PIPER FUNDS INC, 497, 1996-05-17

PIPER FUNDS INC
497, 1996-05-17

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[LOGO]

HERCULES FUNDS INC.
HERCULES NORTH AMERICAN GROWTH
AND INCOME FUND
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA
55402-3804

May 17, 1996

Dear Shareholder:

A special meeting of shareholders of Hercules North American Growth and Income
Fund (the "Fund") will be held at the offices of Hercules Funds Inc. on June 18,
1996 at 10 a.m. central time at 222 South Ninth Street, 3rd floor, Minneapolis,
Minnesota.

This meeting has been called to seek shareholder approval to combine the assets
of the Fund with assets of Growth and Income Fund, a series of Piper Funds Inc.
If approved, Fund shareholders would become shareholders of Growth and Income
Fund and would receive shares with a value equal to the value of their Fund
shares.

This reorganization is part of a larger proposal to eliminate Hercules as a
separate family of funds, as we believe the funds are unlikely to grow to a size
which is economically viable. If you are a shareholder in more than one Hercules
fund, you will receive separate mailings of proxy materials for each fund.
PLEASE RETURN A COMPLETED PROXY CARD FOR EACH FUND IN WHICH YOU ARE INVESTED.

We urge you to read all of the enclosed materials carefully but direct your
attention to the following important points:

- The Board of Directors of the Company has unanimously approved the
reorganization and recommends that you vote FOR the reorganization.

- Shareholders will not incur any commissions, sales loads or other charges
in connection with the reorganization and Piper Capital, the investment
manager for both funds, has agreed to pay for all direct expenses
including the proxy solicitation.

- The expense ratio for Growth and Income Fund is lower than the Fund's
expense ratio. While waivers and reimbursements currently keep the Fund's
expense ratio artificially low, Piper Capital and the Fund's distributor
do not presently intend to continue waiving expenses for the Fund after
June 30, 1996.

- The reorganization would enable Fund shareholders to enjoy an expanded
range of mutual fund investment options, including 16 other open-end Piper
Funds. Shareholders who receive Growth and Income Fund shares in the
reorganization would have exchange privileges within the Piper family of
funds.

- The reorganization will not result in any federal taxable income to the
Fund or its shareholders.

PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE,
AS YOUR PROMPT RESPONSE WILL ELIMINATE THE NEED FOR ADDITIONAL MAILINGS. A
postage-paid envelope is enclosed with each proxy mailing for your convenience.
As the meeting date approaches, if you haven't voted you may receive a telephone
call reminding you to vote.
<PAGE>
The enclosed QUESTION AND ANSWER sheet provides more detailed information about
the proposal. Also enclosed are the formal Notice of Special Meeting and Proxy
Statement/Prospectus documents. If you have additional questions, please contact
your investment professional or call Piper Capital at 1 800 866-7778 and press
2.

Sincerely,

[SIG]

William H. Ellis
President
<PAGE>
SHAREHOLDER Q&A

MAY 17, 1996
- --------------------------------------------------------------------------------

ON FEBRUARY 6, 1996, PIPER CAPITAL MANAGEMENT INCORPORATED RECOMMENDED TO THE
BOARD OF DIRECTORS OF HERCULES FUNDS INC. THAT IT ELIMINATE HERCULES AS A
SEPARATE FUND FAMILY BECAUSE THE FUNDS ARE TOO SMALL TO BE ECONOMICALLY VIABLE.
THE BOARD UNANIMOUSLY AGREED THAT IT WOULD BE IN THE BEST INTEREST OF
SHAREHOLDERS TO REORGANIZE THE HERCULES EQUITY FUNDS INTO APPROPRIATE PIPER
FUNDS AND TO LIQUIDATE THE WORLD BOND FUND. THESE PROPOSALS ARE SUBJECT TO
SHAREHOLDER APPROVAL.

WHAT WILL HAPPEN TO THE VARIOUS HERCULES FUNDS?

Piper Capital is proposing the following changes:

- Hercules North American Growth and Income Fund will be reorganized into
Growth and Income Fund, a series of Piper Funds Inc.

- Hercules European Value Fund and Hercules Pacific Basin Value Fund will be
reorganized into Pacific-European Growth Fund, a series of Piper Global
Funds Inc.

- Hercules Latin American Value Fund will be reorganized into the Emerging
Markets Growth Fund, a newly-created series of Piper Global Funds Inc.

- Hercules World Bond Fund will be liquidated and net assets distributed to
shareholders.

WHAT ABOUT HERCULES MONEY MARKET FUND?

We expect that shareholders will redeem out of Hercules Money Market Fund as a
result of Piper Capital's decision to discontinue the fund's 1% expense
limitation effective July 1, 1996.

WHY WERE THESE CHANGES RECOMMENDED?

The Hercules funds have not been able to attract sufficient assets to make them
economically viable to operate and prospects for future growth appear remote. If
the changes are approved, we believe shareholders will benefit from:

- A potential increase in operating efficiencies and therefore a reduction
in expense ratios

- The potential for greater investment diversification and more flexibility
in portfolio management because the existing corresponding Piper funds
have a larger asset base

- The advantages of ownership within a larger fund family, including
flexibility to transfer between funds in the Piper funds complex at net
asset value

WILL SHAREHOLDERS PAY A SALES CHARGE WHEN THEY MOVE INTO THE PIPER FUNDS?

No. Even though Hercules shareholders paid no front-end sales charges, the
maximum 4% front-end load on Piper fund shares acquired in the reorganizations
will be waived if the proposal is approved.

WILL THE HERCULES CONTINGENT DEFERRED SALES CHARGE (CDSC) BE WAIVED?

Yes. Shareholders subject to a CDSC (those who purchased shares after June 19,
1995) will not pay a CDSC if they exchange into the respective Piper fund
through the reorganization.

WILL SHAREHOLDERS BE ABLE TO EXCHANGE OR TRANSFER TO OTHER PIPER OPEN-END FUNDS
AT NET ASSET VALUE?

Yes. After Hercules fund shares are reorganized into the applicable Piper fund,
shareholders will then be able to exchange or transfer into other Piper funds at
net asset value.

HOW MANY OTHER PIPER OPEN-END FUNDS ARE AVAILABLE?

The back side of the enclosed brochure lists the 16 other funds available in
Piper's family of open-end funds.
<PAGE>
WHAT PERCENTAGE OF SHAREHOLDERS MUST VOTE "YES" FOR THE PROPOSAL TO PASS?

For each fund, shareholders representing a majority of the outstanding shares
must vote yes in order for the proposed reorganization or liquidation of that
fund to occur.

IF APPROVED, HOW WILL THE REORGANIZATIONS BE ACCOMPLISHED?

The reorganizations would be accomplished by combining substantially all of the
assets of each fund with the corresponding Piper fund and distributing shares of
the Piper fund with a value equal to the value of each Hercules shareholder's
fund holdings.

WHO WILL PAY FOR THE REORGANIZATION?

Piper Capital has agreed to pay all direct costs associated with the proposed
reorganizations and liquidation including the costs of proxy solicitation. No
commission, sales loads or other charges will be incurred by shareholders. Also,
we anticipate the proposed reorganizations would be completed on a tax-free
basis.

HOW DOES THE HERCULES NORTH AMERICAN GROWTH AND INCOME FUND COMPARE WITH THE
PIPER GROWTH AND INCOME FUND?

Here are a few comparisons of fund characteristics. Please review the Proxy
Statement/Prospectus for a complete comparison:

<TABLE>
<CAPTION>
HERCULES NORTH AMERICAN PIPER
GROWTH AND INCOME GROWTH AND INCOME
<S> <C> <C>
Investment objective Long-term capital Current income and long-term
appreciation and current growth of capital and income
income
Investment policies 65% minimum in U.S., 95% minimum in U.S.
Canadian, & Mexican securities
securities
Country allocation as of 58% U.S., 18% Canada, 24% 100% U.S.
2/29/96 Mexico
Net assets as of 2/29/96 $8.7 million $83.3 million
Adviser/Subadvisers Piper Capital/AGF Advisers, Piper Capital
Acci Worldwide, Piper
Capital
</TABLE>
<PAGE>
HERCULES FUNDS INC.
HERCULES NORTH AMERICAN GROWTH AND INCOME FUND
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804

------------------------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1996

---------------------

TO THE SHAREHOLDERS OF HERCULES NORTH AMERICAN GROWTH AND INCOME FUND,
A SERIES OF HERCULES FUNDS INC.

Notice is hereby given that a Special Meeting (the "Meeting") of
shareholders of Hercules North American Growth and Income Fund (the "Fund"), one
of six portfolios of Hercules Funds Inc. (the "Company"), will be held in the
office of the Company, 222 South Ninth Street, 3rd Floor, Minneapolis, MN 55402,
on June 18, 1996 at 10:00 a.m. central time. Piper Capital will validate parking
at the Energy Center Ramp located at the corner of South Ninth Street and Third
Avenue South. Please bring your parking ticket to the Meeting for validation.
The purposes of the Meeting are:

I. To consider and vote upon an Agreement and Plan of Reorganization, dated
as of April 15, 1996 (the "Plan"), by and between the Company, on behalf
of the Fund, and Piper Funds Inc. ("Piper"), on behalf of Growth and
Income Fund ("Growth and Income Fund"), pursuant to which substantially
all of the assets of the Fund will be acquired by Growth and Income Fund
and shareholders of the Fund will become shareholders of Growth and
Income Fund receiving shares of Growth and Income Fund with a value
equal to the value of their holdings in the Fund. A vote in favor of the
Plan will be considered a vote in favor of an amendment to the articles
of incorporation of the Company required to effect the reorganization as
contemplated by the Plan.

II. To consider and act upon such other matters as may properly come before
the Meeting or any adjournment thereof.

YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE
IN FAVOR OF THE ABOVE PROPOSAL.

The attached Proxy Statement/Prospectus describes the above proposal in
detail and is being sent to shareholders of record as of the close of business
on April 25, 1996, who are the shareholders entitled to notice of and to vote at
the Meeting. Please read the Proxy Statement/Prospectus carefully before telling
us through your proxy or in person how you wish your shares to be voted.

By Order of the Board of Directors

SUSAN SHARP MILEY
SECRETARY

May 17, 1996

IMPORTANT

THE BOARD OF DIRECTORS URGES YOU TO MARK, SIGN AND RETURN THE ENCLOSED
PROXY AS SOON AS POSSIBLE WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING IN PERSON. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO
POSTAGE AND IS PROVIDED FOR YOUR CONVENIENCE.
<PAGE>
GROWTH AND INCOME FUND
A SERIES OF PIPER FUNDS INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
(800) 866-7778 (TOLL FREE)

------------------------

ACQUISITION OF THE ASSETS OF HERCULES NORTH AMERICAN GROWTH AND INCOME FUND
A SERIES OF HERCULES FUNDS INC.

BY AND IN EXCHANGE FOR SHARES OF GROWTH AND INCOME FUND
A SERIES OF PIPER FUNDS INC.

------------------------

This Proxy Statement/Prospectus is being furnished to shareholders of
Hercules North American Growth and Income Fund (the "Fund"), a series of
Hercules Funds Inc. (the "Company"), in connection with an Agreement and Plan of
Reorganization dated as of April 15, 1996 (the "Plan") pursuant to which
substantially all of the assets of the Fund will be combined with those of
Growth and Income Fund ("Growth and Income Fund"), a series of Piper Funds Inc.
("Piper"), in exchange for shares of Growth and Income Fund. As a result of this
transaction, shareholders of the Fund will become shareholders of Growth and
Income Fund and will receive shares of Growth and Income Fund with a value equal
to the value of their holdings in the Fund as of the date of the transaction.
The terms and conditions of this transaction are more fully described in this
Proxy Statement/Prospectus and in the Plan, attached hereto as EXHIBIT A.

Growth and Income Fund is a diversified series of Piper, an open-end
diversified management investment company the shares of which can be offered in
more than one series. The investment objectives of Growth and Income Fund are
current income and long-term growth of capital and income. Growth and Income
Fund seeks to achieve its investment objectives by investing primarily in common
stock of U.S. companies and securities convertible into such common stock and
also in U.S. Government securities and U.S. investment grade corporate debt
securities.

This Proxy Statement/Prospectus sets forth concisely information about
Growth and Income Fund that shareholders of the Fund should know before voting
on the Plan. This Proxy Statement also constitutes a Prospectus of Growth and
Income Fund filed with the Securities and Exchange Commission (the "Commission")
as part of its Registration Statement on Form N-14. A copy of the Prospectus for
Growth and Income Fund dated November 27, 1995, is attached to this Proxy
Statement/Prospectus and is incorporated herein by reference. Also enclosed and
incorporated by reference is the Annual Report for Piper -- Total Return Funds
for Growth and Income Fund's fiscal year ended September 30, 1995. A Statement
of Additional Information relating to the reorganization described in this Proxy
Statement/Prospectus (the "Additional Statement") dated May 2, 1996, has been
filed with the Commission and is also incorporated herein by reference. Also
incorporated herein by reference are the Company's Prospectus dated August 29,
1995, the Company's Annual Report for its fiscal year ended June 30, 1995 and
the Company's Semi-Annual Report for the six months ended December 31, 1995.
Such documents are available without charge, as noted under "Available
Information" below.

INVESTORS ARE ADVISED TO READ AND RETAIN THIS PROXY STATEMENT/PROSPECTUS FOR
FUTURE REFERENCE.

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 ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT/PROSPECTUS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION............................................................................................... 1
General.................................................................................................. 1
Record Date; Share Information........................................................................... 1
Proxies.................................................................................................. 2
Expenses of Solicitation................................................................................. 2
Vote Required............................................................................................ 3
SYNOPSIS................................................................................................... 3
The Reorganization....................................................................................... 3
Fee Table................................................................................................ 3
Tax Consequences of the Reorganization................................................................... 5
Dissenting Shareholders' Rights of Appraisal............................................................. 5
Comparison of the Fund and Growth and Income Fund........................................................ 5
PRINCIPAL RISK FACTORS..................................................................................... 8
THE REORGANIZATION......................................................................................... 8
Background............................................................................................... 8
The Board's Consideration................................................................................ 9
The Plan................................................................................................. 11
Tax Aspects of the Reorganization........................................................................ 12
Dissenters' Rights....................................................................................... 14
Description of Shares.................................................................................... 14
Capitalization Table (unaudited)......................................................................... 14
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............................................. 14
Investment Objectives and Policies....................................................................... 14
Investment Restrictions.................................................................................. 16
Interest of Certain Persons.............................................................................. 17
ADDITIONAL INFORMATION ABOUT THE FUND AND GROWTH AND INCOME FUND........................................... 17
General.................................................................................................. 17
Financial Information.................................................................................... 17
Management............................................................................................... 17
Description of Securities and Shareholder Inquiries...................................................... 17
Dividends, Distributions and Taxes....................................................................... 17
Purchases and Redemptions................................................................................ 17
Pending Legal Proceedings................................................................................ 17
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE................................................................ 17
FINANCIAL STATEMENTS AND EXPERTS........................................................................... 18
LEGAL MATTERS.............................................................................................. 18
AVAILABLE INFORMATION...................................................................................... 18
OTHER BUSINESS............................................................................................. 18
EXHIBIT A -- Agreement and Plan of Reorganization, dated as of April 15, 1996 by and between the Company,
on behalf of the Fund, and Piper, on behalf of Growth and Income Fund......................... A-1
PROSPECTUS OF GROWTH AND INCOME FUND, dated November 27, 1995
</TABLE>

i
<PAGE>
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PROXY STATEMENT/PROSPECTUS
HERCULES NORTH AMERICAN GROWTH AND INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1996

------------------------

INTRODUCTION

GENERAL

This Proxy Statement/Prospectus is being furnished to shareholders of
Hercules North American Growth and Income Fund (the "Fund"), a non-diversified
series of Hercules Funds Inc. ("the Company"), an open-end management investment
company, in connection with the solicitation by the Board of Directors of the
Company (the "Board") of proxies to be used at the Special Meeting of
Shareholders of the Company to be held at the office of the Company, 222 South
Ninth Street, 3rd Floor, Minneapolis, Minnesota 55402-3804 on June 18, 1996 at
10:00 a.m. central time and any adjournments thereof (the "Meeting"). It is
expected that this Proxy Statement/Prospectus will be mailed on or about May 17,
1996.

At the Meeting, Fund shareholders will consider and vote upon an Agreement
and Plan of Reorganization, dated as of April 15, 1996 (the "Plan"), by and
between the Company, on behalf of the Fund, and Piper Funds Inc. ("Piper"), on
behalf of Growth and Income Fund ("Growth and Income Fund"), pursuant to which
substantially all of the assets of the Fund will be combined with those of
Growth and Income Fund in exchange for shares of Growth and Income Fund. As a
result of this transaction, shareholders of the Fund will become shareholders of
Growth and Income Fund and will receive shares in Growth and Income Fund equal
to the value of their holdings in the Fund on the date of such transaction (the
transactions described above are referred to as the "Reorganization"). The
shares to be issued by Growth and Income Fund pursuant to the Reorganization
("Growth and Income Fund Shares") will be issued at net asset value without a
sales charge. Further information relating to Growth and Income Fund is set
forth in the current Prospectus of Growth and Income Fund attached to this Proxy
Statement/Prospectus and is incorporated herein by reference. A vote in favor of
the Plan will be considered a vote in favor of an amendment to the articles of
incorporation of the Company required to effect the reorganization as
contemplated by the Plan.

The information concerning the Fund contained herein has been supplied by
the Company and the information concerning Growth and Income Fund contained
herein has been supplied by Piper.

RECORD DATE; SHARE INFORMATION

The Board has fixed the close of business on April 25, 1996 as the record
date (the "Record Date") for the determination of the holders of shares of the
Fund entitled to notice of, and to vote at, the Meeting. As of the Record Date,
there were 686,836 shares of the Fund issued and outstanding. The holders of
record on the Record Date of shares of the Fund are entitled to one vote per
share held and a fractional vote with respect to fractional shares held on each
matter submitted to a vote at the Meeting. The holders of 10% of the shares
outstanding and entitled to vote will constitute a quorum at the Meeting.

To the knowledge of the Board, as of the Record Date, no person owned of
record or beneficially 5% or more of the outstanding shares of the Fund. As of
the Record Date, the directors and officers of the Company, as a group, owned
less than 1% of the outstanding shares of the Fund.

1
<PAGE>
To the knowledge of Piper's Board of Directors, as of the Record Date no
person owned of record or beneficially 5% or more of the outstanding shares of
Growth and Income Fund. As of the Record Date, the directors and officers of
Piper, as a group, owned less than 1% of the outstanding shares of Growth and
Income Fund.

PROXIES

The enclosed form of proxy, if properly executed and returned, will be voted
in accordance with the choice specified thereon. The proxy will be voted in
favor of the Plan unless a choice is indicated to vote against or to abstain
from voting on the Plan. The Board knows of no business, other than that set
forth in the Notice of Special Meeting, to be presented for consideration at the
Meeting. However, the proxy confers discretionary authority upon the persons
named therein to vote as they determine on other business, not currently
contemplated, which may come before the Meeting.

Abstentions will be included for purposes of determining whether a quorum is
present at the Meeting and for purposes of calculating the vote but shall not be
deemed to have been voted in favor of such matters. Broker non-votes are shares
held in street name for which the broker indicates that instructions have not
been received from the beneficial owners or other persons entitled to vote and
for which the broker does not have discretionary voting authority. Broker
non-votes will be included for purposes of determining whether a quorum is
present at the Meeting, but will not be deemed to be represented at the Meeting
for purposes of calculating whether matters to be voted upon at the Meeting have
been approved. Because approval of the Plan requires an affirmative vote by a
majority of the outstanding shares, abstentions and broker non-votes all have
the same effect as a negative vote.

If a shareholder executes and returns a Proxy Card but fails to indicate how
the votes should be cast, the proxy will be voted in favor of the Plan. The
proxy may be revoked at any time prior to the voting thereof by: (i) delivering
written notice of revocation to the Secretary of the Company at 222 South Ninth
Street, Minneapolis, Minnesota 55402-3804; (ii) attending the Meeting and voting
in person; or (iii) signing and returning a new Proxy Card (if returned and
received in time to be voted). Attendance at the Meeting will not in and of
itself revoke a proxy.

In the event that sufficient votes to approve the Plan are not obtained by
the Meeting date, or, subject to approval of the Board, for other reasons, an
adjournment or adjournments of the Meeting may be sought. Any adjournment would
require a vote in favor of the adjournment by the holders of a majority of the
shares present at the Meeting (or any adjournment thereof) in person or by
proxy. The persons named as proxies will vote all shares represented by proxies
which they are required to vote in favor of the Plan, in favor of an
adjournment, and will vote all shares which they are required to vote against
the Plan, against an adjournment. Approval of the Plan will be deemed approval
of the amendment to the articles of incorporation of the Company attached to the
Plan.

EXPENSES OF SOLICITATION

All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement/ Prospectus, will be borne by Piper Capital
Management Incorporated ("Piper Capital"), investment manager to the Company and
Piper. In addition to the solicitation of proxies by mail, proxies may be
solicited by officers and regular employees of the Company, Piper Capital or the
Fund's distributor, without compensation other than regular compensation,
personally or by mail, telephone, telegraph or otherwise. Brokerage houses,
banks and other fiduciaries may be requested to forward soliciting material to
the beneficial owners of shares and to obtain authorization for the execution of
proxies. For those services, if any, they will be reimbursed by Piper Capital
for their reasonable out-of-pocket expenses. In addition, arrangements have been
made with Shareholder Communications Corporation, an independent shareholder
communication firm, to assist in the solicitation of proxies.

2
<PAGE>
VOTE REQUIRED

Approval of the Plan by the Fund's shareholders requires the affirmative
vote of a majority (I.E., more than 50%) of the outstanding shares of the Fund.
If the Plan is not approved by shareholders, the Fund will continue in existence
and the Board will consider alternative actions.

SYNOPSIS

THE FOLLOWING IS A SYNOPSIS OF CERTAIN INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. THIS SYNOPSIS IS ONLY A SUMMARY
AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS AND THE PLAN.
SHAREHOLDERS SHOULD CAREFULLY REVIEW THIS PROXY STATEMENT/PROSPECTUS AND THE
PLAN IN THEIR ENTIRETY AND, IN PARTICULAR, THE CURRENT PROSPECTUS OF GROWTH AND
INCOME FUND WHICH IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AND WHICH IS
INCORPORATED HEREIN BY REFERENCE.

THE REORGANIZATION

The Plan provides for the transfer of substantially all of the assets of the
Fund, subject to stated liabilities, to Growth and Income Fund in exchange for
Growth and Income Fund Shares. The aggregate net asset value of Growth and
Income Fund Shares issued in the exchange will equal the aggregate value of the
net assets of the Fund received by Growth and Income Fund. On or after the
closing date scheduled for the Reorganization (the "Closing Date"), the Fund
will distribute Growth and Income Fund Shares received by the Fund to holders of
shares of the Fund issued and outstanding as of the Valuation Date (as
hereinafter defined) in complete liquidation of the Fund. If all other series of
the Company effect similar reorganizations or otherwise liquidate, the Company
will take all necessary steps to effect its dissolution as a Minnesota
corporation and its deregistration under the Investment Company Act of 1940, as
amended (the "1940 Act"). As a result of the Reorganization, each Fund
shareholder will receive that number of full and fractional Growth and Income
Fund Shares equal in value to such shareholder's shares of the Fund. The Board
has determined that the interests of existing Fund shareholders will not be
diluted as a result of the Reorganization.

FOR THE REASONS SET FORTH BELOW UNDER "THE REORGANIZATION -- THE BOARD'S
CONSIDERATION," THE BOARD, INCLUDING ALL OF THE DIRECTORS WHO ARE NOT
"INTERESTED PERSONS" OF THE COMPANY, AS THAT TERM IS DEFINED IN THE 1940 ACT
("INDEPENDENT DIRECTORS"), HAS UNANIMOUSLY CONCLUDED THAT THE REORGANIZATION IS
IN THE BEST INTERESTS OF THE FUND AND ITS SHAREHOLDERS AND RECOMMENDS APPROVAL
OF THE PLAN.

FEE TABLE

The funds each pay a variety of expenses for management of their assets,
distribution of their shares and other services, and those expenses are
reflected in the net asset value per share of each of the Fund and Growth and
Income Fund. The following table sets forth the expenses and fees that
shareholders of the Fund and Growth and Income Fund incurred during the twelve
months ended September 30, 1995. The Pro Forma Combined fees reflect what the
fee schedule would have been at September 30, 1995, if the Reorganization had
occurred 12 months prior to that date.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
GROWTH AND PRO FORMA
FUND INCOME FUND COMBINED
--------- ------------- -----------
<S> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) (1)............................ 0% 4.00% 4.00%
Maximum Deferred Sales Charge (2)................................... 2.00% 0% 0%
Exchange Fee (3).................................................... $ 0 $ 0 $ 0
</TABLE>

3
<PAGE>
ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS

<TABLE>
<CAPTION>
GROWTH AND PRO FORMA
FUND INCOME FUND COMBINED
----------- ------------- ------------
<S> <C> <C> <C>
Management Fees (4)............................................... 1.00% 0.75% 0.75%
12b-1 Fees (after voluntary fee limitation) (5)................... 0.50% 0.32% 0.32%
Other Expenses (after voluntary expense reimbursement) (6)........ 0.50% 0.25% 0.25%
----- ----- -----
Total Fund Operating Expenses (after voluntary fee limitation and
expense reimbursement) (6)....................................... 2.00% 1.32% 1.32%
</TABLE>

- ------------------------
(1) No sales charge will be imposed on Shares acquired in the Reorganization. On
unrelated purchases, the front end sales charge of 4.00% applies to
purchases less than $100,000 and scales down to 0% on purchases of $500,000
or more.

(2) The maximum contingent deferred sales charge ("CDSC") on shares of the Fund
is 2.00% on redemptions during the first 365 days after purchase; the charge
declines to 1.00% during the next 365 days after purchase, reaching zero
thereafter. In connection with purchases of Growth and Income Fund of
$500,000 or more, on which no front-end sales charge is imposed, a 1.00%
CDSC will be imposed on redemptions occurring within 24 months of purchase.
See "Comparison of the Fund and Growth and Income Fund -- Purchases,
Redemptions and Exchanges."

(3) There is a $50 fee for each exchange in excess of 12 exchanges per year for
the Fund. There is a $5 fee for each exchange in excess of 4 exchanges per
year for Growth and Income Fund.

(4) Growth and Income Fund pays monthly management fees at an annual rate of
0.75% on assets up to $100 million. These fees are scaled downward as net
assets increase in size to as low as 0.50% on net assets of over $500
million.

(5) 12b-1 fees for the Fund and Growth and Income Fund are currently limited
voluntarily by the distributor of the funds, Piper Jaffray Inc. (the
"Distributor"). Absent such fee limitation, the 12b-1 fees may not exceed
0.70% and 0.50% per annum of the average daily net assets for the Fund and
Growth and Income Fund, respectively. A portion of the 12b-1 fee equal to
0.25% of average daily net assets is characterized as a service fee within
the meaning of the National Association of Securities Dealers, Inc. ("NASD")
guidelines.

(6) Piper Capital has voluntarily limited Total Fund Operating Expenses on a per
annum basis to 2.00% and 1.32% of average daily net assets for the Fund and
Growth and Income Fund, respectively. As a result, certain Other Expenses
are currently borne by Piper Capital. Absent such waivers and reimbursements
for the 12 months ended September 30, 1995, Other Expenses would have been
1.99%, 0.35% and 0.35%, each as a percentage of average daily net assets for
the Fund, Growth and Income Fund and the Pro Forma Combined column,
respectively. Without such limitations and the 12b-1 fee limitations
discussed above, Total Fund Operating Expenses for the 12 months ended
September 30, 1995, as a percentage of average daily net assets, would have
been 3.69%, 1.60% and 1.60% for the Fund, Growth and Income Fund and Pro
Forma Combined column, respectively. After each fund's current fiscal year,
these limitations may be revised or terminated at any time. Piper Capital
and the Distributor do not presently intend to continue any limitations for
the Fund beyond the Fund's fiscal year ending June 30, 1996.

EXAMPLE

To attempt to show the effect of these expenses on an investment over time,
the example shown below has been created. The expenses set forth in the example
below may increase if the fee limitations and expense reimbursements discussed
above are removed. As noted above, Growth and Income Fund charges a maximum
4.00% front-end sales charge on new purchases. The expenses shown below have
been calculated as if no such sales charge was imposed because Fund shareholders
who receive Growth and Income Fund Shares in the Reorganization will not pay the
front-end sales charge with

4
<PAGE>
respect to those shares. Assuming that an investor makes a $1,000 investment in
either the Fund or Growth and Income Fund or on a Pro Forma Combined basis, that
the annual return is 5.00% and that the Total Fund Operating Expenses are the
ones shown in the chart above, if the investment was redeemed at the end of each
period shown below, the investor would incur the following expenses by the end
of each period shown:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------- --------
<S> <C> <C> <C> <C>
The Fund................................ $40 $63 $108 $233
Growth and Income Fund*................. $13 $42 $ 72 $159
Pro Forma Combined**.................... $13 $42 $ 72 $159
</TABLE>

If such investment was not redeemed, the investor would incur the following
expenses:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- -------- --------
<S> <C> <C> <C> <C>
The Fund................................ $20 $63 $108 $233
Growth and Income Fund*................. $13 $42 $ 72 $159
Pro Forma Combined**.................... $13 $42 $ 72 $159
</TABLE>

- ------------------------
*Expenses for shares of Growth and Income Fund purchased subject to the maximum
front end sales charge are: $53, $80, $109, and $193 for the one-, three-,
five-, and ten-year periods shown, respectively.
**Expenses for shares of Growth and Income Fund on a Pro Forma Combined basis,
purchased subject to the maximum front-end sales charge, are: $53, $80, $109,
and $193 for the one-, three-, five-, and ten-year periods shown,
respectively.

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL OPERATING EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.

Long-term shareholders of either fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.

TAX CONSEQUENCES OF THE REORGANIZATION

As a condition to the Reorganization, the Fund will receive an opinion of
the law firm Gordon Altman Butowsky Weitzen Shalov & Wein to the effect that the
Reorganization will constitute a tax-free reorganization for Federal income tax
purposes, and that no gain or loss will be recognized by the Fund or the
shareholders of the Fund for Federal income tax purposes as a result of the
Reorganization. For further information about the tax consequences of the
Reorganization, see "The Reorganization -- Tax Aspects of the Reorganization"
below.

DISSENTING SHAREHOLDERS' RIGHTS OF APPRAISAL

Although under Minnesota law shareholders of a company acquired in a
reorganization who do not vote to approve the reorganization generally have
"appraisal rights" (where they may elect to have the "fair value" of their
shares (determined in accordance with Minnesota law) judicially appraised and
paid to them), the Division of Investment Management of the Commission has taken
the position that Rule 22c-1 under the 1940 Act preempts appraisal provisions in
state statutes. This rule provides that no open-end investment company may
redeem its shares other than at net asset value next computed after receipt of a
tender of such security for redemption. For further information about rights of
appraisal, see "The Reorganization -- Dissenters' Rights".

COMPARISON OF THE FUND AND GROWTH AND INCOME FUND

INVESTMENT OBJECTIVES AND POLICIES. The Fund and Growth and Income Fund
have similar investment objectives. The Fund's objectives are long-term capital
appreciation and current income. The investment objectives of Growth and Income
Fund are current income and long-term growth of capital and income. The
investment objectives of the Fund and Growth and Income Fund are fundamental and
may not be changed without shareholder approval.

5
<PAGE>
The Fund seeks to achieve its investment objectives by investing, under
normal circumstances, at least 65% of its total assets in U.S., Canadian and
Mexican securities. Growth and Income Fund seeks to achieve its investment
objectives by investing in a broadly diversified portfolio of securities, with
an emphasis on securities of large, established companies that have a history of
dividend payments and that the investment adviser believes are undervalued. The
principal difference between the two funds is that Growth and Income Fund
invests at least 95% of its assets in U.S. equity and debt securities, whereas
the Fund invests in U.S. securities and Canadian and Mexican securities.

For both funds, companies are selected on the basis of Piper Capital's
assessment (and the sub-adviser's, in the case of the Fund's non-U.S.
investments) of their prospects for long-term growth in dividends and earnings
in relationship to the prevailing market price. With respect to the Growth and
Income Fund, Piper Capital also considers other factors, including the
sensitivity of a company's particular industry to fluctuations in major economic
variables, such as interest rates and industrial production. With respect to the
Fund, emphasis is placed on investments in companies which Piper Capital (and
the sub-advisers, in the case of non-U.S. investments) believes are well
positioned to benefit from the cross-border commerce among the countries in
North America which is currently taking place and is expected to increase as a
result of government initiatives to promote free cross-border trade.

The Fund may invest without limitation in equity and investment grade debt
securities. Growth and Income Fund may also invest without limitation in equity
and investment grade debt securities but under normal circumstances invests
primarily in common stock and securities convertible into common stock.

The Fund may purchase and sell put and call options, futures contracts and
options on futures contracts with respect to financial instruments, stock and
interest rate indexes and foreign currencies. Futures and options may be used to
facilitate allocation of the Fund's investment among asset classes, to generate
income or to hedge against declines in securities prices or increases in prices
of securities proposed to be purchased. Growth and Income Fund may, for hedging
purposes only, buy put and call options on the securities in which it may
invest, buy exchange-traded stock index options and enter into interest rate and
stock index futures contracts, and options thereon. In addition, Growth and
Income Fund may sell covered options and stock index options for hedging
purposes or to generate income. The Fund may buy or sell options, futures and
options on futures that are traded on U.S. or foreign exchanges or
over-the-counter; however, Growth and Income Fund may purchase and sell only
exchange-traded options, futures and options on futures. In addition, the Fund
may, but Growth and Income Fund may not, enter into currency exchange
transactions (including forward foreign currency exchange contracts and futures
and options contracts on foreign currencies) as a hedge against fluctuations in
foreign exchange rates. To date, the Fund has not engaged in options on futures
contracts, options on stock and interest rate indexes or currency exchange
transactions other than forward contracts.

Both the Fund and Growth and Income Fund may purchase securities on a
when-issued or delayed delivery basis and purchase or sell securities on a
forward commitment basis. Growth and Income Fund may, while the Fund may not,
purchase securities on a "when, as and if issued" basis. Both funds may enter
into repurchase agreements subject to certain procedures designed to minimize
risks associated with such agreements. The Fund may also (i) invest in warrants
up to 5% of its net assets; (ii) invest in American Depository Receipts ("ADRs")
and similar instruments; and (iii) invest in other investment companies (up to
the limits prescribed by the 1940 Act); Growth and Income Fund does not invest
in these types of instruments and, accordingly, only the Fund is exposed to
risks associated with them. Growth and Income Fund may lend portfolio securities
up to one-third of the value of its total assets; the Fund does not enter into
these types of transactions and, accordingly, only Growth and Income Fund is
exposed to risks associated with securities lending.

In addition, the Fund is a non-diversified investment company, within the
meaning of the 1940 Act, whereas Growth and Income Fund is a diversified
investment company.

6
<PAGE>
For a more detailed comparison of the investment objectives and policies of
the Fund and Growth and Income Fund, see "Comparison of Investment Objectives,
Policies and Restrictions," below.

INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. The Fund and Growth and
Income Fund have the same Board of Directors. In addition, the Fund and Growth
and Income Fund obtain management services from Piper Capital. For each fund,
fees are payable monthly based on the average net asset value of such fund as of
the close of business each day. The Fund pays a management fee at an annual rate
of 1.00% of its average daily net asset value and Growth and Income Fund pays at
the annual rate of 0.75% of the portion of average daily net assets up to $100
million, 0.65% of such assets between $100 million and $300 million, 0.55% of
such assets between $300 million and $500 million, and 0.50% of the portion of
daily net assets exceeding $500 million.

With respect to the Fund, Piper Capital has retained the services of Acci
Worldwide, S.A. de C.V. ("Acci") and AGF Investment Advisers, Inc. ("AGF") as
sub-advisers for investments in Mexican and Canadian issuers, respectively.
Piper Capital manages the Fund's investments in U.S. securities. As compensation
for their portfolio management services, Piper Capital, Acci and AGF together
receive monthly compensation, calculated in the same manner as the investment
advisory fee, of 0.50% of net assets of the Fund. This fee is paid by Piper
Capital and is split equally among Piper Capital, Acci and AGF without regard to
the amount of assets under their respective management at any one time.

Both the Fund and Growth and Income Fund have adopted distribution plans
(each, a "12b-1 Plan") pursuant to Rule 12b-1 under the 1940 Act pursuant to
which the Distributor is compensated for its expenses incurred in connection
with servicing of the funds' shareholder accounts and in connection with
distribution-related services provided with respect to each 12b-1 Plan. Payments
under the 12b-1 Plan may not exceed 0.70% of average daily net assets in the
case of the Fund and 0.50% in the case of Growth and Income Fund. The
Distributor has voluntarily limited reimbursements under each 12b-1 Plan to
0.50% in the case of the Fund and 0.32% in the case of Growth and Income Fund.
In the case of Growth and Income Fund, this limitation may be revised or
terminated at any time after its fiscal year end. In the case of the Fund, Piper
Capital and the Distributor do not presently intend to continue these
limitations beyond the Fund's current fiscal year. Payments made under the 12b-1
Plans for the Fund and Growth and Income Fund are not tied exclusively to
expenses actually incurred by the Distributor and may exceed such expenses.

OTHER SIGNIFICANT FEES. Both the Fund and Growth and Income Fund pay
additional fees in connection with their operations, including legal, auditing,
transfer agent and custodial fees. See "Fee Table" above for the percentage of
average net assets represented by such Other Expenses.

PURCHASES, REDEMPTIONS AND EXCHANGES.

PURCHASES. The Fund and Growth and Income Fund each continuously issue
their shares to investors at a price equal to net asset value at the time of
such issuance. Investors in Growth and Income Fund, however, also pay a
front-end sales charge of 4.00% on purchases of less than $100,000 scaled down
to 0% on purchases of $500,000 and above. Shareholders of the Fund who acquire
Growth and Income Fund Shares in the Reorganization will not pay the front-end
sales charge on such Shares; however, such sales charge will be applied to
additional purchases of Growth and Income Fund. Shares of the Fund and Growth
and Income Fund are distributed by the Distributor and other broker-dealers who
have entered into selected broker-dealer agreements with the Distributor.
Purchase orders for shares of the Fund will not be accepted after the date on
which the Plan is approved by Fund shareholders.

REDEMPTIONS. Shareholders of the Fund and Growth and Income Fund may redeem
their shares for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable contingent deferred sales charge ("CDSC"). In most circumstances,
redemptions of Fund shares made within two years of purchase are subject to a
CDSC, scaled down from 2.00% to 1.00% of the amount redeemed. No CDSC will be
applied to shares of the Fund at the time of the Reorganization or to Growth and
Income Fund Shares acquired in the Reorganization on redemption of such shares.
With respect to Growth and Income Fund, shareholders

7
<PAGE>
who invested more than $500,000 and accordingly paid no front-end sales charge,
are in most circumstances subject to a CDSC if shares are redeemed within 24
months. The charge is equal to 1.00% of the lesser of the net asset value of the
shares at the time of purchase or at the time of redemption. Growth and Income
Fund offers a reinstatement privilege whereby a shareholder whose shares have
been redeemed may, within thirty days after the date of redemption invest any
portion or all of the proceeds thereof in another fund managed by Piper Capital
(other than portfolios of the Company) without payment of an additional sales
charge, or if such redemption was subject to a CDSC, a pro rata credit will be
given for such CDSC. The Fund and Growth and Income Fund may redeem
involuntarily, at net asset value, accounts valued at less than $200.

EXCHANGES. Each of the Fund and Growth and Income Fund makes available to
its shareholders exchange privileges allowing exchange of shares for shares
of certain other funds. Shares of the Fund may be exchanged for shares of any of
the five other series of the Company. Growth and Income Fund Shares may be
exchanged for shares of any of the 15 other funds open to new investors that are
advised by Piper Capital. Both the Fund and Growth and Income Fund provide
telephone exchange privileges to their shareholders.

For a more detailed discussion of purchasing, redeeming and exchanging
Growth and Income Fund shares, see "Shareholder Guide to Investing -- How to
Purchase Shares", "-- How to Redeem Shares" and "-- Shareholder Services" in
Growth and Income Fund's current Prospectus.

DIVIDENDS. Dividends from anticipated net investment income are declared
and paid quarterly by Growth and Income Fund and annually by the Fund. Net
short-term capital gains and long-term capital gains distributions are paid at
least once annually by both funds. Dividends and capital gains distributions of
both the Fund and Growth and Income Fund are automatically reinvested in
additional shares at net asset value unless the shareholder elects to receive
cash.

PRINCIPAL RISK FACTORS

The Fund and Growth and Income Fund are subject to the same risks to the
extent each invests in equity and debt securities, namely, market risk with
respect to equity investments and credit risk and interest rate risk with
respect to investments in debt securities. However, because the Fund pursues its
investment objectives in part through investment in foreign securities, and
Growth and Income Fund does not, the Fund is also exposed to the risks of
international investing. These risks include: risks relating to adverse currency
fluctuations, potential political and economic instability of countries in which
the Fund invests, limited liquidity and greater volatility of prices as compared
to U.S. securities, investment and repatriation restrictions, and foreign
taxation.

The Fund, unlike Growth and Income Fund, invests in options traded
over-the-counter (OTC). OTC options trading has no daily price fluctuation
limits and OTC options are considered illiquid. Furthermore, only the Fund
engages in currency forward contracts. These transactions are affected by all of
the factors which influence foreign exchange rates and foreign investments
generally, as well as limited reporting of last sale quotations, limitations,
charges or taxes associated with making or accepting delivery of foreign
currencies, and the absence of an established secondary market.

In addition, as discussed above, the Fund is a non-diversified investment
company under the 1940 Act, whereas Growth and Income Fund is a diversified
investment company. As a result, the Fund may invest a higher percentage of its
assets in a more limited number of issuers than Growth and Income Fund.

The foregoing discussion is a summary of the principal risk factors. For a
more complete discussion of the risks of each fund, see "Special Risk
Considerations" in the Fund's Prospectus and "Investment Objectives and Policies
- -- Growth and Income Fund -- Investment Risks" in Growth and Income Fund's
Prospectus.

8
<PAGE>
THE REORGANIZATION

BACKGROUND

The Company was managed initially through a joint venture ("Hercules")
between Piper Jaffray Companies, Inc. ("Piper Jaffray") and Midland Walwyn
Capital Corporation ("Midland") pursuant to which the parties agreed to jointly
promote, distribute and manage a family of international funds in the United
States and Canada. Shares of the Company were first offered to the public in the
U.S. on November 9, 1993.

The Company's shares, including shares of the Fund, were originally offered
for sale with no front-end or back-end sales charge. In lieu of a sales charge
paid by investors, Hercules and each sub-adviser retained by Hercules to manage
the portfolio of each series of the Company, advanced to broker-dealers a sales
commission (except with respect to the Money Market Fund) in the aggregate of
2.00% of the net asset value of shares purchased. If a shareholder redeemed in
less than two years, all or a portion of the advanced commission was charged
back to the broker-dealer. If a shareholder exchanged among the series within
the same two year period, the sub-advisers paid, or were paid, as the case may
be, a portion of the commission advance that had not yet been recovered. While
initially the Company, including the Fund, experienced positive growth, a trend
of net redemptions commenced in November of 1994 which has yet to be reversed.

In April 1995, Piper Jaffray and Midland announced their mutual agreement to
terminate the joint venture arrangement and to dissolve Hercules. After
requisite shareholder approval was obtained in July 1995, Piper Capital assumed
the role of manager and investment adviser for the Company.

After becoming manager to the Company, Piper Capital focused on the
structure, pricing and marketing of the various Hercules funds in the United
States in an attempt to promote asset growth in the funds and reverse the trend
of net redemptions. In particular, it invested considerable time and financial
resources to develop a distribution network with broker-dealers in addition to
Piper Jaffray because Piper Capital believed that the development of an external
distribution system was critical to the successful distribution of the Hercules
funds.

As part of this effort, a change in the pricing structure was implemented in
June 1995 incorporating a CDSC. Implementation of the CDSC was intended to
eliminate the need to recoup from the broker-dealer through whom the shares were
sold the commissions advanced to it by Piper Capital and the applicable
sub-adviser in the event of a redemption within two years of purchase. In lieu
thereof, shareholders would be required to pay a declining CDSC if shares were
redeemed within two years of purchase. It was believed that this pricing
structure would prove attractive to broker-dealers as well as to future
investors. The implementation of the CDSC did not, however, have the desired
effect on growth. Rather, the trend of net redemptions continued. Latin American
Value Fund and Money Market Fund are the only Hercules funds which have had even
one month since October 1994 where shareholder purchases exceeded redemptions.
Moreover, sales through broker-dealers other than Piper Jaffray remained
minimal.

The continuing inability to achieve asset growth in the Hercules funds
prompted a further review by Piper Capital of the future prospects of the funds.
Ultimately, Piper Capital concluded that it is unlikely that the Hercules funds
will, in the foreseeable future grow to a sufficient size to be economically
viable. Accordingly, Piper Capital recommended to the Board of Directors of the
Company that the Hercules funds be eliminated as a free standing family of funds
and that instead each Hercules fund be combined with an appropriate fund within
the Piper family of funds (or in the case of World Bond Fund and Money Market
Fund, that the fund be liquidated).

THE BOARD'S CONSIDERATION

At a meeting of the Board of Directors held on February 6, 1996, Piper
Capital reviewed for the Board the basis for its recommendation. It detailed the
efforts that have been made since inception of

9
<PAGE>
the Hercules Funds to promote and market the funds, the continuing inability to
reverse the trend of net redemptions that has continued since November 1994
despite these efforts, and the basis for its pessimistic view respecting the
Company's future prospects.

At its meeting on February 6, 1996, the Board, including all of the
Independent Directors, unanimously approved the Reorganization and, on March 29,
1996, approved the Plan and determined to recommend that shareholders of the
Fund approve the Plan.

In determining whether to recommend that shareholders of the Fund approve
the Plan, the Board, with the advice and assistance of independent legal
counsel, inquired into a number of matters. In particular, the Board considered
the Company's prospects for future growth and the effect upon shareholders
should assets remain at current levels or continue to be reduced further. The
Board considered in this regard that since the commencement of operations, Piper
Capital (or Hercules) has voluntarily limited total expenses of the Fund and the
Distributor has voluntarily limited its 12b-1 fees payable by the Fund and that
they do not presently intend to continue these limitations beyond the Fund's
fiscal year ending June 30, 1996. The Board noted that absent such assumption of
expenses and waiver of fees, the expense ratio of the Fund for the most current
fiscal year would have been considerably higher and total return lower.

The Board carefully considered the compatibility of the investment
objectives, policies, restrictions and portfolios of the Fund and Growth and
Income Fund. In particular the Board focused on the differences in the
investment policies of the Fund and Growth and Income Fund. The most significant
difference between the two, as discussed more fully below in "Comparison of
Investment Objectives, Policies and Restrictions -- Investment Objectives and
Policies," is that the Fund invests primarily in securities of the U.S., Canada
and Mexico, whereas Growth and Income Fund invests only in U.S. securities. In
considering the suitability of Growth and Income Fund for shareholders of the
Fund given Growth and Income Fund's focus solely on U.S. investments, the Board
noted the substantial percentage of the Fund's assets invested in the U.S.
(approximately 57% of the Portfolio as of January 31, 1996), and the fact that
the sub-adviser responsible for the U.S. investments of the Fund, Piper Capital,
is also the investment adviser of Growth and Income Fund.

The Board also took into account Piper Capital's view that a combination of
the Fund with another fund which more closely resembles the Fund may not be
practicable because there are so few North American funds and the small size of
the Fund makes it less attractive as a merger candidate.

In addition, the Board considered the comparative expenses currently
incurred in the operation of the Fund and Growth and Income Fund, the terms and
conditions of the proposed Reorganization, the comparative performance of the
funds, Piper Capital's undertaking to pay all the direct costs (E.G., proxy
solicitation) of the Reorganization, and the indirect costs (E.G., brokerage)
likely to be incurred by the Fund in the Reorganization. In recommending the
Reorganization to the shareholders of the Fund, the Board considered that the
Reorganization would have the following benefits for shareholders of the Fund:

1. The total expenses borne by shareholders of the combined fund should
be lower on a percentage basis than the total expenses per share of the
Fund. The Fund's expense ratio for its fiscal year ended June 30, 1995 was
2.00%, giving effect to waivers and expense reimbursements which Piper
Capital and the Distributor intend to discontinue after the Fund's fiscal
year ending June 30, 1996. Absent such waivers and reimbursements, expenses
would have been 3.39%. By contrast, the expense ratio for Growth and Income
Fund for its fiscal year ended September 30, 1995 was 1.32% (or 1.60% absent
fee limitations and expense reimbursements). The Distributor has voluntarily
agreed to limit the 12b-1 fee to an annual rate of 0.32% of Growth and
Income Fund's average daily net assets for its current fiscal year and Piper
Capital has voluntarily agreed to reimburse Growth and Income Fund for the
amount by which total fund operating expenses exceed 1.32% for its current
fiscal year. In addition, Growth and Income Fund's advisory fee scales down
as asset levels increase, and, because Growth and Income Fund is much larger
than the Fund, there is the opportunity to benefit from economies of scale,
greater investment diversification and facilitation of portfolio management.

10
<PAGE>
2. Shareholders of the Fund will be able to acquire shares of Growth
and Income Fund, which are otherwise subject to a maximum 4.00% front-end
sales charge, at net asset value and pursue a similar investment objective
in a larger and more economically viable fund without having to sell their
shares. Moreover, shareholders will be able to redeem the shares so acquired
at net asset value without any CDSC being imposed and will not pay any CDSC
on Fund shares converted in the Reorganization.

3. The Fund's shareholders would retain the capabilities and resources
of Piper Capital and its affiliates in the areas of operations, management,
distribution, shareholder servicing and marketing.

4. The Reorganization would enable the Fund's shareholders to enjoy an
expanded range of mutual fund investment options. The Piper Funds complex of
which Growth and Income Fund is a part, includes fifteen mutual fund
portfolios that will be available for exchange by Fund shareholders who
receive Growth and Income Fund Shares in the Reorganization.

5. The Reorganization will constitute a tax-free reorganization for
Federal income tax purposes, and no gain or loss will be recognized by the
Fund or its shareholders for Federal income tax purposes as a result of the
Reorganization.

Based on the foregoing, the Board determined that the Reorganization is in
the best interests of the shareholders of the Fund and that the interests of
Fund shareholders will not be diluted as a result thereof.

The Board of Directors of Growth and Income Fund, including all of the
Independent Directors, has also determined that the Reorganization is in the
best interests of Growth and Income Fund and that the interests of existing
shareholders of Growth and Income Fund will not be diluted as a result thereof.
The transaction will enable Growth and Income Fund to acquire investment
securities which are consistent with its objectives without the brokerage costs
attendant to the purchase of such securities in the market. Also, the addition
of the Fund's assets should result in some cost savings to the extent that fixed
expenses of Growth and Income Fund can be spread over a larger asset base. A
larger asset base could also lead to reduced management fees as a result of
"breakpoints" in the management fees payable by Growth and Income Fund.

THE PLAN

The terms and conditions under which the Reorganization would be consummated
are set forth in the Plan and are summarized below. This summary is qualified in
its entirety by reference to the Plan, a copy of which is attached as EXHIBIT A
to this Proxy Statement/Prospectus.

The Plan provides that (i) the Fund will transfer all of its assets,
including appropriate portfolio securities, cash, cash equivalents, securities,
commodities, futures and dividend and interest receivables to Growth and Income
Fund on the Closing Date in exchange for the assumption by Growth and Income
Fund of the Fund's stated liabilities, including all expenses, costs, charges
and reserves, as reflected on an unaudited statement of assets and liabilities
of the Fund prepared by the Treasurer of the Company as of the Valuation Date in
accordance with generally accepted accounting principles consistently applied
from the prior audited period, and the delivery of Growth and Income Fund
Shares; (ii) such Growth and Income Fund Shares will be distributed to the
shareholders of the Fund on the Closing Date or as soon as practicable
thereafter; and (iii) the Company shall be dissolved as a Minnesota corporation
and deregistered as an investment company under the 1940 Act, promptly following
the making of all distributions and the reorganization or liquidation of each
other series of the Company. In most cases, reorganization or liquidation of the
other series is contingent on obtaining the approval of shareholders of the
series.

For technical reasons, certain of the Fund's existing investment limitations
may be deemed to preclude the Fund from consummating the Reorganization to the
extent that the Reorganization

11
<PAGE>
would involve the Fund holding all of its assets as shares of Growth and Income
Fund until such shares are distributed to the Fund's shareholders. By approving
the Plan, the Fund's shareholders will be deemed to have agreed to waive each of
these limitations.

The number of Growth and Income Fund Shares to be delivered to the Fund will
be determined by dividing the value of the Fund assets acquired by Growth and
Income Fund (net of stated liabilities assumed by Growth and Income Fund) by the
net asset value of a Growth and Income Fund Share; these values will be
calculated as of the close of business of the New York Stock Exchange on a
business day not later than the fifth business day following the receipt of the
requisite approval of the Plan by the shareholders of the Fund or at such other
time as the Fund and Growth and Income Fund may agree (the "Valuation Date").
The net asset value of a Growth and Income Fund Share shall be the net asset
value per share computed on the Valuation Date, using the valuation procedures
set forth in Growth and Income Fund's then current Prospectus and Statement of
Additional Information. As an illustration, if on the Valuation Date the Fund
were to have securities with a market value of $95,000 and cash in the amount of
$5,000, the value of the assets which would be transferred to Growth and Income
Fund would be $100,000. If the net asset value per share of Growth and Income
Fund were $10 per share at the close of business on the Valuation Date, the
number of shares to be issued would be 10,000 ($100,000 DIVIDED BY $10). These
10,000 shares of Growth and Income Fund would be distributed to the former
shareholders of the Fund. This example is given for illustration purposes only
and does not bear any relationship to the dollar amounts or shares expected to
be involved in the Reorganization. Growth and Income Fund will cause its
transfer agent to credit and confirm an appropriate number of Growth and Income
Fund Shares to each Fund shareholder. Neither the Fund nor Growth and Income
Fund issues stock certificates.

The Closing Date will be the next business day following the Valuation Date,
or at such other time as the Fund and Growth and Income Fund may agree. The
consummation of the Reorganization is contingent upon the approval of the
Reorganization by the shareholders of the Fund and the receipt of the other
opinions and certificates set forth in Sections 6, 7 and 8 of the Plan and the
occurrence of the events described in those Sections, certain of which may be
waived by the Fund or Growth and Income Fund. The Plan may be amended in any
mutually agreeable manner, except that no amendment may be made subsequent to
the Meeting which would detrimentally affect the value of the shares of Growth
and Income Fund to be distributed. Piper Capital will bear all direct costs
associated with the Reorganization including preparation, printing, filing and
proxy solicitation expenses incurred in connection with obtaining requisite
shareholder approval of the Reorganization.

The Plan may be terminated and the Reorganization abandoned at any time,
before or after approval by the Fund's shareholders, by mutual consent of the
Fund and Growth and Income Fund. In addition, either party may terminate the
Plan upon the occurrence of a material breach of the Plan by the other party or
if, by September 15, 1996, any condition set forth in the Plan has not been
fulfilled or waived by the party entitled to its benefits.

The effect of the Reorganization is that shareholders of the Fund who vote
their shares in favor of the Plan are electing to sell their shares of the Fund
(at net asset value on the Valuation Date) and reinvest the proceeds in Growth
and Income Fund at net asset value and without recognition of taxable gain or
loss for Federal income tax purposes. Prior to the Valuation Date, the Fund will
declare and pay a dividend to distribute all of its accumulated investment
company taxable income and net capital gain, if any. The proceeds of such
distribution may be taxable to Fund shareholders. See "Tax Aspects of the
Reorganization" below. All contracts entered into by or on behalf of the Fund
will terminate upon consummation of the Reorganization.

Shareholders of the Fund will continue to be able to redeem their shares at
net asset value (subject to any applicable CDSC) next determined after receipt
of the redemption request until the close of business on the business day next
preceding the Closing Date. Redemption requests received by the Fund thereafter
will be treated as requests for redemption of shares of Growth and Income Fund.

12
<PAGE>
TAX ASPECTS OF THE REORGANIZATION

At least one but not more than 20 business days prior to the Valuation Date,
the Fund will declare and pay a dividend or dividends which, together with all
previous such dividends, will have the effect of distributing to the Fund's
shareholders all of the Fund's investment company taxable income for all periods
since inception of the Fund through and including the Valuation Date (computed
without regard to any dividends paid deduction), and all of the Fund's net
capital gain, if any, realized in such periods (after reduction for any capital
loss carry-forward).

The Reorganization is intended to qualify for Federal income tax purposes as
a tax-free reorganization under Section 368(a)(1) of the Internal Revenue Code
of 1986, as amended (the "Code"). The Company and Piper have represented that,
to their best knowledge, there is no plan or intention by Fund shareholders to
redeem, sell, exchange or otherwise dispose of a number of Growth and Income
Fund Shares received in the transaction that would reduce the Fund shareholders'
ownership of Growth and Income Fund Shares to a number of shares having a value,
as of the Closing Date, of less than 50% of the value of all of the formerly
outstanding the Fund shares as of the same date. The Company and Piper have each
further represented that, as of the Closing Date, the Fund and Growth and Income
Fund will qualify as regulated investment companies. In addition, Piper has
further represented that Growth and Income Fund will qualify as a regulated
investment company for its current fiscal year.

As a condition to the Reorganization, the Fund and Growth and Income Fund
will receive an opinion of Gordon Altman Butowsky Weitzen Shalov & Wein that,
based on certain assumptions, facts, the terms of the Plan and additional
representations set forth in the Plan or provided by the Company and Piper:

1. The transfer of substantially all of the Fund's assets in exchange
for Growth and Income Fund Shares and the assumption by Growth and Income
Fund of certain stated liabilities of the Fund followed by the distribution
by the Fund of Growth and Income Fund Shares to the Fund Shareholders in
exchange for their Fund shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code, and the Fund and Growth and Income
Fund will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code;

2. No gain or loss will be recognized by Growth and Income Fund upon
the receipt of the assets of the Fund solely in exchange for Growth and
Income Fund Shares and the assumption by Growth and Income Fund of the
stated liabilities of the Fund;

3. No gain or loss will be recognized by the Fund upon the transfer of
the assets of the Fund to Growth and Income Fund in exchange for Growth and
Income Fund Shares and the assumption by Growth and Income Fund of the
stated liabilities or upon the distribution of Growth and Income Fund Shares
to the Fund's shareholders in exchange for their Fund shares;

4. No gain or loss will be recognized by the Fund shareholders upon the
exchange of the shares of the Fund for Growth and Income Fund Shares;

5. The aggregate tax basis for Growth and Income Fund Shares received
by each of the Fund's shareholders pursuant to the reorganization will be
the same as the aggregate tax basis of the shares in the Fund held by each
such shareholder of the Fund immediately prior to the Reorganization;

6. The holding period of Growth and Income Fund Shares to be received
by each shareholder of the Fund will include the period during which the
shares in the Fund surrendered in exchange therefor were held (provided such
shares in the Fund were held as capital assets on the date of the
Reorganization);

7. The tax basis of the assets of the Fund acquired by Growth and
Income Fund will be the same as the tax basis of such assets to the Fund
immediately prior to the Reorganization; and

13
<PAGE>
8. The holding period of the assets of the Fund in the hands of Growth
and Income Fund will include the period during which those assets were held
by the Fund.

The Reorganization will be treated as a "change in ownership" under Section
382 of the Code. It is not anticipated that any resulting limitations on the use
of any capital loss carryovers of the Fund will be material. In addition, the
economic benefit of any capital loss carryovers of the Fund would be available
to shareholders of the combined entity with a resulting benefit to Growth and
Income Fund shareholders. It is not anticipated that any such benefit will be
material.

SHAREHOLDERS OF THE FUND SHOULD CONSULT THEIR TAX ADVISERS REGARDING THE
EFFECT, IF ANY, OF THE PROPOSED TRANSACTION IN LIGHT OF THEIR INDIVIDUAL
CIRCUMSTANCES. BECAUSE THE FOREGOING DISCUSSION ONLY RELATES TO THE FEDERAL
INCOME TAX CONSEQUENCES OF THE PROPOSED TRANSACTION, SHAREHOLDERS OF THE FUND
SHOULD ALSO CONSULT THEIR TAX ADVISERS AS TO STATE AND LOCAL TAX CONSEQUENCES,
IF ANY, OF THE PROPOSED TRANSACTION.

DISSENTERS' RIGHTS

Pursuant to Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act (the "MBCA Sections"), record holders of shares of the Company
are entitled to assert dissenters' rights in connection with the Reorganization
and obtain payment of the "fair value" of their shares, provided that such
shareholders comply with the requirements of the MBCA Sections. NOTWITHSTANDING
THE PROVISIONS OF THE MBCA SECTIONS, THE DIVISION OF INVESTMENT MANAGEMENT OF
THE COMMISSION HAS TAKEN THE POSITION THAT ADHERENCE TO STATE APPRAISAL
PROCEDURES BY A REGISTERED INVESTMENT COMPANY ISSUING REDEEMABLE SECURITIES
WOULD CONSTITUTE A VIOLATION OF RULE 22C-1 UNDER THE 1940 ACT. THIS RULE
PROVIDES THAT NO OPEN-END INVESTMENT COMPANY MAY REDEEM ITS SHARES OTHER THAN AT
NET ASSET VALUE NEXT COMPUTED AFTER RECEIPT OF A TENDER OF SUCH SECURITY FOR
REDEMPTION. IT IS THE VIEW OF THE DIVISION OF INVESTMENT MANAGEMENT THAT RULE
22C-1 PREEMPTS APPRAISAL PROVISIONS IN STATE STATUTES.

In the interests of ensuring equal valuation of all interests in the Fund,
the Company will determine dissenters' rights in accordance with the Division's
interpretation. It should be emphasized that Fund shareholders may sell their
shares at net asset value (subject to any applicable CDSC) at any time prior to
the Closing Date.

DESCRIPTION OF SHARES

Shares of Growth and Income Fund to be issued pursuant to the Plan will,
when issued, be fully paid and non-assessable by Growth and Income Fund and
transferable without restrictions and will have no preemptive or conversion
rights.

CAPITALIZATION TABLE (UNAUDITED)

The following table sets forth the capitalization of Growth and Income Fund
and the Fund as of September 30, 1995 and on a pro forma combined basis as if
the Reorganization had occurred on that date:

<TABLE>
<CAPTION>
SHARES
NET ASSETS OUTSTANDING NET ASSET
(000S (000S VALUE PER
OMITTED) OMITTED) SHARE
------------ ----------- ---------
<S> <C> <C> <C>
Fund.................................... $ 11,599 1,089 $10.65
Growth and Income Fund.................. $ 73,431 5,678 $12.93
Pro Forma Combined...................... $ 85,030 6,575 $12.93
</TABLE>

COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVES AND POLICIES

The Fund and Growth and Income Fund have similar investment objectives. The
Fund's objectives are long-term capital appreciation and current income. The
investment objectives of Growth and Income Fund are current income and long-term
growth of capital and income. The investment objectives of the Fund and Growth
and Income Fund are fundamental and may not be changed without shareholder
approval.

The Fund seeks to achieve its investment objectives by investing, under
normal circumstances, at least 65% of its total assets in U.S., Canadian and
Mexican securities, which are defined in its current

14
<PAGE>
prospectus as securities issued by (a) companies organized in the U.S., Canada
or Mexico or for which the principal trading market is located in such
countries, (b) companies that derive at least 50% of their gross revenues from
either goods produced, sales made, services performed or investments made in
such countries, (c) companies which have at least 50% of their total assets
located in the U.S., Canada or Mexico or (d) or guaranteed by the governments of
such countries or their agencies, political subdivisions or instrumentalities or
the central bank of such country (sovereign debt). The Fund does not invest 25%
or more of its total assets in government obligations issued by Canada or
Mexico. Growth and Income Fund seeks to achieve its investment objectives by
investing in a broadly diversified portfolio of securities, with an emphasis on
securities of large, established companies that have a history of dividend
payments and that the investment adviser believes are undervalued. The principal
difference between the two funds is that Growth and Income Fund invests at least
95% of its assets in U.S. equity and debt securities, whereas the Fund invests
in U.S. securities and Canadian and Mexican securities.

For both funds, companies are selected on the basis of Piper Capital's (and
the sub-adviser's, in the case of the Fund's non-U.S. investments) assessment of
their prospects for long-term growth in dividends and earnings in relationship
to the prevailing market price (I.E., investments that the adviser believes to
be undervalued). With respect to Growth and Income Fund, Piper Capital also
considers other factors, including the sensitivity of a company's particular
industry to fluctuations in major economic variables, such as interest rates and
industrial production. With respect to the Fund, emphasis is placed on
investments in companies which Piper Capital (and the sub-advisers, in the case
of non-U.S. investments) believes are well positioned to benefit from the
cross-border commerce among the countries in North America which is currently
taking place and is expected to increase as a result of government initiatives
to promote free cross-border trade. In addition, the Fund is authorized to
invest up to 35% of its total assets in securities of issuers located outside
North America that are believed by Piper Capital (and the sub-advisers) to be
well positioned to benefit from cross-border trade with the U.S., Canada and
Mexico.

The Fund may invest part or all of its assets in U.S. dollar- or foreign
currency-denominated cash or domestic or foreign high-quality money market
instruments to maintain a temporary "defensive" posture, when, in the opinion of
the investment adviser, it is advisable to do so because of market conditions.
For temporary defensive purposes, Growth and Income Fund may retain cash or
invest all or part of its assets in short-term money market securities including
U.S. Government obligations, time deposits, bank CDs, bankers' acceptances,
high-grade commercial paper, and other money market instruments.

15
<PAGE>
hedge against fluctuations in foreign exchange rates. To date, the Fund has not
engaged in options on futures contracts, options on stock and interest rate
indexes or currency exchange transactions other than forward contracts.

Both the Fund and Growth and Income Fund may purchase securities on a
when-issued or delayed delivery basis, may purchase or sell securities on a
forward commitment basis. Growth and Income Fund may, while the Fund may not,
purchase securities on a "when, as and if issued" basis. While Growth and Income
Fund may not currently invest in warrants at all. Both funds may enter into
repurchase agreements subject to certain procedures designed to minimize risks
associated with such agreements. The Fund may also (i) invest up to 5% of its
net assets in warrants; (ii) invest in American Depository Receipts ("ADRs") and
similar instruments; and (iii) invest in other investment companies (up to the
limits prescribed by the 1940 Act); Growth and Income Fund does not invest in
these types of instruments. Growth and Income Fund may lend portfolio securities
up to one-third of the value of its total assets; the Fund does not enter into
these types of transactions.

In addition, the Fund is a non-diversified investment company within the
meaning of the 1940 Act, whereas Growth and Income Fund is a diversified
investment company. A non-diversified investment company may invest a greater
portion of its assets in the securities of a single issuer than a diversified
investment company. To the extent that a relatively high percentage of a
non-diversified fund's assets may be invested in the securities of a limited
number of issuers, such fund may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of a
diversified investment company.

The investment policies of both the Fund and Growth and Income Fund are
non-fundamental and may be changed by their respective Boards of Directors
unless otherwise noted herein. The foregoing discussion is a summary of the
principal differences and similarities between the investment policies of the
funds. For a more complete discussion of each fund's policies see "Investment
Objectives and Policies" in each fund's respective Prospectus and "Investment
Objectives and Policies" in the Fund's Statement of Additional Information and
"Investment Objectives, Policies and Restrictions" in Growth and Income Fund's
Statement of Additional Information.

INVESTMENT RESTRICTIONS

Complete descriptions of the fundamental and non-fundamental investment
restrictions adopted by the Fund and Growth and Income Fund appear under the
caption "Investment Restrictions" in the Prospectus and Statement of Additional
Information of the Fund and "Special Investment Methods -- Investment
Restrictions" in Growth and Income Fund's Prospectus and "Investment Objectives,
Policies and Restrictions" in Growth and Income Fund's Statement of Additional
Information. A fundamental investment restriction cannot be changed without the
vote of a majority of the fund's outstanding voting securities, as defined in
the 1940 Act. The material differences between the investment restrictions of
the two funds are as follows: First, as a diversified investment company, Growth
and Income Fund may not, as a matter of fundamental policy, with respect to 75%
of its total assets, invest more than 5% of the value of its total assets in the
securities of any one issuer or own more than 10% of the outstanding voting
securities of any one issuer (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities). The Fund is subject to a
similar non-fundamental limitation only with respect to 50% of its assets.

Second, neither fund may invest for purposes of exercising control, however,
for Growth and Income Fund this is a non-fundamental restriction. Third, only
Growth and Income Fund is subject to a non-fundamental restriction against
investments in other investment companies (except as part of a merger,
consolidation or acquisition of assets). Fourth, as mentioned above, the Fund
may purchase warrants with up to 5% of its net assets, whereas Growth and Income
Fund is subject to a non-fundamental restriction against investing in any
warrants. Fifth, according to each fund's fundamental restrictions, the Fund
may, but Growth and Income Fund may not, enter into reverse repurchase
agreements for leverage purposes. Sixth, also as a matter of fundamental
restriction, the Fund may,

16
<PAGE>
but Growth and Income Fund may not, invest in readily marketable interests in
real estate investment trusts. Seventh, neither fund may invest more than 15% of
the value of its net assets in illiquid securities, however, with respect to
Growth and Income Fund this is a non-fundamental restriction. Finally, Growth
and Income Fund may, but the Fund, pursuant to its fundamental restrictions, may
not, make loans of money or property except through the purchase of debt
obligations. Any non-public loans made by Growth and Income Fund generally would
be subject to its limitation on investments in illiquid securities.

INTERESTS OF CERTAIN PERSONS

The following persons affiliated with the Fund and Growth and Income Fund
receive payments from the Fund and Growth and Income Fund for services rendered
pursuant to contractual arrangements with both funds: (i) Piper Capital, as the
investment adviser and manager to each fund, and (ii) the Distributor, as the
distributor of shares of each fund. In addition, with respect to Growth and
Income Fund only, Piper Trust Company, an affiliate of Piper Capital and the
Distributor, and the Distributor provide certain transfer agent and dividend
disbursing agent services for certain shareholder accounts.

ADDITIONAL INFORMATION ABOUT THE FUND
AND GROWTH AND INCOME FUND

GENERAL

For a discussion of the organization and operation of the Fund, see
"Management", "Investment Objectives and Policies", "Investment Restrictions"
and "General Information" in its prospectus. For a discussion of the
organization and operation of Growth and Income Fund, see "Introduction",
"Management", "Investment Objectives and Policies" and "General Information" in
its prospectus.

FINANCIAL INFORMATION

For certain financial information about Growth and Income Fund and the Fund,
see "Financial Highlights" and "Performance Comparisons" in their respective
prospectuses.

MANAGEMENT

For information about Growth and Income Fund's and the Fund's Board of
Directors, investment manager and distributor, see "Management" and
"Distribution of Fund Shares" in their respective prospectuses.

DESCRIPTION OF SECURITIES AND SHAREHOLDER INQUIRIES

For a description of the nature and most significant attributes of shares of
the Fund and Growth and Income Fund, and information regarding shareholder
inquiries, see "General Information" and "Introduction -- Shareholder Inquiries"
in their respective prospectuses.

DIVIDENDS, DISTRIBUTIONS AND TAXES

For a discussion of the Fund's policies with respect to dividends,
distributions and taxes, see "Dividends, Distributions and Tax Status" in its
prospectus. For a discussion of Growth and Income Fund's policies with respect
to dividends, distributions, and taxes, see "Dividends and Distributions" and
"Tax Status" in its prospectus.

PURCHASES AND REDEMPTIONS

For a discussion of how the Fund's shares may be purchased and redeemed, see
"Purchase of Shares" and "Redemption of Shares" in its prospectus. For a
discussion of how Growth and Income Fund's shares may be purchased and redeemed,
see "Shareholder Guide to Investing" in its prospectus.

PENDING LEGAL PROCEEDINGS

For a discussion of pending legal proceedings see "Pending Litigation" in
the Fund's prospectus and "General Information -- Pending Legal Proceedings" in
Growth and Income Fund's prospectus.

17
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

For management's discussion of Growth and Income Fund's performance as of
its fiscal year ended September 30, 1995, see Piper's Annual Report for such
fiscal year accompanying this Proxy Statement/Prospectus and incorporated herein
by reference. For management's discussion of the Fund's performance, see the
Company's Annual Report for its fiscal year ended June 30, 1995, which is
incorporated herein by reference. The Company's Annual Report is available
without charge, as noted under "Available Information" below.

FINANCIAL STATEMENTS AND EXPERTS

The annual financial statements of Growth and Income Fund and the Fund
incorporated by reference in the Additional Statement have been audited by KPMG
Peat Marwick LLP, independent accountants, for the periods indicated in its
respective reports thereon. Such financial statements have been incorporated by
reference in reliance upon such reports given upon the authority of KPMG Peat
Marwick LLP as experts in accounting and auditing.

LEGAL MATTERS

Certain legal matters concerning the issuance of shares of Growth and Income
Fund will be passed upon by Dorsey & Whitney LLP, Minneapolis, Minnesota.

AVAILABLE INFORMATION

ADDITIONAL INFORMATION ABOUT THE FUND AND GROWTH AND INCOME FUND IS
AVAILABLE, AS APPLICABLE, IN THE FOLLOWING DOCUMENTS WHICH ARE INCORPORATED
HEREIN BY REFERENCE: (I) GROWTH AND INCOME FUND'S PROSPECTUS DATED NOVEMBER 27,
1995, ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS, WHICH PROSPECTUS FORMS A PART
OF POST-EFFECTIVE AMENDMENT NO. 27 TO PIPER'S REGISTRATION STATEMENT ON FORM
N-1A (FILE NOS. 33-10261; 811-4905); (II) GROWTH AND INCOME FUND'S STATEMENT OF
ADDITIONAL INFORMATION DATED NOVEMBER 27, 1995; (III) THE ANNUAL REPORT FOR
PIPER -- TOTAL RETURN FUNDS FOR GROWTH AND INCOME FUND'S FISCAL YEAR ENDED
SEPTEMBER 30, 1995 ACCOMPANYING THIS PROXY STATEMENT/PROSPECTUS; (IV) THE
COMPANY'S PROSPECTUS DATED AUGUST 29, 1995, WHICH PROSPECTUS FORMS A PART OF
POST-EFFECTIVE AMENDMENT NO. 6 TO THE COMPANY'S REGISTRATION STATEMENT ON FORM
N-1A (FILE NOS. 33-67016; 811-7936); (V) THE COMPANY'S STATEMENT OF ADDITIONAL
INFORMATION DATED AUGUST 29, 1995; (VI) THE COMPANY'S ANNUAL REPORT FOR THE
FISCAL YEAR ENDED JUNE 30, 1995; AND (VII) THE COMPANY'S SEMI-ANNUAL REPORT FOR
THE SIX MONTHS ENDED DECEMBER 31, 1995. THE FOREGOING DOCUMENTS MAY BE OBTAINED
WITHOUT CHARGE UPON REQUEST FROM SHAREHOLDER SERVICES, PIPER JAFFRAY TOWER, 222
SOUTH NINTH STREET, 55402-3804, (800) 866-7778.

The Company and Piper are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith, file
reports and other information with the Commission. Proxy material, reports and
other information about the Fund and Growth and Income Fund which are of public
record can be inspected and copied at public reference facilities maintained by
the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and certain of its regional offices, and copies of such
materials can be obtained at prescribed rates from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549.

OTHER BUSINESS

Management of the Company knows of no business other than the matters
specified above which will be presented at the Meeting. Since matters not known
at the time of the solicitation may come before the Meeting, the proxy as
solicited confers discretionary authority with respect to such matters

18
<PAGE>
as properly come before the Meeting, including any adjournment or adjournments
thereof, and it is the intention of the persons named as attorneys-in-fact in
the proxy to vote this proxy in accordance with their judgment on such matters.

By Order of the Board of Directors,

SUSAN SHARP MILEY
SECRETARY

May 17, 1996

19
<PAGE>
EXHIBIT A

AGREEMENT AND PLAN OF REORGANIZATION
HERCULES NORTH AMERICAN GROWTH AND INCOME FUND AND PIPER GROWTH AND INCOME FUND

THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
15th day of April, 1996, by and between Hercules Funds Inc. ("Hercules
Company"), on behalf of its series Hercules North American Growth and Income
Fund ("Hercules Fund"), and Piper Funds Inc. ("Piper Company"), on behalf of its
series Growth and Income Fund ("Piper Fund"). Hercules Company and Piper Company
are Minnesota corporations. As used in this Agreement, the terms "Piper Fund"
and "Hercules Fund" shall be construed to mean, respectively, 'Piper Company on
behalf of Piper Fund' and 'Hercules Company on behalf of Hercules Fund', where
necessary to reflect the fact that a corporate series is generally considered
the beneficiary of corporate level actions taken with respect to the series and
is not itself recognized as a person under law.

This Agreement is intended to be and is adopted as a "plan of
reorganization" within the meaning of Treas. Reg. 1.368-2(g), for a
reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Code"). The reorganization ("Reorganization") will consist of the
transfer to Piper Fund of substantially all of the assets of Hercules Fund in
exchange for the assumption by Piper Fund of all stated liabilities of Hercules
Fund and the issuance by Piper Fund of shares of common stock, par value $0.01
per share ("Piper Fund Shares"), to be distributed, after the Closing Date
hereinafter determined, to the shareholders of Hercules Fund in liquidation of
Hercules Fund as provided herein, all upon the terms and conditions hereinafter
set forth in this Agreement. The distribution of Piper Fund Shares to Hercules
Fund shareholders and the retirement and cancellation of Hercules Fund shares
will be effected pursuant to an amendment to the Articles of Incorporation of
Hercules Company in the form attached hereto as Exhibit 1 (the "Amendment"), to
be adopted by Hercules Company in accordance with the Minnesota Business
Corporation Act.

In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:

1. THE REORGANIZATION AND LIQUIDATION OF HERCULES FUND

1.1. Subject to the terms and conditions set forth herein and in the
Amendment and on the basis of the representations and warranties contained
herein, Hercules Fund agrees to assign, deliver and otherwise transfer the
Hercules Fund Assets (as defined in paragraph 1.2(a)) to Piper Fund and Piper
Fund agrees in exchange therefor to assume all stated liabilities of Hercules
Fund on the Closing Date (as defined in paragraph 3.1) as set forth in paragraph
1.3 and to deliver to Hercules Fund Shareholders (as defined in paragraph 1.5)
the number of Piper Fund Shares, including fractional Piper Fund Shares,
determined in accordance with paragraph 2.2. Such transactions shall take place
at the closing provided for in paragraph 3.1 ("Closing").

1.2.(a) The "Hercules Fund Assets" shall consist of all property including,
without limitation, all cash, cash equivalents, securities, commodities,
futures, and dividend and interest receivables owned by Hercules Fund, and
any deferred or prepaid expenses shown as an asset on Hercules Fund's books,
on the Valuation Date (as defined in paragraph 2.1).

(b) Hercules Fund reserves the right to sell any of the securities in
its portfolio but will not, from the date on which the Proxy Materials (as
defined in paragraph 4.3) are mailed to Hercules Fund shareholders, acquire
without the prior approval of Piper Fund, any additional securities or other
instruments other than securities or instruments of the type in which Piper
Fund is permitted to invest and in amounts agreed to by Piper Fund. In the
event that Hercules Fund holds any assets that Piper Fund is not permitted
to hold, Hercules Fund will dispose of such assets on or prior to the
Valuation Date. In addition, if it is determined that the portfolios of
Hercules Fund and Piper Fund, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon Piper Fund with
respect to such investments (including,

A-1
<PAGE>
among others, percentage limitations necessary to satisfy the
diversification requirements of the Code), Hercules Fund if requested by
Piper Fund will, on or prior to the Valuation Date, dispose of and/or
reinvest a sufficient amount of such investments as may be necessary to
avoid violating such limitations as of the Closing Date.

1.3. Hercules Fund will endeavor to discharge all of its liabilities and
obligations on or prior to the Valuation Date. Piper Fund will assume all stated
liabilities, which include, without limitation, all expenses, costs, charges and
reserves reflected on an unaudited Statement of Assets and Liabilities of
Hercules Fund prepared by the Treasurer of Hercules Fund as of the Valuation
Date in accordance with generally accepted accounting principles consistently
applied from the prior audited period ("Valuation Date Statement").

1.4. In order for Hercules Fund to comply with Section 852(a)(1) of the
Code and to avoid having any investment company taxable income or net capital
gain (as defined in Sections 852(b)(2) and 1222(11) of the Code, respectively)
in the taxable year ending with its dissolution, Hercules Fund will on or before
the Valuation Date (a) declare a dividend in an amount large enough so that it
will have declared dividends of all of its investment company taxable income and
net capital gain, if any, for such taxable year (determined without regard to
any deduction for dividends paid) and (b) distribute such dividend.

1.5. On the Closing Date or as soon as practicable thereafter, pursuant to
paragraph 1.1 hereof and the Amendment, Hercules Fund will distribute Piper Fund
Shares received by Hercules Fund pro rata to its shareholders of record
determined as of the close of business on the Valuation Date ("Hercules Fund
Shareholders"). Thereafter, no additional shares representing interests in the
Hercules Fund shall be issued. Such distribution will be accomplished by an
instruction, signed by Hercules Fund's Secretary, to transfer Piper Fund Shares
then credited to Hercules Fund's account on the books of Piper Fund to open
accounts on the books of Piper Fund in the names of the Hercules Fund
Shareholders and representing the respective pro rata number of Piper Fund
Shares due each such Hercules Fund Shareholder. All issued and outstanding
shares of Hercules Fund simultaneously will be canceled on Hercules Fund's
books. No Hercules Fund Shareholder will be charged any contingent deferred
sales charge described in Hercules Fund's current or then-current prospectus as
a result of the conversion of Hercules Fund holdings into Piper Fund Shares
described in this paragraph.

1.6. Ownership of Piper Fund Shares will be shown on the books of Piper
Fund's transfer agent. Piper Fund Shares will be issued in the manner described
in Piper Fund's then current Prospectus and Statement of Additional Information,
except no front-end sales charges will be incurred by Hercules Fund Shareholders
in connection with Piper Fund Shares received in the Reorganization.

1.7. Any transfer taxes payable upon issuance of Piper Fund Shares in a
name other than the registered holder of Hercules Fund Shares on Hercules Fund's
books as of the close of business on the Valuation Date shall, as a condition of
such issuance and transfer, be paid by the person to whom Piper Fund Shares are
to be issued and transferred.

1.8. Any reporting responsibility of Hercules Fund is and shall remain the
responsibility of Hercules Fund up to and including the date on which Hercules
Fund is dissolved and deregistered pursuant to paragraph 1.9.

1.9 Hercules Company shall be dissolved as a Minnesota corporation and
deregistered as an investment company under the Investment Company Act of 1940,
as amended ("1940 Act"), promptly following the making of all distributions
pursuant to paragraph 1.5 and the reorganization or liquidation of each of its
series, such that no shares of Hercules Company remain issued and outstanding.

1.10 All books and records maintained on behalf of Hercules Fund will be
delivered to Piper Fund and, after the Closing, will be maintained by Piper Fund
or its designee in compliance with applicable record retention requirements
under the 1940 Act.

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2. VALUATION

2.1. The "Valuation Date" shall be a business day not later than the 5th
business day following the receipt of the requisite approval of this Agreement
by shareholders of Hercules Fund or such other date after such shareholder
approval as may be mutually agreed upon. The value of the Hercules Fund Assets
shall be the value of such assets computed as of 4:00 p.m., Eastern time, on the
Valuation Date, using the valuation procedures set forth in Piper Fund's then
current Prospectus and Statement of Additional Information.

2.2. The net asset value of a Piper Fund Share shall be the net asset value
per share computed on the Valuation Date, using the valuation procedures set
forth in Piper Fund's then current Prospectus and Statement of Additional
Information.

2.3. The number of Piper Fund Shares (including fractional shares, if any)
to be issued hereunder shall be determined by dividing the value of the Hercules
Fund Assets, net of the liabilities of Hercules Fund assumed by Piper Fund
pursuant to paragraph 1.1, determined in accordance with paragraph 2.1, by the
net asset value of a Piper Fund Share determined in accordance with paragraph
2.2.

2.4. All computations of value shall be made by Piper Capital Management
Incorporated ("PCM") in accordance with its regular practice in pricing Piper
Fund. Piper Fund shall cause PCM to deliver a copy of its valuation report at
the Closing.

3. CLOSING AND CLOSING DATE

3.1. The Closing shall take place on the Valuation Date as of 5:00 p.m.,
Eastern time, or at such other day or time as the parties may agree (the
"Closing Date"). The Closing shall be held in a location mutually agreeable to
the parties hereto. All acts taking place at the Closing shall be deemed to take
place simultaneously as of 5:00 p.m., Eastern time, on the Closing Date unless
otherwise provided.

3.2. Portfolio securities held by Hercules Fund (together with any cash or
other assets) shall be delivered by Hercules Fund to Investors Fiduciary Trust
Company (the "Custodian"), as custodian for Piper Fund, for the account of Piper
Fund on or before the Closing Date in conformity with applicable custody
provisions under the 1940 Act and duly endorsed in proper form for transfer in
such condition as to constitute good delivery thereof in accordance with the
custom of brokers. The portfolio securities shall be accompanied by all
necessary federal and state stock transfer stamps or a check for the appropriate
purchase price of such stamps. Portfolio securities and instruments deposited
with a securities depository (as defined in Rule 17f-4 under the 1940 Act) shall
be delivered on or before the Closing Date by book-entry in accordance with
customary practices of such depository and the Custodian. The cash delivered
shall be in the form of a Federal Funds wire, payable to the order of "Investors
Fiduciary Trust Company, Custodian for Piper Growth and Income Fund, a series of
Piper Funds, Inc."

3.3. In the event that on the Valuation Date, (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such Exchange or elsewhere shall be
disrupted so that, in the judgment of both Piper Fund and Hercules Fund,
accurate appraisal of the value of the net assets of Piper Fund or the Hercules
Fund Assets is impracticable, the Valuation Date shall be postponed until the
first business day after the day when trading shall have been fully resumed
without restriction or disruption and reporting shall have been restored.

3.4. At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, share certificates, if any, receipts or other
documents as such other party or its counsel may reasonably request.

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4. COVENANTS OF PIPER FUND AND HERCULES FUND

4.1. Except as otherwise expressly provided herein with respect to Hercules
Fund, Piper Fund and Hercules Fund each will operate its business in the
ordinary course between the date hereof and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and other distributions.

4.2. Piper Company will prepare and file with the Securities and Exchange
Commission ("Commission") a registration statement on Form N-14 under the
Securities Act of 1933, as amended ("1933 Act"), relating to Piper Fund Shares
("Registration Statement"). Hercules Company will provide Piper Company with the
Proxy Materials as described in paragraph 4.3 below, for inclusion in the
Registration Statement. Hercules Company will further provide Piper Company with
such other information and documents relating to Hercules Fund as are reasonably
necessary for the preparation of the Registration Statement.

4.3. Hercules Fund will call a meeting of its shareholders to consider and
act upon this Agreement and the Amendment and to take all other action necessary
to obtain approval of the transactions contemplated herein, including, if
necessary, the waiver of any existing investment limitations that might
otherwise preclude Hercules Fund from holding all of its assets as Piper Fund
Shares until such shares are distributed to Hercules Fund shareholders. Hercules
Company will prepare the notice of meeting, form of proxy and proxy statement
(collectively, "Proxy Materials") to be used in connection with such meeting.
Piper Company will furnish Hercules Company with a currently effective
prospectus relating to Piper Fund Shares for inclusion in the Proxy Materials
and with such other information relating to Piper Fund as is reasonably
necessary for the preparation of the Proxy Materials.

4.4. Subject to the provisions of this Agreement, Piper Fund and Hercules
Fund will each take, or cause to be taken, all action, and do or cause to be
done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.

4.5. As soon after the Closing Date as is reasonably practicable, Hercules
Company (a) shall prepare and file all federal and other tax returns and reports
of Hercules Fund required by law to be filed with respect to all periods ending
on or before the Closing Date but not theretofore filed and (b) shall pay all
federal and other taxes shown as due thereon and/or all federal and other taxes
that were unpaid as of the Closing Date, including without limitation, all taxes
for which the provision for payment was made as of the Closing Date (as
represented in paragraph 5.2(k)).

4.6. Piper Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and such of
the state blue sky and securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.

5. REPRESENTATIONS AND WARRANTIES

5.1. Piper Company represents and warrants to Hercules Company as follows:

(a) Piper Fund is a series of Piper Company. Piper Company is a
corporation validly existing and in good standing under the laws of
Minnesota with corporate power to carry on its business as presently
conducted;

(b) Piper Company is a duly registered, open-end, management investment
company, and its registration with the Commission as an investment company
under the 1940 Act and the registration of its shares under the 1933 Act are
in full force and effect;

(c) All of the issued and outstanding shares of common stock of Piper
Fund have been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities
laws. Shares of Piper Fund are registered in all jurisdictions in which they
are required to be registered under state securities laws and other laws,
and Piper Company is not subject to any stop order and is fully qualified to
sell Piper Fund shares in each state in which such shares have been
registered;

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(d) The current Prospectus and Statement of Additional Information of
Piper Fund conform in all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the regulations thereunder and do not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;

(e) Piper Fund is not in, and the execution, delivery and performance of
this Agreement will not result in a, material violation of any provision of
Piper Company's Articles of Incorporation or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which Piper
Fund is a party or by which it is bound;

(f) Other than as disclosed in Piper Fund's currently effective
prospectus, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against Piper Company or Piper Fund
or any of its properties or assets which, if adversely determined, would
materially and adversely affect its financial condition or the conduct of
its business; and Piper Fund knows of no facts that might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely affect, its business or its ability to consummate
the transactions herein contemplated;

(g) Piper Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights as
of Piper Fund's most recent fiscal year-end, and for the year then ended,
certified by KPMG Peat Marwick LLP (copies of which have been furnished to
Hercules Fund), fairly present, in all materials respects, Piper Fund's
financial condition as of such date in accordance with generally accepted
accounting principles, and its results of operations, changes in its net
assets and financial highlights for such period, and as of such date there
were no known liabilities of Piper Fund (contingent or otherwise) not
disclosed therein that would be required in accordance with generally
accepted accounting principles to be disclosed therein;

(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in Piper Fund's financial
condition, assets, liabilities or business, other than changes occurring in
the ordinary course of business, or any incurrence by Piper Fund of
indebtedness maturing more than one year from the date such indebtedness was
incurred, except indebtedness incurred in the ordinary course of business.
For the purpose of this subparagraph (h), neither a decline in Piper Fund's
net asset value per share nor a decrease in Piper Fund's size due to
redemptions by Piper Fund shareholders shall constitute a material adverse
change;

(i) All issued and outstanding Piper Fund shares are, and at the Closing
Date will be, duly and validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof.
Piper Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares, nor is there outstanding any
security convertible to any of its shares;

(j) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of Piper Company, and
this Agreement constitutes a valid and binding obligation of Piper Fund
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance,
and other laws relating to or affecting creditors rights and to general
equity principles. No other consents, authorizations or approvals are
necessary in connection with Piper Fund's performance of this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act and the
1940 Act and such as may be required under state securities laws;

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(k) Piper Fund Shares to be issued and delivered to Hercules Fund, for
the account of the Hercules Fund Shareholders, pursuant to the terms of this
Agreement will at the Closing Date have been duly authorized and, when so
issued and delivered, will be duly and validly issued Piper Fund Shares, and
will be fully paid and nonassessable with no personal liability attaching to
the ownership thereof;

(l) All material federal and other tax returns and reports of Piper Fund
required by law to be filed on or before the Closing Date have been filed
and are correct, and all federal and other taxes shown as due or required to
be shown as due on said returns and reports have been paid or provision has
been made for the payment thereof, and to the best of Piper Fund's
knowledge, no such return is currently under audit and no assessment has
been asserted with respect to any such return and there are no facts that
might form the basis for such proceedings;

(m) For each taxable year since its inception, Piper Fund has met the
requirements of Subchapter M of the Code for qualification and treatment as
a "regulated investment company" and neither the execution or delivery of,
nor the performance of its obligations under, this Agreement will adversely
affect, and no other events, to the best of Piper Fund's knowledge, are
reasonably likely to occur which will adversely affect, the ability of Piper
Fund to continue to meet the requirements of Subchapter M of the Code;

(n) Since Piper Fund's most recent fiscal year-end, there has been no
change by Piper Fund in accounting methods, principles, or practices,
including those required by generally accepted accounting principles;

(o) The information furnished or to be furnished by Piper Fund for use
in registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto; and

(p) The Proxy Materials to be included in the Registration Statement
(only insofar as they relate to Piper Fund) will, on the effective date of
the Registration Statement and on the Closing Date, not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not materially
misleading.

5.2. Hercules Company represents and warrants to Piper Company as follows:

(a) Hercules Fund is a series of Hercules Company. Hercules Company is a
corporation validly existing and in good standing under the laws of
Minnesota.

(b) Hercules Company is a duly registered, open-end, management
investment company, and its registration with the Commission as an
investment company under the 1940 Act and the registration of its shares
under the 1933 Act are in full force and effect;

(c) All of the issued and outstanding shares of common stock of Hercules
Fund have been offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and state securities
laws. Shares of Hercules Fund are registered in all jurisdictions in which
they are required to be registered under state securities laws and other
laws, and Hercules Company is not subject to any stop order and is fully
qualified to sell Hercules Fund shares in each state in which such shares
have been registered;

(d) The current Prospectus and Statement of Additional Information of
Hercules Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the regulations thereunder
and do not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading;

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(e) Hercules Fund is not in, and the execution, delivery and performance
of this Agreement will not result in a, material violation of any provision
of Hercules Company's Articles of Incorporation or By-Laws or of any
agreement, indenture, instrument, contract, lease or other undertaking to
which Hercules Fund is a party or by which it is bound;

(f) Other than as disclosed in Hercules Fund's currently effective
prospectus, no material litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or, to its knowledge, threatened against Hercules Fund or any of its
properties or assets which, if adversely determined, would materially and
adversely affect its financial condition or the conduct of its business; and
Hercules Fund knows of no facts that might form the basis for the
institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is reasonably likely to
materially and adversely affect, its business or its ability to consummate
the transactions herein contemplated;

(g) Hercules Fund's Statement of Assets and Liabilities, Statement of
Operations, Statement of Changes in Net Assets and Financial Highlights of
Hercules Fund as of June 30, 1995 and for the year then ended, certified by
KPMG Peat Marwick LLP (copies of which have been or will be furnished to
Piper Fund) fairly present, in all material respects, Hercules Fund's
financial condition as of such date, and its results of operations, changes
in its net assets and financial highlights for such period in accordance
with generally accepted accounting principles, and as of such date there
were no known liabilities of Hercules Fund (contingent or otherwise) not
disclosed therein that would be required in accordance with generally
accepted accounting principles to be disclosed therein;

(h) Since the date of the most recent audited financial statements,
there has not been any material adverse change in Hercules Fund's financial
condition, assets, liabilities or business, other than changes occurring in
the ordinary course of business, or any incurrence by Hercules Fund of
indebtedness maturing more than one year from the date such indebtedness was
incurred, except as otherwise disclosed in writing to and acknowledged by
Piper Fund prior to the date of this Agreement and prior to the Closing
Date. All liabilities of Hercules Fund (contingent and otherwise) are
reflected in the Valuation Date Statement. For the purpose of this
subparagraph (h), neither a decline in Hercules Fund's net asset value per
share nor a decrease in Hercules Fund's size due to redemptions by Hercules
Fund shareholders shall constitute a material adverse change;

(i) Hercules Fund has no material contracts or other commitments (other
than this Agreement) that will be terminated with liability to it prior to
the Closing Date;

(j) All issued and outstanding shares of Hercules Fund are, and at the
Closing Date will be, duly and validly issued and outstanding, fully paid
and nonassessable with no personal liability attaching to the ownership
thereof. Hercules Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any of its shares, nor is there
outstanding any security convertible to any of its shares. All such shares
will, at the time of Closing, be held by the persons and in the amounts
recorded by Hercules Fund's transfer agent;

(k) The execution, delivery and performance of this Agreement will have
been duly authorized prior to the Closing Date by all necessary action on
the part of Hercules Company, and subject to the approval of Hercules Fund's
shareholders, this Agreement constitutes a valid and binding obligation of
Hercules Fund enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, and other laws relating to or affecting creditors
rights and to general equity principles. No other consents, authorizations
or approvals are necessary in connection with Hercules Fund's performance of
this Agreement, except such as have been obtained under the 1933 Act, the
1934 Act and the 1940 Act and such as may be required under state securities
laws;

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(l) All material federal and other tax returns and reports of Hercules
Fund required by law to be filed on or before the Closing Date shall have
been filed and are correct and all federal and other taxes shown as due or
required to be shown as due on said returns and reports have been paid or
provision has been made for the payment thereof, and to the best of Hercules
Fund's knowledge, no such return is currently under audit and no assessment
has been asserted with respect to any such return and there are no facts
that might form the basis for such proceedings;

(m) For each taxable year since its inception, Hercules Fund has met all
the requirements of Subchapter M of the Code for qualification and treatment
as a "regulated investment company" and neither the execution or delivery
of, nor the performance of its obligations under, this Agreement will
adversely affect, and no other events, to the best of Hercules Fund's
knowledge, are reasonably likely to occur which will adversely affect the
ability of Hercules Fund to continue to meet the requirements of Subchapter
M of the Code;

(n) At the Closing Date, Hercules Fund will have good and valid title to
the Hercules Fund Assets, subject to no liens (other than the obligation, if
any, to pay the purchase price of portfolio securities purchased by Hercules
Fund which have not settled prior to the Closing Date), security interests
or other encumbrances, and full right, power and authority to assign,
deliver and otherwise transfer such assets hereunder, and upon delivery and
payment for such assets, Piper Fund will acquire good and marketable title
thereto, subject to no restrictions on the full transfer thereof, including
any restrictions as might arise under the 1933 Act;

(o) On the effective date of the Registration Statement, at the time of
the meeting of Hercules Fund's shareholders and on the Closing Date, the
Proxy Materials will (i) comply in all material respects with the provisions
of the 1933 Act, the Securities Exchange Act of 1934, as amended ("1934
Act") and the 1940 Act and the regulations thereunder and (ii) not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither Hercules Fund nor Hercules Company shall be
construed to have made the foregoing representation with respect to portions
of the Proxy Materials furnished by Piper Fund. Any other information
furnished by Hercules Fund for use in the Registration Statement or in any
other manner that may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with applicable federal securities and other laws and
regulations thereunder;

(p) Hercules Fund has maintained or has caused to be maintained on its
behalf all books and accounts as required of a registered investment company
in compliance with the requirements of Section 31 of the 1940 Act and the
Rules thereunder; and

(q) Hercules Fund is not acquiring Piper Fund Shares to be issued
hereunder for the purpose of making any distribution thereof other than in
accordance with the terms of this Agreement.

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF HERCULES FUND

The obligations of Hercules Fund to consummate the transactions provided for
herein shall be subject, at its election, to the performance by Piper Fund of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:

6.1. All representations and warranties of Piper Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the be Closing Date.

6.2. Piper Fund shall have delivered to Hercules Fund a certificate of its
President and Treasurer, in a form reasonably satisfactory to Hercules Fund and
dated as of the Closing Date, to the effect that the representations and
warranties of Piper Company made in this Agreement are true and correct at and
as of the a Closing Date, except as they may be affected by the transactions
contemplated by this Agreement, and as to such other matters as Hercules Company
shall reasonably request.

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6.3. Hercules Company shall have received a favorable opinion from Dorsey &
Whitney LLP, counsel to Piper Fund, dated as of the Closing Date, to the effect
that: (a) Piper Company is a validly existing Minnesota corporation and has the
corporate power to own all of the properties and assets of Piper Fund and, to
the knowledge of such counsel, to carry on its business as presently conducted;
(b) Piper Company is a duly registered, open-end, management investment company,
and, to the knowledge of such counsel, its registration with the Commission as
an investment company under the 1940 Act is in full force and effect; (c) this
Agreement has been duly authorized, executed and delivered by Piper Fund and,
assuming that the Registration Statement complies with the 1933 Act, the 1934
Act and the 1940 Act and regulations thereunder and assuming due authorization,
execution and delivery of this Agreement by Hercules Fund, is a valid and
binding obligation of Piper Fund enforceable against Piper Fund in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other laws relating to or
affecting creditors rights and to general equity principles; (d) Piper Fund
Shares to be issued to Hercules Fund Shareholders as provided by this Agreement
are duly authorized and, assuming receipt of the consideration to be paid
therefor, upon such delivery will be validly issued and outstanding and fully
paid and nonassessable, and, to the knowledge of such counsel, no shareholder of
Piper Fund has any preemptive rights to subscription or purchase in respect
thereof; (e) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, violate Piper
Company's Articles of Incorporation or By-Laws; and (f) to the knowledge of such
counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or any state is required for the
consummation by Piper Fund of the transactions contemplated herein, except such
as have been obtained under the 1933 Act, the 1934 Act and the 1940 Act and such
as may be required under state securities laws.

6.4. As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions, nor any increase in the
investment management fees or annual fees payable pursuant to Piper Fund's 12b-1
plan of distribution, from those described in the Prospectus and Statement of
Additional Information of Piper Fund in effect on the date of this Agreement.

7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PIPER FUND

The obligations of Piper Fund to complete the transactions provided for
herein shall be subject, at its election, to the performance by Hercules Fund of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions:

7.1. All representations and warranties of Hercules Company contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.

7.2. Hercules Fund shall have delivered to Piper Fund at the Closing a
certificate of its President and its Treasurer, in form and substance
satisfactory to Piper Fund and dated as of the Closing Date, to the effect that
the representations and warranties of Hercules Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement, and as to such other matters
as Piper Fund shall reasonably request.

7.3. Hercules Fund shall have delivered to Piper Fund a statement,
certified by the Treasurer of Hercules Company, of the Hercules Fund Assets and
its liabilities, together with a list of Hercules Fund's portfolio securities
and other assets showing the respective adjusted bases and holding periods
thereof for income tax purposes, such statement to be prepared as of the Closing
Date and in accordance with generally accepted accounting principles
consistently applied.

7.4. Piper Fund shall have received at the Closing a favorable opinion from
Gordon Altman Butowsky Weitzen Shalov & Wein, counsel to Hercules Fund, dated as
of the Closing Date to the effect that: (a) Hercules Company is a validly
existing Minnesota corporation and has the corporate power to own all of the
properties and assets of Hercules Fund and, to the knowledge of such counsel, to
carry on its business as presently conducted (Minnesota counsel may be relied
upon in delivering such

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opinion); (b) Hercules Company is a duly registered, open-end management
investment company under the 1940 Act, and, to the knowledge of such counsel,
its registration with the Commission as an investment company under the 1940 Act
is in full force and effect; (c) this Agreement has been duly authorized,
executed and delivered by Hercules Fund and, assuming that the Registration
Statement complies with the 1933 Act, the 1934 Act and the 1940 Act and the
regulations thereunder and assuming due authorization, execution and delivery of
this Agreement by Piper Fund, is a valid and binding obligation of Hercules Fund
enforceable against Hercules Fund in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and other laws relating to or affecting creditors rights and to
general equity principles; (d) the execution and delivery of this Agreement did
not, and the consummation of the transactions contemplated hereby will not,
violate Hercules Company's Articles of Incorporation or By-Laws; and (e) to the
knowledge of such counsel, no consent, approval, authorization or order of any
court or governmental authority of the United States or any state is required
for the consummation by Hercules Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934 Act and the 1940
Act and such as may be required under state securities laws.

7.5. On the Closing Date, the Hercules Fund Assets shall include no assets
that Piper Fund, by reason of Piper Company's Articles of Incorporation
limitations or otherwise, may not properly acquire.

8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF PIPER FUND AND
HERCULES FUND

The obligations of Hercules Fund and Piper Fund hereunder are each subject
to the further conditions that on or before the Closing Date:

8.1. This Agreement and the Amendment and the transactions contemplated
herein and therein shall have been approved by the requisite vote of the holders
of the outstanding shares of Hercules Fund in accordance with the provisions of
Hercules Company's Articles of Incorporation, and certified copies of the
resolutions evidencing such approval shall have been delivered to Piper Fund.

8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.

8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by Piper Fund or Hercules Fund to permit
consummation, in all material respects, of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such consent, order
or permit would not involve risk of a material adverse effect on the assets or
properties of Piper Fund or Hercules Fund.

8.4. The Registration Statement shall have become effective under the 1933
Act, no stop orders suspending the effectiveness thereof shall have been issued
and, to the best knowledge of the parties hereto, no investigation or proceeding
for that purpose shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.

8.5. On or prior to the Valuation Date, Hercules Fund shall have declared
and paid a dividend or dividends and/or other distribution or distributions
that, together with all previous such dividends or distributions, shall have the
effect of distributing to its shareholders all of Hercules Fund's investment
company taxable income (computed without regard to any deduction for dividends
paid) and all of its net capital gain (after reduction for any capital loss
carry-forward and computed without regard to any deduction for dividends paid)
for all taxable years ending on or before the Closing Date.

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8.6. The parties shall have received a favorable opinion of the law firm of
Gordon Altman Butowsky Weitzen Shalov & Wein (based on such representations as
such law firm shall reasonably request), addressed to Piper Company and Hercules
Company, which opinion may be relied upon by the shareholders of Hercules Fund,
substantially to the effect that, for federal income tax purposes:

(a) The transfer of substantially all of Hercules Fund's assets in
exchange for Piper Fund Shares and the assumption by Piper Fund of certain
stated liabilities of Hercules Fund followed by the distribution by Hercules
Fund of Piper Fund Shares to the Hercules Fund Shareholders in exchange for
their Hercules Fund shares will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code, and Hercules Fund and Piper Fund
will each be a "party to a reorganization" within the meaning of Section
368(b) of the Code;

(b) No gain or loss will be recognized by Piper Fund upon the receipt of
the assets of Hercules Fund solely in exchange for Piper Fund Shares and the
assumption by Piper Fund of the stated liabilities of Hercules Fund;

(c) No gain or loss will be recognized by Hercules Fund upon the
transfer of the assets of Hercules Fund to Piper Fund in exchange for Piper
Fund Shares and the assumption by Piper Fund of the stated liabilities of
Hercules Fund or upon the distribution of Piper Fund Shares to the Hercules
Fund Shareholders as provided for in this Agreement;

(d) No gain or loss will be recognized by the Hercules Fund Shareholders
upon the exchange of the Hercules Fund shares for Piper Fund Shares;

(e) The aggregate tax basis for Piper Fund Shares received by each
Hercules Fund Shareholder pursuant to the Reorganization will be the same as
the aggregate tax basis of the Hercules Fund shares held by each such
Hercules Fund Shareholder immediately prior to the Reorganization;

(f) The holding period of Piper Fund Shares to be received by each
Hercules Fund Shareholder will include the period during which the Hercules
Fund shares surrendered in exchange therefor were held (provided such
Hercules Fund Shares were held as capital assets on the date of the
Reorganization);

(g) The tax basis of the assets of Hercules Fund acquired by Piper Fund
will be the same as the tax basis of such assets to Hercules Fund
immediately prior to the Reorganization; and

(h) The holding period of the assets of Hercules Fund in the hands of
Piper Fund will include the period during which those assets were held by
Hercules Fund.

Notwithstanding anything herein to the contrary, neither Piper Fund nor
Hercules Fund may waive the condition set forth in this paragraph 8.6.

8.7. The Amendment shall have been filed in accordance with applicable
provisions of Minnesota law.

9. FEES AND EXPENSES

9.1.(a) PCM shall bear all direct expenses incurred in connection with
entering into and carrying out the provisions of this Agreement, including
expenses incurred in connection with the preparation, printing, filing and
solicitation of proxies to obtain requisite shareholder approvals.

(b) In the event the transactions contemplated herein are not
consummated by reason of Hercules Fund's being either unwilling or unable to
go forward (other than by reason of the nonfulfillment or failure of any
condition to Hercules Fund's obligations specified in this Agreement), PCM's
obligations, on behalf of Hercules Fund, shall be limited to reimbursement
of Piper Fund for all reasonable out-of-pocket fees and expenses incurred by
Piper Fund in connection with those transactions.

A-11
<PAGE>
(c) In the event the transactions contemplated herein are not
consummated by reason of Piper Fund's being either unwilling or unable to go
forward (other than by reason of the nonfulfillment or failure of any
condition to Piper Fund's obligations specified in the Agreement), Piper
Fund's only obligation hereunder shall be to reimburse Hercules Fund for all
reasonable out-of-pocket fees and expenses incurred by Hercules Fund in
connection with those transactions.

10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES

10.1. This Agreement constitutes the entire agreement between the parties.

10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated herein, except
that the representations, warranties and covenants of Hercules Fund hereunder
shall not survive the dissolution and complete liquidation of Hercules Fund in
accordance with Section 1.9.

11. TERMINATION

11.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:

(a) by the mutual written consent of Hercules Company and Piper Company;

(b) by either Piper Company or Hercules Company by notice to the other,
without liability to the terminating party on account of such termination
(providing the terminating party is not otherwise in material default or
breach of this Agreement) if the Closing shall not have occurred on or
before September 15, 1996; or

(c) by either Piper Fund or Hercules Fund, in writing without liability
to the terminating party on account of such termination (provided the
terminating party is not otherwise in material default or breach of this
Agreement), if (i) the other party shall fail to perform in any material
respect its agreements contained herein required to be performed on or prior
to the Closing Date, (ii) the other party materially breaches any of its
representations, warranties or covenants contained herein, (iii) the
Hercules Fund shareholders fail to approve this Agreement at any meeting
called for such purpose at which a quorum was present or (iv) any other
condition herein expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will
not or cannot be met.

11.2. (a) Termination of this Agreement pursuant to paragraphs 11.1(a)
or (b) shall terminate all obligations of the parties hereunder and there
shall be no liability for damages on the part of Piper Fund or Hercules Fund
or the directors or officers of Piper Fund or Hercules Fund, to any other
party or its directors or officers.

(b) Termination of this Agreement pursuant to paragraph 11.1(c) shall
terminate all obligations of the parties hereunder and there shall be no
liability for damages on the part of Piper Fund or Hercules Fund or the
directors or officers of Piper Fund or Hercules Fund, except that any party
in breach of this Agreement shall, upon demand, reimburse the non-breaching
party for all reasonable out-of-pocket fees and expenses incurred in
connection with the transactions contemplated by this Agreement, including
legal, accounting and filing fees.

12. AMENDMENTS

This Agreement may be amended, modified or supplemented in such manner as
may be mutually agreed upon in writing by the parties; PROVIDED, HOWEVER, that
following the meeting of Hercules Fund's shareholders called by Hercules Fund
pursuant to paragraph 4.3, no such amendment may have the effect of changing the
provisions for determining the number of Piper Fund Shares to be issued to the
Hercules Fund Shareholders under this Agreement to the detriment of such
Hercules Fund Shareholders without their further approval.

A-12
<PAGE>
13. MISCELLANEOUS

13.1. The article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

13.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.

13.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of Minnesota.

13.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.

13.5. The obligations and liabilities of Piper Company hereunder are solely
those of Piper Fund. It is expressly agreed that no shareholder, nominee,
director, officer, agent, or employee of Piper Company on behalf of Piper Fund
shall be personally liable hereunder. The execution and delivery of this
Agreement have been authorized by the directors of Piper Company and signed by
authorized officers of Piper Company acting as such, and neither such
authorization by such directors nor such execution and delivery by such officers
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally.

13.6. The obligations and liabilities of Hercules Company hereunder are
solely those of Hercules Company. It is expressly agreed that no shareholder,
nominee, director, officer, agent, or employee of Hercules Fund shall be
personally liable hereunder. The execution and delivery of this Agreement have
been authorized by the directors of Hercules Company and signed by authorized
officers of Hercules Company acting as such, and neither such authorization by
such directors nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them personally.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by a duly authorized officer.

HERCULES FUNDS INC., on behalf of
Hercules North American
Growth and Income Fund

By: _______/s/ William H. Ellis_______
Name: William H. Ellis
Title: President

PIPER FUNDS INC., on behalf of
Growth and Income Fund

By: _______/s/ Robert H. Nelson_______
Name: Robert H. Nelson
Title: Senior Vice President

A-13
<PAGE>
EXHIBIT 1 TO AGREEMENT AND PLAN OF REORGANIZATION
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
HERCULES FUNDS INC.

The undersigned officer of Hercules Funds Inc. ("Hercules Company"), a
corporation subject to the provisions of Chapter 302A of the Minnesota Statutes,
hereby certifies that Hercules Company's (a) Board of Directors, by written
action dated March 29, 1996, and (b) shareholders, at a meeting held June 18,
1996, adopted the resolutions hereinafter set forth; and such officer further
certifies that the amendments to Hercules Company's Articles of Incorporation
set forth in such resolutions were adopted pursuant to Chapter 302A.

WHEREAS, Hercules Company is registered as an open-end management investment
company (I.E., a mutual fund) under the Investment Company Act of 1940 and
offers its shares to the public in several series, each of which represents a
separate and distinct portfolio of assets; and

WHEREAS, it is desirable and in the best interest of the holders of the
Hercules North American Growth and Income Fund ("Hercules Fund"), a series of
Hercules Company, that the assets belonging to such series, subject to its
stated liabilities, be sold to Growth and Income Fund ("Piper Fund"), a series
of Piper Funds Inc. ("Piper Company"), a Minnesota corporation and an open-end
management investment company registered under the Investment Company Act of
1940, in exchange for shares of Piper Fund; and

WHEREAS, Hercules Company wishes to provide for the PRO RATA distribution of
such shares of Piper Fund received by it to holders of shares of Hercules Fund
and the simultaneous cancellation and retirement of the outstanding shares of
Hercules Fund; and

WHEREAS, Hercules Company and Piper Company have entered into an Agreement
and Plan of Reorganization providing for the foregoing transactions; and

WHEREAS, the Agreement and Plan of Reorganization requires that, in order to
bind all shareholders of Hercules Fund to the foregoing transactions, and in
particular to bind such shareholders to the cancellation and retirement of the
outstanding shares of Hercules Fund, it is necessary to adopt an amendment to
Hercules Company's Articles of Incorporation.

NOW, THEREFORE, BE IT RESOLVED, that Hercules Company's Articles of
Incorporation be, and the same hereby are, amended to add the following Article
5A immediately following Article 5 thereof:

5A. (a) For purposes of this Article 5A, the following terms shall have the
following meanings:

"HERCULES COMPANY" means the Corporation.

"PIPER COMPANY" means Piper Funds Inc., a Minnesota corporation.

"ACQUIRED FUND" means Hercules Company's Hercules North American Growth
and Income Fund, the Series A Shares of the Corporation.

"ACQUIRING FUND" means Piper Company's Growth and Income Fund.

"VALUATION DATE" means the day established in the Agreement and Plan of
Reorganization, as the day upon which the value of the Acquired Fund's
assets is determined for purposes of the reorganization.

"CLOSING DATE" means 9:00 a.m. on the next business day following the
Valuation Date or such other date and time set forth in the pertinent plan
of reorganization or liquidation, as the case may be, for the consummation
of the reorganization or liquidation.

(b) At the Closing Date, the assets belonging to the Acquired Fund, the
Special Liabilities associated with such assets, and the General Assets and
General Liabilities allocated to the Acquired Fund, shall be sold to and
assumed by the Acquiring Fund in return for Acquiring Fund
<PAGE>
shares, all pursuant to the Agreement and Plan of Reorganization. For
purposes of the foregoing, the terms "assets belonging to", "Special
Liabilities", "General Assets", and "General Liabilities" have the meanings
assigned to them in Article 7(b), (c), and (d) of Hercules Company's
Articles of Incorporation.

(c) The number of Acquiring Fund shares to be received by the Acquired
Fund and distributed by it to the Acquired Fund shareholders shall be
determined as follows:

(i) The value of the Acquired Fund's assets and the net asset value
per share of the Acquiring Fund's shares shall be computed as of the
Valuation Date using the valuation procedures set forth in the Acquiring
Fund's then-current Prospectus and Statement of Additional Information,
and as may be required by the Investment Company Act of 1940, as amended
(the "1940 Act").

(ii) The total number of Acquiring Fund shares to be issued
(including fractional shares, if any) in exchange for assets and
liabilities of the Acquired Fund shall be determined as of the Valuation
Date by dividing the value of the Acquired Fund's assets, net of its
stated liabilities on the Closing Date to be assumed by the Acquiring
Fund, by the net asset value of the Acquiring Fund's shares, each as
determined pursuant to (i) above.

(iii) On the Closing Date, or as soon as practicable thereafter, the
Acquired Fund shall distribute PRO RATA to its shareholders of record as
of the Valuation Date the full and fractional Acquiring Fund shares
received by the Acquired Fund pursuant to (ii) above.

(d) The distribution of Acquiring Fund shares to Acquired Fund
shareholders provided for in paragraph (c) above shall be accomplished by an
instruction, signed by Hercules Company's Secretary, to transfer Acquiring
Fund shares then credited to the Acquired Fund's account on the books of the
Acquiring Fund to open accounts on the books of the Acquiring Fund in the
names of the Acquired Fund shareholders in amounts representing the
respective PRO RATA number of Acquiring Fund shares due each such
shareholder pursuant to the foregoing provisions. All issued and outstanding
shares of the Acquired Fund shall simultaneously be canceled on the books of
the Acquired Fund and retired.

(e) From and after the Closing Date, the Acquired Fund shares canceled
and retired pursuant to paragraph (d) above shall have the status of
authorized and unissued Shares of Hercules Company, without designation as
to series.

IN WITNESS WHEREOF, the undersigned officer of Hercules Company has executed
these Articles of Amendment on behalf of Hercules Company on , 1996.

HERCULES FUNDS INC.

By ___________________________________

Its __________________________________

2
<PAGE>
EXHIBIT B

GROWTH FUND
EMERGING GROWTH FUND
GROWTH AND INCOME FUND
EQUITY STRATEGY FUND
BALANCED FUND
A SERIES OF
PIPER FUNDS INC.
Supplement dated January 24, 1996 to
Prospectus dated April 27, 1995

The section of the prospectus on page 31 entitled "Special Purchase
Plans--Purchases by Other Individuals Without a Sales Charge" is amended by
adding the following paragraph:

American Government Term Trust Inc. ("AGT"), a closed-end fund which
was managed by
the Adviser, recently dissolved and distributed its net assets to
shareholders. Former AGT
shareholders may invest the distributions received by them in connection
with such dissolution in shares of the Funds without payment of a sales
charge. (Any such sales are subject to the eligibility of Fund share
purchases in the shareholder's state as well as the minimum investment
requirements and other applicable terms set forth in this Prospectus).
<PAGE>
PROSPECTUS DATED NOVEMBER 27, 1995

PIPER FUNDS INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET, MINNEAPOLIS, MINNESOTA 55402-3804
(800) 866-7778 (TOLL FREE)

Growth Fund, Emerging Growth Fund, Growth and Income Fund, Equity Strategy
Fund and Balanced Fund (the "Funds") are series of Piper Funds Inc. (the
"Company"), an open-end mutual fund whose shares are currently offered in
thirteen series. Each Fund has its own investment objectives and policies
designed to meet different investment goals.

GROWTH FUND (formerly Value Fund) has a primary investment objective of
long-term capital appreciation with secondary objectives of current income and
conservation of principal. The Fund invests primarily in a diversified portfolio
of common stocks or securities convertible into or carrying rights to buy common
stocks.

EMERGING GROWTH FUND has an investment objective of long-term capital
appreciation. The Fund invests primarily in common stocks and securities
convertible into common stocks of emerging growth companies, with an emphasis on
companies headquartered or maintaining offices or manufacturing facilities in
states in which the Distributor maintains offices.

GROWTH AND INCOME FUND has investment objectives of both current income and
long-term growth of capital and income. The Fund invests in a broadly
diversified portfolio of securities, with an emphasis on securities of large,
established companies that have a history of dividend payments and that the
Adviser believes are undervalued.

EQUITY STRATEGY FUND has an investment objective of a high total investment
return consistent with prudent investment risk. The Fund invests primarily in
common stocks and securities convertible into or carrying rights to buy common
stocks of companies representing a number of different sectors of the economy.
In pursuing its objective, the Fund expects to have a high portfolio turnover
rate.

BALANCED FUND has investment objectives of both current income and long-term
capital appreciation consistent with conservation of principal. The Fund invests
primarily in common stocks and fixed-income securities with emphasis on
income-producing securities that appear to have some potential for capital
appreciation.

INVESTMENTS IN CERTAIN FUNDS MAY INVOLVE ADDITIONAL RISKS. EQUITY STRATEGY
FUND MAY ENGAGE IN SHORT-TERM TRADING IN ATTEMPTING TO ACHIEVE ITS INVESTMENT
OBJECTIVE, WHICH WILL INCREASE TRANSACTION COSTS. IN ADDITION, EQUITY STRATEGY
FUND MAY SELL SECURITIES SHORT. EACH FUND MAY INVEST IN ILLIQUID SECURITIES
WHICH WILL INVOLVE GREATER RISK THAN INVESTMENTS IN OTHER SECURITIES AND MAY
INCREASE FUND EXPENSES. SEE "SPECIAL INVESTMENT METHODS" FOR A DISCUSSION OF THE
RISKS OF EACH OF THESE TECHNIQUES.

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 27,
1995, is available free of charge. Write to the Funds at Piper Jaffray Tower,
222 South Ninth Street, Minneapolis, Minnesota 55402-3804 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

Growth Fund (formerly Value Fund), Emerging Growth Fund, Growth and Income
Fund, Equity Strategy Fund and Balanced 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 thirteen series. Each Fund has a different investment
objective and is designed to meet different investment needs and each Fund 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. Fees for each Fund
are paid at an annual rate of .75% on net assets up to $100 million and are
scaled downward as assets increase in size. These fees are higher than fees paid
by most other investment companies. 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 the next determined net
asset value after receipt of an order by a shareholder's Piper Jaffray
Investment Executive or other broker-dealer, plus a maximum sales charge of 4%
of the offering price (4.17% of the net asset value) on purchases of less than
$100,000. The sales charge is reduced on a graduated scale on purchases of
$100,000 or more. In connection with purchases of $500,000 or more, there is no
initial sales charge; however, a 1% contingent deferred sales charge will be
imposed in the event of a redemption transaction occurring within 24 months
following such a purchase. See "How to Purchase Shares--Public Offering Price."

MINIMUM INITIAL AND SUBSEQUENT 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 (except Hercules Funds Inc.) which is open to new investors and
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. You may make four exchanges per
year without payment of a service charge. Thereafter, there is a $5 service
charge for each exchange. 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. A contingent deferred sales charge
will be imposed upon the redemption of certain shares initially purchased
without a sales charge. See "How to Redeem Shares--Contingent Deferred Sales
Charge." Each Fund reserves the right, upon 30 days' written notice, to redeem
an account in any Fund if the net asset value of the shares falls below $200.
See "How to Redeem Shares--Involuntary Redemption."

CERTAIN RISK FACTORS TO CONSIDER

An investment in any of the Funds is subject to certain risks, as set forth
in detail under "Investment Objectives and Policies" and "Special Investment
Methods." As with other mutual funds, there can be no assurance that any Fund
will achieve its objective. Each of the Funds is subject to market risk (the
risk that a security will be worth less when it is sold than when it was bought
due to any number of factors, including reduced demand or loss of investor
confidence in the market) and/or interest-rate risk (the risk that rising
interest rates will make bonds issued at lower interest rates worth less). As a
result, the value of each Fund's

2
<PAGE>
shares will vary. Some or all of the Funds, to the extent set forth under
"Investment Objectives and Policies" and "Special Investment Methods," may
engage in the following investment practices: the use of repurchase agreements,
the lending of portfolio securities, borrowing from banks, entering into options
transactions on securities in which the Funds may invest and on stock indexes,
the use of stock index futures contracts and interest rate futures contracts,
entering into options on futures contracts, the use of short sales, and the
purchase or sale of securities on a "when-issued" or forward commitment basis,
including the use of mortgage dollar rolls. These techniques may increase the
volatility of a Fund's net asset value. Equity Strategy Fund may engage in
short-term trading in attempting to achieve its investment objective, which will
increase transaction costs. Balanced Fund and Growth and Income Fund may
purchase mortgage-related securities, including derivative mortgage securities.
In addition to interest rate risk, mortgage-related securities are subject to
prepayment risk. Recent market experience has shown that certain derivative
mortgage securities may be extremely sensitive to changes in interest rates and
in prepayment rates on the underlying mortgage assets and, as a result, the
prices of such securities may be highly volatile. All of these transactions
involve certain special risks, as set forth under "Investment Objectives and
Policies" and "Special Investment Methods."

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.

FUND EXPENSES

<TABLE>
<CAPTION>
EMERGING GROWTH AND EQUITY
GROWTH GROWTH INCOME STRATEGY BALANCED
FUND FUND FUND FUND FUND
------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........... 4.00% 4.00% 4.00% 4.00% 4.00%
Exchange Fee * $ 0 0 0 0 0
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees................................. .71% .70% .75% .75% .75%
Rule 12b-1 Fees (after voluntary limitation)
**............................................ .32% .32% .32% .32% .32%
Other Expenses (after voluntary expense reim-
bursement) **................................. .24% .22% .25% .33% .25%
------ --- --- --- ---
Total Fund Operating Expenses (after voluntary
limitations and expense reimbursements)....... 1.27% 1.24% 1.32% 1.40% 1.32%
</TABLE>

- ---------
* There is a $5.00 fee for each exchange in excess of four exchanges per year.
See "How to Purchase Shares--Exchange Privilege."

** See the discussion below for an explanation of voluntary Rule 12b-1 fee
limitations and expense reimbursements.

3
<PAGE>
EXAMPLE

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>
EMERGING GROWTH AND EQUITY
GROWTH GROWTH INCOME STRATEGY BALANCED
FUND FUND FUND FUND FUND
------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
1 Year ........................................ $ 52 52 53 53 53
3 Years ....................................... $ 79 78 80 80 80
5 Years ....................................... $ 107 106 109 109 109
10 Years ....................................... $ 187 185 193 193 193
</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 set forth in the table is based on actual expenses
(including expenses paid through expense offset arrangements) incurred by the
Funds during the fiscal year ended September 30, 1995. The expenses for all
Funds reflect a voluntary limitation by the Distributor of the fee payable to it
under each Fund's Rule 12b-1 Plan to .32% of each Fund's average daily net
assets. In addition, the Adviser reimbursed Growth and Income Fund, Equity
Strategy Fund and Balanced Fund for the amount by which total Fund operating
expenses (excluding expenses paid through expense offset arrangements) for
fiscal 1995 exceeded 1.32% of average daily net assets. Absent any Rule 12b-1
fee limitations or expense reimbursements, Total Fund Operating Expenses for the
fiscal year ended September 30, 1995, as a percentage of average daily net
assets, would have been 1.45% for Growth Fund, 1.42% for Emerging Growth Fund,
1.60% for Growth and Income Fund, 1.63% for Equity Strategy Fund and 1.65% for
Balanced Fund. The voluntary Rule 12b-1 fee limitations for each Fund and the
expense reimbursements for Growth and Income Fund, Equity Strategy Fund and
Balanced Fund reflected in the Fund Expenses table may be discontinued at any
time after the fiscal 1996 year end. The Adviser may or may not assume
additional expenses of the Funds from time to time, in its discretion, while
retaining the ability to be reimbursed by the Funds for expenses assumed 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 increasing yield to
investors when such amounts are assumed or the inverse when such amounts are
reimbursed.

As a result of each Fund's annual payment of its Rule 12b-1 fee, a portion
of which is considered an asset-based sales charge, long-term shareholders of a
Fund may pay more than the economic equivalent of the maximum 6.25% front end
sales charge permitted under the rules of the National Association of Securities
Dealers, Inc. For additional information, including a more complete explanation
of management and Rule 12b-1 fees, see "Management--Investment Adviser" and
"Distribution of Fund Shares."

4
<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 each Fund. 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.

GROWTH FUND

<TABLE>
<CAPTION>
PERIOD PERIOD
FROM FROM
FISCAL YEAR ENDED SEPTEMBER 30, 11/1/88 YEAR 3/16/87*
----------------------------------------- TO ENDED TO
1995 1994 1993 1992 1991 1990 9/30/89 10/31/88 10/31/87
------ ----- ----- ----- ----- ----- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $18.90 19.30 17.06 16.86 11.69 12.46 9.60 8.61 10.00
------ ----- ----- ----- ----- ----- ------- -------- --------
Operations:
Net investment income........................... 0.08 0.08 0.12 0.17 0.19 0.20 0.17 0.19 0.10
Net realized and unrealized gains (losses) on
investments................................... 3.60 (0.37) 2.24 0.76 5.18 (0.78) 2.86 0.98 (1.40)
------ ----- ----- ----- ----- ----- ------- -------- --------
Total from operations....................... 3.68 (0.29) 2.36 0.93 5.37 (0.58) 3.03 1.17 (1.30)
------ ----- ----- ----- ----- ----- ------- -------- --------
Distributions from net investment income.......... (0.08) (0.11) (0.12) (0.16) (0.20) (0.19) (0.17) (0.18) (0.09)
Distributions from net realized gains............. (2.10) -- -- (0.57) -- -- -- -- --
------ ----- ----- ----- ----- ----- ------- -------- --------
Total distributions......................... (2.18) (0.11) (0.12) (0.73) (0.20) (0.19) (0.17) (0.18) (0.09)
------ ----- ----- ----- ----- ----- ------- -------- --------
Net asset value, end of period.................... $20.40 18.90 19.30 17.06 16.86 11.69 12.46 9.60 8.61
------ ----- ----- ----- ----- ----- ------- -------- --------
------ ----- ----- ----- ----- ----- ------- -------- --------
Total return (%)+................................. 20.60 (1.51) 13.85 5.76 46.23 (4.81) 31.90 13.79 (13.16)
Net assets end of period (in millions)............ $ 172 195 252 200 107 47 37 19 18
Ratio of expenses to average daily net assets
(%)++........................................... 1.27 1.23 1.26 1.29 1.32 1.31 1.30** 1.30 1.00**
Ratio of net investment income to average daily
net assets (%)++................................ 0.40 0.43 0.66 1.04 1.25 1.57 1.75** 2.06 1.84**
Portfolio turnover rate (excluding short-term
securities) (%)................................. 80 11 45 36 36 37 48 52 32
</TABLE>

- ----------

*Commencement of operations.

**Adjusted to an annual basis.

+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.

++During the periods reflected above, the Advisor and Distributor voluntarily
waived fees and expenses. Had the Fund paid all expenses and had the maximum
Rule 12b-1 fee been in effect, the ratios of expenses and net investment
income to average daily net assets would have been: 1.45%/022% in fiscal 1995,
1.42%/0.24% in fiscal 1994, 1.44%/0.48% in fiscal 1993, 1.47%/0.86% in fiscal
1992, 1.55%/1.02% in fiscal 1991, 1.64%/1.24% in fiscal 1990, 1.89%/1.16% in
fiscal 1989, 1.96%/1.40% in fiscal 1988 and 2.29%/0.55% in fiscal 1987.
Beginning in fiscal 1995, the expense ratio reflects the effect of gross
expenses paid indirectly by the Fund. Prior period expense ratios have not
been adjusted.

5
<PAGE>
EMERGING GROWTH FUND

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
------------------------------------------
1995 1994 1993 1992 1991 1990*
------ ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $19.26 19.73 14.41 13.86 8.59 10.00
------ ----- ----- ----- ----- ------
Operations:
Net investment income (loss).................... (0.11) (0.07) (0.05) (0.01) 0.02 0.02
Net realized and unrealized gains (losses) on
investments................................... 6.80 (0.40) 5.37 0.64 5.28 (1.42)
------ ----- ----- ----- ----- ------
Total from operations....................... 6.69 (0.47) 5.32 0.63 5.30 (1.40)
------ ----- ----- ----- ----- ------
Distributions from net investment income.......... -- -- -- -- (0.03) (0.01)
Distributions from net realized gains............. -- -- -- (0.08) -- --
------ ----- ----- ----- ----- ------
Total distributions......................... -- -- -- (0.08) (0.03) (0.01)
------ ----- ----- ----- ----- ------
Net asset value, end of period.................... $25.95 19.26 19.73 14.41 13.86 8.59
------ ----- ----- ----- ----- ------
------ ----- ----- ----- ----- ------
Total return (%)+................................. 34.68 (2.38) 36.92 4.55 61.80 (14.01)

Net asset, end of period (in millions)............ $ 253 224 191 110 56 21
Ratio of expenses to average daily net assets
(%)++........................................... 1.24 1.24 1.29 1.30 1.30 1.30**
Ratio of net investment income to average daily
net assets (%)++................................ (0.51) (0.38) (0.34) (0.14) 0.11 0.71**
Portfolio turnover rate (excluding short-term
securities) (%)................................. 33 31 30 21 27 6
</TABLE>

- ----------

*Period from 4/23/90 (commencement of operations) to 9/30/90.

**Adjusted to an annual basis.

+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.

++During the periods reflected above, the Adviser and the Distributor
voluntarily waived fees and expenses. Had the Fund paid all expenses and had
the maximum Rule 12b-1 fee been in effect, the ratios of expenses and net
investment income to average daily net assets would have been: 1.42%/(0.69%)
in fiscal 1995, 1.44%/(0.58%) in fiscal 1994, 1.49%/(0.54%) in fiscal 1993,
1.56%/(0.40%) in fiscal 1992, 1.70%/(0.29%) in fiscal 1991 and 1.95%/0.06% in
fiscal 1990. Beginning in fiscal 1995, the expense ratio reflects the effect
of gross expenses paid indirectly by the Fund. Prior period expense ratios
have not been adjusted.

6
<PAGE>
GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
------------------------------------------
1995 1994 1993 1992*
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................................. $ 10.27 10.30 10.01 10.00
--------- --------- --------- ---------
Operations:
Net investment income............................................... 0.19 0.24 0.24 0.03
Net realized and unrealized gains (losses) on investments........... 2.70 0.02 0.29 (0.02)
--------- --------- --------- ---------
Total from operations........................................... 2.89 0.26 0.53 0.01
--------- --------- --------- ---------
Distributions from net investment income.............................. (0.19) (0.24) (0.24) --
Distributions from net realized gains................................. (0.04) (0.05) -- --
--------- --------- --------- ---------
Total distributions............................................. (0.23) (0.29) (0.24) --
--------- --------- --------- ---------
Net asset value, end of period........................................ $ 12.93 10.27 10.30 10.01
--------- --------- --------- ---------
--------- --------- --------- ---------
Total return (%)+..................................................... 28.81 2.53 5.41 0.10

Net assets, end of period (in millions)............................... $ 73 73 96 52
Ratio of expenses to average daily net assets (%)++................... 1.32 1.29 1.32 1.28**
Ratio of net investment income to average daily net assets (%)++...... 1.93 2.26 2.51 3.00**
Portfolio turnover rate (excluding short-term securities) (%)......... 14 20 26 1
</TABLE>

- ----------

*Period from 7/21/92 (commencement of operations) to 9/30/92.

**Adjusted to an annual basis.

+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.

++During the periods reflected above, the Adviser and the Distributor
voluntarily waived fees and expenses. Had the Fund paid all expenses and had
the maximum Rule 12b-1 fee been in effect, the ratios of expenses and net
investment income to average daily net assets would have been: 1.60%/1.65% in
fiscal 1995, 1.62%/1.93% in fiscal 1994, 1.58%/2.25% in fiscal 1993 and
2.06%/2.22% in fiscal 1992. Beginning in fiscal 1995, the expense ratio
reflects the effect of gross expenses paid indirectly by the Fund. Prior
period expense ratios have not been adjusted.

7
<PAGE>
EQUITY STRATEGY FUND

<TABLE>
<CAPTION>
PERIOD
FROM
FISCAL YEAR ENDED SEPTEMBER 30, PERIOD FROM YEAR 3/16/87*
----------------------------------------- 11/1/88 TO ENDED TO
1995 1994 1993 1992 1991 1990 9/30/89 10/31/88 10/31/87
------ ----- ----- ----- ----- ----- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $17.17 16.84 13.57 12.82 9.17 10.05 8.07 7.90 10.00
------ ----- ----- ----- ----- ----- ----------- -------- --------
Operations:
Net investment income+++........................ 0.11 0.07 0.03 0.08 0.07 0.10 0.38 0.09 0.08
Net realized and unrealized gains (losses) on
investments................................... 2.27 0.29 3.30 0.71 3.65 (0.74) 1.85 0.19 (2.11)
------ ----- ----- ----- ----- ----- ----------- -------- --------
Total from operations....................... 2.38 0.36 3.33 0.79 3.72 (0.64) 2.23 0.28 (2.03)
------ ----- ----- ----- ----- ----- ----------- -------- --------
Distributions from net investment income.......... (0.09) (0.03) (0.06) (0.04) (0.07) (0.24) (0.25) (0.11) 0.07
------ ----- ----- ----- ----- ----- ----------- -------- --------
Net asset value, end of period.................... $19.46 17.17 16.84 13.57 12.82 9.17 10.05 8.07 7.90
------ ----- ----- ----- ----- ----- ----------- -------- --------
------ ----- ----- ----- ----- ----- ----------- -------- --------
Total return (%)+................................. 13.88 2.12 24.56 6.18 40.71 (6.61) 27.86 3.47 (20.48)

Net assets end of period (in millions)............ $ 48 78 84 9 9 8 13 19 28
Ratio of expenses to average daily net assets
(%)++........................................... 1.40 1.32 1.28 1.47 1.32 1.49 1.30** 1.52 1.02**
Ratio of net investment income to average daily
net assets (%)++................................ 0.43 0.37 0.50 0.56 0.61 1.03 3.95** 1.13 1.51**
Portfolio turnover rate (excluding short-term
securities) (%)................................. 182 177 154 420 507 514 375 202 200
</TABLE>

- ----------

*Commencement of operations.

**Adjusted to an annual basis.

+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.

++During the periods reflected above, the Adviser and Distributor voluntarily
waived fees and expenses. Had the Fund paid all expenses and had the maximum
Rule 12b-1 fee been in effect, the ratios of expenses and net investment
income to average daily net assets would have been: 1.63%/0.20% in fiscal
1995, 1.54%/0.15% in fiscal 1994, 1.86%/(0.08%) in fiscal 1993, 2.49%/(0.46%)
in fiscal 1992, 2.39%/(0.46%) in fiscal 1991, 2.55%/(0.03%) in fiscal 1990,
2.23%/3.02% in fiscal 1989, 2.20%/0.45% in fiscal 1988 and 2.24%/0.29% in
fiscal 1987. Beginning in fiscal 1995, the expense ratio reflects the effect
of gross expenses paid indirectly by the Fund. Prior period expense ratios
have not been adjusted.

+++For the years ended September 30, 1992, and October 31, 1988, gross expenses
included $0.02 per share of income tax expense.

8
<PAGE>
BALANCED FUND

<TABLE>
<CAPTION>
PERIOD
FROM
FISCAL YEAR ENDED SEPTEMBER 30, PERIOD FROM YEAR 3/16/87*
----------------------------------------- 11/1/88 TO ENDED TO
1995 1994 1993 1992 1991 1990 9/30/89 10/31/88 10/31/87
------ ----- ----- ----- ----- ----- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $11.81 12.23 11.88 10.77 8.87 10.00 9.19 8.97 10.00
------ ----- ----- ----- ----- ----- ----------- -------- --------
Operations:
Net investment income........................... 0.47 0.38 0.34 0.38 0.43 0.42 0.44 0.51 0.28
Net realized and unrealized gains (losses) on
investments................................... 1.93 (0.26) 0.65 1.17 1.89 (1.14) 0.83 0.22 (1.09)
------ ----- ----- ----- ----- ----- ----------- -------- --------
Total from operations....................... 2.40 0.12 0.99 1.55 2.32 (0.72) 1.27 0.73 (0.81)
------ ----- ----- ----- ----- ----- ----------- -------- --------
Distributions from net investment income.......... (0.35) (0.37) (0.34) (0.39) (0.42) (0.41) (0.46) (0.51) (0.22)
Distributions from net realized gains............. (0.12) (0.17) (0.30) (0.05) -- -- -- -- --
------ ----- ----- ----- ----- ----- ----------- -------- --------
Total distributions......................... (0.47) (0.54) (0.64) (0.44) (0.42) (0.41) (0.46) (0.51) (0.22)
------ ----- ----- ----- ----- ----- ----------- -------- --------
Net asset value, end of period.................... $13.74 11.81 12.23 11.88 10.77 8.87 10.00 9.19 8.97
------ ----- ----- ----- ----- ----- ----------- -------- --------
------ ----- ----- ----- ----- ----- ----------- -------- --------
Total return (%)+................................. 21.78 1.00 8.51 14.75 26.61 (7.42) 14.20 8.53 (8.24)

Net assets end of period (in millions)............ $ 44 46 57 28 15 14 16 13 13
Ratio of expenses to average daily net assets
(%)++........................................... 1.32 1.32 1.32 1.32 1.32 1.31 1.30** 1.30 .99**
Ratio of net investment income to average daily
net assets (%)++................................ 3.54 3.03 3.13 3.57 4.15 4.32 5.15** 5.58 5.46**
Portfolio turnover rate (excluding short-term
securities) (%)................................. 39 62 41 58 44 105 95 73 95
</TABLE>

- ----------

*Commencement of operations.

**Adjusted to an annual basis.

+Total return is based on the change in net asset value during the periods,
assumes reinvestment of all distributions and does not reflect a sales charge.

++During the periods reflected above, the Adviser and the Distributor
voluntarily waived fees and expenses. Had the Fund paid all expenses and had
the maximum Rule 12b-1 fee been in effect, the ratios of expenses and net
investment income to average daily net assets would have been: 1.65%/3.21% in
fiscal 1995, 1.60%/2.75% in fiscal 1994, 1.62%/2.83% in fiscal 1993,
1.77%/3.12% in fiscal 1992, 1.98%/3.49% in fiscal 1991, 1.96%/3.67% in fiscal
1990, 2.29%/4.16% in fiscal 1989, 2.09%/4.79% in fiscal 1988 and 1.96%/4.09%
in fiscal 1987. Beginning in fiscal 1995, the expense ratio reflects the
effect of gross expenses paid indirectly by the Fund. Prior period expense
ratios have not been adjusted.

9
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The investment objectives listed below cannot be changed without shareholder
approval. The investment policies and techniques employed in pursuit of the
Funds' objectives may be changed without shareholder approval, unless otherwise
noted.

Because of the risks associated with common stock and bond investments, the
Funds are intended to be long-term investment vehicles and are not designed to
provide investors with a means of speculating on short-term market movements.
Investors should be willing to accept the risk of the potential for sudden,
sometimes substantial declines in market value. No assurance can be given that
the Funds will achieve their objectives or that shareholders will be protected
from the risk of loss that is inherent in equity and bond market investing.

GROWTH FUND

INVESTMENT OBJECTIVES. Growth Fund's primary investment objective is
long-term capital appreciation with secondary objectives of current income and
conservation of principal.

INVESTMENT POLICIES AND TECHNIQUES. Growth Fund (formerly known as Value
Fund) will maintain a carefully selected portfolio of securities broadly
diversified among industries and companies. The Fund will invest at least 60% of
its total assets in securities of large companies with market capitalizations of
over $500 million offering, in the opinion of the Adviser, long-term earnings
growth, a cyclical earnings rebound or above-average dividend yield when
compared to the S&P 500. Emphasis will be placed on common stocks of companies
which the Adviser believes are well managed with strong business fundamentals
and which are trading at a discount to the present value of their projected
future earnings. Growth Fund may also invest up to 40% of its total assets in
securities of medium ($100-$500 million market capitalization) and smaller sized
(under $100 million market capitalization) companies, some of which may be
considered speculative in nature, which the Adviser believes could generate high
levels of future revenue and earnings growth and where, in the Adviser's
opinion, the investment opportunity is not fully reflected in the price of the
securities.

Growth Fund will invest under normal market conditions not less than 90% of
its total assets in common stocks or securities convertible into or that carry
the right to buy common stocks and in repurchase agreements. See "Special
Investment Methods--Repurchase Agreements." Under unusual circumstances, as a
defensive measure, Growth Fund may retain cash or invest part or all of its
assets in short-term money market securities deemed by the Adviser to be
consistent with a temporary defensive posture. In addition, normally up to 5% of
the Fund's total assets will be held in short-term money market securities and
cash to pay redemption requests and Fund expenses. Investments in short-term
money market securities may include obligations of the U.S. Government and its
agencies and instrumentalities, time deposits, bank certificates of deposit,
bankers' acceptances, high-grade commercial paper and other money market
instruments. See "Investment Objectives, Policies and Restrictions" in the
Statement of Additional Information.

Growth Fund may write covered put and call options on the securities in
which it may invest, purchase put and call options with respect to such
securities, and enter into closing purchase and sale transactions with respect
thereto. Growth Fund may also purchase and write put and call options on stock
indexes listed on national securities exchanges. See "Special Investment
Methods--Options Transactions." In addition, solely for the purpose of hedging
against changes in the value of its portfolio securities due to anticipated
changes in the market, Growth Fund may enter into stock index futures contracts,
purchase and write put or call options on such contracts, and close such
contracts and options. See "Special Investment Methods--Futures Contracts and
Options on Futures Contracts" and "--Risks of Transactions in Futures Contracts
and Options on Futures Contracts."

INVESTMENT RISKS. As a mutual fund investing primarily in common stocks,
Growth Fund is subject to market risk, i.e., the possibility that stock prices
in general will decline over short or even extended periods. The stock market
tends to be cyclical, with periods when stock prices generally rise and periods
when stock prices generally decline. The investment techniques used by the Fund
also pose certain risks. See "Special Investment Methods."

10
<PAGE>
EMERGING GROWTH FUND

INVESTMENT OBJECTIVE. Emerging Growth Fund's investment objective is
long-term capital appreciation. Dividend and interest income from portfolio
securities, if any, is incidental to the Fund's objective.

INVESTMENT POLICIES AND TECHNIQUES. Emerging Growth Fund seeks to achieve
its objective by investing, under normal circumstances, at least 90% of its
assets in common stocks and securities convertible into common stocks of
companies which the Adviser believes to have superior appreciation potential.
Emerging Growth Fund invests primarily (i.e., at least 65% of its assets under
normal market conditions) in common stocks and securities convertible into
common stocks of small and medium sized companies that are early in their life
cycles but that have the potential to become major enterprises (emerging growth
companies). These companies generally will have annual gross revenues at the
time of purchase ranging from $10 million to $1 billion, and their shares will
frequently be traded in the over-the-counter market. Companies with revenues in
this range typically will have market capitalizations ranging from $250 million
to $4 billion. The Fund may also invest, however, in more established companies
whose rates of earnings growth are expected to accelerate because of special
factors such as a rejuvenated management, new products, changes in consumer
demand or basic changes in the economic environment, and in companies which
appear to be undervalued in relation to their long-term earning power or asset
values. Emerging Growth Fund also intends to invest at least 65% of its assets
in common stocks and securities convertible into common stocks of companies
headquartered or maintaining offices or manufacturing facilities in states in
which the Distributor maintains offices. This will allow the Fund to draw on the
Distributor's local expertise and research capabilities. The Distributor
currently maintains offices in Arizona, California, Colorado, Idaho, Illinois,
Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, New Jersey, New York,
North Dakota, Oregon, South Dakota, Utah, Washington, Wisconsin and Wyoming;
however, these states may change from time to time.

The Fund's emphasis on emerging growth companies stems from the Adviser's
belief that there are four broad phases of corporate growth, with the fastest
growth normally occurring in the second of these phases. The first phase of
corporate growth occurs during the infancy of a company. Investing in a company
during this phase of its growth involves high risk, with many companies failing
to survive. During the second phase of a company's growth, sometimes referred to
as the emerging growth phase, there is often a period of swift development
during which growth occurs at a rate generally not equaled by more mature
companies. There next occurs a third phase of established growth in which growth
is generally less dramatic because of competitive forces, regulations and
internal bureaucracy. This is followed by a fourth phase of maturity, when the
growth pattern of a company begins to roughly reflect the increase in gross
national product. The Adviser intends to focus on companies positioned in the
second phase of growth. Of course, the actual growth of a company is not
necessarily consistent with this pattern and cannot be foreseen. Consequently,
it may be difficult to determine the phase in which a company is currently
situated.

11
<PAGE>
The following illustration represents the Adviser's conception of the four
growth phases of a successful business. This graph is presented for illustrative
purposes only, and does not represent the actual growth of a typical company. In
addition, there is no necessary correlation between the business growth of a
company and the market value of its stock. This illustration should not be
considered a representation of the performance of the common stocks in which the
Fund invests.

[CHART]

Under unusual circumstances, as a defensive measure, Emerging Growth Fund
may retain cash or invest part or all of its assets in short-term money market
securities deemed by the Adviser to be consistent with a temporary defensive
posture. In addition, even when Emerging Growth Fund is "fully invested,"
normally up to 5% of the Fund's total assets will be held in short-term money
market securities and cash to pay redemption requests and Fund expenses.
Investments in short-term money market securities may include obligations of the
U.S. Government and its agencies and instrumentalities, time deposits, bank
certificates of deposit, bankers' acceptances, high-grade commercial paper and
other money market instruments. See "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information. Emerging Growth Fund
may also enter into repurchase agreements. See "Special Investment
Methods--Repurchase Agreements."

Emerging Growth Fund may write covered put and call options on the
securities in which it may invest, purchase put and call options with respect to
such securities, and enter into closing purchase and sale transactions with
respect thereto. Emerging Growth Fund may also purchase and write put and call
options on stock indexes listed on national securities exchanges. See "Special
Investment Methods--Options Transactions." In addition, solely for the purpose
of hedging against changes in the value of its portfolio securities due to
anticipated changes in the market, Emerging Growth Fund may enter into stock
index futures contracts, purchase and write put or call options on such
contracts, and close such contracts and options. See "Special Investment
Methods--Futures Contracts and Options on Futures Contracts" and "--Risks of
Transactions in Futures Contracts and Options on Futures Contracts."

INVESTMENT RISKS. As a mutual fund investing primarily in common stocks,
Emerging Growth Fund is subject to market risk, i.e., the possibility that stock
prices in general will decline over short or even extended periods. The stock
market tends to be cyclical, with periods when stock prices generally rise and
periods when stock prices generally decline. In addition, companies in which the
Fund invests also may involve certain special risks. Emerging growth companies
may have limited product lines, markets or financial resources, and they may be
dependent on a limited management group. The securities of emerging growth
companies may have limited market stability and may be subject to more abrupt or
erratic market movements than securities of larger, more established companies
or the market averages in general. Thus, shares of Emerging Growth Fund will
probably be subject to greater fluctuation in value than shares of a more
conservative equity fund and an investment in the Fund should not be considered
a total investment plan. In addition, Emerging Growth Fund may be less
diversified by industry and company than other funds with a similar investment
objective and no geographic limitation. The investment techniques used by the
Fund also pose certain risks. See "Special Investment Methods."

12
<PAGE>
GROWTH AND INCOME FUND

INVESTMENT OBJECTIVES. Growth and Income Fund's investment objectives are
to provide current income and long-term growth of capital and income.

INVESTMENT POLICIES AND TECHNIQUES. Growth and Income Fund will pursue its
investment objectives by investing in a broadly diversified portfolio of
securities, with an emphasis on securities of large, established companies that
have a history of dividend payments and that the Adviser believes are
undervalued. Companies will be selected on the basis of the Adviser's assessment
of their prospects for long-term growth in dividends and earnings. Additional
factors which the Adviser will consider include the stability of a company's
earnings as well as the sensitivity of that company's particular industry to
fluctuations in major economic variables, such as interest rates and industrial
production.

Under normal market conditions, Growth and Income Fund will invest
principally in common stocks and securities convertible into common stocks.
However, the Fund may also invest in debt securities, including U.S. Government
securities (securities issued or guaranteed as to payment of principal and
interest by the U.S. Government or its agencies or instrumentalities) and
nonconvertible preferred stocks. Investments in long-term debt securities,
including debt securities convertible into common stock, will be limited to U.S.
Government securities and those securities rated at the time of purchase within
the four highest investment grades assigned by Moody's Investors Service, Inc.
("Moody's") (Aaa, Aa, A or Baa) or Standard & Poor's Ratings Services ("Standard
& Poor's") (AAA, AA, A, or BBB), or to unrated securities judged by the Adviser
at the time of purchase to be of comparable quality. Debt securities rated Baa
and BBB have speculative characteristics; changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than is the case with higher grade bonds. In the
event a security held in Growth and Income Fund's portfolio is downgraded to a
rating below Baa or BBB, the Fund will sell such security as promptly as
practicable. For an explanation of Moody's and Standard & Poor's ratings, see
Appendix A to the Statement of Additional Information. U.S. Government
securities in which the Fund may invest 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. 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
obligations 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 of other agencies or instrumentalities are
backed only by the credit of the agency or instrumentality issuing the
obligations. See "Investment Objectives and Policies--U.S. Government
Securities" in the Statement of Additional Information.

Under unusual circumstances, as a defensive measure, Growth and Income Fund
may retain cash or invest part or all of its assets in short-term money market
securities deemed by the Adviser to be consistent with a temporary defensive
posture. In addition, normally a small portion of the Fund's total assets will
be held in short-term money market securities and cash to pay redemption
requests and Fund expenses. Investments in short-term money market securities
may include obligations of the U.S. Government and its agencies and
instrumentalities, time deposits, bank certificates of deposit, bankers'
acceptances, high-grade commercial paper and other money market instruments. See
"Investment Objectives, Policies and Restrictions" in the Statement of
Additional Information. Growth and Income Fund may also enter into repurchase
agreements. See "Special Investment Methods--Repurchase Agreements."

Growth and Income Fund may write covered put and call options on the
securities in which it may invest, purchase put and call options with respect to
such securities, and enter into closing purchase and sale transactions with
respect thereto. Growth and Income Fund may also purchase and write put and call
options on stock indexes listed on national securities exchanges. See "Special
Investment Methods--Options Transactions." In addition, solely for the purpose
of hedging against changes in the value of its portfolio securities due to
anticipated changes in the market, Growth and Income Fund may enter into stock
index futures contracts and interest rate futures contracts, purchase and write
put or call options on such contracts,

13
<PAGE>
and close such contracts and options. See "Special Investment Methods--Futures
Contracts and Options on Futures Contracts" and "--Risks of Transactions in
Futures Contracts and Options on Futures Contracts."

Growth and Income Fund may purchase or sell securities on a "when-issued" or
"forward commitment" basis and may enter into mortgage "dollar rolls." The use
of these techniques could result in increased volatility of the Fund's net asset
value. See "Special Investment Methods--When-Issued Securities."

INVESTMENT RISKS. As a mutual fund investing primarily in common stocks,
Growth and Income Fund is subject to market risk, i.e., the possibility that
stock prices in general will decline over short or even extended periods. The
stock market tends to be cyclical, with periods when stock prices generally rise
and periods when stock prices generally decline.

Because Growth and Income Fund also may invest in debt securities, the Fund
may be subject to interest rate risk as well. Bond prices generally vary
inversely with changes in the level of interest rates so that when interest
rates rise, the prices of bonds fall; conversely, when interest rates fall, bond
prices rise. Investments in debt securities may also subject the Fund to credit
risk. Credit risk, also know as default risk, is the possibility that a bond
issuer will fail to make timely payments of interest or principal. As discussed
above, the Fund's investments in long-term debt securities are limited to U.S.
Government securities and securities which, at the time of purchase, are rated
investment grade or are judged by the Adviser to be of comparable quality. The
investment techniques used by the Fund also pose certain risks. See "Special
Investment Methods."

EQUITY STRATEGY FUND

INVESTMENT OBJECTIVE. Equity Strategy Fund's investment objective is to
provide a high total investment return consistent with prudent investment risk.

INVESTMENT POLICIES AND TECHNIQUES. Equity Strategy Fund invests primarily
(at least 65% of its assets under normal market conditions) in common stocks and
in securities that are convertible into or that carry rights to buy common
stocks of companies representing a number of different sectors of the economy.
The Fund seeks to achieve its objective by varying the weighting of its
portfolio among the different sectors. The sectors in which the Fund currently
invests are: Basic Energy, Basic Materials, Industrial Manufacturing, Utilities,
Commercial and Industrial Services, Financial, Consumer Staples, Consumer
Cyclical, Health Care, Technology and Transportation. For a description of the
scope of each of these industry sectors, see Appendix D to the Statement of
Additional Information.

In selecting investments for Equity Strategy Fund, the Adviser intends to
follow the investment strategies used by Piper Jaffray in developing the
MicroGroup Project. The MicroGroup Project divides over 5,300 individual issuers
into over 350 MicroGroups, which are groups of stocks that have similar trading
patterns and whose earnings or revenues are derived from similar lines of
business. Stocks of companies that are broadly diversified may be included in
more than one MicroGroup and possibly in more than one sector. The MicroGroups
are then split into the eleven broader economic sectors listed above. For
example, the Transportation Sector consists of Airline, Air Freight, Trucking,
Freight Forwarder, Railroad and Marine Transportation MicroGroups. Divisions
into sectors and MicroGroups are based upon the concept that stocks of issuers
engaged in similar operations will respond to market forces in a similar manner.
The number of sectors into which the MicroGroup Project divides the economy may
change from time to time, and Equity Strategy Fund may invest in any of these
sectors. Equity Strategy Fund may invest up to 25% of its total assets in common
stocks or securities convertible into common stocks that are deemed by the
Adviser to have investment merit but that are not included in any of the
MicroGroups. Most typically, a stock will not be included in a MicroGroup for
one of the following reasons: (a) the stock is being issued in connection with
an initial public offering and has not yet been placed in a MicroGroup; (b) the
issuer's line of business precludes an ideal fit into a MicroGroup (e.g., the
issuer is too specialized or too diversified); or (c) the stock is that of a
foreign issuer. (No more than 5% of the total assets of Equity Strategy Fund
will be invested in the securities of foreign issuers.)

In response to changes or anticipated changes in the general economy and
within one or more particular industry sectors, the Adviser may increase,
decrease or eliminate entirely a particular sector's representation in the
Fund's portfolio, which may result in a higher portfolio turnover rate than
experienced by other equity funds. Sector and MicroGroup selections are based
upon both fundamental factors (e.g., economic and

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<PAGE>
interest rate sensitivity) and technical factors (e.g., whether the sector or
MicroGroup appears to be under accumulation or distribution) and upon relative
strength considerations (whether the sector or MicroGroup is outperforming or
underperforming the market). Component companies of selected MicroGroups are in
turn evaluated based upon fundamental earnings developments, financial condition
and technical considerations. As a result of adhering to these principles, it is
anticipated that Equity Strategy Fund will invest in both large- and
small-capitalization issues, some of which may be considered speculative in
nature.

From time to time, for temporary defensive purposes, Equity Strategy Fund
may retain cash or invest part or all of its assets in short-term money market
securities deemed by the Adviser to be consistent with a temporary defensive
posture. In addition, even when Equity Strategy Fund is "fully invested,"
normally up to 5% of the Fund's total assets will be held in short-term money
market securities and cash, to pay redemption requests and Fund expenses.
Investments in short-term money market securities may include obligations of the
U.S. Government and its agencies and instrumentalities, time deposits, bank
certificates of deposit, bankers' acceptances, high-grade commercial paper and
other money market instruments. See "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information. Equity Strategy Fund
may also enter into repurchase agreements. See "Special Investment
Methods--Repurchase Agreements."

Equity Strategy Fund may write covered put and call options on the
securities in which it may invest, purchase put and call options with respect to
such securities, and enter into closing purchase and sale transactions with
respect thereto. Equity Strategy Fund may also purchase and write put and call
options on stock indexes listed on national securities exchanges. See "Special
Investment Methods--Options Transactions." In addition, solely for the purpose
of hedging against changes in the value of its portfolio securities due to
anticipated changes in the market, Equity Strategy Fund may enter into stock
index futures contracts, purchase and write put or call options on such
contracts, and close such contracts and options. See "Special Investment
Methods--Futures Contracts and Options on Futures Contracts" and "--Risks of
Transactions in Futures Contracts and Options on Futures Contracts." Equity
Strategy Fund may also make short sales of securities. See "Special Investment
Methods--Short Sales."

INVESTMENT RISKS. As a mutual fund investing primarily in common stocks,
Equity Strategy Fund is subject to market risk, i.e., the possibility that stock
prices in general will decline over short or even extended periods. The stock
market tends to be cyclical, with periods when stock prices generally rise and
periods when stock prices generally decline. The investment results of the Fund
will also depend upon the Adviser's ability to anticipate correctly the relative
performance of various industry sectors. The Fund's investment results would
suffer, for example, if none or only a small portion of the Fund's assets were
allocated to a particular sector during a significant market advance in that
sector, or if a major portion of its assets were allocated to a particular
sector during a market decline in that sector. The Adviser's strategy may result
in the Fund investing in both large and small capitalization issues, some of
which may be considered speculative in nature. The investment techniques used by
the Fund also pose certain risks. See "Special Investment Methods."

BALANCED FUND

INVESTMENT OBJECTIVES. Balanced Fund has investment objectives of both
current income and long-term capital appreciation consistent with conservation
of principal.

INVESTMENT POLICIES AND TECHNIQUES. It is intended that the assets of
Balanced Fund will be invested on the basis of combined considerations of risk,
income, capital appreciation and protection of capital value. The Fund may
invest in any type or class of securities, including money market securities,
fixed-income securities, such as bonds, debentures, preferred stocks and U.S.
Government securities (securities issued or guaranteed as to payment of
principal and interest by the U.S. Government or its agencies or
instrumentalities), senior securities convertible into common stocks and common
stocks. The Fund may invest up to 25% of its total assets in foreign securities.
See "Special Investment Methods--Foreign Securities." Balanced Fund may also
enter into repurchase agreements. See "Special Investment Methods--Repurchase
Agreements." The mix of securities in the Fund's portfolio will be determined on
the basis of existing and anticipated market conditions. Consequently, the
relative percentages of each type of security in the portfolio may be expected
to fluctuate. At least 35% of the Fund's total assets, however, must be invested
in fixed-income

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<PAGE>
securities. To pay redemption requests and Fund expenses, normally up to 5% of
the Fund's total assets will be held in short-term money market securities and
cash.

Investments in long-term debt securities will be limited to U.S. Government
securities and to those securities rated at the time of purchase within the four
highest investment grades assigned by Moody's (Aaa, Aa, A or Baa) or Standard &
Poor's (AAA, AA, A or BBB) or unrated securities judged by the Adviser at the
time of purchase to be of comparable quality. Debt securities rated Baa and BBB
have speculative characteristics; changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. In the event a
security held in Balanced Fund's portfolio is downgraded to a rating below Baa
or BBB, the Fund will sell such security as promptly as practicable. For an
explanation of Moody's and Standard & Poor's ratings, see Appendix A to the
Statement of Additional Information. Not more than 20% of the long-term debt
securities held at any one time by Balanced Fund will be unrated. U.S.
Government securities in which the Fund may invest 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. 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
obligations 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 of other agencies or instrumentalities are
backed only by the credit of the agency or instrumentality issuing the
obligations. The Fund may invest in mortgage-related U.S. Government securities,
including derivative mortgage securities. Recent market experience has shown
that certain derivative mortgage securities may be extremely sensitive to
changes in interest rates and in prepayment rates on the underlying mortgage
assets and, as a result, may be highly volatile. However, Balanced Fund will not
invest more than 5% of its net assets, in the aggregate, in the following types
of derivative mortgage securities: inverse floaters, interest only, principal
only, inverse interest only and Z tranches of collateralized mortgage
obligations, and stripped mortgage-backed securities. See "Investment Objectives
and Policies--U.S. Government Securities" in the Statement of Additional
Information. Investments in short-term money market securities may include
obligations of the U.S. Government and its agencies and instrumentalities, time
deposits, bank certificates of deposit, bankers' acceptances, high-grade
commercial paper and other money market instruments. See "Investment Objectives,
Policies and Restrictions" in the Statement of Additional Information.

Balanced Fund may write covered put and call options on the securities in
which it may invest, purchase put and call options with respect to such
securities, and enter into closing purchase and sale transactions with respect
thereto. Balanced Fund may also purchase and write put and call options on stock
indexes listed on national securities exchanges. See "Special Investment
Methods--Options Transactions." In addition, solely for the purpose of hedging
against changes in the value of its portfolio securities due to anticipated
changes in the market and in interest rates, Balanced Fund may enter into stock
index futures contracts and interest rate futures contracts, purchase and write
put or call options on such contracts, and close such contracts and options. See
"Special Investment Methods--Futures Contracts and Options on Futures Contracts"
and "--Risks of Transactions in Futures Contracts and Options on Futures
Contracts."

Balanced Fund may purchase or securities on a "when-issued" or "forward
commitment" basis and may enter into mortgage "dollar rolls." The use of these
techniques could result in increased volatility of the Fund's net asset value.
See "Special Investment Methods--When-Issued Securities."

EFFECTIVE DURATION. In managing the fixed income portion of Balanced Fund's
portfolio, the Adviser will attempt to maintain an average effective duration of
3 to 6 1/2 years. Effective duration estimates the interest rate risk (price
volatility) of a security, I.E., how much the value of the security is expected
to change with a given change in interest rates. The longer a security's
effective duration, the more sensitive its price is to changes in interest
rates. For example, if interest rates were to increase by 1%, the market value
of a bond with an effective duration of five years would decrease by about 5%,
with all other factors being constant.

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<PAGE>
It is important to understand that, while a valuable measure, effective
duration is based on certain assumptions and has several limitations. It is most
useful as a measure of interest rate risk when interest rate changes are small,
rapid and occur equally across all the different points of the yield curve. In
addition, effective duration is difficult to calculate precisely for bonds with
prepayment options, such as mortgage-backed securities, because the calculation
requires assumptions about prepayment rates. For example, when interest rates go
down, homeowners may prepay their mortgages at a higher rate than assumed in the
initial effective duration calculation, thereby shortening the effective
duration of the Fund's mortgage-backed securities. Conversely, if rates
increase, prepayments may decrease to a greater extent than assumed, extending
the effective duration of such securities. For these reasons, the effective
durations of funds which invest a significant portion of their assets in
mortgage-backed securities can be greatly affected by changes in interest rates.

INVESTMENT RISKS. The Fund may invest in any type or class of securities,
including money market securities, fixed-income securities and common stocks. As
a result, investors in the Fund will be exposed to the market risks of both
common stocks and bonds. Stock market risk is the possibility that stock prices
in general will decline over short or even extended periods. The stock market
tends to be cyclical, with periods when stock prices generally rise and periods
when stock prices generally decline. Bond market risk is the potential for
fluctuations in the market value of bonds. Bond prices vary inversely with
changes in the level of interest rates. When interest rates rise, the prices of
bonds fall; conversely, when interest rates fall, bond prices rise.

To the extent the Fund invests in mortgage-related securities, the Fund will
also be subject to prepayment risk. Prepayment risk results because, as interest
rates fall, homeowners are more likely to refinance their home mortgages. When
home mortgages are refinanced, the principal on mortgage-related securities held
by the Fund is "prepaid" earlier than expected. The Fund must then reinvest the
unanticipated principal payments, just at a time when interest rates on new
mortgage investments are falling. Prepayment risk has two important effects on
the Fund:

- When interest rates fall and additional mortgage prepayments must be
reinvested at lower interest rates, the income of the Fund will be
reduced.

- When interest rates fall, prices on mortgage-backed securities may not
rise as much as comparable Treasury bonds because bond market investors
may anticipate an increase in mortgage prepayments and a likely decline in
income.

Balanced Fund's investments in mortgage-related securities also subject the
Fund to extension risk. Extension risk is the possibility that rising interest
rates may cause prepayments to occur at a slower than expected rate. This
particular risk may effectively change a security which was considered short- or
intermediate-duration at the time of purchase into a long-duration security.
Long-duration securities generally fluctuate more widely in response to changes
in interest rates than short- or intermediate-duration securities.

Investments in debt securities may also subject the Fund to credit risk.
Credit risk, also known as default risk, is the possibility that a bond issuer
will fail to make timely payments of interest or principal. As discussed above,
the Fund's investments in long-term debt securities are limited to U.S.
Government securities and securities which, at the time of purchase, are rated
investment grade or are judged by the Adviser to be of comparable quality. The
investment techniques used by the Fund and the Fund's ability to invest up to
25% of its total assets in foreign securities also pose certain risks. See
"Special Investment Methods."

Investors should also be aware that the investment results of the Fund
depend upon the Adviser's ability to anticipate correctly the relative
performance and risks of stocks, bonds and money market instruments. The Fund's
investment results would suffer, for example, if only a small portion of the
Fund's assets were invested in stocks during a significant market advance, or if
a major portion of its assets were invested in stocks during a market decline.
Similarly, the Fund's performance could deteriorate if the Fund were
substantially invested in bonds at a time when interest rates moved adversely.

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<PAGE>
SPECIAL INVESTMENT METHODS

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with respect to securities
issued or guaranteed as to payment of principal and interest by the U.S.
Government or its agencies or instrumentalities. 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.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, each Fund may lend portfolio
securities up to one-third of the value of its total assets to broker-dealers,
banks or other financial borrowers of securities. As with other extensions of
credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
Funds will only enter into loan arrangements with broker-dealers, banks or other
institutions which the Adviser has determined are creditworthy under guidelines
established by the Company's Board of Directors and will receive collateral in
the form of cash, U.S. Government securities or other high-grade debt
obligations equal to at least 100% of the value of the securities loaned. The
value of the collateral and of the securities loaned will be marked to market on
a daily basis. During the time portfolio securities are on loan, the borrower
pays the Fund an amount equivalent to any dividends or interest paid on the
securities and the Fund may invest the cash collateral and earn additional
income or may receive an agreed upon amount of interest income from the
borrower. However, the amounts received by the Fund may be reduced by finders'
fees paid to broker-dealers and related expenses.

BORROWING

Each Fund may borrow money from banks for temporary or emergency purposes in
an amount up to 10% of the value of the Fund's total assets. 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. Each Fund may mortgage, pledge or hypothecate its assets in an amount
not exceeding 10% of the value of its 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.

OPTIONS TRANSACTIONS

WRITING COVERED OPTIONS. Each Fund may write (i.e., sell) covered put and
call options with respect to the securities in which they may invest. By writing
a call option, a Fund becomes obligated during the term of the option to deliver
the securities underlying the option upon payment of the exercise price if the
option is exercised. By writing a put option, a Fund becomes obligated during
the term of the option to purchase the securities underlying the option at the
exercise price if the option is exercised. With respect to put options written
by any Fund, there will have been a predetermination that acquisition of the
underlying security is in accordance with the investment objective of such Fund.

The principal reason for writing call or put options is to obtain, through
the receipt of premiums, a greater current return than would be realized on the
underlying securities alone. The Funds receive premiums from writing call or put
options, which they retain whether or not the options are exercised. By writing
a call option, a Fund might lose the potential for gain on the underlying
security while the option is open,

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<PAGE>
and by writing a put option a Fund might become obligated to purchase the
underlying security for more than its current market price upon exercise.

For Growth Fund, Emerging Growth Fund, Growth and Income Fund and Balanced
Fund, the aggregate value of the securities or other collateral underlying the
calls and obligations underlying the puts written by a Fund, determined as of
the date the options are sold, will not exceed 25% of the net assets of such
Fund. For Equity Strategy Fund, the aggregate value of the securities or other
collateral underlying the puts written by the Fund, determined as of the date
the options are sold, will not exceed 50% of the Fund's net assets. Equity
Strategy Fund may write covered call options without limit.

PURCHASING OPTIONS. Each Fund may purchase put options, solely for hedging
purposes, in order to protect portfolio holdings in an underlying security
against a substantial decline in the market value of such holdings ("protective
puts"). Such protection is provided during the life of the put because a Fund
may sell the underlying security at the put exercise price, regardless of a
decline in the underlying security's market price. Any loss to a Fund is limited
to the premium paid for, and transaction costs paid in connection with, the put
plus the initial excess, if any, of the market price of the underlying security
over the exercise price. However, if the market price of such security
increases, the profit a Fund realizes on the sale of the security will be
reduced by the premium paid for the put option less any amount for which the put
is sold.

Each Fund may also purchase call options solely for the purpose of hedging
against an increase in prices of securities that the Fund ultimately wants to
buy. Such protection is provided during the life of the call option because the
Fund may buy the underlying security at the call exercise price regardless of
any increase in the underlying security's market price. In order for a call
option to be profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and transaction
costs. By using call options in this manner, a Fund will reduce any profit it
might have realized had it bought the underlying security at the time it
purchased the call option by the premium paid for the call option and by
transaction costs.

The Funds may purchase and write only exchange-traded put and call options.

STOCK INDEX OPTION TRADING. The Funds may purchase and write put and call
options on stock indexes listed on national securities exchanges. Stock index
options will be purchased for the purpose of hedging against changes in the
value of a Fund's portfolio securities due to anticipated changes in the market.
Stock index options will be written for hedging purposes and to realize income
from the premiums received on the sale of such options. Options on stock indexes
are similar to options on stock except that, rather than the right to take or
make delivery of stock at a specified price, an option on a stock index gives
the holder the right to receive, upon exercise of the option, an amount of cash
if the closing level of the stock index upon which the option is based is
greater than, in the case of a call, or less than, in the case of a put, the
exercise price of the option. The writer of the option is obligated to make
delivery of this amount. The value of a stock index fluctuates with changes in
the market values of the stocks included in the index. The index may include
stocks representative of the entire market, such as the S&P 500, or may include
only stocks in a particular industry or market segment, such as the AMEX Oil and
Gas Index. The effectiveness of purchasing or writing stock index options as a
hedging technique depends upon the extent to which price movements in a Fund's
portfolio correlate with price movements of the stock index selected.

For further information concerning the characteristics and risks of options
transactions, see "Investment Objectives, Policies and Restrictions--Options" in
the Statement of Additional Information.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

Each Fund may purchase and sell interest rate futures contracts. Balanced
Fund and Growth and Income Fund also may purchase and sell interest rate futures
contracts. The futures contracts in which the Funds may invest have been
developed by and are traded on national commodity exchanges. Stock index futures
contracts may be based upon broad-based stock indexes such as the S&P 500 or
upon narrow-based stock indexes. A buyer entering into a stock index futures
contract will, on a specified future date, pay or receive a final cash payment
equal to the difference between the actual value of the stock index on the last
day of the contract and the value of the stock index established by the
contract. An interest rate futures contract is an agreement to purchase or sell
an agreed amount of debt securities at a set price for delivery on a future
date.

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<PAGE>
The purpose of the acquisition or sale of a futures contract by a Fund is to
hedge against fluctuations in the value of its portfolio without actually buying
or selling securities. For example, if a Fund owns long-term U.S. Government
securities and interest rates are expected to increase, the Fund might sell
futures contracts. If interest rates did increase, the value of the U.S.
Government securities in the Fund's portfolio would decline, but the value of
the Fund's futures contracts would increase at approximately the same rate,
thereby keeping the net asset value of the Fund from declining as much as it
otherwise would have. If, on the other hand, the Fund held cash reserves and
short-term investments pending anticipated investment in long-term obligations
and interest rates were expected to decline, the Fund might purchase futures
contracts for U.S. Government securities. Since the behavior of such contracts
would generally be similar to that of long-term securities, the Fund could take
advantage of the anticipated rise in the value of long-term securities without
actually buying them until the market had stabilized. At that time, the Fund
could accept delivery under the futures contracts or the futures contracts could
be liquidated and the Fund's reserves could then be used to buy long-term
securities in the cash market. The Funds will engage in such transactions only
for hedging purposes, on either an asset-based or a liability-based basis, in
each case in accordance with the rules and regulations of the Commodity Futures
Trading Commission. See Appendix B and Appendix C to the Statement of Additional
Information.

Each Fund may purchase and sell put and call options on futures contracts
and enter into closing transactions with respect to such options to terminate
existing positions. The Funds may use such options on futures contracts in
connection with their hedging strategies in lieu of purchasing and writing
options directly on the underlying securities or purchasing and selling the
underlying futures contracts.

There are risks in using futures contracts and options on futures contracts
as hedging devices. The primary risks associated with the use of futures
contracts and options thereon are (a) the prices of futures contracts and
options may not correlate perfectly with the market value of the securities
subject to the hedge and (b) the possible lack of a liquid secondary market for
a futures contract and the resulting inability to close a futures position prior
to its maturity date. With respect to stock index futures contracts, the risk of
imperfect correlation increases as the composition of a Fund's portfolio
diverges from the securities included in the applicable stock index. The Adviser
will attempt to reduce this risk, to the extent possible, by entering into
futures contracts on indexes whose movements it believes will have a significant
correlation with movements in the value of the Fund's portfolio securities
sought to be hedged. The risk that a Fund will be unable to close out a futures
position will be minimized by entering into such transactions on a national
exchange with an active and liquid secondary market.

Additional information with respect to interest rate and stock index futures
contracts, together with information regarding options on such contracts, is set
forth in Appendix B and Appendix C, respectively, to the Statement of Additional
Information.

WHEN-ISSUED SECURITIES

Balanced Fund and Growth and Income Fund may purchase securities on a
"when-issued" basis and may purchase or sell securities on a "forward
commitment" basis. When such transactions are negotiated, the price is fixed at
the time the commitment is made, but delivery and payment for the securities
take place at a later date. The Funds will not accrue income with respect to
when-issued or forward commitment securities prior to their stated delivery
date. Pending delivery of the securities, each Fund maintains in a segregated
account cash or liquid high-grade debt obligations in an amount sufficient to
meet its purchase commitments.

The purchase of securities on a when-issued or forward commitment basis
exposes the Funds to risk because the securities may decrease in value prior to
their delivery. Purchasing securities on a when-issued or forward commitment
basis involves the additional risk that the return available in the market when
the delivery takes place will be higher than that obtained in the transaction
itself. A Fund's purchase of securities on a when-issued or forward commitment
basis while remaining substantially fully invested increases the amount of the
Fund's assets that are subject to market risk to an amount that is greater than
the Fund's net asset value, which could result in increased volatility of the
price of the Fund's shares. For additional information concerning when-issued
and forward commitment transactions, see "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information.

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<PAGE>
MORTGAGE DOLLAR ROLLS

In connection with their ability to purchase securities on a when-issued or
forward commitment basis, Balanced Fund and Growth and Income Fund may enter
into mortgage "dollar rolls" in which a Fund sells securities for delivery in
the current month and simultaneously contracts with the same counterparty to
repurchase similar (same type, coupon and maturity) but not identical securities
on a specified future date. The Fund gives up the right to receive principal and
interest paid on the securities sold. However, the Fund would benefit to the
extent of any difference between the price received for the securities sold and
the lower forward price for the future purchase plus any fee income received.
Unless such benefits exceed the income, capital appreciation and gain or loss
due to mortgage prepayments that would have been realized on the securities sold
as part of the mortgage dollar roll, the use of this technique will diminish the
investment performance of the Fund compared with what such performance would
have been without the use of mortgage dollar rolls. Each Fund will hold and
maintain in a segregated account until the settlement date cash or liquid
high-grade debt securities in an amount equal to the forward purchase price. The
benefits derived from the use of mortgage dollar rolls may depend upon the
Adviser's ability to predict correctly mortgage prepayments and interest rates.
There is no assurance that mortgage dollar rolls can be successfully employed.
In addition, the use of mortgage dollar rolls by a Fund while remaining
substantially fully invested increases the amount of the Fund's assets that are
subject to market risk to an amount that is greater than the Fund's net asset
value, which could result in increased volatility of the price of the Fund's
shares.

For financial reporting and tax purposes, the Funds treat mortgage dollar
rolls as two separate transactions: one involving the purchase of a security and
a separate transaction involving a sale. The Funds do not currently intend to
enter into mortgage dollar rolls that are accounted for as a financing.

No more than one-third of a Fund's total assets may be committed to the
purchase of securities on a when-issued or forward commitment basis, including
mortgage dollar roll purchases.

SHORT SALES

Equity Strategy Fund may make short sales, which are transactions in which
the Fund sells a security it does not own in anticipation of a decline in the
market value of that security. To complete such a transaction, Equity Strategy
Fund must borrow the security to make delivery to the buyer. The Fund then is
obligated to replace the security borrowed by purchasing it at the market price
at the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Fund. Until the security is
replaced, the Fund is required to pay to the lender any dividends or interest
which accrue during the period of the loan. To borrow the security, Equity
Strategy Fund also may be required to pay a premium, which would increase the
cost of the securities sold. The proceeds of the short sale will be retained by
the broker, to the extent necessary to meet margin requirements, until the short
position is closed out.

Equity Strategy Fund will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and the date
on which the Fund replaces the borrowed security. Equity Strategy Fund will
realize a gain if the security declines in price between those dates. The amount
of any gain will be decreased, and the amount of any loss increased, by the
amount of any premium, dividends or interest Equity Strategy Fund may be
required to pay in connection with the short sale.

No securities will be sold short if, after effect is given to any such short
sale, the total market value of all securities sold short would exceed 5% of the
value of the Fund's total assets. In addition, the value of the securities of
any one issuer in which Equity Strategy Fund is short will not exceed the lesser
of 2% of the value of the Fund's net assets or 2% of the securities of any class
of any issuer. Equity Strategy Fund will make short sales (other than short
sales "against the box," as discussed below) only of securities listed on a
national securities exchange.

In addition to the short sales discussed above, Equity Strategy Fund may
also make short sales "against the box" of securities or maintain a short
position, provided that at all times when a short position is open the Fund owns
an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities of
the same issue as, and equal in amount to, the securities sold short. Not more
than 50% of the Fund's total assets (determined at the time of the short sale)

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may be held as collateral for such sales. Such sales will be made for the
purpose of hedging against an anticipated decline in the underlying securities.

ILLIQUID SECURITIES

As a nonfundamental investment restriction that may be changed at any time
without shareholder approval, no Fund will invest more than 15% of its net
assets in illiquid securities. A security is considered illiquid if it cannot be
sold in the ordinary course of business within seven days at approximately the
price at which it is valued. Illiquid securities may offer a higher yield than
securities which are more readily marketable, but they may not always be
marketable on advantageous terms.

The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses 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 securities, at a time which is not
advantageous.

"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 Securities and Exchange
Commission 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 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 on the so-called "private placement" exemption from registration under
Section 4(2) of the 1933 Act and with respect to IO, PO and inverse floating
classes of mortgage-backed securities issued by the U.S. Government or its
agencies and instrumentalities.

FOREIGN SECURITIES

As nonfundamental investment objectives which may be changed at any time
without shareholder approval, Balanced Fund may invest up to 25% of its total
assets in foreign securities and each of the other Funds may invest up to 5% of
its total assets in such securities. The value of foreign securities investments
may be affected by changes in currency rates or exchange control regulations,
changes in governmental administration or economic or monetary policy (in this
country or abroad) or changed circumstances in dealings between nations. Costs
may be incurred in connection with conversions between various currencies.
Moreover, there may be less publicly available information about foreign issuers
than about domestic issuers, and foreign issuers may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those of domestic issuers. Securities of some foreign issuers are
less liquid and more volatile than securities of comparable domestic issuers and
foreign brokerage commissions are generally higher than in the United States.
Foreign securities markets may also be less liquid, more volatile and less
subject to government supervision than in the United States. Investments in
foreign countries could be affected by other factors not present in the United
States, including expropriation, confiscatory taxation and potential
difficulties in enforcing contractual obligations and could be subject to
extended settlement periods.

In addition, as a result of their investments in foreign securities, the
Funds may receive interest or dividend payments, or the proceeds of the sale or
redemption of such securities, in the foreign currencies in which such
securities are denominated. Under certain circumstances, such as where the
Adviser believes that the applicable exchange rate is unfavorable at the time
the currencies are received or the Adviser anticipates, for any other reason,
that the exchange rate will improve, the Funds may hold such currencies for an
indefinite period of time. While the holding of currencies will permit the Funds
to take advantage of favorable movements in the applicable exchange rate, such
strategy also exposes the Funds to risk of loss if

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exchange rates move in a direction adverse to a Fund's position. Such losses
could reduce any profits or increase any losses sustained by the Funds from the
sale or redemption of securities, and could reduce the dollar value of interest
or dividend payments received.

PORTFOLIO TURNOVER

Equity Strategy Fund may engage in short-term trading in attempting to
achieve its investment objective. It may be expected that a substantial portion
of Equity Strategy Fund's portfolio will at times consist of securities believed
to have potential primarily for short-term gains. The Fund may also take
short-term gains on securities originally purchased for their long-term
potential should the price objective be achieved earlier than anticipated, or
sell securities where the Adviser believes that growth is no longer feasible or
that the risk of market decline is too great. Since Equity Strategy Fund engages
in short-term trading, it pays greater brokerage commission costs or mark-up
charges. High portfolio turnover also may increase short-term capital gains,
which are taxable as ordinary income when distributed to shareholders.

While it is not the policy of any of the remaining Funds to trade actively
for short-term profits, each Fund will dispose of securities without regard to
the time they have been held when such action appears advisable to the Adviser.
In the case of each Fund, frequent changes may result in higher brokerage and
other costs for the Fund. The method of calculating portfolio turnover rate is
set forth in the Statement of Additional Information under "Investment
Objectives, Policies and Restrictions--Portfolio Turnover." Portfolio turnover
rates for the Funds are set forth in "Financial Highlights."

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. As to utility
companies, gas, electric, telephone, telegraph, satellite and microwave
communications companies are considered as separate industries.) In addition, as
a nonfundamental investment restriction which may be changed at any time without
shareholder approval, 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. 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" 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.

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, 1995, 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 55402-3804.

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The Adviser furnishes each Fund 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, each Fund pays the
Adviser monthly fees at an annual rate of .75% on average daily net assets up to
$100 million. These fees are higher than fees paid by most other investment
companies. The fees are scaled downward as net assets increase in size to as low
as .50% on net assets of over $500 million.

PORTFOLIO MANAGEMENT

Beginning December 9, 1994, Steven V. Markusen assumed primary
responsibility for the day-to-day management of the Growth Fund's portfolio. Mr.
Markusen has been a Senior Vice President of the Adviser since December 1993.
Prior to that, he served as a Senior Vice President of Investment Advisers,
Inc., in Minneapolis, Minnesota, where he was responsible for managing
institutional equity and balanced portfolios and the IAI Growth Fund. In
addition, he was responsible for a group which managed $2.5 billion in large
capitalization growth equity assets. Before joining Investment Advisers, Inc. in
1989, Mr. Markusen was a Vice President with INVESCO Funds, where he managed
three equity funds for five years. He is a Chartered Financial Analyst ("CFA")
and has 12 years of financial experience.

Sandra K. Shrewsbury has been primarily responsible for the day-to-day
management of the Emerging Growth Fund's portfolio since 1993. Ms. Shrewsbury
has been a Vice President of the Distributor since 1990, prior to which she had
been an Assistant Vice President of the Distributor. She is a CFA and has 13
years of financial experience.

Paul A. Dow has been primarily responsible for the day-to-day management of
the Growth and Income Fund's portfolio since the Fund's inception in 1992. Mr.
Dow has shared that primary responsibility with Michael S. Wallace since October
1995. Mr. Dow has been a Senior Vice President of the Adviser since February
1989 and Chief Investment Officer of the Adviser since December 1989. He is a
CFA and has 22 years of financial experience. Mr. Wallace has been a portfolio
manager for the Adviser since December 1994, prior to which he had been an
analyst for the Adviser since June 1993. Prior to joining the Adviser, Mr.
Wallace was a Financial Analyst for Allstate Insurance Company from 1987 to
1991. He has an MBA in Finance and Accounting from Cornell University and six
years of financial experience.

Edward P. Nicoski has been primarily responsible for the day-to-day
management of the Equity Strategy Fund's portfolio since the Fund's inception in
1987. Mr. Nicoski has been a Vice President of the Adviser since October 1985
and a Managing Director of the Distributor since November 1986. He is a CFA with
26 years of financial experience.

Bruce D. Salvog and David M. Steele have been primarily responsible for the
day-to-day management of the fixed income portion of Balanced Fund's portfolio
since 1992. Mr. Salvog has been a Senior Vice President of the Adviser since
1992. He has an AB from Harvard University and 26 years of financial experience.
Mr. Steele has been a Senior Vice President of the Adviser since 1992. He has an
MBA from the University of Southern California and 16 years of financial
experience. Paul A. Dow has been primarily responsible for the day-to-day
management of the equity portion of Balanced Fund's portfolio since 1989. He has
shared that primary responsibility with John K. Schonberg since October 1995.
Mr. Dow is also portfolio manager for Growth and Income Fund and his experience
is discussed above. Mr. Schonberg has been a portfolio manager for the Adviser
since 1989, prior to which he had been a research analyst for the Distributor
since 1987. Mr. Schonberg has eight years of financial experience.

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.

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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
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.

PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS

The Adviser selects brokers and futures commission merchants to use for the
Funds' portfolio transactions. In making its selection, the Adviser may consider
a number of factors, which are more fully discussed in the Statement of
Additional Information, including, but not limited to, research services, the
reasonableness of commissions 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 may be effected through the Distributor on a
securities exchange in compliance with Section 17(e) of the Investment Company
Act of 1940, as amended (the "1940 Act"). 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 with respect to each
Fund. This fee is calculated and paid monthly at an annual rate equal to .50% of
the average daily net assets of each Fund.

A portion of the total fee equal to .25% 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 .32% of each Fund's average daily net assets. This limitation may be
revised or terminated at any time after fiscal 1996 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, out
of their own assets, may 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 Rule 12b-1 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 .30% 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 .30% of the average daily net assets of the Fund
attributable to shares sold by the Investment Executive.

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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, plus a front-end sales charge as follows:

<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE
AS A PERCENTAGE OF AS A PERCENTAGE OF
AMOUNT OF TRANSACTION AT OFFERING PRICE OFFERING PRICE NET ASSET VALUE
- --------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Less than $100,000....................................... 4.00% 4.17%
$100,000 but less than $250,000.......................... 3.25% 3.36%
$250,000 but less than $500,000.......................... 2.50% 2.56%
$500,000 and over........................................ 0.00% 0.00%
</TABLE>

This table sets forth total sales charges or underwriting commissions. The
Distributor may reallow up to the entire sales charge to broker-dealers in
connection with their sales of shares. These broker-dealers may, by virtue of
such reallowance, be deemed to be "underwriters" under the 1933 Act.

The Distributor will make certain payments to its Investment Executives and
to other 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.

PURCHASES OF $500,000 OR MORE

If you make a purchase of $500,000 or more (including purchases made under a
Letter of Intent), a 1% contingent deferred sales charge will be assessed in the
event you redeem shares within 24 months following the purchase. This sales
charge will be paid to the Distributor. For more information, please refer to
the Contingent Deferred Sales Charge section of "How To Redeem Shares." The
Distributor currently pays its Investment Executives and other broker-dealers
fees in connection with these purchases as follows:

<TABLE>
<CAPTION>
FEE AS A PERCENTAGE
AMOUNT OF TRANSACTION OF OFFERING PRICE
- --------------------------------------------------------------------------- --------------------
<S> <C>
First $1,000,000........................................................... 1.00%
Next $2,000,000............................................................ 0.75%
Next $2,000,000............................................................ 0.50%
Next $5,000,000............................................................ 0.25%
Above $10,000,000.......................................................... 0.15%
</TABLE>

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Piper Jaffray Investment Executives and other broker-dealers generally will
not receive a fee in connection with purchases on which the contingent deferred
sales charge is waived. However, the Distributor, in its discretion, may pay a
fee out of its own assets to its Investment Executives and other broker-dealers
in connection with purchases by employee benefit plans on which no sales charge
is imposed. Please see the Special Purchase Plans section of "Reducing Your
Sales Charge."

MINIMUM INVESTMENTS

A minimum initial investment of $250 is required. There is no minimum for
subsequent investments. The Distributor, in its discretion, may waive the
minimum.

REDUCING YOUR SALES CHARGE

You may qualify for a reduced sales charge through one or more of several
plans. You must notify your Piper Jaffray Investment Executive or broker-dealer
at the time of purchase to take advantage of these plans.

AGGREGATION
Front-end or initial sales charges may be reduced or eliminated by
aggregating your purchase with purchases of certain related personal accounts.
In addition, purchases made by members of certain organized groups will be
aggregated for purposes of determining sales charges. Sales charges are
calculated by adding the dollar amount of your current purchase to the higher of
the cost or current value of shares of any Piper fund sold with a sales charge
that are currently held by you and your related accounts or by other members of
your group.

QUALIFIED GROUPS. You may group purchases in the following personal
accounts together:

- Your individual account.

- Your spouse's account.

- Your children's accounts (if they are under the age of 21).

- Your employee benefit plan accounts if they are exclusively for your
benefit. This includes accounts such as IRAs, individual 403(b) plans or
single-participant Keogh-type plans.

- A single trust estate or single fiduciary account if you are the trustee
or fiduciary.

Additionally, purchases made by members of any organized group meeting the
requirements listed below may be aggregated for purposes of determining sales
charges:

- The group has been in existence for more than six months.

- It is not organized for the purpose of buying redeemable securities of a
registered investment company.

- Purchases must be made through a central administration, or through a
single dealer, or by other means that result in economy of sales effort or
expense.

An organized group does not include a group of individuals whose sole
organizational connection is participation as credit card holders of a company,
policyholders of an insurance company, customers of either a bank or
broker-dealer or clients of an investment adviser.

RIGHT OF ACCUMULATION

Sales charges for purchases of Fund shares into Piper Jaffray accounts will
be automatically calculated taking into account the dollar amount of any new
purchases along with the higher of current value or cost of shares previously
purchased in any other mutual fund managed by the Adviser (except Hercules Funds
Inc.) that was sold with a sales charge. For other broker-dealer accounts, you
should notify your Investment Executive at the time of purchase of additional
Piper fund shares you may own.

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LETTER OF INTENT

Your sales charge may be reduced by signing a non-binding Letter of Intent.
This Letter of Intent will state your intention to invest $100,000 or more in
any of the mutual funds managed by the Adviser that are sold with a sales charge
(except Hercules Funds Inc.) over a 13-month period, beginning not earlier than
90 days prior to the date you sign the Letter. You will pay the lower sales
charge applicable to the total amount you plan to invest over the 13-month
period. Part of your shares will be held in escrow to cover additional sales
charges that may be due if you do not invest the planned amount. Please see
"Purchase of Shares" in the Statement of Additional Information for more
details. You can contact your Piper Jaffray Investment Executive or other
broker-dealer for an application.

SPECIAL PURCHASE PLANS

For more information on any of the following special purchase plans, contact
your Piper Jaffray Investment Executive or other broker-dealer.

PURCHASES BY PIPER JAFFRAY COMPANIES INC., ITS SUBSIDIARIES AND ASSOCIATED
PERSONS

Piper Jaffray Companies Inc. and its subsidiaries may buy shares of the
Funds without incurring a sales charge. The following persons associated with
such entities also may buy Fund shares without paying a sales charge:

- Officers, directors and partners.

- Employees and retirees.

- Sales representatives.

- Spouses or children under the age of 21 of any of the above.

- Any trust, pension, profit-sharing or other benefit plan for any of the
above.

PURCHASES BY BROKER-DEALERS

Employees of broker-dealers who have entered into sales agreements with the
Distributor, and spouses and children under the age of 21 of such employees, may
buy shares of the Funds without incurring a sales charge.

PURCHASES BY OTHER INDIVIDUALS WITHOUT A SALES CHARGE

The following other individuals and entities also may buy Fund shares
without paying a sales charge:
- Clients of the Adviser buying shares of the Funds in their advisory
accounts.

- Discretionary accounts at Piper Trust Company and participants in
investment companies exempt from registration under the 1940 Act that are
managed by the Adviser.

- Trust companies and bank trust departments using funds over which they
exercise exclusive discretionary investment authority and which are held
in a fiduciary, agency, advisory, custodial or similar capacity.

- Investors purchasing shares through a Piper Jaffray Investment Executive
if the purchase of such shares is funded by the proceeds from the sale of
shares of any non-money market open-end mutual fund. This privilege is
available for 30 days after the sale.

PURCHASES BY EMPLOYEE BENEFIT PLANS AND TAX-SHELTERED ANNUITIES

- Shares of the Funds will be sold at net asset value, without a sales
charge, to employee benefit plans containing an actively maintained
qualified cash or deferred arrangement under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code") (a "401(k) Plan").
In the event a 401(k) Plan of an employer has purchased shares in the
Funds or any other series of the Company (other than a money market fund)
during any calendar quarter, any other employee benefit plan of such
employer that is a qualified plan under Section 401(a) of the Code also
may purchase shares of the Funds during such quarter without incurring a
sales charge.

- Custodial accounts under Section 403(b) of the Code (known as
tax-sheltered annuities) also may buy shares of the Funds without
incurring a sales charge.

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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 the
receipt of your instructions in good form by your Piper Jaffray Investment
Executive or other broker-dealer as explained below.

PIPER JAFFRAY INC. ACCOUNTS. To redeem your shares, please contact your
Piper Jaffray Investment Executive with an oral request to redeem your shares.

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 "Redemption of
Shares" in the Statement of Additional Information for more details.

CONTINGENT DEFERRED SALES CHARGE

If you invest $500,000 or more and, as a result, pay no front-end sales
charge, you may incur a contingent deferred sales charge if you redeem within 24
months. This charge will be equal to 1% of the lesser of the net asset value of
the shares at the time of purchase or at the time of redemption. This charge
does not apply to amounts representing an increase in the value of Fund shares
due to capital appreciation or to shares acquired through reinvestment of
dividend or capital gain distributions. In determining whether a contingent
deferred sales charge is payable, shares that are not subject to any deferred
sales charge will be redeemed first, and other shares will then be redeemed in
the order purchased.

LETTER OF INTENT. In the case of a Letter of Intent, the 24-month period
begins on the date the Letter of Intent is completed.

SPECIAL PURCHASE PLANS. If you purchased your shares through one of the
plans described above under "Special Purchase Plans," the contingent deferred
sales charge will be waived. In addition, the contingent deferred sales charge
will be waived in the event of:

- The death or disability (as defined in Section 72(m)(7) of the Code) of
the shareholder. (This waiver will be applied to shares held at the time
of death or the initial determination of disability of either an
individual shareholder or one who owns the shares as a joint tenant with
the right of survivorship or as a tenant in common.)

- A lump sum distribution from an employee benefit plan qualified under
Section 401(a) of the Code, an individual retirement account under Section
408(a) of the Code or a simplified employee pension plan under Section
408(k) of the Code.

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- Systematic withdrawals from any such plan or account if the shareholder is
at least 59 1/2 years old.

- A tax-free return of the excess contribution to an individual retirement
account under Section 408(a) of the Code.

- Involuntary redemptions effected pursuant to the right to liquidate
shareholder accounts having an aggregate net asset value of less than
$200.

EXCHANGES. If you exchange your shares, no contingent deferred sales charge
will be imposed. However, the charge will apply if you subsequently redeem the
new shares within 24 months of the original purchase.

REINSTATEMENT PRIVILEGE. If you elect to use the Reinstatement Privilege
(please see "Shareholder Services" below), any contingent deferred sales charge
you paid will be credited to your account (proportional to the amount
reinvested). Please see "Redemption of Shares" in the Statement of Additional
Information for more details.

PAYMENT OF REDEMPTION PROCEEDS

After your shares have been redeemed, the cash proceeds will normally be
sent to you or your broker-dealer within three business days. 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 checks have
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. In addition, if
you hold your shares in a Piper Jaffray account you may arrange to make such
additional purchases by having $25 or more automatically transferred each month
from any of the money market fund series of the Company. You should contact your
Piper Jaffray Investment Executive or IFTC to obtain authorization forms or for
additional information.

REINSTATEMENT PRIVILEGE
If you have redeemed shares of a Fund, you may be eligible to reinvest in
shares of any fund managed by the Adviser without payment of an additional sales
charge (except Hercules Funds Inc.). The reinvestment request must be made
within 30 days of the redemption. This privilege is 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.

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.

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SHAREHOLDER GUIDE TO INVESTING
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You may exchange your shares for shares of any other mutual fund managed by
the Adviser (except Hercules Funds Inc.) that is open to new investors. 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 are made on the basis of
the net asset values of the funds involved, except that investors exchanging
into a fund which has a higher sales charge must pay the difference.

You may make four exchanges per year without payment of a service charge.
Thereafter, you will pay a $5 service charge for each exchange. The Company
reserves the right to change or discontinue the exchange privilege, or any
aspect of the privilege, upon 60 days' written notice.

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 telephonic 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.

DIRECTED DIVIDENDS

You may direct income dividends and capital gains distributions to be
invested in any other mutual fund managed by the Adviser (other than a money
market fund or Hercules Funds Inc.) that is offered in your state. This
investment will be made at net asset value. It will not be subject to a minimum
investment amount except that you must hold shares in such fund (including the
shares being acquired with the dividend or distribution) with a value at least
equal to such fund's minimum initial investment amount.

SYSTEMATIC WITHDRAWAL PLAN

If your account has a value of $5,000 or more, you may establish a
Systematic Withdrawal Plan for any of the Funds. This plan will allow you to
receive regular periodic payments by redeeming as many shares from your account
as necessary. As with other redemptions, a redemption to make a withdrawal is a
sale for federal income tax purposes. Payments made under a Systematic
Withdrawal Plan cannot be considered as actual yield or income since part of the
payments may be a return of capital.

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SHAREHOLDER GUIDE TO INVESTING
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A request to establish a Systematic Withdrawal Plan must be submitted in
writing to your Piper Jaffray Investment Executive or other broker-dealer. There
are no service charges for maintenance; the minimum amount that you may withdraw
each period is $100. You will be required to have any income dividends and any
capital gains distributions reinvested. You may choose to have withdrawals made
monthly, quarterly or semiannually. Please contact your Piper Jaffray Investment
Executive, other broker-dealer or IFTC for more information.

You should be aware that additional investments in an account that has an
active Systematic Withdrawal Plan may be inadvisable due to sales charges and
tax liabilities. Please refer to "Redemption of Shares" in the Statement of
Additional Information for additional details.

ACCOUNT PROTECTION

If you purchased your shares of any of the Funds through a Piper Jaffray
Investment Executive, you may choose from several account options. Your
investments in any of the Funds held in a Piper Jaffray account (except for
non-"PAT" accounts) would be protected up to $25 million. Investments held in
non-"PAT" Piper Jaffray accounts are protected up to $2.5 million. In each case,
the Securities Investor Protection Corporation ("SPIC") provides $500,000 of
protection; the additional coverage is provided by The Aetna Casualty & Surety
Company. 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, you will receive a confirmation
statement describing that activity. 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 to reduce Fund expenses, it will help the environment by saving paper.
Please contact your Piper Jaffray Investment Executive for more information.

DIVIDENDS AND DISTRIBUTIONS

Dividends from net investment income, if any, will be paid quarterly by
Growth Fund, Growth and Income Fund and Balanced Fund and annually by Emerging
Growth Fund and Equity Strategy Fund. Net realized capital gains, if any, will
be distributed at least once annually by each Fund.

BUYING A DIVIDEND. On the ex-dividend date for a distribution, a Fund's
share price is reduced by the amount of the distribution. If you buy shares just
before the ex-dividend date ("buying a dividend"), you will pay the full price
for the shares and then receive a portion of the price back as a taxable
distribution.

DISTRIBUTION OPTIONS. All net investment income dividends and net realized
capital gains distributions for a Fund generally will be payable in additional
shares of that Fund at net asset value ("Reinvestment Option"). If you wish to
receive your distributions in cash, you must notify your Piper Jaffray
Investment Executive or other broker-dealer. You may elect either to receive
income dividends in cash and capital gains distributions in additional shares of
the Fund at net asset value ("Split Option"), or to receive both income
dividends and capital gains distributions in cash ("Cash Option"). You may also
direct income dividends and capital gains distributions to be invested in
another mutual fund managed by the Adviser. See "Shareholder Services--Directed
Dividends" above. The taxable status of income dividends and/or net capital
gains distributions is not affected by whether they are reinvested or paid in
cash.

32
<PAGE>
VALUATION OF SHARES

The Funds compute their net asset value on each day the New York Stock
Exchange (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.

The net asset value per share for each of the Funds is determined by
dividing the value of the securities owned by the Fund plus any cash and other
assets (including interest accrued and dividends declared but not collected)
less all liabilities by the number of Fund shares outstanding. For the purposes
of determining the aggregate net assets of the Funds, cash and receivables will
be valued at their face amounts. Interest will be recorded as accrued and
dividends will be recorded on the ex-dividend date. Securities traded on a
national securities exchange or on the Nasdaq National Market System are valued
at the last reported sale price that day. Securities traded on a national
securities exchange or on the Nasdaq National Market System for which there were
no sales on that day and securities traded on other over-the-counter markets for
which market quotations are readily available are valued at the mean between the
bid and asked prices. If a Fund should have an open short position as to a
security, the valuation of the contract will be at the average of the bid and
asked prices. Portfolio securities underlying actively traded options will be
valued at their market price as determined above. The current market value of
any exchange-traded option held or written by a Fund is its last sales price on
the exchange prior to the time when assets are valued. Lacking any sales that
day, the options will be valued at the mean between the current closing bid and
asked prices. Financial futures are valued at the settlement price established
each day by the board of trade or exchange on which they are traded.

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. Pricing services consider such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at securities valuations.
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 during such period, or
if the Company's management determines for any other reason that valuations
provided by the pricing service are inaccurate, such securities will be valued
at their fair value according to procedures decided upon in good faith by the
Board of Directors. In addition, any securities or other assets of a Fund for
which market prices are not readily available will be valued at their fair value
in accordance with such procedures.

TAX STATUS

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 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.

Distributions by a Fund are generally taxable to the shareholders, whether
received in cash or additional shares of the Fund (or shares of another mutual
fund managed by the Adviser). Under the Code, corporate shareholders generally
may deduct 70% of distributions from a Fund attributable to dividends paid by
domestic corporations. Distributions of net capital gains (designated as
"capital gain dividends") are taxable to shareholders as long-term capital
gains, regardless of the length of time the shareholder has held the shares of
the Fund.

A shareholder will recognize a capital gain or loss upon the sale or
exchange of shares in a Fund if, as is normally the case, the shares are capital
assets in the shareholder's hands. This capital gain or loss will be long-term
if the shares have been held for more than one year.

33
<PAGE>
The foregoing relates to federal income taxation as in effect 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 check the consequences of your local and state tax laws.

PERFORMANCE COMPARISONS

Advertisements and other sales literature for Growth Fund, Emerging Growth
Fund, Growth and Income Fund, Equity Strategy Fund and Balanced Fund may refer
to a Fund's "average annual total return" and "cumulative total return." In
addition, Growth and Income Fund and Balanced Fund may provide yield
calculations in advertisements and other sales literature. When a Fund
advertises its yield, it will also advertise its total return as required by the
rules of the Securities and Exchange Commission. All such yield and total return
quotations are based upon historical earnings and are not intended to indicate
future performance. The return on and principal value of an investment in any of
the Funds will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.

Yield calculations will be based upon a 30-day period stated in the
advertisement and will be calculated by dividing the net investment income per
share (as defined under Securities and Exchange Commission rules and
regulations) earned during the advertised period by the offering price per share
(including the maximum sales charge) on the last day of the period. The result
will then be "annualized" using a formula that provides for semi-annual
compounding of income.

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, the
maximum sales charge is deducted from the hypothetical investment and all
dividends and distributions are assumed to be reinvested. Such total return
quotations may be accompanied by quotations which do not reflect the reduction
in value of the initial investment due to the sales charge, and which thus will
be higher.

Comparative performance information also may be used from time to time in
advertising the Funds' shares. For example, advertisements may compare the
Funds' performance to that of various unmanaged market indices, or may include
performance data from Lipper Analytical Services, Inc., Morningstar, Inc. or
other entities or organizations which track the performance of investment
companies.

For additional information regarding comparative performance information and
the calculation of yield, 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 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. Four hundred billion of these shares have been
authorized by the Board of Directors to be issued in thirteen separate series,
as follows: Growth Fund, Emerging Growth Fund, Growth and Income Fund, Equity
Strategy Fund, Balanced Fund, Government Income Fund, Short-Intermediate Bond
Fund, Institutional Government Income Portfolio, National Tax-Exempt Fund and
Minnesota Tax-Exempt Fund, each of 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.

34
<PAGE>
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. On an issue affecting only a particular
series, the shares of the affected series vote separately. 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 and for all amendments to
investment advisory contracts and Rule 12b-1 distribution plans. The 1940 Act
also provides that Directors of the Company may be removed by action of the
record holders of two-thirds or more of the outstanding shares of the Company.
The Directors are required to call a meeting of shareholders for the purpose of
voting upon the question of removal of any Director when so requested in writing
by the record holders of at least 10% of the Company's outstanding shares.

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, the Adviser, the Distributor, and certain
individuals affiliated or formerly affiliated with the Adviser and the
Distributor. In addition, complaints have been filed in 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 sub-adviser.
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. See "Pending Litigation" in the
Statement of Additional Information.

A settlement agreement has been reached with respect to one of the
complaints involving PJIGX. An Amended Consolidated Class Action Complaint,
which represents a consolidation of claims previously brought by 11 persons or
entities, was filed on October 5, 1994 in the United States District Court,
District of Minnesota. The named plaintiffs in this putative class action (the
"PJIGX action") purport to represent a class of individuals and groups who
purchased shares of PJIGX during the period from July 1, 1991 through May 9,
1994. The named plaintiffs and defendants have entered into a settlement
agreement which has received preliminary approval from the Court. The terms of
the settlement are set forth in a Settlement Agreement dated July 20, 1995 (as
modified by an Addendum filed on July 28, 1995). The Settlement Agreement
contained a provision which would have permitted the defendants to cancel the
Agreement if shareholders who had incurred a cumulative "loss" (as defined under
the Agreement) of more than 10% of the loss sustained by the entire class had
opted out. The October 2, 1995 deadline for requesting exclusion from the class
has passed, and the loss sustained by persons requesting exclusion is less than
10%. If granted final approval by the Court, the settlement agreement would
provide up to approximately $70 million to class members in payments scheduled
over approximately three years. Such payments would be made by

35
<PAGE>
Piper Jaffray Companies and the Adviser and would not be an obligation of the
Company. Six additional complaints have been brought and a number of actions
have been commenced in arbitration relating to PJIGX. The complaints generally
have been consolidated with the PJIGX action for pretrial purposes and the
arbitrations and litigations have been stayed pending entry of an order by the
Court permitting those class members who have requested exclusion to proceed
with their actions.

The Adviser and the Distributor to not believe that the PJIGX settlement or
any outstanding complaint or action in arbitration 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, and they intend to defend such lawsuits
and actions vigorously.

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 ANY 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.

36
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-

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 P.L.L.P.

Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction......................... 2
Fund Expenses........................ 3
Financial Highlights................. 5
Investment Objectives and Policies... 10
Special Investment Methods........... 18
Management........................... 23
Distribution of Fund Shares.......... 25
SHAREHOLDER GUIDE TO INVESTING
How to Purchase Shares............. 26
Reducing Your Sales Charge......... 27
Special Purchase Plans............. 28
How to Redeem Shares............... 29
Shareholder Services............... 30
Dividends and Distributions........ 32
Valuation of Shares.................. 33
Tax Status........................... 33
Performance Comparisons.............. 34
General Information.................. 34
</TABLE>

XGF/XTR-05
<PAGE>
HERCULES FUNDS INC.
HERCULES NORTH AMERICAN GROWTH AND INCOME FUND

PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 1996

The undersigned shareholder of Hercules North American Growth and Income
Fund ("North American Fund"), a series of Hercules Funds Inc. (the "Company"),
does hereby appoint WILLIAM H. ELLIS, ROBERT H. NELSON and SUSAN SHARP MILEY and
each of them, as attorneys-in-fact and proxies of the undersigned, each with the
full power of substitution, to attend the Special Meeting of Shareholders of
North American Fund to be held on June 18, 1996, at Piper Jaffray Tower, 222
South Ninth Street, Third Floor, Minneapolis, Minnesota at 10:00 a.m. Central
time, and at all adjournments thereof and to vote the shares held in the name of
the undersigned on the record date for said meeting for the Proposal specified
on the reverse side hereof. Said attorneys-in-fact shall vote in accordance with
their best judgment as to any other matter.

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE PROPOSAL LISTED ON THE REVERSE SIDE HEREOF. THE SHARES
REPRESENTED HEREBY WILL BE VOTED AS INDICATED ON THE REVERSE SIDE OR FOR IF NO
CHOICE IS INDICATED.

Please mark your proxy, date and sign it on the reverse side and return it
promptly in the accompanying envelope, which requires no postage if mailed in
the United States.
<PAGE>
PLEASE MARK BOXES / / OR /X/ IN BLUE OR BLACK INK.

The Proposal:

Approval of the Agreement and Plan of Reorganization, dated as of April 15,
1996 (the "Plan"), by and between the Company, on behalf of North American Fund,
and Piper Funds Inc., on behalf of Growth and Income Fund ("Growth Fund"),
pursuant to which substantially all of the assets of North American Fund will be
acquired by Growth Fund and shareholders of North American Fund will become
shareholders of Growth Fund receiving shares of Growth Fund with a value equal
to the value of their holdings in North American Fund. A vote in favor of the
Plan will be considered a vote in favor of an amendment to the articles of
incorporation of the Company required to effect the reorganization as
contemplated by the Plan.

FOR / / AGAINST / / ABSTAIN / /
Dated: __ ________________________, 1996
(Month) (Day)
________________________________________
Signature(s)
________________________________________
Signature(s)

Please read both sides of this ballot.

NOTE: PLEASE SIGN EXACTLY AS YOUR NAME(S)
APPEAR HEREON.When signing as custodian,
attorney, executor, administrator,
trustee, etc., please give your full
title as such. All joint owners should
sign this proxy. If the account is
registered in the name of a corporation,
partnership or other entity, a duly
authorized individual must sign on its
behalf and give his or her title.