-----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, EQTuYQNA6sF7Zv1BuJKoRZfLpGPlmvnB3CMM5iLs72feRA/666DS52b6p90/rltW 5jG04Q8itMPH9t9WScGGXQ== 0000912057-96-013570.txt : 19960702 0000912057-96-013570.hdr.sgml : 19960702 ACCESSION NUMBER: 0000912057-96-013570 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960701 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAS INCOME TRUST INC CENTRAL INDEX KEY: 0000914034 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 411771845 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-08094 FILM NUMBER: 96589404 BUSINESS ADDRESS: STREET 1: PIPER JAFFRAY TOWER STREET 2: 222 S NINTH STREET CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6143426387 MAIL ADDRESS: STREET 1: 222 S NINTH STREET CITY: MINNEAPOLIS STATE: MN ZIP: 55402 N-30D 1 FORM N-30D The Americas Income Trust [LOGO] [PHOTO] SEMIANNUAL REPORT 1996 Table of Contents THE AMERICAS INCOME TRUST The Americas Income Trust is a non-diversified, closed-end fund. The fund's primary investment objective is to provide a high level of current income, and its secondary objective is to seek long-term capital appreciation. To realize its objectives, the fund primarily invests in debt securities that are issued by issuers located in the United States, Canada and Mexico. The fund may invest up to 35% of its assets in securities of other countries. Average Annualized Total Returns... 1 Letter to Shareholders............. 2 Financial Statements and Notes..... 10 Investments in Securities.......... 21 Shareholder Update................. 24 Debt securities that the fund may invest in include: mortgage-related securities, including mortgage derivative securities; asset-backed securities; structured securities, including foreign linked index securities; municipal obligations; Brady bonds and corporate debt securities; and U.S. and foreign government securities. Investments in securities issued by non-U.S. issuers involve risks not typically associated with investments in securities issued by U.S. issuers, such as currency exchange risk and the potential of political, economic and social instability. As with other investment companies, no assurance can be given that the fund's investment objectives will be achieved. Fund shares trade on the New York Stock Exchange under the symbol XUS. CALL TO RECEIVE QUARTERLY UPDATES If you would like to be put on our mailing list to receive quarterly fund summaries for The Americas Income Trust (XUS), call our Shareholder Services Department at 1 800 866-7778. Average Annualized Total Returns Periods ended April 30, 1996 [CHART] The Americas Income Trust's total return figures are based on the change in its net asset value (NAV), assume all distributions were reinvested and do not reflect the fund's sales charge. NAV-based performance is used to measure investment management results. Average annualized total returns based on the change in market price for the one-year and since inception periods ended April 30, 1996, were 8.18% and - -21.35%, respectively. These figures also include reinvested distributions and do not reflect a sales charge. The Lipper World Income Funds Averages represent the average total returns, with distributions reinvested and not including sales charges, of 14 developed nation closed-end funds and 12 emerging nation closed-end funds which invest in non-U.S. dollar and U.S. dollar debt instruments with unspecified maturities or other income-producing securities as characterized by Lipper Analytical Services. The since inception numbers for the averages are calculated from the month end closest to the fund's inception through April 30, 1996. Figures shown reflect past performance and do not guarantee future results. 1 The Americas Income Trust [PHOTO] WILLIAM H. ELLIS PRESIDENT, PIPER CAPITAL MANAGEMENT June 20, 1996 Dear Shareholders: IN THIS REPORT, WE ARE PLEASED TO INTRODUCE YOU TO THE NEW SUBADVISER TO THE AMERICAS INCOME TRUST --SALOMON BROTHERS ASSET MANAGEMENT INC (SBAM). Shareholders recently approved SBAM as the fund's subadviser, a change that took effect May 22. SBAM now handles the fund's day-to-day portfolio management duties, while Piper Capital Management, as the fund's adviser, remains responsible for the oversight of the fund's portfolio strategy. This change allows Piper Capital to concentrate its resources on U.S. investment management services. THE CHANGE ALSO ALLOWS YOU TO BE SERVED BY A COMPANY WITH EXTENSIVE EXPERIENCE IN GLOBAL BOND MARKETS. SBAM currently serves as investment adviser to four other investment companies with investment objectives similar to that of The Americas Income Trust. Of the firm's $14.3 billion in assets under management, more than $5 billion are in global fixed income products. SBAM was incorporated in 1987 and is based in New York, with affiliates in London, Frankfurt and Hong Kong. The firm offers a full range of fixed income and equity investment management services to proprietary and non-proprietary mutual funds, offshore funds, institutional accounts, wrap fee products and private clients. AS SBAM MOVES FORWARD IN MANAGING THE AMERICAS INCOME TRUST, THEY ARE FOLLOWING NEW INVESTMENT POLICIES, APPROVED BY THE FUND'S BOARD OF DIRECTORS. These new policies allow the investment of a higher percentage of the fund's assets in non-investment grade and unrated securities. Non-investment grade securities, commonly known as "high yield" or "junk" bonds, are subject to higher risks and greater market 2 THE AMERICAS INCOME TRUST fluctuations than are lower-yielding, higher-rated securities. SBAM believes these investments present an attractive opportunity in emerging markets such as Mexico. Peter Wilby, the fund's new portfolio manager, explains the risks and opportunities involved with the new investment guidelines on page 7. Starting on page 4, Tom McGlinch from Piper Capital discusses the fund's performance for the six-month period. Mr. Wilby, a chartered financial analyst and certified public accountant, is the senior portfolio manager responsible for directing investment policy and strategy for all SBAMemerging markets debt and high-yield fixed income portfolios. He leads a team of professional portfolio managers averaging 12 years of financial experience, who will contribute to the management of the fund. We appreciate your investment in The Americas Income Trust, and we can assure you that SBAM shares our commitment to providing you with top-quality service and investment management. Sincerely, /s/ William H. Ellis William H. Ellis President Piper Capital Management 3 The Americas Income Trust [PHOTO] TOM MCGLINCH, CFA PIPER CAPITAL MANAGEMENT, WAS PRIMARILY RESPONSIBLE FOR THE MANAGEMENT OF THE AMERICAS INCOME TRUST THROUGH MAY 22, 1996. HE HAS 15 YEARS OF FINANCIAL EXPERIENCE. Dear Shareholders: FOR THE SIX-MONTH PERIOD ENDED APRIL 30, 1996, THE NET ASSET VALUE TOTAL RETURN FOR THE AMERICAS INCOME TRUST WAS 2.51%.* This compares to the Lipper World Income Funds Average: Developed Nations return of 6.81% and the Lipper World Income Funds Average: Emerging Nations return of 22.26% for the same period. The funds in both Lipper groups generally benefited from the strong returns of the non-investment grade (high-yield) sector of the foreign markets. The Americas Income Trust was limited to a 10% position in that market sector until recent changes were made to the fund's investment guidelines, which accounts for a large share of the difference in performance. AT THE END OF APRIL, THE FUND'S SHARES WERE TRADING AT APPROXIMATELY A 15% DISCOUNT TO THEIR NET ASSET VALUE. (See "Premium vs. Discount" discussion in box at left.) Based on the change in the fund's market price, the fund's total return for the six-month period was 4.56%.* Fund returns assume distributions were reinvested and do not reflect sales charges. THE SIX-MONTH PERIOD WAS VOLATILE IN THE U.S. MARKET. THIS IS SIGNIFICANT, SINCE THE UNITED STATES REPRESENTED 61% OF THE FUND'S TOTAL ASSETS AS OF APRIL 30. The Federal Reserve Board reduced short-term rates in January 1996; however, the bond market had already factored in a more significant decline, based on expectations of a weak economy. Once economic reports PREMIUM VS. DISCOUNT The underlying value of a fund's securities and other assets, minus its liabilities, is the fund's "net asset value." Closed-end funds may trade in the market at a price that is equal to, above, or below this net asset value. Shares are trading at a "premium" when investors purchase or sell shares in the market at a price that is greater than the shares' net asset value. Conversely, when investors purchase or sell shares in the market at a price that is lower than the shares' net asset value, they are said to be trading at a "discount." *PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 4 The Americas Income Trust showed stronger than expected growth, interest rates rose and bond prices fell sharply, ending the bond market rally abruptly and resulting in the third worst quarter for bonds in general since interest rates peaked in 1981. The fund was positioned for this volatility, having sold long-duration derivative securities in anticipation of rising rates and by holding more cash and defensive securities as rates were rising. THE MOST SIGNIFICANT EVENT IN CANADA DURING THE SIX MONTHS WAS THE QUEBEC REFERENDUM IN LATE 1995. We hedged a portion of the fund's position in the Canadian dollar futures market prior to the vote, but did not sell bonds because we wanted to maintain the fund's income. The referendum's failure, its expected deferral for several years, and the country's increased focus on balancing its fiscal budgets resulted in a positive environment for Canadian investments. For example, the yield on 10-year Canadian government bonds had traded at a spread of 1.75% over U.S. government bonds in late 1995. That spread has since fallen below 1%, which benefited the fund's Canadian investments. IN 1996, WE'VE MAINTAINED THE FUND'S MEXICAN EXPOSURE. As of April 30, the fund was a bit underweighted in Mexico, with about half of its Mexican investments denominated in pesos and the remainder denominated in U.S. dollars. The Mexican economy appears somewhat more stable this year. Although there is weak economic growth, PORTFOLIO COMPOSITION April 30, 1996 [CHART] 5 The Americas Income Trust inflation is falling and interest rates are expected to be in the 20% range, as compared to rates as high as 80% in the past year. While the peso depreciated more than 15% over the past six months, it has recently stabilized. ALL OF THE FUND'S DISTRIBUTIONS FOR THE FISCAL YEAR ENDING OCT. 31, 1996, WILL BE CLASSIFIED AS RETURNS OF CAPITAL FOR TAX PURPOSES. The returns of capital resulted from foreign currency losses experienced by the fund. Tax accounting rules require that foreign currency losses be offset against net investment income when determining ordinary income. FOR YOU AS AN INVESTOR, A RETURN OF CAPITAL MEANS THE DISTRIBUTION IS NOT REPORTED AS TAXABLE INCOME BUT REDUCES YOUR COST BASIS IN THE FUND. Therefore, while it defers taxes on your earnings now, it will likely affect the capital gain or loss calculation when you sell fund shares. Your tax adviser can provide more information about how this will affect you in your tax reporting. I URGE YOU TO READ AND UNDERSTAND THE PLANS FOR FUTURE INVESTMENTS IN THE AMERICAS INCOME TRUST. On the next pages, Peter Wilby, the fund's primary portfolio manager at Salomon Brothers Asset Management, outlines some of the changes in the fund's investment policy. We believe SBAM is the best company to take the fund through these changes, and we look forward to working with them. Sincerely, /s/ Tom McGlinch Tom McGlinch Portfolio Manager Piper Capital Management 6 The Americas Income Trust [PHOTO] PETER WILBY, CFA, CPA, SALOMON BROTHERS ASSET MANAGEMENT, IS PRIMARILY RESPONSIBLE FOR THE MANAGEMENT OF THE AMERICAS INCOME TRUST, BEGINNING MAY 22, 1996. PETER HAS 13 YEARS OF FINANCIAL EXPERIENCE. HE JOINED SBAM IN 1989 AS A DIRECTOR OF HIGH-YIELD AND EMERGING MARKETS FIXED INCOME PORTFOLIO MANAGEMENT. IN 1996, HE WAS APPOINTED A MANAGING DIRECTOR OF SALOMON BROTHERS INC. Dear Shareholders: SALOMON BROTHERS ASSET MANAGEMENT IS PLEASED TO ACCEPT ITS NEW ROLE AS SUBADVISER TO THE AMERICAS INCOME TRUST. We believe now is an excellent time to take action in response to favorable market conditions in the countries represented in the fund, as well as in other international markets. A CHANGE IN THE FUND'S INVESTMENT POLICIES ALLOWS US TO INVEST A HIGHER PERCENTAGE OF ASSETS IN THE HIGH-YIELD BOND MARKET, WHICH WE BELIEVE PRESENTS AN ATTRACTIVE OPPORTUNITY. The Americas Income Trust now has the ability to invest up to 35% of its total assets in non-investment grade securities or unrated securities of comparable quality (up from a previous limit of 10%). Non-investment grade securities, commonly known as "high-yield" or "junk" bonds, are subject to higher risks and greater market fluctuations than are lower-yielding, higher-rated securities. Another policy change allows the investment of up to 35% of total assets in unrated securities of any quality (up from a previous limit of 20%). Unrated securities deemed comparable to non-investment grade securities will have similar characteristics to those securities. The fund will not invest any more than 35% of its total assets, collectively, in unrated securities of any quality and non-investment grade or comparable quality securities. WITH THESE NEW POLICIES IN EFFECT, WE ANTICIPATE CHANGING THE FUND'S ALLOCATION. Our expected allocation will include a significant portion of U.S. and Canadian investment grade bonds, but will also include emerging markets debt, high-yield bonds and international investment grade bonds. We believe the ability to invest in the high-yield bond market in the United States and Canada could bring positive results. We also believe that stable to 7 The Americas Income Trust improving credit quality trends and strong cash flows into mutual funds should continue to support the high-yield market. In the emerging markets, moderate economic growth and political stability should support the markets, providing adequate liquidity for buyers of emerging markets debt. The emerging debt market currently yields approximately 7% over U.S. Treasuries, while U.S. BB/B sectors yield 2.5% to 4.3% above U.S. Treasuries. WE ARE ENCOURAGED BY THE FISCAL AND ECONOMIC TRENDS IN THE UNITED STATES, CANADA AND MEXICO, AND WE BELIEVE THEY SHOULD HAVE A POSITIVE EFFECT ON THE AMERICAS INCOME TRUST. In the United States, signs of economic strength continue to emerge, suggesting that the accelerated pace of growth in the first quarter of 1996 will carry forward. Canada's current low inflation rate, the government's commitment to fiscal discipline, and stability in the Canadian dollar indicate a positive outlook for bonds. In Mexico, there is adequate liquidity in the market and buyers still have an appetite for Mexican bonds, as demonstrated by new long-dated, uncollateralized bonds being issued. NEWS FROM EMERGING MARKET COUNTRIES IS ENCOURAGING. In mid-January, Moody's eliminated the single grade rating gap between Eurobonds and Brady bonds, effectively giving Bradys a credit boost. This upgraded Poland's Brady bonds to an investment grade rating, the first of its kind for a Brady bond. (Both S&P and Moody's, two independent rating agencies, upgraded Poland's Eurobonds to investment grade during 1995.) This credit rating boost had a positive effect on the entire emerging markets debt INVESTMENT GRADE SECURITIES Investment grade securities are those rated from AAA to BBBby rating agencies like Standard & Poor's or Moody's. They usually are considered to be good quality. NON-INVESTMENT GRADE SECURITIES Non-investment grade securities (also known as high-yield securities or "junk bonds") are rated BB or lower by rating agencies. They are issued by companies without long track records of sales and earnings, or by those with questionable credit strength. Since they are more volatile and pay higher yields than investment grade bonds, many risk-oriented investors focus on them. UNRATED SECURITIES Unrated securities are securities that, for any number of reasons, do not have a rating. The name "unrated" does not necessarily mean that a security is risky or that a rating has been denied. Many issuers do not apply for a rating, or they determine that the cost of applying for and maintaining a rating is too great. 8 The Americas Income Trust sector. Buyers from the U.S. high-yield market and from Europe and Asia have entered the emerging debt markets following the ratings upgrade. Consistent demand should support the market going forward. WE ARE OPTIMISTIC THAT THE FIXED INCOME SECTORS REPRESENTED IN THE AMERICAS INCOME TRUST WILL RESULT IN STRONG INVESTMENT PERFORMANCE OVER THE LONG TERM. The combination of investment grade, high-yield and emerging markets debt should provide the opportunity for relatively higher yields than a portfolio of solely domestic bonds. In addition, we believe diversification across a broad range of bond sectors reduces dependency on any one individual market and helps limit portfolio fluctuations. Thank you for your investment in The Americas Income Trust. We consider it a privilege to manage your money, and we are committed to providing you with the best service. Sincerely, /s/ Peter Wilby Peter Wilby Managing Director, Portfolio Manager Salomon Brothers Asset Management 9 - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS (Unaudited) STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1996 ASSETS: Investments in securities at market value* (including a repurchase agreement of $563,000) (note 2) ......... $ 49,853,501 Cash in bank on demand deposit ........................... 185,542 Other assets ............................................. 10,052 Accrued interest receivable .............................. 684,297 ---------------- Total assets ......................................... 50,733,392 ---------------- LIABILITIES: Accrued investment management fee ........................ 20,739 Accrued administrative fee ............................... 8,296 Other accrued expenses ................................... 67,332 ---------------- Total liabilities .................................... 96,367 ---------------- Net assets applicable to outstanding capital stock ....... $ 50,637,025 ---------------- ---------------- REPRESENTED BY: Capital stock - authorized 2 billion shares of $0.01 par value; outstanding, 6,251,305 shares ................. $ 62,513 Additional paid-in capital ............................... 78,924,020 Distributions in excess of net investment income ......... (81,096) Accumulated net realized loss on investments ............. (23,045,817) Unrealized depreciation of investments and on translation of other assets and liabilities denominated in foreign currencies ............................................. (5,222,595) ---------------- Total - representing net assets applicable to outstanding capital stock ........................ $ 50,637,025 ---------------- ---------------- Net asset value per share of outstanding capital stock ... $ 8.10 ---------------- ---------------- * Investments in securities at identified cost ........... $ 55,078,462 ---------------- ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 10 - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS (UNAUDITED) STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED APRIL 30, 1996 INCOME: Interest ............................................... $ 2,207,797 ---------------- EXPENSES (NOTE 3): Investment management fee ................................ 127,271 Administrative fee ....................................... 50,908 Custodian, accounting and transfer agent fees ............ 57,939 Reports to shareholders .................................. 26,465 Directors' fees .......................................... 5,650 Audit and legal fees ..................................... 33,056 Other expenses ........................................... 15,267 ---------------- Total expenses ....................................... 316,556 Less expenses paid indirectly ............................ (1,008) ---------------- Total net expenses ................................... 315,548 ---------------- Net investment income ................................ 1,892,249 ---------------- NET REALIZED AND UNREALIZED GAINS (LOSSES): Net realized loss on investments and foreign currency transactions (note 4) .................................. (8,419,028) Net realized loss on closed futures contracts ............ (32,850) ---------------- Net realized loss on investments and foreign currency transactions ......................................... (8,451,878) Net change in unrealized appreciation or depreciation of investments and on translation of other assets and liabilities denominated in foreign currencies .......... 7,769,618 ---------------- Net realized and unrealized loss on investments and foreign currency transactions ........................ (682,260) ---------------- Net increase in net assets resulting from operations ....................................... $ 1,209,989 ---------------- ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 11 - -------------------------------------------------------------------------------- FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended 4/30/96 Year Ended (Unaudited) 10/31/95 ---------------- ---------------- OPERATIONS: Net investment income .................................. $ 1,892,249 5,047,323 Net realized loss on investments and foreign currency transactions and on translation of other assets and liabilities denominated in foreign currencies .......... (8,451,878) (18,226,930) Net change in unrealized appreciation or depreciation of investments ............................................ 7,769,618 5,519,734 ---------------- ---------------- Net increase (decrease) in net assets resulting from operations ........................................... 1,209,989 (7,659,873) ---------------- ---------------- DISTRIBUTIONS TO SHAREHOLDERS: Tax return of capital .................................... (1,973,345) (5,613,003) ---------------- ---------------- CAPITAL SHARE TRANSACTIONS: Payments for retirement of 51,000 and 129,300 shares, respectively ........................................... (351,813) (948,203) ---------------- ---------------- Total decrease in net assets ......................... (1,115,169) (14,221,079) Net assets at beginning of period .......................... 51,752,194 65,973,303 ---------------- ---------------- Net assets at end of period .............................. $ 50,637,025 51,752,194 ---------------- ---------------- ---------------- ---------------- Distributions in excess of net investment income ......... $ (81,096) -- ---------------- ---------------- ---------------- ----------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 12 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) ORGANIZATION The Americas Income Trust Inc. (the fund) is registered under the Investment Company Act of 1940 (as amended) as a non-diversified, closed-end investment management company. The fund primarily invests in debt securities that are issued by issuers located in the United States, Canada and Mexico and denominated in the currencies of those countries. Debt securities that the fund may invest in include: mortgage-related securities, including mortgage derivative securities; asset-backed securities; structured securities, including foreign linked index securities; municipal obligations; Brady bonds and corporate debt securities, and U.S. and foreign government securities. Fund shares are listed on the New York Stock Exchange under the symbol XUS. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVESTMENTS IN SECURITIES The values of fixed income securities are determined using pricing services or prices quoted by independent brokers. Exchange-listed options are valued at the last sales price, and open financial futures contracts are valued at the last settlement price. When market quotations are not readily available, securities are valued at fair value according to methods selected in good faith by the board of directors. Short-term securities with maturities of 60 days or less are valued at amortized cost which approximates market value. Securities transactions are accounted for on the date the securities are purchased or sold. Realized gains and losses are calculated on the identified-cost basis. Interest income, including amortization of bond discount and premium computed on a level-yield basis, is accrued daily. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the closing rate of exchange. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. For financial reporting purposes the realized and unrealized gain (loss) on investments reflects changes in exchange rates as well as changes in the foreign denominated market value of investments. The fund also may enter into forward foreign currency exchange contracts for hedging purposes. The net U.S. dollar value of foreign 13 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) currency underlying all contractual commitments held by the fund, and the resulting unrealized appreciation or depreciation, are determined using foreign currency exchange rates from independent pricing sources. The fund is subject to the credit risk that the other party will not complete the obligations of the contract. OPTIONS TRANSACTIONS For hedging purposes, the fund may buy and sell put and call options, write covered call options on portfolio securities, and write cash-secured puts. The risk in writing a call option is that the fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the fund may incur a loss if the market price of the security decreases and the option is exercised. The risk of buying an option is that the fund pays a premium whether or not the option is exercised. The fund also has the additional risk of not being able to enter into a closing transaction if a liquid secondary market does not exist. Option contracts are valued daily and unrealized appreciation or depreciation is recorded. The fund will realize a gain or loss upon expiration or closing of the option transaction. When an option is exercised, the proceeds on the sale of a written call option, the purchase cost of a written put option, or the cost of a security for purchased put and call options is adjusted by the amount of premium received or paid. FUTURES TRANSACTIONS In order to gain exposure to or protect against changes in the market, the fund may buy and sell financial futures contracts and related options. Risks of entering into futures contracts and related options include the possibility there may be an illiquid market and that a change in the value of the contract or option may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the fund is required to deposit either cash or securities in an amount (initial margin) equal to a certain percentage of the contract value. Subsequent payments (variation margin) are made or received by the fund each day. The variation margin payments are equal to the daily changes in the 14 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) contract value and are recorded as unrealized gains and losses. The fund recognizes a realized gain or loss when the contract is closed or expires. INTEREST RATE TRANSACTIONS To preserve a return or spread on a particular investment or portion of its portfolio or for other non-speculative purposes, the fund may enter into various hedging transactions, such as interest rate swaps and the purchase of interest rate caps and floors. Interest rate swaps involve the exchange of commitments to pay or receive interest, e.g., an exchange of floating rate payments for fixed rate payments. The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payments of interest on a contractually based notional principal amount from the party selling the interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a contractually based notional principal amount from the party selling the interest rate floor. If forecasts of interest rates and other market factors are incorrect, investment performance will diminish compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there is risk that the positions may correlate imperfectly with the asset or liability being hedged. Other risks of entering into these transactions are that a liquid secondary market may not always exist or that the other party to the transaction may not perform. For interest rate swaps, caps and floors, the fund accrues weekly, as an increase or decrease to interest income, the current net amount due to or owed by the fund. Interest rate swaps, caps and floors are valued from prices quoted by independent brokers. These valuations represent the present value of all future cash settlement amounts based on implied forward interest rates. SECURITIES PURCHASED ON A WHEN-ISSUED BASIS Delivery and payment for securities that have been purchased by the fund on a forward-commitment or when-issued basis can take place a month or more after the transaction date. During this period, such securities do not earn interest, are subject to market fluctuation and 15 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) may increase or decrease in value prior to their delivery. The fund maintains, in a segregated account 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 April 30, 1996, the fund had no outstanding when-issued or forward-commitments. In connection with its ability to purchase securities on a when-issued or forward-commitment basis, the fund may enter into mortgage "dollar rolls" in which the fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity) but not identical securities on a specified future date. As an inducement to "roll over" its purchase commitments, the fund receives negotiated fees. For six months ended April 30, 1996, the fund earned no such fees. 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. Net investment income and net realized gains (losses) may differ for financial statement and tax purposes primarily because of market discount amortization, the differences in amortization policies for notional principal contracts, the recognition of certain foreign currency gains (losses) as ordinary income (loss) for tax purposes, the "mark-to-market" investments for tax purposes, losses deferred due to "wash sale" and "straddle" transactions and 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. Distributions that exceed the net investment income or net realized gains recorded on a tax basis are presented as a "tax return of capital" in the statements of changes in net assets and the financial highlights. In addition, due 16 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 (losses) were recorded by the fund. DISTRIBUTIONS TO SHAREHOLDERS Distributions from net investment income are made monthly and realized capital gains, if any, will be distributed at least annually. These distributions are recorded as of the close of business on the ex-dividend date. Such distributions are payable in cash or, pursuant to the fund's dividend reinvestment plan, reinvested in additional shares of the fund's capital stock. Under the plan, fund shares will be purchased in the open market unless the market price plus commissions exceeds the net asset value by 10% or more. If, at the close of business on the dividend payment date, the shares purchased in the open market are insufficient to satisfy the dividend reinvestment requirement, the fund will issue new shares at a discount of up to 5% from the current market price. REPURCHASE AGREEMENTS For repurchase agreements entered into with certain broker-dealers, the fund, along with other affiliated registered investment companies, may transfer uninvested cash balances into a joint trading account, the daily aggregate of which is invested in repurchase agreements secured by U.S. government or agency obligations. Securities pledged as collateral for all individual and joint repurchase agreements are held by the fund's custodian bank until maturity of the repurchase agreement. Provisions for all agreements ensure that the daily market value of the collateral is in excess of the repurchase amount, including accrued interest, to protect the fund in the event of a default. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported results of operations during the reporting period. Actual results could differ from those estimates. 17 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (3) EXPENSES The fund has entered into the following agreements with Piper Capital Management Incorporated (the adviser and the administrator): The investment advisory agreement provides the adviser with a monthly investment management fee equal to an annualized rate of 0.50% of the fund's average weekly net assets. For its fee, the adviser provides investment advice and conducts the management and investment activity of the fund. Effective May 22, 1996, Salomon Brothers Asset Management Inc. (SBAM) became the subadviser to the fund. SBAM now handles the fund's day-to-day portfolio management duties, while Piper Capital Management, as the fund's adviser, remains responsible for the oversight of the fund's portfolio strategy. The administration agreement provides the administrator with a monthly fee in an amount equal to an annualized rate of 0.20% of the fund's average weekly net assets. For its fee, the administrator will provide reporting, regulatory and record-keeping services for the fund. 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; taxes and other miscellaneous expenses. Expenses paid indirectly represents a reduction of custodian fees for earnings on cash balances maintained by the fund. (4) INVESTMENT SECURITY TRANSACTIONS Cost of purchases and proceeds from sales of securities, other than temporary investments in short-term securities, for the six months ended April 30, 1996 aggregated $15,813,307 and $11,171,197, respectively. During the six months ended April 30, 1996, no brokerage commissions were paid to Piper Jaffray Inc., an affiliated broker. (5) CAPITAL LOSS CARRYOVER For federal income tax purposes, the fund had capital loss carryovers of $14,593,939 as of October 31, 1995, which, if not offset by 18 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (UNAUDITED) subsequent capital gains, will expire in 2002 and 2003. It is unlikely the board of directors will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or expires. (6) RETIREMENT OF FUND SHARES The fund's board of directors voted to discontinue the share repurchase program effective February 6, 1996. Pursuant to the plan, the fund had cumulatively repurchased and retired 190,300 shares as of February 6, 1996, which represents 3.0% of the shares originally issued. 19 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (7) FINANCIAL HIGHLIGHTS Per-share data for a share of capital stock outstanding throughout each period and selected information for each period are as follows:
Six months ended Year Period from 4/30/96 Ended 1/28/94 (f) (Unaudited) 10/31/95 to 10/31/94 ------------ -------- ------------ PER-SHARE DATA Net asset value, beginning of period ............... $ 8.21 10.26 14.04 ------------ -------- ------------ Operations: Net investment income (loss) ....................... 0.30 (0.79) 0.92 Net realized and unrealized loss on investments .... (0.09) (1.96) (3.85) ------------ -------- ------------ Total from operations ........................... 0.21 (1.17) (2.93) ------------ -------- ------------ Distributions to shareholders: From net investment income ......................... -- -- (0.73) Tax return of capital .............................. (0.32) (0.88) (0.12) ------------ -------- ------------ Total distributions to shareholders ............. -- (0.88) (0.85) ------------ -------- ------------ Net asset value, end of period ................. $ 8.10 8.21 10.26 ------------ -------- ------------ ------------ -------- ------------ Market value, end of period .................... $ 6.88 6.88 9.75 ------------ -------- ------------ ------------ -------- ------------ SELECTED INFORMATION Total return, net asset value (a) .................... 2.51% (10.96%) (20.98%) Total return, market value (b) ....................... 4.56% (20.90%) (29.98%) Net assets at end of period (in millions) .......... $ 51 52 66 Ratio of expenses to average daily net assets (c) .... 1.24%(g) 1.21% 0.93%(g) Ratio of net investment income ....................... 7.44%(g) 9.60% 10.82%(g) Portfolio turnover rate (excluding short-term securities) ........................................ 21% 61% 62% Amount of borrowings outstanding at end of period (in millions) (d) .................................... $ -- -- 15 Per-share amount of borrowings outstanding at end of period ........................................... $ -- -- 2.33 Per-share amount of net assets, excluding borrowings, at end of period ................................. $ -- -- 12.59 Asset coverage ratio (e) ............................. -- -- 540%
(A) BASED ON THE CHANGE IN NET ASSET VALUE OF A SHARE DURING THE PERIOD AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT NET ASSET VALUE. (B) BASED ON THE CHANGE IN MARKET PRICE OF A SHARE DURING THE PERIOD AND ASSUMES REINVESTMENT OF DISTRIBUTIONS AT ACTUAL PRICES PURSUANT TO THE FUND'S DIVIDEND REINVESTMENT PLAN. (C) BEGINNING IS FISCAL 1995, THE EXPENSE RATIO REFLECTS THE EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIO HAS NOT BEEN ADJUSTED. (D) SECURITIES PURCHASED ON A WHEN-ISSUED BASIS FOR WHICH LIQUID, HIGH-GRADE DEBT OBLIGATIONS ARE MAINTAINED IN A SEGREGATED ACCOUNT ARE NOT CONSIDERED BORROWINGS. SEE FOOTNOTE 2 IN THE NOTES TO FINANCIAL STATEMENTS. (E) REPRESENTS NET ASSETS, EXCLUDING BORROWINGS, AT END OF PERIOD DIVIDED BY BORROWINGS OUTSTANDING AT END OF PERIOD. (F) COMMENCEMENT OF OPERATIONS WAS ON JANUARY 28, 1994. (G) ADJUSTED TO AN ANNUAL BASIS. 20 - -------------------------------------------------------------------------------- INVESTMENTS IN SECURITIES (Unaudited) THE AMERICAS INCOME TRUST APRIL 30, 1996
Principal Market Name of Issuer Amount Value (a) - --------------------------------------------------------- ---------- ----------- (PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS) UNITED STATES (57.7%): U.S. Government Securities (19.7%): U.S. Treasury Bond, 7.25%, 5/15/16 .................. $ 2,000,000 2,039,740 U.S. Treasury Note, 5.88%, 2/15/04 .................... 2,000,000 1,909,040 U.S. Treasury Note, 5.88%, 3/31/99 .................... 2,000,000 1,983,180 U.S. Treasury Note, 6.75%, 4/30/00 .................... 4,000,000 4,054,758 ----------- Total U.S. Government Securities (cost: $10,292,145) ................................ 9,986,720 ----------- Mortgage-Backed Securities (29.6%): U.S. Agency Fixed Rate Mortgages (27.9%): 6.50%, FHLMC, 12/1/10 ................................. 1,949,689 1,890,555 7.00%, FHLMC, 6/1/10 .................................. 4,521,425 4,473,317 11.00%, FNMA, 10/1/20 ................................. 1,399,429 1,561,651 7.00%, GNMA, 8/15/23 .................................. 1,896,509 1,830,700 8.00%, GNMA, 5/1/25 ................................... 4,305,649 4,363,431 ----------- 14,119,654 ----------- Collateralized Mortgage Obligations - Z-Tranche (b) (1.7%): 6.50%, FHLMC, Series 1694, Class Z, 3/15/24 ........... 1,144,595 884,257 ----------- Total Mortgage-Backed Securities (cost: $15,031,077) ................................ 15,003,911 ----------- Corporate Bonds (8.4%): Ford Motor Credit, 7.50%, 1/15/03 ..................... 1,000,000 1,018,980 General Motors, 8.80%, 3/1/21 ......................... 1,000,000 1,111,100 General Motors Acceptance Corporation, 9.38%, 4/1/00 ............................................... 1,000,000 1,085,920 Royal Caribbean Cruises, 8.13%, 7/28/04 ............... 1,000,000 1,014,770 ----------- Total Corporate Bonds (cost: $4,209,454) ................................. 4,230,770 ----------- Total United States Securities (cost: $29,532,676) ................................ 29,221,401 ----------- CANADIAN SECURITIES (26.0%): Government Securities (15.2%) (c): Canadian Government, 9.75%, 5/1/00 .................... 2,900,000 2,336,433
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES. 21 - -------------------------------------------------------------------------------- INVESTMENTS IN SECURITIES (UNAUDITED) THE AMERICAS INCOME TRUST (CONTINUED)
Principal Market Name of Issuer Amount Value (a) - --------------------------------------------------------- ---------- ----------- Canadian Government, 8.00%, 6/1/23 .................. $ 3,000,000 2,136,015 Canadian Government, 8.75%, 12/1/05 ................... 2,850,000 2,225,127 Canadian Government Residual, 7.17%, 10/1/08 .......... 3,700,000(d) 985,870 ----------- Total Government Securities (cost: $7,843,062) ................................. 7,683,446 ----------- Mortgage-Backed Securities (10.8%) (c): First Heritage, 6.54%, 12/1/98 ........................ 1,458,955 1,066,627 Firstline Trust, 7.87%, 8/1/18 ........................ 1,797,314 1,333,787 Firstline Trust, 7.25%, 11/1/00 ....................... 4,187,840 3,077,978 ----------- Total Mortgage Backed Securities (cost: $5,750,259) ................................. 5,478,392 ----------- Total Canadian Securities (cost: $13,593,321) ................................ 13,161,837 ----------- MEXICAN SECURITIES (13.7%): Government Securities (7.6%): Mexican Brady Par - Series A, 6.25%, 12/31/19 ......... 3,500,000(g) 2,314,375 United Mexican States Bondes, 40.17%, 2/26/98 ......... 11,300,000(c)(e) 1,507,439 ----------- Total Government Securities (cost: $4,353,502) ................................. 3,821,814 ----------- Corporate Debt Securities (6.1%): Banamex SA, Medium-Term Note, 0.11%, 12/2/96 .......... 16,460,000(c) 1,913,246 Mexico-Cuernavaca Trust, 9.25%, 7/25/01 ............... 1,717,514(f)(g) 1,172,203 ----------- Total Corporate Debt Securities (cost: $7,035,964) ................................. 3,085,449 ----------- Total Mexican Securities (cost: $11,389,466) ................................ 6,907,263 ----------- SHORT-TERM SECURITIES (1.1%): Repurchase agreement with Morgan Stanley, collateralized by U.S. Government agency securities, acquired on 4/30/96, accrued interest of $80, 5.10%, 5/1/96 (cost: $563,000) ..................................... 563,000 563,000 ----------- Total Investments in Securities (cost: $55,078,462) (h) ........................... $ 49,853,501 ----------- -----------
22 - -------------------------------------------------------------------------------- INVESTMENTS IN SECURITIES (UNAUDITED) NOTES TO INVESTMENTS IN SECURITIES: (A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL STATEMENTS. (B) Z-TRANCHE - REPRESENTS SECURITIES THAT PAY NO INTEREST OR PRINCIPAL DURING THEIR INITIAL ACCRUAL PERIODS, BUT ACCRUE ADDITIONAL PRINCIPAL AT SPECIFIED RATES. INTEREST RATE DISCLOSED REPRESENTS CURRENT YIELD BASED UPON THE COST BASIS AND ESTIMATED TIMING OF FUTURE CASH FLOWS. (C) PAR VALUE IS STATED IN THE LOCAL CURRENCY. (D) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD ON THE DATE OF PURCHASE. (E) INTEREST RATE VARIES TO REFLECT CURRENT MARKET CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON APRIL 30, 1996. (F) SECURITIES SOLD WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM AND MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS. (G) REPRESENTS BONDS ISSUED BY FOREIGN ENTITIES AND DENOMINATED IN U.S. DOLLARS, WHOSE VALUE DEPENDS UPON THE OVERALL LEVEL OF INTEREST RATES IN THE UNITED STATES AND THE ECONOMIC CONDITIONS OF THE SPECIFIC COUNTRY. (H) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS: GROSS UNREALIZED APPRECIATION .... $ 317,372 GROSS UNREALIZED DEPRECIATION ...... (5,542,333) ----------- NET UNREALIZED DEPRECIATION .... $ (5,224,961) ----------- -----------
23 - -------------------------------------------------------------------------------- SHAREHOLDER UPDATE ANNUAL MEETING RESULTS An annual meeting of the fund's shareholders was held on May 9, 1996. At the meeting, shareholders elected the Board of Directors and ratified the selection of KPMG Peat Marwick LLP as the independent public accountants of the fund for the fiscal year ended Oct. 31, 1996. The annual meeting was adjourned until May 14, 1996, at which time shareholders approved the Investment Advisory Agreement between the fund and Piper Capital Management Inc. and the Sub-advisory agreement between Salomon Brothers Asset Management Inc and Piper Capital Management Inc. The voting results of these matters, including 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 six directors:
Shares Shares Withholding Voted "For" Authority to Vote ----------- ------------------ David T. Bennett 4,745,242 193,295 Jaye F. Dyer 4,746,249 192,288 William H. Ellis 4,742,249 196,288 Karol D. Emmerich 4,746,015 192,522 Luella G. Goldberg 4,746,149 192,388 George Latimer 4,745,576 192,961
2. The fund's shareholders ratified the selection by a majority of the independent members of the fund's Board of Directors of KPMG Peat Marwick LLP as the independent public accountants for the fund for the fiscal year ending Oct. 31, 1996. The following votes were cast regarding this matter:
Shares Shares Voted Broker Voted "For" "Against" Abstentions Non-votes - ----------- ------------- ----------- --------------- 4,770,057 52,427 116,054 --
3. The fund's shareholders approved the Investment Advisory Agreement between the fund and Piper Capital Management as adviser to the fund. The following votes were cast regarding this matter:
Shares Shares Voted Broker Voted "For" "Against" Abstentions Non-votes - ----------- ------------- ----------- ----------- 2,880,811 153,421 164,470 1,739,836
24 - -------------------------------------------------------------------------------- SHAREHOLDER UPDATE 4. The fund's shareholders approved the Sub-advisory Agreement between Salomon Brothers Asset Management Inc as subadviser to the fund and Piper Capital Management as adviser to the fund. The following votes were cast regarding this matter:
Shares Shares Voted Broker Voted "For" "Against" Abstentions Non-votes - ----------- ------------- ----------- ----------- 2,854,724 188,223 155,755 1,739,836
25 - -------------------------------------------------------------------------------- DIRECTORS AND OFFICERS DIRECTORS David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC., USL PRODUCTS, INC., KIEFER BUILT, INC., OF COUNSEL, GRAY, PLANT, MOOTY, MOOTY & BENNETT, P.A. Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY William H. Ellis, PRESIDENT, PIPER JAFFRAY COMPANIES INC., PIPER CAPITAL MANAGEMENT INCORPORATED Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP Luella G. Goldberg, DIRECTOR, TCF FINANCIAL, RELIASTAR FINANCIAL CORP., HORMEL FOODS CORP. George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL EQUITY FUNDS OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD AND PRESIDENT Paul A. Dow, SENIOR VICE PRESIDENT Thomas S. McGlinch, SENIOR VICE PRESIDENT Robert H. Nelson, SENIOR VICE PRESIDENT AND TREASURER Susan S. Miley, SECRETARY INVESTMENT ADVISER Piper Capital Management Incorporated 222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804 CUSTODIAN Morgan Stanley Trust Company 1 PIERREPONT PLAZA, BROOKLYN, NY 11201 TRANSFER AND Investors Fiduciary Trust Company RECORD KEEPING 127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716 AGENT LEGAL COUNSEL Dorsey & Whitney LLP 220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402 26 PIPER CAPITAL ---------------- MANAGEMENT Bulk Rate U.S. Postage PIPER CAPITAL MANAGEMENT INCORPORATED PAID 222 SOUTH NINTH STREET Permit No. 3008 MINNEAPOLIS, MN 55402-3804 Mpls., MN ---------------- PIPER JAFFRAY INC., NASD MEMBER. [LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM 100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE. In an effort to reduce costs to our shareholders, we have implemented a process to reduce duplicate mailings of the fund's shareholder reports. This householding process should allow us to mail one report to each address where one or more registered shareholders with the same last name reside. If you would like to have additional reports mailed to your address, please call our Shareholder Services area at 1 800 866-7778, or mail your request to: Piper Capital Management Attn: Communications Department 222 South Ninth Street Minneapolis, MN 55402-3804 http://www.piperjaffray.com 144-96 XUSO2 6/96 -----END PRIVACY-ENHANCED MESSAGE-----