 03/28/01 999,690 999,690 1,049,675
Pacific Periodicals Building,
8.03%, 1/1/08 12/09/97 1,239,749 1,239,749 1,289,339
Rockwood Galleria,
7.25%, 2/1/11 01/06/03 1,582,609 1,582,609 1,661,740
Schendel Office Building,
8.20%, 10/1/07 09/30/97 1,036,665 1,036,665 725,665
Stephens Center,
6.38%, 9/1/10 08/21/03 1,383,831 1,383,831 1,453,023
Voit Office Building,
8.13%, 9/1/08 08/17/01 1,524,375 1,524,375 1,600,594
------------- -------------
16,428,498 16,734,381
------------- -------------
</Table>
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS.
19
<Page>
<Table>
<Caption>
DATE PAR
DESCRIPTION OF SECURITY ACQUIRED VALUE COST VALUE (a)
- ------------------------------------------------------------ ------------- ------------- ------------- -------------
MULTIFAMILY LOANS -- 39.1%
1500 Geneva I,
5.38%, 10/1/06 09/03/03 $ 740,000 $ 740,000 $ 754,800
1500 Geneva II,
13.38%, 10/1/06 09/03/03 50,000 50,000 49,411
3715 California I,
5.38%, 10/1/06 09/03/03 1,485,000 1,485,000 1,514,700
3715 California II,
13.38%, 10/1/06 09/03/03 100,000 100,000 98,822
437 Hyde I,
5.38%, 10/1/06 09/03/03 950,000 950,000 969,000
437 Hyde II,
13.38%, 10/1/06 09/03/03 50,000 50,000 49,411
500 Bartlett I,
5.38%, 10/1/06 09/03/03 555,000 555,000 566,100
500 Bartlett II,
13.38%, 10/1/06 09/03/03 25,000 25,000 24,706
825 Jones I,
5.38%, 10/1/06 09/03/03 1,750,000 1,750,000 1,785,000
825 Jones II,
13.38%, 10/1/06 09/03/03 100,000 100,000 98,822
839 Jones I,
5.38%, 10/1/06 09/03/03 1,415,000 1,415,000 1,443,300
839 Jones II,
13.38%, 10/1/06 09/03/03 100,000 100,000 98,822
Applewood Manor,
8.63%, 1/1/08 12/23/93 625,449 622,322 650,467
Charleston Plaza Apartments,
7.38%, 7/1/98 04/01/04 1,440,457 1,440,457 1,512,479
El Dorado Apartments,
4.40%, 6/1/07 05/28/04 2,630,000 2,630,000 2,630,000
Franklin Woods Apartments,
9.78%, 3/1/10 02/24/95 1,029,336 1,026,553 1,080,803
Park Hollywood,
7.38%, 6/1/12 05/31/02 1,157,100 1,157,100 1,214,955
Rush Oaks Apartments,
7.78%, 12/1/07 11/26/97 495,770 495,770 515,601
Upland Apartments,
5.38%, 6/1/06 05/23/03 1,200,000 1,200,000 1,236,000
Vanderbilt Condominiums,
8.04%, 10/1/09 09/29/99 1,148,228 1,148,228 1,205,639
Villa Bonita, Chez Royalle,
Fitzhugh Apartments I,
7.25%, 3/1/06 02/21/03 1,900,000 1,900,000 1,938,000
</Table>
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS.
20
<Page>
<Table>
<Caption>
DATE PAR
DESCRIPTION OF SECURITY ACQUIRED VALUE COST VALUE (a)
- ------------------------------------------------------------ ------------- ------------- ------------- -------------
Villa Bonita, Chez Royalle,
Fitzhugh Apartments II,
9.88%, 3/1/06 02/21/03 $ 350,000 $ 350,000 $ 325,187
Woodland Garden Apartments,
7.38%, 9/1/08 08/26/98 998,283 998,283 1,048,197
------------- -------------
20,288,713 20,810,222
------------- -------------
SINGLE FAMILY LOANS -- 3.5%
Aegis, 10.00%, 3/26/10 10/26/95 48,671 45,971 50,131
Aegis II, 9.66%, 1/28/14 12/28/95 40,436 36,994 41,649
American Portfolio,
4.88%, 10/18/15 07/18/95 27,462 26,152 28,285
Anivan,
5.19%, 4/14/12 06/14/96 118,758 119,530 119,525
Bank of New Mexico,
6.23%, 5/31/96 03/01/04 81,957 80,427 84,415
Bluebonnet Savings and Loan,
6.66%, 8/31/10 05/22/92 210,253 192,502 216,560
Bluebonnet Savings and
Loan II, 11.50%, 8/31/10 05/22/92 10,079 9,872 10,116
CLSI Allison Williams,
9.38%, 8/1/17 02/28/92 65,206 59,585 67,163
Cross Roads Savings and Loan,
6.25%, 1/1/21 01/07/92 42,255 39,952 43,524
Cross Roads Savings and
Loan II, 8.34%, 1/1/21 01/07/92 62,848 59,073 64,733
Fairbanks, Utah,
5.50%, 9/23/15 05/21/92 24,089 20,431 24,811
First Boston Mortgage Pool,
9.04%, 6/29/04 06/23/92 78,747 64,183 81,109
Huntington MEWS,
9.00%, 8/1/17 01/22/92 168,539 145,429 173,595
Knutson Mortgage Portfolio I,
9.37%, 8/1/17 02/26/92 191,305 182,513 197,044
McClemore, Matrix
Funding Corporation,
10.50%, 9/30/12 09/09/92 50,046 47,538 51,547
Nomura III, 8.20%, 4/29/17 09/29/95 400,311 361,733 408,881
Rand Mortgage Corporation,
9.50%, 2/1/92 07/01/02 71,711 58,783 73,863
Salomon II,
9.34%, 11/23/14 12/23/94 80,926 70,403 83,354
</Table>
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS.
21
<Page>
<Table>
<Caption>
PAR
DATE VALUE/
DESCRIPTION OF SECURITY ACQUIRED SHARES COST VALUE (a)
- ------------------------------------------------------------ ------------- ------------- ------------- -------------
Valley Bank of Commerce, N.M.,
9.01%, 8/31/10 05/07/92 $ 37,247 $ 31,571 $ 38,365
------------- -------------
1,652,642 1,858,670
------------- -------------
Total Whole Loans and
Participation Mortgages 38,369,853 39,403,273
------------- -------------
MORTGAGE SERVICING RIGHTS (e,f) -- 0.1%
Matrix Servicing Rights,
0.12%, 7/10/22 07/10/92 5,462,076 45,744 44,674
------------- -------------
PREFERRED STOCKS -- 5.6%
REAL ESTATE INVESTMENT TRUSTS -- 5.6%
Archstone Community Trust,
Series D 04/23/01 13,125 342,038 337,575
BRE Properties, Series B 01/28/03 20,500 539,150 544,275
Developers Divers Realty 01/08/03 13,000 338,650 335,400
Equity Residential Properties,
Series D 08/15/02 1,600 42,553 42,304
Federal Realty
Investment Trust 01/21/03 22,000 580,483 566,940
HRPT Properties Trust,
Series A 01/09/03 8,400 225,120 223,020
HRPT Properties Trust,
Series B 01/08/03 14,000 364,477 369,600
PS Business Park,
Series D 01/29/03 11,500 308,161 306,015
PS Business Park,
Series F 01/21/03 10,500 276,103 274,260
------------- -------------
Total Preferred Stocks 3,016,735 2,999,389
------------- -------------
Total Investments in
Unaffiliated Securities 56,171,090 57,380,777
------------- -------------
AFFILIATED MONEY MARKET FUND (g) -- 7.2%
First American Prime
Obligations Fund, Class Z 3,806,508 3,806,508 3,806,508
------------- -------------
Total Investments in
Securities (h) - 115.1% $ 59,977,598 $ 61,187,285
============= =============
</Table>
SEE ACCOMPANYING NOTES TO SCHEDULE OF INVESTMENTS.
22
<Page>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 IN
NOTES TO FINANCIAL STATEMENTS.
(b) ON MAY 31, 2004, SECURITIES VALUED AT $8,492,632 WERE PLEDGED AS COLLATERAL
FOR THE FOLLOWING OUTSTANDING REVERSE REPURCHASE AGREEMENT:
<Table>
<Caption>
NAME OF
BROKER
ACQUISITION ACCRUED AND DESCRIPTION
AMOUNT DATE RATE DUE INTEREST OF COLLATERAL
- ----------- ------------- ------- --------- ---------- -----------------
$ 8,191,087 5/12/04 1.10%* 6/11/04 $ 5,006 (1)
=========== ==========
</Table>
*RATE IS A NEGOTIATED FIXED RATE
NAME OF BROKER AND DESCRIPTION OF COLLATERAL:
(1) MORGAN STANLEY:
FNMA, 6.00%, 10/1/16, $1,084,099 PAR
FNMA, 5.00%, 7/1/18, $3,896,746 PAR
FNMA, 6.50%, 6/1/29, $464,027 PAR
FNMA, 7.50%, 3/1/30, $1,201,532 PAR
FNMA, 7.50%, 5/1/30, $125,104 PAR
FNMA, 8.00%, 5/1/30, $33,840 PAR
FNMA, 6.00%, 5/1/31, $877,390 PAR
FNMA, 6.50%, 11/1/31, $621,208 PAR
THE FUND HAS ENTERED INTO A LENDING AGREEMENT 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 AGREEMENT.
(c) INTEREST RATES ON COMMERCIAL AND MULTIFAMILY LOANS ARE THE RATES IN EFFECT
ON MAY 31, 2004. INTEREST RATES AND MATURITY DATES DISCLOSED ON SINGLE
FAMILY LOANS REPRESENT THE WEIGHTED AVERAGE COUPON AND WEIGHTED AVERAGE
MATURITY FOR THE UNDERLYING MORTGAGE LOANS AS OF MAY 31, 2004.
(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, ARE PRESENTED BELOW.
COMMERCIAL LOANS:
ADVANCE SELF STORAGE - LINCOLN, NE
BUCA RESTAURANT - MAPLE GROVE, MN
HAMPDEN MEDICAL OFFICE - ENGLEWOOD, CO
INTEGRITY PLAZA SHOPPING CENTER - ALBUQUERQUE, NM
METRO CENTER - ALBUQUERQUE, NM
ORCHARD COMMONS - ENGLEWOOD, CO
PACIFIC PERIODICALS BUILDING - LAKEWOOD, WA
ROCKWOOD GALLERIA - GRESHAM, OR
SCHENDEL OFFICE BUILDING - BEAVERTON, OR
STEPHENS CENTER - MISSOULA, MT
VOIT OFFICE BUILDING - ORANGE, CA
23
<Page>
MULTIFAMILY LOANS:
1500 GENEVA I - SAN FRANCISCO, CA
1500 GENEVA II - SAN FRANCISCO, CA
3715 CALIFORNIA I - SAN FRANCISCO, CA
3715 CALIFORNIA II - SAN FRANCISCO, CA
437 HYDE I - SAN FRANCISCO, CA
437 HYDE II - SAN FRANCISCO, CA
500 BARTLETT I - SAN FRANCISCO, CA
500 BARTLETT II - SAN FRANCISCO, CA
825 JONES I - SAN FRANCISCO, CA
825 JONES II - SAN FRANCISCO, CA
839 JONES I - SAN FRANCISCO, CA
839 JONES II - SAN FRANCISCO, CA
APPLEWOOD MANOR - DULUTH, MN
CHARLESTON PLAZA APARTMENTS - LAS VEGAS, NV
EL DORADO APARTMENTS - TUCSON, AZ
FRANKLIN WOODS APARTMENTS - FRANKLIN, NH
PARK HOLLYWOOD - PORTLAND, OR
RUSH OAKS APARTMENTS - LaPORTE, TX
UPLAND APARTMENTS - UPLAND, CA
VANDERBILT CONDOMINIUMS - AUSTIN, TX
VILLA BONITA, CHEZ ROYALLE, FITZHUGH APARTMENTS I - DALLAS, TX
VILLA BONITA, CHEZ ROYALLE, FITZHUGH APARTMENTS II - DALLAS, TX
WOODLAND GARDEN APARTMENTS - ARLINGTON, WA
SINGLE FAMILY LOANS:
AEGIS - 1 LOAN, MIDWESTERN UNITED STATES
AEGIS II - 2 LOANS, MIDWESTERN UNITED STATES
AMERICAN PORTFOLIO - 1 LOAN, TEXAS AND CALIFORNIA
ANIVAN - 2 LOANS, MARYLAND, NEW JERSEY, VIRGINIA
BANK OF NEW MEXICO - 2 LOANS, NEW MEXICO
BLUEBONNET SAVINGS AND LOAN - 7 LOANS, TEXAS
BLUEBONNET SAVINGS AND LOAN II - 1 LOAN, TEXAS
CLSI ALLISON WILLIAMS - 6 LOANS, TEXAS
CROSS ROADS SAVINGS AND LOAN - 1 LOAN, OKLAHOMA
CROSS ROADS SAVINGS AND LOAN II - 3 LOANS, OKLAHOMA
FAIRBANKS, UTAH - 1 LOAN, UTAH
FIRST BOSTON MORTGAGE POOL - 5 LOANS, UNITED STATES
HUNTINGTON MEWS - 4 LOANS, NEW JERSEY
KNUTSON MORTGAGE PORTFOLIO I - 3 LOANS, MIDWESTERN UNITED STATES
McCLEMORE, MATRIX FUNDING CORPORATION - 1 LOAN, NORTH CAROLINA
NOMURA III - 8 LOANS, MIDWESTERN UNITED STATES
RAND MORTGAGE CORPORATION - 3 LOANS, TEXAS
SALOMON II - 2 LOANS, MIDWESTERN UNITED STATES
VALLEY BANK OF COMMERCE, N.M. - 4 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. THESE SECURITIES ARE FAIR
VALUED IN ACCORDANCE WITH THE BOARD APPROVED VALUATION PROCEDURES. ON MAY
31, 2004, THE TOTAL VALUE OF FAIR VALUED SECURITIES WAS $39,447,947 OR
74.2% OF NET ASSETS.
(f) INTEREST RATE DISCLOSED REPRESENTS THE CURRENT YIELD BASED ON THE CURRENT
COST BASIS AND ESTIMATED FUTURE CASH FLOWS.
(g) INVESTMENT IN AFFILIATED SECURITY. THIS MONEY MARKET FUND IS ADVISED BY
U.S. BANCORP ASSET MANAGEMENT, INC., WHICH ALSO SERVES AS THE ADVISOR FOR
THE FUND. SEE NOTE 3 IN NOTES TO FINANCIAL STATEMENTS.
24
<Page>
(h) ON MAY 31, 2004, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL INCOME
TAX PURPOSES WAS $60,662,111. THE AGGREGATE GROSS UNREALIZED APPRECIATION
AND DEPRECIATION OF INVESTMENTS IN SECURITIES, BASED ON THIS COST WERE AS
FOLLOWS:
<Table>
GROSS UNREALIZED APPRECIATION $ 914,534
GROSS UNREALIZED DEPRECIATION (389,360)
----------------
NET UNREALIZED APPRECIATION $ 525,174
================
</Table>
ABBREVIATIONS:
FHLMC--FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA--FEDERAL NATIONAL MORTGAGE ASSOCIATION
25
<Page>
SHAREHOLDER UPDATE (Unaudited)
HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICIES
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; (2) at
firstamericanfunds.com; and (3) on the U.S. Securities
and Exchange Commission's website at sec.gov.2004
26
<Page>
(This page has been left blank intentionally.)
<Page>
(This page has been left blank intentionally.)
<Page>
BOARD OF DIRECTORS
VIRGINIA STRINGER
Chairperson of American Strategic Income Portfolio Inc.
Owner and President of Strategic Management Resources, Inc.
BENJAMIN FIELD III
Director of American Strategic Income Portfolio Inc.
Retired; former Senior Financial Advisor, Senior Vice President, Chief Financial
Officer, and Treasurer of Bemis Company, Inc.
MICKEY FORET
Director of American Strategic Income Portfolio Inc.
Consultant to, and formerly Executive Vice President and Chief Financial Officer
of, Northwest Airlines, Inc.
ROGER GIBSON
Director of American Strategic Income Portfolio Inc.
Vice President of Cargo-United Airlines
VICTORIA HERGET
Director of American Strategic Income Portfolio Inc.
Investment Consultant; former Managing Director of Zurich Scudder Investments
LEONARD KEDROWSKI
Director of American Strategic Income Portfolio Inc.
Owner and President of Executive and Management Consulting, Inc.
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.
Owner and President of Strauss Management Company
JAMES WADE
Director of American Strategic Income Portfolio Inc.
Owner and President of Jim Wade Homes
AMERICAN STRATEGIC INCOME PORTFOLIO INC.'S BOARD OF DIRECTORS IS COMPRISED
ENTIRELY OF INDEPENDENT DIRECTORS.
<Page>
AMERICAN STRATEGIC INCOME PORTFOLIO INC.
2004 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.
[GRAPHIC]
This document is printed on paper Containing 10% postconsumer Waste.
7/2004 0255.04 ASP-SAR
<Page>
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).
(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.
<Page>
(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.
RESPONSE: Not applicable to semi-annual report.
ITEM 5--AUDIT COMMITTEE OF LISTED REGISTRANTS
(a) If the registrant is a listed issuer as defined in Rule 10A-3 under the
Exchange Act (17 CFR 240.10A-3), state whether or not the registrant has a
separately-designated standing audit committee established in accordance
with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If
the registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee as specified in Section 3(a)(58)(B) of the
Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state.
(b) If applicable, provide the disclosure required by Rule 10A-3(d) under the
Exchange Act (17 CFR 240.10A-3(d)) regarding an exemption from the listing
standards for audit committees.
RESPONSE: Not applicable to semi-annual report.
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ITEM 6--SCHEDULE OF INVESTMENTS (applicable for periods ending on or after July
9, 2004) - File Schedule I - Investments in securities of unaffiliated issuers
as of the close of the reporting period as set forth in Section 210.12-12 of
Regulation S-X [17 CFR 210.12-12], unless the schedule is included as part of
the report to shareholders filed under Item 1 of this Form.
RESPONSE: Not applicable for periods ending before July 9, 2004.
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--PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS (applicable for periods ending on or after
June 15, 2004)
(a) If the registrant is a closed-end management investment company, in the
following tabular format, provide the information specified in paragraph (b)
of this Item with respect to any purchase made by or on behalf of the
registrant or any "affiliated purchaser," as defined in Rule 10b-18(a)(3)
under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units
of any class of the registrant's equity securities that is registered
pursuant to Section 12 of the Exchange Act (15 U.S.C. 781).
(b) The table shall include the following information for each class of
securities for each month included in the period covered by the report:
(1) The total number of shares (or units) purchased (column (a));
(2) The average price paid per share (or unit) (column (b));
(3) The number of shares (or units) purchased as part of publicly announced
repurchase plans or programs (column (c)); and
(4) The maximum number (or approximate dollar value) of shares (or units)
that may yet be purchased under the plans or programs (column (d)).
RESPONSE: Not applicable for periods ending before June 15, 2004.
ITEM 9--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Describe any
material changes to the procedures by which shareholders may recommend nominees
to the registrant's board of directors, where those changes were implemented
after the registrant last provided disclosure in response to the requirements of
Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item.
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RESPONSE: The registrant's Board of Directors has adopted the following
procedures by which shareholders may recommend nominees to the registrant's
board of directors. The Governance Committee of the registrant's Board of
Directors will consider shareholder recommendations for director nominees in
connection with each annual shareholders meeting of the registrant and any
special shareholders meeting which is called for the purpose of electing
directors. There are no differences in the manner in which the Governance
Committee evaluates nominees for director based on whether the nominee is
recommended by a shareholder.
A shareholder who wishes to recommend a director nominee should submit his or
her recommendation in writing to the Chair of the Board (Virginia Stringer) or
the Chair of the Governance Committee (Richard Riederer), in either case at
First American Funds, P.O. Box 1329, Minneapolis, Minnesota 55440-1329. At a
minimum, the recommendation should include:
- the name, address, and business, educational, and/or other pertinent
background of the person being recommended;
- a statement concerning whether the person is "independent" within the
meaning of New York Stock Exchange listing standards and is not an
"interested person" as defined in the Investment Company Act of 1940;
- any other information that the registrant would be required to include
in a proxy statement concerning the person if he or she was nominated;
and
- the name and address of the person submitting the recommendation,
together with the number of shares held in the registrant by such person
and the period for which the shares have been held.
The recommendation also can include any additional information which the person
submitting it believes would assist the Governance Committee in evaluating the
recommendation. In order for the Governance Committee to consider a
shareholder's recommended nominee for election at the annual shareholders
meeting in a given year, the recommendation should be submitted to the
Governance Committee no later than May 31 in that year.
ITEM 10--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
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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.
Notwithstanding this conclusion, the registrant's Principal Executive
Officer and Principal Financial Officer seek continuous improvements to the
registrant's disclosure controls and procedures.
(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 11 - EXHIBITS
11(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.
11(b) - Attach certifications (4 in total pursuant to Sections 302 and 906 for
PEO/PFO).
RESPONSE: Attached hereto.
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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.
By: /s/ Thomas S. Schreier, Jr.
---------------------------
Thomas S. Schreier, Jr.
President
Date: August 6, 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: August 6, 2004
By: /s/ Joseph M. Ulrey III
---------------------------
Joseph M. Ulrey III
Treasurer
Date: August 6, 2004