<PAGE>
1933 Act Registration No. 33-10261
1940 Act Registration No. 811-4905
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Registration No. 33-10261)
Pre-Effective Amendment No.
------
Post-Effective Amendment No. 31
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AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
(Registration No. 811-4905)
Amendment No. 31
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(Check appropriate box or boxes)
PIPER FUNDS INC.
(Exact Name of Registrant as Specified in Charter)
Piper Jaffray Tower, 222 South 9th Street, Minneapolis, MN 55402
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (6l2) 342-6384
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Paul A. Dow
Piper Capital Management Incorporated
Piper Jaffray Tower
222 South 9th Street, Minneapolis, Minnesota 55402
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(Name and Address of Agent for Service)
Copy to:
Kathleen L. Prudhomme
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
X immediately upon filing pursuant to paragraph (b) of rule 485
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on (specify date) pursuant to paragraph (b) of rule 485
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75 days after filing pursuant to paragraph (a) of rule 485, unless
- ------ effectiveness is accelerated by the staff of the Securities and
Exchange Commission
on (specify date) pursuant to paragraph (a) of rule 485
- ------
The Registrant has registered an indefinite number of its common
shares pursuant to Regulation 270.24f-2 under the Investment Company Act of
1940. A Rule 24f-2 Notice for the fiscal year ended September 30, 1996 will be
filed no later than November 30, 1996.
<PAGE>
PIPER FUNDS INC.
(Money Market Funds)
Registration Statement on Form N-1A
------------------------------
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
------------------------------
Item No. Prospectus Heading
-------- ------------------
1. Cover Page. . . . . . . . . . Cover Page
2. Synopsis. . . . . . . . . . . Introduction; Fund Expenses
3. Financial Highlights. . . . . Financial Highlights
4. General Description of
Registrant . . . . . . . . . Introduction; Investment Objectives and
Policies; Special Investment Methods and
Risk Factors
5. Management of the Fund. . . . Management
6. Capital Stock and Other
Securities . . . . . . . . . General Information; Introduction;
Dividends and Distributions; Tax Status
7. Purchase of Securities
Being Offered. . . . . . . . Distribution of Fund Shares; How to
Purchase Shares; Cash Management Program;
Valuation of Shares; Shareholder Services
8. Redemption or Repurchase. . . How to Redeem Shares; Shareholder Services
9. Pending Legal Proceedings . . General Information
Statement of Additional Information Heading
-------------------------------------------
10. Cover Page. . . . . . . . . . Cover Page
11. Table of Contents . . . . . . Cover Page
12. General Information
and History. . . . . . . . . General Information; Pending Litigation
13. Investment Objectives
and Policies . . . . . . . . Investment Policies and Restrictions
<PAGE>
14. Management of the Fund. . . . Directors and Executive Officers
15. Control Persons and Principal
Holders of Securities. . . . Capital Stock and Ownership of Shares
16. Investment Advisory and
Other Services . . . . . . . Investment Advisory and Other Services
17. Brokerage Allocation. . . . . Portfolio Transactions and Allocation of
Brokerage
18. Capital Stock and Other
Securities . . . . . . . . . Capital Stock and Ownership of Shares
19. Purchase, Redemption and
Pricing of Securities
Being Purchased. . . . . . . Net Asset Value and Public Offering Price;
Performance Comparisons; Redemption of
Shares
20. Tax Status. . . . . . . . . . Taxation
21. Underwriters. . . . . . . . . Investment Advisory and Other Services;
Portfolio Transactions and Allocation of
Brokerage
22. Calculations of
Performance Data . . . . . . Performance Comparisons; Calculation of
Yield
23. Financial Statements. . . . . Financial Statements
<PAGE>
Prospectus Dated November 18, 1996
MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
Series of Piper Funds Inc.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402-3804
(800) 866-7778 (toll free)
MONEY MARKET FUND AND U.S. GOVERNMENT MONEY MARKET FUND both have an
investment objective of maximum current income consistent with preservation of
capital and maintenance of liquidity. Money Market Fund invests in a variety of
high quality money market instruments such as high grade domestic and U.S.
dollar denominated foreign commercial paper, repurchase agreements, obligations
of domestic and foreign banks (time deposits, certificates of deposit and
bankers' acceptances), U.S. Government securities and short-term corporate
obligations. U.S. Government Money Market Fund invests only in securities that
are issued or guaranteed as to payment of principal and interest by the U.S.
government, its agencies or instrumentalities, and repurchase agreements with
respect to such securities.
TAX-EXEMPT MONEY MARKET FUND has an investment objective of a high level of
current income exempt from federal income taxes consistent with preservation of
capital and maintenance of liquidity. The Fund seeks to achieve this objective
by investing primarily in high quality tax-exempt securities with short-term
maturities, including municipal bonds, municipal notes and municipal commercial
paper.
Investments in the Funds are neither insured nor guaranteed by the U.S.
Government or any other entity. There is no assurance that the Funds will be
able to maintain a stable net asset value of $1.00 per share.
This Prospectus concisely describes the information about the Funds that you
ought to know before investing. Please read it carefully before investing and
retain it for future reference.
A Statement of Additional Information about the Funds dated November 18,
1996, is available free of charge. Write to the Funds at Piper Jaffray Tower,
222 South Ninth Street, Minneapolis, Minnesota 55402 or telephone (800) 866-7778
(toll free). The Statement of Additional Information has been filed with the
Securities and Exchange Commission and is incorporated in its entirety by
reference in this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
INTRODUCTION
Money Market Fund, U.S. Government Money Market Fund and Tax-Exempt Money
Market Fund (sometimes referred to herein as a "Fund" or, collectively, as the
"Funds") are series of Piper Funds Inc. (the "Company"). The Company is an
open-end management investment company organized under the laws of the State of
Minnesota in 1986, the shares of which are currently offered in twelve series.
Each Fund has its own investment objective and policies and each is classified
as a diversified fund.
The Investment Adviser
The Company is managed by Piper Capital Management Incorporated (the
"Adviser"), a wholly owned subsidiary of Piper Jaffray Companies Inc. Each Fund
pays the Adviser a fee for managing its investment portfolio at an annual rate
of .50% on net assets up to $500 million. For each Fund the fee is scaled
downward as net assets increase in size above $500 million. See
"Management--Investment Adviser."
The Distributor
Piper Jaffray Inc. ("Piper Jaffray"), a wholly owned subsidiary of Piper
Jaffray Companies Inc. and an affiliate of the Adviser, serves as Distributor of
the Funds' shares.
Offering Price
Shares of the Funds are offered to the public at their net asset value of
$1.00 per share with no sales charge. There can be no assurance, however, that
the net asset value per share of any Fund will always be maintained at $1.00.
Minimal Investments
The minimum initial investment for each Fund is $250. There is no minimum
for subsequent investments. See "How to Purchase Shares--Minimum Investments."
Exchanges
You may exchange your shares for shares of any other mutual fund managed by
the Adviser which is eligible for sale in your state of residence. All exchanges
are subject to the minimum investment requirements and other applicable terms
set forth in the prospectus of the fund whose shares you acquire. Exchanges are
made on the basis of the net asset values of the funds involved, except that if
you exchange into a fund with a sales charge, you pay the percentage-point
difference between that fund's sales charge and any sales charge you have
previously paid in connection with the shares you are exchanging. See
"Shareholder Services-- Exchange Privilege."
Redemption Price
Shares of any Fund may be redeemed at any time at their net asset value next
determined after a redemption request is received by your Piper Jaffray
Investment Executive or other broker-dealer. The Funds reserve the right, upon
30 days' written notice, to redeem your account if the net asset value of the
shares falls below $200. See "How to Redeem Shares--Involuntary Redemption."
Certain Risk Factors to Consider
As with other mutual funds, there can be no assurance that any Fund will
achieve its objective. As set forth in detail under "Investment Objectives and
Policies" and "Special Investment Methods and Risk Factors," an investment in
any of the Funds is subject to certain risks and some or all of the Funds may
engage in the following investment practices which involve certain special
risks: the use of repurchase agreements and the purchase or sale of securities
on a "when-issued" or "forward commitment" basis.
Shareholder Inquiries
Any questions or communications regarding a shareholder account should be
directed to your Piper Jaffray Investment Executive or, in the case of shares
held through another broker-dealer, to IFTC at (800) 874-6205. General inquiries
regarding the Funds should be directed to the Funds at the telephone number set
forth on the cover page of this Prospectus.
2
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
U.S. Tax- Exempt
Money Government Money
Market Money Market Market
Fund Fund Fund
---------- ------------- ----------
<S> <C> <C> <C>
Shareholder Transaction Expenses................................. None None None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees................................................ .40 % .50 % .50 %
Rule 12b-1 Fees (after voluntary limitation)................... .20 % .20 % .20 %
Other Expenses................................................. .24 % .20 % .20 %
--- --- ---
Total Fund Operating Expenses (after voluntary limitation)..... .84 % .90 % .90 %
</TABLE>
Example
For each of the Funds, you would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Money Market Fund........................................................... $ 9 $ 27 $ 47 $ 104
U.S. Government Money Market Fund.......................................... $ 9 $ 29 $ 50 $ 111
Tax-Exempt Money Market Fund............................................... $ 9 $ 29 $ 50 $ 111
</TABLE>
The purpose of the above Fund Expenses table is to assist you in
understanding the various costs and expenses that investors in the Funds will
bear directly or indirectly. The Example contained in the table should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown.
The information in the table reflects actual expenses incurred during the
fiscal year ended September 30, 1996. The Funds have adopted a Rule 12b-1 Plan
under which each Fund pays the Distributor a fee equal, on an annual basis, to
.30% of such Fund's average daily net assets in connection with the servicing of
Fund shareholder accounts and the provision of distribution-related services to
the Funds. The Distributor voluntarily limited fees payable under the Plan to
.20% of each Fund's average daily net assets during the fiscal year ended
September 30, 1996. Absent this limitation, Total Fund Operating Expenses for
the fiscal year ended September 30, 1996, as a percentage of average daily net
assets, would have been .94% for Money Market Fund and 1.00% for each of U.S.
Government Money Market Fund and Tax-Exempt Money Market Fund. The Distributor
has agreed to continue limiting Rule 12b-1 fees to .20% of each Fund's average
daily net assets during the fiscal year ending September 30, 1997. After fiscal
1997, this limitation may be revised or terminated at any time. For additional
information, including a more complete explanation of management and Rule 12b-1
fees, see "Management--Investment Adviser" and "Distribution of Fund Shares."
The Adviser may or may not assume expenses of the Funds from time to time, in
its discretion, while retaining the ability to be reimbursed by the Funds for
expenses assumed by it during a fiscal year prior to the end of such year. The
foregoing policy will have the effect of lowering a Fund's overall expense ratio
and of increasing yield to investors when such amounts are assumed or the
inverse when such amounts are reimbursed.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights show certain per share data and selected
information for a share of capital stock outstanding during the indicated
periods for the Funds. This information has been audited by KPMG Peat Marwick
LLP, independent auditors, and should be read in conjunction with the financial
statements of each Fund contained in its annual report. An annual report of each
Fund is available without charge by contacting the Funds at 800-866-7778 (toll
free). In addition to financial statements, the annual reports contain further
information about the performance of the Funds.
Money Market Fund
<TABLE>
<CAPTION>
Fiscal year ended September 30, Period from Period from
------------------------------------------------------- 11/1/87 to 3/16/87* to
1996 1995 1994 1993 1992 1991 1990 1989 9/30/88 10/31/87
------ ----- ----- ----- ----- ----- ----- ----- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period............... $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Operations:
Net investment
income............. 0.05 0.05 0.03 0.02 0.04 0.06 0.08 0.08 0.06 0.04
Distributions from net
investment income.... (0.05) (0.05) (0.03) (0.02) (0.04) (0.06) (0.08) (0.08) (0.06) (0.04)
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of
period............... $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
------ ----- ----- ----- ----- ----- ----- ----- ----- -----
Total return***........ 4.79% 5.05% 2.98% 2.45% 3.87% 6.34% 7.88% 8.60% 6.02% 3.70%
Net assets, end of
period
(in millions)........ $1,966 1,703 1,185 1,106 1,096 1,242 1,176 1,004 583 215
Ratio of expenses to
average daily net
assets(1)............ 0.84% 0.92% 0.93% 0.96% 0.90% 0.89% 0.91% 1.00% 1.05%** 0.74%**
Ratio of net investment
income to average
daily net
assets(1)............ 4.73% 4.94% 2.90% 2.42% 3.66% 6.06% 7.56% 8.32% 6.45%** 6.29%**
</TABLE>
- ------------
U.S. Government Money Market Fund
<TABLE>
<CAPTION>
Fiscal year ended September 30, Period from
------------------------------------------------------- 7/5/88* to
1996 1995 1994 1993 1992 1991 1990 1989 9/30/88
------ ----- ----- ----- ----- ----- ----- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period........... $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
------ ----- ----- ----- ----- ----- ----- -----
Operations:
Net investment
income............ 0.05 0.05 0.03 0.02 0.04 0.06 0.08 0.08 0.01
Distributions from net
investment income... (0.05) (0.05) (0.03) (0.02) (0.04) (0.06) (0.08) (0.08) (0.01)
------ ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end
of period........... $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
------ ----- ----- ----- ----- ----- ----- ----- -----
------ ----- ----- ----- ----- ----- ----- ----- -----
Total return***....... 4.72% 4.99% 2.98% 2.51% 3.78% 6.05% 7.80% 8.37% 1.28%
Net assets, end of
period
(in millions)....... $ 291 256 185 195 191 199 112 46 17
Ratio of expenses to
average daily net
assets(2)........... 0.90% 0.91% 0.92% 0.93% 0.90% 0.88% 0.91% 0.90% 0.90%**
Ratio of net
investment income to
average daily net
assets(2)........... 4.62% 4.90% 2.88% 2.41% 3.58% 5.84% 7.35% 8.17% 7.16%**
</TABLE>
- ------------
See Notes to Financial Highlights
4
<PAGE>
Tax-Exempt Money Market Fund
<TABLE>
<CAPTION>
Fiscal year ended September 30, Period from
------------------------------------------------------- 7/5/88* to
1996 1995 1994 1993 1992 1991 1990 1989 9/30/88
------ ----- ----- ----- ----- ----- ----- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning
of period........... $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
------ ----- ----- ----- ----- ----- ----- ----- -----
Operations:
Net investment
income............ 0.03 0.03 0.02 0.02 0.03 0.04 0.05 0.06 0.01
Distributions from net
investment
income(3)........... (0.03) (0.03) (0.02) (0.02) (0.03) (0.04) (0.05) (0.06) (0.01)
------ ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end
of period........... $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
------ ----- ----- ----- ----- ----- ----- ----- -----
------ ----- ----- ----- ----- ----- ----- ----- -----
Total return***....... 2.80% 3.02% 1.82% 1.87% 3.07% 4.54% 5.41% 5.76% 1.21%
Net assets, end of
period
(in millions)....... $ 210 206 178 169 158 134 116 84 36
Ratio of expenses to
average daily net
assets (4).......... 0.90% 0.91% 0.90% 0.92% 0.88% 0.87% 0.89% 0.90% 0.90%**
Ratio of net
investment income to
average daily net
assets (4).......... 2.76% 2.97% 1.80% 1.83% 2.91% 4.37% 5.34% 5.63% 4.99%**
</TABLE>
- ------------
Notes to Financial Highlights
* Commencement of operations.
** Adjusted to an annual basis.
*** Total return is based on the change in net asset value during the period and
assumes reinvestment of all distributions.
(1)During the periods reflected above, Money Market Fund's distribution fee was
voluntarily limited by the Distributor. In addition, other various fees and
expenses were voluntarily waived or absorbed by the Adviser during fiscal
1987. Had the maximum distribution fee been in effect and the fund paid all
fees and expenses, the ratios of expenses and net investment income to
average daily net assets would have been: 0.94%/4.63% in fiscal 1996,
1.02%/4.84% in fiscal 1995, 1.03%/2.80% in fiscal 1994, 1.06%/2.32% in
fiscal 1993, 1.00%/3.56% in fiscal 1992, 0.98%/5.97% in fiscal 1991,
1.00%/7.47% in fiscal 1990, 1.10%/8.22% in fiscal 1989, 1.10%/6.40% in
fiscal 1988 and 1.35%/5.68% in fiscal 1987.
(2)During the periods reflected above, U.S. Government Money Market Fund's
distribution fee was voluntarily limited by the Distributor. Prior to fiscal
year 1991, other various fees and expenses were voluntarily waived or
absorbed by the Adviser. Had the maximum distribution fee been in effect and
the fund paid all fees and expenses, the ratios of expenses and net
investment income to average daily net assets would have been: 1.00%/4.52%
in fiscal 1996, 1.01%/4.80% in fiscal 1995, 1.02%/2.78% in fiscal 1994,
1.03%/2.31% in fiscal 1993, 1.00%/3.48% in fiscal 1992, 0.97%/5.75% in
fiscal 1991, 1.05%/7.21% in fiscal 1990, 1.29%/7.78% in fiscal 1989 and
2.08%/5.98% in fiscal 1988.
(3)Tax-Exempt Money Market Fund distributions from net investment income that
are taxable for federal and state income tax purposes were $0.000, $0.0001,
$0.0000, $0.0000, $0.0001, $0.0002, $0.0003, $0.0010 and $0.0030 per share
for the years ended September 30, 1996, 1995, 1994, 1993, 1992, 1991, 1990
and 1989, and for the period ended September 30, 1988, respectively.
(4)During the periods reflected above, Tax-Exempt Money Market Fund's
distribution fee was voluntarily limited by the Distributor. Prior to fiscal
year 1990, other various fees and expenses were voluntarily waived or
absorbed by the Adviser. Had the maximum distribution fee been in effect and
the fund paid all fees and expenses, the ratios of expenses and net
investment income to average daily net assets would have been: 1.00%/2.66%
in fiscal 1996, 1.01%/2.87% in fiscal 1995, 1.00%/1.70% in fiscal 1994,
1.02%/1.73% in fiscal 1993, 0.98%/2.81% in fiscal 1992, 0.96%/4.28% in
fiscal 1991, 0.98%/5.25% in fiscal 1990, 1.04%/5.49% in fiscal 1989 and
1.44%/4.45% in fiscal 1988.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives listed below cannot be changed without shareholder
approval. In view of the risks inherent in all investments in securities, there
is no assurance that these objectives will be achieved. The investment policies
and techniques employed in pursuit of the Funds' objectives may be changed
without shareholder approval, unless otherwise noted.
RULE 2A-7. Each Fund is subject to the investment restrictions of Rule 2a-7
under the Investment Company Act of 1940, as amended (the "1940 Act"), in
addition to its other policies and restrictions. Rule 2a-7 requires that each of
the Funds invest exclusively in securities that mature within 397 days and that
each maintain an average weighted maturity of not more than 90 days. Rule 2a-7
also requires that all investments by the Funds be limited to United States
dollar-denominated investments that: (1) present "minimal credit risks," and (2)
are at the time of acquisition "Eligible Securities." Eligible Securities
include, among others, (a) securities that are rated by two Nationally
Recognized Statistical Rating Organizations ("NRSROs") in one of the two highest
categories for short-term debt obligations, such as A-1 or A-2 by Standard &
Poors Ratings Services or P-1 or P-2 by Moody's Investors Service, Inc., (b)
securities that at the time of issuance were long-term securities but that have
remaining maturities of 397 calendar days or less, provided the issuer has
comparable outstanding short-term debt rated in one of the two highest
categories, and (c) unrated securities of comparable quality. See Appendix A to
the Statement of Additional Information for an explanation of the ratings issued
by NRSROs. It is the responsibility of the Adviser to determine that the Funds'
investments present only "minimal credit risks" and are Eligible Securities,
pursuant to the oversight of, and written guidelines and procedures established
by, the Company's Board of Directors.
Under Rule 2a-7, 95% of the assets of non-tax-exempt money funds (such as
Money Market Fund and U.S. Government Money Market Fund) must be invested in
Eligible Securities that are deemed First Tier Securities, which include, among
others, securities rated by two NRSROs in the highest category (such as A-1 and
P-1). In addition, a non-tax-exempt money fund (1) may not invest (with certain
limited exceptions) more than 5% of its total assets in securities of a single
issuer, other than U.S. Government securities and (2) may not invest more than
the greater of 1% of the fund's total assets or $1,000,000 in Second Tier
Securities of a single issuer. These requirements do not apply to tax-exempt
money funds such as Tax-Exempt Money Market Fund.
Money Market Fund
INVESTMENT OBJECTIVE. Money Market Fund has an investment objective of
maximum current income consistent with preservation of capital and maintenance
of liquidity.
INVESTMENT POLICIES AND TECHNIQUES. Money Market Fund may invest in any
combination of the money market securities described below, and it may invest in
repurchase agreements with respect to such securities. See "Special Investment
Methods and Risk Factors--Repurchase Agreements."
U.S. Government Securities--These obligations are issued or guaranteed as to
principal and interest by the U.S. Government or one of its agencies or
instrumentalities. U.S. Government securities are more fully described below.
See "Investment Objectives and Policies--U.S. Government Money Market Fund."
Foreign Government Obligations--Money Market Fund may invest in U.S. dollar
denominated obligations issued or guaranteed by one or more foreign governments
or any of their political subdivisions, agencies or instrumentalities that are
determined by the Adviser to be of comparable quality to the other obligations
in which the Fund may invest. Such securities also include debt obligations of
supranational
6
<PAGE>
entities. Supranational entities include international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank. The percentage of Money
Market Fund's assets invested in securities issued by foreign governments will
vary depending upon the relative yields of such securities, the economic and
financial markets of the countries in which the investments are made, and the
interest rate climate of such countries.
Commercial Paper--Investments in commercial paper are limited to direct
obligations issued by domestic and foreign entities which, at the time of their
purchase, are Eligible Securities. Commercial paper in which Money Market Fund
invests includes variable amount master demand notes, which are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payees of such notes, whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. Money
Market Fund may also invest in asset-backed commercial paper. This type of
commercial paper is issued by an entity which does not have a corporate purpose
other than that of financing a specific asset or pool of assets with some common
characteristics. Assets include, for example, loans or retail and trade
receivables. Although payment of principal and interest on asset-backed
securities is generally dependent upon the cash flows generated by the assets
backing the securities, the asset-backed commercial paper purchased by Money
Market Fund will generally contain elements of credit support.
Bank Obligations--Money Market Fund will invest in certificates of deposit,
bank notes, time deposits and bankers' acceptances issued by domestic banks,
foreign branches of domestic banks, foreign subsidiaries of domestic banks, and
domestic and foreign branches of foreign banks. See "Risks of Investing in
Foreign Securities," below. Certificates of deposit are certificates evidencing
the obligation of a bank to repay funds deposited with it for a specified period
of time. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits are not transferable and are therefore illiquid prior to their
maturity. The Fund will not invest more than 10% of its net assets in time
deposits and other illiquid securities. See "Special Investment
Methods--Illiquid Securities." Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and of the drawer to
pay the face amount of the instrument upon maturity. Certificates of deposit,
bank notes, time deposits and bankers' acceptances issued by foreign branches of
domestic banks, foreign subsidiaries of domestic banks and foreign branches of
foreign banks will not benefit from insurance from the Bank Insurance Fund or
the Savings Association Insurance Fund administered by the Federal Deposit
Insurance Corporation.
Participation Interests--Money Market Fund may purchase from banks and
securities dealers participation interests in securities in which the Fund may
invest. A participation interest gives the Fund an undivided interest in the
security in the proportion that the Fund's participation interest bears to the
total principal amount of the security. These instruments may have fixed,
floating or variable rates of interest, with remaining maturities of one year or
less. If the participation interest is unrated, or has been given a rating below
that which is permissible for purchase by the Fund, the participation interest
will be backed by an irrevocable letter of credit or guarantee of a bank, or the
payment obligation otherwise will be collateralized by U.S. Government
securities, or, in the case of unrated participation interests, the Adviser must
have determined that the instrument is of comparable quality to those
instruments in which the Fund may invest. For certain participation interests,
the Fund will have the right to demand payment, on not more than seven days'
notice, for all or any part of the Fund's participation interest in the
security, plus accrued interest. As to
7
<PAGE>
these instruments, the Fund intends to exercise its right to demand payment only
upon a default under the terms of the security, as needed to provide liquidity
to meet redemptions, or to maintain or improve the quality of its investment
portfolio. The Fund will not invest more than 10% of its net assets in
participation interests that do not have this demand feature and in other
illiquid securities. See "Special Investment Methods--Illiquid Securities."
Corporate Debt--Money Market Fund may invest in non-convertible corporate
debt securities of domestic and foreign entities (for example, bonds and
debentures) with no more than 397 calendar days remaining to maturity, provided
such obligations are Eligible Securities. Corporate debt securities with a
remaining maturity of 397 calendar days or less tend to be liquid and are traded
as money market securities. Such issues tend to have greater liquidity and
considerably less market value fluctuations than longer term issues.
Risks of Investing in Foreign Securities--Money Market Fund's portfolio may
contain securities issued by foreign governments, or any of their political
subdivisions, agencies or instrumentalities, and by foreign branches of domestic
banks, foreign subsidiaries of domestic banks, domestic and foreign branches of
foreign banks, and commercial paper issued by foreign issuers. As a result, the
Fund will be subject to additional investment risks with respect to such
securities. The issuers of some of these securities, such as bank obligations,
may be subject to less stringent or different regulation than are U.S. issuers.
In addition, there may be less publicly available information about a non-U.S.
issuer, and non-U.S. issuers are not subject to uniform accounting and financial
reporting standards, practices and requirements comparable to those applicable
to U.S. issuers. Additional risks include possible adverse political and
economic developments, and possible adoption of governmental restrictions which
might adversely affect the payment of principal and interest on the foreign
securities or restrict the payment of principal and interest to investors
located outside the country of the issuer.
U.S. Government Money Market Fund
INVESTMENT OBJECTIVE. U.S. Government Money Market Fund has an investment
objective of maximum current income consistent with preservation of capital and
maintenance of liquidity.
INVESTMENT POLICIES AND TECHNIQUES. U.S. Government Money Market Fund may
invest in U.S. Government securities, as described below, and it may invest in
repurchase agreements with respect to such securities. See "Special Investment
Methods and Risk Factors--Repurchase Agreements."
U.S. Government Securities--U.S. Government securities are obligations
issued or guaranteed as to payment of principal and interest by the U.S.
Government or its agencies or instrumentalities. These securities include direct
obligations of the U.S. Treasury, such as U.S. Treasury bills, notes and bonds,
and obligations of U.S. Government agencies or instrumentalities, including, but
not limited to, Federal Home Loan Banks, the Farmers Home Administration,
Federal Farm Credit Banks, the Federal National Mortgage Association, the
Government National Mortgage Association, the Federal Home Loan Mortgage
Corporation, the Financing Corporation and the Student Loan Marketing
Association. Obligations of U.S. Government agencies or instrumentalities are
backed in a variety of ways by the U.S. Government or its agencies or
instrumentalities. Some of these obligations, such as Government National
Mortgage Association mortgage-backed securities, are backed by the full faith
and credit of the U.S. Treasury. Others, such as those of the Federal Home Loan
Banks, are backed by the right of the issuer to borrow from the Treasury. Still
others, such as those issued by the Federal National Mortgage Association, are
backed by the discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality. Finally, obligations
8
<PAGE>
of other agencies or instrumentalities, such as the Student Loan Marketing
Association, are backed by the credit of the agency or instrumentality issuing
the obligations.
Tax-Exempt Money Market Fund
INVESTMENT OBJECTIVE. Tax-Exempt Money Market Fund's investment objective
is to obtain a high level of current income exempt from federal income taxes,
consistent with the preservation of capital and the maintenance of liquidity.
INVESTMENT POLICIES AND TECHNIQUES. Tax-Exempt Money Market Fund pursues
its investment objective by investing at least 80% of its total assets, under
normal circumstances, in high quality Tax-Exempt Securities (as defined below),
the income from which is not includable in federal gross income and is not an
item of tax preference for purposes of the federal alternative minimum tax.
(Income from Tax-Exempt Securities is, however, includable in the adjusted
current earnings of corporations for purposes of determining their alternative
minimum taxable income.) All Tax-Exempt Securities in which the Fund invests
will be, at the time of purchase, Eligible Securities, as discussed above.
The balance of the Fund's total assets in an amount, under normal
circumstances, not to exceed 20% of the value of the Fund's total assets, may be
invested in any combination of the taxable money market securities set forth
above under "Money Market Fund--Investment Policies and Techniques" (subject to
the Fund's limitation on investments in foreign securities set forth below under
"Investment Restrictions") and in Tax-Exempt Securities the income on which is
an item of tax preference for purposes of the federal alternative minimum tax.
The circumstances in which the Fund will invest in taxable securities include,
but are not limited to, (a) pending investment of proceeds of the sale of Fund
shares or of Fund securities, (b) pending settlement of purchase of Fund
securities, and (c) maintaining liquidity to satisfy anticipated redemption
requests.
For defensive purposes, the Fund may temporarily invest more than 20% of the
value of its total assets in taxable money market securities and Tax-Exempt
Securities the income on which is an item of tax preference for purposes of the
federal alternative minimum tax when, in the opinion of the Adviser, it is
advisable to do so in light of prevailing market and economic conditions for
purposes of preserving liquidity or capital.
Tax-Exempt Money Market Fund may invest in repurchase agreements with
respect to the securities in which the Fund may invest, may purchase and sell
securities on a when-issued or forward commitment basis and may purchase
Tax-Exempt Securities which provide for the right to resell them at an agreed
upon price or yield within a specified period of time prior to the maturity date
of such obligations. See "Special Investment Methods and Risk Factors."
Tax-Exempt Securities--Tax-Exempt Securities include obligations issued by
or on behalf of states, territories and possessions of the United States, the
District of Columbia and their political subdivisions, agencies or
instrumentalities, the interest on which, in the opinion of bond counsel, is not
includable in federal gross income. Tax-Exempt Securities are issued to obtain
funds for various public purposes, including the construction or improvement of
a wide range of public facilities such as bridges, docks and wharves, highways,
hospitals, housing, jails, mass transportation, parks, public buildings,
recreational facilities, school facilities, streets, and water and sewer
systems. Other public purposes for which Tax-Exempt Securities may be issued
include the refunding of outstanding obligations, the anticipation of taxes or
federal or state grants or aids, the payment of judgments, community
redevelopment, district heating or cooling facilities, the purchase of street
maintenance and firefighting equipment, and any authorized corporate purpose of
the issuer. In addition, certain types of industrial development or private
activity bonds have been or may be
9
<PAGE>
issued by or on behalf of public corporations to finance privately owned and/or
operated housing facilities, hospitals, nursing homes, air or water pollution
control facilities and certain local facilities for water supply, gas,
electricity or sewage or solid waste disposal. Such obligations are included
within the term Tax-Exempt Securities if the interest payable thereon, in the
opinion of bond counsel, is not includable in federal gross income. Other types
of industrial development or private activity bonds, the proceeds of which are
used for the construction, equipment, repair or improvement of privately owned
and/or operated industrial, commercial or office facilities, may constitute
Tax-Exempt Securities, although current federal income tax laws place
substantial limitations on the size and volume of such issues.
The two principal classifications of Tax-Exempt Securities are general
obligation securities and limited obligation (or revenue) securities. General
obligation securities are obligations involving the credit of an issuer which
are secured by its taxing power without limitation as to rate or amount and are
payable from the issuer's general unrestricted revenues and not from any
particular fund or revenue source. The characteristics and methods of
enforcement of general obligation securities vary according to the law
applicable to the particular issuer. Limited obligation securities are payable
only from the revenues derived from a particular facility or class of
facilities, from a specific limited tax or, in some cases, from the proceeds of
a specific revenue source, such as the user of the facility. Industrial
development or private activity bonds are in most cases limited obligation bonds
payable solely from specific revenues of the project to be financed, which are
pledged to their payment. The credit quality of industrial development or
private activity bonds is usually directly related to the credit standing of the
owner and/or user of the facilities financed (or the credit standing of a
third-party guarantor or other credit enhancement participant, if any).
Tax-Exempt Securities include municipal bonds, notes and commercial paper.
Municipal bonds are debt obligations issued to obtain funds for various public
purposes which have maturities at the time of issuance generally ranging from
one to twenty years or more. Municipal notes are short-term obligations,
generally with maturities ranging from six months to three years. Municipal
notes include grant anticipation notes, tax anticipation notes, revenue
anticipation notes, bond anticipation notes and construction loan notes.
Municipal commercial paper refers to short-term obligations with maturities of
365 days or less issued by state and local governments to finance seasonal
working capital needs or as short-term financing in anticipation of longer-term
financing.
Tax-Exempt Money Market Fund does not intend to invest more than 25% of its
total assets in securities of governmental units located in any one state,
territory or possession of the United States. In addition, the Fund will not
invest more than 25% of its total assets in limited obligation bonds payable
only from revenues derived from facilities or projects within a single industry,
provided that bonds that have been refunded with escrowed U.S. Government
securities will not be subject to this limitation. As to utility companies, gas,
electric, water and telephone companies will be considered as separate
industries.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities, some of which have been enacted. Additional
proposals may be introduced in the future which, if enacted, could affect the
availability of municipal securities for investment by the Fund and the value of
the Fund's portfolio. In such event, the Fund may discontinue the issuance of
shares to new investors and it may reevaluate its investment objective and
policies and submit possible changes in the structure of the Fund for the
approval of its shareholders.
10
<PAGE>
SPECIAL INVESTMENT METHODS AND RISK FACTORS
Repurchase Agreements
Each Fund may enter into repurchase agreements with respect to the
securities in which it may invest. A repurchase agreement involves the purchase
by a Fund of securities with the condition that after a stated period of time
the original seller (a member bank of the Federal Reserve System or a recognized
securities dealer) will buy back the same securities ("collateral") at a
predetermined price or yield. Repurchase agreements involve certain risks not
associated with direct investments in securities. In the event the original
seller defaults on its obligation to repurchase, as a result of its bankruptcy
or otherwise, the Fund will seek to sell the collateral, which action could
involve costs or delays. In such case, the Fund's ability to dispose of the
collateral to recover such investment may be restricted or delayed. While
collateral will at all times be maintained in an amount equal to the repurchase
price under the agreement (including accrued interest due thereunder), to the
extent proceeds from the sale of collateral were less than the repurchase price,
a Fund would suffer a loss. Repurchase agreements maturing in more than seven
days are considered illiquid and subject to each Fund's restriction on investing
in illiquid securities. See "--Illiquid Securities" below. Interest earned by a
Fund from repurchase agreements with respect to Tax-Exempt Securities will not
be treated for federal income tax purposes as tax-exempt interest. For
additional information concerning repurchase agreements, see "Investment
Objectives, Policies and Restrictions" in the Statement of Additional
Information.
Borrowing
Each Fund may borrow money from banks for temporary or emergency purposes in
an amount up to one-third of the value of its total assets in order to meet
redemption requests without immediately selling any money market instruments.
If, for any reason, the current value of any Fund's total assets falls below an
amount equal to three times the amount of its indebtedness from money borrowed,
such Fund will, within three days, reduce its indebtedness to the extent
necessary. To do this, the Fund may have to sell a portion of its investments at
a time when it may be disadvantageous to do so. Interest paid by a Fund on
borrowed funds would decrease the net earnings of that Fund. None of the Funds
will purchase portfolio securities while outstanding borrowings (other than
reverse repurchase agreements) exceed 5% of the value of the Fund's total
assets. The Funds may mortgage, pledge or hypothecate their assets in an amount
not exceeding 10%, with respect to Money Market Fund and U.S. Government Money
Market Fund, or 20% with respect to Tax-Exempt Money Market Fund, of the value
of their total assets to secure temporary or emergency borrowing. The policies
set forth in this paragraph are fundamental and may not be changed without the
approval of a majority of a Fund's shares.
The Funds also may borrow through reverse repurchase agreements with banks
and securities dealers. However, the Funds have not entered into reverse
repurchase agreements during the past fiscal year and have no current intention
of entering into such agreements in the future. See "Investment Objectives and
Policies--Reverse Repurchase Agreements" in the Statement of Additional
Information.
When-Issued Securities
Tax-Exempt Money Market Fund may purchase and sell Tax-Exempt Securities on
a when-issued or forward commitment basis. When-issued and forward commitment
transactions arise when securities are purchased or sold with payment and
delivery beyond the regular settlement date. (When-issued transactions normally
settle within 30-45 days.) On such transactions the payment obligation and the
interest rate are fixed at the time the buyer enters into the commitment. The
commitment to purchase securities on a when-issued or forward commitment basis
may involve an element of risk because the value of the securities is
11
<PAGE>
subject to market fluctuation. No interest accrues to the purchaser prior to the
settlement of the transaction and at the time of delivery the market value may
be less than cost. Although the Fund will only make commitments to purchase such
obligations with the intention of actually acquiring the securities, the Fund
may sell these securities before the settlement date. If the Fund sells a
when-issued or forward commitment security before the settlement date, any gain
or loss would not be exempt from federal income tax. For purposes of Tax-Exempt
Money Market Fund's investment policies, the purchase of securities with a
settlement date occurring on the Public Securities Association approved
settlement date is considered a normal delivery and not a when-issued or forward
commitment purchase. For additional information concerning when-issued and
forward commitment transactions, see "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information.
Puts
Tax-Exempt Money Market Fund may purchase Tax-Exempt Securities which
provide for the right to resell them to the issuer, a bank or a broker-dealer at
a specified price within a specified period of time prior to the maturity date
of such obligations. Such a right to resell, which is commonly known as a "put,"
may be sold, transferred or assigned only with the underlying security or
securities. The Fund may pay a higher price for a Tax-Exempt Security with a put
than would be paid for the same security without a put. The primary purpose of
purchasing Tax-Exempt Securities with puts is to permit the Fund to be as fully
invested as practicable in Tax-Exempt Securities while at the same time
providing the Fund with appropriate liquidity. For additional information
concerning puts, see "Investment Objectives, Policies and Restrictions" in the
Statement of Additional Information.
Variable and Floating Rate Obligations
Certain of the obligations in which the Funds may invest may be variable or
floating rate obligations in which the interest rate is adjusted either at
predesignated periodic intervals (variable rate) or when there is a change in
the index rate of interest on which the interest rate payable on the obligation
is based (floating rate). Variable or floating rate obligations may include a
demand feature which is a put that entitles the holder to receive the principal
amount of the underlying security or securities and which may be exercised
either at any time on no more than 30 days' notice or at specified intervals not
exceeding 397 calendar days on no more than 30 days' notice. Variable or
floating rate instruments with a demand feature enable the Funds to purchase
instruments with a stated maturity in excess of 397 calendar days. The Funds
determine the maturity of variable or floating rate instruments in accordance
with Securities and Exchange Commission rules which allow the Funds to consider
certain of such instruments as having maturities that are less than the maturity
date on the face of the instrument.
Illiquid Securities
Each Fund may invest up to 10% of its net assets in illiquid securities.
Illiquid securities may offer a higher yield than securities which are more
readily marketable, but they may not always be marketable on advantageous terms.
This investment restriction is nonfundamental, which means that it may be
changed without shareholder approval. However, the Securities and Exchange
Commission currently limits a money market fund's investments in illiquid
securities to 10% of net assets.
The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts than does the sale of securities
eligible for trading on national securities exchanges or in the over-the-counter
markets. A Fund may be restricted in its ability to sell such securities at a
time when the Adviser deems it advisable to do so. In addition, in order to meet
redemption requests, a Fund may have to sell other assets, rather than such
illiquid or restricted securities, at a time which is not advantageous.
12
<PAGE>
"Restricted securities" are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933
(the "1933 Act"). Such securities generally have been considered illiquid, since
they may be resold only subject to statutory restrictions and delays or if
registered under the 1933 Act. In 1990, however, the SEC adopted Rule 144A under
the 1933 Act, which provides a safe harbor exemption from the registration
requirements of the 1933 Act for resales of restricted securities to "qualified
institutional buyers," as defined in the rule. The result of this rule has been
the development of a more liquid and efficient institutional resale market for
restricted securities. Thus, restricted securities are no longer necessarily
illiquid. The Funds are not subject to any limitation on their ability to invest
in securities simply because such securities are restricted. The Funds may
therefore invest in Rule 144A securities and treat them as liquid when they have
been determined to be liquid by the Board of Directors of the Company or by the
Adviser subject to the oversight of and pursuant to procedures adopted by the
Board of Directors. See "Investment Objectives, Policies and
Restrictions--Illiquid Securities" in the Statement of Additional Information.
Similar determinations may be made with respect to commercial paper issued in
reliance upon the so-called "private placement" exemption from registration
under Section 4(2) of the 1933 Act. Money Market Fund currently invests a
significant portion of its assets in this type of commercial paper.
Investment Restrictions
Each Fund has adopted certain fundamental and nonfundamental investment
restrictions in addition to those set forth above. As a fundamental investment
restriction which may not be changed without shareholder approval, no Fund will
invest 25% or more of its total assets in any one industry. (This restriction
does not apply to securities of the U.S. Government or its agencies and
instrumentalities and repurchase agreements relating thereto, to Tax-Exempt
Securities, or to obligations of United States banks, domestic branches thereof
and United States branches of foreign banks subject to United States regulation.
As to utility companies, gas, electric, telephone, telegraph, satellite and
microwave communications companies are considered separate industries.) In
addition, the following are nonfundamental investment restrictions which may be
changed at any time without shareholder approval: (1) No Fund will invest more
than 5% of its total assets in the securities of issuers which, with their
predecessors, have a record of less than three years' continuous operation. (2)
No Fund will purchase the securities of other investment companies except as
part of a merger, consolidation or acquisition of assets, provided that
Tax-Exempt Money Market Fund may invest up to 5% of its total assets in the
securities of other investment companies. (3) Tax-Exempt Money Market Fund may
not invest more than 5% of the value of its total assets in foreign securities.
A list of each Fund's fundamental and nonfundamental investment restrictions is
set forth in the Statement of Additional Information.
Except for each Fund's policy regarding borrowing, if a percentage
restriction set forth under "Investment Objectives and Policies" or under
"Special Investment Methods and Risk Factors" is adhered to at the time of an
investment, a later increase or decrease in percentage resulting from changes in
values or assets will not constitute a violation of such restriction.
MANAGEMENT
Board of Directors
The Company's Board of Directors has the primary responsibility for
overseeing the overall management of the Company and electing its officers.
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<PAGE>
Investment Adviser
Piper Capital Management Incorporated (the "Adviser") has been retained
under an Investment Advisory and Management Agreement with the Company to act as
the Funds' investment adviser subject to the authority of the Board of
Directors.
In addition to acting as the investment adviser for the other series of the
Company, the Adviser also serves as investment adviser to a number of other
open-end and closed-end investment companies and to various other concerns,
including pension and profit sharing funds, corporate funds and individuals. As
of November 1, 1996, the Adviser rendered investment advice regarding
approximately $9 billion of assets. The Adviser is a wholly owned subsidiary of
Piper Jaffray Companies Inc., a publicly held corporation which is engaged
through its subsidiaries in various aspects of the financial services industry.
The address of the Adviser is Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402.
The Adviser furnishes each of the Funds with investment advice and
supervises the management and investment programs of the Funds. The Adviser
furnishes at its own expense all necessary administrative services, office
space, equipment and clerical personnel for servicing the investments of the
Funds. The Adviser also provides investment advisory facilities and executive
and supervisory personnel for managing the investments and effecting the
portfolio transactions of the Funds. In addition, the Adviser pays the salaries
and fees of all officers and directors of the Company who are affiliated with
the Adviser.
Under the Investment Advisory and Management Agreement, the Funds pay the
Adviser monthly advisory fees equal on an annual basis to a certain percentage
of each Fund's average net assets as set forth in the following table.
<TABLE>
<CAPTION>
Annual Advisory Fee
as Percentage of
Average Net Asset Values of the Fund Average Net Assets
- ------------------------------------------------------------------------- ---------------------
<S> <C>
On the first $500,000,000................................................ .50%
On the next $250,000,000................................................. .425 %
On the next $250,000,000................................................. .375 %
On the next $500,000,000................................................. .35%
On the next $500,000,000................................................. .325 %
On the next $500,000,000................................................. .30%
On average assets of over $2,500,000,000................................. .275 %
</TABLE>
Transfer Agent, Dividend Disbursing Agent and Custodian
Investors Fiduciary Trust Company ("IFTC"), 127 West Tenth Street, Kansas
City, Missouri 64105, (800) 874-6205, serves as Custodian for the Funds'
portfolio securities and cash and as Transfer Agent and Dividend Disbursing
Agent for the Funds.
The Company has entered into Shareholder Account Servicing Agreements with
the Distributor and Piper Trust Company, an affiliate of the Distributor and the
Adviser. Under these agreements the Distributor and Piper Trust Company provide
certain transfer agent and dividend disbursing agent services for certain
shareholder accounts. For more information, see "Investment Advisory and Other
Services--Transfer Agent and Dividend Disbursing Agent" in the Statement of
Additional Information.
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<PAGE>
Portfolio Transactions and Brokerage Commissions
Portfolio transactions for the Funds are generally effected on a net basis
without payment of brokerage commissions. The Adviser may consider a number of
factors in determining which brokers to use for the Funds' portfolio
transactions. These factors, which are more fully discussed in the Statement of
Additional Information, include, but are not limited to, research services,
favorableness of the net price and quality of services and execution. A broker's
sales of shares of any series of the Company may also be considered a factor if
the Adviser is satisfied that a Fund would receive from that broker the most
favorable price and execution then available for a transaction. Portfolio
transactions for the Funds will generally be with the issuer or with dealers
acting on a principal basis. In the event, however, that any portfolio
transactions are executed on an agency basis, these transactions may be effected
through the Distributor. For more information, see "Portfolio Transactions and
Allocation of Brokerage" in the Statement of Additional Information.
DISTRIBUTION OF FUND SHARES
Piper Jaffray acts as the principal distributor of the Funds' shares. The
Company has adopted a Distribution Plan (the "Plan") as required by Rule 12b-1
under the 1940 Act. Under the Plan, the Distributor is paid a total fee in
connection with the servicing of each Fund's shareholder accounts and in
connection with distribution-related services provided to each Fund. This fee is
calculated daily and paid quarterly at an annual rate equal to .30% of the
average daily net assets of each Fund.
A portion of the total fee equal to .05% of each Fund's average daily net
assets is categorized as a distribution fee intended to compensate the
Distributor for its expenses incurred in connection with the sale of Fund
shares. The remaining portion of the fee, equal to .25% of each Fund's average
daily net assets, is categorized as a servicing fee intended to compensate the
Distributor for ongoing servicing and/or maintenance of shareholder accounts.
The Distributor has voluntarily agreed to limit the total fee payable under the
Plan to .20% of each Fund's average daily net assets. This limitation may be
revised or terminated at any time after fiscal 1997 year end. Payments made
under the Plan are not tied exclusively to expenses actually incurred by the
Distributor and may exceed such expenses. The Adviser and the Distributor may,
out of their own assets, pay for certain expenses incurred in connection with
the distribution of shares of the Funds. In particular, the Adviser may make
payments out of its own assets to Piper Jaffray Investment Executives and other
broker dealers in connection with their sales of shares of the Funds. See "How
to Purchase Shares-- Purchase Price." Further information regarding the Plan is
contained in the Statement of Additional Information.
The Distributor uses all or a portion of its servicing fee to make payments
to Investment Executives of the Distributor and broker-dealers which have
entered into sales agreements with the Distributor. If shares of a Fund are sold
by a representative of a broker-dealer other than the Distributor, the
broker-dealer is paid .20% of the average daily net assets of the Fund
attributable to shares sold by the broker-dealer's representative. If shares of
a Fund are sold by an Investment Executive of the Distributor, compensation is
paid to the Investment Executive in the manner set forth in a written agreement,
in an amount not to exceed .20% of the average daily net assets of the Fund
attributable to shares sold by the Investment Executive.
15
<PAGE>
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SHAREHOLDER GUIDE TO INVESTING
HOW TO PURCHASE SHARES
General
The Funds' shares may be purchased at the public offering price from the
Distributor and from other broker-dealers who have sales agreements with the
Distributor. The address of the Distributor is that of the Funds. The
Distributor reserves the right to reject any purchase order. You should be aware
that, because the Funds do not issue stock certificates, Fund shares must be
kept in an account with the Distributor or with IFTC. All investments must be
arranged through your Piper Jaffray Investment Executive or other broker-dealer.
Purchase Price
You may purchase shares of the Funds at the net asset value per share next
calculated after receipt of your order by your Piper Jaffray Investment
Executive or other broker-dealer. Each Fund's net asset value is normally
expected to be $1.00 per share. For more information on how the value of Fund
shares is determined, see "Valuation of Shares."
The Distributor will make certain payments to its Investment Executives and
to broker-dealers in connection with their sales of Fund shares. See
"Distribution of Fund Shares" above. In addition, the Distributor or the
Adviser, at their own expense, provide promotional incentives to Investment
Executives of the Distributor and to broker-dealers who have sales agreements
with the Distributor in connection with sales of shares of the Funds, other
series of the Company and other mutual funds for which the Adviser acts as
investment adviser. In some instances, these incentives may be made available
only to certain Investment Executives or broker-dealers who have sold or may
sell significant amounts of such shares. The incentives may include payment for
travel expenses, including lodging at luxury resorts, incurred in connection
with sales seminars.
Minimum Investments
A minimum initial investment of $250 is required for each Fund. There is no
minimum for subsequent investments. The Distributor, in its discretion, may
waive the minimum. This minimum does not apply to the Cash Management Program
described below.
CASH MANAGEMENT PROGRAM
You may purchase shares of the Funds through your Piper Automatic Transfer
(PAT) account. The PAT account is a conventional securities account that may be
used to buy and sell securities, paying all customary transactional fees
incurred in the use of a securities account. Available cash in a PAT account is
automatically invested in shares of the Fund you specify. Shares of the Fund are
redeemed automatically at their net asset value as cash is needed to pay debits
in your account. Operational details of the PAT account are covered by your PAT
account agreement, not this Prospectus. Other broker-dealers may offer similar
programs in the future. These programs will be governed and explained by that
brokerage firm's account agreements, brochures or other documents.
HOW TO REDEEM SHARES
Normal Redemption
You may redeem all or a portion of your shares on any day that a Fund values
its shares (Please refer to "Valuation of Shares" below for more information).
Your shares will be redeemed at the net asset value next calculated after
receipt of your instructions by your Piper Jaffray Investment Executive or other
broker-dealer in good form as explained below. Each Fund's net asset value is
normally expected to be $1.00 per share.
PIPER JAFFRAY INC. ACCOUNTS. To redeem your shares, please contact your
Piper Jaffray Investment Executive with an oral request to redeem your shares.
16
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
OTHER BROKER-DEALER ACCOUNTS. To redeem your shares, you may either contact
your broker-dealer with an oral request or send a written request directly to
the Funds' transfer agent, IFTC. This request should contain: the dollar amount
or number of shares to be redeemed, your Fund account number and either a social
security or tax identification number (as applicable). You should sign your
request in exactly the same way the account is registered. If there is more than
one owner of the shares, all owners must sign. A signature guarantee is required
for redemptions over $25,000. Please contact IFTC or refer to the Statement of
Additional Information for more details.
Payment of Redemption Proceeds
After your shares have been redeemed, proceeds will normally be paid on the
next business day. In no event will payment be made more than seven days after
receipt of your order in good form. However, payment may be postponed or the
right of redemption suspended for more than seven days under unusual
circumstances, such as when trading is not taking place on the New York Stock
Exchange. Payment of redemption proceeds may also be delayed if the shares to be
redeemed were purchased by a check drawn on a bank which is not a member of the
Federal Reserve System, until such check has cleared the banking system
(normally up to 15 days from the purchase date).
Involuntary Redemption
Each Fund reserves the right to redeem your account at any time the net
asset value of the account falls below $200 as the result of a redemption or
exchange request. You will be notified in writing prior to any such redemption
and will be allowed 30 days to make additional investments before the redemption
is processed.
SHAREHOLDER SERVICES
Automatic Monthly Investment Program
You may arrange to make additional automated purchases of shares of the
Funds or certain other mutual funds managed by the Adviser. You can
automatically transfer $100 or more per month from your bank, savings and loan
or other financial institution to purchase additional shares. You should contact
your Piper Jaffray Investment Executive or IFTC to obtain authorization forms or
for additional information.
Exchange Privilege
If your investment goals change, you may prefer a fund with a different
objective. If you are considering an exchange into another mutual fund managed
by the Adviser, you should carefully read the appropriate prospectus for
additional information about that fund. A prospectus may be obtained through
your Piper Jaffray Investment Executive, your broker-dealer or the Distributor.
To exchange your shares, please contact your Piper Jaffray Investment Executive,
your broker-dealer or IFTC.
You may exchange your shares for shares of any other mutual fund managed by
the Adviser. All exchanges are subject to the eligibility of share purchases in
your state as well as the minimum investment requirements and any other
applicable terms in the prospectus of the fund being acquired. Exchanges between
the money market funds covered by this Prospectus are made at net asset value.
Exchanges into another fund which imposes a sales charge will generally require
payment of the sales charge, except in some cases where you originally purchased
shares subject to a sales charge, and then exchanged into a money market fund.
In all cases, if the exchange purchase would generate a higher sales charge than
the original purchase, you will be required to pay a sales charge equal to the
difference. If you exchange less than all of your shares of a fund, shares which
may be exchanged at net asset value without payment of any sales charge will
considered to be exchanged first.
The Company reserves the right to change or discontinue the exchange
privilege, or any aspect of the privilege, upon 60 days' written notice.
17
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
Telephone Transaction Privileges
PIPER JAFFRAY INC. ACCOUNTS. If you hold your shares in a Piper Jaffray
account, you may telephone your Investment Executive to execute any transaction
or to apply for many shareholder services. In some cases, you may be required to
complete a written application.
OTHER BROKER-DEALER ACCOUNTS. If you hold your shares in an account with
your broker-dealer or at IFTC, you may authorize telephone privileges by
completing the Account Application and Services Form. Please contact your
broker-dealer or IFTC (800-874-6205) for an application or for more details. The
Funds will employ reasonable procedures to confirm that a request is genuine,
including requiring that payment be made only to the address of record or the
bank account designated on the Account Application and Services Form and
requiring certain means of telephonic identification. A Fund employing such
procedures will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. If a Fund does not employ
such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone transactions. It may be difficult to reach the Funds by
telephone during periods when market or economic conditions lead to an unusually
large volume of telephone requests. If you cannot reach the Funds by telephone,
you should contact your broker-dealer or issue written instructions to IFTC at
the address set forth herein. See "Management--Transfer Agent, Dividend
Disbursing Agent and Custodian." The Funds reserve the right to suspend or
terminate their telephone services at any time without notice.
Account Protection
If your Fund shares are held in a Piper Jaffray account, they are protected
in the unlikely event that Piper Jaffray were to fail financially. Piper Jaffray
is a member of the Securities Investor Protection Corporation ("SIPC") whose
primary purpose is to protect the customers of its members up to $500,000
($100,000 on claims for cash) in the event of a member's liquidation.
In addition to the $500,000 SIPC protection, Piper Jaffray clients have
additional protection provided by Aetna Casualty and Surety Company. Your
investments in the Funds held in a Piper Jaffray PRIME or PAT Plus account are
protected up to $49.5 million beyond that provided by SIPC for total account
protection of $50 million. Investments held in all other Piper Jaffray accounts
are protected up to $24.5 million beyond that provided by SIPC for total account
protection of $25 million. This protection does NOT cover any declines in the
net asset value of Fund shares.
Confirmation of Transactions and Reporting of Other Information
Each time there is a transaction involving your Fund shares such as a
purchase, redemption or dividend reinvestment, it will be reported to you on
your next regular account statement. This information will be provided to you
from either Piper Jaffray, your broker-dealer or IFTC. In addition, you will
receive various IRS forms after the first of each year detailing important tax
information and each Fund is required to supply annual and semiannual reports
that list securities held by the Fund and include the current financial
statements of the Fund.
HOUSEHOLDING. If you have multiple accounts with Piper Jaffray, you may
receive some of the above information in combined mailings. This will not only
help reduce Fund expenses, it will also help the environment by saving paper.
Please contact your Piper Jaffray Investment Executive for more information.
DIVIDENDS AND DISTRIBUTIONS
The net investment income of each Fund will be declared as dividends daily
and will be reinvested in additional shares of the Fund monthly. Net investment
income for Saturdays, Sundays and other days on which the New York Stock
Exchange (the "Exchange") is closed will be declared as dividends on the prior
business day. Each daily dividend is payable to Fund shareholders of record at
the time of its declaration. Net realized capital gains of each Fund, if any,
will be declared and reinvested in additional Fund shares at least annually.
18
<PAGE>
VALUATION OF SHARES
The Funds compute their net asset value (or price per share) on each day the
Exchange is open for business. The calculation is made as of the regular close
of the Exchange (currently 4:00 p.m., New York time) after the Funds have
declared any applicable dividends.
It is the policy of each Fund to attempt to maintain a net asset value of
$1.00 per share. The securities held by the Funds are valued on the basis of
amortized cost, in accordance with the Funds' election to operate under the
provisions of Rule 2a-7 under the 1940 Act. The amortized cost method of
valuation involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by amortized cost, is higher or lower than the
price the Fund would receive if it sold the instrument.
Under the direction of the Board of Directors, procedures have been adopted
to monitor and stabilize each Fund's price per share. Calculations are made to
compare the value of each Fund's portfolio valued at amortized cost with market
values. In the event that a deviation of one-half of 1% or more exists between
the $1.00 per share net asset value for a Fund and the net asset value
calculated by reference to market quotations, or if there is any other deviation
which the Board of Directors believes would result in a material dilution to
shareholders or purchasers, the Board of Directors will promptly consider what
action, if any, should be initiated. See "Net Asset Value and Public Offering
Price" in the Statement of Additional Information.
TAX STATUS
Taxes
Each Fund is treated as a separate corporation for federal income tax
purposes under the Internal Revenue Code of 1986, as amended (the "Code").
Therefore, each Fund is treated separately in determining whether it qualifies
as a regulated investment company under the Code and for purposes of determining
the net ordinary income (or loss), net realized capital gains (or losses) and
distributions necessary to relieve such Fund of any federal income tax
liability. Each Fund qualified as a regulated investment company during its last
taxable year and each intends to so qualify during the current taxable year. If
so qualified, a Fund will not be liable for federal income taxes to the extent
it distributes its taxable income to shareholders.
The following discussions relate to federal income taxation as of the date
of this Prospectus. For a more detailed discussion of the federal income tax
consequences of investing in shares of the Funds, see "Taxation" in the
Statement of Additional Information. Before investing in any of the Funds, you
should consult your tax adviser regarding the consequences of your local and
state tax laws.
MONEY MARKET FUND AND U.S. GOVERNMENT MONEY MARKET FUND. Distributions by
Money Market Fund and U.S. Government Money Market Fund are generally taxable to
shareholders as ordinary income.
Interest income from direct investment by noncorporate taxpayers in United
States Government obligations (but not repurchase agreements) generally is not
subject to state taxation. However, some states attempt to tax mutual fund
dividends attributable to such income. This treatment has been challenged in a
number of lawsuits. Shareholders are encouraged to consult their tax advisers
concerning this matter.
TAX-EXEMPT MONEY MARKET FUND. Tax-Exempt Money Market Fund intends to take
all actions required under the Code to ensure that it may pay "exempt-interest
dividends." If the Fund meets these requirements, distributions of net interest
income from tax-exempt obligations that are designated by the Fund as
exempt-interest dividends will be excludable from the gross income of the Fund's
shareholders. Distributions paid from other interest income will be taxable to
shareholders as ordinary income.
19
<PAGE>
Exempt-interest dividends attributable to interest income on certain tax
exempt obligations issued after August 7, 1986 to finance private activities are
treated as an item of tax preference for purposes of computing the alternative
minimum tax for individuals, estates and trusts. Tax-Exempt Money Market Fund
may invest up to 20% of its total assets in securities which generate interest
which is treated as an item of tax preference. See "Taxation" in the Statement
of Additional Information.
Some states may exclude from taxable income the portion of the dividends
paid by Tax-Exempt Money Market Fund that is attributable to interest on the
obligations of the state or its political subdivisions. In the case of
shareholders subject to Minnesota income tax, no portion of the dividends paid
by Tax-Exempt Money Market Fund will be exempt from their Minnesota taxable
income. The Fund will provide to shareholders annually information showing the
portion of the dividends they receive that is attributable to interest on the
obligations of each state.
PERFORMANCE COMPARISONS
Advertisements and other sales literature may refer to the Funds' "yield,"
"effective yield," "average annual total return" and "cumulative total return."
In addition, Tax-Exempt Money Market Fund may advertise its "tax equivalent
yield." All such yield and total return quotations are based upon historical
earnings and are not intended to indicate future performance.
The yield of a Fund refers to the income generated by an investment in the
Fund over a seven-day period (which period will be stated in the advertisement).
This income is then annualized. That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
a Fund is assumed to be reinvested. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed reinvestment.
Tax equivalent yield quotations will be calculated by applying the stated
income tax rate only to that portion of Tax-Exempt Money Market Fund's seven-day
yield or effective yield that is exempt from taxation. The stated income tax
rate is subtracted from the number 1 (e.g., 1-28% = 72%) and the tax-exempt
portion of the yield is divided by the difference. The result is then added to
that portion of the Fund's yield, if any, that is not tax-exempt.
Average annual total return is the average annual compounded rate of return
on a hypothetical $1,000 investment made at the beginning of the advertised
period. Cumulative total return is calculated by subtracting a hypothetical
$1,000 payment to a Fund from the redeemable value of such payment at the end of
the advertised period, dividing such difference by $1,000 and multiplying the
quotient by 100. In calculating average annual and cumulative total return, all
dividends are assumed to be reinvested.
For additional information regarding comparative performance information and
the calculation of yield, effective yield, total return, average annual total
return and cumulative total return, see "Performance Comparisons" in the
Statement of Additional Information.
GENERAL INFORMATION
The Company, which was organized under the laws of the State of Minnesota in
1986, is authorized to issue a total of 10 trillion shares of common stock, with
a par value of $.01 per share. Three hundred and ninety billion of these shares
have been authorized to be issued in twelve separate series, as follows: Growth
Fund, Emerging Growth Fund, Growth and Income Fund, Small Company Growth Fund
(formerly Equity Strategy Fund), Balanced Fund, Government Income Fund,
Intermediate Bond Fund (formerly Institutional Government Income Portfolio),
National Tax-Exempt Fund and Minnesota Tax-Exempt Fund, each of
20
<PAGE>
which has ten billion authorized shares, and Money Market Fund, Tax-Exempt Money
Market Fund and U.S. Government Money Market Fund, each of which has one hundred
billion authorized shares.
The Board of Directors is empowered under the Company's Articles of
Incorporation to issue additional series of the Company's common stock without
shareholder approval. In addition, the Board of Directors may, without
shareholder approval, create and issue one or more additional classes of shares
within each Fund, as well as within any series of the Company created in the
future. See "Capital Stock and Ownership of Shares" in the Statement of
Additional Information.
All shares, when issued, will be fully paid and nonassessable and will be
redeemable. All shares have equal voting rights. They can be issued as full or
fractional shares. A fractional share has pro-rata the same kind of rights and
privileges as a full share. The shares possess no preemptive or conversion
rights.
Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the series'
shares. On some issues, such as the election of directors, all shares of the
Company vote together as one series. Cumulative voting is not authorized. This
means that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and, in such
event, the holders of the remaining shares will be unable to elect any
directors.
The Bylaws of the Company provide that shareholder meetings be held only
with such frequency as required under Minnesota law. Minnesota corporation law
requires only that the Board of Directors convene shareholder meetings when it
deems appropriate. In addition, Minnesota law provides that if a regular meeting
of shareholders has not been held during the immediately preceding 15 months, a
shareholder or shareholders holding 3% or more of the voting shares of the
Company may demand a regular meeting of shareholders by written notice given to
the chief executive officer or chief financial officer of the Company. Within 30
days after receipt of the demand, the Board of Directors shall cause a regular
meeting of shareholders to be called, which meeting shall be held no later than
90 days after receipt of the demand, all at the expense of the Company. In
addition, the 1940 Act requires a shareholder vote for all amendments to
fundamental investment policies and restrictions, for all amendments to
investment advisory contracts and for certain amendments to Rule 12b-1
distribution plans.
Pending Legal Proceedings
Complaints have been brought against the Adviser and the Distributor
relating to another series of the Company and to other investment companies for
which the Adviser acts or has acted as investment adviser or subadviser. These
lawsuits do not involve the Funds.
A number of complaints have been brought in federal and state court against
the Institutional Government Income Portfolio ("PJIGX") series of the Company
(such series has been renamed Intermediate Bond Fund), the Adviser, the
Distributor, and certain individuals affiliated or formerly affiliated with the
Adviser and the Distributor. On February 13, 1996, a Settlement Agreement became
effective for the consolidated class action lawsuit, titled In re: PIPER FUNDS
INC. INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO LITIGATION. The Amended
Consolidated Class Action Complaint was filed on October 5, 1994 in the United
States District Court, District of Minnesota, against PJIGX, the Adviser, the
Distributor, William H. Ellis and Edward J. Kohler, and had alleged the making
of materially misleading statements in the prospectus, common law negligent
misrepresentation and breach of fiduciary duty. The Settlement Agreement will
provide approximately $67.5 million, together with interest earned, less certain
disbursements and attorney fees, to class members in payments scheduled over
approximately three years. Such payments will be made by Piper Jaffray Companies
Inc. and the Adviser and will not be an obligation of the Company. A number of
lawsuits and arbitrations brought by some of the investors who requested
exclusion from the settlement class remain pending.
21
<PAGE>
Complaints also have been filed in state and federal court relating to a
number of closed-end investment companies managed by the Adviser and two
open-end investment companies for which the Adviser has acted as subadviser. The
complaints, which ask for rescission of plaintiff shareholders' purchases or
compensatory damages, plus interest, costs and expenses, generally allege, among
other things, certain violations of federal and/or state securities laws,
including the making of materially misleading statements in prospectuses
concerning investment policies and risks. In addition to the Settlement
Agreement discussed above, a settlement agreement has been reached with respect
to a consolidated complaint relating to four closed-end investment companies
managed by the Adviser and agreements-in-principle have been reached to settle
certain other complaints. The Adviser and the Distributor also are subject to
regulatory inquiries related to various funds or assets managed by the Adviser.
See "Pending Litigation" in the Statement of Additional Information.
The Adviser and the Distributor do not believe that the settlements
discussed above, any agreement-in-principle to settle, or any outstanding
complaint, action in arbitration or regulatory inquiry will have a material
adverse effect on their ability to perform under their agreements with the
Company or a material adverse effect on the Funds.
TAX-EXEMPT VS. TAXABLE INCOME
The table below shows the approximate yields that taxable securities must
earn to equal tax-exempt yields under selected 1996 federal income tax brackets.
<TABLE>
<CAPTION>
Equivalent Taxable Yield
--------------------------------------------------------------------------
Tax-Free 28% 31% 36% 39.6%
Yield Federal Bracket Federal Bracket Federal Bracket Federal Bracket
- ------------ ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
2.00% 2.78% 2.90% 3.13% 3.31%
2.50 3.47 3.62 3.91 4.14
3.00 4.17 4.35 4.69 4.97
3.50 4.86 5.07 5.47 5.79
4.00 5.56 5.80 6.25 6.62
4.50 6.25 6.52 7.03 7.45
5.00 6.94 7.25 7.81 8.28
5.50 7.64 7.97 8.59 9.11
6.00 8.33 8.70 9.38 9.93
</TABLE>
This table does not take into consideration any federal alternative minimum
tax. In addition, the table is based upon yields that are derived solely from
tax-exempt income. To the extent a Fund's advertised yield is derived from
taxable income, the Fund's equivalent taxable yield will be less than set forth
in the table. The tax-free yields used in this table should not be considered as
representations of any particular rates of return and are for purposes of
illustration only. The table is based on federal tax rates in effect for
individuals in 1996 and currently scheduled to be in effect for individuals in
1997. To the extent that these rates are increased in 1997 or subsequent years,
the equivalent taxable yields shown above will also increase.
No dealer, sales representative or other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus (and/or in the Statement of Additional Information referred to
on the cover page of this Prospectus), and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Funds or Piper Jaffray Inc. This Prospectus does not constitute an offer or
solicitation by anyone in the state in which such offer or solicitation is not
authorized, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation.
22
<PAGE>
PIPER FUNDS INC.
INVESTMENT ADVISER
Piper Capital Management Incorporated
DISTRIBUTOR
Piper Jaffray Inc.
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
LEGAL COUNSEL
Dorsey & Whitney LLP
Table of Contents
<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction......................... 2
Fund Expenses........................ 3
Financial Highlights................. 4
Investment Objectives and Policies... 6
Special Investment Methods and
Risk Factors........................ 11
Management........................... 13
Distribution of Fund Shares.......... 15
SHAREHOLDER GUIDE TO INVESTING
How to Purchase Shares............. 16
Cash Management Program............ 16
How To Redeem Shares............... 16
Shareholder Services............... 17
Dividends and Distributions........ 18
Valuation of Shares.................. 19
Tax Status........................... 19
Performance Comparisons.............. 20
General Information.................. 20
Tax-Exempt vs. Taxable Income........ 22
</TABLE>
- -------------------------------------------
Prospectus
[LOGO]
--------------------------
Cash Management Funds
Money Market Fund
U.S. Government Money
Market Fund
Tax-Exempt Money Market Fund
November 18, 1996
---------------------------------
30600 021-97
<PAGE>
PART B
MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
TAX-EXEMPT MONEY MARKET FUND
Series of Piper Funds Inc.
STATEMENT OF ADDITIONAL INFORMATION
November 18, 1996
Table of Contents
Page
----
Investment Policies and Restrictions . . . . . . . . . . . . . . . . . . 2
Directors and Executive Officers . . . . . . . . . . . . . . . . . . . . 7
Investment Advisory and Other Services . . . . . . . . . . . . . . . . . 11
Portfolio Transactions and Allocation of Brokerage . . . . . . . . . . . 16
Capital Stock and Ownership of Shares. . . . . . . . . . . . . . . . . . 18
Net Asset Value and Public Offering Price. . . . . . . . . . . . . . . . 19
Calculation of Yield . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Performance Comparisons. . . . . . . . . . . . . . . . . . . . . . . . . 22
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
General Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Pending Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Appendix A - Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Prospectus dated November 18,
1996, and should be read in conjunction therewith. A copy of the Prospectus may
be obtained from the Funds at Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402.
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
The shares of Piper Funds Inc. (the "Company") are currently offered in
12 series. This Statement of Additional Information relates to three of
those series, Money Market Fund, U.S. Government Money Market Fund and
Tax-Exempt Money Market Fund (sometimes referred to herein as a "Fund" or,
collectively, as the "Funds"). The investment objectives and policies of the
Funds are set forth in the Prospectus. Certain additional investment
information is set forth below.
REPURCHASE AGREEMENTS
Each Fund may invest in repurchase agreements. The Funds' custodian will
hold the securities underlying any repurchase agreement or such securities will
be part of the Federal Reserve Book Entry System. The market value of the
collateral underlying the repurchase agreement will be determined on each
business day. If at any time the market value of the collateral falls below the
repurchase price of the repurchase agreement (including any accrued interest),
the respective Fund will promptly receive additional collateral (so the total
collateral is an amount at least equal to the repurchase price plus accrued
interest).
U.S. Government Money Market Fund will enter into repurchase agreements and
reverse repurchase agreements (see "--Reverse Repurchase Agreements" below) only
with the primary reporting dealers that report to the Federal Reserve Bank of
New York and with banks that are among the 100 largest United States commercial
banks.
The Funds have received from the Securities and Exchange Commission an
exemptive order permitting the Funds, along with the other series of the
Company, closed-end and other open-end investment companies currently managed by
Piper Capital Management Incorporated (the "Adviser"), and all future series of
the Company and all future investment companies advised by the Adviser or its
affiliates, to deposit uninvested cash balances into a large single joint
account to be used to enter into one or more large repurchase agreements.
REVERSE REPURCHASE AGREEMENTS
Each Fund may enter into reverse repurchase agreement transactions with the
same parties with whom it may enter into repurchase agreements. However, the
Funds do not currently enter into or intend to enter into such transactions
during the coming year. Under a reverse repurchase agreement, a Fund sells
securities and agrees to repurchase them at a mutually agreed date and price.
Because certain of the incidents of ownership of the security are retained by
the Fund, reverse repurchase agreements are considered a form of borrowing by
the Fund from the buyer, collateralized by the security. At the time the Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing high-grade liquid debt
securities having a value not less than the repurchase price (including accrued
interest). Reverse repurchase agreements involve the risk that the market value
of the securities retained in lieu of sale by the Fund may decline below the
price of the securities the Fund has sold but is obligated to repurchase. In
the event the buyer of securities
-2-
<PAGE>
under a reverse repurchase agreement files for bankruptcy or becomes insolvent,
such buyer or its trustee or receiver may receive an extension of time to
determine whether to enforce the Fund's obligation to repurchase the securities
and the Fund's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decisions. Reverse repurchase agreements
will be used as a means of borrowing for investment purposes. This speculative
technique is referred to as leveraging. Leveraging may exaggerate the effect on
net asset value of any increase or decrease in the market value of a Fund's
portfolio. Money borrowed for leveraging will be subject to interest costs
which may or may not be recovered by income from or appreciation of the
securities purchased. The Board of Directors has established procedures, which
are periodically reviewed by the Board, pursuant to which the Adviser will
monitor the creditworthiness of the dealers and banks with which the Funds enter
into reverse repurchase agreement transactions.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
Tax-Exempt Money Market Fund may purchase securities on a "hen-issued"
basis and may purchase and sell securities on a "forward commitment" basis. When
the Fund purchases securities on a when-issued or forward commitment basis, it
will maintain in a segregated account with its custodian cash or liquid
high-grade debt obligations having an aggregate value equal to the amount of
such purchase commitments until payment is made; the Fund will likewise
segregate securities it sells on a forward commitment basis.
PUTS
To help assure appropriate liquidity, Tax-Exempt Money Market Fund may
acquire Municipal Obligations which provide for the right to resell them to the
issuer, a bank or a broker-dealer at a specified price within a specified period
of time prior to the maturity date of such obligation. Such a right to resell,
which is commonly known as a " put," may be sold, transferred or assigned only
with the underlying security or securities. Immediately after acquisition of
any put, Tax-Exempt Money Market Fund will not, with respect to 75% of the total
amortized cost value of its assets, have invested more than 5% of the total
amortized cost value of its assets in securities underlying puts from the same
institution. An unconditional put, which is a put that would be readily
exercisable in the event of a default in payment of principal or interest on the
underlying security or securities, will not be considered to be a put from that
institution, provided that the amortized cost value of all securities held by
the Fund and issued or guaranteed by the same institution does not exceed 10% of
the total amortized cost value of the Fund's assets. For the purposes of this
paragraph, a put will be considered to be from the party to whom the Fund will
look for payment of the exercise price and an unconditional put will be
considered to be a guarantee of the underlying security or securities.
If an issuer, bank or broker-dealer should default on its obligation to
repurchase a security, Tax-Exempt Money Market Fund might be unable to recover
all or a portion of any loss sustained from having to sell the security
elsewhere. It will be the Fund's policy to enter into puts only with issuers,
banks or broker-dealers that are determined by the Adviser to present minimal
credit risks.
-3-
<PAGE>
ILLIQUID SECURITIES
As set forth in the Prospectus, the Funds may invest in Rule 144A
securities and commercial paper issued pursuant to Rule 4(2) under the
Securities Act of 1933, and treat such securities as liquid when they have been
determined to be liquid by the Board of Directors of the Company or by the
Adviser subject to the oversight of and pursuant to procedures adopted by the
Board of Directors. Under these procedures, factors taken into account in
determining the liquidity of a security include (a) the frequency of trades and
quotes for the security; (b) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (c) dealer
undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). With respect to Rule 144A securities, investing in such securities
could have the effect of increasing the level of Fund illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.
PORTFOLIO TURNOVER
Each Fund, consistent with its investment objective, may attempt to
maximize yield through portfolio trading. This may involve selling portfolio
instruments and purchasing different instruments to take advantage of
disparities of yield in different segments of the high-grade money market or
among particular instruments within the same segment of the market. Since each
Fund's assets will be invested in securities with short maturities and the Funds
will manage their portfolios as described above, each Fund's portfolio will turn
over several times a year. However, this will not generally increase the Funds'
brokerage costs, since brokerage commissions as such are not usually paid in
connection with the purchase or sale of the instruments in which the Funds
invest.
Portfolio turnover is the ratio of the lesser of annual purchases or sales
of portfolio securities to the average monthly value of portfolio securities,
not including securities maturing in less than 12 months. A 100% portfolio
turnover rate would occur, for example, if the lesser of the value of purchases
or sales of portfolio securities for a particular year were equal to the average
monthly value of the portfolio securities owned during such year. Because
securities with maturities of less than one year are excluded from required
portfolio turnover rate calculations, the portfolio turnover rate for each Fund
will generally be insignificant.
INVESTMENT RESTRICTIONS
In addition to the investment objectives and policies set forth in the
Prospectus, each Fund is subject to certain fundamental and nonfundamental
investment restrictions, as set forth below. Fundamental investment
restrictions may not be changed without the vote of a majority of a Fund's
outstanding shares. "Majority," as used in the Prospectus and in this Statement
of Additional Information, means the lesser of (a) 67% of a Fund's outstanding
shares present at a meeting of the holders if more than 50% of the outstanding
shares are present in person or by proxy or (b) more than 50% of a Fund's
outstanding shares.
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<PAGE>
As fundamental investment restrictions, no Fund will:
1. Invest 25% or more of the value of its total assets in the securities
of issuers conducting their principal business activities in any one industry.
This restriction does not apply to securities of the U.S. Government or its
agencies and instrumentalities and repurchase agreements relating thereto, or to
Tax-Exempt Securities, as defined in the Prospectus. In addition, this
restriction does not apply to obligations of United States banks, domestic
branches thereof and United States branches of foreign banks subject to United
States regulation. The various types of utilities companies, such as gas,
electric, telephone, telegraph, satellite and microwave communications
companies, are considered as separate industries.
2. Issue any senior securities, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), other than as set forth in restriction
number 3 below and except to the extent that purchasing or selling securities on
a when-issued or delayed delivery basis may be deemed to constitute issuing a
senior security.
3. Borrow money (provided that the Funds may enter into reverse
repurchase agreements) except from banks for temporary or emergency purposes.
Each Fund may borrow money in an amount up to one-third of the value of its
total assets in order to meet redemption requests without immediately selling
any money market instruments. If, for any reason, the current value of a Fund's
total assets falls below an amount equal to three times the amount of its
indebtedness from money borrowed, such Fund will, within three business days,
reduce its indebtedness to the extent necessary. To do this, a Fund may have to
sell a portion of its investments at a time when it may be disadvantageous to do
so. With respect to each of the Funds, interest paid on borrowed funds will
decrease the net earnings of the Fund. None of the Funds will purchase
portfolio securities while outstanding borrowing exceeds 5% of the value of the
Fund's total assets. None of the Funds will borrow money for leverage purposes
(provided that the Funds may enter into reverse repurchase agreements for such
purposes).
4. Mortgage, pledge or hypothecate its assets except in an amount not
exceeding 10%, with respect to Money Market Fund and U.S. Government Money
Market Fund, and 20% with respect to Tax-Exempt Money Market Fund, of the value
of their total assets to secure temporary or emergency borrowing.
5. Purchase or sell commodities or commodity futures contracts.
6. Purchase or sell real estate or real estate mortgage loans, except
that the Funds may invest in securities secured by real estate or interests
therein or issued by companies that invest in real estate or interests therein.
7. Act as an underwriter of securities of other issuers, except insofar
as each Fund may be technically deemed an underwriter under the federal
securities laws in connection with the disposition of portfolio securities.
As nonfundamental investment restrictions that may be changed at any time
without shareholder approval, no Fund will:
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<PAGE>
1. Invest more than 10% of its net assets in illiquid securities.
2. Invest in warrants.
3. Invest more than 5% of the value of its total assets in the securities
of any issuers which, with their predecessors, have a record of less than three
years' continuous operation. (Securities of such issuers will not be deemed to
fall within this limitation if they are guaranteed by an entity in continuous
operation for more than three years. The value of all securities issued or
guaranteed by such guarantor and owned by a Fund shall not exceed 10% of the
value of the total assets of such Fund.)
4. Make short sales of securities.
5. Purchase any securities on margin except to obtain such short-term
credits as may be necessary for the clearance of transactions.
6. Write, purchase or sell puts, calls or combinations thereof, provided
that the Funds may purchase securities with demand or put features.
7. Purchase or retain the securities of any issuer if, to the Fund's
knowledge, those officers or directors of the Company or its affiliates or of
its investment adviser who individually own beneficially more than 0.5% of the
outstanding securities of such issuer, together own more than 5% of such
outstanding securities.
8. Invest for the purpose of exercising control or management.
9. Purchase or sell oil, gas or other mineral leases, rights or royalty
contracts, except that the Funds may purchase or sell securities of companies
investing in the foregoing.
10. Purchase the securities of other investment companies except as part
of a merger, consolidation or acquisition of assets, provided that Tax-Exempt
Money Market Fund may invest up to 5% of its total assets in the securities of
other investment companies. Any purchases by Tax-Exempt Money Market Fund of
the securities of other investment companies will be made in the open market
where customary brokerage fees and commissions are paid.
11. Invest in foreign securities, except as follows: (a) Money Market
Fund may invest without limit in foreign securities, subject to the requirements
of Rule 2a-7 of the 1940 Act, and (b) Tax-Exempt Money Market Fund may invest up
to 5% of its total assets in foreign securities. For purposes of this
investment limitation, securities of foreign issuers which are guaranteed as to
payment of principal and interest by the U.S. Government or its agencies or
instrumentalities are not considered foreign securities.
12. Loan portfolio securities.
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The identification of the issuer of a Tax-Exempt Security depends on the
terms and conditions of the obligation. If the assets and revenues of an
agency, authority, instrumentality or other political subdivision are separate
from those of the government creating the subdivision, and the obligation is
backed only by the assets and revenues of the subdivision, such subdivision will
be regarded as the sole issuer. Similarly, in the case of a nongovernmental
user, such as an industrial corporation or a privately owned or operated
hospital, if the security is backed only by the assets and revenues of the
nongovernmental user then such nongovernmental user will be deemed to be the
sole issuer. If in either case the creating government or another entity
guarantees an obligation, and the value of all securities issued or guaranteed
by the guarantor and owned by a Fund exceeds 10% of the value of such Fund's
total assets, the guarantee will be regarded as a separate security and treated
as an issue of such government or entity.
Any investment restriction or limitation referred to above or in the
Prospectus, except the borrowing policy, which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after an acquisition of securities or
utilization of assets and such excess results therefrom.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and officers of the Company and their principal occupations
during the past five years are set forth below. Unless otherwise indicated, all
positions have been held for more than five years. The Company's directors and
officers also serves as a director or officer of various closed-end and open-end
investment companies managed by the Adviser.
Name, Address and (Age) Position with the Company
----------------------- -------------------------
William H. Ellis* (54) Chairman of the Board of Directors
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
David T. Bennett (56) Director
3400 City Center
33 South Sixth Street
Minneapolis, Minnesota 55402
Jaye F. Dyer (69) Director
4670 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Karol D. Emmerich (47) Director
7302 Claredon Drive
Edina, Minnesota 55439
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<PAGE>
Luella G. Goldberg (59) Director
7019 Tupa Drive
Edina, Minnesota 55435
David A. Hughey (65) Director
134 Powers Road
Meredith, NH 03253
George Latimer (61) Director
754 Linwood Avenue
St. Paul, MN 55105
Paul A. Dow (45) President
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
Robert H. Nelson (33) Vice President
Piper Jaffray Tower and Treasurer
222 South Ninth Street
Minneapolis, Minnesota 55402
Susan S. Miley (39) Secretary
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
- --------------------
* Directors of the Company who are interested persons (as that term is
defined by the 1940 Act) of Piper Capital Management Incorporated and the
Funds.
William H. Ellis is President of Piper Jaffray Companies Inc.; Director and
Chairman of the Board of Piper Capital Management Incorporated ("the Adviser");
President of the Adviser since 1994; Director of Piper Jaffray Inc..
David T. Bennett is of counsel to the law firm of Gray, Plant, Mooty, Mooty
& Bennett, P.A., located in Minneapolis, Minnesota. Mr. Bennett is chairman of
a group of privately held companies and serves on the board of directors of a
number of nonprofit organizations.
Jaye F. Dyer has been President of Dyer Management Company, a private
management company, since 1991. Prior to that he was President and Chief
Executive Officer of Dyco Petroleum Corporation, a Minneapolis based oil and
natural gas development company he founded, from 1971 to March 1, 1989, and
Chairman of the Board until December 31, 1990. Mr. Dyer serves on the board of
directors of Northwestern National Life Insurance Company, The ReliaStar
Financial Corp. (the holding company of Northwestern National Life Insurance
Company) and various privately held and nonprofit corporations.
Karol D. Emmerich has been President of The Paraclete Group, a consultant
to nonprofit organizations, since 1993. Prior to that she was Vice President,
Chief
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<PAGE>
Accounting Officer and Treasurer of Dayton Hudson Corporation from 1980 to 1993.
Ms. Emmerich is an Executive Fellow at the University of St. Thomas Graduate
School of Business and serves on the board of directors of a number of privately
held and nonprofit organizations.
Luella G. Goldberg serves on the board of directors of Northwestern
National Life Insurance Company (since 1976), The ReliaStar Financial Corp.
(since 1989), TCF Bank Savings fsb (since 1985), TCF Financial Corporation
(since 1988), and Hormel Foods Corp. (since 1993). Ms. Goldberg also serves as
a Trustee of Wellesley College, and as a director of a number of other
organizations, including the University of Minnesota Foundation and the
Minnesota Orchestral Association. Ms. Goldberg was Chairman of the Board of
Trustees of Wellesley College from 1985 to 1993 and acting President from
July 1, 1993 to October 1, 1993.
David A. Hughey is a Trustee of Bentley College. Prior to September 1996,
he was Executive Vice President and Chief Administrative Officer of Dean Witter
InterCapital Inc., Dean Witter Services Company Inc. and Dean Witter
Distributors Inc.; Director, Executive Vice President and Chief Administrative
Officer of Dean Witter Trust Company; Vice President of Dean Witter Family of
Funds and TCW/DW Family of Funds; and Director of ICI Mutual Insurance Company.
George Latimer has been Chief Executive Officer of National Equity Fund,
Chicago, Illinois since November 1995; prior thereto, Mr. Latimer was Director,
Special Actions Office, Office of the Secretary, Department of Housing and Urban
Development since 1993, and prior thereto he had been Dean of Hamline Law
School, Saint Paul, Minnesota from 1990 to 1993. Mr. Latimer also serves on the
board of directors of Digital Biometrics, Inc. and Payless Cashways, Inc.
Paul A. Dow is Chief Investment Officer and Senior Vice President of the
Adviser.
Robert H. Nelson has been a Senior Vice President of the Adviser since
1993; prior thereto he had been a Vice President of the Adviser from 1991 to
1993.
Susan S. Miley has been Senior Vice President and General Counsel of the
Adviser since 1995 and Secretary of the Adviser since 1996; prior to which she
was counsel for American Express Financial Advisors, Minneapolis, Minnesota from
1994 to 1995 and an attorney at Simpson Thatcher & Bartlett, New York, New York
from 1984 to 1992.
Ms. Emmerich, Ms. Goldberg Mr. Hughey are members of the Audit Committee of
the Board of Directors. Ms. Emmerich acts as the chairperson of such committee.
The Audit Committee oversees the Company's financial reporting process, reviews
audit results and recommends annually to the Company a firm of independent
certified public accountants.
The Board of Directors also has a Committee of the Independent Directors,
consisting of Messrs. Bennett, Dyer, Hughey and Latimer, Ms. Emmerich and Ms.
Goldberg, and a Derivatives Subcommittee consisting of Ms. Emmerich, who serves
as chairperson, Ms. Goldberg and Mr. Dyer.
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<PAGE>
The functions of the Committee of the Independent Directors are: (a)
recommendation to the full Board of approval of any management, advisory, sub-
advisory and/or administration agreements; (b) recommendation to the full Board
of approval of any underwriting and/or distribution agreements; (c) review of
the fidelity bond and premium allocation; (d) review of errors and omissions and
any other joint insurance policies and premium allocation; (e) review of, and
monitoring of compliance with, procedures adopted pursuant to certain rules
promulgated under the 1940 Act; and (f) such other duties as the independent
directors shall, from time to time, conclude are necessary or appropriate to
carry out their duties under the 1940 Act. The functions of the Derivatives
Subcommittee are: (a) to oversee practices, policies and procedures of the
Adviser in connection with the use of derivatives; (b) to receive periodic
reports from management; and (c) to report periodically to the Committee of the
Independent Directors and the Board of Directors.
The directors of the Company who are officers or employees of the Adviser
or of its affiliates receive no remuneration from the Company. Each of the
other directors currently receives a quarterly retainer of $3,625 that is
allocated among the Funds and all other open-end funds managed by the Adviser on
the basis of the total assets of each such fund. In addition, each director
receives a fee from the Company for each regular quarterly and in-person special
meeting of the Board of Directors attended. (The per-meeting fee is based on
the combined total assets of the Company and Piper Institutional Funds Inc.)
The per-meeting fee is based upon asset size and is $250 if assets are under
$200 million, $500 if assets are $200 million and over but less than $500
million, $750 if asses are $500 million and over but less than $1 billion,
$1,000 if assets are $1 billion and over but less than $5 billion, and $1,500 if
assets are $5 billion or over. Members of the Audit Committee who are not
affiliated with the Adviser receive $1,000 for each Audit Committee meeting
attended ($2,000 for the chairperson of the Committee), and the chairperson of
the Committee of the Independent Directors receives $1,000 for each meeting of
such committee attended, with such fees being allocated evenly between the
Company and all other closed-end and open-end investment companies managed by
the Adviser. Members of the Committee of the Independent Directors and the
Derivatives Subcommittee (other than the chairperson of the Committee of the
Independent Directors) currently receive no additional compensation. In
addition, each Director who is not affiliated with the Adviser is reimbursed for
expenses incurred in connection with attending meetings.
The following table sets forth the compensation received by each director
from the Company during the fiscal year ended September 30, 1996, as well as the
total compensation received by each director from the Company and all other
registered investment companies managed by the Adviser or affiliates of the
Adviser during the calendar year ended December 31, 1995. Directors who are
officers or employees of the Adviser or any of its affiliates did not receive
any such compensation and are not included in the table. Mr. Hughey became a
director of the Company on September 3, 1996.
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<PAGE>
Aggregate Compensation Total Compensation
Director from the Company from Fund Complex*
- -------- ---------------------- ------------------
David T. Bennett $ 6,400 $ 61,700
Jaye F. Dyer $ 6,775 $ 67,700
Karol D. Emmerich $ 6,775 $ 67,700
Luella G. Goldberg $ 7,150 $ 70,700
George Latimer $ 6,400 $ 64,700
David A. Hughey $ 0 $ 0
- --------------------
* Currently consists of 20 registered investment companies managed by the
Adviser or an affiliate of the Adviser, including the Company. During the 1995
calendar year, the Fund Complex consisted of up to 27 such investment companies,
several of which were merged or consolidated during the year. Each director
included in the table serves on the board of each such open-end and closed-end
investment company.
INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser for the Funds is Piper Capital Management
Incorporated (the "Adviser"). Its affiliate, Piper Jaffray Inc. (the
"Distributor") acts as the Funds' distributor. Each will act as such
pursuant to a written agreement which will be periodically approved by the
directors or the shareholders of the Funds. The address of both the Adviser
and the Distributor is Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402.
CONTROL OF THE ADVISER AND THE DISTRIBUTOR
The Adviser and the Distributor are both wholly owned subsidiaries of Piper
Jaffray Companies Inc., a publicly held corporation which is engaged through its
subsidiaries in various aspects of the financial services industry.
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
The Adviser acts as the investment adviser of the Funds under an Investment
Advisory and Management Agreement which has been approved by the Board of
Directors (including a majority of the directors who are not parties to the
agreement, or interested persons of any such party, other than as directors of
the Funds) and the shareholders of the Funds.
The Investment Advisory and Management Agreement will terminate
automatically in the event of its assignment. In addition, the agreement is
terminable at any time, without penalty, by the Board of Directors of the
Company or by vote of a majority of the Company's outstanding voting securities
on not more than 60 days' written notice to the Adviser, and by the Adviser on
60 days' written notice to the Company. The agreement may be terminated with
respect to a particular Fund at any time by a vote of the holders of a majority
of the outstanding voting securities of such Fund, upon 60 days' written notice
to the Adviser. Unless sooner terminated, the agreement shall continue in
effect for more than two years after its execution only so long as such
continuance is specifically approved at least annually by either the Board of
Directors or by a vote of a majority of the outstanding voting securities of the
Company, provided that in either event such
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<PAGE>
continuance is also approved by a vote of a majority of the directors who are
not parties to such agreement, or interested persons of such parties, cast in
person at a meeting called for the purpose of voting on such approval. If a
majority of the outstanding voting securities of any of the Funds approves the
agreement, the agreement shall continue in effect with respect to such approving
Fund whether or not the shareholders of any other Fund approve the agreement.
Pursuant to the Investment Advisory and Management Agreement, the Funds pay
the Adviser monthly advisory fees equal on an annual basis to a certain
percentage of each Fund's average net assets as set forth in the following
table.
Annual Advisory Fee
Average Net Asset Values as Percentage of
of the Fund Average Net Assets
- ------------------------ -------------------
On the first $500,000,000 .50%
On the next $250,000,000 .425%
On the next $250,000,000 .375%
On the next $500,000,000 .35%
On the next $500,000,000 .325%
On the next $500,000,000 .30%
On average assets of over
$2,500,000,000 .275%
Money Market Fund, U.S. Government Money Market Fund and Tax-Exempt Money
Market Fund paid $5,287,804, $995,914 and $972,714, respectively, in advisory
fees for the fiscal year ended September 30, 1994, $5,857,287, $1,105,123 and
$966,676, respectively, in advisory fees for the fiscal year ended September 30,
1995 and $7,536,110, $1,477,604 and $1,122,039, respectively for the fiscal year
ended September 30, 1996.
The Investment Advisory and Management Agreement provides that the Adviser
must make any expense reimbursements to the Funds required under state law. The
laws of California provide that aggregate annual expenses of a mutual fund shall
not normally exceed 2-1/2% of the first $30 million of the average net assets,
2% of the next $70 million of the average net assets and 1-1/2% of the remaining
average net assets. Such expenses include the Adviser's compensation, but
exclude interest, taxes, brokerage fees and commissions, extraordinary expenses
and amounts paid under the Company's Rule 12b-1 Plan. The Adviser does not
believe that the laws of any other state in which the Funds' shares may be
offered for sale contain expense reimbursement requirements.
Under the Investment Advisory and Management Agreement, the Adviser
provides each Fund with advice and assistance in the selection and disposition
of that Fund's investments. All investment decisions are subject to review by
the Board of Directors of the Company. The Adviser is obligated to pay the
salaries and fees of any affiliates of the Adviser serving as officers or
directors of the Funds.
The same security may be suitable for more than one of the Funds and/or for
other series of the Company or other funds or private accounts managed by the
Adviser or its affiliates. If and when two or more funds or accounts
simultaneously purchase or sell the same security, the transactions will be
allocated as to price and amount in accordance with arrangements equitable to
each fund or account. The
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<PAGE>
simultaneous purchase or sale of the same securities by more than one of the
Funds or by any of the Funds and other series of the Company or other funds or
accounts may have a detrimental effect on a Fund, as this may affect the price
paid or received by that Fund or the size of the position obtainable or able to
be sold by that Fund.
EXPENSES
The expenses of each Fund are deducted from their income before dividends
are paid. These expenses include, but are not limited to, organizational costs,
fees paid to the Adviser, fees and expenses of officers and directors who are
not affiliated with the Adviser, taxes, interest, legal fees, transfer agent,
dividend disbursing agent and custodian fees, audit fees, brokerage fees and
commissions, fees and expenses of registering and qualifying the Funds and their
shares for distribution under federal and state securities laws, expenses of
preparing prospectuses and statements of additional information and of printing
and distributing prospectuses and statements of additional information annually
to existing shareholders, the expenses of reports to shareholders, shareholders'
meetings and proxy solicitations, distribution expenses pursuant to the Rule
12b-1 plan, and other expenses which are not expressly assumed by the Adviser
under the Investment Advisory and Management Agreement. Any general expenses of
the Company that are not readily identifiable as belonging to a particular
series of the Company will be allocated among the series based upon the relative
net assets of the series at the time such expenses were incurred.
DISTRIBUTION PLAN
Rule l2b-1(b) under the 1940 Act provides that any payments made by the
Funds in connection with financing the distribution of their shares may only be
made pursuant to a written plan describing all aspects of the proposed financing
of distribution, and also requires that all agreements with any person relating
to the implementation of the plan must be in writing. Because some of the
payments described below to be made by the Funds are distribution expenses
within the meaning of Rule 12b-1, the Company has entered into an Underwriting
and Distribution Agreement with the Distributor pursuant to a Distribution Plan
adopted in accordance with such Rule.
Rule l2b-1(b)(1) requires that such plan be approved by a majority of a
Fund's outstanding shares, and Rule l2b-1(b)(2) requires that such plan,
together with any related agreements, be approved by a vote of the Board of
Directors and of the directors who are not interested persons of the Company and
who have no direct or indirect interest in the operation of the plan or in the
agreements related to the plan, cast in person at a meeting called for the
purpose of voting on such plan or agreement. Rule l2b-1(b)(3) requires that the
plan or agreement provide, in substance:
(a) that it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in paragraph (b)(2) of Rule l2b-1;
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<PAGE>
(b) that any person authorized to direct the disposition of moneys
paid or payable by the Company pursuant to the plan or any related
agreement shall provide to the Company's Board of Directors, and the
directors shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made; and
(c) in the case of a plan, that it may be terminated at any time by a
vote of a majority of the members of the Board of Directors of the Company
who are not interested persons of the Company and who have no direct or
indirect financial interest in the operation of the plan or in any
agreements related to the plan or by a vote of a majority of the
outstanding voting securities of a Fund.
Rule l2b-1(b)(4) requires that such a plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and that all material amendments of the plan must be approved in the manner
described in paragraph (b)(2) of Rule l2b-1.
Rule 12b-1(c) provides that the Company may rely upon Rule l2b-1(b) only if
the selection and nomination of the Company's disinterested directors are
committed to the discretion of such disinterested directors. Rule l2b-1(e)
provides that the Company may implement or continue a plan pursuant to Rule
l2b-1(b) only if the directors who vote to approve such implementation or
continuation conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under state law, and under Sections 36(a) and
(b) of the Investment Company Act of 1940, that there is a reasonable likelihood
that the plan will benefit the Company and its shareholders. The Board of
Directors has concluded that there is a reasonable likelihood that the
Distribution Plan will benefit the Company and its shareholders.
Pursuant to the provisions of the Distribution Plan, each Fund pays a
fee to the Distributor at a monthly rate of 1/12 of .30% of such Fund's
average daily net assets in connection with servicing of the Fund's
shareholder accounts and in connection with distribution-related services
provided with respect to the Funds. A portion of the total fee (to be
determined from time to time by the Board of Directors) may be paid as a
distribution fee and will be used by the Distributor to cover expenses that
are primarily intended to result in, or that are primarily attributable to,
the sale of shares of the Funds ("Distribution Expenses"), and the remaining
portion of the fee may be paid as a shareholder servicing fee and will be
used by the distributor to provide compensation for ongoing servicing and/or
maintenance of shareholder accounts with respect to the Funds ("Shareholder
Servicing Costs"). Distribution Expenses under the Plan include, but are not
limited to, initial and ongoing sales compensation (in addition to sales
charges) paid to Investment Executives of the Distributor and to other
broker-dealers; expenses incurred in the printing of prospectuses, statements
of additional information and reports used for sales purposes; expenses of
preparation and distribution of sales literature; expenses of advertising of
any type; an allocation of the Distributor's overhead; and payments to and
expenses of persons who provide support services in connection with the
distribution of Fund shares. Shareholder Servicing Costs include all expenses
of the Distributor incurred in connection with providing administrative or
accounting services to shareholders, including, but not limited to,
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<PAGE>
an allocation of the Distributor's overhead and payments made to persons,
including employees of the Distributor, who respond to inquiries of shareholders
of the Funds regarding their ownership of shares or their accounts with the
Funds, or who provide other administrative or accounting services not otherwise
required to be provided by the Funds' Adviser or transfer agent.
For each of the fiscal years ended September 30, 1994, 1995 and 1996, the
Distributor voluntarily limited amounts payable under the Distribution Plan to
an annual rate of .20% of average daily net assets for each Fund. Money Market
Fund paid distribution fees for the fiscal years ended September 30, 1994, 1995
and 1996 of $2,450,296, $2,725,532 and $3,774,268, respectively. U.S.
Government Money Market Fund paid distribution fees for the fiscal years ended
September 30, 1994, 1995 and 1996 of $399,419, $443,366 and $587,962,
respectively. Tax-Exempt Money Market Fund paid distribution fees for the
fiscal years ended September 30, 1994, 1995 and 1996 of $389,086, $381,907 and
$446,581, respectively.
Distribution fees for the fiscal year ended September 30, 1996, were used
by the Distributor as follows:
U.S. Government Tax-Exempt
Money Market Money Market Money Market
Fund Fund Fund
------------ --------------- ------------
Advertising. . . . . . . . . . $ -0- $ -0- $ -0-
Printing and Mailing of
Prospectuses to Other
than Current Shareholders . . -0- -0- -0-
Compensation to Under-
writers (trail fees to
Investment Executives). . . . $ 3,774,268 $ 587,962 $ 446,581
Compensation to Dealers. . . . -0- -0- -0-
Compensation to Sales
Personnel . . . . . . . . . . -0- -0- -0-
Interest, Carrying or Other
Finance Charge. . . . . . . . -0- -0- -0-
Other (Specify). . . . . . . . -0- -0- -0-
----------- --------- ---------
$ 3,774,268 $ 587,962 $ 446,581
UNDERWRITING AND DISTRIBUTION AGREEMENT
Pursuant to the Underwriting and Distribution Agreement, the Distributor
has agreed to act as the principal underwriter for the Funds in the sale and
distribution to the public of shares of the Funds, either through dealers or
otherwise. The Distributor has agreed to offer such shares for sale at all
times when such shares are available for sale and may lawfully be offered for
sale and sold.
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<PAGE>
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Investors Fiduciary Trust Company ("IFTC"), the transfer agent for the
Company, maintains certain omnibus shareholder accounts for each of the Funds.
Each such omnibus account represents the accounts of a number of individual
shareholders of a Fund. The Company has entered into Shareholder Account
Servicing Agreements with the Distributor and Piper Trust Company ("Piper
Trust"), pursuant to which the Distributor and Piper Trust provide certain
transfer agent and dividend disbursing agent services for the underlying
individual shareholder accounts. Pursuant to such Agreements, the Distributor
and Piper Trust have agreed to perform the usual and ordinary services of
transfer agent and dividend disbursing agent not performed by IFTC with respect
to the underlying individual shareholder accounts, including, without
limitation, the following: maintaining all shareholder accounts, preparing
shareholder meeting lists, mailing shareholder reports and prospectuses,
tracking shareholder accounts for blue sky and Rule l2b-1 purposes, withholding
taxes on nonresident alien and foreign corporation accounts, preparing and
mailing checks for disbursement of income dividends and capital gains
distributions, preparing and filing U.S. Treasury Department Form 1099 for all
shareholders, preparing and mailing confirmation forms to shareholders and
dealers with respect to all purchases, exchanges and liquidations of series
shares and other transactions in shareholder accounts for which confirmations
are required, recording reinvestments of dividends and distributions in series
shares, recording redemptions of series shares, and preparing and mailing checks
for payments upon redemption and for disbursements to withdrawal plan holders.
As compensation for such services, the Distributor and Piper Trust are paid
annual fees of $9.00 per active shareholder account by each Fund and $6.00 per
inactive account (defined as an account that has a balance of shares in any of
the Funds but that does not require a client statement for the current month) by
each Fund. There is no charge for a closed shareholder account (defined as an
account that has been inactive for at least three consecutive months). Such fee
is payable on a monthly basis at a rate of 1/12 of the annual per-account
charge. Such fee covers all services listed above, with the exception of
preparing shareholder meeting lists and mailing shareholder reports and
prospectuses. These services, along with proxy processing (if applicable) and
other special service requests, are billable as performed at a mutually agreed
upon fee in addition to the annual fee noted above, provided that such mutually
agreed upon fee shall be fair and reasonable in light of the usual and customary
charges made by others for services of the same nature and quality.
During the fiscal year ended September 30, 1996, Money Market Fund, U.S.
Government Money Market Fund and Tax-Exempt Money Market Fund paid
$3,189,833, $201,049 and $120,803, respectively, to the Distributor under
the Shareholder Account Servicing Agreement and $18,085, $0 and $0,
respectively to Piper Trust under the Shareholder Account Servicing Agreement.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
Because each Fund's portfolio is composed exclusively of debt, rather than
equity securities, most of the Funds' portfolio transactions are effected
without the
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payment of brokerage commissions, but at net prices which usually include a
markup. Most of the Funds' transactions are with the issuer, or with major
dealers on a principal basis acting for their own account and not as brokers.
However, portfolio transactions for the Funds which are executed on an agency
basis may be effected through the Distributor on a securities exchange if the
commissions, fees or other remuneration received by the Distributor are
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers or other futures commission merchants in connection with
comparable transactions involving similar securities or similar futures
contracts or options on futures contracts being purchased or sold on an exchange
during a comparable period of time. In effecting portfolio transactions through
the Distributor, the Funds intend to comply with Section 17(e)(1) of the 1940
Act. For the fiscal years ended September 30, 1994, 1995 and 1996, the Funds
did not pay any brokerage commissions.
The Adviser is responsible for effecting securities transactions for each
of the Funds. In placing orders for securities transactions, the primary
criterion for the selection of a broker-dealer is the ability of the
broker-dealer, in the opinion of the Adviser, to secure prompt execution of the
transactions at the most favorable net price, considering the state of the
market at the time. Frequently the Adviser selects a broker-dealer to effect a
particular transaction without contacting all broker-dealers who might be able
to effect such transaction, because of the volatility of the money market and
the desire to accept a particular price for a security because the price offered
by the broker-dealer meets a Fund's guidelines for profit, yield, or both.
When consistent with the objectives of prompt execution and favorable net
price, business may be placed with broker-dealers who furnish investment
research or services to the Adviser. Such research or services include advice,
both directly and in writing, as to the value of securities; the advisability of
investing in, purchasing or selling securities; and the availability of
securities, or purchasers or sellers of securities; as well as analyses and
reports concerning issues, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. This allows the Adviser to
supplement its own investment research activities and enables the Adviser to
obtain the views and information of individuals and research staffs of many
different securities firms prior to making investment decisions for the Funds.
To the extent portfolio transactions are effected with broker-dealers who
furnish research services to the Adviser, the Adviser receives a benefit, not
capable of evaluation in dollar amounts, without providing any direct monetary
benefit to the Funds from these transactions. The Adviser believes that most
research services obtained by it generally benefit several or all of the
investment companies and private accounts which it manages, as opposed to solely
benefiting one specific managed fund or account. Normally, research services
obtained through managed funds or accounts investing in common stocks would
primarily benefit the managed funds or accounts which invest in common stock;
similarly, services obtained from transactions in fixed-income securities would
normally be of greater benefit to the managed funds or accounts which invest in
debt securities.
The Adviser has not entered into any formal or informal agreements with any
broker-dealers, nor does it maintain any "formula" which must be followed in
connection with the placement of the Funds' portfolio transactions in exchange
for
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<PAGE>
research services provided the Adviser, except as noted below. However, the
Adviser does maintain an informal list of broker-dealers, which is used from
time to time as a general guide in the placement of the Funds' business, in
order to encourage certain broker-dealers to provide the Adviser with research
services which the Adviser anticipates will be useful to it. Because the list
is merely a general guide, which is to be used only after the primary criterion
for the selection of broker-dealers (discussed above) has been met, substantial
deviations from the list are permissible and may be expected to occur. In the
event any transactions are executed on an agency basis, the Adviser will
authorize the Funds to pay an amount of commission for effecting a securities
transaction in excess of the amount of commission another broker-dealer would
have charged only if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with respect to
the accounts as to which it exercises investment discretion. If the Funds
execute any transactions on an agency basis, they will generally pay higher than
the lowest commission rates available.
Any portfolio transactions for the Funds executed on an agency basis may be
effected through the Distributor. In determining the commissions to be paid to
the Distributor, it is the policy of the Funds that such commissions will, in
the judgment of the Adviser, subject to review by the Board of Directors, be
both (a) at least as favorable as those which would be charged by other
qualified brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time, and (b) at least as favorable as commissions contemporaneously charged by
the Distributor on comparable transactions for its most favored comparable
unaffiliated customers. While the Funds do not deem it practicable and in their
best interest to solicit competitive bids for commission rates on each
transaction, consideration will regularly be given to posted commission rates as
well as to other information concerning the level of commissions charged on
comparable transactions by other qualified brokers.
From time to time the Funds may acquire the securities of their regular
brokers or dealers or parent companies of such brokers or dealers. As of
September 30, 1996, Money Market Fund held $29,971,824 of securities issued by
Goldman Sachs Group L.P., $31,537,877 of securities issued by Merrill Lynch
Company, Inc., and $28,974,677 of securities issued by Morgan Stanley, Inc.
During the 1996 fiscal year, Money Market Fund also purchased securities issued
by C.S. First Boston, Goldman Sachs Group L.P., Merrill Lynch Company, Inc. and
Morgan Stanley Group, Inc. During the 1996 fiscal year, U.S. Government Money
Market Fund and Tax-Exempt Money Market Fund did not purchase any securities of
their regular brokers or dealers or parent companies of such brokers or dealers.
CAPITAL STOCK AND OWNERSHIP OF SHARES
The Board of Directors is empowered under the Company's Articles of
Incorporation to issue additional series of the Company's common stock without
shareholder approval. On an issue affecting only a particular series, the
shares of the affected series vote separately. An example of such an issue
would be a
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fundamental investment restriction pertaining to only one series. In voting on
the Investment Advisory and Management Agreement (the "Agreement"), approval of
the Agreement by the shareholders of a particular series would make the
Agreement effective as to that series whether or not it had been approved by the
shareholders of the other series.
The assets received by the Company for the issue or sale of shares of each
series, and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are allocated to such series, and constitute the
underlying assets of such series. The underlying assets of each series are
required to be segregated on the books of account, and are to be charged with
the expenses in respect to such series and with a share of the general expenses
of the Company. Any general expenses of the Company not readily identifiable as
belonging to a particular series shall be allocated among the series based upon
the relative net assets of the series at the time such expenses were accrued.
The Board of Directors may, without shareholder approval, create and issue
one or more additional classes of shares within each Fund, as well as within any
series of the Company created in the future. All classes of shares in a Fund
would be identical except that each class of shares would be available through a
different distribution channel and certain classes might incur different
expenses for the provision of distribution services or the provision of
shareholder services or administration assistance by institutions. Shares of
each class would share equally in the gross income of a series, but any
variation in expenses would be charged separately against the income of the
particular class incurring such expenses. This would result in variations in
net investment income accrued and dividends paid by and in the net asset value
of the different classes of a series. This ability to create multiple classes
of shares within each series of the Company will allow the Company in the future
the flexibility to better tailor its methods of marketing, administering and
distributing shares of the Funds to the needs of particular investors and to
allocate expenses related to such marketing, administration and distribution
methods to the particular classes of shareholders of the Fund incurring such
expenses.
As of November 1, 1996, no shareholder was known by any of the Funds to own
beneficially 5% or more of the outstanding shares of the Fund. The directors
and officers of the Company as a group owned less than 1% of the outstanding
shares of each of the Funds as of such date.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The method for determining the public offering price of Fund shares (which
is equal to their net asset value) is summarized in the Prospectus in the text
following the heading "Valuation of Shares." The net asset value of each Fund's
shares is determined on each day on which the New York Stock Exchange is open,
provided that the net asset value need not be determined on days when no Fund
shares are tendered for redemption and no order for Fund shares is received. The
New York Stock Exchange is not open for business on the following holidays (or
on the nearest Monday or Friday if the holiday falls on a weekend): New Year's
Day,
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Presidents' Day, Good Friday, Memorial Day, July 4th, Labor Day, Thanksgiving
and Christmas.
The portfolio securities in which each Fund invests fluctuate in value, and
hence the net asset value per share of each Fund may also fluctuate. On
September 30, 1996, the net asset value and public offering price per share for
each Fund were calculated as follows:
MONEY MARKET FUND
NET ASSETS ($1,965,800,008) = Net Asset Value Per Share
- -------------------------------------------
Shares Outstanding (1,965,800,008) ($1.00)
U. S. GOVERNMENT MONEY MARKET FUND
NET ASSETS ($291,021,811) = Net Asset Value Per Share
- -------------------------------------------
Shares Outstanding (291,021,811) ($1.00)
TAX-EXEMPT MONEY MARKET FUND
NET ASSETS ($209,938,990) = Net Asset Value Per Share
- ------------------------------------------
Shares Outstanding (209,938,990) ($1.00)
Each Fund values its portfolio securities at amortized cost in accordance
with Rule 2a-7 under the 1940 Act. This method involves valuing an instrument
at its cost and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuations in interest rates
on the market value of the instrument and regardless of any unrealized capital
gains or losses. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price a Fund would receive if it sold the instrument. During
periods of declining interest rates, the daily yield on shares of a Fund
computed by dividing the annualized daily income of the Fund by the net asset
value computed as described above may tend to be higher than a like computation
made by the Fund with identical investments utilizing a method of valuation
based upon market prices and estimates of market prices for all of its
securities.
Pursuant to Rule 2a-7, the Board of Directors has determined, in good faith
based upon a full consideration of all material factors, that it is in the best
interests of each of the Funds and their shareholders to maintain a stable net
asset value per share by virtue of the amortized cost method of valuation. Each
of the Funds will continue to use this method only so long as the Board of
Directors believes that it fairly reflects the market-based net asset value per
share. In accordance with Rule 2a-7, the Board of Directors has undertaken, as
a particular responsibility within the overall duty of care owed to Fund
shareholders, to establish procedures reasonably designed, taking into account
current market conditions and the Funds' investment objectives, to stabilize
each Fund's net asset value per share at a single value. These procedures
include the periodic determination of any deviation of current net asset value
per share, calculated using available market quotations, from each Fund's
amortized cost price per share, the periodic review by the Board of the
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amount of any such deviation and the method used to calculate any such
deviation, the maintenance of records of such determinations and the Board's
review thereof, the prompt consideration by the Board if any such deviation
exceeds 1/2 of 1%, and the taking of such remedial action by the Board as it
deems appropriate where it believes the extent of any such deviation may result
in material dilution or other unfair results to investors or existing
shareholders. Such remedial action may include redemptions in kind, selling
portfolio instruments prior to realizing capital gains or losses, shortening the
average portfolio maturity, withholding dividends or utilizing a net asset value
per share as determined by using available market quotations. Each Fund will,
in further compliance with Rule 2a-7, maintain a dollar-weighted average
portfolio maturity appropriate to its objective of maintaining a stable net
asset value and not exceeding 90 days, will not purchase any instrument with a
remaining maturity of greater than 397 calendar days, will limit its portfolio
investments to those U.S. dollar-denominated instruments which the Board
determines present minimal credit risks and which are at the time of acquisition
Eligible Securities (as defined in Rule 2a-7), and will record, maintain and
preserve a written copy of the above-described procedures and a written record
of the Board's considerations and actions taken in connection with the discharge
of its above-described responsibilities.
CALCULATION OF YIELD
Each Fund may issue current yield quotations. Simple yields are computed
by determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of a recent seven calendar day period, subtracting a hypothetical charge
reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then multiplying the base period return by 365/7. The
resulting yield figure will be carried to at least the nearest hundredth of one
percent. Effective yields are computed by determining the net change, exclusive
of capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of a recent seven calendar day period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
Effective Yield = [(Base Period Return +1)365/7] -1
When calculating the foregoing yield or effective yield quotations, the
calculation of net change in account value will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, and all fees, other
than nonrecurring accounts or sales charges, that are charged to all shareholder
accounts in proportion to the length of the base period. Realized gains and
losses from the sale of securities and unrealized appreciation and depreciation
are excluded from the calculation of yield and effective yield.
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Tax-Exempt Money Market Fund may also advertise its tax equivalent yield.
This yield will be computed by dividing that portion of the seven-day yield or
effective yield of the Fund (computed as set forth above) which is tax-exempt by
one minus a stated income tax rate and adding the product to that portion, if
any, of the yield of the Fund that is not tax-exempt.
The Funds' yields, effective yields and, in the case of Tax-Exempt Money
Market Fund, tax-equivalent yield (assuming a 36% federal income tax rate),
based upon the seven days ended September 30, 1996, are set forth below.
Effective Tax-Equivalent Tax-Equivalent
Fund Yield Yield Yield Effective Yield
---- ----- --------- -------------- ---------------
Money Market Fund 4.63% 4.74% N/A N/A
U.S. Government Money
Market Fund 4.55% 4.66% N/A N/A
Tax-Exempt Money
Market Fund 2.81% 2.85% 4.39% 4.45%
During some of the periods for which yields are calculated, the Adviser
voluntarily waived certain Rule 12b-1 fees for each Fund, thereby increasing
yields. These fees may or may not be waived or paid in the future, in the
Adviser's discretion. The following table sets forth the yields of each Fund as
of September 30, 1996, absent the waiver of fees.
Effective Tax-Equivalent Tax-Equivalent
Fund Yield Yield Yield Effective Yield
---- ----- --------- -------------- ---------------
Money Market Fund 4.53% 4.64% N/A N/A
U.S. Government Money
Market Fund 4.45% 4.56% N/A N/A
Tax-Exempt Money
Market Fund 2.71% 2.75% 4.23% 4.30%
PERFORMANCE COMPARISONS
Advertisements and other sales literature for the Funds may refer to
"average annual total return" and "cumulative total return."
Average annual total return figures are computed by finding the average
annual compounded rates of return over the periods indicated in the
advertisement that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period
of a hypothetical $1,000 payment made at the
beginning of such period.
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This calculation assumes all dividends and any capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The following table sets forth the average annual total return of each Fund
for various periods ended September 30, 1996:
Average Annual Total Returns
-----------------------------------------------------
Absent Voluntary
Actual Fee Waivers
------------------------- -------------------------
Since Since
1 Year 5 Year Inception 1 Year 5 Year Inception
------ ------ --------- ------ ------ ---------
Money Market Fund
(Inception 3/16/87) 4.79% 3.79% 5.40% 4.69% 3.69% 5.29%
U.S. Government Money
Market Fund
(Inception 7/5/88) 4.72% 3.77% 5.16% 4.62% 3.67% 5.03%
Tax-Exempt Money
Market Fund
(Inception 7/5/88) 2.80% 2.51% 3.57% 2.70% 2.41% 3.44%
Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
CTR = (ERV-P) 100
-----
P
Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period; and
P = initial payment of $1,000.
This calculation assumes all dividends and any capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.
The cumulative total return for Money Market Fund from inception (March 16,
1987) to September 30, 1996 was 64.99%. The cumulative total return for U.S.
Government Money Market Fund from inception (July 5, 1988) to September 30, 1996
was 51.16%. The cumulative total return for Tax-Exempt Money Market Fund from
inception (July 5, 1988) to September 30, 1996 was 33.37%. Had the Adviser not
voluntarily waived certain fees, the total returns for Money Market Fund, U.S.
Government Money Market Fund and Tax-Exempt Money Market Fund would have been
63.34%, 49.65% and 32.04%, respectively.
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In addition to advertising total return and yield, comparative performance
information may be used from time to time in advertising the Fund's shares,
including data from Lipper Analytical Services, Inc. ("Lipper"), Morningstar,
other industry publications and other entities or organizations which track the
performance of investment companies. Performance information for the Funds also
may be compared to various unmanaged indices. Unmanaged indices do not reflect
deductions for administrative and management costs and expenses. The Funds may
also include in advertisements and communications to Fund shareholders
evaluations of a Fund published by nationally recognized ranking services and by
financial publications that are nationally recognized, such as BARRON'S,
BUSINESS WEEK, FORBES, INSTITUTIONAL INVESTOR, INVESTOR'S DAILY, MONEY,
KIPLINGER'S PERSONAL FINANCE MAGAZINE, MORNINGSTAR MUTUAL FUND VALUES, THE NEW
YORK TIMES, USA TODAY AND THE WALL STREET JOURNAL.
REDEMPTION OF SHARES
Redemption of shares, or payment, may be suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said Exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Funds of securities owned by them
is not reasonably practicable, or it is not reasonably practicable for the Funds
fairly to determine the value of their net assets, or (d) during any other
period when the Securities and Exchange Commission, by order, so permits,
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist.
Shareholders who purchased shares through a broker-dealer other than the
Distributor may also redeem such shares by written request to IFTC at the
address set forth in the Prospectus. To be considered in proper form, written
requests for redemption should indicate the dollar amount or number of shares to
be redeemed, refer to the shareholder's Fund account number, and give either a
social security or tax identification number. The request should be signed in
exactly the same way the account is registered. If there is more than one owner
of the shares, all owners must sign. If shares to be redeemed have a value of
$10,000 or more or redemption proceeds are to be paid to someone other than the
shareholder at the shareholder's address of record, the signature(s) must be
guaranteed by an "eligible guarantor institution," which includes a commercial
bank that is a member of the Federal Deposit Insurance Corporation, a trust
company, a member firm of a domestic stock exchange, a savings association or a
credit union that is authorized by its charter to provide a signature guarantee.
IFTC may reject redemption instructions if the guarantor is neither a member of
nor a participant in a signature guarantee program. Signature guarantees by
notaries public are not acceptable. The purpose of a signature guarantee is to
protect shareholders against the possibility of fraud. Further documentation
will be requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by
facsimile will not be accepted. Unless other instructions are given in proper
form, a check for the proceeds of the redemption will be sent to the
shareholder's address of record.
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TAXATION
Pursuant to the Internal Revenue Code of 1986, as amended (the "Code"),
each Fund will be subject to a nondeductible excise tax equal to 4% of the
excess, if any, of the amount required to be distributed pursuant to the Code
for each calendar year over the amount actually distributed. In order to avoid
the imposition of this excise tax, each Fund generally must declare dividends by
the end of a calendar year representing 98% of the Fund's ordinary income for
the calendar year and 98% of its capital gain net income (both long-term and
short-term capital gains) for the 12-month period ending October 31 of the
calendar year. For purposes of this calculation, any amount of income on which
corporate-level income tax has been paid is deemed to have been distributed.
Ordinarily, distributions and redemption proceeds earned by a Fund
shareholder are not subject to withholding of federal income tax. However, 31%
of a Fund's distributions and redemption proceeds must be withheld if a Fund
shareholder fails to supply the Fund or its agent with such shareholder's
taxpayer identification number or if a Fund shareholder who is otherwise exempt
from withholding fails to properly document such shareholder's status as an
exempt recipient.
Distributions paid from net realized capital gains, if any, will be taxable
to shareholders as ordinary income. Capital gains from the sale or exchange of
shares are also taxable.
Distributions may be subject to state and local income taxes and the
treatment thereof may differ from the federal income tax consequences discussed
above.
TAX-EXEMPT MONEY MARKET FUND
Under the Code, interest on indebtedness incurred or continued to purchase
or carry shares of an investment company paying exempt-interest dividends, such
as Tax-Exempt Money Market Fund, will not be deductible by a shareholder in
proportion to the ratio of exempt-interest dividends to all dividends other than
those treated as long-term capital gains. Indebtedness may be allocated to
shares of Tax-Exempt Money Market Fund even though not directly traceable to the
purchase of such shares. Federal law also restricts the deductibility of other
expenses allocable to shares of Tax-Exempt Money Market Fund.
For federal income tax purposes, an alternative minimum tax ("AMT") is
imposed on taxpayers to the extent that such tax exceeds a taxpayer's regular
income tax liability (with certain adjustments). Exempt-interest dividends
attributable to interest income on certain tax-exempt obligations issued after
August 7, 1986 to finance certain private activities are treated as an item of
tax preference that is included in alternative minimum taxable income for
purposes of computing the federal alternative minimum tax for all taxpayers and
the federal environmental tax on corporations. Tax-Exempt Money Market Fund may
invest in obligations the interest on which is treated as an item of tax
preference, to the extent set forth in the Prospectus. In addition, a portion
of all other tax-exempt interest received by a corporation, including exempt-
interest dividends, will be included in adjusted
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current earnings and earnings and profits for purposes of determining the
federal corporate alternative minimum tax, the environmental tax imposed on
corporations by Section 59A of the Code, and the branch profits tax imposed on
foreign corporations under Section 884 of the Code.
Because liability for AMT in the case of individuals will depend upon
the regular tax liability and tax preference items of a specific taxpayer,
the extent, if any, to which any tax preference items resulting from
investment in Tax-Exempt Money Market Fund will be subject to the tax will
depend upon each shareholder's individual situation. For shareholders with
substantial tax preferences, the AMT could reduce the after-tax economic
benefits of an investment in the Fund. Each shareholder is advised to
consult his or her tax adviser with respect to the possible effects of such
tax preference items.
For shareholders who are or may become recipients of Social Security
benefits, exempt-interest dividends are includable in computing modified
adjusted gross income" for purposes of determining the amount of Social Security
benefits, if any, that is required to be included in gross income. The maximum
amount of Social Security benefits includable in gross income is 85%.
The Code imposes requirements on certain tax-exempt bonds which, if not
satisfied, could result in loss of tax-exemption for interest on such bonds,
even retroactively to the date of issuance of the bonds. Proposals may be
introduced before Congress in the future, the purpose of which will be to
further restrict or eliminate the federal income tax exemption for Tax-Exempt
Securities. The Fund cannot predict what additional legislation may be enacted
that may affect shareholders. The Fund will avoid investment in Tax-Exempt
Securities which, in the opinion of the Adviser, pose a material risk of the
loss of tax exemption. Further, if a Tax-Exempt Security in the Fund's
portfolio loses its exempt status, the Fund will make every effort to dispose of
such investment on terms that are not detrimental to the Fund.
GENERAL INFORMATION
Minnesota has enacted legislation which authorizes corporations to
eliminate or limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of the fiduciary duty of "care"
(the duty to act with the care an ordinarily prudent person in a like position
would exercise under similar circumstances). Minnesota law does not, however,
permit a corporation to eliminate or limit the liability of a director (a) for
any breach of the director's duty of "loyalty" to the corporation or its
shareholders (the duty to act in good faith and in a manner reasonably believed
to be in the best interest of the corporation), (b) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(c) for authorizing a dividend, stock repurchase or redemption or other
distribution in violation of Minnesota law or for violation of certain
provisions of Minnesota securities laws, or (d) for any transaction from which
the director derived an improper personal benefit. Minnesota law does not
permit elimination or limitation of a
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director's liability under the 1933 Act or the Securities Exchange Act of 1934,
and the 1940 Act prohibits elimination or limitation of a director's liability
for acts involving willful malfeasance, bad faith, gross negligence or reckless
disregard of the duties of a director. The Articles of Incorporation of the
Company limit the liability of directors to the fullest extent permitted by
Minnesota law and the 1940 Act.
FINANCIAL STATEMENTS
The audited financial statements for the Funds dated September 30, 1996, as
set forth in Funds' Annual Reports, are incorporated by reference into this
Statement of Additional Information. The audited financial statements are
provided in reliance on the report of KPMG Peat Marwick LLP, 4200 Norwest
Center, Minneapolis, Minnesota 55402, independent auditors of the Funds, given
on the authority of such firm as experts in accounting and auditing.
PENDING LITIGATION
Complaints have been brought in federal and state court relating to one
open-end and twelve closed-end investment companies managed by the Adviser and
to two open-end funds for which the Adviser has acted as sub-adviser. On
February 13, 1996, a Settlement Agreement became effective for the consolidated
class action lawsuit, titled IN RE: PIPER FUNDS INC. INSTITUTIONAL GOVERNMENT
INCOME PORTFOLIO LITIGATION. The Amended Consolidated Class Action Complaint
was filed on October 5, 1994, in the United States District Court, District of
Minnesota, against Institutional Government Income Portfolio (a series of Piper
Funds Inc.), the Adviser, the Distributor, William H. Ellis and Edward J.
Kohler, and had alleged the making of materially misleading statements in the
prospectus, common law negligent misrepresentation and breach of fiduciary duty.
The Settlement Agreement will provide approximately $67.5 million, together with
interest earned, less certain disbursements and attorney fees, to class members
in payments scheduled over approximately three years. Such payments will be
made by Piper Jaffray Companies Inc. and the Adviser and will not be an
obligation of Piper Funds Inc.
Two additional complaints relating to the Institutional Government Income
Portfolio remain pending. These complaints were brought by investors who
requested exclusion from the settlement class and are based on claims similar to
those asserted in the consolidated Class Action complaint. The first pending
complaint was brought on April 11, 1995, and filed in the Minnesota State
District Court, Hennepin County. This action was removed to United States
District Court, District of Minnesota. The plaintiff, Frank R. Berman, Trustee
of Frank R. Berman Professional CP Pension Plan Trust, sued individually and not
on behalf of any putative class. Defendants are the Distributor, Piper Funds
Inc., Morton Silverman and Worth Bruntjen. A second pending complaint relating
to the Institutional Government Income Portfolio was filed on June 22, 1995 in
the Montana Thirteenth Judicial District Court, Yellowstone County by Beverly
Muth against the Distributor and Teresa L. Darnielle. In addition to the above
complaints, a number of actions have been commenced in arbitration by some of
individual investors who requested exclusion from the settlement class in the IN
RE: PIPER FUNDS INC. action.
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<PAGE>
A complaint was filed by Herman D. Gordon on October 20, 1994, in the
United States District Court, District of Minnesota, against American Adjustable
Rate Term Trust Inc.--1998, American Adjustable Rate Term Trust Inc.--1999, the
Adviser, the Distributor, Piper Jaffray Companies Inc., Benjamin Rinkey, Jeffrey
Griffin, Charles N. Hayssen and Edward J. Kohler. A second complaint was filed
by Frank Donio, I.R.A. and other plaintiffs on April 14, 1995, in the United
States District Court, District of Minnesota, against American Adjustable Rate
Term Trust Inc.--1996, American Adjustable Rate Term Trust Inc.--1997, American
Adjustable Rate Term Trust Inc.--1998, American Adjustable Rate Term Trust Inc.-
- -1999, the Adviser, the Distributor, Piper Jaffray Companies Inc. and certain
associated individuals. Plaintiffs in both actions filed a Consolidated Amended
Class Action Complaint on May 23, 1995 and by Order dated June 8, 1995, the
Court consolidated the two putative class actions. The consolidated amended
complaint, which purports to be a class action, alleges certain violations of
federal and state securities laws, breach of fiduciary duty and negligent
misrepresentation. On August 23, 1996, the Court granted final approval to the
parties' agreement to settle all outstanding cliams of the purported class
action. The Effective Date of the Settlement Agreement was September 23, 1996.
The Settlement Agreement provides for $14 million in principal payments
consisting of $500,000 which was paid upon the Court's preliminary approval,
$1.5 million which was paid on the Effective Date of the Settlement Agreement,
and payments of $3 million on each anniversary of the Effective Date for the
next four years, with accrued interest payments of up to $1.8 million.
Two additional complaints relating to the American Adjustable Rate Term
Trusts, which are based on claims similar to those asserted in the Gordon/Donio
Consolidated Complaint, remain pending. The first of these additional
complaints was filed against the Distributor on August 11, 1995 in Washington
State District Court, King County, by plaintiff Ernest Volinn. The second
complaint was filed against the Distributor on November 1, 1995 in the United
States District Court, District of Idaho, by plaintiff Ewing Company Profit
Sharing Plan. In addition to the above complaints, a number of actions have
been commenced in arbitration by individual investors in the American Adjustable
Rate Term Trusts.
A complaint was filed by Gary E. Nelson on June 28, 1995 in the United
States District Court for the Western District of Washington at Seattle against
American Strategic Income Portfolio Inc. -- II ("BSP"), the Adviser, the
Distributor, Piper Jaffray Companies Inc., Worth Bruntjen, Charles N. Hayssen,
Michael Jansen, William H. Ellis and Edward J. Kohler. A second complaint was
filed by the same individual in the same court on July 12, 1995 against American
Opportunity Income Fund Inc. ("OIF"), the Adviser, the Distributor, Piper
Jaffray Companies Inc., Worth Bruntjen, Charles N. Hayssen, Michael Jansen,
William H. Ellis and Edward J. Kohler. On September 7, 1995, Christian
Fellowship Foundation Peace United Church of Christ, Gary E. Nelson and Lloyd
Schmidt filed an amended complaint purporting to be a class action in the United
States District Court for the District of Washington. The complaint was filed
against American Government Income Portfolio, Inc. ("AAF"), American Government
Income Fund Inc. ("AGF"), American Government Term Trust, Inc., American
Strategic Income Portfolio Inc. ("ASP"), American Strategic Income Portfolio
Inc. -- II, American Strategic Income Portfolio Inc. -- III ("CSP"), American
Opportunity Income Fund Inc., American
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<PAGE>
Select Portfolio Inc., Piper Jaffray Companies Inc., the Distributor, the
Adviser and certain associated individuals. By Order filed October 5, 1995, the
complaints were consolidated. Plaintiffs filed a second amended complaint on
February 5, 1996 and a third amended complaint on June 4, 1996. The third
amended third complaint alleges generally that the prospectus and financial
statements of each investment company were false and misleading. Specific
violations of various federal securities laws are alleged with respect to each
investment company. The complaint also alleges that the defendants violated the
Racketeer Influenced and Corrupt Organizations Act, the Washington State
Securities Act and the Washington Consumer Protection Act. The named plaintiffs
and defendants have reached an agreement-in-principle on a proposed settlement.
If approved by the Court, a settlement agreement consistent with the terms of
the agreement-in-principle would provide $15.5 million to class members in
payments by Piper Jaffray Companies Inc. and the Adviser over the next four
years. The settlement also includes an agreement that each of OIF, AAF, and AGF
would offer to repurchase up to 25% of their outstanding shares from current
shareholders at net asset value. If the discounts between net asset value and
market price of these funds do not decrease to 5% or less within approximately
two years after the effective date of the settlement, the fund boards may submit
shareholder proposals to convert these funds to an open-end format. Finally,
the agreement stipulates that each of ASP, BSP, CSP and SLA would offer to
repurchase up to 10% of their outstanding shares from current shareholders at
net asset value.
Four additional complaints are pending which involve the funds named as
defendants in the Nelson/Christian Fellowship Consolidated Action and are based
on claims similar to that action. The first additional complaint was filed
against the Distributor and Richard Tallent in Montana State District Court,
Silver Bow County on November 1, 1995 by plaintiff John Darlington. The second
complaint was filed against the Distributor and Richard Tallent on April 11,
1996 in Montana State District Court, Silver Bow County by plaintiff Kenneth
Schneider. The third complaint was filed against the Distributor and Richard
Tallent on April 11, 1996 in Montana State District Court, Silver Bow County by
plaintiff Margaret Nagel. The fourth complaint was filed against the
Distributor on August 7, 1996 by plaintiff Kenneth Gennerman as Trustee of the
Nicole Bowlin Trust in Wisconsin Circuit Court, Waukesha County. In addition to
the above complaints, a number of arbitrations have been commenced by individual
investors in the funds named as defendants in the Nelson/Christian Fellowship
Consolidated Action.
Complaints have also been filed relating to two open-end funds for which
the Adviser has acted as sub-adviser, Managers Intermediate Mortgage Fund and
Managers Short Government Fund. A complaint was filed on September 26, 1994 in
the United States District Court, District of Connecticut, by Florence R. Hosea,
Bobby W. Hosea, Getrud B. Dale and Peter M. Dale, Andrew Poffel and Diane Poffel
as tenants by the Entireties, Myrone Sarone, Donna M. DiPalo, Bernard B. Geltner
and Gail Geltner and Paul Delman. The complaint was filed against The Managers
Funds, The Managers Funds, L.P., Robert P. Watson, the Adviser, the Distributor,
an individual associated with the Adviser, Evaluation Associates, Inc. and
Managers Intermediate Mortgage Fund. The complaint, which is a putative class
action, alleges certain violations of federal securities laws, including the
making of false and misleading statements in the prospectus, and alleges
negligent
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misrepresentation, breach of fiduciary duty and common law fraud. A similar
complaint was filed as a putative class action in the same court on November 4,
1994. The complaint was filed by Karen E. Kopelman against The Managers Fund,
The Managers Funds, L.P., Robert P. Watson, the Adviser, the Distributor, Worth
Bruntjen, Evaluation Associates, Inc. and Managers Intermediate Mortgage Fund.
The two putative class actions were consolidated by court order on December 13,
1994. Plaintiffs filed an Amended and Restated Complaint on July 19, 1995. A
complaint relating to the Managers Short Government Fund was filed on
November 18, 1994 in the United States District Court, District of Minnesota.
The complaint was filed by Robert Fleck as a putative class action against The
Managers Funds, The Managers Funds, L.P., the Adviser, the Distributor, Worth
Bruntjen, Evaluation Associates, Inc., Robert P. Watson, John E. Rosati, William
M. Graulty, Madeline H. McWhinney, Steven J. Pasggioli, Thomas R. Schneeweis and
Managers Short Government Fund, F/K/A/ Managers Short Government Income Fund.
The complaint alleges certain violations of federal securities laws, including
the making of false and misleading statements in the prospectus, and negligent
misrepresentation. The named plaintiff and defendants have reached an
agreement-in-principle on a proposed settlement. If approved by the Court and a
sufficiently large percentage of the putative class members, a settlement
agreement consistent with the terms of the agreement-in-principle would provide
to class members up to a total of $1.5 million collectively from The Managers
Funds, L.P. and the Adviser on the effective date of the settlement. A third
complaint relating to both the Managers Intermediate Mortgage Fund and the
Managers Short Government Fund was filed on October 26, 1995 in Connecticut
State Superior Court, Stamford/Norwalk District. The complaint was filed by
First Commercial Trust Company, N.A. against the Managers Funds, Managers Short
Government Fund, Managers Intermediate Mortgage Fund, Managers Short and
Intermediate Bond Fund, The Managers Funds, L.P., EAIMC Holdings Corporation,
Evaluation Associates Holding Corporation, EAI Partners, L.P., Evaluation
Associates, Inc., Robert P. Watson, William W. Graulty, Madeline H. McWhinney,
Steven J. Paggioli, Thomas R. Schneeweis, William J. Crerend, the Adviser, Piper
Jaffray Companies Inc., Worth Bruntjen, Standish, Ayer & Wood, Inc., TCW Funds
Managements, Inc., and TCW Management Company. The complaint alleges claims
under Connecticut common law and violation of the Connecticut Securities Act and
the Connecticut Unfair and Deceptive Trade Practices Act.
The Adviser and Distributor do not believe that the settlements described
above, or any of the above lawsuits and arbitrations, will have a material
adverse effect upon their ability to perform under their agreements with the
Company, and they intend to defend the remaining lawsuits vigorously.
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APPENDIX A
RATINGS
Description of the two highest commercial paper, bond and other short- and
long-term rating categories assigned by Standard & Poor's Ratings Services
("S&P"), Moody's Investors Service, Inc. ("Moody's"), Fitch Investors Service LP
("Fitch"), Duff & Phelps, Inc. ("Duff"), IBCA Limited and IBCA Inc. ("IBCA") and
Thomson BankWatch, Inc. ("BankWatch").
COMMERCIAL PAPER AND SHORT-TERM RATINGS
The designation A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus sign (+)
designation. Capacity for timely payment on issues with an A-2 designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 (P-1) is the highest commercial paper rating assigned by
Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well-established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issues rated Prime-2 (P-2) have a strong capacity for repayment of short-term
promissory obligations. This ordinarily will be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets, and sound liquidity factors
and company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2
are supported by a strong capacity for timely repayment, although such capacity
may be susceptible to adverse changes in business, economic or financial
conditions.
A-1
<PAGE>
The rating TBW-1 is the highest short-term obligation rating assigned by
BankWatch. Obligations rated TBW-1 are regarded as having the strongest
capacity for timely repayment. Obligations rated TBW-2 are supported by a
strong capacity for timely repayment, although the degree of safety is not as
high as for issues rated TBW-1.
BOND AND LONG-TERM RATINGS
Bonds rated AAA are considered by S&P to be the highest grade obligations
and possess an extremely strong capacity to pay principal and interest. Bonds
rated AA by S&P are judged by S&P to have a very strong capacity to pay
principal and interest, and in the majority of instances differ only in small
degrees from issues rated AAA.
Bonds rated Aaa are judged by Moody's to be of the best quality. Bonds
rated Aa by Moody's are judged by Moody's to be of high quality by all standards
and, together with the Aaa group, they comprise what are generally known as
high-grade bonds. Bonds rated Aa are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuations of protective elements may be
of greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger. Moody's applies numerical modifiers 1, 2 and
3 in the Aa rating category. The modifier 1 indicates a ranking for the
security in the higher end of this rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
the rating category.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high-grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions, and liable to but slight market fluctuation other than through
changes in the money rate. The prime feature of an AAA bond is a showing of
earnings several times or many times interest requirements, with such stability
of applicable earnings that safety is beyond reasonable question whatever
changes occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be
of safety virtually beyond question and are readily salable, whose merits are
not unlike those of the AAA class, but whose margin of safety is less strikingly
broad. The issue may be the obligation of a small company, strongly secured but
influenced as to rating by the lesser financial power of the enterprise and more
local type of market.
Bonds rated AAA by Duff are considered to be of the highest credit quality.
The risk factors are negligible, being only slightly more than U.S. Treasury
debt. Bonds rated AA are considered by Duff to be of high credit quality with
strong protection factors. Risk is modest but may vary slightly from time to
time because of economic conditions.
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk significantly. Obligations rated AA by
IBCA have a very low expectation of investment risk. Capacity for timely
repayment of principal and
A-2
<PAGE>
interest is substantial. Adverse changes in business, economic or financial
condition may increase investment risk, albeit not very significantly.
IBCA also assigns a rating to certain international and U.S. banks. An
IBCA bank rating represents IBCA's current assessment of the strength of the
bank and whether such bank would receive support should it experience
difficulties. In its assessment of a bank, IBCA uses a dual rating system
comprised of Legal Ratings and Individual Ratings. In addition, IBCA assigns
banks Long- and Short-Term Ratings as used in the corporate ratings discussed
above. Legal Ratings, which range in gradation from 1 through 5, address the
question of whether the bank would receive support provided by central banks or
shareholders if it experienced difficulties, and such ratings are considered by
IBCA to be a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent IBCA's assessment of a
bank's economic merits and address the question of how the bank would be viewed
if it were entirely independent and could not rely upon support from state
authorities or its owners.
In addition to its ratings of short-term obligations, BankWatch assigns a
rating to each issuer it rates, in gradations of A through E. BankWatch
examines all segments of the organization, including, where applicable, the
holding company, member banks or associations, and other subsidiaries. In those
instances where financial disclosure is incomplete or untimely, a qualified
rating (QR) is assigned to the institution. BankWatch also assigns, in the case
of foreign banks, a country rating which represents an assessment of the overall
political and economic stability of the country in which the bank is domiciled.
A-3
<PAGE>
PART C
OTHER INFORMATION
U.S. Government Money Market Fund, Money Market Fund and
Tax-Exempt Money Market Fund
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements are incorporated by reference to the Registrant's
Annual Reports previously filed with the Commission.
(b) Exhibits:
1.1 Restated Articles of Incorporation dated November 23, 1993 *
1.2 Certificate of Designation of Series M Common Shares *
2.1 Bylaws *
2.2 Amendment to Bylaws dated July 6, 1995 *
2.3 Amendment to Bylaws dated September 13, 1996 (1)
5.1 Investment Advisory and Management Agreement dated February 19,
1987 *
5.2 Supplement to Investment Advisory and Management Agreement dated
April 4, 1988 *
5.3 Supplement to Investment Advisory and Management Agreement dated
March 16, 1990 *
5.4 Supplement to Investment Advisory and Management Agreement dated
July 21, 1992 *
5.5 Supplement to Investment Advisory and Management Agreement dated
April 10, 1995 *
6 Amended Underwriting and Distribution Agreement *
9.1 Shareholder Account Servicing Agreement between Piper Funds Inc.
and Piper Trust Company *
9.2 Shareholder Account Servicing Agreement between Piper Funds Inc.
and Piper Jaffray Inc. *
10 Opinion and Consent of Dorsey & Whitney P.L.L.P. dated April 7,
1995 *
11 Consent of KPMG Peat Marwick LLP (2)
13 Letter of Investment Intent dated April 6, 1995 *
15.1 Amended and Restated Plan of Distribution *
15.2 Supplement to Distribution Plan dated April 10, 1995 *
17.1 Power of Attorney dated November 27, 1995 *
------------------------
* Incorporated by reference to Post-Effective Amendment No. 27 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on November 27, 1995.
(1) Incorporated by reference to Post-Effective Amendment No. 29 to the
Registrant's Registration Statement on Form N-1A filed with the
Commission on September 13, 1996.
(2) Filed herewith.
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No person is directly or indirectly controlled by or under common control
with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of November 13, 1996: Number of
Title of Class Record Holders
-------------- --------------
U. S. Government Money Market Fund Common Shares 20,736
Money Market Fund Common Shares 336,319
Tax-Exempt Money Market Fund Common Shares 12,331
ITEM 27. INDEMNIFICATION
The Articles of Incorporation and Bylaws of the Registrant provide that the
Registrant shall indemnify such persons for such expenses and liabilities, in
such manner and under such circumstances, to the full extent permitted by
Section 302A.521, Minnesota Statutes, as now enacted or hereafter amended,
provided that no such indemnification may be made if it would be in violation of
Section 17(h) of the Investment Company Act of 1940, as now enacted or hereafter
amended. Section 302A.521 of the Minnesota Statutes, as now enacted, provides
that a corporation shall indemnify a person made or threatened to be made a
party to a proceeding of the person against judgments, penalties, fines,
settlements, and reasonable expenses, including attorneys' fees and
disbursements, incurred by the person in connection with the proceeding if, with
respect to the acts or omissions of the person complained of in the proceeding,
the person has not been indemnified by another organization for the same
judgments, penalties, fines, settlements, and reasonable expenses incurred by
the person in connection with the proceeding with respect to the same acts or
omissions; acted in good faith, received no improper personal benefit and the
Minnesota Statutes dealing with directors' conflicts of interest, if applicable,
have been satisfied; in the case of a criminal proceeding, had no reasonable
cause to believe that the conduct was unlawful; and reasonably believed that the
conduct was in the best interests of the corporation or, in certain
circumstances, reasonably believed that the conduct was not opposed to the best
interests of the corporation.
Insofar as the indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
2
<PAGE>
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information on the business of the Adviser is described in the section of
the Prospectus, incorporated by reference in this Registration Statement,
entitled "Management -- Investment Adviser."
The officers and directors of the Adviser and their titles are as follow:
Name Title
---- -----
William H. Ellis President, Director and Chairman of
the Board
Deborah K. Roesler Director
Bruce C. Huber Director
David E. Rosedahl Director
Momchilo Vucenich Director
Paul A. Dow Senior Vice President and
Chief Investment Officer
Susan S. Miley Senior Vice President, General
Counsel and Secretary
Worth Bruntjen Senior Vice President
Richard Daly Senior Vice President
Michael C. Derck Senior Vice President
Richard W. Filippone Senior Vice President
John J. Gibas Senior Vice President
Marijo A. Goldstein Senior Vice President
Mark R. Grotte Senior Vice President
Jerry F. Gudmundson Senior Vice President
Robert C. Hannah Senior Vice President
Lynne Harrington Senior Vice President
Kim Jenson Senior Vice President
Russell J. Kappenman Senior Vice President
Kimberly F. Kaul Senior Vice President
Lisa A. Kenyon Senior Vice President
Thomas S. McGlinch Senior Vice President
Curt D. McLeod Senior Vice President
Steven V. Markusen Senior Vice President
Paula Meyer Senior Vice President
Robert H. Nelson Senior Vice President
Gary Norstrem Senior Vice President
Nancy S. Olsen Senior Vice President
Ronald R. Reuss Senior Vice President
Bruce D. Salvog Senior Vice President
John K. Schonberg Senior Vice President
Sandra K. Shrewsbury Senior Vice President
Eric L. Siedband Senior Vice President
David M. Steele Senior Vice President
Jill A. Thompson Senior Vice President
Robert H. Weidenhammer Senior Vice President
John G. Wenker Senior Vice President
Douglas J. White Senior Vice President
3
<PAGE>
Cynthia K. Castle Vice President
Molly Destro Vice President
Julie Deutz Vice President
Rochelle B. Gonzo Vice President
Joyce A. K. Halbe Vice President
Joan L. Harrod Vice President
Mary M. Hoyme Vice President
Amy K. Johnson Vice President
John D. Kightlinger Vice President
Wan-Chong Kung Vice President
Jane C. Longueville Vice President
Brent D. Mellum Vice President
Steven Meyer Vice President
Thomas Moore Vice President
Chris Neuharth Vice President
Paul D. Pearson Vice President
Catherine M. Stienstra Vice President
Shaista Tajamal Vice President
Jane K. Welter Vice President
Marcy K. Winson Vice President
Fong P. Woo Vice President
Principal occupations of Messrs. Ellis, Dow, Nelson and Ms. Miley are set
forth in the Statement of Additional Information under the heading "Directors
and Officers." MR. HAYSSEN is a Director of the Adviser and has been Chief
Information Officer of Piper Jaffray Companies Inc. since January 1996 and a
Managing Director of Piper Jaffray Inc. ("Piper Jaffray") since 1986, prior to
which he was a Managing Director of Piper Jaffray Companies Inc. from 1987 to
1995, Chief Financial Officer of Piper Jaffray from 1988 to 1995, Chief
Financial Officer of the Adviser from 1989 to 1995 and Chief Operating Officer
of the Adviser from 1994 to 1995. MR. HUBER has been a Director of the Adviser
since 1985 and a Managing Director of Piper Jaffray since 1986. MR. ROSEDAHL is
a Director of the Adviser and Managing Director and Secretary for Piper Jaffray
and Managing Director, Secretary and General Counsel for Piper Jaffray Companies
Inc. MR. VUCENICH has been a Director of the Adviser since 1994 and a Managing
Director of Piper Jaffray Inc. since 1993.
MR. BRUNTJEN has been a Senior Vice President of the Adviser since 1988.
MR. DALY has been a Senior Vice President of the Adviser since November 1996,
prior to which he had been a Vice President of the Adviser from 1992 to 1996 and
an Assistant Vice President of Piper Jaffray since 1990. MR. DERCK has been a
Vice President of the Adviser since November 1992, prior to which he had been
a manager of Advisory Accounts Services with the Adviser since April 1992 and,
before that, an Assistant Vice President at First Trust since 1976.
MR. FILIPPONE has been a Senior Vice President of the Adviser since 1991.
MR. GIBAS has been a Senior Vice President of the Adviser since 1992, prior to
which he had been a Vice President of the Adviser from 1987 to 1992. MS.
GOLDSTEIN has been a Senior Vice President of the Adviser since 1993, prior to
which she was a Vice President of the Adviser from 1991 to 1993. MR. GROTTE has
been a Senior Vice President of the Adviser since 1992, prior to which he had
been a Vice President of the Adviser from 1988 to 1992. MR. GUDMUNDSON has been
a Senior Vice President of the Adviser
4
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since 1995, prior to which he was an Executive Vice President at Resource
Capital Advisers from 1991 to 1995. MR. HANNAH has been a Senior Vice President
of the Adviser since 1995, prior to which he was manager of Craig and Associates
in Seattle, Washington from 1993 to 1994, and prior thereto, he was manager of
Exvere in Seattle from January 1993 to August 1993 and a registered
representative at Geneva in Irvine, California from 1991 to 1992. MS.
HARRINGTON has been a Senior Vice President of the Adviser since 1995, prior to
which she was a Managing Director at Piper Jaffray Inc. in the Public Finance
Department. MR. KAPPENMAN has been a Senior Vice President of the Adviser since
Novemenber 1996, prior to which he was a Vice President of the Adviser from 1991
to 1996. MS. KAUL has been a Senior Vice President of the Adviser since
November 1996 and Director of Corporate Communications of the Adviser since
1991, prior to which she was a Vice President of the Adviser from 1991 to 1996.
MS. KENYON has been a Senior Vice President of the Adviser since 1992, prior to
which she had been a financial adviser for a private family in Los Angeles.
MS. JENSON has been a Senior Vice President of the Adviser since 1996, prior to
which she was a Managing Director at Piper Trust since 1991. MR. MCGLINCH has
been a Senior Vice President of the Adviser since 1995, prior to which he had
been a Vice President of the Adviser since 1992 and, prior thereto, he had been
a specialty products trader at FBS Investment Services from 1990 to 1992.
MR. MCLEOD has been a Senior Vice President of the Adviser since 1995, prior to
which he had been a Vice President of the Adviser since 1994, and prior thereto,
a Vice President of Piper Jaffray since 1991. MR. MARKUSEN has been
a Senior Vice President of the Adviser since 1993, prior to which had been a
senior vice president of Investment Advisers, Inc., in Minneapolis, Minnesota
from 1989 to 1993. MS. MEYER has been a Senior Vice President of the Adviser
since 1994, prior to which she had been a Vice President of Secura Insurance,
Appleton, Wisconsin from 1988 to 1994. MR. NORSTREM has been a Senior Vice
President of the Adviser since 1993, prior to which he was Treasurer of the City
of Saint Paul, Minnesota for twenty-eight years. MS. OLSEN has been a Senior
Vice President of the Adviser since 1991. MR. REUSS has been a Senior
Vice President of the Adviser since 1989. MR. SALVOG has been a Senior Vice
President of the Adviser since 1992, prior to which he had been a portfolio
manager at Kennedy & Associates in Seattle, Washington from 1984 to 1992. MR.
SCHONBERG has been a Senior Vice President of the Adviser since 1995, prior to
which he was a Vice President of the Adviser from 1992 to 1995 and a portfolio
manager for the Adviser since 1989. MS. SHREWSBURY has been a Senior Vice
President of the Adviser since 1993, prior to which she had been a Managing
Director of Piper Jaffray since 1992, and a Vice President of Piper Jaffray
since 1990. MR. SIEDBAND has been a Senior Vice President of the Adviser since
November 1996, prior to which he was a Vice President of the Adviser from 1992
to 1996. MR. STEELE has been a Senior Vice President of the Adviser since
1992, prior to which he had been a portfolio manager at Kennedy & Associates in
Seattle, Washington from 1987 to 1992. MS. THOMPSON has been a Senior Vice
President of the Adviser since November 1996, prior to which she was a Vice
President of the Adviser from 1994 to 1996, and prior thereto, a Vice
President of Piper Jaffray since 1991. MR. WEIDENHAMMER has been a Senior Vice
President of the Adviser since 1991. MR. WENKER has been a Senior Vice
President of the Adviser since 1993, prior to which he had been a Managing
Director of Piper Jaffray from 1992 to 1993, and prior thereto, the Director of
Revitalization Resources of the Minneapolis Community Development Agency from
1990 to 1992. MR. WHITE has been a Senior Vice President of the Adviser since
1991.
MS. CASTLE has been a Vice President of the Adviser since 1994, prior to
which she was a client service associate of the Adviser since 1990. MS. DESTRO
has been aVice President of the Adviser since 1994, prior to which she was an
Accounting Manager from 1993 to 1994 and mutual fund accountant from 1991 to
1993 with the Adviser. MS. DEUTZ has been a Vice President of the Adviser
since September 1995, prior to which she was an Assistant Vice President at
5
<PAGE>
Daiwa Bank, Ltd. from 1992 to September 1995 and a manager of financial
reporting at The Churchill Companies from 1991 to 1992. MS. GONZO has been a
Vice President of the Adviser since November 1996, prior to which she was a
communications manager of the Adviser since 1993, and prior thereto, a senior
financial communications specialist at Minnesota Mutual in St. Paul, Minnesota
from 1986 to 1993. MS. HALBE has been a Vice President of the Adviser since
1996, prior to which she was a Vice President at First Asset Management since
1990. MS. HARROD has been a Vice President of the Adviser since 1992 and has
been a trader for the Adviser since 1989. MS. HOYME has been a Vice President
of the Adviser since 1996, prior to which she had been a Vice President at
First Asset Management since 1989. MS. JOHNSON has been aVice President of
the Adviser since 1994, prior to which she was an Accounting Manager from 1993
to 1994 and mutual fund accountant from 1991 to 1993 with the Adviser.
MR. KIGHTLINGER has been a Vice President of the Adviser since 1991. MS. KUNG
has been a Vice President of the Adviser since 1993, prior to which she had been
a Senior Consultant at Cytrol Inc. from 1989 to 1992. MS. LONGUEVILLE has been
a Vice President of the Adviser since November 1996, prior to which she was an
Assistant Vice President since 1995, and prior thereto, a communications manager
at the Adviser. MR. MELLUM has been a Vice President of the Adviser since 1996,
prior to which he was an Assistant Vice President of the Adviser since 1995, and
prior thereto, a credit analyst at the Adviser since 1993, and prior to that he
was a student. MR. MEYER has been a Vice President of the Adviser since 1994
and manager of Systems Integration for the Adviser since 1991. MR. MOORE has
been a Vice President of the Adviser since 1992, prior to which he was a
Portfolio Manager at Alpine Capital Management from 1990 to 1992 and a broker
at Hanifen Capital Management from 1990 to 1992. MR. NEUHARTH has been a Vice
President of the Adviser since 1996, prior to which he had been a senior
mortgage trader at FBS Mortgage since 1995, and prior thereto, a fixed income
portfolio manager at Fortis Financial since 1987. MR. PEARSON has been a Vice
President of the Adviser since 1995, prior to which he was Mutual Funds
Accounting Manager of the Adviser from 1994 to 1995 and prior thereto, Director
of Fund Operations at Norwest Bank, Minneapolis from 1992 to 1994. MS. STIENSTRA
has been a Vice President of the Adviser since November 1995 and a municipal
bond trader of the Adviser since June 1995, prior to which she was an assistant
analyst of the Adviser from 1991 to 1994. MS. TAJAMAL has been a Vice President
of the Adviser since 1995 and a portfolio manager of the Adviser since 1993,
prior to which she was a money market analyst of the Adviser from 1990 to 1993.
MS. WELTER has been a Vice President of the Adviser since 1994, prior to which
she was a client service associate of the Adviser since 1993 and a mutual fund
accountant with the Adviser from 1990 to 1993. MS. WINSON has been a Vice
President of the Adviser since November 1993, prior to which she was an
Assistant Vice President of the Adviser since March 1993 and an educator from
1990 to 1992. MR. WOO has been a Vice President of the Adviser since 1994,
prior to which he was a municipal credit analyst of the Adviser since 1992 and
a credit specialist at a commercial trading firm from 1991 to 1992.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Piper Jaffray Inc. acts as principal underwriter for the Registrant
and also for three other open-end investment companies, Piper Funds Inc. -- II,
the shares of which are currently offered in one series, Piper Institutional
Funds Inc., the shares of which are currently offered in one series and Piper
Global Funds Inc., the shares of which are currently offered in two series.
Piper Jaffray has acted as principal underwriter in connection with the initial
public offering of shares of 23 closed-end investment companies.
6
<PAGE>
(b) The name, positions and offices with Piper Jaffray Inc., and positions
and offices with the Registrant of each director and officer of Piper Jaffray
Inc. are as follow:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Addison L. Piper Chairman of the Board of None
Directors and Chief Executive
Officer
Andrew S. Duff President None
Ralph W. Burnet Member of the Board None
of Directors
William H. Ellis Member of the Board None
of Directors
John L. McElroy, Jr. Member of the Board None
of Directors
Kathy Halbreich Member of the Board None
of Directors
Robert S. Slifka Member of the Board None
of Directors
David Stanley Member of the Board None
of Directors
James J. Bellus Managing Director None
AnnDrea M. Benson Managing Director and None
General Counsel
Lloyd K. Benson Managing Director None
Gary J. Blauer Managing Director None
Karen M. Bohn Managing Director None
Sean K. Boyea Managing Director None
Ronald O. Braun Managing Director None
Jay A. Brunkhorst Managing Director None
Edward M. Caillier Managing Director None
Kenneth S. Cameranesi Managing Director None
Stephen M. Carnes Managing Director None
7
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Joseph V. Caruso Managing Director None
Antonio J. Cecin Managing Director None
Joyce E. Chaney Managing Director None
Kenneth P. Clark Managing Director None
Linda A. Clark Managing Director None
Stephen B. Clark Managing Director None
John P. Clausen Managing Director None
Mark Copman Managing Director None
David P. Crosby Managing Director None
Mark A. Curran Managing Director None
George S. Dahlman Managing Director None
William E. Darling Managing Director None
Michael D. Deede Managing Director None
Jack C. Dillingham Managing Director None
Mark T. Donahoe Managing Director None
Darci L. Doneff Managing Director None
Michael D. Duffy Managing Director None
Andrew W. Dunleavy Managing Director None
Richard A. Edstrom Managing Director None
Fred R. Eoff, Jr. Managing Director None
Richard D. Estenson Managing Director None
Francis E. Fairman IV Managing Director None
John R. Farrish Managing Director None
G. Richard Ferguson Managing Director None
Paul Ferry Managing Director None
Mark E. Fisler Managing Director None
Michael W. Follett Managing Director None
8
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Daniel P. Gallaher Managing Director None
Peter M. Gill Managing Director None
Kevin D. Grahek Managing Director None
Paul D. Grangaard Managing Director None
Thomas J. Gunderson Managing Director None
James S. Harrington Managing Director None
Charles N. Hayssen Managing Director None
William P. Henderson Managing Director None
Allan F. Hickok Managing Director None
Richard L. Hines Managing Director None
David B. Holden Managing Director None
Charles E. Howell Managing Director None
Bruce C. Huber Managing Director None
Elizabeth A. Huey Managing Director None
John R. Jacobs Managing Director None
Earl L. Johnson Managing Director None
Richard L. Johnson Managing Director None
Nicholas P. Karos Managing Director None
Paul P. Karos Managing Director None
Richard G. Kiss Managing Director None
Gordon E. Knudsvig Managing Director None
Jerome P. Kohl Managing Director None
Eric W. Larson Managing Director None
Michael L. Libera Managing Director None
Marina M. Lyon Managing Director None
9
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Robert J. Magnuson Managing Director None
Robert E. Mapes Managing Director None
Peter T. Mavroulis Managing Director None
Timothy R. McClernon Managing Director None
Michael P. McMahon Managing Director None
G. Terry McNellis Managing Director None
Darryl L. Meyers Managing Director None
Joseph E. Meyers Managing Director None
John V. Miller Managing Director None
Davil L. Miogley Managing Director None
Dennis V. Mitchell Managing Director None
Edward P. Nicoski Managing Director None
Barry J. Nordstrand Managing Director None
Benjamin S. Oehler Managing Director None
Brooks G. O'Neil Managing Director None
John P. O'Neill Managing Director None
John Otterlei Managing Director None
Robin C. Pfister Managing Director None
Laurence S. Podobinski Managing Director None
Steven J. Proeschel Managing Director None
Rex W. Ramsay Managing Director None
Brian J. Ranallo Managing Director None
Jeffrey K. Ray Managing Director None
Roger W. Redmond Managing Director None
Robert P. Rinek Managing Director None
10
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Wesley L. Ringo Managing Director None
Jim M. Roane Managing Director None
Deborah K. Roesler Managing Director None
Ross E. Rogers Managing Director None
David E. Rosedahl Managing Director None
and Secretary
Jeanne R. Rosengren Managing Director None
David D. Rothschild Managing Director None
Terry D. Sandven Managing Director None
Thomas P. Schnettler Managing Director None
Steven R. Schroll Managing Director None
Joyce Nelson Schuette Managing Director None\
Lawrence M. Schwartz, Jr. Managing Director None
Morton D. Silverman Managing Director None
Linda E. Singer Managing Director None
David P. Sirianni Managing Director None
Arch C. Smith Managing Director None
Robert L. Sonnek Managing Director None
Sandra G. Sponem Managing Director None
Thomas E. Stanberry Managing Director None
DeLos V. Steenson Managing Director None
D. Greg Sundberg Managing Director None
Robert D. Swerdling Managing Director None
William H. Teeter Managing Director None
Ann C. Tillotson Managing Director None
Marie Uhrich Managing Director None
Momchilo Vucenich Managing Director None
11
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
---- --------------------- ---------------------
Charles M. Webster, Jr. Managing Director None
Darrell L. Westby Managing Director None
David R. Westcott Managing Director None
Douglas R. Whitaker Managing Director None
James H. Wilford Managing Director None
Stephen W. Woodard Managing Director None
Mark Wren Managing Director None
Saul Yaari Managing Director None
Bradley F. Zilka Managing Director None
Beverly J. Zimmer Managing Director None
The principal business address of each of the individuals listed above is Piper
Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-3804.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The physical possession of the accounts, books, and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 3la-1 to 3la-3 promulgated thereunder is maintained by the Registrant
at Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-
3804, except that the physical possession of certain accounts, books and other
documents related to the custody of the Registrant's securities is maintained by
Investors Fiduciary Trust Company, 127 West Tenth Street, Kansas City, Missouri
64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) Not applicable.
(c) Each recipient of a prospectus of any series of the Registrant may
request the latest Annual Report of such series, and such Annual Report will be
furnished by the Registrant without charge.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement on Form N-1A pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Minneapolis and State of Minnesota on the 18th day of November 1996.
PIPER FUNDS INC.
(Registrant)
By /s/ Paul A. Dow
--------------------------
Paul A. Dow, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
/s/ Paul A. Dow President (principal November 18, 1996
- ------------------------- executive officer)
Paul A. Dow
/s/ Robert H. Nelson Treasurer (principal November 18, 1996
- ------------------------- financial and
Robert H. Nelson accounting officer)
David T. Bennett* Director
Jaye F. Dyer* Director
William H. Ellis* Director
Karol D. Emmerich* Director
Luella G. Goldberg* Director
David A. Hughey* Director
George Latimer* Director
*By /s/ William H. Ellis November 18, 1996
--------------------------
William H. Ellis, Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
TO
REGISTRATION STATEMENT
OF
PIPER FUNDS INC.
Exhibit Page No.
- ------- --------
11 Consent of KPMG Peat Marwick LLP
<PAGE>
Exhibit 11
[LOGO]
[LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Piper Funds Inc.:
We consent to the use of our report dated October 25, 1996 incorporated by
reference herein and to the references to our Firm under the headings "FINANCIAL
HIGHLIGHTS" in Part A and "FINANCIAL STATEMENTS" in Part B of the Registration
Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
November 18, 1996
