<PAGE>
PIPER
TOTAL RETURN
FUNDS
[LOGO]
1996
SEMIANNUAL REPORT
<PAGE>
TABLE OF CONTENTS
GROWTH AND INCOME FUND
Letter to Shareholders . . . . . . . . . 2
Investments in Securities. . . . . . . . 7
Financial Statements and Notes . . . . .11
This fund seeks both current income and long-term growth of capital and income.
To achieve its objective, the fund emphasizes stocks of large, established
companies that appear undervalued and potentially offer long-term dividend and
earnings growth. The fund may also invest in fixed income securities including
U.S. government securities and nonconvertible preferred stock. As with other
mutual funds, there can be no assurance that the fund will achieve its
objective. The fund's Nasdaq symbol is PJGRX.
BALANCED FUND
Letter to Shareholders . . . . . . . . . 4
Investments in Securities. . . . . . . . 9
Financial Statements and Notes . . . . .11
This fund seeks both current income and long-term capital appreciation
consistent with conservation of principal. To achieve its objective, the fund
invests in both common stocks and fixed income securities with an emphasis on
income-producing securities that appear to have some potential for capital
appreciation. At least 35% of the fund's total assets must be invested in fixed
income securities at all times. As with other mutual funds, there can be no
assurance that the fund will achieve its objective. The fund's Nasdaq symbol is
PBALX.
CALL TO RECEIVE QUARTERLY UPDATES
If you would like to be put on our mailing list to receive quarterly fund
summaries for Piper Growth and Income Fund or Piper Balanced Fund, call our
Shareholder Services Department at 1 800 866-7778.
THIS REPORT IS INTENDED FOR SHAREHOLDERS OF PIPER GROWTH AND INCOME FUND AND
PIPER BALANCED FUND, BUT IT MAY ALSO 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 FUNDS.
<PAGE>
SHAREHOLDER SERVICES
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.
LOW MINIMUM INVESTMENTS
You can open most Piper mutual fund accounts with a minimum investment of $250.
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 into 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.
1
<PAGE>
GROWTH AND INCOME FUND
[PHOTO]
[PHOTO]
PAUL DOW, CFA (ABOVE)
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF GROWTH AND INCOME FUND. HE
HAS 22 YEARS OF FINANCIAL EXPERIENCE.
MIKE WALLACE, (BELOW)
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF GROWTH AND INCOME FUND. HE
HAS EIGHT YEARS OF FINANCIAL EXPERIENCE.
DAVID STEELE, (PICTURED ON PAGE 4)
ASSISTS WITH THE MANAGEMENT OF GROWTH AND INCOME FUND. HE HAS 17 YEARS OF
FINANCIAL EXPERIENCE.
PORTFOLIO COMPOSITION
MARCH 31, 1996
[PIE CHART]
CORPORATE FIXED RATE BONDS REPRESENT 0.4% OF OTHER ASSETS.
May 15, 1996
Dear Shareholders:
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1996, THE GROWTH AND INCOME FUND
PROVIDED A 13.46%* TOTAL RETURN WITH ALL DIVIDENDS AND CAPITAL GAINS REINVESTED
BUT NOT INCLUDING SALES CHARGE. The fund outperformed the Standard & Poor's 500
Index, which advanced 11.71%, as well as the Lipper Growth and Income Funds
Average, which gained 10.33% during the same time frame.
OUR DECISION TO OVERWEIGHT THE PORTFOLIO IN ECONOMICALLY-SENSITIVE STOCKS WAS
THE MAIN FACTOR IN THE FUND'S OUTPERFORMANCE OF THE INDEX AND THE AVERAGE. Our
emphasis on economically-sensitive stocks, which include companies that produce
consumer durables, basic materials and capital goods, was due in large part to
our belief that the economy would continue its slow to moderate, low
inflationary growth. Typically, these stocks perform well when the economy is
showing signs of continued growth. Inflation remained under control during this
period and the economy expanded moderately in late 1995 and during the first
three months of this year. And, in turn, economically-sensitive stocks recorded
above-average investment results.
UNCERTAINTY ABOUT THE DIRECTION OF THE ECONOMY AND FALLING INTEREST RATES FOR
THE FIRST HALF OF THE SIX-MONTH PERIOD ALSO HAD A POSITIVE IMPACT ON THE FUND'S
PERFORMANCE. The unclear economic outlook caused high-quality, large-
capitalization issues, such as those that comprise the bulk of the fund's
portfolio, to perform relatively well. Falling rates bolstered the prices of
interest-rate sensitive stocks, such as financial services companies, which we
also emphasized in the fund throughout much of 1995.
ONE ECONOMICALLY-SENSITIVE STOCK THAT PERFORMED PARTICULARLY WELL FOR US WAS
AEROSPACE MANUFACTURER BOEING CO. (2.3%).** The company not only saw orders
increase due to strengthening in U.S. transportation, but orders from its
international business, particularly in China and other areas of the Far East,
also helped improve Boeing's order book. Given our favorable outlook for the
global airline industry, our outlook for Boeing remains positive.
INCREASED DEMAND AND DWINDLING SUPPLY IN THE ENERGY AREA BOLSTERED THE PRICES OF
OUR HOLDINGS IN THE ENERGY SECTOR. These holdings included Schlumberger (1.5%)
and Baker Hughes (1.3%), two oil services companies, and Texaco (2.4%), one of
the largest international oil
* 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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GROWTH AND INCOME FUND
VALUE OF $10,000 INVESTED
MARCH 31, 1996
[GRAPH]
$10,000 invested in July 1992 and held through March 31, 1996, would have grown
to $15,181. The fund's performance reflects the maximum sales charge of 4%,
while no such charges are reflected in the index or average. All performance
figures include reinvested distributions. Past performance does not guarantee
future results.
AVERAGE ANNUALIZED TOTAL RETURNS
THROUGH MARCH 31, 1996
One Year . . . . . . . . . . . . .27.43%
Since Inception (7/21/92). . . . .12.01%
DURING SOME PERIODS, PIPER CAPITAL WAIVED OR PAID FUND EXPENSES AND/OR PIPER
JAFFRAY, THE FUND'S DISTRIBUTOR, VOLUNTARILY LIMITED 12b-1 FEES FOR THE FUND.
HAD THESE FEES AND EXPENSES NOT BEEN WAIVED, RETURNS WOULD HAVE BEEN 27.16% ONE
YEAR AND 11.74% SINCE INCEPTION. ALL RETURNS INCLUDE REINVESTED DISTRIBUTIONS
AND THE FUND'S 4% SALES CHARGE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS.
TOP 10 EQUITY HOLDINGS
EACH STOCK IS REPRESENTED AS A PERCENTAGE OF TOTAL ASSETS.
1 General Electric . . . . . . . 3.9%
2 Exxon . . . . . . . . . . . . 2.7%
3 AT&T . . . . . . . . . . . . . 2.6%
4 Texaco . . . . . . . . . . . . 2.4%
5 GTE . . . . . . . . . . . . . 2.3%
6 Merck & Company . . . . . . . 2.3%
7 Boeing . . . . . . . . . . . . 2.3%
8 3M . . . . . . . . . . . . . . 2.1%
9 WMX Technologies . . . . . . . 2.1%
10 Ford Motor . . . . . . . . . . 2.0%
companies. We believe these stocks are still trading below their intrinsic
values and, therefore, still offer attractive return potential. The fundamentals
of most energy stocks, in general, are the best they have been in the last
decade and, going forward, we believe they are solid investments.
ONE HOLDING THAT WE ARE PARTICULARLY OPTIMISTIC ABOUT IS WMX TECHNOLOGIES, NOW
ONE OF OUR 10 LARGEST HOLDINGS. WMX Technologies (2.1%), which is in the capital
goods and services sector, is the world's largest waste collection and disposal
company. Over the past nine months, we have visited the company several times
and believe management is putting strategies in place that will significantly
enhance their earnings power and franchise value over the next few years.
DURING THE PERIOD, WE ALSO FOUND ATTRACTIVE VALUES AMONG SEVERAL HIGH-QUALITY,
MEDIUM-CAPITALIZATION COMPANIES. These include H&R Block (1.8%), one of the
leading tax preparation services and on-line information providers, and Carnival
Corp. (1.2%), the largest cruise ship operator in the world. Both of these
companies trade below what we believe is their intrinsic value and offer strong
growth prospects and solid management. While our emphasis remains on high-
quality, large-cap stocks, we continue to remain open to high-quality, mid-cap
investment opportunities with superior long-term growth characteristics and
attractive valuations.
LOOKING AHEAD, WE CONTINUE TO BELIEVE THE ECONOMY WILL GROW AT A RELATIVELY
MODEST PACE AND THAT INTEREST RATES, FOR THE MOST PART, WILL REMAIN UNDER
CONTROL. However, with recessionary fears no longer apparent as they were this
time last year, we believe investors will continue to view economically-
sensitive stocks in a favorable light. We remain underweighted in technology
stocks, a sector that has begun to show signs of rebounding. We expect to keep a
cautious position toward this industry group until valuations improve. As
always, we will remain focused on high-quality, well-managed companies with good
growth potential.
Thank you for your investment in the Growth and Income Fund. We appreciate the
opportunity to serve your investment needs.
Sincerely,
/s/ Paul A. Dow /s/ Michael S. Wallace
Paul Dow Mike Wallace
Portfolio Manager Portfolio Manager
** EACH STOCK IS REPRESENTED AS A PERCENTAGE OF TOTAL ASSETS AS OF MARCH 31,
1996, UNLESS OTHERWISE INDICATED.
3
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BALANCED FUND
[PHOTO]
[PHOTO]
[PHOTO]
BRUCE SALVOG, (ABOVE)
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF THE
FIXED INCOME PORTION OF BALANCED FUND. HE HAS 26 YEARS OF
FINANCIAL EXPERIENCE.
DAVID STEELE, (MIDDLE)
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF THE
FIXED INCOME PORTION OF BALANCED FUND. HE HAS 17 YEARS OF
FINANCIAL EXPERIENCE.
JOHN SCHONBERG, CFA (BELOW)
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF THE EQUITY PORTION OF
BALANCED FUND. HE HAS NINE YEARS OF FINANCIAL EXPERIENCE.
PAUL DOW, CFA (PICTURED ON PAGE 2)
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF THE EQUITY PORTION OF
BALANCED FUND. HE HAS 22 YEARS OF FINANCIAL EXPERIENCE.
May 15, 1996
Dear Shareholders:
FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1996, THE BALANCED FUND REGISTERED A
7.22%* TOTAL RETURN WITH ALL DIVIDENDS AND CAPITAL GAINS REINVESTED BUT NOT
INCLUDING SALES CHARGE. The fund outperformed the Lipper Balanced Funds Average,
which gained 6.95%. For the same time period, the Standard & Poor's 500 Index
and the Lehman Brothers Government/Corporate Index advanced 11.71% and 2.21%,
respectively. Considering our conservative investment strategy of 50% stocks and
50% bonds during the period, the fund performed in line with its benchmarks.
FALLING INTEREST RATES AND A MODERATE ECONOMIC ENVIRONMENT THROUGHOUT MUCH OF
1995 PROVED REWARDING FOR THE FUND. We saw both our stock and bond holdings
perform relatively well. Even our holdings in the badly battered retail sector
turned in solid gains. As the economy began to show strength early in 1996, many
of our gains came from economically-sensitive stocks and energy issues.
Typically, these sectors perform well in an expanding economy.
THE MOST SIGNIFICANT ECONOMIC AND MARKET DEVELOPMENT DURING THE PERIOD WAS THE
GOVERNMENT'S SURPRISINGLY FAVORABLE EMPLOYMENT REPORT RELEASED IN MARCH. While
the news sent stocks and bonds reeling, albeit temporarily, the fund weathered
the bad news better than similar funds due to our relatively cautious asset
allocation strategy. We believe that most balanced funds maintained a weighting
of 60% stocks and 40% bonds, while we kept approximately 50% in each asset
class. Moreover, we were underweighted in sectors hit hard by the news, such as
the interest-rate sensitive financial services companies and electric/natural
gas utilities.
IN THE EQUITY PORTION OF THE FUND, OUR DECISION TO UNDERWEIGHT TECHNOLOGY STOCKS
AND OVERWEIGHT SELECT RETAIL STOCKS ALSO PROVED BENEFICIAL TO THE FUND.
Technology stocks turned in stellar gains during the first half of 1995 but
performed poorly later in the year. Our reduction in technology stocks in the
middle of 1995 helped preserve net asset value. Our overweighting in select
retail stocks in the first quarter of 1996 helped fund performance, as these
issues turned in strong gains compared to the market. The Gap (0.7%)** was our
best performer in this sector.
* 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
<PAGE>
BALANCED FUND
VALUE OF $10,000 INVESTED
MARCH 31, 1996
[GRAPH]
$10,000 INVESTED IN MARCH 1987 AND HELD THROUGH MARCH 31, 1996, WOULD HAVE GROWN
TO $21,012. THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES CHARGE OF 4%,
WHILE NO SUCH CHARGES ARE REFLECTED IN THE INDEXES OR AVERAGE. ALL PERFORMANCE
FIGURES INCLUDE REINVESTED DISTRIBUTIONS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS.
AVERAGE ANNUALIZED TOTAL RETURNS
THROUGH MARCH 31, 1996
One Year . . . . . . . . . . . . . . 15.55%
Five Year. . . . . . . . . . . . . . 11.02%
Since Inception (3/16/87). . . . . . . 8.55%
DURING SOME PERIODS, PIPER CAPITAL WAIVED OR PAID FUND EXPENSES AND/OR PIPER
JAFFRAY, THE FUND'S DISTRIBUTOR, VOLUNTARILY LIMITED 12b-1 FEES FOR THE FUND.
HAD THESE FEES AND EXPENSES NOT BEEN WAIVED, RETURNS WOULD HAVE BEEN 15.13% ONE
YEAR, 10.65% FIVE YEAR, AND 8.08% SINCE INCEPTION. ALL RETURNS INCLUDE
REINVESTED DISTRIBUTIONS AND THE FUND'S 4% SALES CHARGE. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS.
IN THE BOND PORTION OF THE FUND, OUR STRATEGY OF SHORTENING THE EFFECTIVE
DURATION PROVED SUCCESSFUL. In late 1995, with the 30-year U.S. Treasury bond
yield hovering near 6%, we considered bonds to be slightly overvalued and
proceeded to reduce the fund's effective duration by increasing our investment
in shorter maturity, fixed income securities. This strategy helped protect net
asset value when rates rose and bond prices fell in the first quarter of 1996.
ANOTHER FIXED INCOME STRATEGY THAT BENEFITED SHAREHOLDERS WAS OUR DECISION TO
REMAIN OVERWEIGHTED IN CORPORATE BONDS THROUGHOUT MUCH OF 1995. Corporate bonds
proved to be the best performing fixed income sector last year. Our decision in
December to trim our holdings in this area and increase our position in
mortgage-backed securities also served to bolster performance. In the first
quarter of 1996, these mortgage-backed issues outperformed corporate and
government securities.
GOING FORWARD, WE ARE OPTIMISTIC ABOUT H&R BLOCK (1.1%), THE NATION'S FOREMOST
TAX PREPARER AND MAJORITY OWNER OF COMPUSERVE, ONE OF THE LEADING ON-LINE
INFORMATION PROVIDERS. H&R Block, which is in the consumer services sector, is a
well-managed company with high cash flow. Compuserve has recently expanded its
product line to appeal to sophisticated and novice computer users alike. Talk of
a flat tax has kept H&R Block's stock under pressure, but we believe this issue
will not prove to have a sustainable impact on the price of the stock.
WE BELIEVE BOEING (1.4%) AND 3M (1.4%), TWO OF OUR LARGER HOLDINGS AMONG
ECONOMICALLY-SENSITIVE STOCKS, ALSO HAVE SOLID, LONG-TERM GROWTH POTENTIAL. In
the slower growth environment of the past few years, both companies went to
great lengths to cut costs and restructure their respective businesses. We
believe they are now in good position to reap the benefits of those efforts.
** EACH STOCK IS REPRESENTED AS A PERCENTAGE OF TOTAL ASSETS AS OF MARCH 31,
1996, UNLESS OTHERWISE INDICATED.
5
<PAGE>
BALANCED FUND
PORTFOLIO COMPOSITION
MARCH 31, 1996
Bond Component 50%
[PIE CHART]
Stock Component 50%
[PIE CHART]
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF INVESTMENTS IN BONDS OR COMMON
STOCKS.
TOP 10 EQUITY HOLDINGS
EACH STOCK IS REPRESENTED AS A PERCENTAGE OF TOTAL ASSETS.
1 BankAmerica. . . . . . . . . . . . . . 1.9%
2 General Electric . . . . . . . . . . . 1.8%
3 Federal Nat'l Mortgage Association . . 1.8%
4 Exxon. . . . . . . . . . . . . . . . . 1.6%
5 Procter & Gamble . . . . . . . . . . . 1.6%
6 3M . . . . . . . . . . . . . . . . . . 1.4%
7 Norwest Corporation. . . . . . . . . . 1.4%
8 AlliedSignal . . . . . . . . . . . . . 1.4%
9 Boeing . . . . . . . . . . . . . . . . 1.4%
10 American Home Products . . . . . . . . 1.3%
WE ALSO ANTICIPATE BUYING SELECTED TECHNOLOGY STOCKS IN THE MONTHS AHEAD. The
lower prices for these stocks are increasing our interest. In April, we added
Motorola (0.2% of total assets as of April 10) to the fund.
IN THE COMING MONTHS, WE EXPECT THE ECONOMY TO CONTINUE GROWING AT A MODERATE
PACE. Our estimates for Gross Domestic Product (economic growth) for 1996 are
between 1.5% and 2.5%. We believe inflation will remain benign. Our estimate for
the Consumer Price Index (the key inflation rate) in 1996 is between 2.5% and
3.5%. Given these projections, we expect the Federal Reserve to assume a neutral
monetary policy near-term, meaning we don't expect the Fed to raise or lower
short-term interest rates. On balance, this subdued environment we are
projecting should lead to further increases in stock and bond prices.
As always, we appreciate your investment in the Balanced Fund. We appreciate the
opportunity to serve your investment needs and hope that you will contact us
whenever we can be of assistance.
Sincerely,
/s/ Paul A. Dow /s/ Bruce Salvog
Paul Dow Bruce Salvog
Portfolio Manager Portfolio Manager
/s/ David M. Steele /s/ John Schonberg
David Steele John Schonberg
Portfolio Manager Portfolio Manager
6
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (Unaudited)
GROWTH AND INCOME FUND
MARCH 31, 1996
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
COMMON STOCK (97.6%):
Basic Energy (10.4%):
Baker Hughes Inc. ..................................... 37,000 $1,082,250
Chevron Corp. ......................................... 13,600 763,300
Exxon Corp. ........................................... 29,000 2,367,125
Royal Dutch Petroleum ................................. 9,000 (b) 1,271,250
Schlumberger Ltd. ..................................... 16,400 1,297,650
Texaco Inc. ........................................... 24,400 2,098,400
----------
8,879,975
----------
Basic Materials (8.9%):
Air Products & Chemicals .............................. 30,000 1,638,750
Aluminum Company of America ........................... 15,000 939,375
duPont (EI) deNemours ................................. 12,000 996,000
Engelhard Corp. ....................................... 20,000 467,500
Monsanto Co. .......................................... 8,100 1,243,350
Morton International .................................. 42,500 1,630,938
Union Camp ............................................ 14,500 719,561
----------
7,635,474
----------
Capital Goods and Services (14.8%):
AlliedSignal Inc. ..................................... 25,000 1,478,125
Boeing Co. ............................................ 22,400 1,940,400
Emerson Electric ...................................... 14,700 1,187,025
Fluor Corp. ........................................... 15,000 1,023,750
General Electric ...................................... 42,800 3,333,050
Minnesota Mining & Manufacturing ...................... 28,400 1,842,450
WMX Technologies ...................................... 57,000 1,809,748
----------
12,614,548
----------
Consumer Durables (5.3%):
Eastman Kodak ......................................... 16,900 1,199,900
Ford Motor ............................................ 50,800 1,746,250
General Motors ........................................ 29,000 1,544,250
----------
4,490,400
----------
Consumer Non-Durables (9.1%):
Anheuser-Busch Co. .................................... 12,400 835,450
Coca-Cola Co. ......................................... 17,000 1,404,625
Colgate-Palmolive ..................................... 19,000 1,479,625
Earthgrains Co. ....................................... 496 (b) 14,818
Philip Morris Co. ..................................... 13,000 1,140,750
Procter & Gamble ...................................... 18,600 1,576,350
Reebok International .................................. 49,000 1,353,625
----------
7,805,243
----------
Consumer Services (5.6%):
Carnival Corp. - Class A .............................. 24,000 660,000
Gannett Co. ........................................... 20,000 1,345,000
H&R Block ............................................. 42,500 1,535,313
SCI Finance Ltd. ...................................... 15,000 (b) 1,256,250
----------
4,796,563
----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
Financial Services (10.7%):
American Express ...................................... 27,000 $1,333,125
BankAmerica Corp. ..................................... 20,000 1,550,000
Bankers Trust NY ...................................... 6,000 425,250
Camden Property Trust ................................. 17,000 393,125
Chubb Corp. ........................................... 15,500 1,455,063
Federal National Mortgage Association ................. 40,000 1,275,000
J.P. Morgan ........................................... 12,100 1,004,300
McGraw-Hill Co. ....................................... 4,500 390,375
Norwest Corp. ......................................... 35,000 1,286,250
----------
9,112,488
----------
Health Care (10.2%):
Abbott Laboratories ................................... 41,900 1,707,425
American Home Products ................................ 13,500 1,463,063
Johnson & Johnson ..................................... 15,000 1,383,750
Medtronic, Inc. ....................................... 17,000 1,013,625
Merck & Co. ........................................... 31,400 1,954,650
Schering-Plough ....................................... 20,000 1,162,500
----------
8,685,013
----------
Retail Trade (3.7%):
Dayton Hudson ......................................... 8,900 755,388
Home Depot ............................................ 15,000 718,125
Limited Inc. .......................................... 16,317 310,023
Tandy Corp. ........................................... 30,000 1,387,500
----------
3,171,036
----------
Technology (4.6%):
Avalon Properties ..................................... 35,000 752,500
Cisco Systems ......................................... 20,000 (b) 927,500
General Motors Class E ................................ 21,609 1,231,713
Intel Corp. ........................................... 18,000 1,023,750
----------
3,935,463
----------
Transportation (2.0%):
Burlington Northern Santa Fe .......................... 20,300 1,667,138
----------
Utilities (12.3%):
AirTouch Communications ............................... 29,000 (b) 902,625
AT & T Corp. .......................................... 36,700 2,247,875
BellSouth Corp. ....................................... 42,200 1,561,400
Enron ................................................. 45,000 1,659,375
FPL Group ............................................. 26,500 1,199,125
GTE Corp. ............................................. 45,700 2,005,088
SBC Communications .................................... 16,800 884,100
----------
10,459,588
----------
Total Common Stock
(cost: $57,261,177) ................................ 83,252,929
----------
CORPORATE BONDS (0.5%):
Carnival Cruise Lines, 4.50%, 7/1/97
(cost: $285,098) ................................... $ 250,000 390,000
----------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
7
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
GROWTH AND INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
OPTIONS (0.0%):
Intel Corp., 30 put contracts, exercise price of $65,
expires April 96, 0.00%, 1/0/00
(cost: $11,805) .................................... $ -- 24,000
----------
SHORT-TERM SECURITIES (2.5%):
Repurchase agreement with Goldman Sachs in a joint
trading account collateralized by U.S. government
agency securities, acquired on 3/29/96, accrued
interest of $987, 5.48%, 4/1/96
(cost: $2,162,000) ................................... 2,162,000 2,162,000
----------
Total Investments in Securities (100.6%)
(cost: $59,720,080) (c) ............................ 85,828,929
----------
Liabilities in excess of other assets (-0.6%) ....... (490,670)
----------
Net assets (100.0%) ................................ $ 85,338,259
----------
----------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES. THE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 26,375,310
GROSS UNREALIZED DEPRECIATION ...... (266,461)
----------
NET UNREALIZED APPRECIATION .... $ 26,108,849
----------
----------
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (Unaudited)
BALANCED FUND
MARCH 31, 1996
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
COMMON STOCK (49.5%):
Basic Energy (4.9%):
Baker Hughes Inc. .................................... 11,600 $ 339,300
Exxon Corp. .......................................... 9,900 808,088
Royal Dutch Petroleum ................................ 4,100 579,125
Schlumberger Ltd. .................................... 4,300 340,237
Texaco Inc. .......................................... 3,000 258,000
----------
2,324,750
----------
Basic Materials (3.6%):
Air Products & Chemicals ............................. 9,000 491,625
duPont (EI) deNemours ................................ 3,300 273,900
Engelhard Corp. ...................................... 13,500 315,563
International Paper .................................. 6,800 267,750
Morton International ................................. 9,000 345,375
----------
1,694,213
----------
Capital Goods and Services (8.5%):
AlliedSignal Inc. .................................... 11,000 650,375
Boeing Co. ........................................... 7,500 649,688
Emerson Electric ..................................... 3,000 242,250
Fluor Corp. .......................................... 6,600 450,450
General Electric ..................................... 11,000 856,619
Minnesota Mining & Manufacturing ..................... 10,500 681,188
WMX Technologies ..................................... 15,400 488,950
----------
4,019,520
----------
Consumer Durables (1.8%):
Ford Motor ........................................... 14,400 495,000
General Motors ....................................... 6,400 340,800
----------
835,800
----------
Consumer Non-Durables (4.0%):
Coca-Cola Co. ........................................ 6,300 520,538
Philip Morris Co. .................................... 4,400 386,100
Procter & Gamble ..................................... 9,200 779,700
Reebok International ................................. 8,000 221,000
----------
1,907,338
----------
Consumer Services (4.0%):
Carnival Corp. - Class A ............................. 10,000 275,000
H&R Block ............................................ 15,000 541,875
McDonald's Corp. ..................................... 9,500 456,000
Service Corp. International .......................... 9,600 468,000
Walt Disney Co. ...................................... 2,500 159,688
----------
1,900,563
----------
Financial Services (5.8%):
BankAmerica Corp. .................................... 11,724 908,610
Chubb Corp. .......................................... 3,500 328,563
Federal National Mortgage Association ................ 26,800 854,250
Norwest Corp. ........................................ 17,700 650,475
----------
2,741,898
----------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
Health Care (4.7%):
Abbott Laboratories .................................. 3,700 $ 150,775
American Home Products ............................... 5,600 606,900
Medtronic, Inc. ...................................... 9,800 584,325
Merck & Co. .......................................... 9,000 560,250
United Healthcare .................................... 5,000 307,500
----------
2,209,750
----------
Retail Trade (2.6%):
Gap Inc. ............................................. 5,900 326,713
Home Depot ........................................... 5,600 268,100
Limited Inc. ......................................... 9,246 175,674
Tandy Corp. .......................................... 10,100 467,125
----------
1,237,612
----------
Technology (2.5%):
DSC Communications ................................... 5,000 (b) 135,000
General Instrument ................................... 11,000 (b) 301,125
General Motors Class E ............................... 7,400 421,800
Intel Corp. .......................................... 5,400 307,125
----------
1,165,050
----------
Transportation (1.0%):
Burlington Northern Santa Fe ......................... 5,700 468,113
----------
Utilities (6.1%):
AirTouch Communications .............................. 9,500 (b) 295,688
AT & T Corp. ......................................... 9,000 551,250
BellSouth Corp. ...................................... 14,000 518,000
Enron ................................................ 14,500 534,688
GTE Corp. ............................................ 13,800 605,475
Wisconsin Energy Corp. ............................... 13,250 375,968
----------
2,881,069
----------
Total Common Stock
(cost: $15,111,683) ............................... 23,385,676
----------
CORPORATE BONDS (11.7%):
American Express Credit Corporation, 7.38%,
2/1/99 ............................................ $ 400,000 411,284
Aon Corp., 6.88%, 10/1/99 ............................ 400,000 404,832
Boeing Co., 8.75%, 9/15/31 ........................... 500,000 584,250
Ford Holdings, 9.25%, 3/1/00 ......................... 400,000 436,060
General Motors Acceptance Corp., 6.75%, 3/15/03 ...... 400,000 397,192
Heller Financial, 9.13%, 8/1/99 ...................... 300,000 322,554
Korea Electric Power ADS, 6.38%, 12/1/03 ............. 500,000 481,845
Lehman Brothers, 5.04%, 12/15/03 ..................... 600,000 597,570
NationsBank Corp., 6.63%, 1/15/98 .................... 400,000 404,100
Pennsylvania Power and Light, 7.70%, 10/1/09 ......... 500,000 529,915
Tele-Communications International, 7.38%, 2/15/00 .... 400,000 406,972
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
9
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
BALANCED FUND
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
Time Warner Inc., 8.88%, 10/1/12 ................... $ 500,000 543,340
----------
Total Corporate Bonds
(cost: $5,348,328) ................................ 5,519,914
----------
U.S. GOVERNMENT AND AGENCY SECURITIES (18.3%):
Government Trust Certificates (0.8%):
Government Trust Certificate, 9.25%, 11/15/01 ........ 350,000 379,915
----------
U.S. Agency Debentures (4.2%):
FHLMC, 5.94%, 9/21/99 ................................ 1,000,000 994,350
FNMA, 6.63%, 3/21/06 ................................. 1,000,000 1,001,510
----------
1,995,860
----------
U.S. Government Securities (13.3%):
U.S. Treasury Bond, 8.13%, 8/15/19 ................... 1,000,000 1,145,390
U.S. Treasury Bond, 8.50%, 2/15/20 ................... 1,000,000 1,190,060
U.S. Treasury Note, 5.75%, 8/15/03 ................... 1,300,000 1,256,255
U.S. Treasury Note, 5.88%, 2/15/04 ................... 1,000,000 970,900
U.S. Treasury Note, 6.75%, 6/30/99 ................... 1,000,000 1,022,780
U.S. Treasury Strip, 6.36%, 2/15/15 .................. 2,500,000(d) 677,500
----------
6,262,885
----------
Total U.S. Government And Agency Securities
(cost: $8,390,214) ................................ 8,638,660
----------
MORTGAGE-BACKED SECURITIES (16.3%):
U.S. Agency Fixed Rate Mortgages (9.3%):
6.50%, FHLMC, 9/1/25 ................................. 389,312 370,570
7.00%, FHLMC, 11/1/25 ................................ 683,876 667,408
7.50%, FHLMC, 3/1/11 ................................. 510,000 517,645
6.50%, FHLMC, 1/1/01 ................................. 568,713 570,306
8.00%, FHLMC, 11/1/24 ................................ 1,009,166 1,028,068
6.00%, FNMA, 4/1/09 .................................. 885,776 848,945
6.00%, FNMA, 3/1/03 .................................. 408,000 398,433
----------
4,401,375
----------
U.S. Agency Adjustable Rate Mortgages (1.2%):
7.41%, FNMA, 4/1/18 .................................. 561,040 573,108
----------
Collateralized Mortgage Obligations (c) (5.8%):
U.S. Agency Fixed Rate (0.2%):
10.00%, FNMA, Series 1989-15, Class D, 9/25/18 ....... 94,697 97,642
----------
Private Fixed Rate (3.4%):
6.40%, Capstead Securities Corporation, Series 1993-D,
Class D2, 7/25/23 ................................... 284,548 277,079
8.50%, Residential Funding Mortgage Securities, Series
1993-S26, Class A17, 6/25/09 ........................ 900,000 889,453
9.30%, Security Pacific National Bank, Series 1989-A,
Class 7, 8/25/19 .................................... 445,908 442,007
----------
1,608,539
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
U.S. Agency Floating Rate (2.2%):
6.74%, FHLMC, Series 1435, Class FA, LIBOR,
12/15/22 .......................................... $ 586,622 595,885
5.79%, FHLMC, Series 1724, Class F, LIBOR, 5/15/01 ... 421,004 422,961
----------
1,018,846
----------
Total Mortgage-Backed Securities
(cost: $7,678,960) ................................ 7,699,510
----------
ASSET-BACKED SECURITIES (2.2%):
General Motors Acceptance Corp. Series 1994-A Grantor
Trust, 6.30%, 6/15/99 ............................... 372,330 374,907
NationsBank Credit Card Master Trust, Series 1993-1,
Class A, 4.75%, 9/15/98 480,000 478,070
Premier Auto Trust, Series 1993-6, Class A2, 4.65%,
11/2/99 ............................................. 178,652 176,559
----------
Total Asset-Backed Securities
(cost: $1,029,525) ................................ 1,029,536
----------
SHORT-TERM SECURITIES (1.4%):
Repurchase agreement with Goldman Sachs in a joint
trading account collateralized by U.S. government
agency securities, acquired on 3/29/96, accrued
interest of $309, 5.48%, 4/1/96
(cost: $676,000) .................................... 676,000 676,000
----------
Total Investments in Securities (99.4%)
(cost: $38,234,710) (e) ........................... 46,949,296
----------
Other assets in excess of liabilities (0.6%) ....... 261,934
----------
Net assets (100.0%) ............................... $ 47,211,230
----------
----------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) DESCRIPTIONS OF CERTAIN COLLATERALIZED MORTGAGE OBLIGATIONS ARE AS FOLLOWS:
LIBOR - LONDON INTERBANK OFFERED RATE
FLOATER - REPRESENTS SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) WITH AN INCREASE (DECREASE) IN THE SPECIFIED
INDEX. INTEREST RATES DISCLOSED ARE RATES IN EFFECT ON MARCH 31,
1996.
(D) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(E) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES. THE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 9,033,420
GROSS UNREALIZED DEPRECIATION ...... (318,834)
----------
NET UNREALIZED APPRECIATION .... $ 8,714,586
----------
----------
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (Unaudited)
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996
<TABLE>
<CAPTION>
Growth &
Income Balanced
Fund Fund
------------ ------------
<S> <C> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including repurchase agreements of $2,162,000 and
$676,000, respectively) .............................. $ 85,828,929 46,949,296
Cash in bank on demand deposit ........................... 25,570 25,248
Receivable for fund shares sold .......................... 18,272 2,925
Organizational costs (note 2) ............................ 21,347 --
Dividends and accrued interest receivable ................ 192,956 269,105
Mortgage security paydowns receivable .................... -- 11,054
------------ ------------
Total assets ......................................... 86,087,074 47,257,628
------------ ------------
LIABILITIES:
Payable for investment securities purchased .............. 665,878 --
Payable for fund shares redeemed ......................... 6,707 4,155
Accrued investment management fee ........................ 53,936 29,889
Accrued distribution fee ................................. 22,294 12,354
------------ ------------
Total liabilities .................................... 748,815 46,398
------------ ------------
Net assets applicable to outstanding capital stock ....... $ 85,338,259 47,211,230
------------ ------------
------------ ------------
REPRESENTED BY:
Capital stock - authorized 2 billion shares of $0.01 par
value; outstanding, 5,952,376 and 3,391,613 shares,
respectively ......................................... $ 59,524 33,916
Additional paid-in capital ............................... 57,984,556 37,953,682
Undistributed (distributions in excess of) net investment
income ................................................. (67,472) 1,676
Accumulated net realized gain on investments ............. 1,252,802 507,370
Unrealized appreciation of investments ................... 26,108,849 8,714,586
------------ ------------
Total - representing net assets applicable to
outstanding capital stock ........................ $ 85,338,259 47,211,230
------------ ------------
------------ ------------
Net asset value per share of outstanding capital stock ... $ 14.34 13.92
------------ ------------
------------ ------------
* Investments in securities at identified cost ........... $ 59,720,080 38,234,710
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Growth &
Income Balanced
Fund Fund
------------ ------------
<S> <C> <C>
INCOME:
Dividends (net of foreign withholding taxes of $0 and $5,
respectively) ........................................ $ 1,006,632 245,866
Interest ................................................. 29,995 748,527
------------ ------------
Total investment income .............................. 1,036,627 994,393
------------ ------------
EXPENSES (NOTE 5):
Investment management fee ................................ 296,547 170,008
Distribution fee ......................................... 196,074 112,424
Custodian, accounting and transfer agent fees ............ 46,067 35,333
Shareholder account servicing fees ....................... 28,460 21,271
Registration fees ........................................ 7,404 7,821
Reports to shareholders .................................. 9,740 9,448
Amortization of organization costs ....................... 8,122 --
Directors' fees .......................................... 1,333 1,333
Audit and legal fees ..................................... 17,974 17,826
Other expenses ........................................... 8,457 6,630
------------ ------------
Total expenses ....................................... 620,178 382,094
Less expenses waived by the distributor .................. (74,242) (42,549)
Less expenses waived by the adviser ...................... (30,029) (42,814)
------------ ------------
Net expenses before expenses paid indirectly ........... 515,907 296,731
Less expenses paid indirectly ............................ (45) (179)
------------ ------------
Total net expenses ................................... 515,862 296,552
------------ ------------
Net investment income ................................ 520,765 697,841
------------ ------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 3) ................ 1,382,161 987,013
Net change in unrealized appreciation or depreciation of
investments ............................................ 7,938,851 1,385,624
------------ ------------
Net gain on investments ................................ 9,321,012 2,372,637
------------ ------------
Net increase in net assets resulting from
operations ....................................... $ 9,841,777 3,070,478
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Growth & Income Fund Balanced Fund
-------------------------- --------------------------
Six Months Six Months
Ended Ended
3/31/96 Year Ended 3/31/96 Year Ended
(Unaudited) 9/30/95 (Unaudited) 9/30/95
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .................................. $ 520,765 1,319,711 697,841 1,529,179
Net realized gain on investments ......................... 1,382,161 1,154,360 987,013 1,462,490
Net change in unrealized appreciation or depreciation of
investments ............................................ 7,938,851 14,777,345 1,385,624 5,480,753
------------ ----------- ------------ -----------
Net increase in net assets resulting from operations ... 9,841,777 17,251,416 3,070,478 8,472,422
------------ ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... (743,670) (1,345,444) (732,341) (1,593,407)
From net realized gains .................................. (996,506) (237,873) (1,746,546) (443,615)
------------ ----------- ------------ -----------
Total distributions .................................... (1,740,176) (1,583,317) (2,478,887) (2,037,022)
------------ ----------- ------------ -----------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sales (note 5) ............................. 9,649,569 6,264,849 5,364,529 7,292,483
Shares issued for reinvestment of distributions .......... 1,740,182 1,587,615 2,478,883 2,041,758
Payments for shares redeemed ............................. (7,584,078) (22,910,085) (5,215,401) (17,558,182)
------------ ----------- ------------ -----------
Increase (decrease) in net assets from capital share
transactions ......................................... 3,805,673 (15,057,621) 2,628,011 (8,223,941)
------------ ----------- ------------ -----------
Total increase (decrease) in net assets .............. 11,907,274 610,478 3,219,602 (1,788,541)
Net assets at beginning of period .......................... 73,430,985 72,820,507 43,991,628 45,780,169
------------ ----------- ------------ -----------
Net assets at end of period .............................. $ 85,338,259 73,430,985 47,211,230 43,991,628
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Undistributed (distributions in excess of) net investment
income ................................................. $ (67,472) 155,433 1,676 36,176
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION
Piper Funds Inc. (the company) is registered
under the Investment Company Act of 1940 (as
amended) as a single, open-end investment
management company. The company currently has
13 series, including Growth and Income Fund
and Balanced Fund (the funds), each of which
is classified as a diversified series. The
company's articles of incorporation permit the
board of directors to create additional series
in the future.
Growth and Income Fund invests primarily in
stocks of large, established companies that
appear undervalued and potentially offer
long-term dividend and earnings growth. The
fund may also invest in fixed income
securities including U.S. government
securities and nonconvertible preferred stock.
Balanced Fund invests in both common stocks
and fixed income securities with an emphasis
on income-producing securities that appear to
have some potential for capital appreciation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS IN SECURITIES
Investments in securities traded on a national
securities exchange or on the Nasdaq National
Market System are valued at the last reported
sales price that day. Securities traded on a
national securities exchange or on the Nasdaq
National Market System for which there were no
sales on that day and securities traded on
other over-the-counter markets for which
market quotations are readily available are
valued at the mean of the bid and asked
prices. Exchange-traded options are valued at
the last sales price on the exchange prior to
the time when assets are valued. If no sales
were reported that day, the options will be
valued at the mean between the current closing
bid and asked prices. Financial futures are
valued at the last settlement price
established each day by the board of trade or
exchange on which they are traded. Such
valuations are determined using independent
pricing services or prices quoted by
independent brokers.
The value of certain fixed income securities
will be provided by an independent pricing
service, which determines these valuations at
a time earlier than the close of the Exchange.
Fixed income securities for which prices are
not available from an independent pricing
service but where an active market exists will
be valued using market quotations obtained
from one or more dealers that make markets in
the securities.
Occasionally events affecting the value of
such securities may occur between the time
valuations are determined and the close of the
Exchange. If events materially affecting the
value of such securities occur, if the
Company's management determines for any other
reason that valuations provided by the pricing
service are inaccurate or when market
quotations are not readily available,
securities will be valued at their fair value
according to procedures decided upon 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. Dividend income is
recognized on the ex-dividend date and
interest income, including amortization of
bond discount and premium computed on a
level-yield basis, is accrued daily.
OPTIONS TRANSACTIONS
For hedging purposes, the funds may buy and
sell put and call options, write covered call
options on portfolio securities and write
cash-secured puts. The risk in
14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
writing a call option is that the funds give
up the opportunity of profit if the market
price of the security increases. The risk in
writing a put option is that the funds may
incur a loss if the market price of the
security decreases and the option is
exercised. The risk in buying an option is
that the funds pay a premium whether or not
the option is exercised. The funds also have
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 funds 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 from
changes in the market, the funds may buy and
sell financial futures contracts and related
options. Risks of entering into futures
contracts and related options include the
possibility that 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
funds are 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 funds each day. The
variation margin payments are equal to the
daily changes in the contract value and are
recorded as unrealized gains and losses. The
funds recognize a realized gain or loss when
the contract is closed or expires.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have
been purchased by the funds 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.
Each fund maintains, in segregated accounts
with the 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 each fund's net
asset value if the funds make such purchases
while remaining substantially fully invested.
As of March 31, 1996, the funds had no
outstanding when-issued or
forward-commitments.
In connection with their ability to purchase
securities on a when-issued or forward-
commitment basis, the funds may enter into
mortgage "dollar rolls" in which the funds
sell securities for delivery in the current
month and simultaneously contract 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" their purchase
commitments, the funds receive negotiated
fees. For the six months ended March 31, 1996,
the funds earned no such fees.
FEDERAL TAXES
Each fund is treated separately for federal
income tax purposes. Each 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. In addition, on a
calendar-year basis, the funds will distribute
substantially all of their taxable net
investment income and realized gains, if any,
to avoid the payment of any federal excise
taxes.
15
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Net investment income and net realized gains
(losses) may differ for financial statement
and tax purposes primarily because of losses
deferred due to "wash sale" and "straddle"
transactions. The character of distributions
made during the year from net investment
income or net realized gains may differ from
its ultimate characterization for federal
income tax purposes. In addition, due to the
timing of dividend distributions, the fiscal
year in which amounts are distributed may
differ from the year that the income or
realized gains (losses) were recorded by the
funds.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net
investment income are declared and paid
quarterly. Net realized gains distributions,
if any, will be made at least annually.
Distributions are payable in cash or
reinvested in additional shares.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with
certain broker-dealers, the funds, along with
other affiliated registered investment
companies, may transfer uninvested cash
balances to 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 funds'
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 funds in the event of a
default.
ORGANIZATION COSTS
Organization costs were incurred in connection
with the start up and initial registration of
the funds. These costs are amortized over 60
months on a straight-line basis. If any or all
of the shares representing initial capital of
the fund are redeemed by any holder thereof
prior to the end of the amortization period,
the proceeds will be reduced by the
unamortized organization cost balance in the
same proportion as the number of shares
redeemed bears to the number of initial shares
outstanding preceding the redemption.
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.
(3) 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 March 31, 1996, were as follows:
<TABLE>
<CAPTION>
Growth
and Income Balanced
Fund Fund
---------- ----------
<S> <C> <C>
Purchases ............................................... $ 7,936,503 8,532,819
Proceeds from sales ..................................... $ 6,083,441 8,034,778
</TABLE>
For the six months ended March 31, 1996, no
brokerage commissions were paid to Piper
Jaffray Inc., an affiliated broker.
16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(4) CAPITAL SHARE TRANSACTIONS
Transactions in shares of each fund for the
six months ended March 31, 1996, and the year
ended September 30, 1995, were as follows:
<TABLE>
<CAPTION>
Growth
and Income Balanced
Fund Fund
----------- -----------
<S> <C> <C>
1996:
Sold ................................................... 700,345 384,621
Issued for reinvested distributions .................... 126,919 179,644
Redeemed ............................................... (553,075) (375,164)
----------- -----------
Increase ........................................... 274,189 189,101
----------- -----------
----------- -----------
1995:
Sold ................................................... 536,973 582,543
Issued for reinvested distributions .................... 145,560 166,353
Redeemed ............................................... (2,097,497) (1,423,325)
----------- -----------
Decrease ......................................... (1,414,964) (674,429)
----------- -----------
----------- -----------
</TABLE>
(5) EXPENSES
The company has entered into an investment
management agreement with Piper Capital
Management Incorporated (Piper Capital) under
which Piper Capital manages each fund's assets
and furnishes related office facilities,
equipment, research and personnel. The
agreement requires each fund to pay Piper
Capital a monthly fee based on average daily
net assets. The fee for each fund is equal to
an annual rate of 0.75% of the first $100
million in net assets, 0.65% of the next $200
million and decreasing percentages thereafter
to 0.50% of net assets in excess of $500
million.
Each fund also pays Piper Jaffray Inc. (Piper
Jaffray), the funds' distributor, a monthly
fee for providing shareholder services and
distribution-related services. The fee is
limited to an annual rate of 0.50% of average
daily net assets for each fund and includes
0.25% payable as a servicing fee and 0.25%
payable as a distribution fee. For the year
ended September 30, 1996, Piper Jaffray
voluntarily agreed to limit the fee to an
annual rate of 0.32% of each fund's average
daily net assets.
The company has also entered into shareholder
servicing agreements under which Piper Jaffray
and Piper Trust Company perform various
transfer and dividend disbursing agent
services for accounts held at the respective
company. The fees, which are paid monthly to
Piper Jaffray and Piper Trust Company for
providing these services, are equal to an
annual rate of $6.00 per active shareholder
account and $1.60 per closed account.
In addition to the investment management,
distribution and shareholder account servicing
fees, each 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. For the year ended
September 30, 1996, Piper Capital voluntarily
limited total fees and expenses, including the
distribution and servicing fees, but excluding
interest and income tax expenses, to an annual
rate of 1.32% of average daily net assets for
the funds.
Expenses paid indirectly represent a reduction
of custodian fees for earnings on cash
balances maintained by the funds.
Sales charges received by Piper Jaffray for
distributing the funds' shares were $109,906
and $38,637 for Growth and Income Fund and
Balanced Fund, respectively, for the six
months ended March 31, 1996.
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(6) FINANCIAL HIGHLIGHTS
Per-share data for a share of capital stock
outstanding throughout each period and
selected information for each period are as
follows:
GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Six months Fiscal year ended September 30,
ended Period ended
3/31/96 ------------------------------- September 30,
(Unaudited) 1995 1994 1993 1992(c)
----------- ------- ------- ------- -------------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period .............. $ 12.93 10.27 10.30 10.01 10.00
----------- ------- ------- ------- ------
Operations:
Net investment income ............................. 0.15 0.19 0.24 0.24 0.03
Net realized and unrealized gains (losses) on
investments ..................................... 1.57 2.70 0.02 0.29 (0.02)
----------- ------- ------- ------- ------
Total from operations .......................... 1.72 2.89 0.26 0.53 0.01
----------- ------- ------- ------- ------
Distributions to shareholders:
From net investment income ........................ (0.13) (0.19) (0.24) (0.24) --
From net realized gains on investments ............ (0.18) (0.04) (0.05) -- --
----------- ------- ------- ------- ------
Total distributions to shareholders ............ (0.31) (0.23) (0.29) (0.24) --
----------- ------- ------- ------- ------
Net asset value, end of period ................ $ 14.34 12.93 10.27 10.30 10.01
----------- ------- ------- ------- ------
----------- ------- ------- ------- ------
SELECTED INFORMATION
Total return(a) ..................................... 13.46% 28.81% 2.53% 5.41% 0.10%
Net assets at end of period (in millions) ......... $ 85 73 73 96 52
Ratio of expenses to average daily net assets (b) ... 1.30%(d) 1.32% 1.29% 1.32% 1.28%(d)
Ratio of net investment income to average daily net
assets (b) ........................................ 1.32%(d) 1.93% 2.26% 2.51% 3.00%(d)
Portfolio turnover rate (excluding short-term
securities) ....................................... 8% 14% 20% 26% 1%
</TABLE>
(A) 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.
(B) DURING THE YEARS REFLECTED ABOVE, THE ADVISOR AND DISTRIBUTOR VOLUNTARILY
WAIVED FEES AND EXPENSES. HAD THE FUND PAID ALL EXPENSES AND THE MAXIMUM
DISTRIBUTION FEE BEEN IN EFFECT, THE RATIOS OF EXPENSES AND NET INVESTMENT
INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 1.57%/1.05%,
1.60%/1.65%, 1.62%/1.93%, 1.58%/2.25% AND 2.06%/2.22% FOR THE SIX MONTHS
ENDED 3/31/96, AND FISCAL 1995, 1994, 1993, AND 1992, RESPECTIVELY.
BEGINNING IN FISCAL 1995, THE EXPENSE RATIOS REFLECT THE EFFECT OF GROSS
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE RATIOS HAVE NOT
BEEN ADJUSTED.
(C) COMMENCEMENT OF OPERATIONS WAS JULY 27, 1992.
(D) ADJUSTED TO AN ANNUAL BASIS.
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(6) FINANCIAL HIGHLIGHTS (CONTINUED)
Per-share data for a share of capital stock
outstanding throughout each period and
selected information for each period are as
follows:
BALANCED FUND
<TABLE>
<CAPTION>
Six months
ended Fiscal year ended September 30,
3/31/96 -------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991
----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ......... $ 13.74 11.81 12.23 11.88 10.77 8.87
----------- ------- ------- ------- ------- -------
Operations:
Net investment income ........................ 0.23 0.47 0.38 0.34 0.38 0.43
Net realized and unrealized gains (losses) on
investments ................................ 0.72 1.93 (0.26) 0.65 1.17 1.89
----------- ------- ------- ------- ------- -------
Total from operations ..................... 0.95 2.40 0.12 0.99 1.55 2.32
----------- ------- ------- ------- ------- -------
Distributions to shareholders:
From net investment income ................... (0.22) (0.35) (0.37) (0.34) (0.39) (0.42)
From net realized gains on investments ....... (0.55) (0.12) (0.17) (0.30) (0.05) --
----------- ------- ------- ------- ------- -------
Total distributions to shareholders ....... (0.77) (0.47) (0.54) (0.64) (0.44) (0.42)
----------- ------- ------- ------- ------- -------
Net asset value, end of period ........... $ 13.92 13.74 11.81 12.23 11.88 10.77
----------- ------- ------- ------- ------- -------
----------- ------- ------- ------- ------- -------
SELECTED INFORMATION
Total return(a) ................................ 7.22% 21.78% 1.00% 8.51% 14.75% 26.61%
Net assets at end of period (in millions) .... $ 47 44 46 57 28 15
Ratio of expenses to average daily net
assets(b) .................................... 1.31%(c) 1.32% 1.32% 1.32% 1.32% 1.32%
Ratio of net investment income to average daily
net assets(b) ................................ 3.08%(c) 3.54% 3.03% 3.13% 3.57% 4.15%
Portfolio turnover rate (excluding short-term
securities) .................................. 18% 39% 62% 41% 58% 44%
</TABLE>
(A) 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.
(B) DURING THE YEARS REFLECTED ABOVE, THE ADVISOR AND DISTRIBUTOR VOLUNTARILY
WAIVED FEES AND EXPENSES. HAD THE FUND PAID ALL EXPENSES AND THE MAXIMUM
DISTRIBUTION FEE BEEN IN EFFECT, THE RATIOS OF EXPENSES AND NET INVESTMENT
INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 1.69%/2.70%,
1.65%/3.21%, 1.60%/2.75%, 1.62%/2.83%,1.77%/3.12%, AND 1.98%/3.49% FOR SIX
MONTHS ENDED 3/31/96, AND FISCAL 1995, 1994, 1993, 1992 AND 1991,
RESPECTIVELY. BEGINNING IN FISCAL 1995, THE EXPENSE RATIOS REFLECT THE
EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE
RATIOS HAVE NOT BEEN ADJUSTED.
(C) ADJUSTED TO AN ANNUAL BASIS.
19
<PAGE>
- --------------------------------------------------------------------------------
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
Paul A. Dow, PRESIDENT
Worth Bruntjen, SENIOR VICE PRESIDENT
Richard W. Filippone, SENIOR VICE PRESIDENT
Marjo A. Goldstein, SENIOR VICE PRESIDENT
Steven V. Markusen, SENIOR VICE PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT AND
TREASURER
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
Marcy K. Winson, VICE PRESIDENT
Susan Sharp Miley, SECRETARY
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
LEGAL COUNSEL Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
20
<PAGE>
---------------
[PIPER CAPITAL Bulk Rate
MANAGEMENT LOGO] U.S. Postage
PAID
PIPER CAPITAL MANAGEMENT INCORPORATED Permit No. 3008
222 SOUTH NINTH STREET Mpls., MN
MINNEAPOLIS, MN 55402-3804 ---------------
PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.
[RECYCLE 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
131-96 XTR02 5/96
