<PAGE>
PIPER
TAX-EXEMPT
FUNDS
[LOGO]
1996
SEMIANNUAL REPORT
<PAGE>
TABLE OF CONTENTS
NATIONAL TAX-EXEMPT FUND
Letter to Shareholders . . . . . . 2
Effective Duration . . . . . . . . 6
Investments in Securities. . . . . 7
Financial Statements and Notes . . 12
The fund's investment objective is to provide maximum current income that is
exempt from federal income taxes, consistent with prudent investment risk and
preservation of capital. To achieve its investment objective, the fund
invests primarily in investment-grade or comparable quality municipal bonds,
notes and tax-free municipal leases issued by states, territories and
possessions of the United States, the District of Columbia, or their
agencies, instrumentalities and political subdivisions. The fund's
investments may include municipal derivative securities. As with other mutual
funds, there can be no assurance that the fund will achieve its objective.
The fund's Nasdaq symbol is PJNTX.
MINNESOTA TAX-EXEMPT FUND
Letter to Shareholders . . . . . . 4
Effective Duration . . . . . . . . 6
Investments in Securities. . . . . 9
Financial Statements and Notes . . 12
The fund's investment objective is to provide maximum current income that is
exempt from both federal and Minnesota state income taxes, consistent with
prudent investment risk and preservation of capital. To achieve its
objective, the fund invests primarily in investment-grade or comparable
quality municipal bonds, notes and tax-free municipal leases issued by the
state of Minnesota, its agencies, instrumentalities and political
subdivisions, and certain securities of U.S. territorial possessions. The
fund's investments may include municipal derivative securities. As with other
mutual funds, there can be no assurance that the fund will achieve its
objective. The fund's Nasdaq symbol is PJMNX.
CALL TO RECEIVE QUARTERLY UPDATES
If you would like to be put on our mailing list to receive quarterly fund
summaries for Piper National Tax-Exempt Fund or Piper Minnesota Tax-Exempt Fund,
call our Shareholder Services Department at 1 800 866-7778.
THIS REPORT IS INTENDED FOR SHAREHOLDERS OF PIPER NATIONAL TAX-EXEMPT FUND AND
PIPER MINNESOTA TAX-EXEMPT FUND, BUT IT MAY ALSO BE USED AS SALES LITERATURE IF
PRECEDED OR ACCOMPANIED BY A PROSPECTUS. THE PROSPECTUS GIVES DETAILS ABOUT THE
CHARGES, INVESTMENT RESULTS, RISKS AND OPERATING POLICIES OF THE FUNDS.
<PAGE>
SHAREHOLDER SERVICES
AS A SHAREHOLDER IN PIPER FUNDS, YOU HAVE ACCESS TO A FULL RANGE OF SERVICES AND
BENEFITS. CHECK YOUR PROSPECTUS FOR DETAILS ABOUT SERVICES AND ANY LIMITATIONS
THAT MIGHT APPLY TO YOUR FUND.
LOW MINIMUM INVESTMENTS
You can open most Piper mutual fund accounts with a minimum investment of $250.
QUANTITY DISCOUNTS
If your initial investment exceeds a specified amount, if an investment combined
with the value of your existing Piper shares exceeds a specified amount, or if
your investments combined during a 13-month period exceed a specified amount,
you can reduce or even eliminate the front-end sales charge.
WAIVER OF SALES CHARGES
Money market funds carry no sales charges.* Sales charges on other Piper
funds are waived on purchases of $500,000 or more. However, a contingent
deferred sales charge may be imposed. See your prospectus for details.
AUTOMATIC REINVESTMENT OF DIVIDENDS
For maximum growth of your assets, you can reinvest dividends and capital gains
automatically in additional shares of your fund without a sales charge.
CROSS-REINVESTMENT OF DISTRIBUTIONS
Diversify your holdings by reinvesting dividends and capital gains from one
Piper fund into another.
CASH DISTRIBUTIONS
If you prefer, take your dividends and/or capital gains in cash.
AUTOMATIC MONTHLY INVESTMENT PROGRAM
You may automatically transfer $25 or more each month from any Piper money
market fund into many other Piper funds.*
AUTOMATIC MONTHLY MONEY TRANSFER PROGRAM
If you are starting a savings discipline or seeking a convenient way to invest,
you can transfer a minimum of $100 automatically from your bank, savings and
loan or other financial institution into many of the Piper funds.
EXCHANGE PRIVILEGES
Revise your investment plan without incurring a sales charge by moving assets
from one Piper fund to another with the same fee structure. See your prospectus
for restrictions involving exchanges between funds with different sales charges.
REINVESTMENT PRIVILEGES
If you buy a fund with a sales charge and later redeem your shares, you may
reinvest all or part of the proceeds in shares of that fund or another Piper
fund within 30 days and pay no additional sales charge, subject to each fund's
minimum investment requirements.
SYSTEMATIC WITHDRAWAL PLAN
If your account has a value of $5,000 or more, you can elect to receive
periodic payments of $100 or more, at no cost, excluding money market funds.
ACCOUNT STATEMENTS
Whenever you add to or withdraw money from your account, you'll receive a
monthly statement from Piper Jaffray. Accounts with no activity receive a
quarterly statement instead. Periodic dividend and capital gain
distributions, if any, also appear on your statement.
CONFIRMATION OF TRANSACTIONS
You receive a confirmation statement following every transaction, except in
the money market funds. All transactions are reflected on your account
statement.
$25 MILLION SHAREHOLDER PROTECTION
If you have a Piper Jaffray PRIME or PAT account, you are protected up to $25
million in the unlikely event that Piper Jaffray were to fail financially.
This is in addition to basic Securities Investor Protection Corporation
(SIPC) coverage, which protects up to $500,000 in cash and securities
($100,000 in cash only) per customer. This protection does not cover market
loss.
* AN INVESTMENT IN A PIPER MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.
1
<PAGE>
NATIONAL TAX-EXEMPT FUND
[PHOTO]
RONALD REUSS
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF NATIONAL
TAX-EXEMPT FUND. HE HAS 27 YEARS OF FINANCIAL EXPERIENCE.
DOUGLAS WHITE, CFA (PICTURED ON PAGE 4)
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF NATIONAL
TAX-EXEMPT FUND. HE HAS 13 YEARS OF FINANCIAL EXPERIENCE.
PORTFOLIO COMPOSITION BY RATING
MARCH 31, 1996
[PIE CHART]
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
MUNICIPAL DERIVATIVE SECURITIES (INVERSE FLOATERS) ACCOUNT FOR 4% OF THE FUND'S
TOTAL ASSETS.
AVERAGE ANNUALIZED TOTAL RETURNS
THROUGH MARCH 31, 1996
One Year . . . . . . . . . . . . . . 3.17%
Five Year. . . . . . . . . . . . . . 6.84%
Since Inception (7/11/88). . . . . . 7.20%
DURING SOME PERIODS, PIPER CAPITAL WAIVED OR PAID FUND EXPENSES AND/OR PIPER
JAFFRAY, THE FUND'S DISTRIBUTOR, VOLUNTARILY LIMITED 12b-1 FEES FOR THE FUND.
HAD THESE FEES AND EXPENSES NOT BEEN WAIVED, RETURNS WOULD HAVE BEEN 3.07% ONE
YEAR, 6.72% FIVE YEAR AND 6.91% SINCE INCEPTION. ALL RETURNS INCLUDE REINVESTED
DISTRIBUTIONS AND THE FUND'S 4% SALES CHARGE. PAST PERFORMANCE DOES NOT
GUARANTEE FUTURE RESULTS.
May 15, 1996
Dear Shareholders:
NATIONAL TAX-EXEMPT FUND ACHIEVED A 3.48%* TOTAL RETURN FOR THE SIX-MONTH PERIOD
ENDED MARCH 31, 1996. This return includes reinvested distributions but not the
fund's sales charge. The fund's return compares to the Lipper General Municipal
Bond Funds Average return of 2.71% and the Lehman Brothers Municipal Bond Index
return of 2.87% for the same six-month period. The fund's outperformance is
largely due to its relatively long effective duration and long call protection
(which is the length of time during which a security cannot be redeemed by the
issuer) during the declining interest rate environment in late 1995.
THROUGHOUT MOST OF THIS PERIOD, TAX-FREE BONDS OUTPERFORMED THEIR TAXABLE
COUNTERPARTS, AS FLAT TAX PROPOSALS CONTINUED TO LOSE SUPPORT. Today, investors
only need to be in the 15% tax bracket before tax-exempt issues become a
preferable option. During the last few months of 1995, interest rates fell as
investors projected economic weakness. In early 1996, however, the economy began
to strengthen and interest rates began to rise, resulting in a decline in bond
prices. While the fund's longer effective duration benefited the fund in late
1995, this long duration had a negative impact on the fund's performance as
rates rose. (See page 6 for more information about effective duration.) However,
there was a positive side effect of rising interest rates: the viability of many
scheduled municipal bond refundings was diminished, reducing the market's
estimate of new issue supply. The reduced new issue estimate - combined with the
existing supply shortage - caused municipal bond prices to fall less than
taxable bonds.
AS OF MARCH 31, THE FUND'S POSITION IN INVERSE FLOATING RATE MUNICIPAL
SECURITIES REPRESENTED ABOUT 4% OF TOTAL ASSETS. Inverse floating rate
securities have an inverse relationship with interest rates. Therefore, as
interest rates fell in 1995, the value of these securities and their coupons
increased. Conversely, as rates rose in early 1996, these securities dropped in
value and their coupons fell somewhat. We believe these securities will remain
attractive holdings over a longer investment horizon and will continue to
provide relatively high tax-exempt cash flow compared to the fund's more
traditional municipal bonds. While we plan to continue to invest in these
securities, it's important to recognize that in volatile interest rate
environments they may cause the fund to experience increased price and income
volatility.
* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES, WHEN SOLD,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
2
<PAGE>
NATIONAL TAX-EXEMPT FUND
VALUE OF $10,000 INVESTED
[GRAPH]
$10,000 INVESTED IN JULY 1988 AND HELD THROUGH MARCH 31, 1996, WOULD HAVE
GROWN TO $17,108. THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES CHARGE OF
4%, WHILE NO SUCH CHARGES ARE REFLECTED IN THE INDEX OR AVERAGE. ALL
PERFORMANCE FIGURES INCLUDE REINVESTED DISTRIBUTIONS. PAST PERFORMANCE DOES
NOT GUARANTEE FUTURE RESULTS.
PORTFOLIO COMPOSITION BY STATE
MARCH 31, 1996
[GRAPH]
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
WE RECENTLY BEGAN INCREASING THE FUND'S INCOME EARNING POWER BY SELECTIVELY
ADDING TO THE FUND'S NON-RATED AND INVERSE FLOATING RATE SECURITIES. Even as
interest rates fluctuate, the relatively high, fixed coupons of non-rated
securities tend to make their prices less volatile. The income generated by
inverse floating rate securities is still currently higher than that of more
traditional municipal bonds; however, because of their inverse relationship with
interest rates, a substantial rise in rates could reduce the income of inverse
floaters to below that of traditional bonds, as well as cause their values to
decline.
THE FUND'S GEOGRAPHIC FOCUS CONTINUES TO BE ON THE CENTRAL, SOUTHWESTERN AND
NORTHWESTERN UNITED STATES. As of March 31, Indiana, Texas, Illinois,
Wisconsin and North Dakota were the fund's largest state concentrations.
Although Texas still has a fairly large weighting, we have reduced the fund's
position in Texas since we last reported to you because we were able to sell
many of these holdings at attractive prices. In addition, we purchased a
California general obligation bond during this period as this state's economy
appears to be showing signs of recovery. We continue to view parts of the
West and Southeast favorably and will watch for additional opportunities to
invest in these areas.
WE EXPECT THE SUPPLY OF OUTSTANDING MUNICIPAL BONDS TO CONTINUE TO SHRINK AS
IT HAS FOR THE PAST TWO YEARS, WHICH SHOULD CAUSE TAX-FREE BONDS TO CONTINUE
TO OUTPERFORM THEIR TAXABLE COUNTERPARTS. However, we also expect to see
further volatility in the municipal market due to the ongoing tax-reform
debate and fluctuating expectations regarding new issue supply. We will
continue to look for opportunities to increase the fund's call protection and
yield while actively monitoring credit quality.
Thank you for investing in National Tax-Exempt Fund. We are dedicated to serving
your financial needs and look forward to helping you reach your financial goals
in 1996.
Sincerely,
/s/ Ronald Reuss
Ronald Reuss, Portfolio Manager
/s/ Douglas White
Douglas White, Portfolio Manager
3
<PAGE>
MINNESOTA TAX-EXEMPT FUND
[PHOTO]
DOUGLAS WHITE, CFA
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF MINNESOTA TAX-EXEMPT
FUND. HE HAS 13 YEARS OF FINANCIAL EXPERIENCE.
RONALD REUSS (PICTURED ON PAGE 2)
SHARES PRIMARY RESPONSIBILITY FOR THE MANAGEMENT OF MINNESOTA
TAX-EXEMPT FUND. HE HAS 27 YEARS OF FINANCIAL EXPERIENCE.
PORTFOLIO COMPOSITION BY SECTOR
MARCH 31, 1996
INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.
MUNICIPAL DERIVATIVE SECURITIES (INVERSE FLOATERS) ACCOUNT FOR 8% OF THE
FUND'S TOTAL ASSETS.
May 15, 1996
Dear Shareholders:
MINNESOTA TAX-EXEMPT FUND ACHIEVED A 2.78%* TOTAL RETURN FOR THE SIX-MONTH
PERIOD ENDED MARCH 31, 1996. This return includes reinvested distributions
but not the fund's sales charge. The fund's return compares to the Lipper
Minnesota Municipal Bond Funds Average return of 2.23% and the Lehman
Brothers Municipal Bond Index return of 2.87% for the same six-month period.
The fund outperformed the Lipper average because of its emphasis on
income-producing securities, its relatively long effective duration and its
long call protection during the declining interest rate environment in late
1995.
DURING MOST OF THIS PERIOD, TAX-FREE BONDS OUTPERFORMED THEIR TAXABLE
COUNTERPARTS, AS FLAT TAX PROPOSALS CONTINUED TO LOSE SUPPORT. Today,
investors only need to be in the 15% tax bracket before tax-exempt issues
become a preferable option. During the last few months of 1995, interest
rates fell as investors projected economic weakness. In early 1996, however,
the economy began to strengthen and interest rates began to rise, resulting
in a decline in bond prices. While the fund's longer effective duration
benefited the fund in late 1995, this long duration had a negative impact on
the fund's performance as rates rose. (See page 6 for more information about
effective duration.) However, there was a positive side effect of rising
interest rates: the viability of many scheduled municipal bond refundings was
diminished, reducing the market's estimate of new issue supply. The reduced
new issue estimate - combined with the existing supply shortage - caused
municipal bond prices to fall less than taxable bonds.
WE MAINTAINED THE FUND'S POSITION IN INVERSE FLOATING RATE MUNICIPAL
SECURITIES, WHICH REPRESENTED ABOUT 8% OF TOTAL ASSETS ON MARCH 31. Inverse
floating rate securities have an inverse relationship with interest rates.
Therefore, as interest rates fell in 1995, the value of these securities and
their coupons increased. Conversely, as rates rose in early 1996, these
securities dropped in value and their coupons fell somewhat. We believe these
securities will remain attractive holdings over a longer investment horizon
and will continue to provide relatively high tax-exempt cash flow compared to
the fund's more traditional municipal bonds. While we plan to maintain our
position in these securities, it's important to recognize that in volatile
interest rate environments they may cause the fund to experience increased
price and income volatility.
* PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES, WHEN SOLD,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
4
<PAGE>
MINNESOTA TAX-EXEMPT FUND
PORTFOLIO COMPOSITION BY RATING
MARCH 31, 1996
[PIE CHART]
VALUE OF $10,000 INVESTED
[GRAPH]
$10,000 INVESTED IN JULY 1988 AND HELD THROUGH MARCH 31, 1996, WOULD HAVE GROWN
TO $16,922. THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES CHARGE OF 4%,
WHILE NO SUCH CHARGES ARE REFLECTED IN THE INDEX OR AVERAGE. ALL PERFORMANCE
FIGURES INCLUDE REINVESTED DISTRIBUTIONS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS.
AVERAGE ANNUALIZED TOTAL RETURNS
THROUGH MARCH 31, 1996
One Year . . . . . . . . . . . 3.19%
Five Year. . . . . . . . . . . 6.84%
Since Inception (7/11/88). . . 7.05%
DURING SOME PERIODS, THE FUND'S ADVISER WAIVED OR PAID CERTAIN FUND EXPENSES
AND/OR THE FUND'S DISTRIBUTOR VOLUNTARILY LIMITED 12b-1 FEES FOR THE FUND.
OTHERWISE, THE AVERAGE ANNUALIZED TOTAL RETURNS WOULD HAVE BEEN 3.10% ONE
YEAR, 6.74% FIVE YEAR AND 6.85% SINCE INCEPTION. ALL RETURNS INCLUDE
REINVESTED DISTRIBUTIONS AND THE FUND'S 4% SALES CHARGE. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS.
DURING THIS SIX-MONTH PERIOD, WE TRADED SECURITIES WITH SHORTER CALL
PROTECTION FOR THOSE WITH LONGER CALL PROTECTION. Call protection is the
length of time during which a security cannot be redeemed by the issuer. We
believe this longer call protection will not only protect the fund's tax-free
income for a longer period of time, but will enhance the price performance
potential of the fund. However, keep in mind that securities with longer call
protection may lengthen the effective duration of the fund which increases
its volatility. Going forward, we will continue to trade shorter call
securities for longer call securities.
WE HAVE DIVERSIFIED THE FUND BY OWNING BOTH GENERAL OBLIGATION AND REVENUE
BONDS THROUGHOUT THE STATE. Minnesota's general obligation bonds were
recently upgraded by Moody's Investor Service, a rating agency, from Aa1 to
an Aaa rating. This is the highest rating and has been granted to only nine
other states. Moody's cited the state's low unemployment rate, diverse
economy and maintenance of a sound financial position as reasons for the
rating upgrade. In addition, school district bonds guaranteed by the state of
Minnesota were upgraded from Aa to Aa1. Within the revenue bond category, the
fund has maintained its overweighted position in the hospital sector, as
Minnesota continues to show leadership in health care reform and legislation.
WE EXPECT THE SUPPLY OF OUTSTANDING MUNICIPAL BONDS TO CONTINUE TO SHRINK AS
IT HAS FOR THE PAST TWO YEARS, WHICH SHOULD CAUSE TAX-FREE BONDS TO CONTINUE
TO OUTPERFORM THEIR TAXABLE COUNTERPARTS. However, we also expect to see
further volatility in the municipal market due to the ongoing tax-reform
debate and fluctuating expectations regarding new issue supply. We will
continue to look for opportunities to increase the fund's call protection and
yield while actively monitoring credit quality.
Thank you for investing in Minnesota Tax-Exempt Fund. We are committed to
providing you with quality management services and look forward to helping
you reach your financial goals in 1996.
Sincerely,
/s/ Ronald Reuss
Ronald Reuss, Portfolio Manager
/s/ Douglas White
Douglas White, Portfolio Manager
5
<PAGE>
EFFECTIVE DURATION
Effective duration estimates the interest rate risk of a security, in other
words how much the value of the security is expected to change with a given
change in interest rates. The longer a security's effective duration, the more
sensitive its price is to changes in interest rates. For example, if interest
rates increased by 1%, the market value of a bond with an effective duration of
five years would decrease by about 5%, with all other factors being constant.
It is important to understand that, while a valuable measure, effective duration
is based on certain assumptions and has several limitations. It is most
effective as a measure of interest rate risk when interest rate changes are
small, rapid and occur equally across short-, intermediate- and long-term
interest rates. In addition, effective duration is difficult to calculate
precisely, especially in the case of a bond that is callable prior to maturity.
6
<PAGE>
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INVESTMENTS IN SECURITIES (UNAUDITED)
NATIONAL TAX-EXEMPT FUND
MARCH 31, 1996
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (93.7%):
California (4.6%):
State General Obligation, 5.63%, 9/1/24 ............. $ 2,500,000 2,394,050
----------
Colorado (2.0%):
Montrose County Health Care Facilities, 8.25%,
11/1/19 .............................................. 1,000,000 1,048,040
----------
Florida (0.6%):
Clay County Industrial Development Revenue, 6.40%,
3/1/11 ............................................... 300,000(e) 313,743
----------
Georgia (2.2%):
State General Obligation, 6.75%, 9/1/10 ............... 1,000,000 1,149,790
----------
Illinois (8.5%):
Board of Governors, State College and University,
7.55%-7.70%, 2/1/16-2/1/22 ........................... 425,000 461,728
Development Financial Authority, 7.38%, 7/1/21 ........ 500,000 556,865
Health Facilities, United Medical Center, 8.38%,
7/1/12 ............................................... 360,000 430,470
Rock Island Nursing Home Revenue, 7.00%-7.20%,
6/1/06-6/1/13 ........................................ 1,500,000 1,540,641
State Sales Tax, Zero Coupon, 4.34%-4.72%,
6/15/14-6/15/15 ...................................... 500,000(b) 338,593
State Toll Highway Authority, 6.30%, 1/1/12 ........... 1,000,000 1,070,900
----------
4,399,197
----------
Indiana (13.7%):
Elberfeld J H Castle School Building Corporation,
Zero-Coupon, 6.30%, 7/15/07 .......................... 500,000(b) 268,250
Evansville University Educational Facility, 8.13%,
11/1/10 .............................................. 500,000 577,550
Hammond School Building Corporation, 6.00%, 1/15/13 ... 1,000,000 1,043,060
IPS School Building Corporation, 6.15%, 1/15/16 ....... 1,200,000 1,238,196
Lake County Redevelopment Authority, 6.50%, 2/1/16 .... 800,000 849,480
Municipal Power Agency, 6.00%-6.00%, 1/1/11-1/1/12 .... 2,000,000 2,114,750
Seymour Community School Building Corporation, 6.25%,
1/15/14 .............................................. 1,000,000 1,027,140
----------
7,118,426
----------
Louisiana (0.6%):
St. Charles Parish Pollution Control Revenue, 8.00%,
12/1/14 .............................................. 300,000 331,971
----------
Massachusetts (2.4%):
Massachusetts Bay Transportation Authority, 5.38%,
3/1/16 ............................................... 1,300,000 1,234,441
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
Michigan (4.6%):
Hospital Financing Authority-Metropolitan Hospital,
5.88%, 7/1/18 ...................................... $ 1,100,000 1,034,946
Romulus County Schools, 5.13%, 5/1/17 ................. 1,475,000 1,365,644
----------
2,400,590
----------
Minnesota (4.7%):
Brooklyn Center Health Care Facility, 7.60%,
12/1/18 .............................................. 400,000 414,896
Fergus Falls Health Care Facility, 7.00%, 11/1/19 ..... 500,000 500,030
Roseville Housing Facility Revenue, 7.13%, 10/1/13 .... 1,000,000 1,033,070
St. Paul Housing-Como Lake Project, 7.50%, 3/1/26 ..... 500,000(f) 478,750
----------
2,426,746
----------
Montana (0.5%):
Sidney Nursing Home, 9.00%, 6/1/11 .................... 250,000 272,290
----------
Nevada (0.4%):
Sparks Redevelopment Agency, 8.10%, 3/1/07 ............ 200,000 211,354
----------
New Mexico (6.7%):
Mortgage Finance Authority, 6.20%-6.40%,
7/1/15-7/1/15 ........................................ 3,350,000 3,495,203
----------
North Dakota (7.5%):
Mercer County Pollution Control Revenue, 7.20%,
6/30/13 .............................................. 3,300,000 3,911,820
----------
Oklahoma (1.1%):
Mental Health Facility, Series A, 7.80%-8.30%,
4/1/98-10/1/04 ....................................... 560,000 596,956
----------
South Dakota (4.8%):
Health and Education Facility Revenue, 6.50%,
8/1/12 ............................................... 1,000,000 1,044,660
Housing Development Authority, 6.65%, 5/1/14 .......... 1,135,000 1,179,708
Lead Sales Tax Revenue-Community Center, 8.88%,
10/1/18 .............................................. 240,000 271,735
----------
2,496,103
----------
Texas (12.1%):
Austin Employment Commission, 8.10%-8.45%,
8/1/01-8/1/08 ........................................ 440,000 447,156
Carrolton Public Improvement Revenue, 6.13%,
8/15/13 .............................................. 1,000,000 1,036,340
Cypress-Fairbanks Independent School District,
Zero-Coupon, 6.15%, 2/15/12 .......................... 5,000,000(b) 1,995,350
Fort Bend Independent School District, 5.00%,
2/15/14 .............................................. 975,000 907,832
Harts Bluff Independent School District, 8.60%-8.80%,
11/15/98-11/15/00 .................................... 100,000 101,504
Houston Employment Commission, 7.85%-8.05%,
5/1/04-5/1/07 ...................................... $ 135,000 137,206
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
7
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
NATIONAL TAX-EXEMPT FUND
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
Round Rock Independent School District, 6.10%,
8/1/11 ............................................... 1,580,000 1,652,490
----------
6,277,878
----------
Utah (0.6%):
Carbon County Road Improvement Revenue, 7.90%,
8/1/04 ............................................... 300,000 314,214
----------
Washington (7.0%):
Chelan County Public Utilities District, 5.70%,
7/1/68 ............................................... 1,000,000 985,620
Grant County Public Utilities District, 5.70%,
1/1/15 ............................................... 1,000,000 990,250
King County School District, 5.55%, 12/1/11 ........... 1,000,000 994,850
Public Power Supply System, 7.13%, 7/1/16 600,000 675,792
----------
3,646,512
----------
Wisconsin (9.0%):
City of Milwaukee, 6.00%, 2/1/10 ...................... 1,000,000 1,065,420
Dallas Nursing Home Revenue, 6.25%, 5/1/19 ............ 1,020,000 982,586
State Clean Water Revenue, 5.80%, 6/1/14 .............. 500,000 505,800
State Health Facilities Authority-Franciscan Hospital,
6.13%, 11/15/15 ...................................... 2,000,000 1,999,820
Watertown Community Development Authority, 8.50%,
3/1/19 ............................................... 95,000 100,803
----------
4,654,429
----------
Total Municipal Long-Term Securities
(cost: $47,028,204) ................................. 48,693,753
----------
MUNICIPAL DERIVATIVE SECURITIES (4.3%):
Illinois Health Facilities Authority, inverse floater,
9.57%, 6/19/15 ....................................... 1,000,000(c) 1,130,000
North Central Texas Health Facility, inverse floater,
9.61%, 6/22/21 ....................................... 1,000,000(c) 1,118,750
----------
Total Municipal Derivative Securities
(cost: $2,000,000) ................................. 2,248,750
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- --------- ----------
<S> <C> <C>
MUNICIPAL SHORT-TERM SECURITIES (1.0%):
Indiana (1.0%):
Indiana Hospital Equipment Capital Access, 2.20%,
12/1/15
(cost: $500,000) ................................... $ 500,000(d) 500,000
----------
Total Investments in Securities (99.0%)
(cost: $49,528,204) (g) ............................. 51,442,503
----------
Other assets in excess of liabilities (1.0%) ......... 541,223
----------
Net assets (100.0%) ................................ $ 51,983,726
----------
----------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(C) INVERSE FLOATER - REPRESENTS SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) IN THE SAME MAGNITUDE AS, OR IN A MULTIPLE OF, A
DECLINE (INCREASE) IN THE MARKET RATE PAID ON A RELATED, FLOATING RATE
SECURITY. INTEREST RATES DISCLOSED ARE IN EFFECT ON MARCH 31, 1996.
(D) VARIABLE RATE NOTE. INTEREST RATE VARIES TO REFLECT CURRENT MARKET
CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON MARCH 31, 1996.
(E) SECURITIES SOLD WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM AND MAY BE
SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS.
(F) NON-INCOME PRODUCING SECURITY AS TO PAYMENT OF PRINCIPAL AND OR INTEREST.
(G) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 2,192,119
GROSS UNREALIZED DEPRECIATION ...... (277,820)
----------
NET UNREALIZED APPRECIATION .... $ 1,914,299
----------
----------
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
MINNESOTA TAX-EXEMPT FUND
MARCH 31, 1996
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
MUNICIPAL LONG-TERM SECURITIES (90.1%):
Education Revenue (3.3%):
Higher Education Facility-Carleton College, 5.75%,
11/1/12 ............................................ $ 1,050,000 1,062,359
Higher Education Facility-St. Benedict College,
6.20%-6.38%, 3/1/14-3/1/20 ........................... 1,400,000 1,400,649
Higher Education Facility-University of St. Thomas,
5.63%-5.63%, 10/1/16-10/1/21 ......................... 1,000,000 966,295
Higher Education Facility-Vermillion Community College,
6.00%, 1/1/13 ........................................ 890,000 897,743
-----------
4,327,046
-----------
Electric Revenue (7.5%):
Southern Municipal Power Agency, 5.75%, 1/1/18 ........ 850,000 864,765
Southern Municipal Power Agency, 5.00%, 1/1/12 ........ 1,000,000 927,270
Southern Municipal Power Agency, Zero-Coupon,
6.20%-6.85%, 1/1/19-1/1/23 ........................... 31,800,000(b) 7,417,339
Western Municipal Power Agency, 9.75%, 1/1/16 ......... 410,000 601,252
-----------
9,810,626
-----------
General Obligations (31.5%):
Burnsville Independent School District, 5.13%,
2/1/17 ............................................... 2,000,000 1,875,680
Chaska Independent School District, 5.88%-6.00%,
2/1/11-2/1/16 ........................................ 9,690,000 9,967,375
Columbia Heights Capital Appreciation, Zero-Coupon,
7.18%, 9/1/08 ........................................ 470,000(b) 227,485
Eden Prairie Independent School District, 5.10%-5.10%,
2/1/11-2/1/12 ........................................ 1,650,000 1,589,846
Long Prairie Independent School District, 5.00%-5.00%,
4/1/12-4/1/14 ........................................ 2,500,000 2,343,215
Mahtomedi Independent School District, 5.75%,
2/1/17 ............................................... 1,000,000 996,900
Minneapolis and St. Paul Metropolitan Council, 5.60%,
6/1/15 ............................................... 2,400,000 2,396,160
Minneapolis Capital Appreciation, Series A,
Zero-Coupon, 5.70%-5.75%, 12/1/09-12/1/12 ............ 3,420,000(b) 1,490,405
Minneapolis Sports Arena Project, 5.10%-5.13%,
4/1/13-10/1/20 ....................................... 2,250,000 2,123,965
North Branch Independent School District, 5.60%-5.63%,
2/1/13-2/1/17 ........................................ 3,500,000 3,464,000
North St. Paul Independent School District, 5.00%,
2/1/15 ............................................... 2,925,000 2,701,296
Prior Lake Independent School District, 5.10%-5.25%,
2/1/13-2/1/15 ........................................ 3,335,000 3,162,597
Rosemount Independent School District, Zero-Coupon,
5.99%-6.00%, 3/1/07-3/1/08 ........................... 2,450,000(b) 1,311,964
South Washington Independent School District, 5.85%,
6/1/15 ............................................... 500,000 506,855
St. Paul Independent School District, 5.00%-5.90%,
2/1/13-2/1/15 ........................................ 4,000,000 3,875,160
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
St. Paul Independent School District, Zero-Coupon,
7.06%, 7/1/12 ...................................... $ 650,000(b) 252,987
Wayzata Independent School District, 5.95%-6.00%,
2/1/13-2/1/16 ........................................ 3,000,000 3,052,958
-----------
41,338,848
-----------
Health Service/HMO's (3.9%):
Coon Rapids Medical Clinic, 6.00%, 5/1/03 ............. 1,140,000 1,162,310
Duluth Clinic Health Care Facilities, 6.30%,
11/1/22 .............................................. 145,000 150,287
Minneapolis and St. Paul, Health One Obligated Group,
5.00%-5.60%, 8/15/12-8/15/25 ......................... 4,085,000 3,792,296
-----------
5,104,893
-----------
Hospital Revenue (10.9%):
Chisago City Health Facility-Pleasant Heights, 7.30%,
7/1/25 ............................................... 400,000 402,372
Mankato Hospital Revenue, Emmanuel, 6.30%, 8/1/22 ..... 1,500,000 1,521,180
Northern Itasca Hospital Revenue, 7.50%-8.00%,
7/1/03-7/1/11 ........................................ 830,000 863,663
Northfield Hospital Revenue, 7.00%-7.00%,
12/1/05-12/1/08 ...................................... 1,690,000 1,771,695
Rochester Health Care, 6.03%, 11/15/15 . 2,000,000 2,043,760
Roseau Hospital District Revenue, 7.20%-7.20%,
10/1/11-10/1/13 ...................................... 730,000 748,404
South St. Paul, Healtheast Hospital, 6.75%, 11/1/09 ... 2,000,000 2,059,280
St. Cloud Hospital Facility Revenue, 5.00%, 7/1/15 .... 4,000,000 3,659,560
Worthington Hospital Revenue, 6.50%-6.50%,
12/1/10-12/1/12 ...................................... 1,230,000 1,241,046
-----------
14,310,960
-----------
Housing Revenue (16.2%):
Austin Housing-Courtyard Project, 7.25%, 1/1/26 ....... 500,000 497,500
Coon Rapids, Multifamily Development-Woodland Apts.,
5.63%, 12/1/09 ....................................... 1,045,000 1,045,230
Dakota County Housing and Redevelopment, 8.10%,
9/1/12 ............................................... 745,000 792,404
Fairmount Housing-Maplewood Project, 8.50%, 7/1/15 .... 900,000 955,845
Maplewood-Hazel Ridge Project, 8.50%-9.25%,
12/1/97-12/1/00 ...................................... 665,000 684,406
Maplewood-Mounds Park Academy Project, 7.00%,
9/1/23 ............................................... 1,500,000 1,510,665
Minneapolis and St. Paul, Health One Obligated Group,
5.70%, 8/15/16 ....................................... 500,000 492,565
Minneapolis Community Development Agency, 7.88%-8.25%,
6/1/02-7/1/17 ........................................ 645,000 681,292
Minneapolis Housing and Urban Development, 7.88%-8.25%,
2/1/06-2/1/18 ........................................ 2,810,000 2,878,771
Minneapolis Housing Revenue-Seward Towers, 7.38%,
12/20/30 ............................................. 1,370,000 1,451,940
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
9
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
MINNESOTA TAX-EXEMPT FUND
(CONTINUED)
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Minneapolis Housing-Churchill Apartments, 7.05%,
10/1/22 ............................................ $ 750,000 783,233
Minnetonka Housing Revenue, 7.50%, 12/1/27 ............ 500,000 530,770
Roseville Housing Facility Revenue, 7.13%, 10/1/13 .... 2,000,000 2,066,140
St. Cloud Northway Housing Project, 7.50%, 12/1/18 .... 500,000 528,315
St. Louis Park Rental Housing-Tamarind Project, 5.50%,
11/1/13 .............................................. 3,225,000 3,115,576
St. Louis Park, Multifamily Housing Project, 6.25%,
12/1/28 .............................................. 500,000 501,180
St. Paul Housing-Como Lake Project, 7.50%, 3/1/26 ..... 1,500,000(f) 1,436,250
St. Paul Multifamily, Peoples Inc., 8.00%-8.00%,
12/1/96-12/1/00 ...................................... 395,000 401,202
State Housing and Finance Agency, 7.00%-7.65%,
7/1/08-8/1/27 ........................................ 845,000 888,719
-----------
21,242,003
-----------
IDR - Miscellaneous Projects (0.8%):
Duluth Economic Development Revenue, 8.00%, 2/1/09 .... 325,000 363,493
Fridley Industrial Development Revenue, 7.00%-7.10%,
6/1/99-6/1/00 ........................................ 300,000 310,844
Shakopee Industrial Development, 5.85%-7.50%,
6/1/96-12/1/08 ....................................... 405,000(e) 429,372
-----------
1,103,709
-----------
Leasing Revenue (5.4%):
Hastings Housing and Redevelopment Authority, 6.50%,
2/1/14 ............................................... 1,000,000 1,014,190
Hennepin County Certificates of Participation,
6.65%-6.80%, 11/15/08-5/15/17 ........................ 3,625,000 3,908,761
Little Canada Community Development, 7.10%, 4/1/13 .... 1,880,000 1,909,441
Melrose City Center Project, 7.80%-8.00%,
2/1/02-8/1/04 ........................................ 270,000 290,311
-----------
7,122,703
-----------
Nursing Home Revenue (8.7%):
Brooklyn Center Health Care Facility, 7.60%,
12/1/18 .............................................. 900,000 933,516
Faribault-St. Lukes Health and Welfare, 8.75%-9.00%,
2/1/11-2/1/21 ........................................ 480,000(f) 240,000
Fergus Falls Health Care Facility, 7.00%, 11/1/19 ..... 1,000,000 1,000,060
Glencoe Health Care System, 8.50%, 12/1/15 ............ 575,000 606,677
Litchfield Health Care, 8.75%, 8/1/20 ................. 500,000 550,675
Little Canada Presbyterian Home, 7.00%, 7/1/07 ........ 700,000 709,527
</TABLE>
<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- --------------------------------------------------------- ---------- -----------
<S> <C> <C>
Maplewood Health Care Facility, 7.50%, 10/1/24 ...... $ 1,500,000 1,546,125
Minneapolis, Careview Home Inc., 8.00%, 5/1/21 ........ 250,000 260,905
Plymouth Health Care Facility, 7.50%-7.50%,
8/1/14-8/1/24 ........................................ 1,600,000 1,653,496
Red Wing Elderly Housing-River Region, 6.40%,
9/1/12 ............................................... 1,000,000 1,013,340
Rushford Good Shepard Nursing Home, 9.00%, 11/1/06 .... 200,000 200,128
Springfield Nursing Home, 8.50%, 11/1/19 .............. 250,000 271,448
St. Anthony Elderly Housing, 10.25%-10.25%,
12/1/98-12/1/15 ...................................... 810,000 855,924
White Bear Lake Care Center, 8.25%, 11/1/12 ........... 1,500,000 1,634,009
-----------
11,475,830
-----------
Other Revenue (1.9%):
Moorhead Economic Development Revenue, 8.00%,
9/1/11 ............................................... 1,000,000 1,058,400
Moorhead Golf Course Revenue, 7.75%, 12/1/15 .......... 1,165,000 1,293,208
Olmsted County Hiawatha Children's Home, 6.50%,
7/1/16 ............................................... 205,000 203,832
-----------
2,555,440
-----------
Total Municipal Long-Term Securities
(cost: $115,969,963) ............................... 118,392,058
-----------
MUNICIPAL DERIVATIVE SECURITIES (8.1%):
Osseo Independent School District, inverse floater,
8.65%, 2/1/14 ........................................ 3,195,000(c) 2,915,438
Richfield Independent School District, inverse floater,
6.78%, 2/1/15 ........................................ 2,365,000(c) 2,137,369
St. Cloud General Obligation, inverse floater, 8.80%,
8/1/13 ............................................... 5,200,000(c) 5,550,999
-----------
Total Municipal Derivative Securities
(cost: $9,726,562) ................................. 10,603,806
-----------
MUNICIPAL SHORT-TERM SECURITIES (0.6%):
Mankato General Obligation Sales Tax, 2.32%, 2/1/18
(cost: $800,000) ..................................... 800,000(d) 800,000
-----------
Total Investments in Securities (98.8%)
(cost: $126,496,525) (g) ........................... 129,795,864
-----------
Other assets in excess of liabilities (1.2%) ........ 1,601,881
-----------
Net assets (100.0%) ................................ $ 131,397,750
-----------
-----------
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES (UNAUDITED)
NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) FOR ZERO-COUPON INVESTMENTS, THE INTEREST RATE SHOWN IS THE EFFECTIVE YIELD
ON THE DATE OF PURCHASE.
(C) INVERSE FLOATER - REPRESENTS SECURITIES THAT PAY INTEREST AT RATES THAT
INCREASE (DECREASE) IN THE SAME MAGNITUDE AS, OR IN A MULTIPLE OF, A
DECLINE (INCREASE) IN THE MARKET RATE PAID ON A RELATED, FLOATING RATE
SECURITY. INTEREST RATES DISCLOSED ARE IN EFFECT ON MARCH 31, 1996.
(D) VARIABLE RATE NOTE. INTEREST RATE VARIES TO REFLECT CURRENT MARKET
CONDITIONS; RATE SHOWN IS THE EFFECTIVE RATE ON MARCH 31, 1996.
(E) SECURITIES SOLD WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM AND MAY BE
SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER ACCREDITED INVESTORS.
(F) NON-INCOME PRODUCING SECURITY AS TO PAYMENT OF PRINCIPAL AND OR INTEREST.
(G) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 4,771,778
GROSS UNREALIZED DEPRECIATION ...... (1,472,439)
----------
NET UNREALIZED APPRECIATION .... $ 3,299,339
----------
----------
</TABLE>
11
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 1996
<TABLE>
<CAPTION>
National Minnesota
Tax-Exempt Tax-Exempt
Fund Fund
----------- ------------
<S> <C> <C>
ASSETS:
Investment in securities, at market value* (note 2) .... $ 51,442,503 129,795,864
Cash in bank on demand deposit ........................... 68,740 133,396
Receivable for fund shares sold .......................... -- 206,540
Accrued interest receivable .............................. 725,686 1,920,371
----------- ------------
Total Assets ......................................... 52,236,929 132,056,171
----------- ------------
LIABILITIES:
Dividends payable to shareholders ($0.0422 per share and
$0.0474 per share, respectively) ....................... 203,379 573,837
Payable for fund shares redeemed ......................... 18,288 5,000
Accrued investment management fee ........................ 22,208 56,045
Accrued distribution fee ................................. 9,328 23,539
----------- ------------
Total Liabilities .................................... 253,203 658,421
----------- ------------
Net assets applicable to outstanding capital stock ....... $ 51,983,726 131,397,750
----------- ------------
----------- ------------
REPRESENTED BY:
Capital stock - authorized 2 billion shares for each fund
of $0.01 par value; outstanding, 4,819,262 and
12,144,012 shares, respectively ...................... $ 48,193 121,440
Additional paid-in capital ............................... 50,474,293 127,624,482
Distributions in excess of net investment income ......... (8,879) (45,370)
Accumulated net realized gain (loss) on investments ...... (444,180) 397,859
Unrealized appreciation of investments ................... 1,914,299 3,299,339
----------- ------------
Total - representing net assets applicable to
outstanding capital stock ........................ $ 51,983,726 131,397,750
----------- ------------
----------- ------------
Net asset value per share of outstanding capital stock ... $ 10.79 10.82
----------- ------------
----------- ------------
* Investments in securities, at identified cost .......... $ 49,528,204 126,496,525
----------- ------------
----------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
National Minnesota
Tax-Exempt Tax-Exempt
Fund Fund
---------- -----------
<S> <C> <C>
INCOME:
Interest ........................................... $ 1,660,668 4,262,950
---------- -----------
EXPENSES (NOTE 5):
Investment management fee ................................ 137,243 340,547
Distribution fee ......................................... 81,761 203,017
Custodian, accounting and transfer agent fees ............ 35,660 69,085
Shareholder account servicing fees ....................... 8,202 14,693
Registration fees ........................................ 7,918 10,151
Reports to shareholders .................................. 6,851 6,851
Directors' fees .......................................... 1,333 1,333
Audit and legal fees ..................................... 19,270 20,714
Other expenses ........................................... 7,844 13,637
---------- -----------
Total expenses ....................................... 306,082 680,028
Less expenses waived by the distributor .................. (24,647) (61,313)
---------- -----------
Net expenses before expenses paid indirectly ......... 281,435 618,715
Less expenses paid indirectly ............................ (1,108) (2,375)
---------- -----------
Total net expenses ................................... 280,327 616,340
---------- -----------
Net investment income ................................ 1,380,341 3,646,610
---------- -----------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 3) ................ 759,551 1,985,948
Net change in unrealized appreciation or depreciation of
investments ............................................ (173,764) (1,869,198)
---------- -----------
Net gain on investments ................................ 585,787 116,750
---------- -----------
Net increase in net assets resulting from
operations ....................................... $ 1,966,128 3,763,360
---------- -----------
---------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
National Minnesota
Tax-Exempt Fund Tax-Exempt Fund
-------------------------- --------------------------
Six-Months Six-Months
Ended Ended
3/31/96 Year Ended 3/31/96 Year Ended
(Unaudited) 9/30/95 (Unaudited) 9/30/95
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income .................................. $ 1,380,341 3,205,862 3,646,610 8,194,043
Net realized gain (loss) on investments .................. 759,551 (286,382) 1,985,948 594,780
Net change in unrealized appreciation or depreciation of
investments ............................................ (173,764) 2,746,079 (1,869,198) 5,979,488
------------ ----------- ------------ -----------
Net increase in net assets resulting from operations ... 1,966,128 5,665,559 3,763,360 14,768,311
------------ ----------- ------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... (1,371,168) (3,195,698) (3,623,553) (8,169,500)
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Proceeds from sales ...................................... 1,263,677 7,261,365 4,384,671 10,065,315
Shares issued for reinvestment of distributions .......... 1,387,059 1,894,074 3,704,762 6,920,383
Payments for shares redeemed ............................. (8,322,623) (22,514,103) (10,688,595) (52,194,970)
------------ ----------- ------------ -----------
Decrease in net assets from capital share
transactions ......................................... (5,671,887) (13,358,664) (2,599,162) (35,209,272)
------------ ----------- ------------ -----------
Total decrease in net assets ......................... (5,076,927) (10,888,803) (2,459,355) (28,610,461)
Net assets at beginning of period .......................... 57,060,653 67,949,456 133,857,105 162,467,566
------------ ----------- ------------ -----------
Net assets at end of period .............................. $ 51,983,726 57,060,653 131,397,750 133,857,105
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
Distributions in excess of net investment income ......... $ (8,879) (18,052) (45,370) (68,427)
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) ORGANIZATION
Piper Funds Inc. (the company) is registered
under the Investment Company Act of 1940 (as
amended) as a single, open-end investment
management company. The company currently has
13 series, including National Tax-Exempt Fund
and Minnesota Tax-Exempt Fund (the funds),
which are classified as diversified and
nondiversified series, respectively. The
company's articles of incorporation permit the
board of directors to create additional series
in the future.
National Tax-Exempt Fund invests primarily in
investment-grade or comparable quality
municipal bonds, notes and tax-free municipal
leases issued by states, territories and
possessions of the United States, the District
of Columbia or their agencies,
instrumentalities and political subdivisions.
The fund's investments may include municipal
derivative securities.
Minnesota Tax-Exempt Fund invests primarily in
investment-grade or comparable quality
municipal bonds, notes and tax-free municipal
leases issued by the state of Minnesota, its
agencies, instrumentalities and political
subdivisions, and certain securities of U.S.
territorial possessions. The fund's
investments may include municipal derivative
securities.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS IN SECURITIES
The value of certain fixed-income securities
will be provided by an independent pricing
service, which determines these valuations at
a time earlier than the close of the Exchange.
Fixed-income securities for which prices are
not available from an independent pricing
service but where an active market exists will
be valued using market quotations obtained
from one or more dealers that make markets in
the securities.
Occasionally events affecting the value of
such securities may occur between the time
valuations are determined and the close of the
Exchange. If events materially affecting the
value of such securities occur, if the
Company's management determines for any other
reason that valuations provided by the pricing
service are inaccurate or when market
quotations are not readily available,
securities will be valued at their fair value
according to procedures decided upon in good
faith by the Board of Directors. Short-term
securities with maturities of 60 days or less
are valued at amortized cost, which
approximates market value.
Financial futures are valued at the last
settlement price established each day by the
board of trade or exchange on which they are
traded. Such valuations are determined using
independent pricing services or prices quoted
by independent brokers.
Securities transactions are accounted for on
the date the securities are purchased or sold.
Realized gains and losses are calculated on
the identified-cost basis. Interest income,
including amortization of bond discount and
premium computed on a level-yield basis, is
accrued daily.
Minnesota Tax-Exempt Fund concentrates its
investments in Minnesota and, therefore, may
have more credit risk related to the economic
conditions of Minnesota than a portfolio with
a broader geographical diversification.
FUTURES TRANSACTIONS
In order to gain exposure to or protect from
changes in the market, the funds may buy and
sell financial futures contracts and related
options. Risks of entering into
15
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
futures contracts and related options include
the possibility that there may be an illiquid
market and that a change in the value of the
contract or option may not correlate with
changes in the value of the underlying
securities.
Upon entering into a futures contract, the
funds are required to deposit either cash or
securities in an amount (initial margin) equal
to a certain percentage of the contract value.
Subsequent payments (variation margin) are
made or received by the funds each day. The
variation margin payments are equal to the
daily changes in the contract value and are
recorded as unrealized gains and losses. The
funds recognize a realized gain or loss when
the contract is closed or expires.
SECURITIES PURCHASED ON A WHEN-ISSUED BASIS
Delivery and payment for securities that have
been purchased by the funds on a
forward-commitment or when-issued basis can
take place a month or more after the
transaction date. During this period, such
securities do not earn interest, are subject
to market fluctuation and may increase or
decrease in value prior to their delivery.
Each fund maintains, in segregated accounts
with the custodian, assets with a market value
equal to the amount of its purchase
commitments. The purchase of securities on a
when-issued or forward-commitment basis may
increase the volatility of each fund's net
asset value if the funds make such purchases
while remaining substantially fully invested.
As of March 31, 1996, the funds had no
outstanding when-issued or forward-
commitments.
FEDERAL TAXES
Each fund is treated separately for federal
income tax purposes. Each fund intends to
comply with the requirements of the Internal
Revenue Code applicable to regulated
investment companies and not be subject to
federal income tax. Therefore, no income tax
provision is required. In addition, on a
calendar-year basis, the funds will distribute
substantially all of their taxable net
investment income and realized gains, if any,
to avoid the payment of any federal excise
taxes.
Net investment income and net realized gains
(losses) may differ for financial statement
and tax purposes primarily because of losses
deferred due to 'wash sale' transactions and
market discount amortization.
The character of distributions made during the
year from net investment income or net
realized gains may differ from its ultimate
characterization for federal income tax
purposes. In addition, due to the timing of
dividend distributions, the fiscal year in
which amounts are distributed may differ from
the year that the income or realized gains
(losses) were recorded by the funds.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net
investment income are declared daily and paid
monthly. Net realized gains distributions, if
any, will be made at least annually.
Distributions are payable in cash or
reinvested in additional shares.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with
certain broker-dealers, the funds, along with
other affiliated registered investment
companies, may transfer uninvested cash
balances to a joint trading account, the daily
aggregate of which is invested in repurchase
agreements secured by U.S. government or
agency obligations. Securities pledged as
collateral for all individual and joint
repurchase agreements are held by the funds'
custodian bank until maturity of the
repurchase agreement. Provisions for
16
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
all agreements ensure that the daily market
value of the collateral is in excess of the
repurchase amount, including accrued interest,
to protect the funds in the event of a
default.
USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities and
disclosures of contingent assets and
liabilities at the date of the financial
statements and the reported results of
operations during the reporting period. Actual
results could differ from those estimates.
(3) INVESTMENT SECURITY TRANSACTIONS
Cost of purchases and proceeds from sales of
securities, other than temporary investments
in short-term securities for the six months
ended March 31, 1996, were as follows:
<TABLE>
<CAPTION>
National Minnesota
Tax-Exempt Tax-Exempt
Fund Fund
----------- ------------
<S> <C> <C>
Purchases ............................................. $ 9,804,815 29,807,564
Proceeds from sales ................................... $ 14,840,374 33,315,940
</TABLE>
For the six months ended March 31, 1996, no
brokerage commissions were paid to Piper
Jaffray Inc., an affiliated broker.
(4) CAPITAL SHARE TRANSACTIONS
Transactions in shares of each fund for the
six months ended March 31, 1996, and year
ended September 30, 1995, were as follows:
<TABLE>
<CAPTION>
National Minnesota
Tax-Exempt Tax-Exempt
Fund Fund
----------- -----------
<S> <C> <C>
1996
Sold ................................................. 114,805 394,067
Issued for reinvested distributions .................. 126,329 333,819
Redeemed ............................................. (758,403) (961,446)
----------- -----------
Decrease ......................................... (517,269) (233,560)
----------- -----------
----------- -----------
1995
Sold ................................................. 713,082 987,596
Issued for reinvested distributions .................. 183,824 659,450
Redeemed ............................................. (2,212,011) (5,070,335)
----------- -----------
Decrease ....................................... (1,315,105) (3,423,289)
----------- -----------
----------- -----------
</TABLE>
(5) EXPENSES
The company has entered into an investment
management agreement with Piper Capital
Management Incorporated (Piper Capital) under
which Piper Capital manages each fund's assets
and furnishes related office facilities,
equipment, research and personnel. The
agreement requires each fund to pay Piper
Capital a monthly fee based on average daily
net assets. The fee for each fund is equal to
an annual rate of 0.50% of the first $250
million in net assets, 0.45% of the next $250
million and 0.40% of net assets in excess of
$500 million.
Each fund also pays Piper Jaffray Inc. (Piper
Jaffray), the funds' distributor, a monthly
fee for providing shareholder services and
distribution-related services. The fee is
limited to an annual rate of 0.30% of average
daily net assets for each fund and includes
0.25% payable as a servicing fee and 0.05%
payable as a distribution fee. For the year
ending September 30, 1996, Piper Jaffray
voluntarily agreed to limit the fee to an
annual rate of 0.22% of each fund's average
daily net assets.
17
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The company has also entered into shareholder
servicing agreements under which Piper Jaffray
and Piper Trust Company perform various
transfer and dividend disbursing agent
services for accounts held at the respective
company. The fees, which are paid monthly to
Piper Jaffray and Piper Trust Company for
providing these services, are equal to an
annual rate of $7.50 per active shareholder
account and $1.60 per closed account.
In addition to the investment management,
distribution and shareholder account servicing
fees, each fund is responsible for paying most
other operating expenses including: outside
directors' fees and expenses; custodian fees;
registration fees; printing and shareholder
reports; transfer agent fees and expenses;
legal, auditing and accounting services;
insurance; interest; taxes and other
miscellaneous expenses.
Expenses paid indirectly represent a reduction
of custodian fees for earnings on cash
balances maintained by the funds.
Sales charges received by Piper Jaffray for
distributing the funds' shares were $12,284
and $83,245 for National Tax-Exempt Fund and
Minnesota Tax-Exempt Fund, respectively, for
the six months ended March 31, 1996.
(6) CAPITAL LOSS CARRYOVERS
For federal income tax purposes, the following
funds had capital loss carryovers at September
30, 1995, which, if not offset by subsequent
capital gains, will expire as noted. It is
unlikely the board of directors will authorize
a distribution of any net realized capital
gains until the available capital loss
carryovers have been offset or expired.
<TABLE>
<CAPTION>
Capital
Loss Expiration
Carryovers Date
----------- --------------
<S> <C> <C>
National Tax-Exempt Fund ........................... $ 1,177,851 2003 and 2004
Minnesota Tax-Exempt Fund .......................... $ 1,588,089 2003
</TABLE>
18
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(7) FINANCIAL HIGHLIGHTS
Per-share data for a share of capital stock
outstanding throughout each period and
selected information for each period are as
follows:
NATIONAL TAX-EXEMPT FUND
<TABLE>
<CAPTION>
Six months
ended Fiscal year ended September 30,
3/31/96 -------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991
------------ -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ...$ 10.69 10.22 11.76 10.94 10.51 9.91
------------ -------- --------- -------- -------- --------
Operations:
Net investment income ................. 0.29 0.60 0.57 0.61 0.66 0.68
Net realized and unrealized gains
(losses) on investments ............. 0.09 0.47 (1.21) 0.94 0.43 0.60
------------ -------- --------- -------- -------- --------
Total from operations .............. 0.38 1.07 (0.64) 1.55 1.09 1.28
------------ -------- --------- -------- -------- --------
Distributions to shareholders:
From net investment income(a) ......... (0.28) (0.60) (0.57) (0.61) (0.66) (0.68)
From net realized gains on
investments ......................... -- -- (0.33) (0.12) -- --
------------ -------- --------- -------- -------- --------
Total distributions to shareholders
.................................. (0.28) (0.60) (0.90) (0.73) (0.66) (0.68)
------------ -------- --------- -------- -------- --------
Net asset value, end of period .... $ 10.79 10.69 10.22 11.76 10.94 10.51
------------ -------- --------- -------- -------- --------
------------ -------- --------- -------- -------- --------
SELECTED INFORMATION
Total return(b) ......................... 3.48% 10.30% (5.72)% 14.76% 10.68% 13.31%
Net assets at end of period (in
millions) ........................... $ 52 57 68 79 59 46
Ratio of expenses to average daily net
assetsc ............................... 1.03%(d) 1.01% 0.93% 0.94% 0.94% 0.92%
Ratio of net investment income to average
daily net assets(c) ................... 5.03%(d) 5.37% 5.25% 5.42% 6.13% 6.59%
Portfolio turnover rate (excluding short-
term securities) ...................... 18% 28% 65% 43% 35% 59%
</TABLE>
(A) AMOUNTS INCLUDED IN DISTRIBUTIONS FROM NET INVESTMENT INCOME THAT ARE
TAXABLE FOR FEDERAL INCOME TAX PURPOSES ARE $0.001 PER SHARE FOR FISCAL
1991.
(B) TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT A SALES
CHARGE.
(C) DURING THE YEARS REFLECTED ABOVE, THE ADVISOR AND DISTRIBUTOR VOLUNTARILY
WAIVED FEES AND EXPENSES. HAD THE FUND PAID ALL EXPENSES AND THE MAXIMUM
DISTRIBUTION FEE BEEN IN EFFECT, THE RATIOS OF EXPENSES AND NET INVESTMENT
INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 1.12%/4.94%,
1.09%/5.29%, 1.03%/5.15%, 1.04%/5.32%, 1.10%/5.97%, AND 1.15%/6.36% IN THE
SIX MONTHS ENDED 3/31/96 AND FISCAL 1995, 1994, 1993, 1992 AND 1991,
RESPECTIVELY. BEGINNING IN FISCAL 1995, THE EXPENSE RATIOS REFLECT THE
EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE
RATIOS HAVE NOT BEEN ADJUSTED.
(D) ADJUSTED TO AN ANNUAL BASIS.
19
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(7) FINANCIAL HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock
outstanding throughout each period and
selected information for each period are as
follows:
MINNESOTA TAX-EXEMPT FUND
<TABLE>
<CAPTION>
Six months
ended Fiscal year ended September 30,
3/31/96 ------------------------------------------------------------
(Unaudited) 1995 1994 1993 1992 1991
------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period .... $ 10.81 10.28 11.43 10.79 10.46 9.92
------------ -------- -------- -------- -------- --------
Operations:
Net investment income ................... 0.30 0.66 0.61 0.62 0.64 0.66
Net realized and unrealized gains
(losses) on investments ............... 0.01 0.53 (0.95) 0.68 0.33 0.54
------------ -------- -------- -------- -------- --------
Total from operations ................ 0.31 1.19 (0.34) 1.30 0.97 1.20
------------ -------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income(a) ........... (0.30) (0.66) (0.61) (0.62) (0.64) (0.66)
From net realized gains on
investments ........................... -- -- (0.20) (0.04) -- --
------------ -------- -------- -------- -------- --------
Total distributions to shareholders
.................................... (0.30) (0.66) (0.81) (0.66) (0.64) (0.66)
------------ -------- -------- -------- -------- --------
Net asset value, end of period ...... $ 10.82 10.81 10.28 11.43 10.79 10.46
------------ -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- --------
SELECTED INFORMATION
Total return(b) ........................... 2.78% 11.38% (3.14)% 12.52% 9.56% 12.49%
Net assets at end of period (in
millions) ............................. $ 131 134 162 169 132 83
Ratio of expenses to average daily net
assetsc ................................. 0.91%(d) 0.91% 0.89% 0.91% 0.93% 0.92%
Ratio of net investment income to average
daily net assets(c) ..................... 5.36%(d) 5.80% 5.61% 5.62% 6.00% 6.44%
Portfolio turnover rate (excluding short-
term securities) ........................ 22% 30% 44% 29% 35% 22%
</TABLE>
(A) AMOUNTS INCLUDED IN DISTRIBUTIONS FROM NET INVESTMENT INCOME THAT ARE
TAXABLE FOR FEDERAL INCOME TAX PURPOSES ARE $0.003 AND $0.001 PER SHARE FOR
FISCAL 1992 AND 1991, RESPECTIVELY.
(B) TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT A SALES
CHARGE.
(C) DURING THE YEARS REFLECTED ABOVE, THE ADVISOR AND DISTRIBUTOR VOLUNTARILY
WAIVED FEES AND EXPENSES. HAD THE FUND PAID ALL EXPENSES AND THE MAXIMUM
DISTRIBUTION FEE BEEN IN EFFECT, THE RATIOS OF EXPENSES AND NET INVESTMENT
INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 1.00%/5.27%,
0.99%/5.72%, 0.99%/5.51%, 1.00%/5.53%, 1.01%/5.92%, AND 1.05%/6.31% IN THE
SIX MONTHS ENDED 3/31/96 AND FISCAL 1995, 1994, 1993, 1992 AND 1991,
RESPECTIVELY. BEGINNING IN FISCAL 1995 THE EXPENSE RATIOS REFLECT THE
EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE
RATIOS HAVE NOT BEEN ADJUSTED.
(D) ADJUSTED TO AN ANNUAL BASIS.
20
<PAGE>
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DIRECTORS AND OFFICERS
DIRECTORS David T. Bennett, CHAIRMAN, HIGHLAND HOMES, INC.,
USL PRODUCTS, INC., KIEFER BUILT, INC., OF
COUNSEL, GRAY, PLANT, MOOTY, MOOTY & BENNETT,
P.A.
Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY
COMPANIES INC., PIPER CAPITAL MANAGEMENT
INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL,
RELIASTAR FINANCIAL CORP., HORMEL FOODS CORP.
George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL
EQUITY FUNDS
OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
Paul A. Dow, PRESIDENT
Worth Bruntjen, SENIOR VICE PRESIDENT
Richard W. Filippone, SENIOR VICE PRESIDENT
Marjo A. Goldstein, SENIOR VICE PRESIDENT
Steven V. Markusen, SENIOR VICE PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT AND
TREASURER
Edward P. Nicoski, SENIOR VICE PRESIDENT
Nancy S. Olsen, SENIOR VICE PRESIDENT
Ronald R. Reuss, SENIOR VICE PRESIDENT
Bruce D. Salvog, SENIOR VICE PRESIDENT
Sandra K. Shrewsbury, SENIOR VICE PRESIDENT
David M. Steele, SENIOR VICE PRESIDENT
Douglas J. White, SENIOR VICE PRESIDENT
Marcy K. Winson, VICE PRESIDENT
Susan Sharp Miley, SECRETARY
INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
DISTRIBUTOR Piper Jaffray Inc.
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716
LEGAL COUNSEL Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
21
<PAGE>
-------------------
[PIPER CAPITAL Bulk Rate
MANAGEMENT LOGO] U.S. Postage
PAID
PIPER CAPITAL MANAGEMENT INCORPORATED Permit No. 3008
222 SOUTH NINTH STREET Mpls., MN
MINNEAPOLIS, MN 55402-3804 -------------------
PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.
[RECYCLE LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.
In an effort to reduce costs to our shareholders, we have
implemented a process to reduce duplicate mailings of
the fund's shareholder reports. This householding
process should allow us to mail one report to each
address where one or more registered shareholders with
the same last name reside. If you would like to have
additional reports mailed to your address, please call our
Shareholder Services area at 1 800 866-7778, or mail
your request to:
Piper Capital Management
Attn: Communications Department
222 South Ninth Street
Minneapolis, MN 55402-3804
http://www.piperjaffray.com
129-96 XTE02 5/96
