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INSTITUTIONAL
GOVERNMENT
INCOME
PORTFOLIO
[LOGO]
1995
ANNUAL REPORT
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TABLE OF CONTENTS
INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
This fund seeks a high level of current income consistent with preservation of
capital. In an effort to realize its objective, the fund invests in a variety of
government and agency securities, including mortgage-backed derivative
securities, and may also purchase securities through the sale-forward (dollar-
roll) program. Use of these investment techniques may cause the fund's net asset
value (NAV) to fluctuate to a greater extent than would be expected from
interest rate movements alone. As with other mutual funds, there can be no
assurance that the fund will achieve its objective. (Please see "Investment
Objectives and Policies" in the fund's prospectus for a more complete
discussion.) The fund's Nasdaq symbol is PJIGX.
STANDARD & POOR'S RATINGS
Standard & Poor's Mutual Funds Rating Group evaluates the credit quality of
funds. Credit Quality Ratings represent an assessment of the creditworthiness of
an issuer with respect to a specific obligation. They are not an indication of
the fund's market risk. As of September 30, 1995, Institutional Government
Income Portfolio was rated AAAF by Standard & Poor's Mutual Funds Rating Group.*
LETTER TO SHAREHOLDERS . . . . . . . . . . . . . 2
EFFECTIVE DURATION . . . . . . . . . . . . . . . 5
FINANCIAL STATEMENTS AND NOTES . . . . . . . . . 6
INVESTMENTS IN SECURITIES. . . . . . . . . . . . 13
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . 15
FEDERAL TAX INFORMATION. . . . . . . . . . . . . 16
* THE "AAAF" CREDIT RATING MEANS INVESTMENTS IN THE FUND HAVE AN OVERALL CREDIT
QUALITY OF AAA. ALTHOUGH THE FUND'S SECURITIES HAVE AN OVERALL CREDIT RATING
OF AAA, CERTAIN SECURITIES HAVE BEEN DESIGNATED BY S&P AS SECURITIES THAT MAY
EXPERIENCE HIGH VOLATILITY OR HIGH VARIABILITY IN EXPECTED RETURNS DUE TO
NON-CREDIT RISKS.
THE FUND HAS ALSO BEEN GIVEN A MARKET RISK RATING BY S&P, WHICH WE CANNOT
PUBLISH DUE TO NASD REGULATIONS. RISK RATINGS EVALUATE VARIOUS INVESTMENT RISKS
THAT CAN AFFECT THE PERFORMANCE OF A BOND FUND AND INDICATE THE FUND'S OVERALL
STABILITY AND SENSITIVITY TO CHANGING MARKET CONDITIONS. THESE RATINGS ARE
AVAILABLE BY CALLING S&P AT 1-800-424-FUND.
THIS REPORT IS INTENDED FOR SHAREHOLDERS OF INSTITUTIONAL GOVERNMENT INCOME
PORTFOLIO. THE FUND IS CURRENTLY CLOSED TO NEW INVESTORS. IN THE EVENT THAT THE
FUND IS REOPENED TO NEW INVESTORS, THIS REPORT MAY BE USED AS SALES LITERATURE
IF PRECEDED OR ACCOMPANIED BY A PROSPECTUS. THE PROSPECTUS GIVES DETAILS ABOUT
THE CHARGES, INVESTMENT RESULTS, RISKS AND OPERATING POLICIES OF THE FUND.
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SHAREHOLDER SERVICES
QUANTITY DISCOUNTS
If your initial investment exceeds a specified amount, if an investment combined
with the value of your existing Piper shares exceeds a specified amount, or if
your investments combined during a 13-month period exceed a specified amount,
you can reduce or even eliminate the front-end sales charge.
WAIVER OF SALES CHARGES
Money market funds carry no sales charges.*
Sales charges on other Piper funds are waived on purchases of $500,000 or more.
However, a contingent deferred sales charge may be imposed. See your prospectus
for details.
AUTOMATIC REINVESTMENT OF DIVIDENDS
For maximum growth of your assets, you can reinvest dividends and capital gains
automatically in additional shares of your fund without a sales charge.
CROSS-REINVESTMENT OF DISTRIBUTIONS
Diversify your holdings by reinvesting dividends and capital gains from one
Piper fund to another.
CASH DISTRIBUTIONS
If you prefer, take your dividends and/or capital gains in cash.
AUTOMATIC MONTHLY INVESTMENT PROGRAM
You may automatically transfer $25 or more each month from any Piper money
market fund into many other Piper Funds*
AUTOMATIC MONTHLY MONEY TRANSFER PROGRAM
If you are starting a savings discipline or seeking a convenient way to invest,
you can transfer a minimum of $100 automatically from your bank, savings and
loan or other financial institution into many of the Piper funds.
EXCHANGE PRIVILEGES
Revise your investment plan without incurring a sales charge by moving assets
from one Piper fund to another with the same fee structure. See your prospectus
for restrictions involving exchanges between funds with different sales charges.
REINVESTMENT PRIVILEGES
If you buy a fund with a sales charge and later redeem your shares, you may
reinvest all or part of the proceeds in shares of that fund or another Piper
fund within 30 days and pay no additional sales charge, subject to each fund's
minimum investment requirements.
SYSTEMATIC WITHDRAWAL PLAN
If your account has a value of $5,000 or more, you can elect to receive periodic
payments of $100 or more, at no cost, excluding money market funds.
ACCOUNT STATEMENTS
Whenever you add to or withdraw money from your account, you'll receive a
monthly statement from Piper Jaffray. Accounts with no activity receive a
quarterly statement instead. Periodic dividend and capital gain distributions,
if any, also appear on your statement.
CONFIRMATION OF TRANSACTIONS
You receive a confirmation statement following every transaction, except in the
money market funds. All transactions are reflected on your account statement.
$25 MILLION SHAREHOLDER PROTECTION
If you have a Piper Jaffray PRIME or PAT account, you are protected up to $25
million in the unlikely event that Piper Jaffray were to fail financially. This
is in addition to basic Securities Investor Protection Corporation (SIPC)
coverage, which protects up to $500,000 in cash and securities ($100,000 in cash
only) per customer. This protection does not cover market loss.
* AN INVESTMENT IN A PIPER MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.
AS A SHAREHOLDER IN PIPER FUNDS, YOU HAVE ACCESS TO A FULL RANGE OF SERVICES AND
BENEFITS. CHECK YOUR PROSPECTUS FOR DETAILS ABOUT SERVICES AND ANY LIMITATIONS
THAT MIGHT APPLY TO YOUR FUND.
1
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INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
November 15, 1995
Dear Shareholders:
INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO'S TOTAL RETURN FOR THE ONE-YEAR PERIOD
ENDED SEPTEMBER 30 WAS 16.15%,* INCLUDING REINVESTED DISTRIBUTIONS BUT NOT THE
FUND'S SALES CHARGE. This compares to a 13.46% total return for the Salomon
Brothers Mortgage Index and a 8.20% total return for the Lipper Short U.S.
Government Funds Average during the same one-year period.
THE FUND'S OUTPERFORMANCE OVER THE PAST YEAR WAS DUE TO THE FUND MAINTAINING
CHARACTERISTICS DIFFERENT FROM THE SALOMON INDEX AND THE AVERAGE FUND IN THE
LIPPER CATEGORY. For example, while the fund invested in interest-only,
principal-only, inverse floating and inverse interest-only mortgage-backed
derivative securities, these securities are not included in the Salomon Brothers
Mortgage Index. In addition, the fund generally maintained an effective duration
longer than that of the average fund in the Lipper Short U.S. Government Funds
category. While these are not the only examples, the overall differences
contributed to the fund's outperformance of the Salomon index and the Lipper
average as interest rates fell during 1995. Had interest rates risen, the fund
would have likely underperformed.
INTEREST RATES HAVE DECLINED SINCE THE BEGINNING OF 1995 DUE TO REPORTS OF
SLOWING ECONOMIC GROWTH. Long-term interest rates, based on the 30-year U.S.
Treasury bond, declined from 7.87% on January 2, 1995, to 6.47% on October 2.
Short-term interest rates moved even more dramatically, from 7.16% on January 2
to 5.64% on October 2, as represented by the one-year U.S. Treasury bill.
ONE OF THE GOALS WE SET FOR THIS PAST YEAR WAS TO REDUCE THE FUND'S VOLATILITY,
WHICH WE ACCOMPLISHED PRIMARILY THROUGH SELLING MOST OF THE FUND'S INTEREST-
ONLY, PRINCIPAL-ONLY, INVERSE FLOATING AND INVERSE INTEREST-ONLY MORTGAGE-BACKED
DERIVATIVE SECURITIES. We did not begin to significantly reduce our position in
these securities, however, until after the rally in bond prices began, which is
the main reason the fund has performed so well this year. The decline in
interest rates greatly improved the prices of these securities. As of September
30, 16%of the fund's total
[PHOTO]
FPO
63%
[PHOTO]
FPO
55%
WORTH BRUNTJEN
is primarily responsible for the management of Institutional Government Income
Portfolio. He has 28 years of financial experience.
MARIJO GOLDSTEIN
assists with the management of Institutional Government Income Portfolio. She
has 10 years of financial experience.
* 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.
2
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INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
assets were invested in interest-only, principal-only, inverse floating and
inverse interest-only mortgage-backed derivative securities. By October 31, this
position had been reduced to only 3% of the fund's total assets and consisted
entirely of inverse interest-only securities. (See the portfolio composition pie
charts on page 4.) The fund's effective duration had been reduced to 3.1 years
as of October 31.
TO HELP SEEK OUR SECOND GOAL OF MAINTAINING HIGH MONTHLY INCOME, WE RELIED ON
THE FUND'S ACCUMULATED DIVIDEND RESERVE. As you know, the fund's portfolio
earnings decreased over the past year - primarily due to restructuring the
portfolio and declining interest rates - and the fund's monthly earnings have
been falling short of its monthly dividend. Consequently, we've been relying on
the fund's dividend reserve to help pay the fund's monthly dividend of 8.5 cents
per share. Recently, the fund paid special dividends of 5 cents per share and 8
cents per share in October and November, respectively. These special dividends
were paid in order to lower the fund's dividend reserve, which will help reduce
the amount of excise tax the fund will have to pay for 1995. Because mutual
funds are structured as pass-through vehicles, 98% of the income earned during
each calendar year must be distributed to shareholders or they pay an excise tax
(4%) on any income held by the fund. Keep in mind that reducing the dividend
reserve, whether through paying special or regular monthly dividends, reduces
the fund's net asset value penny for penny.
ACHIEVING OUR THIRD GOAL OF INCREASING THE FUND'S NET ASSET VALUE WAS MADE MORE
DIFFICULT AS WE TOOK STEPS TO HELP US ACHIEVE OUR FIRST TWO GOALS. Prioritizing
our goals required compromise, since they often conflicted with one another.
Obviously, reducing the fund's volatility worked against our final goal of
increasing the fund's net asset value, as did drawing down the dividend reserve.
As we discussed in last May's semiannual report, the fund's net asset value
increased rather quickly in the first few months of this year - from a low of
$7.42 on January 5 to a net asset value of $7.96 on May 15. However, we
cautioned that future increases should not be expected to be as dramatic, which,
in fact, they were not. The fund's net asset value on October 31 was $8.02. Our
efforts to make the fund less volatile have reduced the impact that changes in
interest rates should have on the fund's net asset value.
VALUE OF $25,000 INVESTED
SEPTEMBER 30, 1995
[CHART]
$25,000 INVESTED IN JULY 1988 AND HELD THROUGH SEPTEMBER 30, 1995, WOULD HAVE
GROWN TO $41,210. THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES CHARGE OF
1.5%, WHILE NO SUCH CHARGES ARE REFLECTED IN THE INDEXES OR AVERAGE. ALL
PERFORMANCE FIGURES INCLUDE REINVESTED DISTRIBUTIONS. PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS. AS DISCUSSED IN LAST MAY'S SEMIANNUAL REPORT, PRIOR TO
MAY 1995, THE FUND'S PERFORMANCE WAS COMPARED TO THE MERRILL LYNCH 3-5 YEAR
TREASURY INDEX. IN FUTURE REPORTS, THE FUND'S PERFORMANCE WILL BE COMPARED TO
THE SALOMON BROTHERS MORTGAGE INDEX. WE BELIEVE AN INDEX COMPOSED OF MORTGAGE-
BACKED SECURITIES IS MORE APPROPRIATE THAN AN INDEX COMPOSED OF U.S. TREASURY
SECURITIES.
AVERAGE ANNUALIZED TOTAL RETURNS
THROUGH 9/30/95, INCLUDING 1.5% SALES CHARGE
One Year . . . . . . . . . . . . . . . . . . . . .14.41%
Five Year. . . . . . . . . . . . . . . . . . . . .6.18%
Since Inception (7/11/88). . . . . . . . . . . . .7.16%
All returns include reinvested distributions. Since the fund's inception, the
fund's distributor has voluntarily limited 12b-1 fees. Had the limitation not
been in effect, returns would
have been lower. Past performance does not guarantee
future results.
3
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INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
LOOKING FORWARD TO FISCAL YEAR 1996, YOU SHOULD EXPECT A CHANGE TO THE FUND'S
MONTHLY DIVIDEND LEVEL. Due to reduced portfolio earnings and a declining
dividend reserve, sometime during fiscal year 1996 the fund's Dividend Committee
will likely begin making gradual changes to the monthly dividend to begin
bringing it in line with the fund's monthly earnings. (As of the end of October,
the fund's monthly earnings per share were approximately $0.056, as highlighted
in the portfolio income summary chart below.) In the future, we do not intend to
maintain a significant dividend reserve. So once the dividend reserve is
substantially distributed, we expect the fund's monthly dividend level to
reflect its monthly earnings, which means it will likely fluctuate.
FINALLY, YOUR EXPECTATIONS FOR THE FUND'S PERFORMANCE IN THE YEARS AHEAD SHOULD
BE PUT IN A NEW PERSPECTIVE, GIVEN OUR RESTRUCTURING OF THE PORTFOLIO. The
fund's performance over the past year has been impressive. However, because we
intend to maintain only a small percentage of interest-only, principal-only,
inverse floating or inverse interest-only mortgage-backed derivative securities
in the portfolio - or eliminate them entirely - the fund will likely not
experience the dramatic growth achieved in previous years or the poor
performance experienced in 1994. We believe a less volatile portfolio structure
will ultimately benefit shareholders by providing more consistent returns than
in the past.
YOUR SUPPORT DURING THE PAST YEAR, WHILE PERHAPS DIFFICULT TO MAINTAIN, WAS
APPRECIATED. We are pleased 1995 has been a more favorable year for investors
and look forward to helping you meet your future investment goals.
Sincerely,
/s/Worth Bruntjen
Worth Bruntjen
Portfolio Manager
PORTFOLIO COMPOSITION
SEPTEMBER 30, 1995
[GRAPH]
October 31, 1995
Investment categories reflect percentage of total assets.
PORTFOLIO INCOME SUMMARY
OCTOBER 31, 1995
Monthly Dividend . . . . . . . . . . . . . .$0.085
Dividend Reserve (Accumulated
Undistributed Net Investment
Income/Share). . . . . . . . . . . . . . . .$0.340
Monthly Net
Investment Income/Share. . . . . . . . . . .$0.056
NET INVESTMENT INCOME PER SHARE IS BASED ON A THREE-MONTH AVERAGE. ACCUMULATED
UNDISTRIBUTED NET INVESTMENT INCOME (DIVIDEND RESERVE) PER SHARE IS REFLECTED IN
THE FUND'S NET ASSET VALUE. ANY REDUCTION OF THIS AMOUNT WILL REDUCE THE FUND'S
NET ASSET VALUE PENNY FOR PENNY. THE DIVIDEND RESERVE PER SHARE WILL VARY BASED
ON THE NUMBER OF FUND SHARES OUTSTANDING. THE DIVIDEND RESERVE IS A MONTH-END
BALANCE AND REFLECTS ADJUSTMENTS ON INTEREST-ONLY AND PRINCIPAL-ONLY SECURITIES
SOLD DURING THE FUND'S FISCAL YEAR.
4
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Effective duration estimates the interest rate risk of a security, in other
words how much the value of the security is expected to change with a given
change in interest rates. The longer a security's effective duration, the more
sensitive its price is to changes in interest rates. For example, if interest
rates were to increase by 1%, the market value of a bond with an effective
duration of five years would decrease by about 5%, with all other factors being
constant.
It is important to understand that, while a valuable measure, effective duration
is based upon certain assumptions and has several limitations. It is most
effective as a measure of interest rate risk when interest rate changes are
small, rapid and occur equally across all the different points of the yield
curve.
In addition, effective duration is difficult to calculate precisely for bonds
with prepayment options, such as mortgage-backed securities, because the
calculation requires assumptions about prepayment rates. For example, when
interest rates go down, homeowners may prepay their mortgages at a higher rate
than assumed in the initial effective duration calculation, thereby shortening
the effective duration of the fund's mortgage-backed securities. Conversely, if
rates increase, prepayments may decrease to a greater extent than assumed,
extending the effective duration of such securities. For these reasons, the
effective durations of funds that invest a significant portion of their assets
in mortgage-backed securities can be greatly affected by changes in interest
rates.
5
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FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $38,982,000) .... $ 342,488,458
Cash in bank on demand deposit ........................... 452,557
Receivable for fund shares sold .......................... 17,387
Accrued interest receivable .............................. 2,422,324
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Total assets ......................................... 345,380,726
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LIABILITIES:
Dividends payable to shareholders ($0.135 per share) ..... 5,368,226
Payable for investment securities purchased on a
when-issued basis (note 2) ............................. 19,806,600
Payable for fund shares redeemed ......................... 1,457,881
Accrued investment management fee ........................ 68,893
Accrued distribution fee ................................. 54,509
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Total liabilities .................................... 26,756,109
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Net assets applicable to outstanding capital stock ....... $ 318,624,617
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REPRESENTED BY:
Capital stock - authorized 10 billion shares of $0.01 par
value; outstanding, 39,250,195 shares ................ $ 392,502
Additional paid-in capital ............................... 574,490,039
Undistributed net investment income ...................... 17,447,004
Accumulated net realized loss on investments ............. (262,276,703)
Unrealized depreciation of investments ................... (11,428,225)
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Total - representing net assets applicable to
outstanding capital stock ........................ $ 318,624,617
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Net asset value per share of outstanding capital stock ... $ 8.12
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----------------
* Investments in securities at identified cost ........... $ 353,916,683
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
6
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FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
INCOME:
Interest ............................................... $ 34,325,467
Fee income (note 2) ...................................... 857,811
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Total investment income .............................. 35,183,278
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EXPENSES (NOTE 4):
Investment management fee ................................ 959,379
Distribution fee ......................................... 1,174,157
Custodian, accounting and transfer agent fees ............ 391,037
Shareholder account servicing fees ....................... 30,800
Registration fees ........................................ 34,066
Reports to shareholders .................................. 52,028
Directors' fees .......................................... 6,883
Audit and legal fees ..................................... 62,609
Federal excise taxes (note 2) ............................ 1,437,855
Other expenses ........................................... 51,447
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Total expenses ....................................... 4,200,261
Less expenses waived by the distributor .............. (393,090)
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Net expenses before expenses paid indirectly ......... 3,807,171
Less expenses paid indirectly ........................ (7,843)
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Total net expenses ................................... 3,799,328
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Net investment income ................................ 31,383,950
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NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized loss on investments (note 3) ................ (135,311,109)
Net change in unrealized appreciation or depreciation of
investments ............................................ 153,372,835
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Net gain on investments ................................ 18,061,726
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Net increase in net assets resulting from
operations ....................................... $ 49,445,676
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
7
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FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
9/30/95 9/30/94
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<S> <C> <C>
OPERATIONS:
Net investment income .................................. $ 31,383,950 68,339,224
Net realized loss on investments ......................... (135,311,109) (113,952,335)
Net change in unrealized appreciation or depreciation of
investments . 153,372,835 (180,297,867)
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Net increase (decrease) in net assets resulting from
operations ........................................... 49,445,676 (225,910,978)
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... (51,996,924) (68,061,165)
From net realized gains .................................. -- (16,149,263)
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Total distributions .................................... (51,996,924) (84,210,428)
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CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of 3,262,247 and 38,694,272 shares,
respectively . 24,931,594 416,335,443
Issuance of 5,175,622 and 5,319,902 shares for
reinvestment of distributions, respectively ............ 40,478,651 55,193,687
Payments for 39,887,016 and 38,099,975 shares redeemed,
respectively ........................................... (308,593,733) (388,599,061)
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Increase (decrease) in net assets from capital share
transactions ......................................... (243,183,488) 82,930,069
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Total decrease in net assets ......................... (245,734,736) (227,191,337)
Net assets at beginning of year ............................ 564,359,353 791,550,690
---------------- ----------------
Net assets at end of year ................................ $ 318,624,617 564,359,353
---------------- ----------------
---------------- ----------------
Undistributed net investment income ...................... $ 17,447,004 31,178,651
---------------- ----------------
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</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
8
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NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Piper Funds Inc. (the company) was
incorporated on November 12, 1986, and is
registered under the Investment Company Act of
1940 (as amended) as a single open-end
management investment company. The company
currently includes a series of 13 funds,
including the Institutional Government Income
Portfolio (the fund), which is classified as a
diversified fund. The company's articles of
incorporation permit the board of directors to
create additional funds in the future. On June
14, 1994, the fund was closed to new
investors.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
INVESTMENTS IN SECURITIES
The values of fixed income securities are
provided by independent pricing services or
prices quoted by independent brokers. When
market quotations are not readily available,
securities are valued at fair value as
determined in good faith by the board of
directors. Short-term securities with
maturities of less than 60 days when acquired,
or that subsequently are within 60 days of
maturity, are valued at amortized cost which
approximates market value.
Security 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.
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 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 NAV to
the extent the fund makes such purchases while
remaining substantially fully invested. As of
September 30, 1995, the fund had entered into
outstanding when-issued or forward commitments
of $19,806,600.
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 the year ended September 30, 1995,
such fees earned by the fund amounted to
$857,811.
FEDERAL TAXES
The fund is treated as a separate entity for
federal income tax purposes. 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. However, the fund
incurred federal excise taxes of $1,437,855 or
$0.037 per share on income retained by the
fund during the 1994 excise tax year. The fund
may retain a portion of its taxable income for
the 1995 excise tax year and pay an excise tax
on the undistributed amount.
Net investment income and net realized gains
(losses) may differ for financial statement
and tax purposes primarily because of the
recognition of losses deferred due to "wash
sale" transactions and the timing of
recognition of income on certain interest-only
and principal-only securities. The character
of distributions made during the year from net
investment income or net realized gains may
differ from
9
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NOTES TO FINANCIAL STATEMENTS
their ultimate characterization for federal
income tax purposes. Also, due to the timing
of dividend distributions, the fiscal year in
which amounts are distributed may differ from
the year that the income or realized gains
(losses) were recorded by the fund. The fund
will elect to utilize equalization debits, by
which a portion of the costs of redemptions
which occurred during the year ended September
30, 1995, will reduce undistributed net
investment income for tax purposes. On the
statement of assets and liabilities, as a
result of this and other permanent book-to-tax
differences, a reclassification adjustment has
been made to increase undistributed net
investment income by $6,881,327, increase
accumulated net realized losses on investments
by $6,902,473 and increase additional
paid-in-capital by $21,146.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net
investment income are declared daily and paid
monthly in cash or reinvested in additional
shares. Distributions from net realized gains,
if any, will be made on an annual basis for
the fund.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with
certain broker-dealers, the fund, along with
other affiliated registered investment
companies, may transfer uninvested cash
balances into a joint trading account, the
daily aggregate of which is invested in
repurchase agreements secured by U.S.
government and agency obligations. Securities
pledged as collateral for all individual and
joint repurchase agreements are held by the
fund's custodian bank until maturity of the
repurchase agreement. Procedures for all
agreements ensure that the daily market value
of the collateral is in excess of the
repurchase amount in the event of default.
(3) INVESTMENT
SECURITY
TRANSACTIONS
For the fiscal year ended September 30, 1995,
cost of purchases and proceeds from sales of
securities, other than temporary investments
in short-term securities, aggregated
$488,739,353 and $802,674,899, respectively.
(4) FEES AND
EXPENSES
The company has entered into an investment
management agreement with Piper Capital
Management Incorporated (Piper Capital) under
which Piper Capital manages the fund's assets
and furnishes related office facilities,
equipment, research and personnel. The
agreement requires the fund to pay Piper
Capital a monthly fee based on average daily
net assets. The fee is equal to an annual rate
of 0.30% of the first $100 million in net
assets, 0.25% of the next $150 million and
0.20% of net assets in excess of $250 million.
The fund also pays Piper Jaffray Inc. (Piper
Jaffray) a monthly fee for expenses incurred
in the distribution and promotion of fund
shares. The monthly fee is limited to a
maximum of 1/12 of 0.30% of the fund's average
daily net assets. The 0.30% fee includes 0.25%
payable as a servicing fee and 0.05% payable
as a distribution fee. During the year ended
September 30, 1995, Piper Jaffray Inc.
voluntarily agreed to limit the fee to an
annual rate of 0.20% of the fund's average
daily net assets.
The fund has also entered into a shareholder
account servicing agreement under which Piper
Jaffray performs various transfer and dividend
disbursing agent services. The fee, which is
paid monthly to Piper Jaffray for providing
such service, is equal to an annual rate of
$7.50 per active shareholder account and $1.60
per closed shareholder account.
In addition to these fees, the fund is
responsible for paying most other operating
expenses including outside directors' fees and
expenses, custodian fees, registration
10
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
fees, shareholder reports, printing expenses,
transfer agent fees and expenses, legal,
auditing and accounting services, insurance,
interest, taxes and other miscellaneous
expenses.
Expenses paid indirectly represent a reduction
of custodian fees for earnings on cash
balances maintained by the Fund.
Sales charges by Piper Jaffray for
distributing the fund's shares were $43,458
for the year ended September 30, 1995.
(5) PENDING LITIGATION
A number of complaints have been brought in
federal and state court against the fund and
certain of its affiliates. An Amended
Consolidated Class Action Complaint was filed
on October 5, 1994 in the United States
District Court, District of Minnesota, against
the fund, Piper Capital Management
Incorporated ("PCM"), Piper Jaffray Inc.
("PJI"), William H. Ellis and Edward J. Kohler
alleging certain violations of federal and
state securities laws, including the making of
materially misleading statements in the
prospectus, common law negligent
misrepresentation and breach of fiduciary
duty. This is a consolidated putative class
action in which claims brought by 11 persons
or entities have been consolidated under the
title IN RE: PIPER FUNDS INC. INSTITUTIONAL
GOVERNMENT INCOME PORTFOLIO LITIGATION. The
named plaintiffs and defendants have entered
into a settlement agreement which has received
preliminary approval from the Court. If
granted final approval by the Court, the
Settlement Agreement would provide up to $70
million, together with interest earned, less
certain disbursements and attorneys fees as
approved by the Court, to class members in
payments scheduled over approximately three
years. Such payments would be made by Piper
Jaffray Companies Inc. and PCM and would not
be an obligation of the fund. Six additional
complaints have been brought and a number of
actions have been commenced in arbitration
relating to the fund. The complaints generally
have been consolidated with the IN RE: PIPER
FUNDS INC. action for pretrial purposes and
the arbitrations and litigation have been
stayed pending entry of an order by the Court
permitting those class members who have
requested exclusion from the class to proceed
with their actions. Although it is impossible
to predict the outcome of such arbitrations
and litigation, management believes, based on
the facts currently available, that there will
be no material adverse impact on the fund.
(6) CAPITAL LOSS
CARRYOVER
For federal income tax purposes, the fund had
a capital loss carryover of $262,276,703 on
September 30, 1995, which if not offset by
subsequent capital gains, will expire in 2003
and 2004. 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.
11
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(7) FINANCIAL
HIGHLIGHTS
Per-share data for a share of capital stock
outstanding throughout each year and selected
information for each year are as follows:
<TABLE>
<CAPTION>
Fiscal year ended September 30,
--------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of year ............. $ 7.98 12.22 11.51 10.71 10.02
---------- ---------- ---------- ---------- ----------
Operations:
Net investment income........................... 0.88 0.90 1.29 1.07 0.94
Net realized and unrealized gains (losses)
on investments................................. 0.31 (3.96) 0.56 0.73 0.67
---------- ---------- ---------- ---------- ----------
Total from operations......................... 1.19 (3.06) 1.85 1.80 1.61
---------- ---------- ---------- ---------- ----------
Distributions to shareholders from:
Net investment income........................... (1.05) (0.95) (0.90) (0.91) (0.90)
Net realized gains.............................. -- (0.23) (0.24) (0.09) (0.02)
---------- ---------- ---------- ---------- ----------
Total distributions........................... (1.05) (1.18) (1.14) (1.00) (0.92)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ................... $ 8.12 7.98 12.22 11.51 10.71
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
SELECTED INFORMATION
Total return*..................................... 16.15% (26.65%) 17.04% 17.70% 16.80%
Net assets, end of year (in millions) .......... $ 319 564 792 470 132
Ratio of expenses to average daily net assets+.... 0.97%** 0.78%** 0.70%** 0.65%** 0.75%
Ratio of net investment income to average daily
net assets**.................................... 8.02% 9.33% 12.51% 11.01% 9.29%
Portfolio turnover rate (excluding short-term
securities)..................................... 136% 169% 109% 64% 29%
</TABLE>
* TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT A SALES
CHARGE.
** INCLUDES FEDERAL EXCISE TAXES OF 0.37%, 0.23%, 0.09% AND 0.02% FOR THE
FISCAL YEARS ENDED 9/30/95, 9/30/94, 9/30/93 AND 9/30/92, RESPECTIVELY.
+ DURING THE YEARS REFLECTED ABOVE, THE FUND'S DISTRIBUTION FEE WAS
VOLUNTARILY LIMITED. HAD THE MAXIMUM FEE BEEN IN EFFECT, THE RATIOS OF
EXPENSES AND NET INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN: 1.07%/7.92% IN FISCAL 1995, 0.85%/9.26% IN FISCAL 1994, 0.77%/12.44%
IN FISCAL 1993, 0.72%/10.94% IN FISCAL 1992 AND 0.82%/9.22% IN FISCAL 1991.
BEGINNING IN FISCAL 1995, THE EXPENSE RATIO REFLECTS THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
12
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MORTGAGE-BACKED SECURITIES (95.3%):
COLLATERALIZED MORTGAGE OBLIGATIONS (C) (25.1%):
U.S. AGENCY FLOATING RATE (7.7%):
6.04%, FHLMC, Series 1661,
Class FH, COFI, 3/15/08 ........................... $ 8,585,238 8,354,724
6.04%, FNMA, Series 1993-209, Class FG, COFI,
8/25/08 ............................................. 4,467,434 4,316,346
6.04%, FNMA, Series 1993-214, Class F, COFI,
12/25/08 ............................................ 5,838,955 5,677,041
6.09%, FNMA, Series 1993-229, Class FB, COFI,
12/25/08 ............................................ 4,000,000 3,868,360
6.14%, FNMA, Series 1994-33, Class FA, COFI,
3/25/09 ............................................. 2,378,787 2,319,246
------------
24,535,717
------------
U.S. AGENCY INTEREST-ONLY (4.8%):
30.78%, FHLMC, Series 1314, Class M, 2/15/06 ......... -- 808,247
1.12%, FHLMC, Series 24, Class IA, 8/25/13 ........... -- 1,716,861
7.24%, FNMA, Series 1990-76, Class L, 7/25/20 ........ -- 1,093,848
0.90%, FNMA, Series 1991-151, Class G, 11/25/21 ...... -- 2,896,111
1.35%, FNMA, Series 1991-19, Class L, 3/25/21 ........ -- 2,080,935
0.0%, FNMA, Series 1991-82, Class PQ, 8/25/21 ........ --(d) 2,367,439
7.47%, FNMA, Series 1992-197, Class B, 7/25/18 ....... -- 765,345
5.41%, FNMA, Series G92-35, Class G, 7/25/22 ......... -- 3,592,456
------------
15,321,242
------------
U.S. AGENCY INVERSE INTEREST-ONLY (3.3%):
45.06%, FHLMC, Series 1439,
Class IB, LIBOR, 11/15/21 ........................... -- 664,634
28.32%, FHLMC, Series 1517, Class MB, COFI,
5/15/22 ............................................. -- 433,743
11.11%, FHLMC, Series 1527,
Class S, COFI, 5/15/23 .............................. -- 433,246
39.91%, FHLMC, Series 1543,
Class E, LIBOR, 6/15/21 ............................. -- 214,091
39.67%, FHLMC, Series 1543, Class UE, LIBOR,
6/15/21 ............................................. -- 146,201
27.20%, FHLMC, Series 1560,
Class S, COFI, 8/15/23 .............................. -- 180,003
15.49%, FHLMC, Series 1590, Class JC, COFI,
1/15/19 ............................................. -- 736,079
64.46%, FNMA, Series 1992-200, Class SC, LIBOR,
9/25/21 ............................................. -- 414,215
64.96%, FNMA, Series G 1992-64, Class S, LIBOR,
12/25/18 ............................................ -- 4,895,214
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
21.99%, FNMA, Series G 1993-17, Class S, LIBOR,
4/25/23 ........................................... $ -- 2,001,329
------------
10,118,755
------------
U.S. AGENCY INVERSE FLOATER (9.3%):
6.91%, FHLMC, Series 1504,
Class SA, LIBOR, 10/15/22 ........................... 156,222 126,499
8.12%, FHLMC, Series 1542,
Class OB, COFI, 7/15/22 ............................. 1,864,572 1,377,135
7.70%, FHLMC, Series 1564,
Class SE, COFI, 8/15/08 ............................. 3,713,192 2,836,470
5.64%, FHLMC, Series 1601,
Class SC, Treasury, 10/15/08 ........................ 2,215,876 1,685,484
6.99%, FHLMC, Series 1704,
Class S, COFI, 3/15/09 .............................. 4,769,103 3,660,954
7.41%, FNMA, Series 1992-206, Class S, LIBOR,
11/25/22 ............................................ 507,728 394,667
7.14%, FNMA, Series 1993-165, Class SC, COFI,
1/25/22 ............................................. 3,712,744 2,352,246
7.38%, FNMA, Series 1993-181, Class S, COFI,
2/25/08 ............................................. 3,155,211 2,441,818
7.05%, FNMA, Series 1994-30,
Class S, COFI, 6/25/23 .............................. 6,049,037 4,394,081
7.49%, FNMA, Series 1994-32,
Class S, COFI, 3/25/09 .............................. 5,958,290 4,802,024
5.04%, FNMA, Series 1994-33, Class SA, COFI,
2/25/08 ............................................. 8,411,309 5,637,092
------------
29,708,470
------------
U.S. AGENCY FIXED RATE MORTGAGES (70.2%):
7.00%, FHLMC, 1/1/97 ................................. 3,042,211 3,078,292
7.00%, FHLMC, 8/1/10 ................................. 9,707,065 9,743,369
8.00%, FHLMC, 12/1/98 ................................ 4,388,224 4,495,122
6.50%, FHLMC, 11/1/98 ................................ 6,715,271 6,734,074
7.00%, FHLMC, 9/1/10 ................................. 14,700,000 14,754,978
8.50%, FNMA, 12/1/06 ................................. 3,802,510 3,948,602
8.50%, FNMA, 7/1/09 .................................. 6,803,248 7,064,629
7.50%, FNMA, 1/1/02 .................................. 28,281,769 28,767,367
6.50%, FNMA, 10/1/02 ................................. 10,000,000 9,949,900
6.50%, GNMA, 10/27/10 ................................ 20,000,000(b) 19,799,800
8.50%, GNMA II, 8/20/24 .............................. 3,018,721 3,130,926
8.50%, GNMA II, 11/20/24 ............................. 8,110,385 8,411,848
8.50%, GNMA II, 6/20/25 .............................. 22,909,509 23,761,055
8.00%, GNMA II, 5/20/25 .............................. 3,382,165 3,461,375
9.00%, GNMA II, 5/20/25 .............................. 35,272,812 36,859,736
8.00%, GNMA II, 7/20/25 .............................. 4,972,997 5,089,465
8.50%, GNMA II, 7/20/25 .............................. 9,794,166 10,158,215
8.00%, GNMA II, 9/20/25 .............................. 1,000,000 1,023,420
9.00%, GNMA II, 9/20/25 .............................. 4,424,558 4,623,619
8.00%, GNMA II, 8/20/25 .............................. 18,532,453 18,966,482
------------
223,822,274
------------
Total Mortgage-Backed Securities
(cost: $314,934,683) .............................. 303,506,458
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
13
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
SHORT-TERM SECURITIES (12.2%):
Repurchase agreement with Goldman Sachs in a joint
trading account, collateralized by U.S. government
agency securities, acquired on 9/29/95, accrued
interest of $20,920, 6.44%, 10/2/95
(cost: $38,982,000) ............................... $ 38,982,000 38,982,000
------------
Total Investments in Securities
(cost: $353,916,683)(e) .......................... $ 342,488,458
------------
------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) ON SEPTEMBER 30, 1995, THE TOTAL COST OF INVESTMENTS PURCHASED ON A
WHEN-ISSUED BASIS WAS $19,806,600.
(C) DESCRIPTIONS OF CERTAIN COLLATERALIZED MORTGAGE OBLIGATIONS ARE
AS FOLLOWS:
LIBOR -- LONDON INTERBANK OFFERED RATE
COFI (11TH DISTRICT) -- COST OF FUNDS INDEX OF THE FEDERAL RESERVE'S 11TH
DISTRICT
INVERSE FLOATER -- REPRESENTS SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) WITH A DECLINE (INCREASE) IN THE SPECIFIED INDEX. THE
INTEREST RATE PAID BY THE INVERSE FLOATER WILL GENERALLY CHANGE AT A
MULTIPLE OF ANY CHANGE IN THE INDEX. INTEREST RATES DISCLOSED ARE IN
EFFECT ON SEPTEMBER 30, 1995.
INTEREST-ONLY -- REPRESENTS SECURITIES THAT ENTITLE HOLDERS TO RECEIVE ONLY
INTEREST PAYMENTS ON THE UNDERLYING MORTGAGES. THE YIELD TO MATURITY OF
AN INTEREST-ONLY IS EXTREMELY SENSITIVE TO THE RATE OF PRINCIPAL PAYMENTS
ON THE UNDERLYING MORTGAGE ASSETS. A RAPID (SLOW) RATE OF PRINCIPAL
REPAYMENTS MAY HAVE AN ADVERSE (POSITIVE) EFFECT ON YIELD TO MATURITY.
INTEREST RATES DISCLOSED REPRESENT CURRENT YIELDS BASED UPON THE CURRENT
COST BASIS AND ESTIMATED TIMING AND AMOUNT OF FUTURE CASH FLOWS.
INVERSE INTEREST-ONLY -- REPRESENTS SECURITIES THAT ENTITLE HOLDERS TO
RECEIVE ONLY INTEREST PAYMENTS ON THE UNDERLYING MORTGAGES. INTEREST IS
PAID AT A RATE THAT INCREASES (DECREASES) WITH A DECLINE (INCREASE) IN
THE SPECIFIED INDEX. THE YIELD TO MATURITY OF AN INVERSE INTEREST-ONLY IS
EXTREMELY SENSITIVE TO THE RATE OF PRINCIPAL PAYMENTS ON THE UNDERLYING
MORTGAGE ASSETS. A RAPID (SLOW) RATE OF PRINCIPAL REPAYMENTS MAY HAVE AN
ADVERSE (POSITIVE) EFFECT ON YIELD TO MATURITY. INTEREST RATES DISCLOSED
REPRESENT CURRENT YIELDS BASED UPON THE CURRENT COST BASIS AND ESTIMATED
TIMING AND AMOUNT OF FUTURE CASH FLOWS.
(D) BASED UPON ESTIMATED TIMING AND AMOUNT OF FUTURE CASH FLOWS, INCOME IS
CURRENTLY NOT BEING RECOGNIZED ON CERTAIN INTEREST-ONLY SECURITIES WITH AN
AGGREGATE MARKET VALUE OF $2,367,439.
(E) ON SEPTEMBER 30, 1995, FOR FEDERAL INCOME TAX PURPOSES, THE COST OF
INVESTMENTS WAS $353,365,677. THE AGGREGATE GROSS UNREALIZED APPRECIATION
AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS
FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 3,426,060
GROSS UNREALIZED DEPRECIATION ...... (14,303,279)
------------
NET UNREALIZED DEPRECIATION .... $ (10,877,219)
------------
------------
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER FUNDS INC.:
We have audited the accompanying statement of
assets and liabilities, including the schedule
of investments in securities, of Institutional
Government Income Portfolio (a portfolio
within Piper Funds Inc.) as of September 30,
1995 and the related statement of operations
for the year then ended, the statements of
changes in net assets for each of the years in
the two-year period then ended, and the
financial highlights for each of the years in
the five-year period then ended. These
financial statements and the financial
highlights are the responsibility of the
portfolio's management. Our responsibility is
to express an opinion on these financial
statements and the financial highlights based
on our audits.
We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements and the
financial highlights are free of material
misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts
and disclosures in the financial statements.
Investment securities held in custody are
confirmed to us by the custodian. As to
securities purchased but not received, we
request confirmations from brokers and where
replies are not received, we carry out other
appropriate auditing procedures. An audit also
includes assessing the accounting principles
used and significant estimates made by
management, as well as evaluating the overall
financial statement presentation. We believe
that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and
the financial highlights referred to above
present fairly, in all material respects, the
financial position of Institutional Government
Income Portfolio at September 30, 1995, the
results of its operations for the year then
ended, the changes in net assets for each of
the years in the two-year period then ended
and the financial highlights for each of the
years in the five-year period then ended in
conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 10, 1995
15
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO
The following information is to alert you of
income distributions which are taxable in
1995. In February 1996, you will receive Form
1099-DIV reporting these and any other
distributions the fund may make this calendar
year.
Please consult a tax adviser on how to report
distributions for state and local income
taxes.
The distributions listed below are taxable as
dividend income, and none qualify for
corporate dividends received deductions.
TAXABLE DISTRIBUTIONS PAID DURING THE FISCAL
YEAR ENDED SEPTEMBER 30, 1995:
<TABLE>
<CAPTION>
Payable Date Per Share
- ---------------------------------------------------------------- -----------
<S> <C>
October 5, 1994 .............................................. $ 0.075
November 3, 1994 ............................................... 0.075
December 5, 1994 ............................................... 0.075
January 5, 1995 ................................................ 0.085
February 3, 1995 ............................................... 0.085
March 3, 1995 .................................................. 0.085
April 5, 1995 .................................................. 0.085
May 3, 1995 .................................................... 0.085
June 1, 1995 ................................................... 0.085
July 3, 1995 ................................................... 0.085
August 1, 1995 ................................................. 0.085
September 1, 1995 .............................................. 0.085
-----------
Total ...................................................... $ 0.990
-----------
-----------
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
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 CAPITAL MANAGEMENT INCORPORATED, PIPER
JAFFRAY COMPANIES INC.
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL, RELIASTAR FINANCIAL CORP.,
HORMEL
FOODS CORP.
George Latimer, DIRECTOR, SPECIAL ACTIONS OFFICE, OFFICE OF THE SECRETARY,
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
Paul A. Dow, PRESIDENT
Worth Bruntjen, SENIOR VICE PRESIDENT
Richard W. Filippone, SENIOR VICE PRESIDENT
Marijo A. Goldstein, SENIOR VICE PRESIDENT
Steven V. Markusen, SENIOR VICE PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT
Edward P. Nicoski, SENIOR VICE PRESIDENT
Nancy S. Olsen, SENIOR VICE PRESIDENT
Ronald R. Reuss, SENIOR VICE PRESIDENT
Bruce D. Salvog, SENIOR VICE PRESIDENT
Sandra K. Shrewsbury, SENIOR VICE PRESIDENT
David M. Steele, SENIOR VICE PRESIDENT
Douglas J. White, SENIOR VICE PRESIDENT
J. Bradley Stone, VICE PRESIDENT
Marcy K. Winson, VICE PRESIDENT
David E. Rosedahl, SECRETARY
Charles N. Hayssen, TREASURER
INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
DISTRIBUTOR Piper Jaffray Inc.
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
INDEPENDENT AUDITORS KPMG Peat Marwick LLP
4200 NORWEST CENTER, MINNEAPOLIS, MN 55402
LEGAL COUNSEL Dorsey & Whitney P.L.L.P.
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
</TABLE>
17
<PAGE>
--------------- ---------------
PIPER CAPITAL Bulk Rate
MANAGEMENT U.S. Postage
--------------- PAID
Permit No. 3008
Mpls., MN
---------------
PIPER CAPITAL MANAGEMENT INCORPORATED
222 SOUTH NINTH STREET
MINNEAPOLIS, MN 55402-3804
PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.
[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
014-96 PJIGX-01 11/95
