PIPER FUNDS INC, N14AE24/A, 1996-04-02

PIPER FUNDS INC
N14AE24/A, 1996-04-02

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1996

SECURITIES ACT FILE NO. 33-
- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM N-14
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. __
/ /
POST-EFFECTIVE AMENDMENT NO. __
/ /
------------------------

PIPER GLOBAL FUNDS INC.
(Exact name of Registrant as specified in Charter)
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (800) 866-7778
------------------------

WILLIAM H. ELLIS
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
(Name and address of agent for service)
------------------------

COPIES TO:

<TABLE>
<S> <C>
Kathleen Prudhomme, Esq. Stuart M. Strauss, Esq.
Dorsey & Whitney LLP Gordon Altman Butowsky
220 South Sixth Street Weitzen Shalov & Wein
Minneapolis, MN 55402-1498 114 West 47th Street
New York, New York 10036
</TABLE>

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

It is proposed that this filing will become effective on the thirtieth day
after the date of filing pursuant to Rule 488.
------------------------

The Exhibit Index is located on page __.
------------------------

No filing fee is due because the Registrant has previously registered an
indefinite number of shares under the Securities Act of 1933 pursuant to the
provisions of Rule 24f-2 under the Investment Company Act of 1940. The
Registrant filed the Rule 24f-2 Notice for its fiscal year ended February 28,
1995, with the Securities and Exchange Commission on April 24, 1995. The
Registrant intends to file the Rule 24f-2 Notice for its fiscal year ended
February 29, 1996 on or about April 4, 1996.
------------------------

PURSUANT TO RULE 429, THIS REGISTRATION STATEMENT RELATES TO SHARES PREVIOUSLY
REGISTERED BY THE REGISTRANT ON FORM N-1A (REGISTRATION NO. 33-33534).

- - - - --------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------
<PAGE>
FORM N-14
PIPER GLOBAL FUNDS, INC.
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
PART A OF FORM N-14
ITEM NO. PROXY STATEMENT AND PROSPECTUS HEADING
- - - - ------------------------ -------------------------------------------------------------------------------------------
<C> <S>
Cross Reference Sheet
1(a)
Front Cover Page
(b)
*
(c)

*
2(a)
Table of Contents
(b)

Fee Table
3(a)
Synopsis
(b)
Principal Risk Factors
(c)

The Reorganization
4(a)
The Reorganization -- Capitalization Table (Unaudited)
(b)
Registrant's Prospectus
5(a)
*
(b)
*
(c)
*
(d)
Available Information
(e)
Available Information
(f)

Prospectus of Hercules Funds Inc.
6(a)
Available Information
(b)
*
(c)
*
(d)

Introduction -- Proxies
7(a)
*
(b)
Introduction; The Reorganization -- Dissenters' Rights
(c)
The Reorganization
8(a)
*
(b)

*
9
</TABLE>

- - - - ------------------------
* Not Applicable or Negative Answer
<PAGE>
<TABLE>
<CAPTION>
PART B OF FORM N-14
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION HEADING
- - - - ------------------------ -------------------------------------------------------------------------------------------
<C> <S>
Cover Page
10(a)
*
(b)

Table of Contents
11

Additional Information about Pacific-European Fund
12(a)
*
(b)

Additional Information about Hercules Pacific Basin Value Fund
13(a)
*
(b)
*
(c)

Registrant's Statement of Additional Information dated April 28, 1995; Hercules Funds
Inc.'s Statement of Additional Information dated August 29, 1995
14

PART C OF FORM N-14
ITEM NO. OTHER INFORMATION HEADING
- - - - ------------------------ -------------------------------------------------------------------------------------------
<C> <S>
Indemnification
15

Exhibits
16

Undertakings
17
</TABLE>
<PAGE>
HERCULES FUNDS INC.
HERCULES PACIFIC BASIN VALUE FUND
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804

May 20, 1996

Dear Shareholder:

A Special Meeting of Shareholders of Hercules Pacific Basin Value Fund (the
"Fund"), a series of Hercules Funds Inc. (the "Company"), will be held at the
offices of Hercules Funds Inc. on June 18, 1996 at a.m./p.m. central time in
the office of the Company, 222 South Ninth Street, 3rd Floor, Minneapolis, MN.

The purpose of the meeting is to ask shareholders of the Fund to consider
and approve an Agreement and Plan of Reorganization pursuant to which the assets
of the Fund would be combined with those of Pacific-European Growth Fund
("Pacific-European Fund"), a series of Piper Global Funds Inc., and Fund
shareholders would become shareholders of Pacific-European Fund. Pacific-
European Fund is a mutual fund with an objective of long-term capital
appreciation. It invests primarily in common stock of companies in the Pacific
Basin or in Europe. Pacific-European Fund is managed by Piper Capital Management
Incorporated ("Piper Capital"). Edinburgh Fund Managers plc, an experienced
international investment manager, serves as the sub-adviser to Pacific-European
Fund.

The combination of assets of the Fund with Pacific-European Fund is one
element of an overall recommendation that Hercules Funds Inc. be eliminated as a
separate family of funds and that instead, each Hercules fund be combined with
the assets of appropriate mutual funds in the Piper family of mutual funds (or,
in the case of Hercules World Bond Fund and Hercules Money Market Fund, that the
fund be liquidated). As set forth in the enclosed Proxy Statement/Prospectus,
efforts to develop an effective distribution system for the Hercules funds have
not proven to be successful and it is believed unlikely that the Hercules funds
will, in the foreseeable future, grow to a size to be economically viable.
Pursuant to the reorganization, you would receive shares of Pacific-European
Fund with a value equal to the value of your Fund shares at the time of the
reorganization.

We urge you to read all of the enclosed proxy 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 in the Fund will not incur any commissions, sales loads or
other similar charges in connection with this reorganization. In addition,
Piper Capital has agreed to pay for all direct expenses of the
reorganization (including the proxy solicitation).

-The expense ratio for Pacific-European Fund is lower than that of the Fund.
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 these limitations beyond the Fund's fiscal year ending
June 30, 1996.

-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.

-The Fund's shareholders would retain the capabilities and resources of
Edinburgh Fund Managers plc, an experienced international investment
manager, which is also the sub-adviser to Pacific-European Fund.
<PAGE>
-The reorganization would enable the Fund's shareholders to enjoy an
expanded range of mutual fund investment options. The Piper Funds complex
of which Pacific-European Fund is a part, includes 15 other mutual fund
portfolios that will be available for exchange by Fund shareholders who
receive Pacific-European Fund shares in the reorganization.

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

The enclosed shareholder QUESTION AND ANSWER SHEET and the enclosed proxy
material give you more detailed information about the proposals and the reasons
why the Board of Directors recommends voting in favor of them. Please read these
documents carefully.

Also enclosed are the formal Notice of Special Meeting and a Proxy Card for
you to mark, sign, date and return to us. PLEASE RETURN YOUR PROXY CARD
IMMEDIATELY TO ASSURE THAT YOUR VOTE WILL BE COUNTED WHETHER OR NOT YOU PLAN TO
ATTEND THE SPECIAL MEETING IN PERSON. YOUR PROMPT RESPONSE WILL ELIMINATE
ADDITIONAL MAILING.

If you are also a shareholder in any other series of Hercules Funds Inc.
(except Hercules Money Market Fund) you also will receive proxy material,
including a Proxy Card, for that series. The Board of Directors recommends that
you vote in favor of the proposals contained in the Proxy Statement/ Prospectus.
PLEASE REMEMBER TO RETURN A COMPLETED PROXY CARD FOR EACH SERIES IN WHICH YOU
ARE INVESTED. A POSTAGE-PAID ENVELOPE IS ENCLOSED WITH EACH PROXY FOR YOUR
CONVENIENCE.

As the meeting date approaches, if you haven't already voted, you may
receive a telephone call reminding you to vote. If you have further questions
about your proxy, please contact your investment professional.

Sincerely,

WILLIAM H. ELLIS
PRESIDENT
<PAGE>
QUESTION AND ANSWER SHEET

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 LOAD 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 fifteen other funds
available in Piper's family of open-end funds.

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.
<PAGE>
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 PACIFIC BASIN VALUE FUND COMPARE WITH THE PACIFIC-EUROPEAN
GROWTH FUND?

Here are a few comparisons of fund characteristics. Please review the Proxy

<TABLE>
<CAPTION>
Statement/Prospectus for a complete comparison:
<S> <C> <C>
HERCULES PACIFIC BASIN PACIFIC-EUROPEAN GROWTH
Investment objective Long-term capital Long-term capital
appreciation and, to a appreciation. Current
lesser extent, current income is incidental.
income
Investment policies Primarily through Primarily investments in
investments in the Pacific the Pacific Basin and
Basin Europe
Country allocation as of 100% Pacific Basin 67% Pacific Basin, 28%
2/29/96 Europe, 5% Latin America
Net assets as of 2/29/96 $26.4 million $163.3 million
Fund registration Non-diversified Diversified
Adviser/Sub-adviser Piper Capital/Edinburgh Piper Capital/Edinburgh
Fund Managers Fund Managers
</TABLE>

<PAGE>
HERCULES FUNDS INC.
HERCULES PACIFIC BASIN VALUE 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 PACIFIC BASIN VALUE FUND,
A SERIES OF HERCULES FUNDS INC.

Notice is hereby given that a Special Meeting (the "Meeting") of
shareholders of Hercules Pacific Basin Value 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 a.m./p.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 , 1996 (the "Plan"), by and between the Company, on behalf
of the Fund, and Piper Global Funds Inc. ("Piper Global"), on behalf of
Pacific-European Growth Fund ("Pacific-European Fund"), pursuant to
which substantially all of the assets of the Fund will be combined with
those of Pacific-European Fund and shareholders of the Fund will become
shareholders of Pacific-European Fund receiving shares of
Pacific-European 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 20, 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>
PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF PIPER GLOBAL FUNDS INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
(800) 866-7778 (TOLL FREE)
ACQUISITION OF THE ASSETS OF HERCULES PACIFIC BASIN VALUE FUND
A SERIES OF HERCULES FUNDS INC.
BY AND IN EXCHANGE FOR SHARES OF PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF PIPER GLOBAL FUNDS INC.

This Proxy Statement/Prospectus is being furnished to shareholders of
Hercules Pacific Basin Value Fund (the "Fund"), a series of Hercules Funds Inc.
(the "Company"), in connection with an Agreement and Plan of Reorganization
dated as of , 1996 (the "Plan") pursuant to which substantially all
of the assets of the Fund will be combined with those of Pacific-European Growth
Fund ("Pacific-European Fund"), a series of Piper Global Funds Inc. ("Piper
Global"), in exchange for shares of Pacific-European Fund. As a result of this
transaction, shareholders of the Fund will become shareholders of
Pacific-European Fund and will receive shares of Pacific-European 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.

Pacific-European Fund is a diversified series of Piper Global, an open-end
management investment company the shares of which can be offered in more than
one series. The investment objective of Pacific-European Fund is long-term
capital appreciation. Current income is incidental to this objective.
Pacific-European Fund seeks to achieve its investment objective by investing
primarily in Common Stock (as herein defined) of companies in the Pacific Basin
or in Europe (including Eastern Europe). Up to 25% of Pacific-European Fund's
total assets may be invested in other areas of the world to the extent
significant opportunities for long-term capital appreciation outside of the
Pacific Basin and Europe become available. Pacific-European Fund does not invest
in Common Stock of U.S. companies.

This Proxy Statement/Prospectus sets forth concisely information about
Pacific-European Fund that shareholders of the Fund should know before voting on
the Plan. This Proxy Statement also constitutes a Prospectus of Pacific-European
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
Pacific-European Fund dated April 28, 1995, is attached to this Proxy
Statement/Prospectus and is incorporated herein by reference. Also enclosed and
incorporated by reference is Piper Global's Annual Report for the fiscal year
ended February 29, 1996. A Statement of Additional Information relating to the
reorganization described in this Proxy Statement/Prospectus (the "Additional
Statement") dated , 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................................................................................................ 4
Tax Consequences of the Reorganization................................................................... 6
Dissenting Shareholders' Rights of Appraisal............................................................. 6
Comparison of the Fund and Pacific-European Fund......................................................... 6

PRINCIPAL RISK FACTORS..................................................................................... 9

THE REORGANIZATION......................................................................................... 9
Background............................................................................................... 9
The Board's Consideration................................................................................ 10
The Plan................................................................................................. 12
Tax Aspects of the Reorganization........................................................................ 13
Dissenters' Rights....................................................................................... 14
Description of Shares.................................................................................... 15
Capitalization Table (unaudited)......................................................................... 15

COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS............................................. 15
Investment Objectives and Policies....................................................................... 15
Investment Restrictions.................................................................................. 17
Interest of Certain Persons.............................................................................. 17

ADDITIONAL INFORMATION ABOUT THE FUND AND PACIFIC-EUROPEAN FUND............................................ 17
General.................................................................................................. 17
Financial Information.................................................................................... 17
Management............................................................................................... 18
Description of Securities and Shareholder Inquiries...................................................... 18
Dividends, Distributions and Taxes....................................................................... 18
Purchases and Redemptions................................................................................ 18
Pending Legal Proceedings................................................................................ 18

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE................................................................ 18

FINANCIAL STATEMENTS AND EXPERTS........................................................................... 18

LEGAL MATTERS.............................................................................................. 18

AVAILABLE INFORMATION...................................................................................... 18

OTHER BUSINESS............................................................................................. 19

EXHIBIT A -- Agreement and Plan of Reorganization, dated as of , 1996 by and between the
Company, on behalf of the Fund, and Piper Global, on behalf of Pacific-European Fund...................... A-1

EXHIBIT B -- PROSPECTUS OF PACIFIC-EUROPEAN FUND, dated April 28, 1995
</TABLE>

i
<PAGE>
HERCULES FUNDS INC.
HERCULES PACIFIC BASIN VALUE FUND
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET
MINNEAPOLIS, MINNESOTA 55402-3804
(800) 584-1317 (TOLL FREE)

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

PROXY STATEMENT/PROSPECTUS
---------------------

SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 1996

INTRODUCTION

GENERAL

This Proxy Statement/Prospectus is being furnished to shareholders of
Hercules Pacific Basin Value 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 a.m./p.m.
central time and any adjournments thereof (the "Meeting"). It is expected that
this Proxy Statement/Prospectus will be mailed on or about May 20, 1996.

At the Meeting, Fund shareholders will consider and vote upon an Agreement
and Plan of Reorganization, dated as of , 1996 (the "Plan"), by and
between the Company, on behalf of the Fund, and Piper Global Funds Inc. ("Piper
Global"), on behalf of Pacific-European Growth Fund ("Pacific-European Fund"),
pursuant to which substantially all of the assets of the Fund will be combined
with those of Pacific-European Fund in exchange for shares of Pacific-European
Fund. As a result of this transaction, shareholders of the Fund will become
shareholders of Pacific-European Fund and will receive shares in
Pacific-European 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 Pacific-European Fund pursuant
to the Reorganization ("Pacific-European Fund Shares") will be issued at net
asset value without a sales charge. Further information relating to
Pacific-European Fund is set forth in the current Prospectus of Pacific-European
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 Pacific-European Fund contained
herein has been supplied by Piper Global.

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 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 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.

1
<PAGE>
[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.]

[To the knowledge of Piper Global's Board of Directors, as of the Record
Date no person owned of record or beneficially 5% or more of the outstanding
shares of Pacific-European Fund. As of the Record Date, the directors and
officers of Piper Global, as a group, owned less than 1% of the outstanding
shares of Pacific-European 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 the quorum for the Meeting cannot be obtained, 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 Global. 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
PACIFIC-EUROPEAN 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 Pacific-European Fund in exchange for
Pacific-European Fund Shares. The aggregate net asset value of Pacific-European
Fund Shares issued in the exchange will equal the aggregate value of the net
assets of the Fund received by Pacific-European Fund. On or after the closing
date scheduled for the Reorganization (the "Closing Date"), the Fund will
distribute Pacific-European 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 Pacific-European
Fund Shares equal in value to such shareholder's shares of the Fund. A similar
reorganization is being proposed to shareholders of Hercules European Value
Fund. If shareholders of that fund approve a similar reorganization,
substantially all of the assets of that fund, subject to stated liabilities,
will also be transferred to Pacific-European 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.

3
<PAGE>
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
Pacific-European Fund. The following table sets forth the expenses and fees that
shareholders of the Fund and Pacific-European Fund incurred during the twelve
months ended February 29, 1996. The Pro Forma Combined fees reflect what the fee
schedule would have been at February 29, 1996, if the Reorganization and the
proposed reorganization of Hercules European Value Fund into Pacific-European
Fund (discussed above) had occurred 12 months prior to that date. If the
proposed reorganization of Hercules European Value Fund into Pacific-European
Fund does not occur, the expenses set forth in the Pro Forma Combined column
would not be materially different from those presented below.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<CAPTION>
PACIFIC-
EUROPEAN PRO FORMA
FUND 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>

ANNUAL FUND OPERATING EXPENSES AS A PERCENTAGE OF AVERAGE NET ASSETS

<TABLE>
<CAPTION>
PACIFIC-
EUROPEAN PRO FORMA
FUND FUND COMBINED
----------- ------------ ------------
<S> <C> <C> <C>
Management Fees (4).................................................. 1.00% 0.75% 0.72%
12b-1 Fees (after voluntary fee limitation) (5)(6)................... 0.50% 0.32% 0.32%
Other Expenses (after voluntary expense reimbursement) (6)........... 0.50% 0.48% 0.48%
Total Fund Operating Expenses (after voluntary fee limitation and
expense reimbursement) (6).......................................... 2.00% 1.55% 1.52%
</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 2.00% contingent deferred sales charge on shares of the Fund
applies to redemptions during the first 365 days after purchase; the charge
declines to 1.00% during the next 365 days after purchase, reaching zero
thereafter. No CDSC is imposed on shares purchased prior to June 19, 1995.
In connection with purchases of Pacific-European 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 Pacific-European 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 Pacific-European Fund.

(4) With respect to Pacific-European Fund and the Pro Forma Combined fund,
Management Fees may be more or less than those set forth in the table to the
extent that Pacific-European Fund and the Pro Forma Combined fund
outperforms or underperforms the EAFE Index (as defined herein). For the
fiscal year ended February 29, 1996, the performance fee adjustment resulted
in a reduction of Management Fees of 0.21% of average daily net assets.
Absent such reduction, Management Fees for Pacific-European Fund and the Pro
Forma Combined fund would be 0.96% and 0.93% of average daily net assets,
respectively. See "Comparison of the Fund and Pacific-European Fund --
Investment Management and Distribution Plan Fees."

4
<PAGE>
(5) 12b-1 fees for the Fund and Pacific-European Fund are currently limited
voluntarily by the Fund's distributor, Piper Jaffray Inc. (the
"Distributor"). Absent such fee limitation, the Rule 12b-1 fees may not
exceed 0.70% and 0.50% per annum of the average daily net assets for the
Fund and Pacific-European 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 expenses of the Fund on a per
annum basis to 2.00% of average daily net assets. As a result, certain Other
Expenses are currently borne by Piper Capital. Absent such limitations, for
the 12 months ended February 29, 1996, Other Expenses would have been 1.17%
of the average daily net assets for the Fund. Without such limitations and
the 12b-1 fee limitations discussed above, Total Fund Operating Expenses for
the 12 months ended February 29, 1996, as a percentage of average daily net
assets, would have been 2.87%, 1.73% and 1.70% for the Fund,
Pacific-European Fund and the Pro Forma Combined column, respectively.
Pacific-European Fund's limitations may be revised or terminated at any time
subsequent to the end of its fiscal year. Piper Capital and the Fund's
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, Pacific-European 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 Pacific-European Fund Shares in the Reorganization will not pay the
front-end sales charge with respect to those shares. Assuming that an investor
makes a $1,000 investment in either the Fund or Pacific-European 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
Pacific-European Fund*................................... $ 16 $ 49 $ 84 $ 185
Pro Forma Combined**..................................... $ 15 $ 48 $ 83 $ 181
</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
Pacific-European Fund*................................... $ 16 $ 49 $ 84 $ 185
Pro Forma Combined**..................................... $ 15 $ 48 $ 83 $ 181
</TABLE>

- - - - ------------------------
* Expenses for shares of Pacific-European Fund purchased subject to the
maximum front end sales charge are: $55, $87, $121 and $217 for the one-,
three-, five-, and ten-year periods shown, respectively.

** Expenses for shares of Pacific-European Fund on a Pro Forma Combined basis
purchased subject to the front-end sales charge are: $55, $86, $120 and $214
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.

5
<PAGE>
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 PACIFIC-EUROPEAN FUND

INVESTMENT OBJECTIVES AND POLICIES. The Fund and Pacific-European Fund have
similar investment objectives. The Fund's objectives are long-term capital
appreciation and, to a lesser extent, current income. The investment objective
of Pacific-European Fund is long-term capital appreciation. Current income is
incidental to this objective. The investment objective of the Fund is
fundamental and may not be changed without shareholder approval. The investment
objective of Pacific-European Fund is non-fundamental and, accordingly, it may
be changed without shareholder approval.

The Fund seeks to achieve its investment objective by investing, under
normal circumstances, at least 65% of its total assets in the securities of
issuers located in the Pacific Basin. Pacific-European Fund seeks to achieve its
investment objective by investing, under normal circumstances, at least 65% of
its total assets in Common Stock (as defined herein) of companies in the Pacific
Basin or in Europe (including Eastern Europe). Up to 25% of Pacific-European
Fund's total assets may be invested in other areas of the world to the extent
significant opportunities for long-term capital appreciation outside of the
Pacific Basin and Europe become available. Accordingly, the principal difference
between the two funds is that Pacific-European Fund invests primarily in
countries that comprise the Pacific Basin and Europe and may invest up to 25% of
its assets in other areas of the world, whereas the Fund invests primarily in
the Pacific Basin. In addition, although emphasis is placed on investments in
equity securities, the Fund may invest without limitation in investment grade
debt securities of governmental and private issuers (including bonds, notes,
debentures, Brady Bonds, mortgage-backed securities and asset-backed
securities), whereas Pacific-European Fund invests in debt instruments solely
for temporary defensive purposes.

The Fund and Pacific-European Fund may invest in American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs") and in other investment
companies (up to the limits prescribed by the 1940 Act). The Fund may also
invest up to 10% of its total assets in foreign index linked instruments and in
loan participations and assignments; Pacific-European Fund does not invest in
these types of securities.

6
<PAGE>
Fund may invest. Both funds may buy or sell options, futures or options on
futures that are traded on U.S. or foreign exchanges or over-the-counter. In
addition, both funds may 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.

Both the Fund and Pacific-European Fund may purchase securities on a
when-issued or delayed delivery basis and may purchase or sell securities on a
forward commitment basis. Both funds may invest in warrants up to 5% of its net
assets. Both funds may enter into repurchase agreements subject to certain
procedures designed to minimize risks associated with such agreements. Although
both funds may enter into reverse repurchase agreements, neither fund has, nor
does Pacific-European Fund have any current intention of entering into such
agreements in the future. The Fund may invest in zero coupon bonds, deferred
interest bonds and bonds on which the interest is payable in kind ("PIK Bonds");
Pacific-European Fund does not invest in these instruments.

In addition, the Fund is a non-diversified investment company, within the
meaning of the 1940 Act, whereas Pacific-European Fund is a diversified
investment company.

For a more detailed comparison of the investment objectives and policies of
the Fund and Pacific-European Fund, see "Comparison of Investment Objectives,
Policies and Restrictions," below.

INVESTMENT MANAGEMENT AND DISTRIBUTION PLAN FEES. The Fund and
Pacific-European Fund have the same Board of Directors. In addition, the Fund
and Pacific-European 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 net asset value. Pacific-European Fund pays
a management fee at an annual rate of 1.00% of the portion of daily net assets
up to $100 million, 0.875% of such assets between $100 million and $200 million
and 0.75% of the portion of daily net assets exceeding $200 million (the "Basic
Fee"), and is subject to adjustment as described below. The adjustment is based
upon the investment performance of Pacific-European Fund in relation to the
investment record of the Morgan Stanley Capital International European,
Australian and Far East Index (the "EAFE-SM- Index"). The EAFE Index is an
unmanaged market capitalization weighted index containing (as of February 29,
1996) 1,109 companies representing approximately 60% of the market
capitalization of each of the following 20 countries or territories: Australia,
Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy,
Japan, The Netherlands, New Zealand, Norway, Singapore, Malaysia, Spain, Sweden,
Switzerland and the United Kingdom. The Basic Fee for each month may be
increased or decreased by up to 0.25% (on an annualized basis) of
Pacific-European Fund's average daily net assets depending upon the extent by
which Pacific-European Fund's performance varies from the EAFE Index over the
applicable performance period. For a more detailed discussion of the performance
component of the advisory fee for Pacific-European Fund, see "Management --
Investment Adviser" in Pacific-European Fund's current Prospectus.

Edinburgh Fund Managers plc ("EFM") is the sub-adviser of the Fund and of
Pacific-European Fund. With respect to the Fund, as compensation for its
services Piper Capital pays EFM monthly compensation, calculated in the same
manner as the investment advisory fee, of 0.50% of net assets of the Fund. With
respect to Pacific-European Fund, as compensation for its services, Piper
Capital pays EFM monthly compensation, calculated in the same manner as the
investment advisory fee, of 65% of the Basic Fee plus or minus 90% of the
performance fee adjustment described above. EFM has entered into an expense
reimbursement agreement with Piper Capital under which it pays Piper Capital a
monthly fee equal to 10% of the Basic Fee. This 10% fee is a reimbursement to
Piper Capital for certain expenses it bears in connection with the
administration of Pacific-European Fund.

Both the Fund and Pacific-European 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 entitled to reimbursement each month for its actual
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

7
<PAGE>
case of the Fund and 0.50% in the case of Pacific-European 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 Pacific-European Fund. In the case of
Pacific-European 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.

OTHER SIGNIFICANT FEES. Both the Fund and Pacific-European 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 Pacific-European Fund each continuously issue their
shares to investors at a price equal to net asset value at the time of such
issuance. Investors in Pacific-European 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 Pacific-
European 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 Pacific-European Fund. Shares of the Fund and Pacific-European Fund
are distributed by the Distributor and other broker-dealers who have entered
into selected broker-dealer agreements with the Distributor.

REDEMPTIONS. Shareholders of the Fund and Pacific-European 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
Pacific-European Fund Shares acquired in the Reorganization on redemption of
such Shares. With respect to Pacific-European Fund, shareholders 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. Pacific-European 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 Pacific-European Fund may redeem involuntarily, at net asset
value, accounts valued at less than $200.

EXCHANGES. Each of the Fund and Pacific-European 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. Pacific-European 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 Pacific-European Fund provide
telephone exchange privileges to their shareholders.

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

DIVIDENDS. Dividends from both the Fund's and Pacific-European Fund's
anticipated net investment income are declared and paid annually and net
short-term capital gains and long-term capital gains distributions, if any, are
paid at least annually. Dividends and capital gains distributions of both the
Fund and Pacific-European Fund are automatically reinvested in additional shares
at net asset value unless the shareholder elects to receive cash.

8
<PAGE>
PRINCIPAL RISK FACTORS

The Fund and Pacific-European Fund each pursue their respective investment
objectives through investment in foreign securities. Accordingly, they are both
subject to the same general risks associated with international investing. These
risks include: risks relating to adverse currency fluctuations, potential
political and economic instability of certain countries, limited liquidity and
greater volatility of prices as compared to U.S. securities, investment and
repatriation restrictions, and foreign taxation. Their risks differ to the
extent that Pacific-European Fund invests in both the Pacific Basin and Europe
and may invest up to 25% of its assets anywhere in the world, whereas the Fund
invests primarily in the Pacific Basin.

Another difference between the two funds is that although the Fund
emphasizes investment in equity securities, it may also pursue its objective
through investment in investment grade debt securities and may invest without
limitation in such securities. By contrast, Pacific-European Fund may invest in
debt securities solely for defensive purposes. Accordingly, the Fund may be
subject to the risks associated with investments in debt securities (E.G.,
credit risk, interest rate risk) to a greater extent than Pacific-European Fund.

While both Funds may participate in the futures and options markets for
hedging purposes, and the risks of such participation are similar, the Fund may
also enter into such transactions for speculative purposes to generate income.
In addition, as discussed above, the Fund may invest in zero coupon bonds,
deferred interest bonds and PIK Bonds and Pacific-European Fund does not engage
in such transactions. Accordingly, Pacific-European Fund is not subject to the
risks associated with these transactions.

In addition, as discussed above, the Fund is a non-diversified investment
company under the 1940 Act, whereas Pacific-European 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 Pacific-European 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 "Risk Factors" in Pacific-European
Fund's Prospectus.

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.

9
<PAGE>
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 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 but 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 higher and total return lower.

The Board carefully considered the compatibility of the investment
objectives, policies, restrictions and portfolios of the Fund and
Pacific-European Fund. In particular the Board focused on the

10
<PAGE>
differences in the investment policies of the Fund and Pacific-European 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 the Pacific
Basin whereas Pacific-European Fund invests primarily in the Pacific Basin as
well as Europe (including Eastern Europe). In considering the suitability of
Pacific-European Fund for shareholders of the Fund given Pacific-European Fund's
broader geographic focus, the Board evaluated information provided by Piper
Capital that indicated that a significant percentage of shareholders of the Fund
were also shareholders of the Hercules European Value Fund and therefore were
investors who sought exposure to the Pacific Basin and Europe. In addition, the
Board considered information provided by Piper Capital that over 60% of
Pacific-European Fund's assets were currently invested in the Pacific Basin.

The Board also considered the comparative expenses currently incurred in the
operation of the Fund and Pacific-European Fund, the terms and conditions of the
proposed Reorganization, the comparative performance of the funds, Piper
Capital's undertaking to pay all 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 continue after the Fund's fiscal year
ending June 30, 1996. Absent such waivers and reimbursements, expenses would
have been 2.53%. By contrast, the expense ratio for Pacific-European Fund
for its fiscal year ended February 28, 1995 was 1.76%, giving effect to the
Distributor's voluntary limitation. Absent such limitation expenses would
have been 1.98%. The Distributor has voluntarily agreed to limit the 12b-1
fee to an annual rate of 0.32% of Pacific-European Fund's average daily not
assets for its current fiscal year. (Advisory fees for Pacific-European Fund
could, in the future, be more or less than that incurred during its last
fiscal year because the fee is subject to a performance based adjustment
upward or downward of up to 0.25%.) In addition, Pacific-European Fund's
advisory fee scales down as asset levels increase, because Pacific-European
Fund is much larger than the Fund, and there is the opportunity to benefit
from economies of scale, greater investment diversification and facilitation
of portfolio management. In fact, subsequent to the Reorganization (and the
proposed reorganization of Hercules European Value Fund into
Pacific-European Fund, as discussed above) advisory fees for
Pacific-European Fund may be reduced, as a percentage of net assets, due to
increased net assets of the combined funds.

2. Shareholders of the Fund will be able to acquire shares of
Pacific-European 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.

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 Fund's shareholders would retain the capabilities and resources
of EFM, an experienced international investment manager and sub-adviser to
Pacific-European Fund.

5. The Reorganization would enable the Fund's shareholders to enjoy an
expanded range of mutual fund investment options. The Piper Funds complex,
of which Pacific-European Fund is a part, includes 15 mutual fund portfolios
that will be available for exchange by Fund shareholders who receive
Pacific-European Fund Shares in the Reorganization.

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<PAGE>
6. 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 Pacific-European Fund, including all of the
Independent Directors, has also determined that the Reorganization is in the
best interests of Pacific-European Fund and that the interests of existing
shareholders of Pacific-European Fund will not be diluted as a result thereof.
The transaction will enable Pacific-European 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 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 Pacific-European 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 Pacific-European
Fund on the Closing Date in exchange for the assumption by Pacific-European 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 Pacific-European Fund Shares;
(ii) such Pacific-European 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 would involve the Fund holding all of its assets
as shares of Pacific-European 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 Pacific-European Fund Shares to be delivered to the Fund will
be determined by dividing the value of the Fund assets acquired by
Pacific-European Fund (net of stated liabilities assumed by Pacific-European
Fund) by the net asset value of a Pacific-European Fund Share; these values will
be calculated as of the close of business of the New York Stock Exchange on the
fifth business day following the receipt of the requisite approval by the
shareholders of the Fund of the Plan or at such other time as the Fund and
Pacific-European Fund may agree (the "Valuation Date"). The net asset value of a
Pacific-European Fund Share shall be the net asset value per share computed on
the Valuation Date, using the valuation procedures set forth in Pacific-European
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 Pacific-European Fund would be $100,000. If
the net asset value per share of Pacific-European Fund were $10 per share at the
close of business on the

12
<PAGE>
Valuation Date, the number of shares to be issued would be 10,000 ($100,000
DIVIDED BY $10). These 10,000 shares of Pacific-European 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.
Pacific-European Fund will cause its transfer agent to credit and confirm an
appropriate number of Pacific-European Fund Shares to each Fund shareholder.
Neither the Fund nor Pacific-European 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 Pacific-European 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 Pacific-European 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 Pacific-
European 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 Pacific-European 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
Pacific-European Fund at net asset value and without recognition of taxable gain
or loss for Federal income tax purposes. However, if the Fund recognizes net
gain from the sale of securities prior to the Closing Date, such gain, to the
extent not offset by capital loss carry-forwards, will be distributed to
shareholders prior to the Closing Date and will be taxable to shareholders as
capital gain. See "Tax Aspects of the Reorganization" below.

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 Pacific-European Fund.

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 Global 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
Pacific-European Fund Shares received in the transaction that would reduce the
Fund shareholders' ownership of Pacific-European 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 Fund shares as of the same date. The Company and
Piper Global have each further represented that, as of the Closing Date, the
Fund and

13
<PAGE>
Pacific-European Fund will qualify as regulated investment companies. In
addition, Piper Global has further represented that Pacific-European Fund will
qualify as a regulated investment company for its current fiscal year.

As a condition to the Reorganization, the Fund and Pacific-European 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
Global:

1. The transfer of substantially all of the Fund's assets in exchange
for Pacific-European Fund Shares and the assumption by Pacific-European Fund
of certain stated liabilities of the Fund followed by the distribution by
the Fund of Pacific-European 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 Pacific-European
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 Pacific-European Fund upon the
receipt of the assets of the Fund solely in exchange for Pacific-European
Fund Shares and the assumption by Pacific-European 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 Pacific-European Fund in exchange for
Pacific-European Fund Shares and the assumption by Pacific-European Fund of
the stated liabilities or upon the distribution of Pacific-European 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 Pacific-European Fund Shares;

5. The aggregate tax basis for Pacific-European 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 Pacific-European 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 Pacific-European
Fund will be the same as the tax basis of such assets to the Fund
immediately prior to the Reorganization; and

8. The holding period of the assets of the Fund in the hands of
Pacific-European 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
Pacific-European 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 ADVISORS 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

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<PAGE>
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. Accordingly, in the event that any shareholder elects to
exercise dissenters' rights under Minnesota law, the Company intends to submit
this question to a court of competent jurisdiction. In such event, a dissenting
shareholder would not receive any payment until disposition of any such court
proceeding. 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 Pacific-European Fund to be issued pursuant to the Plan will, when
issued, be fully paid and non-assessable by Pacific-European Fund and
transferable without restrictions and will have no preemptive or conversion
rights.

CAPITALIZATION TABLE (UNAUDITED)

The following table sets forth the capitalization of Pacific-European Fund
and the Fund as of February 29, 1996 and on a pro forma combined basis as if the
Reorganization (and the proposed reorganization of Hercules European Value Fund
into Pacific-European Fund, as discussed above) had occurred on that date:

<TABLE>
<CAPTION>
SHARES
NET ASSETS OUTSTANDING NET ASSET
(000S (000S VALUE
OMITTED) OMITTED) PER SHARE
------------- ------------- -----------
<S> <C> <C> <C>
The Fund..................................................... $ 26,429 2,627 $ 10.06
Pacific-European Fund........................................ $ 163,312 11,783 $ 13.86
Pro Forma Combined........................................... $ 203,612 14,691 $ 13.86
</TABLE>

COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVES AND POLICIES

The Fund and Pacific-European Fund have a similar investment objective. The
Fund's objectives are long-term capital appreciation and, to a lesser extent,
current income. The investment objective of Pacific-European Fund is long-term
capital appreciation. Current income is incidental to this objective. The
investment objective of the Fund is fundamental and may not be changed without
shareholder approval. The investment objective of Pacific-European Fund is
non-fundamental and, accordingly, it may be changed without shareholder
approval. If there is a change in investment objective of Pacific-European Fund,
shareholders would need to consider whether Pacific-European Fund remains an
appropriate investment in light of their then current financial position and
needs.

The Fund seeks to achieve its investment objective by investing, under
normal circumstances, at least 65% of its total assets in the securities of
issuers located in the Pacific Basin. Emphasis is placed on investment in equity
securities; however, the Fund may invest without limit in investment grade debt
securities of governmental and private issuers (including notes, debentures,
Brady Bonds, mortgage-backed securities and asset-backed securities).
Pacific-European Fund seeks to achieve its investment objective by investing,
under normal circumstances, at least 65% of its total assets in Common Stock of
companies in the Pacific Basin or in Europe (including Eastern Europe). "Common
Stock" means common stock and foreign equity securities which are substantially
similar to common stock in the U.S. and does not include preferred stock or
convertible debt securities). Up to 25% of

15
<PAGE>
Pacific-European Fund's total assets may be invested in other areas of the world
to the extent significant opportunities for long-term capital appreciation
outside of the Pacific Basin and Europe become available. Pacific-European Fund
invests in debt securities solely for temporary defensive purposes. As discussed
above, the principal difference between the two funds is that Pacific-European
Fund invests in countries that comprise the Pacific Basin (namely, Malaysia,
Pakistan, Sri Lanka, the Philippines, Singapore, South Korea, Thailand, India,
Indonesia, Hong Kong, Japan, Taiwan, Australia and New Zealand) and Europe
(including Eastern Europe), whereas the Fund invests primarily in the Pacific
Basin.

As of February 29, 1996, approximately 67% of Pacific-European Fund's
investments were in companies in the Pacific Basin (including Japan) and
approximately 28% were in companies in Europe. While Pacific-European Fund has
no specific policy or restriction on the allocation of its funds between Europe
and the Pacific Basin, Piper Capital and EFM believe that the opportunities for
long-term capital appreciation in the Pacific Basin are generally superior to
those presently available in the economically more mature areas of the world.
The relative emphasis of Pacific-European Fund's investments between the Pacific
Basin and Europe may change over time.

Both the Fund and Pacific-European Fund may invest part or all of their
respective 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.

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. Pacific-European Fund may, for hedging
purposes only, buy or sell put and call options on the securities in which it
may invest and enter into futures contracts and options on futures contracts
based on financial indices including any index of securities in which the Fund
may invest. Both funds may buy or sell options, futures or options on futures
that are traded on U.S. or foreign exchanges or over-the-counter. In addition,
both funds may 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.

Both the Fund and Pacific-European Fund may purchase securities on a
when-issued or delayed delivery basis and may purchase or sell securities on a
forward commitment basis. Both funds may invest in warrants up to 5% of its net
assets. Included within this amount, but not to exceed 2% of the value of its
net assets, may be warrants that are not listed on the New York or American
Stock Exchange. Warrants are, in effect, options to purchase equity securities
at a specific price, during a specific period, and have no voting or other
rights with respect to the corporation issuing them and pay no dividends. Both
funds may enter into repurchase agreements subject to certain procedures
designed to minimize risks associated with such agreements. Although both funds
may enter into reverse repurchase agreements, neither Fund has, nor does
Pacific-European Fund have any current intention of entering into such
agreements in the future. The Fund may invest in zero coupon bonds, deferred
interest bonds and PIK Bonds; Pacific-European Fund does not invest in these
types of instruments.

In addition, the Fund is a non-diversified investment company within the
meaning of the 1940 Act, whereas Pacific-European 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

16
<PAGE>
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 Pacific-European 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
Objective and Policies" in each fund's respective Prospectus and "Investment
Objectives and Policies" in the Fund's Statement of Additional Information and
"Investment Objective, Policies and Restrictions" in Pacific-European Fund's
Statement of Additional Information.

INVESTMENT RESTRICTIONS

The investment restrictions adopted by the Fund and Pacific-European Fund as
fundamental policies appear under the caption "Investment Restrictions" in the
Prospectus and Statement of Additional Information of the Fund and "Special
Investment Methods -- Investment Restrictions" in Pacific-European Fund's
Prospectus and "Investment Objective, Policies and Restrictions" in Pacific-
European Fund's Statement of Additional Information. A fundamental investment
restriction cannot be changed without the vote of a majority of the outstanding
voting securities of a fund, as defined in the 1940 Act. The material
differences are as follows: As a diversified investment company, Pacific-
European Fund may not, as a matter of fundamental policy, with respect to 75% of
its total asset, 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. While
both funds are prohibited from making short sales, the Fund is subject to such
limitation on a non-fundamental basis. As a fundamental restriction, both the
Fund and Pacific-European Fund may not purchase real estate or interests therein
other than securities backed by mortgages and similar investments; however, the
Fund may purchase readily marketable interests in real estate investment trusts
or readily marketable securities of companies that invest in real estate. In
addition, the Fund has a fundamental restriction prohibiting the purchase of
real estate limited partnership interests whereas Pacific-European Fund is
subject to the same limitation on a non-fundamental basis.

INTEREST OF CERTAIN PERSONS

The following persons affiliated with the Fund and Pacific-European Fund
receive payments from the Fund and Pacific-European 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
Pacific-European Fund only, the Distributor provides certain transfer agent and
dividend disbursing agent services for shareholder accounts held at the
Distributor.

ADDITIONAL INFORMATION ABOUT THE FUND
AND PACIFIC-EUROPEAN 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 Pacific-European Fund, see "Introduction,"
"Management," Investment Objective and Policies" and "General Information" in
its prospectus.

FINANCIAL INFORMATION

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

17
<PAGE>
MANAGEMENT

For information about Pacific-European 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 Pacific-European 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 Pacific-European 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 Pacific-European 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
Pacific-European Fund's prospectus.

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE

For management's discussion of Pacific-European Fund's performance as of its
fiscal year ended February 29, 1996, see Piper Global'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 Pacific-European 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 Pacific-European
Fund will be passed upon by Dorsey & Whitney LLP, Minneapolis, Minnesota.

AVAILABLE INFORMATION

ADDITIONAL INFORMATION ABOUT THE FUND AND PACIFIC-EUROPEAN FUND IS
AVAILABLE, AS APPLICABLE, IN THE FOLLOWING DOCUMENTS WHICH ARE INCORPORATED
HEREIN BY REFERENCE: (I) PACIFIC-EUROPEAN FUND'S PROSPECTUS DATED APRIL 28,
1995, ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS, WHICH PROSPECTUS FORMS A PART
OF POST-EFFECTIVE AMENDMENT NO. 4 TO PIPER GLOBAL'S REGISTRATION STATEMENT ON
FORM N-1A (FILE NOS. 33-33534; 811-06046); (II) PACIFIC-EUROPEAN FUND'S
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 28, 1995; (III) PIPER GLOBAL'S
ANNUAL REPORT FOR ITS FISCAL YEAR ENDED FEBRUARY 29, 1996 ACCOMPANYING THIS
PROXY

18
<PAGE>
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 Global 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 Pacific-European 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 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 20, 1996

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EXHIBIT A

AGREEMENT AND PLAN OF REORGANIZATION
HERCULES PACIFIC BASIN VALUE FUND AND PACIFIC-EUROPEAN GROWTH FUND

THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made as of this
day of , 1996, by and between Hercules Funds Inc. ("Hercules
Company"), on behalf of its series Hercules Pacific Basin Value Fund ("Hercules
Fund"), and Piper Global Funds Inc. ("Piper Company"), on behalf of its series
Pacific-European Growth 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

1.1Subject 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

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Piper Fund with respect to such investments (including, 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.

1.3Hercules 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").

1.4In 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.

1.5On 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.

1.6Ownership 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.

1.7Any 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.

1.8Any 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.

1.9Hercules 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

2.1The "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.

2.2The 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.

2.3The 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.

2.4All 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

3.1The 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.

3.2Portfolio 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."

3.3In 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.

3.4At 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

4.1Except 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.

4.2Piper 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.

4.3Hercules 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.

4.4Subject 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.

4.5As 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)).

4.6Piper 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

5.1Piper 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;

(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

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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.

5.2Hercules 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:

6.1All 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.

6.2Piper 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

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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.

6.3Hercules 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.

6.4As 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:

7.1All 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.

7.2Hercules 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.

7.3Hercules 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.

A-9
<PAGE>
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 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

A-10
<PAGE>
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.

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

A-11
<PAGE>
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.

(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

A-12
<PAGE>
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.

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 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.

A-13
<PAGE>
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 Pacific Basin Value Fund
By: __________________________________

Name:
Title

PIPER GLOBAL FUNDS INC., on behalf of
Pacific-European Growth Fund
By: __________________________________

Name:
Title

A-14
<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 Pacific Basin Value Fund ("Hercules Fund"), a series of Hercules
Company, that the assets belonging to such series, subject to its stated
liabilities, be sold to Pacific-European Growth Fund ("Piper Fund"), a series of
Piper Global 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
5C immediately following Article 5 thereof:

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

"HERCULES COMPANY" means this corporation.

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

"ACQUIRED FUND" means Hercules Company's Hercules Pacific Basin Value
Fund.

"ACQUIRING FUND" means Piper Company's Pacific-European Growth 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 shares, all pursuant to the
Agreement and Plan of Reorganization. For purposes of the foregoing, the terms
<PAGE>
"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 the Series A Common Shares of Hercules Company.

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

PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF
PIPER GLOBAL FUNDS INC.
Supplement dated January 25, 1996 to
Prospectus dated April 28, 1995

The section of the prospectus on page 24 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 Fund 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).
PJPEX-05A
<PAGE>
PROSPECTUS DATED APRIL 28, 1995

PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF PIPER GLOBAL FUNDS INC.
PIPER JAFFRAY TOWER
222 SOUTH NINTH STREET, MINNEAPOLIS, MINNESOTA 55402-3804
(800) 866-7778 (TOLL FREE)

Pacific-European Growth Fund (the "Fund") is a diversified series of Piper
Global Funds Inc. ("Piper Global"), an open-end management investment company
the shares of which can be offered in more than one series. The Fund is the only
series of Piper Global currently outstanding. The investment objective of the
Fund is long-term capital appreciation. Current income is incidental to this
objective. The Fund seeks to achieve its investment objective through
investments primarily in Common Stock (as herein defined) of companies in the
Pacific Basin or in Europe (including Eastern Europe). Up to 25% of the Fund's
total assets may be invested in other areas of the world to the extent
significant opportunities for long-term capital appreciation outside of the
Pacific Basin and Europe become available. The Fund does not invest in Common
Stock of U.S. companies. No assurance can be given that the Fund's investment
objective will be achieved.

Investment in the Fund involves certain risks and requires consideration of
factors not typically associated with investment in securities of U.S. issuers.
See "Risk Factors."

This Prospectus concisely describes the information about the Fund that you
should know before investing. Please read the Prospectus carefully before
investing and retain it for future reference.

A Statement of Additional Information about the Fund dated April 28, 1995 is
available free of charge. Write to the Fund 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

Pacific-European Growth Fund (the "Fund") is a diversified series of Piper
Global Funds Inc. ("Piper Global"), an open-end management investment company,
or mutual fund, the shares of which can be offered in more than one series. Each
series in effect represents a separate fund with its own investment objectives
and policies. The Fund is the only series of Piper Global currently outstanding.
Piper Global was organized under the laws of the State of Minnesota in 1990 as a
closed-end investment company and converted to an open-end investment company on
August 31, 1992. The investment objective of the Fund is long-term capital
appreciation. Current income is incidental to this objective.

THE INVESTMENT ADVISER

The Fund is managed by Piper Capital Management Incorporated (the
"Adviser"), a wholly owned subsidiary of Piper Jaffray Companies Inc. The Fund
pays the Adviser a basic management fee calculated and paid monthly at an annual
rate of 1.00% on net assets up to $100 million, with the fee scaled downward as
assets increase in size (the "Basic Fee"). The Basic Fee (as a percentage of net
assets) is higher than that paid by most other mutual funds. The Basic Fee may
be increased or decreased by up to a maximum, on an annual basis, of .25% of the
Fund's average daily net assets depending upon the extent to which the Fund
outperforms or underperforms the Morgan Stanley Capital International European,
Australian and Far East Index (the "EAFE-SM- Index"). See
"Management--Investment Adviser."

THE SUB-ADVISER

Edinburgh Fund Managers plc acts as the Fund's sub-adviser (the
"Sub-Adviser") under an agreement with the Adviser. The Sub-Adviser is a public
limited company that was incorporated in 1969. It is a majority-owned subsidiary
of The British Investment Trust PLC, a Scottish closed-end investment company
founded in 1889, for which the Sub-Adviser serves as investment manager and
adviser. For its services, the Sub-Adviser is paid a fee by the Adviser equal to
65% of the Basic Fee plus or minus 90% of the performance fee adjustment. See
"Management--Sub-Adviser."

THE DISTRIBUTOR

Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor"), a wholly owned
subsidiary of Piper Jaffray Companies Inc. and an affiliate of the Adviser,
serves as Distributor of the Fund's shares.

OFFERING PRICE

Shares of the Fund 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. FUND SHARES ARE BEING OFFERED TO THE PUBLIC WITHOUT AN INITIAL
OR DEFERRED SALES CHARGE THROUGH JUNE 30, 1995. 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 the Fund is $250. There is no minimum for
subsequent investments. See "How to Purchase Shares--Minimum Investments."

EXCHANGES

You may exchange your shares for shares of any other mutual fund managed by
the Adviser which is 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."

2
<PAGE>
REDEMPTION PRICE

Shares of the 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 Shares
Charge." The Fund reserves the right, upon 30 days written notice, to redeem an
account 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 the Fund is subject to certain risks, as set forth in
detail under "Investment Objective and Policies," "Special Investment Methods"
and "Risk Factors." As with other mutual funds, there can be no assurance that
the Fund will achieve its objective. Because the Fund invests in foreign
securities, an investment in the Fund requires consideration of certain risk
factors that are not typically associated with investing in securities of U.S.
companies. These factors include risks relating to adverse currency
fluctuations, potential political and economic instability of certain countries,
limited liquidity and volatile prices of certain securities of non-U.S.
companies, and foreign taxation. In addition, the Fund may engage in the
following investment practices which involve certain special risks: entering
into currency exchange transactions, forward foreign currency exchange
transactions and foreign currency futures and options, entering into options
transactions on securities in which the Fund may invest, the use of repurchase
agreements, the lending of portfolio securities, entering into futures contracts
and options on futures contracts, the purchase of securities on a "when-issued"
basis and the purchase or sale of securities on a "forward commitment" basis.
These techniques involve certain special risks and may increase the volatility
of the Fund's net asset value. The Fund may invest in illiquid securities which
will involve greater risk than investments in other securities and may increase
Fund expenses.

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 Fund should be directed to the Fund at the telephone number set
forth on the cover page of this Prospectus.

3
<PAGE>
FUND EXPENSES

<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price).................................................. 4.00%
Exchange Fee*..................................................... $0
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fee.................................................... 1.03%
Rule 12b-1 Fees (after voluntary limitation)...................... .32%
Other Expenses.................................................... .45%
-----
Total Fund Operating Expenses (after voluntary limitation).... 1.80%
</TABLE>

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

EXAMPLE

You would pay the following expenses on a $1,000 investment assuming a 5%
annual return and redemption at the end of each time period:

<TABLE>
<S> <C>
1 year............. $ 58
3 years............ $ 94
5 years............ $134
10 years............ $243
</TABLE>

The purpose of the above Fund Expenses table is to assist you in
understanding the various costs and expenses that investors in the Fund 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 LESSER THAN THOSE SHOWN.

The information set forth in the table is based on actual expenses incurred
by the Fund during the fiscal year ended February 28, 1995, except that the Rule
12b-1 fees and total fund operating expenses have been restated to reflect a
change in the Distributor's voluntary Rule 12b-1 fee limit for fiscal 1996. The
Fund has adopted a Rule 12b-1 Plan under which the Fund is required to reimburse
the Distributor for shareholder servicing costs and distribution costs in an
amount not to exceed, on an annualized basis, .50% of the average daily net
assets of the Fund. Of such amount, the Distributor may be paid shareholder
servicing fees of up to .25% of the average daily net assets of the Fund to
cover shareholder servicing costs, and distribution fees of a like amount to
cover distribution costs. The Distributor has voluntarily agreed to limit the
fee to an annual rate of .32% of the Fund's average daily net assets. This
voluntary limitation may be revised or terminated at any time after fiscal year
end. The Adviser may or may not assume additional expenses of the Fund from time
to time, in its discretion, while retaining the ability to be reimbursed by the
Fund for expenses assumed during a fiscal year prior to the end of such year.
The foregoing policy will have the effect of lowering the Fund's overall
expenses ratio and increasing yield to investors when such amounts are assumed
or the inverse when such amounts are reimbursed. During the fiscal year ended
February 28, 1995, the Distributor voluntarily limited Rule 12b-1 fees to .28%
of average daily net assets, resulting in total operating expenses equal to
1.76% of average daily net assets. Absent any Rule 12b-1 fee limitation, total
Fund operating expenses for the fiscal year ended February 28, 1995, would have
been 1.98% of average daily net assets. The management fees for fiscal 1996 may
be more or less than those set forth in the table to the extent that the Fund
outperforms or underperforms the EAFE Index. See "Management-- Investment
Adviser." As a result of the Fund's reimbursement of its distribution costs,
which payments are considered asset-based sales charges, long-term shareholders
of the 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."

FINANCIAL HIGHLIGHTS

The information presented in this section relates to fiscal periods ended
both before and after the conversion of Piper Global from a closed-end
investment company to an open-end investment company on August 31, 1992. The
following financial highlights have been audited by KPMG Peat Marwick LLP,
independent auditors, whose report thereon appears in the Statement of
Additional Information. This

4
<PAGE>
information should be read in conjunction with the financial statements and the
related notes thereto appearing in the Statement of Additional Information. The
table sets forth for the Fund per-share data for a share of capital stock
outstanding throughout each fiscal period and selected information for such
periods.

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28, PERIOD FROM
----------------------------------------- 4/27/90*
1995 1994 1993 1992 TO 2/28/91
------- ------- ------ ------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 15.44 $ 10.81 $10.53 $10.18 $10.97
------- ------- ------ ------ -----------
Operations:
Investment income (loss)--net................... (0.03) (0.03) -- 0.06 0.20
Net realized and unrealized gains (losses) on
investments................................... (1.63) 4.72 0.28 0.37 (0.79)
------- ------- ------ ------ -----------
Total from operations......................... (1.66) 4.69 0.28 0.43 (0.59)
------- ------- ------ ------ -----------
Distributions from net investment income.......... -- -- -- (0.06) (0.20)
Return of capital distributions................... -- -- -- (0.02) --
Distributions from net realized gains............. (1.05) (0.06) -- -- --
------- ------- ------ ------ -----------
Total distributions........................... (1.05) (0.06) -- (0.08) (0.20)
------- ------- ------ ------ -----------
Net asset value, end of period.................... $ 12.73 $ 15.44 $10.81 $10.53 $10.18
------- ------- ------ ------ -----------
------- ------- ------ ------ -----------
Total return +.................................... (11.09)% 43.45% 2.66% 4.44% (5.03)%
Net assets, end of period (000s omitted).......... 154,393 165,655 59,791 35,680 34,492
Ratio of expenses to average daily net assets
++............................................... 1.76% 1.81% 2.25% 1.92% 1.77%**
Ratio of net investment income (loss) to average
daily net assets ++.............................. (0.19)% (0.29)% 0.03% 0.60% 2.36%**
Portfolio turnover rate (excluding short-term
securities)...................................... 57% 52% 59% 69% 10%
</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 1995 and 1994, the Fund's Rule 12b-1 fee was voluntarily limited by
the Distributor to .28% and .30%, respectively, of average daily net assets. Had
the maximum fee of .50% been in effect, the ratios of expenses and net
investment income (loss) would have been 1.98%/(.41%) and 2.01%/(.49%),
respectively. During 1993, various fees and expenses were voluntarily limited or
absorbed by the Adviser and the Distributor. Had the Fund paid all 1993
expenses, the ratios of expenses and net investment income (loss) to average
daily net assets would have been 2.59% and (.31)%. Included in 1993 gross
expenses were expenses of approximately .32% of average daily net assets that
related to converting to an open-end investment company.

Further performance information pertaining to the Fund is contained in the
annual report to shareholders which may be obtained without charge by calling or
writing the Fund at the address and telephone number listed on the cover.

INVESTMENT OBJECTIVE AND POLICIES

GENERAL

The Fund's investment objective is long-term capital appreciation. Current
income is incidental to this objective. The Fund seeks to achieve its investment
objective through investments primarily (under normal circumstances, at least
65% of its total assets) in Common Stock of companies in the Pacific Basin or in
Europe (including Eastern Europe). "Common Stock" means common stock and foreign
equity securities which are substantially similar to common stock in the U.S.
and does not include preferred stock or convertible debt securities (such
foreign equity securities may have voting and distribution rights which differ
from those of common stock in the U.S.). The Pacific Basin is generally defined
as those countries bordering the Pacific Ocean. The Fund may invest in the
following countries within the region: Malaysia, Pakistan, Sri Lanka, the
Philippines, Singapore, South Korea, Thailand, India, Indonesia, Hong Kong,
Japan, Taiwan, Australia and New Zealand. In addition, to the extent that
suitable investment

5
<PAGE>
opportunities become available, the Fund may invest in any other country within
the region, including, but not limited to, China. For purposes of this
Prospectus, unless otherwise indicated, Europe consists of Austria, Belgium,
Denmark, Germany, Finland, France, Greece, the Republic of Ireland, Italy, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey and the United
Kingdom (together, "Western Europe"), plus Albania, Bulgaria, the Czech and
Slovak Republics, Hungary, Poland, Romania, the successor states to the former
Yugoslavia, and the Commonwealth of Independent States (formerly, the Union of
Soviet Socialist Republics) (together, "Eastern Europe"). As the securities
markets of additional continental European countries develop, such countries may
be considered part of the Fund's definition of Europe and appropriate countries
for investment by the Fund. For a discussion of the economies of the Pacific
Basin and Europe, see "Investment Objective, Policies and
Restrictions--Investment Background" in the Statement of Additional Information.

As of March 31, 1995, approximately 64% of the Fund's investments were in
companies in the Pacific Basin (including Japan) and approximately 26% were in
companies in Europe. While the Fund has no specific policy or restriction on the
allocation of its funds between Europe and the Pacific Basin, the Adviser and
the Sub-Adviser (collectively, "Management") believe that the opportunities for
long-term capital appreciation in the Pacific Basin are generally superior to
those presently available in the economically more mature areas of the world.
The relative emphasis of the Fund's investments between the Pacific Basin and
Europe may change over time to the extent Management identifies greater
investment opportunities in Europe as a result of more attractive values, recent
developments in Eastern Europe, the removal of most intra-European trade
barriers as a result of the adoption of the Single European Act in 1992 or other
factors. In normal market conditions, the Fund's investments will be allocated
among at least three different countries in the Pacific Basin and/or Europe. For
additional information regarding the allocation of Fund investments, see
"Investment Objective, Policies and Restrictions--Investment
Background--Allocation of Investments Between the Pacific Basin and Europe" in
the Statement of Additional Information.

A company is considered to be in the Pacific Basin or in Europe, as the case
may be, if (a) it is organized under the laws of a country within the Pacific
Basin or in Europe (including the United Kingdom); (b) at least 50% of its
assets are located in the Pacific Basin or in Europe; (c) it derives at least
50% of its total revenues from goods produced, sales made, services performed or
investment in companies in the Pacific Basin or in Europe; or (d) its securities
are traded principally on stock exchanges in a Pacific Basin or European
country. The Fund's definition of companies in the Pacific Basin or in Europe
may include companies that reflect economic and market forces applicable to
other regions as well as the Pacific Basin or Europe. Nevertheless, Management
believes that investment in such companies is appropriate in light of the Fund's
investment objective because Management selects among such companies those
which, in its view, have sufficiently strong exposure to economic and market
forces in the Pacific Basin or in Europe, as the case may be, such that the
value of the securities of such companies will tend to reflect Pacific Basin or
European developments to a greater extent than developments in other regions.
With respect to the investment by the Fund in companies that receive 50% or more
of their revenues from investments in companies located in the Pacific Basin or
Europe (e.g., investment companies and trusts), the Fund believes that
securities of such companies will similarly reflect the development of the
region in which it invests and, in addition, the purchase of such securities is
currently one of the few mechanisms through which the Fund may invest in
securities of South Korean, Taiwanese and Indian companies.

Up to 25% of the Fund's total assets may be invested in other areas of the
world to the extent significant opportunities for long-term capital appreciation
outside of the Pacific Basin and Europe become available. The Fund currently
invests a portion of its assets in certain countries in Latin America, including
Mexico, Brazil, Argentina, Chile, Peru, Venezuela, Colombia and Ecuador. The
Fund may invest in other Latin American countries as opportunities develop. As
of March 31, 1995, approximately 2% of the Fund's investments were in companies
in Latin America. The Fund does not invest in Common Stock of U.S. companies. No
assurance can be given that the Fund's investment objective will be achieved.

The investment objective of the Fund is not fundamental and may be changed
without shareholder approval. If there is a change in investment objective,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then current financial position and needs.

6
<PAGE>
TYPES OF SECURITIES IN WHICH THE FUND MAY INVEST

The Fund invests primarily in Common Stock. In addition, up to 10% of the
Fund's assets may be invested in rights, options or warrants to purchase Common
Stock. In addition to investing directly in Common Stock, the Fund may invest in
American Depository Receipts ("ADRs") and European Depository Receipts ("EDRs").
Generally, ADRs in registered form are U.S. dollar denominated securities
designed for use in the U.S. securities markets, which represent and may be
converted into the underlying foreign security. EDRs are typically issued in
bearer form and are designed for use in the European securities markets. The
Fund also may purchase shares of investment companies or trusts which invest
principally in securities in which the Fund is authorized to invest. The
purchase of investment company stock currently is one of the few mechanisms
through which the Fund may invest in securities of Indian and Taiwanese
companies. For a discussion of the risks of investing in investment companies,
see "Risk Factors-- Investment and Repatriation Restrictions."

For temporary defensive purposes, the Fund may invest without limitation in
U.S. dollar denominated or foreign currency denominated cash or in high quality
debt securities with remaining maturities of one year or less. Such securities
may include commercial paper, certificates of deposit, bankers' acceptances and
securities issued by the U.S. or a foreign government, their agencies or
instrumentalities. All securities in which the Fund invests for defensive
purposes (other than securities issued or guaranteed by the U.S. or a foreign
government, their agencies or instrumentalities) must be rated AA or better by
Standard & Poor's Corporation or be of comparable quality as determined by the
Adviser. For an explanation of ratings, see Appendix A to the Statement of
Additional Information.

SPECIAL INVESTMENT METHODS

The following discussion describes some of the investment management
practices that the Fund may employ from time to time to facilitate portfolio
management and mitigate risk.

FOREIGN CURRENCY TRANSACTIONS

The Fund engages in currency exchange transactions in connection with the
purchase and sale of its investments. Currency exchange transactions are
necessary to enable the Fund to purchase securities denominated in a foreign
currency and to convert interest and dividend payments or sales proceeds paid in
a foreign currency into U.S. dollars or into another currency. In addition, the
Fund may engage in forward foreign currency exchange transactions and foreign
currency futures and options transactions to protect against uncertainty with
respect to future currency exchange rates. Forward currency exchange and futures
and options transactions are used only for hedging and not for speculation. The
Fund conducts its currency exchange transactions either on a spot (cash) basis
at the rate prevailing in the currency exchange market or through entering into
forward or futures contracts to purchase or sell foreign currencies.

The Fund may engage in "transaction hedging" to protect against a change in
the foreign currency exchange rate between the date on which the Fund contracts
to purchase or sell the security and the settlement date or to "lock in" the
U.S. dollar equivalent (or other foreign currency equivalent to the extent
needed for purposes of purchasing securities) of a dividend or interest payment
in a foreign currency. For that purpose, the Fund may purchase or sell a foreign
currency on a spot (or cash) basis at the prevailing spot rate in connection
with the settlement of transactions in portfolio securities denominated in that
foreign currency.

If conditions warrant, the Fund may also enter into contracts to purchase or
sell foreign currencies at a future date ("forward contracts") and purchase or
sell foreign currency futures contracts as a hedge against changes in foreign
currency exchange rates between the trade and settlement dates on particular
transactions and not for speculation. A foreign currency forward contract is a
negotiated agreement to exchange currency at a future time at a rate or rates
that may be higher or lower than the spot rate. Foreign currency futures
contracts are standardized exchange-traded contracts and have margin
requirements.

For transaction hedging purposes, the Fund may also purchase exchange-listed
and over-the-counter call and put options on foreign currency futures contracts
and on foreign currencies. A put option on a

7
<PAGE>
futures contract gives the Fund the right to assume a short position in the
futures contract until expiration of the option. A put option on currency gives
the Fund the right to sell a currency at an exercise price until the expiration
of the option. A call option on a futures contract gives the Fund the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option.

The Fund may engage in "position hedging" to protect against a decline in
the value relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of currency
for securities which the Fund intends to buy, when it holds cash reserves and
short-term investments). For position hedging purposes, the Fund may purchase or
sell foreign currency futures contracts and foreign currency forward contracts,
and may purchase put or call options on foreign currency futures contracts and
in foreign currencies on exchanges or over-the-counter markets. In connection
with position hedging, the Fund may also purchase or sell foreign currency on a
spot basis.

Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. In addition, hedging transactions involve costs and may result in
losses. The Fund may write covered call options on foreign currencies to offset
some of the costs of hedging those currencies. The Fund will engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of the Adviser, the pricing mechanism
and liquidity are satisfactory and the participants are responsible parties
likely to meet their contractual obligations. The Fund's ability to engage in
hedging and related option transactions may be limited by tax considerations.
See "Taxation--Consequences of Certain Fund Investments" in the Statement of
Additional Information.

For additional information regarding foreign currency transactions, see
"Investment Objective, Policies and Restrictions--Foreign Currency Transactions"
in the Statement of Additional Information.

HEDGING

The Fund may engage in various futures and put and call transactions
(collectively, "Hedging Transactions"). Hedging Transactions may be used to
attempt to protect against possible declines in the market value of the Fund's
portfolio, to protect the Fund's unrealized gains in the value of its portfolio
securities, to facilitate the sale of such securities for investment purposes or
to establish a position in the securities markets as a temporary substitute for
purchasing particular securities. Any or all of these techniques may be used at
any time. There is no overall limitation on the percentage of the Fund's
portfolio securities which may be subject to a hedge position. There is no
particular strategy that requires use of one technique rather than another. Use
of any Hedging Transaction is a function of market conditions. The Hedging
Transactions that the Fund may use are described below. Additional Hedging
Transactions may be used by the Fund in the future as they are developed to the
extent deemed appropriate by the Board of Directors of the Fund.

OPTIONS ON SECURITIES. In seeking to reduce fluctuations in net asset
value, the Fund may write (i.e., sell), covered put and call options and
purchase put and call options on the securities in which it may invest. Such
options are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets.

A put option gives the buyer of such option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer of the option on
or before a fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a fixed date, at
a predetermined price. A call option written by the Fund is "covered" if the
Fund owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Fund holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or

8
<PAGE>
less than the exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is maintained by the Fund
in cash and high grade liquid debt securities in a segregated account with its
custodian. A put option written by the Fund is "covered" if the Fund maintains
cash and high grade liquid debt securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security and in the same principal amount as the put written where the
exercise price of the put held is equal to or greater than the exercise price of
the put written. The Fund will not write puts if, as a result, more than 50% of
the Fund's assets would be required to be segregated. The premium paid by the
purchaser of an option will reflect, among other things, the relationship of the
exercise price to the market price and volatility of the underlying security,
the remaining term of the option, supply and demand and interest rates.

In purchasing a call option, the Fund would be in a position to realize a
gain if, during the option period, the price of the security increased above the
call option price by an amount in excess of the cost of the option. Otherwise,
it would realize a loss. In purchasing a put option, the Fund would be in a
position to realize a gain if, during the option period, the price of the
security declined below the put option price by an amount in excess of the cost
of the option. Otherwise, it would realize a loss. If a put or call option
purchased by the Fund were permitted to expire without being sold or exercised,
its premium would be lost by the Fund.

If a put option written by the Fund were exercised, the Fund would be
obligated to purchase the underlying security at the exercise price. If a call
option written by the Fund were exercised, the Fund would be obligated to sell
the underlying security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value of the
underlying security caused by rising interest rates or other factors. If this
occurred, the option could be exercised and the underlying security would then
be sold to the Fund at a higher price than its current value. The risk involved
in writing a call option is that there could be an increase in the market value
of the underlying security caused by declining interest rates or other factors.
If this occurred, the option could be exercised and the underlying security
would then be sold by the Fund at a lower price than its current market value.
These risks could be reduced by entering into a closing transaction as described
in Appendix B to the Statement of Additional Information. The Fund retains the
premium received from writing a put or call option whether or not the option is
exercised. See Appendix B to the Statement of Additional Information for a
further discussion of the use, risks and costs of option trading.

The exchanges have established position limits governing the maximum number
of options which may be written by an investor or group of investors acting in
concert. Similarly, the Commodities Futures Trading Commission and the Chicago
Board of Trade have established futures position limits for an investor or group
of investors acting in concert. (A discussion of the Fund's ability to invest in
futures contracts and options thereon is set forth below.) The position limits
may restrict the Fund's ability to purchase or write options on a particular
security or to enter into futures contracts. It is possible that the Fund and
other clients of the Adviser, including closed-end and other open-end investment
companies managed by the Adviser, may be considered to be a group of investors
acting in concert. Thus, the number of options or futures transactions which the
Fund may enter into may be affected by options or futures transactions of other
investment advisory clients of the Adviser.

Over-the-counter options are purchased or written by the Fund in privately
negotiated transactions. Such options are illiquid and it may not be possible
for the Fund to dispose of an option it has purchased or terminate its
obligations under an option it has written at a time when the Adviser believes
it would be advantageous to do so.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may enter into
contracts for the purchase or sale for future delivery of securities or
contracts based on financial indices including any index of securities in which
the Fund may invest ("futures contracts") and may purchase and write put and
call options to buy or sell futures contracts ("options on futures contracts").
A "sale" of a futures contract means the acquisition of a contractual obligation
to deliver the securities called for by the contract at a specified price on a
specified date. The purchaser of a futures contract on an index agrees to take
or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally

9
<PAGE>
struck. No physical delivery of the securities underlying the index is made.
Options on futures contracts to be written or purchased by the Fund will be
traded on exchanges or over-the-counter. These investment techniques are used
only to hedge against declines in the value of the Fund's portfolio securities
or increases in the prices of securities which the Fund intends to purchase at a
later date. The successful use of such instruments relies upon the Adviser's
experience with respect to such instruments. Should prices move in an unexpected
manner, the Fund may not achieve the anticipated benefits of futures contracts
or options on futures contracts or may realize losses and would thus be in a
worse position than if such strategies had not been used. In addition, the
correlation between movements in the price of futures contracts or options on
futures contracts and movements in the prices of the securities hedged or used
for cover will not be perfect. See Appendix B to the Statement of Additional
Information for further discussion of the use, risks and costs of futures
contracts and options on futures contracts.

Futures contracts and options on futures contracts are used only as a hedge
and not for speculation. In addition, the Fund does not enter into any futures
contracts or options on futures contracts if immediately thereafter the amount
of initial margin deposits on all the futures contracts of the Fund and premiums
paid on options on futures contracts would exceed 5% of the market value of the
total assets of the Fund. This restriction will not be changed by the Fund's
Board of Directors without considering the policies and concerns of the various
applicable federal and state regulatory agencies.

The Fund limits its activities in options and futures contracts to the
extent necessary to prevent disqualification of the Fund as a regulated
investment company under the Internal Revenue Code. For a discussion of the tax
treatment of futures contracts and options on futures contracts, see "Taxation--
Consequences of Certain Fund Investments" in the Statement of Additional
Information.

WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES

The Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. The Fund may make such
purchases in order to lock-in the purchase price of a security which Management
believes will appreciate in value. There is always the risk, however, that the
security will decrease in value prior to its delivery. 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, which can be
a month or more after the date of the transaction. At the time the Fund makes
the commitment to purchase securities on a when-issued or forward commitment
basis, it will record the transaction and thereafter reflect the value of such
securities in determining its net asset value. At the time the Fund enters into
a transaction on a when-issued or forward commitment basis, a segregated account
consisting of cash or high grade liquid debt securities equal to the value of
the when-issued or forward commitment securities will be established and
maintained with the custodian and will be marked to the market daily. On the
delivery date, the Fund will meet its obligations from securities that are then
maturing or sale of the securities held in the segregated asset account and/or
from then available cash flow. If the Fund disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it can incur a gain or loss due
to market fluctuation.

There is always a risk that the securities may not be delivered and that the
Fund may incur a loss or will have lost the opportunity to invest the amount set
aside for such transaction in the segregated asset account. The purchase of
securities on a when-issued or forward commitment basis can result in increased
volatility of the Fund's net asset value to the extent the Fund makes such
purchases while remaining substantially fully invested. Settlements in the
ordinary course, which may take substantially more than three business days for
non-U.S. securities, are not treated by the Fund as when-issued or forward
commitment transactions and, accordingly, are not subject to the foregoing
limitations even though some of the risks described above may be present in such
transactions.

REPURCHASE AGREEMENTS

The Fund may enter, without limitation, into repurchase agreements
pertaining to the securities in which it may invest with securities dealers or
member banks of the Federal Reserve System. A repurchase agreement arises when a
buyer such as the Fund purchases a security and simultaneously agrees to resell
it to the vendor at an agreed-upon future date, normally one day or a few days
later. The resale price is greater than the purchase price, reflecting an agreed
upon interest rate which is effective for the period of time the

10
<PAGE>
buyer's money is invested in the security and which is related to the current
market rate rather than the coupon rate on the purchased security. Such
agreements permit the Fund to keep all of its assets at work while retaining
"overnight" flexibility in pursuit of investments of a longer-term nature. The
Fund requires continual maintenance by its custodian for its account in the
Federal Reserve/Treasury Book Entry System of collateral in an amount equal to,
or in excess of, the resale price. In the event a vendor defaults on its
repurchase obligation, the Fund might suffer a loss to the extent that the
proceeds from the sale of the collateral are less than the repurchase price. In
the event of a vendor's bankruptcy, the Fund might be delayed in, or prevented
from, selling the collateral for the Fund's benefit. The Fund's Board of
Directors has established procedures, which are periodically reviewed by the
Board, pursuant to which the Adviser will monitor the creditworthiness of the
dealers and banks with which the Fund enters into repurchase agreement
transactions.

LENDING OF SECURITIES

In order to facilitate achievement of its investment objective, the Fund may
from time to time lend securities from its portfolio to brokers, dealers and
financial institutions and receive collateral in the form of cash or U.S.
government securities. Securities lending may be used to generate income to
cushion the Fund against declines in stock prices without requiring the Fund to
sell portfolio securities which it believes will appreciate in value. 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 Fund will enter into loan arrangements only with brokers, dealers
or financial institutions which the Adviser has determined are creditworthy
under guidelines established by the Fund's Board of Directors. In addition,
collateral for such loans must be maintained at all times in an amount equal to
at least 100% of the current market value of the loaned securities (including
interest on the loaned securities). The interest accruing on the loaned
securities will be paid to the Fund and the Fund will have the right, on demand,
to call back the loaned securities. The Fund may pay fees to arrange the loans.
The Fund does not lend portfolio securities in excess of 30% of the value of its
total assets (including such loans), nor does the Fund lend its portfolio
securities to any officer, director, employee or affiliate of the Fund or the
Adviser or Sub-Adviser.

ILLIQUID SECURITIES

As a fundamental investment restriction that may not be changed without the
approval of a majority of the Fund's shares, the Fund will not 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. The Fund may be restricted in its
ability to sell such securities at a time when the Adviser or Sub-Adviser deems
it advisable to do so. In addition, in order to meet redemption requests, the
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 Fund 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 or Sub-Adviser subject to the oversight of and pursuant to procedures
adopted by the Board of Directors. See "Investment Objective, Policies and
Restrictions--

11
<PAGE>
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.

BORROWING

The Fund may borrow money only from banks for temporary or emergency
purposes in an amount up to 10% of the value of the Fund's total assets,
provided that reverse repurchase agreements entered into by the Fund are not
subject to such limitation. Reverse repurchase agreements are subject, however,
to the asset coverage requirements of the Investment Company Act of 1940 (the
"1940 Act") and to certain segregated account requirements. The Fund has not
entered into reverse repurchase agreements in the past and has no current
intention of entering into such agreements in the future. See "Investment
Objective, Policies and Restrictions--Reverse Repurchase Agreements" in the
Statement of Additional Information. Interest paid by the Fund on borrowed funds
will decrease the net earnings of the Fund. The Fund will not purchase portfolio
securities while outstanding borrowings (other than reverse repurchase
agreements) exceed 5% of the value of the Fund's total assets. The Fund may
mortgage, pledge or hypothecate its assets only to secure such 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 the Fund's shares.

PORTFOLIO TURNOVER

The Fund intends to acquire and hold securities for long-term capital
appreciation and normally does not intend to trade in securities for short-term
gains; however, securities may be purchased and sold at such times as Management
deems to be in the best interests of the Fund and its shareholders. The method
of calculating portfolio turnover rate is set forth in the Statement of
Additional Information under "Investment Objective, Policies and
Restrictions--Portfolio Turnover." Portfolio turnover rates for the Fund are set
forth in "Financial Highlights."

INVESTMENT RESTRICTIONS

The Fund has adopted certain fundamental and nonfundamental investment
restrictions in addition to those set forth above. Fundamental investment
restrictions which may not be changed without shareholder approval include the
following: (1) With respect to 75% of its total assets, the Fund will not invest
more than 5% of the value of its total assets in any one issuer, or own more
than 10% of the outstanding voting securities of any one issuer. (These
restrictions do not apply to securities issued or guaranteed by the U.S.
government or any agency or instrumentality thereof. For purposes of these
restrictions, the government of any country (other than the U.S.), including its
governmental subdivisions, is each considered a single issuer.) (2) The Fund
will not invest 25% or more of the value of its total assets in the same
industry. (This restriction does not apply to securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities.) In addition, as
nonfundamental investment restrictions which may be changed at any time without
shareholder approval, the Fund will not invest more than 5% of its net assets in
warrants or 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 the Fund's fundamental and nonfundamental investment
restrictions is set forth in the Statement of Additional Information.

RISK FACTORS

Investment in foreign securities requires consideration of factors not
typically associated with investment in securities of U.S. issuers. Those
include the following:

CURRENCY FLUCTUATIONS. The value of the Fund's portfolio securities
computed in U.S. dollars will vary with increases and decreases in the exchange
rate between the currencies in which the Fund has invested and the U.S. dollar.
A decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of the Fund's holdings of securities
denominated in such currency and, therefore, will cause an overall decline in
the Fund's net asset value and net investment income and capital gains, if any,
to be distributed in U.S. dollars to shareholders by the Fund.

12
<PAGE>
The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the price of oil, the pace of activity in the industrial
countries, including the United States, and other economic and financial
conditions affecting the world economy.

POLITICAL AND ECONOMIC RISKS. Investing in securities of non-U.S. companies
may entail additional risks. Nationalization, expropriation or confiscatory
taxation, currency blockage, political changes, government regulation, social
instability or diplomatic developments could affect adversely the economy of a
country or the Fund's investment in such country. The Fund may also be adversely
affected by exchange control regulations.

Certain additional risks are involved in investing in the securities of
Eastern European issuers. Although the Fund has the ability to invest in such
securities, because of current political instability and military conflict in
Eastern Europe, the Fund does not currently hold any such securities and does
not intend to purchase any such securities until a more favorable political
climate exists.

Upon the accession to power of Communist regimes approximately 50 years ago,
the governments of a number of Eastern European countries expropriated a large
amount of property. The claims of many property owners against those governments
were never finally settled. There can be no assurance that any Fund investments
in Eastern Europe would not also be expropriated, nationalized or otherwise
confiscated. In the event of such expropriation, nationalization or other
confiscation, the Fund could lose its entire investment in the country involved.
In addition, any change in the leadership or policies of Eastern European
countries, or any change in the leadership or policies of the Commonwealth of
Independent States (formerly, the Union of Soviet Socialist Republics) that
exercises a significant influence over those countries, may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring
and adversely affect existing investment opportunities.

Most Eastern European countries have had a centrally planned, socialist
economy since shortly after World War II. The governments of a number of Eastern
European countries currently are implementing reforms directed at political and
economic liberalization, including efforts to decentralize the economic decision
making process and move towards a market economy. There can be no assurance that
these reforms will continue or, if continued, will achieve their goals. In
addition, favorable economic developments in Eastern Europe may not continue or
may be reversed by unanticipated political events that could adversely affect
the Fund if it were invested in the securities of Eastern European issuers.

Investing in the securities of Eastern European issuers involves certain
considerations not usually associated with investing in securities of issuers in
more developed capital markets such as the United States, Japan or Western
Europe, including (a) political and economic considerations, such as greater
risks of expropriation, confiscatory taxation and nationalization and less
social, political and economic stability; (b) the small current size of the
markets for such securities and the currently low or nonexistent volume of
trading, resulting in lack of liquidity and in price volatility; (c) certain
national policies which may restrict the Fund's investment opportunities,
including, without limitation, restrictions on investing in issuers or
industries deemed sensitive to relevant national interests; and (d) the absence
of developed legal structures governing private or foreign investments and
private property.

CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Non-U.S.
companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those applicable to U.S. companies. Thus, there may be less available
information concerning non-U.S. issuers of securities held by the Fund than is
available concerning U.S. companies.

Applicable accounting and financial reporting standards in Eastern Europe
may be substantially different from U.S. accounting standards and, in certain
Eastern European countries, no reporting standards currently exist.
Consequently, substantially less information on Eastern European companies is
available to investors and the information that is available may not be
conceptually comparable to, or prepared on the same basis as that available in
more developed capital markets, which may make it difficult to assess the
financial status of particular companies. However, in order to become attractive
to Western

13
<PAGE>
international investors such as the Fund, some Eastern European companies may
submit to reviews of their financial condition conducted in accordance with
accounting standards employed in Western European countries. Management believes
that such information, together with the application of other analytical
techniques, can provide an adequate basis on which to assess the financial
viability of such companies.

MARKET CHARACTERISTICS. Securities of many non-U.S. companies may be less
liquid and their prices more volatile than securities of comparable U.S.
companies. In addition, securities of companies traded in many countries outside
the U.S., particularly those of emerging countries in the Pacific Basin, may be
subject to further risks due to the inexperience of local brokers and financial
institutions in less developed markets, the possibility of permanent or
temporary termination of trading, and greater spreads between bid and asked
prices for securities. Non-U.S. stock exchanges and brokers are subject to less
governmental supervision and regulation than in the U.S. and non-U.S. stock
exchange transactions are usually subject to fixed commissions, which are
generally higher than negotiated commissions on U.S. transactions. In addition,
there may in certain instances be delays in the settlement of non-U.S. stock
exchange transactions.

INVESTMENT AND REPATRIATION RESTRICTIONS. Several of the countries in the
Pacific Basin and certain European countries restrict, to varying degrees,
foreign investments in their securities markets. Government and private
restrictions take a variety of forms, including (a) limitations on the amount of
funds that may be introduced into or repatriated from the country (including
limitations on repatriation of investment income and capital gains); (b)
prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation; (c)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor; (d) limitations on the types of
securities which a foreign investor may purchase; and (e) restrictions on a
foreign investor's right to invest in companies whose securities are not
publicly traded. In some circumstances, these restrictions may limit or preclude
investment in certain countries or may increase the cost of investing in
securities of particular companies.

The governments of certain Eastern European countries may require that a
governmental or quasi-governmental authority act as custodian of the Fund's
assets invested in such countries. These authorities may not be qualified to act
as foreign custodians under the 1940 Act and, as a result, the Fund will not be
able to invest in these countries in the absence of exemptive relief from the
Securities and Exchange Commission. In addition, the risk of loss through
government confiscation may be increased in such countries.

The Fund may make direct investments in Taiwan if it adheres to certain
government restrictions or may invest in Taiwanese stocks quoted elsewhere.
However, the Fund currently intends to invest in Taiwan through the purchase of
shares of investment funds organized under the laws of Taiwan and through
Euromarket Instruments. The Fund currently may not make direct investments in
India. However, the laws regarding investments in India by foreigners have
recently changed and the Fund will most likely apply to the authorities in India
for permission to invest directly in that country. The return on the Fund's
investments in investment companies will be reduced by the operating expenses,
including investment advisory and administrative fees, of such companies. The
Fund's investment in an investment company may require the payment of a premium
above the net asset value of the investment company's shares, and the market
price of the investment company thereafter may decline without any change in the
value of the investment company's assets. The Fund, however, will not invest in
any investment company or trust unless it is believed that the potential
benefits of such investment are sufficient to warrant the payment of any such
premium. Under the 1940 Act, the Fund may not invest more than 10% of its assets
in investment companies or more than 5% of its total assets in the securities of
any one investment company, nor may it own more than 3% of the outstanding
voting securities of any such company.

FOREIGN TAXES. The Fund's interest and dividend income from foreign issuers
may be subject to non-U.S. withholding taxes. The Fund also may be subject to
taxes on trading profits in some countries. In addition, many of the countries
in the Pacific Basin have a transfer or stamp duties tax on certain securities
transactions. The imposition of these taxes will increase the cost to the Fund
of investing in any country imposing such taxes. For U.S. tax purposes, U.S.
shareholders may be entitled to a credit or deduction to the extent of any
foreign income taxes paid by the Fund. See "Tax Status."

14
<PAGE>
MANAGEMENT

BOARD OF DIRECTORS

The Board of Directors of Piper Global has the primary responsibility for
overseeing the overall management of Piper Global and electing its officers.

INVESTMENT ADVISER

Piper Capital Management Incorporated (the "Adviser") has been retained
under an Investment Advisory and Management Agreement (the "Advisory Agreement")
with Piper Global to act as the Fund's investment adviser subject to the
authority of the Board of Directors.

In addition to acting as the investment adviser for the Fund, the Adviser
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 March 31, 1995, the
Adviser rendered investment advice regarding approximately $10.2 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.

The Adviser supervises, directs and monitors the day to day operations of
the Fund in accordance with the Fund's investment objective, policies and
restrictions, as well as the implementation of investment programs formulated by
the Sub-Adviser. The Adviser is responsible for investing the portion of the
Fund's portfolio maintained in cash and short-term high quality debt securities.
The Adviser reviews investment and allocation determinations of the Sub-Adviser.
In addition, the Sub-Adviser must obtain the Adviser's approval prior to (a) any
investment of the assets of the Fund in any country outside of the Pacific Basin
or Europe, and (b) any investment by the Sub-Adviser which would result in
reallocation of in excess of 5% of the Fund's total assets. The Adviser
determines the broker-dealers which are eligible to execute transactions on
behalf of the Fund. The Adviser furnishes at its own expense all necessary
administrative services, office space, equipment and clerical personnel for
providing the foregoing services. In addition, the Adviser pays the salaries and
fees of all officers and directors of the Fund who are affiliated with the
Adviser. The Adviser is liable to the Fund for losses resulting from willful
misconduct, bad faith or gross negligence in the performance of its duties or
from its reckless disregard of its duties under the Advisory Agreement.

Under the Advisory Agreement, the Fund pays the Adviser a monthly management
fee. The fee is paid at an annual rate of 1.00% on average daily net assets up
to $100 million, .875% on net assets over $100 million and up to $200 million,
and .75% on net assets over $200 million (the "Basic Fee"), and is subject to
adjustment as described below. The adjustment is based upon the investment
performance of the Fund in relation to the investment record of the Morgan
Stanley Capital International EAFE-SM- Index (the "EAFE Index"). The Basic Fee
is higher than fees paid by most other investment companies.

Adjustments to the Basic Fee are made by comparison of the Fund's investment
performance for the applicable period with the investment record of the EAFE
Index. The Basic Fee for each month may be increased or decreased by up to .25%
(on an annualized basis) of the Fund's average daily net assets depending upon
the extent (as set forth below) by which the Fund's performance varies from the
EAFE Index over the applicable performance period. For purposes of calculation
of the performance adjustment, average daily net assets are equal to the Fund's
average daily net assets during the month for which the calculation is being
made.

15
<PAGE>
The following table illustrates the full range of permitted increases or
decreases to the Basic Fee on an annualized basis:

<TABLE>
<CAPTION>
ADJUSTMENT
TO BASIC FEE
PERFORMANCE OF FUND RELATIVE TO EAFE INDEX (ANNUALIZED)
- - - - -------------------------------------------------------------------------------- -------------
<S> <C>
+5 Percentage Points or more................................................... +.25
+4............................................................................. +.20
+3............................................................................. +.15
+2............................................................................. +.10
+1............................................................................. +.05
0............................................................................. 0
- - - - -1.............................................................................. -.05
- - - - -2.............................................................................. -.10
- - - - -3.............................................................................. -.15
- - - - -4.............................................................................. -.20
- - - - -5 Percentage Points or more.................................................... -.25
</TABLE>

The Basic Fee, plus or minus the performance adjustments calculated as
described herein, is paid monthly. The applicable performance period is a
rolling 12-month period consisting of the most recent calendar month plus the
immediately preceding 11 months.

In calculating the investment performance of the Fund as compared with the
investment record of the EAFE Index, dividends and other distributions of the
Fund and dividends and other distributions made with respect to component
securities of the EAFE Index during the performance period are treated as having
been reinvested. The investment performance of the Fund is calculated based upon
the total return of the Fund for the applicable period, which consists of the
total net asset value of the Fund at the end of the applicable period, including
reinvestment of dividends and distributions, less the net asset value of the
Fund at the commencement of the applicable period divided by the net asset value
of the Fund at the commencement of the applicable period. Fractions of a
percentage point are rounded to the nearest whole point (to the higher whole
point if exactly one-half).

The EAFE Index is a market capitalization weighted index containing (as of
March 31, 1995) 1,113 companies representing approximately 60% of the market
capitalization of each of the following 20 countries: Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
The Netherlands, New Zealand, Norway, Singapore, Malaysia, Spain, Sweden,
Switzerland and the United Kingdom. The EAFE Index is an unmanaged index of
common stocks, whereas the Fund, under normal circumstances, may invest up to
35% of its assets in securities other than common stock. Additionally, the
largest percentages of the EAFE Index are currently represented by the Japanese
and United Kingdom markets, which currently represent approximately 44% and 16%,
respectively, of the EAFE Index. Consequently, the extent to which the EAFE
Index increases or decreases in any one year will be affected significantly by
the performance of these markets. The Fund currently has approximately 33% and
9%, respectively, of its total assets invested in Japan and the United Kingdom.
Because the Fund's weighting in these two markets is not as significant as that
of the EAFE Index, the performance of the other markets in which the Fund
invests, as compared to that of the Japanese and United Kingdom markets, will
affect to a significant degree whether the Fund outperforms or underperforms the
EAFE Index.

SUB-ADVISER

Edinburgh Fund Managers plc, Donaldson House, 97 Haymarket Terrace,
Edinburgh, Scotland EH12, 5HD, is the Sub-Adviser for the Fund under an
agreement with the Adviser (the "Sub-Advisory Agreement"). The Sub-Adviser is
responsible for the investment and reinvestment of the Fund's assets in non-U.S.
securities and the placement of brokerage transactions in connection therewith.
For its services, the Sub-Adviser is paid a fee by the Adviser equal to 65% of
the Basic Fee plus or minus 90% of the performance fee adjustment described
above. Such fee is paid over the same time periods and calculated in the same
manner as the investment advisory fee described above under "--Investment
Adviser."

16
<PAGE>
The Sub-Adviser is a public limited company that was incorporated in 1969.
It is a majority-owned subsidiary of The British Investment Trust PLC, a
Scottish closed-end investment company founded in 1889, for which the
Sub-Adviser serves as investment manager and adviser. The Sub-Adviser, an
investment adviser registered under the Advisers Act, currently furnishes
investment management services, directly or through subsidiaries, to ten
closed-end investment companies, twenty-six open-end investment companies (which
includes four open-end investment companies serving United Kingdom tax-exempt
institutional clients), twenty-one pension plans, four charitable organizations
and four other individual/corporate clients. As of March 31, 1995, the
Sub-Adviser managed approximately $5.7 billion of assets. Approximately 20% of
such assets were invested in the Pacific Basin and 62% of such assets were
invested in Europe.

PORTFOLIO MANAGEMENT

The day-to-day management of the Fund is primarily the responsibility of the
Sub-Adviser. The following individuals employed by the Sub-Adviser co-manage the
Fund: Iain A. Watt, Michael W. Balfour, Jamie Sandison, Christian Albuisson,
David Currie and Gavin Grant. Mr. Balfour, who is a director of the Fund, has
been director of overseas investments for the Sub-Adviser since 1992, and was
previously the assistant director and head of the Pacific Department of the
Sub-Adviser from 1988 to 1992. Mr. Watt, who is a director of the Fund, has been
the managing director of the Sub-Adviser since 1991, prior to which he had been
a director of the Sub-Adviser since 1986. Mr. Sandison has been a portfolio
manager in the Pacific Department since January 1994 and was previously an
investment manager with Ivory and Sime plc from 1990 to 1994. Mr. Albuisson has
been a portfolio manager in the European Department of the Sub-Adviser since
February 1990 and was previously an investment manager with British Linen Fund
Managers from June 1988 to February 1990. Mr. Currie was appointed assistant
director of the Sub-Adviser in 1993 and head of the Japanese Department in 1992,
prior to which he had been a portfolio manager in that department since 1991 and
a fund manager in the UK Department from October 1988 to January 1991. Mr. Grant
was appointed assistant director of the Sub-Adviser in 1995 and head of the
Latin American Department in 1994, prior to which he had been a portfolio
manager in that department since 1991. Messrs. Watt, Balfour, Albuisson and
Currie have been co-managers of the Fund since its inception. Messrs. Sandison
and Grant have been co-managers of the Fund since 1994 and 1992, respectively.

TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND CUSTODIAN

First Trust National Association, 180 East Fifth Street, St. Paul, Minnesota
55101, serves as Custodian for the Fund's portfolio securities and cash.
Investors Fiduciary Trust Company ("IFTC"), 127 West Tenth Street, Kansas City,
Missouri 64105, serves as Transfer Agent and Dividend Disbursing Agent for the
Fund.

Rules adopted under the 1940 Act permit the Fund to maintain its securities
and cash in the custody of certain eligible banks and securities depositories.
The Fund's portfolio of Pacific Basin and European issuers is held by its
sub-custodians who are approved by the directors in accordance with such rules.
Such determination is made pursuant to such rules following a consideration of a
number of factors including, but not limited to, the reliability and financial
stability of the institution; the ability of the institution to perform
custodial services for the Fund; the reputation of the institution in its
national market; the political and economic stability of the country in which
the institution is located; and the risks of potential nationalization or
expropriation of Fund assets.

Piper Global has entered into a Shareholder Account Servicing Agreement with
the Distributor. Under this agreement, the Distributor provides certain transfer
agent and dividend disbursing agent services for shareholder accounts held at
the Distributor. 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 and Sub-Adviser select brokers and futures commission merchants
to use for the Fund's 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 Fund

17
<PAGE>
shares may also be considered a factor if the Adviser or Sub-Adviser is
satisfied that the Fund would receive from that broker the most favorable price
and execution then available for a transaction. Portfolio transactions for the
Fund may be effected through the Distributor on a securities exchange in
compliance with Section 17(e) of 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 Fund's shares. Piper
Global has adopted a Distribution Plan (the "Plan") as required by Rule 12b-1
under the 1940 Act. Under the Plan, the Distributor is entitled to reimbursement
each month for its actual expenses incurred in connection with servicing of the
Fund's shareholder accounts and in connection with distribution related services
provided with respect to the Fund, in an amount not to exceed, on an annualized
basis, .50% of the average daily net assets of the Fund.

The Distributor is reimbursed under the Plan for its expenses incurred in
connection with the sale of Fund shares ("Distribution Expenses") and for its
costs in connection with the ongoing servicing and/or maintenance of shareholder
accounts ("Shareholder Servicing Costs"). Of the .50% of average daily net
assets reimbursable under the Plan, .25% may be reimbursed to cover Shareholder
Servicing Costs and .25% may be reimbursed to cover Distribution Expenses. The
Distributor has voluntarily agreed to limit reimbursements under the Plan to
.32% of the Fund's average daily net assets. This limitation may be revised or
terminated at any time after fiscal 1996 year end. 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 Fund. 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 Fund. See "How to Purchase Shares--Purchase Price." Further information
regarding the Plan is contained in the Statement of Additional Information.

The Distributor's Shareholder Servicing Costs include payments to investment
executives of the Distributor and broker-dealers which have entered into sales
agreements with the Distributor. If shares of the 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 the 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. Of such payments, an amount equal to .25% of
average daily net assets of the Fund is considered a Shareholder Servicing Cost
under the Plan and the remainder is considered ongoing sales compensation
reimbursable as a Distribution Expense under the Plan.

18
<PAGE>
- - - - --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING

HOW TO PURCHASE SHARES

GENERAL

The Fund's 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 Fund. The Distributor
reserves the right to reject any purchase order. You should be aware that,
because the Fund does 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 Fund 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 AS A PERCENTAGE
OF 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.

FUND SHARES ARE BEING OFFERED TO THE PUBLIC WITHOUT AN INITIAL OR DEFERRED
SALES CHARGE THROUGH JUNE 30, 1995. The Distributor will pay its investment
executives and other broker-dealers selling Fund shares a fee equal to 2.00% of
the net asset value of any shares sold during this period. These payments will
be an expense of the Distributor; they will not be reimbursed by the Fund under
its Rule 12b-1 Plan.

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 Fund 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

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SHAREHOLDER GUIDE TO INVESTING
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
OF OFFERING
AMOUNT OF TRANSACTION 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>

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; and

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SHAREHOLDER GUIDE TO INVESTING

- 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 the Piper funds that were 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.

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 Piper funds sold with a sales charge 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.

PURCHASE BY PIPER JAFFRAY COMPANIES INC., ITS SUBSIDIARIES AND THE SUB-ADVISER

Piper Jaffray Companies Inc., its subsidiaries and the Sub-Adviser may buy
shares of the Fund 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 Fund 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 Fund 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.

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SHAREHOLDER GUIDE TO INVESTING

- 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 Fund 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 Fund
or in any other mutual fund managed by the Adviser (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 Fund 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 Fund without incurring
a sales charge.

HOW TO REDEEM SHARES

NORMAL REDEMPTION

You may redeem all or a portion of your shares on any day that the 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 Fund's 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.

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SHAREHOLDER GUIDE TO INVESTING

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.

- 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 five business days (three business days
after June 3, 1995). In no event will payment be made more than seven days after
receipt of your order in good form. However, payment may be postponed or the
right of redemption suspended for more than seven days under unusual
circumstances, such as when trading is not taking place on the New York Stock
Exchange. Payment of redemption proceeds may also be delayed if the shares to be
redeemed were purchased by a check drawn on a bank which is not a member of the
Federal Reserve System, until such check has cleared the banking system
(normally up to 15 days from the purchase date).

INVOLUNTARY REDEMPTION

The Fund reserves the right to redeem your account at any time if 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 Fund
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

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SHAREHOLDER GUIDE TO INVESTING
more automatically transferred each month from any of the money market fund
series of Piper Funds. 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 the Fund, you may be eligible to reinvest in
shares of any fund managed by the Adviser without payment of an additional sales
charge. 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.

You may exchange your shares for shares of any other mutual fund managed by
the Adviser 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 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 Fund
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 (800-874-6025) for an application or for more details. The
Fund 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. If the Fund follows such
procedures, it will not be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. If the Fund does not employ
such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone instructions.

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) 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.

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SHAREHOLDER GUIDE TO INVESTING

SYSTEMATIC WITHDRAWAL PLAN

If your account has a value of $5,000 or more, you may establish a
Systematic Withdrawal Plan. 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.

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 semi-annually. 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. As a result, you will not be allowed to make additional
investments of less than $5,000 or three times the annual withdrawals while you
have the plan in effect. Please refer to "Redemption of Shares" in the Statement
of Additional Information for additional details.

ACCOUNT PROTECTION

If you purchased your shares of the Fund through a Piper Jaffray investment
executive, you may choose from several account options. Your investments in the
Fund 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. The Fund is required to supply annual and semi-annual 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 and distributions of net realized
capital gains, if any, will be payable to Fund shareholders on an annual basis.

BUYING A DIVIDEND. On the record date for a distribution, the Fund's share
price is reduced by the amount of the distribution. If you buy shares just
before the record 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 the Fund generally will be payable in additional
shares of the 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

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SHAREHOLDER GUIDE TO INVESTING
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.

VALUATION OF SHARES

The Fund computes its 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
Fund has declared any applicable dividends. In valuing the Fund's assets, all
securities for which market quotations are readily available are valued under
normal circumstances at the last sales price prior to the time of determination,
or if no sale is reported at that time, the mean between the closing asked price
and the closing bid price or, if no bid and asked prices are available, at the
most recent available sales price. With respect to a security which is listed or
traded on more than one exchange, the Fund normally looks to the exchange on
which trading is more extensive. In instances where market quotations are not
readily available and in certain other circumstances, fair value is determined
according to methods selected in good faith by the Board of Directors.
Short-term investments having a maturity of 60 days or less are valued at cost
with any premium amortized or discount credited over the period remaining until
maturity. Options will be valued at market value or fair value, as determined in
good faith by or under the direction of the Board of Directors, if no market
exists. Futures contracts will be valued at the settlement price established
each day by the board of trade or exchange on which they are traded. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors.

Any assets or liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars by the pricing service retained by the Fund or,
to the extent that an exchange rate is not available through such pricing
service, at the mean of current bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank that is a regular participant in the
foreign exchange market. The Fund has been advised that the pricing service
translates foreign currencies into U.S. dollars on the basis of the official
exchange rate or by taking into account the quotes provided by a number of major
banks that are regular participants in the foreign exchange market. Trading in
securities on European and Pacific Basin securities exchanges and in
over-the-counter markets is normally completed well before the close of business
on each business day of the Fund. In addition, European or Pacific Basin
securities trading generally or in a particular country or countries may not
take place on all business days in New York. Furthermore, trading takes place in
various foreign markets on days which are not business days of the Fund and on
which the Fund's net asset value is not calculated. Therefore, the net asset
value of the Fund might be significantly affected on days when the investor has
no access to the Fund. The Fund calculates net asset value per share as of the
close of the regular trading session on the Exchange. Such calculation does not
take place contemporaneously with the determination of the prices of the
majority of the portfolio securities used in such calculation. If events
materially affecting the value of such securities occur between the time when
their price is determined and the time when the Fund's net asset value is
calculated, such securities will be valued at fair value as determined in good
faith by or under the direction of the Board of Directors.

TAX STATUS

The Fund qualified as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended, during its last taxable year and
intends to qualify as a regulated investment company during the current taxable
year. If so qualified, the Fund will not be liable for federal income taxes to
the extent it distributes its taxable income to shareholders.

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Distributions by the 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). 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 shares of the
Fund.

A shareholder will recognize a capital gain or loss upon the sale or
exchange of shares in the 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.

The Fund's investments may be subject to taxes in foreign countries which
would reduce the total return on such investments. In addition, if the Fund is
deemed to be a resident of the United Kingdom for United Kingdom tax purposes or
if the Fund is treated as being engaged in a trading activity through an agent
in the United Kingdom, there is a risk that the United Kingdom will attempt to
tax all or a portion of the Fund's gains or income. In light of the structure of
the Fund and the terms and conditions of the Advisory and Sub-Advisory
Agreements, the Adviser believes that any such risk is minimal.

If the Fund has more than 50% of its assets invested in the stock or
securities of foreign corporations at the end of the Fund's taxable year, the
Fund may make an election to allow shareholders either to claim U.S. foreign tax
credits with respect to such foreign taxes paid or to deduct such amounts as an
itemized deduction on their tax return. In the event such an election is made,
shareholders would have to increase their taxable income by the amount of such
taxes and the Fund would not be able to deduct such taxes in computing its
taxable income.

PERFORMANCE COMPARISONS

Advertisements and other sales literature for the Fund may refer to the
Fund's "average annual total return" and "cumulative total return." All such
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 the Fund will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.

Average annual 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 the 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.

In addition to advertising total return, comparative performance information
may be used from time to time in advertising the Fund's shares including data
from Lipper Analytical Services, Inc. and other entities or organizations which
track the performance of investment companies. Performance of the Fund may be
compared to the EAFE Index and to the performance of International Funds as
reported by Lipper.

For additional information regarding the calculation of average annual total
return and cumulative total return, see "Calculation of Performance Data" in the
Statement of Additional Information.

GENERAL INFORMATION

Piper Global is authorized to issue a total of 100 billion shares of common
stock, with a par value of $.01 per share. These shares can be issued in more
than one class or series. Each designated series of stock

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will represent a separate portfolio of investments, each with a different
investment objective. The Board of Directors has authorized two billion shares
to be issued as Series A Common Shares, which are the shares of common stock of
the Fund. Currently, Series A is the only outstanding series of shares of Piper
Global.

In addition, the Board of Directors may, without shareholder approval,
create and issue one or more additional classes of shares within the Fund, as
well as within any series of Piper Global created in the future. All classes of
shares in the Fund would be identical except that each class of shares would be
available through a different distribution channel and certain classes might
incur different expenses for the provision of distribution services or the
provision of shareholder services or administration assistance by institutions.
Shares of each class would share equally in the gross income of the Fund, but
any variation in expenses would be charged separately against the income of the
particular class incurring such expenses. This would result in variations in net
investment income accrued and dividends paid by and in the net asset value of
the different classes of the Fund. This ability to create multiple classes of
shares within the Fund will allow Piper Global in the future the flexibility to
better tailor its methods of marketing, administering and distributing shares of
the Fund to the needs of particular investors and to allocate expenses related
to such marketing, administration and distribution methods to the particular
classes of shareholders of the Fund incurring such expenses.

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 has one vote (with proportionate voting for fractional shares).
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.

On an issue affecting only a particular series, the shares of the affected
series vote separately. An example of such an issue would be a fundamental
investment restriction pertaining to only one series. In voting on the
Investment Advisory and Management Agreement (the "Agreement"), approval of the
Agreement by the shareholders of a particular series would make the Agreement
effective as to that series whether or not it had been approved by the
shareholders of any other series.

If Piper Global issues shares in additional series, the assets received by
Piper Global for the issue or sale of shares of each series, and all income,
earnings, profits and proceeds thereof, subject only to the rights of creditors,
will be allocated to such series, and constitute the underlying assets of such
series. The underlying assets of each series are required to be segregated on
the books of account, and are to be charged with the expenses in respect to such
series and with a share of the general expenses of Piper Global. Any general
expenses of Piper Global not readily identifiable as belonging to a particular
series shall be allocated among the series based upon the relative net assets of
the series at the time such expenses were accrued.

The Bylaws of Piper Global provide that shareholder meetings need be held
only with such frequency as required under Minnesota law. Minnesota corporation
law requires only that the Board of Directors convene shareholders 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
Piper Global may demand a regular meeting of shareholders by written notice
given to the chief executive officer or chief financial officer of Piper Global.
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 Piper
Global. 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 Piper Global may be removed by action of the
record holders of two-thirds or more of the outstanding shares of

28
<PAGE>
- - - - --------------------------------------------------------------------------------
SHAREHOLDER GUIDE TO INVESTING
Piper Global. 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 Piper Global's
outstanding shares.

PENDING LEGAL PROCEEDINGS

Complaints have been filed in U.S. District Court against the Adviser and
the Distributor relating to several other investment companies for which the
Adviser acts as investment adviser or subadviser. These lawsuits do not involve
the Fund and the Adviser and Distributor do not believe that the lawsuits will
have a material adverse effect upon their ability to perform under their
agreements with the Fund. An agreement in principle has been reached to settle
one such lawsuit. The Adviser and Distributor intend to defend the other
lawsuits vigorously. See "Pending Legal Proceedings" in the Statement of
Additional Information.

NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION 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 FUND 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.

29
<PAGE>
PACIFIC-EUROPEAN GROWTH FUND
A Series of Piper Global Funds Inc.

INVESTMENT ADVISER
Piper Capital Management Incorporated

SUB-ADVISER
Edinburgh Fund Managers plc

DISTRIBUTOR
Piper Jaffray Inc.

CUSTODIAN
First Trust National Association

TRANSFER AGENT
Investors Fiduciary Trust Company

LEGAL COUNSEL
Dorsey & Whitney P.L.L.P.

Table of Contents

<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction......................... 2
Fund Expenses........................ 4
Financial Highlights................. 4
Investment Objective and Policies.... 5
Special Investment Methods........... 7
Risk Factors......................... 12
Management........................... 15
Distribution of Fund Shares.......... 18
SHAREHOLDER GUIDE TO
INVESTING
How to Purchase Shares........... 19
Reducing Your Sales Charge....... 20
Special Purchase Plans........... 21
How to Redeem Shares............. 22
Shareholder Services............. 23
Dividends and Distributions...... 25
Valuation of Shares.................. 26
Tax Status........................... 26
Performance Comparisons.............. 27
General Information.................. 27
</TABLE>

PGPEX-05

PACIFIC
EUROPEAN
GROWTH
FUND

[LOGO]

PROSPECTUS

APRIL 28, 1995
<PAGE>

PACIFIC EUROPEAN GROWTH FUND

[Graphic]

1996

ANNUAL REPORT

<PAGE>

TABLE OF CONTENTS

Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . 2
Investments in Securities . . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . 10
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . 18
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . 19

PACIFIC-EUROPEAN GROWTH FUND
Pacific-European Growth Fund is an open-end mutual fund seeking investment
opportunities primarily in the Pacific Basin and Europe. The fund's
investment objective is long-term capital appreciation; any current income
realized is incidental. To reach its objective, the fund invests primarily in
common stocks of companies in the Pacific Basin (for example, Japan, Hong
Kong, Malaysia, Singapore, South Korea and Thailand) or Europe (including
Eastern Europe). Up to 25% of the fund's total assets may also be invested in
other areas of the world. The fund does not invest in common stock of U.S.
companies. As with other mutual funds, there is no assurance that this fund
will achieve its objective. The fund's Nasdaq symbol is PGPEX.

MANAGEMENT EXPERIENCE
Piper Capital Management Incorporated has retained an experienced
international money manager, Edinburgh Fund Managers plc, to act as
subadviser to the fund. Edinburgh Fund Managers Group plc is a holding
company with three wholly owned operating subsidiaries. The main operating
subsidiary is Edinburgh Fund Managers plc, which provides investment services
to institutional clients and investment management services to closed- and
open-end funds and discretionary funds, including pension plans and
charities. Edinburgh Fund Managers Group plc is a publicly listed company
established in 1969 and a majority-owned subsidiary of the British Investment
Trust plc, a Scottish closed-end investment company which was founded in
1889. Pacific-European Growth Fund is co-managed by the following people:
Lloyd Beat, account manager; Iain Watt, group chief executive and fund
director; Mike Balfour, chief investment director and fund director; Jeremy
Whitley, Pacific Basin portfolio manager; Christian Albuisson, European
portfolio manager; Miranda Tulloch, Japanese portfolio manager; Robin Watson,
Latin America portfolio manager; Ralph Woodford, United Kingdom large-company
portfolio manager; and Barry Hutcheon, United Kingdom small-company portfolio
manager.

THIS REPORT IS INTENDED FOR SHAREHOLDERS OF PACIFIC-EUROPEAN GROWTH FUND, BUT
MAY ALSO BE USED AS SALES LITERATURE IF PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
THE PROSPECTUS GIVES DETAILS ABOUT THE CHARGES, INVESTMENT RESULTS, RISKS AND
OPERATING POLICIES OF THE FUND.

<PAGE>

SHAREHOLDER SERVICES

LOW MINIMUM INVESTMENTS
You can open a Piper mutual fund account with a minimum investment of $250.

QUANTITY DISCOUNTS
If your initial investment exceeds a specified amount, if an investment
combined with the value of your existing Piper shares exceeds a specified
amount, or if your investments combined during a 13-month period exceed a
specified amount, you can reduce or even eliminate the front-end sales charge.

WAIVER OF SALES CHARGES
Money market funds carry no sales charges.* Sales charges on other Piper
funds are waived on purchases of $500,000 or more. However, a contingent
deferred sales charge may be imposed. See your prospectus for details.

AUTOMATIC REINVESTMENT OF DIVIDENDS
For maximum growth of your assets, you can reinvest dividends and capital
gains automatically in additional shares of your fund without a sales charge.

CROSS-REINVESTMENT OF DISTRIBUTIONS
Diversify your holdings by reinvesting dividends and capital gains from one
Piper fund to another.

CASH DISTRIBUTIONS
If you prefer, take your dividends and/or capital gains in cash.

AUTOMATIC MONTHLY INVESTMENT PROGRAM
You may automatically transfer $25 or more each month from any Piper money
market fund into many other Piper funds.*

AUTOMATIC MONTHLY MONEY TRANSFER PROGRAM
If you are starting a savings discipline or seeking a convenient way to
invest, you can transfer a minimum of $100 automatically from your bank,
savings and loan or other financial institution into many of the Piper funds.

EXCHANGE PRIVILEGES
Revise your investment plan without incurring a sales charge by moving assets
from one Piper fund to another with the same fee structure. See your
prospectus for restrictions involving exchanges between funds with different
sales charges.

REINVESTMENT PRIVILEGES
If you buy a fund with a sales charge and later redeem your shares, you may
reinvest all or part of the proceeds in shares of that fund or another Piper
fund within 30 days and pay no additional sales charge, subject to each
fund's minimum investment requirements.

SYSTEMATIC WITHDRAWAL PLAN
If your account has a value of $5,000 or more, you can elect to receive
periodic payments of $100 or more, at no cost, excluding money market funds.

ACCOUNT STATEMENTS
Whenever you add to or withdraw money from your account, you'll receive a
monthly statement from Piper Jaffray. Accounts with no activity receive a
quarterly statement instead. Periodic dividend and capital gain
distributions, if any, also appear on your statement.

CONFIRMATION OF TRANSACTIONS
You receive a confirmation statement following every transaction, except in
the money market funds. All transactions are reflected on your account
statement.

$25 MILLION SHAREHOLDER PROTECTION
If you have a Piper Jaffray PRIME or PAT account, you are protected up to $25
million in the unlikely event that Piper Jaffray were to fail financially.
This is in addition to basic Securities Investor Protection Corporation
(SIPC) coverage, which protects up to $500,000 in cash and securities
($100,000 in cash only) per customer. This protection does not cover market
loss.

* AN INVESTMENT IN A PIPER MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.

AS A SHAREHOLDER IN PIPER GLOBAL FUNDS, YOU HAVE ACCESS TO A FULL RANGE OF
SERVICES AND BENEFITS. CHECK YOUR PROSPECTUS FOR DETAILS ABOUT SERVICES AND ANY
LIMITATIONS THAT MIGHT APPLY TO YOUR FUND.

<PAGE>

PACIFIC-EUROPEAN GROWTH FUND

March 15, 1996

Dear Shareholders:

FOR THE YEAR ENDED FEBRUARY 29, 1996, PACIFIC-EUROPEAN GROWTH FUND PROVIDED A
TOTAL RETURN OF 16.70%, WHICH INCLUDES REINVESTED DISTRIBUTIONS BUT NOT THE
FUND'S SALES CHARGE.* This performance is in line with the European,
Australian, Far East (EAFE) Index** return of 17.21%. The fund's strategy has
been to overweight the Pacific, underweight Europe and remain relatively
neutral in Japan and Latin America relative to the EAFE Index. The markets
of Europe were strong in the first half of the fiscal year while Japan and
the Far East rallied in the second half after noticeable weakness at the
beginning of the year. The performance of the Pacific European Growth Fund
was noticeably stronger in the second half.

IN JAPAN, A SIGNIFICANT LOOSENING OF MONETARY POLICY ALONG WITH CONCERTED
ACTION TO ADDRESS BAD DEBTS IN THE FINANCIAL SECTOR PROMPTED A SHARP RALLY IN
THE MARKET. The Japanese market rose a little over 15% for the year in local
currency terms, however, this represents a rally of nearly 30% from the low
point in June. In dollar terms, the rise was a more muted 9.1% for the year.
Approximately 40% of the fund's exposure was hedged into the dollar to
partially protect against a decline in the yen. This policy added
significantly to the fund's return.

AS THE JAPANESE AUTHORITIES CONTINUE TO INJECT LIQUIDITY INTO THE ECONOMY THE
OUTLOOK CONTINUES TO IMPROVE. We believe stronger economic growth and a sharp
rebound in corporate earnings may allow the Japanese market to move
significantly higher over the next twelve months or so. The market remains
attractively valued, in our opinion; Prices are reasonable given the
potential for growth.

THE OUTLOOK FOR MANY MARKETS IN THE PACIFIC RIM IS MUCH IMPROVED. Since the
beginning of November, the region has rallied by 15% as measured by the MSCI
Pacific Ex-Japan Index, thus reversing summer weakness and adding to earlier
gains to produce a return of nearly 22%

[Picture]

IAIN WATT (ABOVE)
IS GROUP CHIEF EXECUTIVE OF EDINBURGH FUND
MANAGERS PLC AND A CO-MANAGER OF PACIFIC-EUROPEAN GROWTH FUND.

MIKE BALFOUR (BELOW)
IS CHIEF INVESTMENT DIRECTOR AT EDINBURGH FUND MANAGERS PLC AND A
CO-MANAGER OF PACIFIC-EUROPEAN GROWTH FUND.

*PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE RETURN AND PRINCIPAL
VALUE OF YOUR INVESTMENT WILL FLUCTUATE SO THAT FUND SHARES, WHEN SOLD, MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.

**THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE INDEX IS AN UNMANAGED
INDEX OF SECURITIES LISTED ON THE STOCK EXCHANGES OF EUROPE, AUSTRALIA, AND
THE FAR EAST.

<PAGE>

PACIFIC-EUROPEAN GROWTH FUND

for the year as a whole. Inflation has largely been dealt with, reductions
in U.S. interest rates have aided government policies, and U.S. investors
have returned to Pacific markets. This suggests a strong upcoming 12 months
for these markets. Earnings growth in many of the Far Eastern markets remains
noticeably stronger than in the West and, in the long run, we believe this
will continue to feed stronger stock market returns.

CONTINENTAL EUROPEAN MARKETS HAVE RECENTLY BEEN MORE FRAGILE AS SIGNS OF
ECONOMIC SLOWDOWN BECOME MORE EVIDENT. Interest rates have not continued to
fall as expected due to the uncertainty surrounding the timetable and criteria
for Monetary Union. In addition, European unemployment has risen sharply and
both political and fiscal strains have become evident. To move ahead in the
longer term, Continental Europe needs to see both political and corporate
restructuring.

THE UNITED KINGDOM APPEARS A LITTLE BETTER PLACED THAN ITS OTHER EUROPEAN
PARTNERS. Interest rates have fallen and are likely to fall further while
both the employment and fiscal situations are stronger. Still, the market has
been unsettled by the fact that the Socialists look likely to win a
convincing general election victory within the next year for the first time
since 1979. As in the United States, some concerns are now being expressed
that the current economic slowdown may continue.

THE LATIN AMERICAN MARKETS HAVE SHOWN SOME STRENGTH RECENTLY, WHICH HAS
CONTRIBUTED TO THE FUND'S RETURN. The MSCI Latin America Free Index
returned nearly 19% for the year. While the long shadow of the Mexican
devaluation debacle is taking time to fade, there are signs that investor
interest is returning to markets which are supported by the prospect of
economic revival over the next year. As the re-emergence of growth becomes
evident, perhaps later in 1996, we expect several of these markets to post
attractive returns.

PORTFOLIO COMPOSITION
FEBRUARY 29, 1996

Pacific-European Growth Fund by Region

Japan 34%
Other Pacific Basin 28% [graphic]
Latin America 5%
Other Assets 3%
Europe 25%
Short-Term 5%

INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS. SEE MAP ON PAGE 5
FOR PORTFOLIO COMPOSITION BY COUNTRY.

EAFE Index by Region

Japan 39%
Europe 50% [graphic]
Pacific/Other 11%

INVESTMENT CATEGORIES REFLECT PERCENTAGE OF TOTAL ASSETS.

<PAGE>

PACIFIC-EUROPEAN GROWTH FUND

THE FUND'S PRIMARY STRATEGY WILL BE TO MAINTAIN A HEAVY WEIGHTING IN JAPAN
AND THE FAR EASTERN MARKETS FOR THE FORESEEABLE FUTURE. These markets are
expected to be noticeably stronger than either Europe or the U.S. over the
next year. We will also pay careful attention to European bond yields, as a
rally in the European bond markets would allow stock markets to make some
headway at least in the short term.

Thank you for your investment in Pacific-European Growth Fund. We remain
committed to providing you with top-quality investment management and service
and look forward to helping you achieve your long-term financial goals.

Sincerely,

/s/ Iain Watt

Iain Watt
Manager, Edinburgh Fund Managers

/s/ Mike Balfour

Mike Balfour
Manager, Edinburgh Fund Managers

/s/ William H. Ellis

William H. Ellis
President, Piper Capital Management

VALUE OF $10,000 INVESTED
FEBRUARY 29, 1996

[graphic]

$10,000 INVESTED IN APRIL 1990 AND HELD THROUGH FEBRUARY 29, 1996, WOULD HAVE
GROWTH TO $_______. THE FUND'S PERFORMANCE REFLECTS THE MAXIMUM SALES CHARGE
OF 4%, AS IF IT WAS APPLIED SINCE THE FUND'S INCEPTION, WHILE NO SUCH CHARGES
ARE REFLECTED IN THE INDEX OR AVERAGE. ALL PERFORMANCE FIGURES INCLUDE
REINVESTED DISTRIBUTIONS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

AVERAGE ANNUALIZED TOTAL RETURNS
THROUGH 2/29/96, INCLUDING 4% SALES CHARGE

One Year . . . . . . . . . . . . . . 23.66%
Five Year . . . . . . . . . . . . . . . . .%
Since Inception (4/27/90) . . . . . . 9.59%

DURING THESE PERIODS, THE FUND'S ADVISER WAIVED OR PAID CERTAIN FUND EXPENSES
AND/OR THE FUND'S DISTRIBUTOR VOLUNTARILY LIMITED 12b-1 FEES FOR THE FUND.
OTHERWISE, THE AVERAGE ANNUAL TOTAL RETURNS WOULD HAVE BEEN ____% ONE YEAR,
____% FIVE YEAR AND _____% SINCE INCEPTION. ALL RETURNS INCLUDE REINVESTED
DISTRIBUTIONS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

<PAGE>

PACIFIC-EUROPEAN GROWTH FUND

PORTFOLIO COMPOSITION BY COUNTRY
FEBRUARY 29, 1996
(AS A PERCENTAGE OF TOTAL ASSETS)

EUROPE [graphic (map)]

PACIFIC BASIN [graphic (map)]

LATIN AMERICA [graphic (map)]

<PAGE>

PACIFIC-EUROPEAN GROWTH FUND

TEN LARGEST HOLDINGS

FEBRUARY 29, 1996
(PERCENTAGE OF NET ASSETS)

TOSHIBA
JAPAN, 1.7%
Toshiba, the #3 electronics firm in Japan, is the world leader in making
large-scale memory chips (DRAMs) and is also a top supplier of color
flat-panel displays for portable computers. Although it has suffered in
recent years because of the Japanese recession and global competition, it is
benefiting from cost cutting measures and new product development.

MATSUSHITA ELECTRIC
WORKS
JAPAN, 1.6%
The #2 powerhouse electronics maker from Japan, Matsushita has built its
business on providing low-cost, high-quality home electronics and appliances.
Matsushita is targeting multimedia as their premier area for growth.

HUTCHISON WHAMPOA
HONG KONG, 1.6%
Hutchinson Whampoa, one of the oldest property companies in Hong Kong, has
recently benefited from its prime locations for high-rise rental properties.
Besides rental properties, the company is diversified in retailing,
telecommunications, energy, container terminals and finance.

MORI SEIKI
JAPAN, 1.5%
Mori Seiki - a major machine tool manufacturer with a strong global sales
network - is experiencing strong order growth as companies increase their
manufacturing related capital expenditures.

NOMURA
JAPAN, 1.5%
Japan's largest brokerage firm, Nomura is also a leading bond underwriter and
a major player in equity issues. The company's earnings are positioned to
improve significantly as the Japanese stock market recovers and trading
volumes increase. The company is also looking to expand into China and other
Asian countries.

DAINIPPON INK AND
CHEMICALS
JAPAN, 1.5%
Dainippon Ink and Chemicals is one of Japan's main chemical companies. In
recent years, the company has diversified into synthetic resins and chemical
products, with approximately 50% of its sales in the graphic arts market.
Also, over 50% of its sales are exports.

UNITED OVERSEAS BANK
SINGAPORE, 1.4%
United Overseas Bank is part of a Singapore banking group with a market
capitalization totaling $10 billion. Besides United Overseas Bank, this group
also includes Chung Khiaw Bank, Lee Wah Bank, Far Eastern Bank and Industrial
and Commercial Bank.

SONY CORPORATION
JAPAN, 1.4%
Sony, the global leader in consumer electronics manufacturing, has recently
been merging its electronics manufacturing with the U.S. entertainment
industry including Columbia and Tri-Star pictures and Columbia and Epic
records. The company will benefit from strong product sales worldwide while
continuing its restructuring program.

ISETAN
JAPAN, 1.4%
Isetan is a Tokyo based department store that targets the younger generation.
The company has one of the lowest exposures to corporate sales, the area
hardest hit by the recession. There are signs that consumption is improving,
especially in the clothing area where the company has a high exposure
relative to most competitors.

DAO HENG BANK
GROUP UNLIMITED
HONG KONG, 1.4%
Dao Heng Bank Group is one of Hong Kong's major commercial banking groups,
with a market capitalization of $2.8 billion.

<PAGE>
- - - - --------------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996

<TABLE>
<S> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including a repurchase agreement of $7,701,000) ..... $ 159,543,727
Cash in bank on demand deposit ........................... 253,608
Foreign cash in bank on demand deposit ................... 518,197
Receivable for investment securities sold ................ 141,493
Receivable for fund shares sold .......................... 159,838
Net unrealized appreciation of forward foreign currency
contracts held (notes 2, 4) ............................ 5,078,658
Dividends and accrued interest receivable ................ 308,060
-----------------
Total assets ......................................... 166,003,581
-----------------

LIABILITIES:
Payable for investment securities purchased .............. 1,515,647
Payable for fund shares redeemed ......................... 100,535
Accrued investment management fee ........................ 118,372
Accrued distribution and shareholder account servicing
fees ................................................... 126,340
Payable for foreign capital gains taxes .................. 828,991
Other accrued expenses ................................... 1,992
-----------------
Total liabilities .................................... 2,691,877
-----------------
Net assets applicable to outstanding capital stock ....... $ 163,311,704
-----------------
-----------------

REPRESENTED BY:
Capital stock - authorized 2 billion shares of $0.01 par
value; outstanding, 11,782,881 shares ................ $ 117,829
Additional paid-in capital ............................... 141,786,457
Accumulated net realized gain on investments and foreign
currency transactions .................................. 2,856,345
Unrealized appreciation of investments and on translation
of other assets and liabilities denominated in foreign
currencies ............................................. 18,551,073
-----------------
Total - representing net assets applicable to
outstanding capital stock ........................ $ 163,311,704
-----------------
-----------------

Net asset value per share of outstanding capital stock ... $ 13.86
-----------------
-----------------

* Investments in securities at identified cost ........... $ 146,080,551
-----------------
-----------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

7
<PAGE>
- - - - --------------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 29, 1996

<TABLE>
<S> <C>
INCOME:
Dividends (net of foreign withholding taxes of
$336,776) ............................................ $ 2,869,826
Interest ................................................. 251,483
----------------
Total investment income .............................. 3,121,309
----------------

EXPENSES (NOTE 5):
Investment management fee ................................ 1,216,305
Distribution fees ........................................ 812,754
Custodian, accounting and transfer agent fees ............ 473,367
Shareholder account servicing fees ....................... 135,878
Reports to shareholders .................................. 66,645
Directors' fees .......................................... 15,434
Audit and legal fees ..................................... 55,634
Other expenses ........................................... 55,842
----------------
Total expenses ....................................... 2,831,859
Less expenses waived by the distributor .................. (298,512)
----------------
Net expenses before expenses paid indirectly ........... 2,533,347
Less expenses paid indirectly ............................ (5,362)
----------------
Total net expenses ................................... 2,527,985
----------------

Net investment income ................................ 593,324
----------------

NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain (loss) on:
Investments (net of foreign withholding taxes of
$321,197) (note 3) ................................... 11,219,771
Foreign currency transactions .......................... (405,039)
----------------
Net realized gain ................................ 10,814,732
----------------
Net change in unrealized appreciation or depreciation of:
Investments ............................................ 8,557,882
Translation of other assets and liabilities denominated
in foreign currencies ................................ 4,933,600
----------------
Net change in unrealized appreciation or
depreciation ......................................... 13,491,482
----------------
Net gain on investments ................................ 24,306,214
----------------

Net increase in net assets resulting from
operations ....................................... $ 24,899,538
----------------
----------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

8
<PAGE>
- - - - --------------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
Year Ended Year Ended
2/29/96 2/28/95
----------------- -----------------

<S> <C> <C>
OPERATIONS:
Net investment income (loss) ........................... $ 593,324 (323,920)
Net realized gain on investments and foreign currency
transactions ........................................... 10,814,732 13,540,140
Net change in unrealized appreciation or depreciation of
investments and on translation of other assets and
liabilities denominated in foreign currencies .......... 13,491,482 (32,565,743)
----------------- -----------------

Net increase (decrease) in net assets resulting from
operations ........................................... 24,899,538 (19,349,523)
----------------- -----------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ............................... (593,324) --
From net realized gains .................................. (10,077,791) (11,890,084)
----------------- -----------------
Total distributions .................................... (10,671,115) (11,890,084)
----------------- -----------------

CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of 2,173,410 and 3,448,028 shares,
respectively ........................................... 29,496,476 50,722,931
Proceeds from issuance of 795,210 and 774,367 shares for
reinvestment of distributions, respectively ............ 10,633,411 10,384,329
Payments for 3,316,664 and 2,819,369 shares redeemed,
respectively ........................................... (45,439,458) (41,129,910)
----------------- -----------------
Increase (decrease) in net assets from capital share
transactions ......................................... (5,309,571) 19,977,350
----------------- -----------------
Total increase (decrease) in net assets .............. 8,918,852 (11,262,257)

Net assets at beginning of year ............................ 154,392,852 165,655,109
----------------- -----------------

Net assets at end of year ................................ $ 163,311,704 154,392,852
----------------- -----------------
----------------- -----------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

9
<PAGE>
- - - - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

(1) ORGANIZATION
The Pacific-European Growth Fund (the fund) is
a diversified series of Piper Global Funds
Inc. (Piper Global) which is registered under
the Investment Company Act of 1940 (as
amended) as an open-end management investment
company. The fund is the only series of Piper
Global currently outstanding. The fund pursues
its investment objective of long-term capital
appreciation by investing primarily in equity
securities of companies in the Pacific Basin
and Europe. Piper Global's articles of
incorporation permit the board of directors to
create additional series in the future.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
The significant accounting policies of the
fund are as follows:
INVESTMENTS IN SECURITIES
Securities traded on U.S. or foreign
securities exchanges or included in a national
market system are valued at the last quoted
sales price; securities for which there were
no sales reported are valued at the mean
between the bid and ask prices; exchange
listed options are valued at the last sales
price and futures contracts are valued at the
last settlement price; bonds and other
securities for which market quotations are not
readily available are valued at fair value
according to methods selected in good faith by
the board of directors. Securities with
maturities of 60 days or less when acquired or
subsequently within 60 days of maturity are
valued at amortized cost, which approximates
market value.

Securities transactions are accounted for on
the date the securities are purchased or sold.
Realized gains and losses are calculated on an
identified cost basis. Dividend income is
recognized on the ex-dividend date or upon
receipt of ex-dividend notification in the
case of certain foreign securities. Interest
income, including level-yield amortization of
premium and discount, is accrued daily.

OPTION TRANSACTIONS
For hedging purposes, the fund may buy and
sell put and call options, write covered-call
options on portfolio securities, write
cash-secured puts, and write call options that
are not covered for cross-hedging purposes.
The risk in writing a call option is that the
fund gives up the opportunity of profit if the
market price of the security increases. The
risk in writing a put option is that the fund
may incur a loss if the market price of the
security decreases and the option is
exercised. The risk in buying an option is
that the fund pay a premium whether or not the
option is exercised. The fund also has the
additional risk of not being able to enter
into a closing transaction if a liquid
secondary market does not exist.

Option contracts are valued daily and
unrealized appreciation or depreciation is
recorded. The fund will realize a gain or loss
upon expiration or closing of the option
transaction. When an option is exercised, the
proceeds on the sale of a written call option,
the purchase cost for a written put option, or
the cost of a security for purchased put and
call options is adjusted by the amount of
premium received or paid.

FUTURES TRANSACTIONS
In order to gain exposure to or protect from
changes in the market, the fund may buy and
sell financial futures contracts and related
options. Risks of entering into futures
contracts and related options include the
possibility there may be an illiquid market
and that a change in the value of the contract
or option may not correlate with changes in
the value of the underlying securities.

Upon entering into a futures contract, the
fund is required to deposit either cash or
securities in an amount (initial margin) equal
to a certain percentage of the contract

10
<PAGE>
- - - - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

value. Subsequent payments (variation margin)
are made or received by the fund each day. The
variation margin payments are equal to the
daily changes in the contract value and are
recorded as unrealized gains and losses. The
fund recognizes a realized gain or loss when
the contract is closed or expires.

FEDERAL TAXES
The fund's policy is to comply with the
requirements of the Internal Revenue Code
applicable to regulated investment companies
and to distribute all of its taxable income to
shareholders. Therefore, no income tax
provision is required. In addition, on a
calendar-year basis, the fund will distribute
substantially all of its net investment income
and realized gains, if any, to avoid the
payment of any federal excise taxes.

Net investment income and net realized gains
(losses) differ for financial statement and
tax purposes primarily because of the
recognition of certain foreign currency gains
(losses) as ordinary income (loss) for tax
purposes, the "mark-to-market" of certain
Passive Foreign Investment Companies (PFICs)
for tax purposes, and losses deferred due to
"wash sale" transactions. The character of
distributions made during the year from net
investment income or net realized gains may
differ from their ultimate characterization
for federal income tax purposes. Also, due to
the timing of dividend distributions, the
fiscal year in which amounts are distributed
may differ from the year that the income or
realized gains were recorded by the fund.

DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net
investment income and realized capital gains,
if any, will be made on an annual basis.
Shareholders may elect to have distributions
paid in cash or reinvested in additional
shares at net asset value.

REPURCHASE AGREEMENTS
The fund, along with other affiliated
registered investment companies, may transfer
uninvested cash balances to a joint trading
account, the daily aggregate of which is
invested in repurchase agreements secured by
U.S. government or agency obligations.
Securities pledged as collateral for all
individual and joint repurchase agreements are
held by the funds' custodian bank until
maturity of the repurchase agreement.
Procedures for all agreements ensure that the
daily market value of the collateral is in
excess of the repurchase amount in the event
of a default.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
Securities and other assets and liabilities
denominated in foreign currencies are
translated into U.S. dollars at the closing
rate of exchange. Foreign currency amounts
related to the purchase or sale of securities
and income and expenses are translated at the
exchange rate on the transaction date. The
fund does not separately identify that portion
of realized and unrealized gain (loss) on
investments arising from changes in the
exchange rates from the portion arising from
changes in the market value of investments.

The fund also may enter into forward foreign
currency exchange contracts for hedging
purposes. The net U.S. dollar value of foreign
currency underlying all contractual
commitments held by the fund and the resulting
unrealized appreciation or depreciation are
determined using foreign currency exchange
rates from independent pricing sources. The
fund is subject to the credit risk that the
other party will not complete the obligations
of the contract.

11
<PAGE>
- - - - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

USE OF ESTIMATES
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make
estimates and assumptions that affect the
reported amounts of assets and liabilities,
the disclosure of contingent assets and
liabilities at the date of the financial
statements, and the results of operations
during the reporting period. Actual results
could differ from those estimates.

(3) INVESTMENT
SECURITY
TRANSACTIONS
Cost of purchases and proceeds from sales of
securities, other than temporary investments
in short-term securities, for the year ended
February 29, 1996, were $102,583,039 and
$115,679,442, respectively.

(4) FORWARD FOREIGN
CURRENCY CONTRACTS
On February 29, 1996, the fund had open
foreign currency exchange contracts which
obligate the fund to deliver and receive
currencies at specified future dates. The
unrealized appreciation (depreciation) on
these contracts is included in the
accompanying financial statements. The terms
of the open contracts are as follows:

<TABLE>
<CAPTION>
Settlement Currency to U.S. $ Value Currency to U.S. $ Value Appreciation
Date be Delivered as of 2/29/96 be Received as of 2/29/96 (Depreciation)
- - - - -------- ------------------- --------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
3/01/96 1,006,174USD 1,006,174 630,593IEP 992,553 (13,621)
3/04/96 14,888,536JPY 141,492 142,310USD 142,310 818
5/22/96 1,085,825,000JPY 10,433,970 13,000,000USD 13,000,000 2,566,030
5/22/96 1,090,050,000JPY 10,474,569 13,000,000USD 13,000,000 2,525,431
--------------- --------------- -------------
$ 22,056,205 $ 27,134,863 $5,078,658
--------------- --------------- -------------
--------------- --------------- -------------
</TABLE>

IEP = IRISH PUNT
JPY = JAPANESE YEN
USD = U.S. DOLLAR

(5) FEES AND EXPENSES
The fund has entered into the following
agreement with Piper Capital Management
Incorporated (the adviser):

The investment advisory agreement provides the
adviser with a monthly investment management
fee calculated at the annualized rate of 1% of
the fund's average daily net assets up to $100
million, 0.875% on net assets of $100 million
to $200 million and 0.75% on net assets in
excess of $200 million.

Starting in April 1991, the basic fee has been
subject to a performance adjustment for the
applicable performance period, based on the
performance of the fund relative to the Morgan
Stanley Capital International EAFE Index. Such
performance period has consisted of a rolling
12-month period. For each percentage point the
fund outperforms or underperforms the EAFE
Index during the applicable performance
period, the monthly fee is increased or
decreased by 0.05% (on an annualized basis) up
to a maximum of 1/12 of 0.25% of the fund's
average daily net assets during the month for
which the calculation is made. During the year
ended February 29, 1996, the performance
adjustment decreased the management fee by
$337,288. Edinburgh Fund Managers plc has been
retained by the adviser as subadviser and is
paid a fee equal to 65% of the basic
investment management fee plus or minus 90% of
the performance adjustment. Edinburgh Fund
Managers plc has entered into an expense
reimbursement agreement with the adviser under
which it pays the adviser a monthly fee equal
to 10% of the basic investment management fee.
This 10% fee is a reimbursement to the adviser
for certain expenses it bears in connection
with the administration of the fund.

The fund pays Piper Jaffray Inc. (the
distributor) a fee in connection with the
servicing of each shareholder account and in
connection with distribution related services
provided to the fund. The fee is limited to a
maximum of 0.50% per

12
<PAGE>
- - - - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

annum of the average daily net assets of the
fund. The 0.50% reimbursement fee includes
0.25% payable as a servicing fee and 0.25%
payable as a distribution fee. For the year
ended February 29, 1996, Piper Jaffray Inc.
voluntarily agreed to limit the reimbursement
fee to an annual rate of 0.32% of average
daily net assets.

The fund has also entered into shareholder
account servicing agreements under which Piper
Jaffray and Piper Trust Company perform
various transfer and dividend disbursing agent
services. The fees, which are paid monthly to
Piper Jaffray and Piper Trust Company for
providing such services, are equal to an
annual rate of $6.00 per active shareholder
account, and $1.60 per closed shareholder
account.

In addition to the investment management fee
and the distribution reimbursement fee, the
fund is responsible for paying most other
operating expenses, including outside
directors' fees and expenses, custodian fees,
registration fees, printing and shareholder
reports, transfer agent fees and expenses,
legal, auditing and accounting services,
insurance and other miscellaneous expenses.

Sales charges received by Piper Jaffray Inc.
for distributing the fund's shares were
$400,766 for the year ended February 29, 1996.

Expenses paid indirectly represent a reduction
of custodian fees for earnings on cash
balances maintained with the custodian by the
fund.

(6) PROPOSED MERGER
The board of directors of Hercules Funds Inc.,
an affiliated open-end management investment
company, approved a plan to reorganize the
Hercules European Value Fund and Hercules
Pacific Basin Value Fund (the Hercules Funds)
subject to shareholder approval. In effect,
the reorganization would merge the Hercules
Funds into Pacific-European Growth Fund. It is
anticipated that the merger, if approved,
would occur in or around June 1996. However,
it is possible that shareholders of one or
both of the Hercules Funds will not approve
this merger. All costs associated with the
merger will be borne by the adviser.

13
<PAGE>
- - - - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

(7) FINANCIAL
HIGHLIGHTS
Per-share data for a share of capital stock
outstanding throughout each period and
selected information for each period are as
follows:

<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------
2/28/93
2/29/96 2/28/95 2/28/94 (c) 2/29/92
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA

Net asset value, beginning of period ........... $ 12.73 15.44 10.81 10.53 10.18
----------- ---------- ---------- ---------- ----------
Operations
Net investment income (loss).................... 0.05 (0.03) (0.03) -- 0.06
Net realized and unrealized gains (losses)...... 2.03 (1.63) 4.72 0.28 0.37
----------- ---------- ---------- ---------- ----------
Total from operations......................... 2.08 (1.66) 4.69 0.28 0.43
----------- ---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment income...................... (0.05) -- -- -- (0.06)
From net realized gains......................... (0.90) (1.05) (0.06) -- --
Return of capital............................... -- -- -- -- (0.02)
----------- ---------- ---------- ---------- ----------
Total distributions........................... (0.95) (1.05) (0.06) -- (0.08)
----------- ---------- ---------- ---------- ----------
Net asset value, end of period ................. $ 13.86 12.73 15.44 10.81 10.53
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------

SELECTED INFORMATION

Total return (a).................................. 16.70% (11.09%) 43.45% 2.66% 4.44%

Net assets at end of period (in millions) ...... $ 163 154 166 60 36
Ratio of expenses to average daily net assets
(b)............................................. 1.55% 1.76% 1.81% 2.25% 1.92%
Ratio of net investment income (loss) to average
daily net assets (b)............................ 0.36% (0.19%) (0.29%) 0.03% 0.60%
Portfolio turnover rate (excluding short-term
securities)..................................... 65% 57% 52% 59% 69%
</TABLE>

(A) TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE DURING THE PERIOD,
ASSUMES REINVESTMENT OF ALL DISTRIBUTIONS AND DOES NOT REFLECT A SALES
CHARGE.
(B) DURING THE PERIODS REFLECTED ABOVE, THE ADVISER AND DISTRIBUTOR VOLUNTARILY
WAIVED FEES AND EXPENSES. HAD THE FUND PAID ALL EXPENSES AND THE MAXIMUM
DISTRIBUTION FEE BEEN IN EFFECT, THE RATIOS OF EXPENSES AND NET INVESTMENT
INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE BEEN AS FOLLOWS: 1.73%/0.18%,
1.98%/(0.41%), 2.01%/(0.49%) AND 2.59%/(0.31%) IN FISCAL YEARS 1996, 1995,
1994 AND 1993, RESPECTIVELY. BEGINNING IN FISCAL 1996, THE EXPENSE RATIO
REFLECTS THE EFFECT OF GROSS EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR
PERIOD EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.
(C) THE FUND CONVERTED FROM A CLOSED-END INVESTMENT COMPANY TO AN OPEN-END
INVESTMENT COMPANY ON AUGUST 31, 1992. INFORMATION FOR PERIODS PRIOR TO
CONVERSION ARE BASED ON THE FUND'S OPERATIONS AS A CLOSED-END FUND. FISCAL
1993 EXPENSES INCLUDE 0.32% RELATED TO THE CONVERSION.

14
<PAGE>
- - - - --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

PACIFIC-EUROPEAN GROWTH FUND
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Number Market
Name of Issuer of Shares Value (a)
- - - - --------------------------------------------------------- ---------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCKS (93.0%):
EUROPE (25.8%):
FRANCE (3.9%):
Alcatel Alsthom - telecommunications ................. 17,249 $ 1,526,907
Elf Aquitaine - oil company .......................... 22,694 1,562,733
Eridania Berghim Say - sugar company ................. 6,880 1,179,643
Pinault Printemps - retail stores .................... 8,880 2,100,995
------------
6,370,278
------------

GERMANY (3.1%):
Deutsche Bank - bank ................................. 35,200 1,771,950
Mannesmann - industrial machinery manufacturing ...... 2,370 844,819
Siemens - electronic capital goods ................... 2,740 1,565,900
Veba - electricity and chemicals ..................... 18,600 875,191
------------
5,057,860
------------

IRELAND (0.6%):
Irish Life PLC - life insurance ...................... 250,000 999,490
------------

ITALY (1.4%):
Italgas - utilities .................................. 319,800(b) 991,421
Stet-societa Finanz Telefon - telecommunications and
cellular ............................................ 421,050 1,286,392
------------
2,277,813
------------

NETHERLANDS (2.3%):
Fortis Amev NV - bank ................................ 18,000 1,198,545
Klondike Post Netherland NV - telecommunications and
cellular ............................................ 17,000 681,443
Verenigde Nederlandse Uitgeversbedrijven Verenigd
Bezit - publishing .................................. 110,000 1,794,421
------------
3,674,409
------------

SPAIN (1.6%):
Iberdrola - utilities ................................ 138,000 1,358,454
Repsol SA - oil and gas .............................. 36,000 1,312,946
------------
2,671,400
------------

SWEDEN (1.0%):
Nordbanken AB - regional banks ....................... 97,000(b) 1,699,025
------------

SWITZERLAND (2.3%):
Brown Boveri - general engineering ................... 1,050 1,255,768
Nestle - food and beverages .......................... 820 896,011
Roche Holdings - pharmaceuticals ..................... 205 1,591,238
------------
3,743,017
------------

UNITED KINGDOM (9.6%):
Abbott Mead Vickers PLC - communications ............. 57,000 460,469
Antofagasta Holdings - diversified industrial
products ............................................ 60,000 344,250
Bluebird Toys PLC - toy manufacturer ................. 119,600 585,562
British Petroleum - oil and gas ...................... 124,000 1,023,539
British Telecom - telecommunications ................. 194,000 1,102,686
</TABLE>

<TABLE>
<CAPTION>
Number Market
Name of Issuer of Shares Value (a)
- - - - --------------------------------------------------------- ---------- ------------
<S> <C> <C>
BTR - conglomerate ................................... 193,700 $ 955,764
Cable & Wireless PLC- telecommunications ............. 120,000 816,102
Compass Group - contract catering .................... 115,600 861,347
Dixons Group PLC- department stores .................. 160,000 1,130,976
Jupiter Split Trust PLC - investment fund ............ 963,716(b) 1,216,451
Marks & Spencer - retail-general ..................... 141,400 906,473
Sheffield Insulation Group - building materials ...... 80,000 271,728
Siebe - industrial products and equipment ............ 102,900 1,272,091
SmithKline Beecham Class A - consumer health
products ............................................ 131,000 1,394,993
Sun Alliance Group - property and casualty
insurance ........................................... 210,000 1,240,218
Thorn Emi - hotel and leisure ........................ 52,000 1,288,872
Watmoughs - printing and publishing .................. 73,000 480,267
Yorkshire Chemicals - chemicals ...................... 82,500 325,660
------------
15,677,448
------------

Total Europe Common Stocks ......................... 42,170,740
------------

LATIN AMERICA (4.5%):
ARGENTINA (0.5%):
Inversiones Y Representaciones (IRSA) GDS - real
estate .............................................. 28,806(b) 788,564
------------

BRAZIL (2.1%):
Cia Acos Especia Itab ADR - steel manufacturer ....... 95,000 1,128,600
Refrigeracao Prana ADR - consumer durable goods ...... 122,000 1,653,832
Telecomunicacoes Brasileiras ADR - telecommunications
and cellular ........................................ 12,500 656,250
------------
3,438,682
------------

CHILE (0.4%):
Five Arrow Chile Fund - mutual fund .................. 200,000 537,500
Five Arrow Chile Fund Warrants - mutual fund ......... 80,000(b) 46,000
------------
583,500
------------

COLOMBIA (0.2%):
Carulla 144A ADS - retail stores ..................... 30,780(c) 284,715
------------

MEXICO (1.3%):
Cementos De Mexico A - cement manufacturer ........... 155,000 527,204
Telefonos De Mexico ADR - telecommunications and
cellular ............................................ 52,700 1,607,350
------------
2,134,554
------------

Total Latin America Common Stocks .................. 7,230,015
------------

PACIFIC BASIN (62.7%):
HONG KONG (9.6%):
China Light and Power Company - electric utilities ... 300,000 1,404,643
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

15
<PAGE>
- - - - --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

PACIFIC-EUROPEAN GROWTH FUND
(CONTINUED)

<TABLE>
<CAPTION>
Number Market
Name of Issuer of Shares Value (a)
- - - - --------------------------------------------------------- ---------- ------------
<S> <C> <C>
Dao Heng Bank Group - bank ........................... 559,574 $ 2,294,315
Esprit Asia Holdings Ltd. - retail ................... 2,500,000 961,974
Hutchison Whampoa - diversified holding company ...... 400,000 2,535,084
Ka Wah Bank - commercial bank ........................ 3,000,000 1,096,165
Sun Hung Kai Properties - property ................... 230,000 2,052,642
Swire Pacific Limited - diversified holding
company ............................................. 250,000 2,182,630
Wharf Holdings - real estate services ................ 500,000 1,936,882
Yizheng Chemicals - chemicals and plastics ........... 4,490,000 1,248,592
------------
15,712,927
------------

INDIA (0.4%):
Hindalco Industries ADR - aluminum manufacturer ...... 20,000(b) 717,400
------------

INDONESIA (2.6%):
PT Andayani Megah - tire and rubber .................. 850,000 733,866
PT Bank International Indonesia - bank . 500,000 2,099,072
PT Hanjaya Mandala Sampoerna - tobacco ............... 75,000 818,314
PT Indocement - construction materials . 160,000 637,167
------------
4,288,419
------------

JAPAN (34.5%):
Amada Metrecs - electronic capital goods ............. 108,000 1,631,932
Circle K Japan Company - retail stores ............... 22,000(b) 932,478
Daifuku - machine tool manufacturer .................. 78,000 1,156,379
Dainippon Ink and Chemical - chemicals and
plastics ............................................ 530,000 2,407,603
Daiwa Securities - finance ........................... 150,000 2,109,765
DDI Corp - telecommunications ........................ 255 1,868,425
Denki Kagaku - chemicals and plastics ................ 300,000(b) 1,200,285
H.I.S. Company - leisure and entertainment ........... 22,000(b) 1,045,379
Honda Motor - motor vehicles ......................... 89,000 1,886,149
Ichiyoshi Securities - securities broker ............. 125,000 801,853
Isetan - retail stores ............................... 184,000 2,308,197
Kobe Steel - iron, steel and aluminum ................ 745,000(b) 2,159,420
Kumagai Gumi - building materials .................... 400,000 1,634,593
Maeda Road Construction - transportation ............. 90,000 1,565,217
Marubeni Corporation - wholesale distributor ......... 420,000 2,271,133
Matsushita Electric Works - electricals .............. 237,000 2,545,118
Mitsubishi Materials - metal mining company .......... 430,000 2,227,132
Mitsui Fudosan - real estate ......................... 190,000 2,220,955
Mori Seiki - machine tool manufacturer . 121,000 2,518,318
Nihon Cement Company - cement manufacturer ........... 344,000 2,288,430
Nippon Telephone and Telegraph -
telecommunications .................................. 291 2,210,121
Nippon Yusen - shipping .............................. 392,000 2,235,210
Nissha Printing - print, media publishing 75,000 1,104,775
Nomura - stock broker ................................ 118,000 2,422,238
Sony Corporation - electronics ....................... 40,000 2,341,649
</TABLE>

<TABLE>
<CAPTION>
Number Market
Name of Issuer of Shares Value (a)
- - - - --------------------------------------------------------- ---------- ------------
<S> <C> <C>
Sumitomo Bank - commercial bank ...................... 76,000 $ 1,444,524
Sumitomo Trust & Banking - bank ...................... 128,000 1,593,538
Tokyo Steel Manufacturing - steel manufacturer ....... 84,000 1,540,699
Topy Industries - tires and auto parts ............... 279,000 1,206,415
Toshiba - electronics ................................ 350,000 2,704,205
Tsudakoma - machine tool manufacturer 101,000 662,294
------------
56,244,429
------------

MALAYSIA (1.7%):
Kim Hin Industries - ceramic tile manufacturer ....... 150,000 300,177
Telekom Malaysia - telecommunications 160,000 1,374,926
YTL Corporation - construction ....................... 240,000 1,130,077
------------
2,805,180
------------

PHILIPPINES (1.2%):
Philippine Long Distance Telephone -
telecommunications and cellular ..................... 15,990 944,544
Philippine National Bank - bank ...................... 75,000(b) 1,060,983
------------
2,005,527
------------

SINGAPORE (4.8%):
City Developments - real estate ...................... 250,000 2,036,119
Development Bank of Singapore - financial services ... 150,000 2,135,269
Genting Berhad - hotels and leisure .................. 150,000 1,341,966
United Overseas Bank - bank .......................... 219,200 2,344,136
------------
7,857,490
------------

SOUTH KOREA (2.4%):
Pohang Iron and Steel - steel manufacturer ........... 18,000 1,383,517
Shinhan Bank - commercial bank ....................... 44,977 1,110,415
Shinsegae Department Stores - retail stores .......... 14,770 1,007,024
Yukong - oil company ................................. 15,000(b) 465,785
------------
3,966,741
------------

THAILAND (5.5%):
Bank of Ayudhya - commercial bank .................... 260,000 1,746,265
Electricity General Public Company - electric
utility ............................................. 300,000 1,127,026
General Finance and Securities Company - financial
services ............................................ 300,000 1,285,204
Land and Houses - residential properties 75,200 1,490,251
Siam Cement - cement manufacturer .................... 21,400 1,106,724
Srithai Superware - consumer durable goods ........... 100,000 670,302
TelecomAsia Corporation - telecommunications ......... 500,000(b) 1,418,087
------------
8,843,859
------------

Total Pacific Basin Common Stocks .................. 102,441,972
------------

Total Common Stock
(cost: $138,379,551) .............................. 151,842,727
------------
</TABLE>

SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.

16
<PAGE>
- - - - --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

PACIFIC-EUROPEAN GROWTH FUND
(CONTINUED)

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- - - - --------------------------------------------------------- ---------- ------------
<S> <C> <C>
SHORT-TERM SECURITIES (4.7%):
Repurchase agreement with Morgan Stanley in a joint
trading account, collateralized by U.S. government
agency securities, acquired on 2/29/96, accrued
interest at repurchase date of $1,112, 5.20%, 3/1/96
(cost: $7,701,000) ................................ $ 7,701,000 7,701,000
------------

Total Investments in Securities (97.7%)
(cost: $146,080,551) (d) .......................... 159,543,727
------------

Other assets in excess of liabilities (2.3%) ....... 3,767,977
------------
Net assets (100.0%) ............................... $ 163,311,704
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:

(A) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(B) PRESENTLY NON-INCOME PRODUCING.
(C) REPRESENTS SECURITY SOLD UNDER RULE 144A AND IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SECURITY HAS BEEN
DETERMINED TO BE LIQUID UNDER GUIDELINES ESTABLISHED BY THE BOARD OF
DIRECTORS.
(D) AT FEBRUARY 29, 1996, THE COST OF INVESTMENTS FOR FEDERAL INCOME TAX
PURPOSES WAS $146,363,187. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND
DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS
FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $ 21,596,119
GROSS UNREALIZED DEPRECIATION ...... (8,415,579)
------------
NET UNREALIZED APPRECIATION .... $ 13,180,540
------------
------------
</TABLE>

17
<PAGE>
- - - - --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER GLOBAL FUNDS INC.:

We have audited the accompanying statement of
assets and liabilities, including the schedule
of investments in securities, of
Pacific-European Growth Fund (a series of
Piper Global Funds Inc.) as of February 29,
1996, and the related statement of operations
for the year then ended, the statements of
changes in net assets for each of the years in
the two-year period then ended and the
financial highlights for each of the years in
the five-year period then ended. These
financial statements and the financial
highlights are the responsibility of the
fund's management. Our responsibility is to
express an opinion on these financial
statements and the financial highlights based
on our audits.

We conducted our audits in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about
whether the financial statements and the
financial highlights are free of material
misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts
and disclosures in the financial statements.
Investment securities held in custody are
confirmed to us by the custodian. As to
securities purchased and sold but not received
or delivered, we request confirmations from
brokers, and where replies are not received,
we carry out other appropriate auditing
procedures. An audit also includes assessing
the accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements and
the financial highlights referred to above
present fairly, in all material respects, the
financial position of Pacific-European Growth
Fund as of February 29, 1996, and the results
of its operations for the year then ended, the
changes in its net assets for each of the
years in the two-year period then ended and
the financial highlights for each of the years
in the five-year period then ended, in
conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Minneapolis, Minnesota
March 14, 1996

18
<PAGE>
- - - - --------------------------------------------------------------------------------
FEDERAL INCOME TAX INFORMATION

Fiscal Year Ended February 29, 1996

Information for federal income tax purposes is
presented below to aid shareholders in
reporting taxable distributions made by the
fund during the fiscal year ended February 29,
1996. In early February 1996, you should have
received Form 1099-DIV which reported these
distributions. Shareholders should consult a
tax advisor on how to report these
distributions at the state and local levels.

<TABLE>
<CAPTION>
Payable Date Per Share
- - - - ------------------------------------------------------------------------- -----------

<S> <C>
December 5, 1995 ...................................................... $ 0.8794*
December 22, 1995........................................................ 0.0680
-----------
Total distributions ............................................... $ 0.9474
-----------
-----------
</TABLE>

* THIS DISTRIBUTION INCLUDES $0.0684 OF NET
SHORT-TERM CAPITAL GAINS AND $0.8110 OF NET
LONG-TERM CAPITAL GAINS.

19
<PAGE>
- - - - --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS

<TABLE>
<S> <C>
DIRECTORS Jaye F. Dyer, PRESIDENT, DYER MANAGEMENT COMPANY
William H. Ellis, PRESIDENT, PIPER JAFFRAY COMPANIES INC.,
PIPER CAPITAL MANAGEMENT INCORPORATED
Karol D. Emmerich, PRESIDENT, THE PARACLETE GROUP
Luella G. Goldberg, DIRECTOR, TCF FINANCIAL, RELIASTAR FINANCIAL CORP.,
HORMEL FOODS CORP.
George Latimer, CHIEF EXECUTIVE OFFICER, NATIONAL EQUITY FUNDS
Iain Watt, MANAGING DIRECTOR, EDINBURGH FUND MANAGERS PLC
Michael Balfour, DIRECTOR, EDINBURGH FUND MANAGERS PLC

OFFICERS William H. Ellis, CHAIRMAN OF THE BOARD
Paul A. Dow, PRESIDENT
Robert H. Nelson, SENIOR VICE PRESIDENT AND TREASURER
Nancy S. Olsen, SENIOR VICE PRESIDENT
Susan Sharp Miley, SECRETARY

INVESTMENT ADVISER Piper Capital Management Incorporated
222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804

INVESTMENT SUBADVISER Edinburgh Fund Managers plc
DONALDSON HOUSE, 97 HAYMARKET TERRACE,
EDINBURGH, SCOTLAND EH12 5HD

INDEPENDENT AUDITORS KPMG Peat Marwick LLP
4200 NORWEST CENTER, MINNEAPOLIS, MN 55402

CUSTODIAN First Trust
180 EAST FIFTH STREET, ST. PAUL, MN 55101

TRANSFER AGENT Investors Fiduciary Trust Company
127 WEST 10TH STREET, KANSAS CITY, MO 64105-1716

LEGAL COUNSEL Dorsey & Whitney LLP
220 SOUTH SIXTH STREET, MINNEAPOLIS, MN 55402
</TABLE>

20
<PAGE>

[PIPER CAPITAL MANAGEMENT LOGO] Bulk Rate
U.S. Postage
PIPER CAPITAL MANAGEMENT INCORPORATED PAID
222 SOUTH NINTH STREET Permit No. 3008
MINNEAPOLIS, MN 55402-3804 Mpls., MN

PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.
[LOGO] THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.

In an effort to reduce costs to our shareholders, we have
implemented a process to reduce duplicate mailings of
the fund's shareholder reports. This householding process
should allow us to mail one report to each address where
one or more registered shareholders with the same last
name reside. If you would like to have additional reports
mailed to your address, please call our Shareholder
Services area at 1 800 866-7778, or mail your request to:

Corporate Communications
Piper Capital Management
222 South Ninth Street
Minneapolis, MN 55402-3804

<PAGE>

Dated: February 7, 1996

Supplement to Prospectus Dated August 29, 1995

HERCULES FUNDS INC.

On February 6, 1996, the Board of Directors of Hercules Funds Inc. (the
"Company") considered a recommendation of Piper Capital Management Incorporated
(the "Manager"), to eliminate the Company as a separate family of funds because
the Company has been unable to attract sufficient assets for its continued
operation to be economically viable. The Board of Directors, including all of
its members who are not "interested persons" of the Company (as defined in the
Investment Company Act of 1940), unanimously agreed that it would be in the best
interests of shareholders of each of the four series of the Company named below
(each, a "Fund" and collectively, the "Funds") to effect the following mergers
(the "Proposed Mergers"):

(i) Hercules North American Growth and Income Fund to be merged into
Growth and Income Fund, a series of Piper Funds Inc.;

(ii) Hercules European Value Fund to be merged into Pacific-European Growth
Fund ("PEF"), a series of Piper Global Funds Inc. ("Piper Global");

(iii) Hercules Pacific Basin Value Fund to be merged into PEF; and

(iv) Hercules Latin American Value Fund to be merged into a newly created
series of Piper Global.

If approved by shareholders of each Fund, the Proposed Mergers would be
effected by combining substantially all of the assets of each Fund with the
corresponding fund set forth above (each an "Acquiring Fund"), and distributing
to shareholders of the Fund shares of the corresponding Acquiring Fund with a
value equal to the value of their holdings in the Fund. Each Acquiring Fund is
managed by the Manager. Edinburgh Fund Managers plc acts as subadviser for PEF
and would serve in the same capacity for the newly created series of Piper
Global.

The Manager has agreed to pay all direct expenses associated with the
Proposed Mergers (such as costs of proxy solicitation). No commission, sales
loads or other charges will be incurred by shareholders in connection with the
Proposed Mergers. Also, the Proposed Mergers should not result in any taxable
income to the Company or its shareholders for federal income tax purposes.

In addition, the Board of Directors unanimously agreed that it is in the
best interests of shareholders of Hercules World Bond Fund to liquidate the
assets of the World Bond Fund (the "Proposed Liquidation"). The Manager has
agreed to pay all direct expenses associated with the Proposed Liquidation (such
as costs of proxy solicitation).

The Company will call a Special Meeting of Shareholders at a date to be
announced for the purpose of voting on the Proposed Mergers and the Proposed
Liquidation. The Proposed Mergers and the Proposed Liquidation are each subject
to the approval of shareholders of the relevant Fund and are also subject to
other conditions. Additional information concerning the Proposed Mergers and
Proposed Liquidation will be included in the proxy material respecting each of
the proposed transactions to be provided to shareholders as of a record date not
yet determined.

Additionally, with respect to Hercules Money Market Fund, because the costs
associated with operating the Money Market Fund have made it economically
unfeasible for the Manager to continue absorbing certain fund expenses, the
Manager intends to cease this practice effective as of July 1, 1996 thereby
eliminating the Money Market Fund's 1% expense limitation currently in place.

<PAGE>
HERCULES EUROPEAN VALUE FUND
A SERIES OF
HERCULES FUNDS INC.
SUPPLEMENT DATED DECEMBER 20, 1995
TO PROSPECTUS DATED AUGUST 29, 1995

Christian Simond is no longer responsible for the day-to-day management of
European Value Fund. Nils Francke, formerly Mr. Simond's assistant, has assumed
such responsibilities. Biographical information about Mr. Francke is included in
this Prospectus. John Gerth will assist Mr. Francke in the day-to-day management
of European Value Fund. Mr. Gerth joined Pictet in 1991. Prior to that time he
was a Vice President and Senior Securities Officer and Head of International
Equities for Citibank.
<PAGE>
PROSPECTUS DATED AUGUST 29, 1995

HERCULES FUNDS INC.
222 SOUTH NINTH STREET,
MINNEAPOLIS, MINNESOTA 55402-3804
(612) 342-1100 (LOCAL CALLS)
(800) 584-1317 (TOLL FREE)

Hercules Funds Inc. (the "Company") is comprised of eight funds (the
"Fund(s)"). A prominent international advisory organization has been retained on
behalf of each Fund to act as its sub-adviser (the "Sub-Adviser(s)"). This
prospectus relates to six of the Funds; the remaining two Funds are not being
offered for sale as of the date hereof. The six Funds, their investment
objectives and Sub-Advisers are as follows:

HERCULES NORTH AMERICAN GROWTH AND INCOME FUND ("North American Fund") has
investment objectives of both long-term capital appreciation and current income.
North American Fund seeks to achieve its objectives primarily through
investments in securities of issuers in Mexico, Canada and the U.S. ACCI
WORLDWIDE, S.A. DE C.V. ("Acci") and AGF INVESTMENT ADVISORS, INC. ("AGF") serve
as Sub-Advisers to North American Fund regarding investments in securities of
Mexican and Canadian issuers, respectively. PIPER CAPITAL MANAGEMENT
INCORPORATED, the Company's investment manager, also manages the U.S. portion of
North American Fund.

HERCULES EUROPEAN VALUE FUND ("European Value Fund") has investment
objectives of long-term capital appreciation and to a lesser extent, current
income. European Value Fund seeks to achieve its objectives primarily through
investments in securities of issuers located in Europe. PICTET INTERNATIONAL
MANAGEMENT LIMITED ("Pictet") serves as Sub-Adviser to European Value Fund.

HERCULES PACIFIC BASIN VALUE FUND ("Pacific Value Fund") has investment
objectives of long-term capital appreciation and to a lesser extent, current
income. Pacific Value Fund seeks to achieve its objectives primarily through
investments in securities of issuers located in the Pacific Basin, which is
defined as those countries bordering on the Pacific Ocean. EDINBURGH FUND
MANAGERS PLC ("EFM") serves as Sub-Adviser to Pacific Value Fund.

HERCULES LATIN AMERICAN VALUE FUND ("Latin American Value Fund") has
investment objectives of long-term capital appreciation and to a lesser extent,
current income. Latin American Value Fund seeks to achieve its objectives
primarily through investments in securities of issuers located in Latin America.
BANKERS TRUST COMPANY serves as Sub-Adviser to Latin American Value Fund.

HERCULES WORLD BOND FUND ("Bond Fund") has an investment objective of a high
level of total investment return. Bond Fund seeks to achieve its objective
through investments principally in debt securities of issuers located anywhere
in the world. SALOMON BROTHERS ASSET MANAGEMENT LIMITED serves as Sub-Adviser to
Bond Fund.

HERCULES MONEY MARKET FUND ("Money Market Fund") has an investment objective
of maximizing current income consistent with the preservation of capital and
maintenance of liquidity. Money Market Fund invests exclusively in a variety of
high quality money market instruments, such as high grade domestic commercial
paper, repurchase agreements, obligations of domestic banks (e.g., time
deposits, certificates of deposit and bankers' acceptances), U.S. Government
securities and short-term corporate obligations. Money Market Fund seeks to
maintain a stable net asset value of $1.00 per share. SALOMON BROTHERS ASSET
MANAGEMENT INC serves as Sub-Adviser to Money Market Fund.

INVESTMENT IN EACH OF THE FUNDS (OTHER THAN MONEY MARKET FUND) INVOLVES
CERTAIN RISKS NOT TYPICALLY ASSOCIATED WITH A FUND WHICH INVESTS PRIMARILY IN
SECURITIES OF U.S. ISSUERS. SEE "SPECIAL RISK CONSIDERATIONS."

This Prospectus describes concisely the information about the Funds that you
should know before investing. Please read the Prospectus carefully before
investing and retain it for future reference. A Statement of Additional
Information about the Company dated August 29, 1995 is available free of charge.
Write to the Company at 222 South Ninth Street, 20th Floor, Minneapolis,
Minnesota 55402-3804 or telephone (612) 342-1100 (local calls) or (800) 584-1317
(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.

INVESTMENT IN MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.

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

The Company is an open-end management investment company, commonly called a
mutual fund. The Company, which was organized as a corporation under the laws of
the State of Minnesota in 1993, has one class of capital stock that is currently
issued in eight separate series. This Prospectus relates to shares of six of
those series: Hercules North American Growth and Income Fund ("North American
Fund") Hercules European Value Fund ("European Value Fund"), Hercules Pacific
Basin Value Fund ("Pacific Value Fund"), Hercules Latin American Value Fund
("Latin American Value Fund"), Hercules World Bond Fund ("Bond Fund") and
Hercules Money Market Fund ("Money Market Fund") (sometimes referred to herein
as a "Fund" or, collectively, as the "Funds"). Shares of the remaining two
series, Hercules Emerging Markets Debt Fund and Hercules Global Short-Term Fund,
are not being offered for sale as of the date hereof. This prospectus relates to
the continuous offering of shares by each of the six Funds set forth above.

MANAGEMENT

On July 18, 1995, shareholders of the Company approved an investment
advisory and management agreement between Piper Capital Management Incorporated
(the "Manager"), a corporation organized under the laws of the state of Delaware
and the Company. Each Fund pays the Manager a fee for managing its investment
portfolio. Management fees for each of the Funds, except for Money Market Fund,
are paid monthly at an annual rate of 1.0% of average daily net assets of the
applicable Fund. These fees are higher than fees paid by most other investment
companies. The management fees for Money Market Fund are paid monthly at an
annual rate of .50% of average daily net assets. See "Management--Investment
Manager."

As previously described, with respect to each Fund, the Manager has entered
into a sub-advisory agreement pursuant to which the Sub-Advisers, subject to the
supervision of the Manager, are responsible for certain investment functions
including researching and developing an overall investment plan and making and
implementing investment decisions regarding assets of the respective Fund. With
respect to North American Fund, the Manager has retained the responsibility to
manage the U.S. portion of the portfolio. For its services, each Sub-Adviser is
paid by the Manager a fee, payable over the same time periods and calculated in
the same manner as the management fee of the applicable Fund, of .50% of average
daily net assets of such Fund (in the case of North American Fund, each of the
two Sub-Advisers is paid .166 of 1%), except that with respect to Money Market
Fund, the Sub-Adviser is paid by the Manager a fee of .25% of average daily net
assets of the applicable Fund. See "Management--Sub-Advisers."

THE DISTRIBUTOR

Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor"), a wholly owned
subsidiary of Piper Jaffray Companies Inc. and an affiliate of the Manager,
serves as Distributor of the Company's shares. For its services as Distributor,
which include distributing shares of the Funds and for sales-related expenses,
the Distributor is entitled to reimbursement from each Fund (other than Money
Market Fund) each month for its actual expenses incurred in the distribution and
promotion of each Fund's shares pursuant to a Rule 12b-1 Distribution Plan
adopted by each of the Funds. Reimbursement to the Distributor is computed
separately for each of the applicable Funds and may not exceed .70% per annum of
the average daily net assets with respect to North American Fund, European Value
Fund, Pacific Value Fund and Latin American Value Fund and .50% per annum with
respect to Bond Fund. The Rule 12b-1 fees may be limited voluntarily by the
Distributor. Currently, reimbursement to the Distributor is limited on a per
annum basis to .50% with respect to average daily net assets of North

2
<PAGE>
American Fund, European Value Fund, Pacific Value Fund and Latin American Value
Fund and .30% with respect to average daily net assets of Bond Fund. These
limitations may be revised or terminated at any time after the Company's current
fiscal year. See "Distribution of Fund Shares."

OFFERING PRICES

Shares of the Funds are offered to the public at the next determined net
asset value after receipt of an order by either the Distributor or the Funds'
transfer agent, Investors Fiduciary Trust Company ("IFTC"). Shares redeemed
within two years of purchase are subject to a contingent deferred sales charge
under most circumstances. See "Purchase of Shares--Public Offering Price" and
"Redemption of Shares--Contingent Deferred Sales Charge."

MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS

The minimum initial investment for each Fund is $250. Subsequent investments
must be $100 or more. These minimums may be lowered by the Distributor in
certain instances. See "Purchase of Shares--Minimum Investments."

EXCHANGES

Shares of a Fund may be exchanged for shares of any other Fund offered in an
investor's state at net asset value. An investor may make twelve exchanges per
year without payment of a service charge. Thereafter, there is a $50 service
charge for each exchange. See "Purchase of Shares--Exchange Privilege."

REDEMPTIONS

Shares of any Fund may be redeemed at any time at their net asset value next
determined after receipt of a redemption request by the Distributor or by IFTC.
The Company reserves the right, upon 30 days' written notice, to redeem an
account in any Fund if the net asset value of the shares in that account falls
below $200 as the result of a redemption or transfer request. Although no
commission or sales load is imposed on the purchase of shares, a contingent
deferred sales charge of up to 2% of net asset value is imposed on redemptions
of shares of each Fund (other than Money Market Fund) within two years of
purchase (the "holding period"). However, there is no charge imposed on
redemption of shares purchased through reinvestment of dividends or
distributions. See "Redemption of Shares."

TAXES

Each of the Funds is treated as a separate corporation for federal tax
purposes and each of the Funds expects to qualify as a regulated investment
company during the current taxable year.

CERTAIN SPECIAL RISK CONSIDERATIONS

An investment in any of the Funds is subject to certain risks, as set forth
in detail under "Special Risk Considerations." As with other mutual funds, there
can be no assurance that any Fund will achieve its objective. Each Fund (other
than Money Market Fund) invests in foreign securities. Accordingly, an
investment in each Fund (other than Money Market Fund) requires consideration of
certain risk factors that are not typically associated with investing in
securities of U.S. companies. To the extent a Fund's investments are denominated
in currencies other than the U.S. dollar, such Fund is subject to a risk of a
decline in the value of such currency against the U.S. dollar. Additional risk
factors include potential political and economic instability of certain
countries, limited liquidity, volatile prices of certain securities of non-U.S.
companies and foreign taxation. See "Special Risk Considerations--Foreign
Securities."

3
<PAGE>
The value of debt securities in which each of the Funds may invest typically
varies inversely with changes in the level of interest rates. Each Fund may
borrow for investment purposes principally through the use of reverse repurchase
agreements and to a lesser extent through borrowing from banks. This speculative
technique is referred to as "leveraging." Leveraging generally exaggerates the
effect on net asset value of any increase or decrease in the market value of the
Funds' portfolio securities. Money borrowed for leveraging will be subject to
interest costs which may or may not be recovered by income from or appreciation
of the securities purchased.

Some or all of the Funds, to the extent set forth under "Investment
Objectives and Policies," "Special Investment Methods" and "Other Eligible
Investments" may engage in the following investment practices: forward foreign
currency exchange transactions and foreign currency futures and options, the use
of repurchase agreements, entering into options and futures transactions with
respect to financial instruments and stock and interest rate indexes, entering
into interest rate swaps, caps and floors, the purchase of securities on a
"when-issued" basis, the purchase or sale of securities on a "forward
commitment" basis, the purchase of zero coupon and payment in kind bonds, the
purchase of Brady Bonds, the use of short sales, the purchase of illiquid
securities, investments in foreign index linked instruments and the purchase of
mortgage-related securities. The use of certain of these financial techniques to
generate income is considered speculative and may involve the creation of
leverage. In addition, the use of certain of these practices may increase the
volatility of a Fund's net asset value. Certain of the investment techniques set
forth above are commonly referred to as "derivative instruments." The term
"derivatives" has been used to identify a variety of financial instruments;
there is no discrete class of instruments that is covered by the term. A
"derivative" is commonly defined as a financial instrument whose value is based
upon, or derived from, an underlying index, reference rate (e.g., interest rates
or currency exchange rates), security, commodity, or other asset. All of these
transactions involve certain special risks, as set forth under "Special Risk
Considerations" and "Other Eligible Investments--Brady Bonds."

The Company has registered as a "non-diversified" investment company so that
each Fund will be able to invest more than 5% of the value of its assets in the
obligations of a single issuer, subject to the diversification requirements of
Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to the
Funds. To the extent the Funds invest a relatively high percentage of their
assets in obligations of a limited number of issuers, the Funds may be more
susceptible than diversified funds to any single economic, political or
regulatory occurrence or to changes in an issuer's financial condition or in the
market's assessment of issuers. See "Special Risk
Considerations--Non-Diversified Status."

Latin American Value Fund and Bond Fund may invest in lower-quality debt
securities rated below Baa3 by Moody's Investors Service, Inc. ("Moody's") or
BBB- by Standard & Poor's Ratings Group ("S&P") (commonly known as "high yield"
or "junk" bonds) or, if unrated, of comparable quality as determined by their
respective Sub-Advisers. Latin American Value Fund and Bond Fund will each
invest less than 35% of its net assets in such high yield securities. Investment
in high yield securities typically involves risks not associated with
higher-rated securities, including, among others, overall greater risk of not
receiving timely and ultimate payment of interest and principal, potentially
greater sensitivity to general economic conditions and changes in interest
rates, greater market price volatility and less liquid secondary market trading.
See "Special Risk Considerations--Risks of Lower-Rated Debt Securities."

Each of the Funds (other than Money Market Fund) may invest in loans,
assignments of loans and participations in loans. Such investments are subject
to special risks, including the lack of a liquid

4
<PAGE>
secondary market for such securities and, in the case of loan participations,
assumption of the credit risk of both the underlying borrower and the seller of
the participation. See "Other Eligible Investments--Loan Participations and
Assignments."

SHAREHOLDER INQUIRIES

Any questions or communications regarding a shareholder account should be
directed to your broker-dealer or to IFTC at (800) 245-7087. General inquiries
regarding the Funds should be directed to the Funds at the telephone number set
forth on the cover page of this Prospectus.

5
<PAGE>
FEES AND EXPENSES

<TABLE>
<CAPTION>
LATIN
NORTH EUROPEAN PACIFIC AMERICAN MONEY
AMERICAN VALUE VALUE VALUE BOND MARKET
FUND FUND FUND FUND FUND FUND
-------- -------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)............................................ 0% 0% 0% 0% 0% 0%
Maximum Contingent Deferred Sales Charge(1)................. 2.00% 2.00% 2.00% 2.00% 2.00% None
Exchange Fee(2)............................................. $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
ANNUAL FUND OPERATING EXPENSES (after fee limitation and
reimbursement; as a percentage of average net assets)
Management Fees............................................. 1.00% 1.00% 1.00% 1.00% 1.00% .50%
12b-1 Fees (after fee limitation)(3),(4).................... .50% .50% .50% .50% .30% 0%(5)
Other Expenses (after expense reimbursement)(4).............
Administrative Services, Transfer Agency and Custodian.... .50% .50% .50% .50% .50% .50%
Total Fund Operating Expenses (after fee limitation and
reimbursement)(4).......................................... 2.00% 2.00% 2.00% 2.00% 1.80% 1.00%
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(4)
1 year.................................................... $ 40 $ 40 $ 40 $ 40 $ 38 $ 10
3 years................................................... $ 63 $ 63 $ 63 $ 63 $ 57 $ 32
5 years................................................... 108 108 108 108 97 55
10 years.................................................. 233 233 233 233 212 122
-------- -------- ------- -------- ------ ------
-------- -------- ------- -------- ------ ------
You would pay the following expenses on the same investment,
assuming no redemption
1 year.................................................... $ 20 $ 20 $ 20 $ 20 $ 18 $ 10
3 years................................................... $ 63 $ 63 $ 63 $ 63 $ 57 $ 32
5 years................................................... 108 108 108 108 97 55
10 years.................................................. 233 233 233 233 212 122
</TABLE>

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

(1)The maximum 2% contingent deferred sales charge on shares of each Fund
(other than Money Market Fund) applies to redemptions during the first 365
days after purchase; the charge declines to 1% during the next 365 days
after purchase, reaching zero thereafter.

(2)There is a $50 fee for each exchange in excess of 12 exchanges per year. See
"Purchase of Shares-- Exchange Privilege."

(3)A portion of the Rule 12b-1 fee equal to .25% of the average daily net
assets with respect to all of the Funds (other than Money Market Fund) is
characterized as a service fee within the meaning of the guidelines of the
National Association of Securities Dealers, Inc. ("NASD").

(4)12b-1 fees for each Fund (other than Money Market Fund) are currently
limited voluntarily by the Distributor. In addition, certain "Other
Expenses" are borne by the Manager. The amounts set forth in the Example may
increase if such fee limitations and expense reimbursement are removed. For
each Fund's current fiscal year the Manager has voluntarily limited total
expenses on a per annum basis to 2% with respect to average daily net assets
of North American Fund, European Value Fund, Pacific Value Fund and Latin
American Value Fund, 1.8% with respect to average daily net assets of Bond
Fund and 1.00% with respect to average daily net assets of Money Market
Fund. After each Fund's current fiscal year, these limitations may be
revised or terminated at any time.

(5)The Company's 12b-1 Distribution Plan authorizes payments by Money Market
Fund in an amount not to exceed .10% per annum of its daily net assets;
however, the Board of Directors of the Company determined to discontinue
such payments by the Fund effective as of June 19, 1995.

6
<PAGE>
The purpose of the above Fees and Expenses table is to assist the investor
in understanding the various costs and expenses that each Fund expects to incur
and that investors in the Funds should expect to bear directly or indirectly.
The percentages set forth for each Fund which are included within the category
"Other Expenses" are estimates. The Rule 12b-1 fees set forth in the table (for
each of the Funds other than Money Market Fund) are pursuant to voluntary fee
limitations by the Distributor which may be revised or terminated at any time
after the conclusion of each Fund's current fiscal year. Absent such fee
limitation, Rule 12b-1 fees may not exceed .70% per annum of the average daily
net assets with respect to North American Fund, Pacific Value Fund, European
Value Fund and Latin American Value Fund and .50% with respect to Bond Fund. In
addition to the Rule 12b-1 fee limitation, certain "Other Expenses" were
voluntarily waived or absorbed by the Manager. Absent such waivers and
reimbursements for the fiscal year ended June 30, 1995, "Other Expenses" would
have been 1.69% of average daily net assets for North American Fund, 1.51% of
average daily net assets for European Value Fund, .83% of average daily net
assets for Pacific Value Fund, 1.77% of average daily net assets for Latin
American Value Fund, 1.03% of average daily net assets for Bond Fund and 24.84%
of average daily net assets for Money Market Fund. Had the Funds paid all
expenses, Total Fund Operating Expenses for the fiscal year ended June 30, 1995
would have been 3.39% of average daily net assets for North American Fund, 3.21%
of average daily net assets for European Value Fund, 2.53% of average daily net
assets for Pacific Value Fund, 3.47% of average daily net assets for Latin
American Value Fund, 2.53% of average daily net assets for Bond Fund and 25.44%
of average daily net assets for Money Market Fund.

THE TABLE AND EXAMPLES SET FORTH ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OR PREDICTION OF FUTURE EXPENSES OR PERFORMANCE WHICH MAY BE MORE
OR LESS THAN THOSE SET FORTH. For additional information, including a more
complete explanation of management and Rule 12b-1 fees, see "Management--
Investment Manager," "Management--Expenses" and "Distribution of Fund Shares."

Long-term shareholders of the Funds (other than Money Market Fund) may pay
more in Rule 12b-1 distribution fees than the economic equivalent of the maximum
front-end sales charge permitted by the NASD.

7
<PAGE>
FINANCIAL HIGHLIGHTS

The following financial highlights show certain per share data and selected
information for a share of capital stock outstanding during the indicated
periods for the Funds. The information has been audited by KPMG Peat Marwick
LLP, independent auditors, whose report thereon appears in the Statement of
Additional Information. This information should be read in conjunction with the
financial statements and the related notes thereto appearing in the Statement of
Additional Information.

<TABLE>
<CAPTION>
NORTH AMERICAN FUND EUROPEAN VALUE FUND
------------------------- -------------------------
FISCAL YEAR PERIOD FROM FISCAL YEAR PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO
6/30/95 6/30/94 6/30/95 6/30/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........................ $ 9.46 10.00 9.86 10.00
- - - - -------------------------------------------------------------------------------------------------------------------
Operations:
Investment income--net**.................................. 0.17 0.04 0.12 0.02
Net realized and unrealized gains (losses)................ 0.33 (0.58) 1.21 (0.16)
- - - - -------------------------------------------------------------------------------------------------------------------
Total from operations....................................... 0.50 (0.54) 1.33 (0.14)
- - - - -------------------------------------------------------------------------------------------------------------------
Distributions from:
Investment income--net.................................... (0.04) -- (0.03) --
Net realized gains........................................ -- -- (0.06) --
- - - - -------------------------------------------------------------------------------------------------------------------
Total distributions......................................... (0.04) -- (0.09) --
- - - - -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $ 9.92 9.46 11.10 9.86
- - - - -------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***............................................. 5.36% (5.40%) 13.52% (1.40%)
Net assets, end of period (000s omitted).................... $13,217 16,856 17,520 16,574
Ratio of expenses to average daily net assets++............. 2.00% 2.00%+ 2.00% 2.00%+
Ratio of net investment income to average daily
net assets++............................................... 1.84% 0.87%+ 1.10% 0.47%+
Portfolio turnover rate (excluding short-term securities)... 52% 23% 131% 60%
</TABLE>

- - - - ------------
* Commencement of operations.

** Based on the weighted average number of shares outstanding during the
period.

***Total return is based on the change in net asset value during the period,
assumes reinvestment of all distributions and does not reflect the
contingent deferred sales charge applicable to shares purchased after
6/19/95.

+ Adjusted to an annual basis.

++ Various portfolio fees and expenses were voluntarily waived or absorbed by
the manager and Distributor. Had the funds paid all expenses, the annualized
ratios of expenses and net investment income to average daily net assets
would have been as follows:

8
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
PACIFIC VALUE FUND LATIN AMERICAN VALUE FUND
------------------------- -------------------------
FISCAL YEAR PERIOD FROM FISCAL YEAR PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO
6/30/95 6/30/94 6/30/95 6/30/94
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........................ $ 10.68 10.00 9.14 10.00
- - - - -------------------------------------------------------------------------------------------------------------------
Operations:
Investment income (loss)--net**........................... (0.10) (0.04) -- 0.01
Net realized and unrealized gains (losses)................ (1.45) 0.72 (1.94) (0.87)
- - - - -------------------------------------------------------------------------------------------------------------------
Total from operations....................................... (1.55) 0.68 (1.94) (0.86)
- - - - -------------------------------------------------------------------------------------------------------------------
Distributions from:
Net realized gains........................................ (0.11) -- -- --
- - - - -------------------------------------------------------------------------------------------------------------------
Total distributions......................................... (0.11) -- -- --
- - - - -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $ 9.02 10.68 7.20 9.14
- - - - -------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***............................................. (14.63%) 6.80% (21.23%) (8.60%)
Net assets, end of period (000s omitted).................... $31,527 40,828 22,624 27,750
Ratio of expenses to average daily net assets++............. 2.00% 2.00%+ 2.00%+ 2.00%+
Ratio of net investment income (loss) to average daily
net assets++............................................... (1.06%) (0.96%)+ (0.03%)+ 0.14%+
Portfolio turnover rate (excluding short-term securities)... 68% 39% 161% 78%
</TABLE>

- - - - ------------
* Commencement of operations.

** Based on the weighted average number of shares outstanding during the
period.

+ Adjusted to an annual basis.

9
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
MONEY MARKET
BOND FUND FUND
------------------------- ------------
FISCAL YEAR PERIOD FROM PERIOD FROM
ENDED 11/9/93* TO 12/13/94* TO
6/30/95 6/30/94 6/30/95
----------- ----------- ------------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period........................ $ 9.35 10.00 1.00
- - - - ------------------------------------------------------------------------------------------------------
Operations:
Investment income net**................................... 0.45 0.12 0.02
Net realized and unrealized gains (losses)................ 0.22 (0.71) --
- - - - ------------------------------------------------------------------------------------------------------
Total from operations....................................... 0.67 (0.59) 0.02
- - - - ------------------------------------------------------------------------------------------------------
Distributions:
From investment income--net............................... (0.09) (0.06) (0.02)
Tax return of capital..................................... (0.11) -- --
- - - - ------------------------------------------------------------------------------------------------------
Total distributions......................................... (0.20) (0.06) (0.02)
- - - - ------------------------------------------------------------------------------------------------------
Net asset value, end of period.............................. $ 9.82 9.35 1.00
- - - - ------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***............................................. 7.24% (5.96%) 2.62%
Net assets, end of period (000s omitted).................... $13,776 32,360 1,230
Ratio of expenses to average daily net assets++............. 1.80% 1.80%+ 1.00%+
Ratio of net investment income to average daily net
assets++................................................... 4.76% 2.63%+ 4.53%+
Portfolio turnover rate (excluding short-term securities)... 501% 291% N/A
</TABLE>

- - - - ------------
*Commencement of operations.

**Based on the weighted average number of shares outstanding during the
period.

+ Adjusted to an annual basis.

10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

The investment objectives listed below are fundamental and cannot be changed
without shareholder approval. In view of the risks inherent in all investments
in securities, there is no assurance that these objectives will be achieved. The
investment policies and techniques employed in pursuit of the Funds' objectives
may be changed without shareholder approval unless otherwise noted.

NORTH AMERICAN FUND

North American Fund's objectives are to achieve long-term capital
appreciation and current income. 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 (as described below).

North American Fund defines U.S., Canadian or Mexican securities 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 will not invest 25% or more of its
total assets in government obligations issued by Canada or Mexico. See "Special
Risk Considerations-- Foreign Securities--Risks of Sovereign Debt Obligations."

In selecting particular investments, each Sub-Adviser and the Manager seek
to identify companies believed by it to have long term prospects for growth of
earnings and dividends in relationship to the prevailing market price. Emphasis
is expected to be placed on investment in companies which the Sub-Advisers and
the Manager believe 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. Assets will be allocated among the U.S., Canada and
Mexico in accordance with the Manager's view as to where the best opportunities
exist. The Manager may rely in whole or in part in making such allocations on
the results of a proprietary allocation model made available to the Fund without
separate charge by a financial institution to be selected by the Manager.

Although initially the Fund expects to invest virtually all of its assets in
North American issuers, the Fund is authorized to invest up to 35% of its total
assets in securities of issuers located outside of the U.S., Canada and Mexico.
In evaluating investments outside of North America, the Manager and Sub-Adviser
will seek investments in issuers which they believe are well positioned to
benefit from cross-border trade with the U.S., Canada and Mexico or from other
developments in North America.

Equity securities in which the Fund may invest include common stocks and
preferred stocks (either convertible or non-convertible), warrants and stock
rights. The Fund does not expect to invest more than 5% of its net assets in
warrants and stock rights. Also, North American Fund may invest to a limited
extent in investment companies or trusts which invest in securities of the U.S.,
Canada and Mexico. See "Other Eligible Investments--Investments in Other
Investment Companies."

Debt securities in which the Fund may invest include bonds, notes and
debentures of any maturity, mortgage-backed securities and asset-backed
securities. Such securities may be issued by governmental or private issuers.
Debt securities must be rated at least BBB by S&P or Baa by Moody's, or, if
unrated, of at least comparable quality as determined by the Sub-Advisers to the
North American Fund. The foregoing rating limitation applies at the time of
acquisition of a security. Any

11
<PAGE>
subsequent change in rating by a rating service will not require the Fund to
dispose of the security. However, if the subsequent change in a rating of any
security causes the Fund to have in the aggregate more than 5% of its net assets
invested in securities rated below investment grade, the Fund will sell, as soon
as it is practicable, sufficient securities to reduce the total to below 5%. See
"Other Eligible Investments--Mortgage-Backed Securities" and "--Asset-Backed
Securities."

Generally, the Fund expects to invest no more than 60% or less than 20% of
its total assets in any one of the U.S., Canada or Mexico.

For temporary defensive purposes, the Fund may invest all or a portion of
its assets in U.S. dollar-or foreign currency-denominated cash or domestic or
foreign high quality money market instruments including commercial paper,
certificates of deposit, bankers' acceptances and securities issued by the U.S.
or a foreign government, their agencies or instrumentalities.

EUROPEAN VALUE FUND

European Value Fund's investment objectives are long-term capital
appreciation and, to a lesser extent, current income. European Value Fund seeks
to achieve its investment objectives primarily through investments (under normal
circumstances, at least 65% of its total assets) in securities issued by issuers
in Europe. The Fund defines Europe as Austria, Belgium, Denmark, Germany,
Finland, France, Greece, the Republic of Ireland, Italy, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey and the United
Kingdom. As the securities markets of additional continental European countries
develop, such countries may be considered part of the Fund's definition of
Europe and appropriate countries for investment by the Fund.

Emphasis is expected to be placed on investments in equity securities. The
Fund may, however, also seek capital appreciation through investment in debt
securities, such as may occur through favorable changes in relative foreign
exchange rates, in relative interest rate levels or in creditworthiness of
issuers.

Under normal market conditions, European Value Fund's investments will be
allocated among at least three different countries in Europe. European Value
Fund defines securities of European issuers as follows: (a) securities of
companies organized under the laws of a country within Europe (including the
United Kingdom) or for which the principal trading market is in Europe; (b)
securities of companies that derive at least 50% of their gross revenues from
goods produced, sales made, services performed or investments in companies in
Europe; (c) securities of companies which have at least 50% of their total
assets located in Europe; or (d) securities issued or guaranteed by the
government of a country in Europe, its agencies, political subdivisions or
instrumentalities or the central bank of such country (sovereign debt). The Fund
will not invest 25% or more of its total assets in obligations issued by the
government of any one European country. See "Special Risk
Considerations--Foreign Securities--Risks of Sovereign Debt Obligations."

The Fund is authorized to invest up to 10% of its net assets in securities
issued by issuers in Eastern Europe. In view of rapid political developments in
Eastern Europe, it is not possible to categorically state the issuing markets;
however, the Fund currently defines Eastern Europe as the Czech Republic,
Slovakia, Hungary, Poland, Lithuania, Latvia, Estonia, Russian Federation,
Romania and Slovenia. The Fund may in the future invest in other markets in
Eastern Europe as these markets develop.

12
<PAGE>
Assets will be allocated among countries and currencies in accordance with
the Sub-Adviser's proprietary asset allocation system. The system involves the
continuing analysis of a fixed set of statistical indicators which (i) describe
the progress of the credit cycle in each country, (ii) gauge the outlook for
bond prices within the context of the historical and current relationship
between money supply growth, inflation and real interest rates, and (iii)
measure the likely relative return of stocks versus bonds on the basis of the
current, implicit equity risk premium vis-a-vis historic norms.

In selecting particular investments, the Sub-Adviser seeks to identify
companies believed by it to be undervalued in the marketplace in relation to
various factors such as the company's assets, earnings, growth potential and
cash flows.

Equity securities in which European Value Fund may invest include common
stocks and preferred stocks (either convertible or non-convertible), warrants
and stock rights. The Fund does not expect to invest more than 5% of its net
assets in warrants and stock rights. European Value Fund also may purchase
shares of investment companies or trusts which invest principally in securities
in which the European Value Fund is authorized to invest. See "Other Eligible
Investments--Investments in Other Investment Companies."

Debt securities that European Value Fund may acquire include bonds, notes
and debentures of any maturity, mortgage-backed securities and asset-backed
securities. Such securities may be issued by governmental or private issuers.
Debt securities that European Value Fund may acquire must be rated at least BBB
by S&P or Baa by Moody's, or, if unrated, of comparable quality as determined by
the Sub-Adviser. The foregoing rating limitation applies at the time of
acquisition of a security. Any subsequent change in rating by a rating service
will not require the Fund to dispose of any security. However, if the subsequent
change in a rating of any security causes the Fund to have in the aggregate more
than 5% of its net assets invested in securities rated below investment grade,
the Fund will sell, as soon as it is practicable, sufficient securities to
reduce the total to below 5%. See "Other Eligible Investments--Mortgage-Backed
Securities" and "--Asset-Backed Securities."

For temporary defensive purposes, European Value Fund may invest all or a
portion of its assets in U.S. dollar- or foreign currency-denominated cash or
domestic or foreign high-quality money market instruments including commercial
paper, certificates of deposit, bankers' acceptances and securities issued by
the U.S. or a foreign government, their agencies or instrumentalities.

PACIFIC VALUE FUND

Pacific Value Fund's investment objectives are long-term capital
appreciation and, to a lesser extent, current income. Pacific Value Fund seeks
to achieve its investment objectives through investments primarily (under normal
circumstances, at least 65% of its total assets) in the securities of issuers
located in the Pacific Basin. The Pacific Basin is defined as those countries
bordering the Pacific Ocean. The Pacific Value Fund may invest in the following
countries within the region: Malaysia, Pakistan, Sri Lanka, the Philippines,
Singapore, South Korea, Thailand, India, Indonesia, Hong Kong, Japan, Taiwan,
Australia and New Zealand. In addition, to the extent that suitable investment
opportunities become available, Pacific Value Fund may invest in the following
other countries: China, Vietnam, Laos, Cambodia, Myanmar, Bangladesh and North
Korea.

Emphasis is expected to be placed on investment in equity securities. The
Fund may, however, also seek capital appreciation through investment in debt
securities, such as may occur through favorable changes in relative foreign
exchange rates, in relative interest rate levels or in creditworthiness of
issuers.

13
<PAGE>
Under normal market conditions, Pacific Value Fund's investments will be
allocated among at least three different countries in the Pacific Basin. Pacific
Value Fund defines securities of Pacific Basin issuers as follows: (a)
securities of companies organized under the laws of a country within the Pacific
Basin or for which the principal trading market for its securities is located in
a country in the Pacific Basin, (b) securities of companies which derive at
least 50% of their gross revenues from goods produced, sales made, services
performed or investments in companies in the Pacific Basin, (c) securities of
companies which have at least 50% of their total assets located in the Pacific
Basin, or (d) securities issued or guaranteed by the government of a country in
the Pacific Basin, its agencies, political subdivisions or instrumentalities, or
the central bank of such country (sovereign debt). The Fund will not invest 25%
or more of its total assets in obligations issued by the governments of any one
country in the Pacific Basin. See "Special Risk Considerations--Foreign
Securities--Risks of Sovereign Debt Obligations."

In selecting investments, the Sub-Adviser seeks to identify countries and
industries which, due to economic and political factors, have potential for
significant growth and to identify those companies within such countries and
industries which are best positioned to benefit therefrom.

The equity securities in which Pacific Value Fund may invest consist of
common stock, preferred stock (convertible and non-convertible), warrants and
stock rights. The Fund does not expect to invest more than 5% of its net assets
in warrants and stock rights. Pacific Value Fund may also to a limited extent
purchase shares of investment companies or trusts which invest principally in
securities in which Pacific Value Fund is authorized to invest. See "Other
Eligible Investments--Investments in Other Investment Companies."

Debt securities that Pacific Value Fund may acquire include bonds, notes and
debentures of any maturity, mortgage-backed securities and asset-backed
securities. Such securities may be issued by governmental or private issuers.
Debt securities that the Fund may acquire must be rated at least BBB by S&P or
Baa by Moody's, or, if unrated, of comparable quality as determined by the Sub-
Adviser.

For temporary defensive purposes, Pacific Value Fund may invest without
limitation in U.S. dollar- or foreign currency-denominated cash or domestic or
foreign high-quality money market instruments.

LATIN AMERICAN VALUE FUND

The investment objectives of Latin American Value Fund are long-term capital
appreciation and to a lesser extent, current income.

Latin American Value Fund seeks to achieve its objectives primarily by
investing under normal circumstances at least 65% of its total assets in
securities of Latin American issuers.

In pursuit of its investment objectives, the Fund may invest in both equity
and debt securities. Capital appreciation from debt securities may result from
favorable changes in relative foreign exchange rates, in relative interest rate
levels or in creditworthiness of issuers. Under normal market conditions, Latin
American Value Fund's investments will be allocated among at least three
different countries in Latin America. The Fund defines Latin America as Mexico,
Central America and South America. Latin American Value Fund defines securities
of Latin American issuers as follows: (a) securities of companies organized in a
country in Latin America or for which the principal trading market is located in
Latin America, (b) securities of companies that derive at least 50% of their
gross revenues from either goods produced, sales made, services performed or
investments in companies in

14
<PAGE>
Latin America, (c) securities of companies which have at least 50% of their
total assets located in Latin America, or (d) securities issued or guaranteed by
the government of a country in Latin America, its agencies, political
subdivisions or instrumentalities, or the central bank of such country
(sovereign debt). The Fund will not invest 25% or more of its total assets in
obligations issued by the governments of any one country in Latin America. See
"Special Risk Considerations--Foreign Securities-- Risks of Sovereign Debt
Obligations."

Latin American Value Fund's assets will be allocated among the countries in
Latin America in accordance with the Manager's and Sub-Adviser's judgment as to
where the best investment opportunities exist. Criteria for determining the
appropriate distribution of investments among various countries and regions
include the prospects for relative growth among the countries, expected levels
of inflation, government policies influencing business conditions, the outlook
for currency relationships and the range of alternative opportunities available
to international investors. Criteria for selection of individual securities
include the issuer's competitive position, prospects for growth, managerial
strength, earnings quality, underlying asset value, relative market value and
overall marketability. The Fund may invest in securities of companies having
various levels of net worth, including smaller companies whose securities
generally are more volatile than securities offered by larger companies with
higher levels of net worth.

Latin American equity securities in which the Fund invests consist of common
stock and preferred stock (either convertible or non-convertible), warrants and
stock rights. The Fund does not expect to invest more than 5% of its net assets
in warrants and stock rights. Latin American Value Fund may invest to a limited
extent in investment companies or trusts which invest principally in securities
in which Latin American Value Fund invests. See, "Other Eligible
Investments--Investments in Other Investment Companies."

Debt securities that Latin American Value Fund may acquire include bonds,
notes and debentures of any maturity, mortgage-backed securities and
asset-backed securities. Such debt securities may be issued by governmental or
private issuers. The Fund may invest in any debt security regardless of rating
(including securities in default status), provided, however, that the Fund may
not invest more than 35% of its net assets in securities rated lower than
investment grade or, if unrated, of comparable quality as determined by the
Sub-Adviser. If a subsequent change in a rating of any security causes the Fund
to have more than 35% of its net assets in securities rated lower than
investment grade, the Fund will sell, as soon as it is practicable, sufficient
securities to reduce the total to 35% or below. See "Other Eligible
Investments--Mortgage-Backed Securities," "--Asset-Backed Securities," "Special
Risk Considerations--Risks of Lower-Rated Debt Securities" and "Appendix."

For temporary defensive purposes, the Fund may invest all or a portion of
its assets in U.S. dollar-or foreign currency-denominated cash or foreign or
domestic high-quality money market instruments including commercial paper,
certificates of deposit, bankers' acceptances and securities issued by the U.S.
or a foreign government, their agencies or instrumentalities.

BOND FUND

The investment objective of Bond Fund is to provide a high level of total
investment return. Bond Fund will attempt to achieve its investment objective by
investing principally in debt securities of issuers located anywhere in the
world. Total investment return is the combination of income and capital
appreciation. The Sub-Adviser emphasizes income in selecting securities for Bond
Fund, but also considers the potential for changes in value resulting from
changes in currency relationships, interest rates, individual issuers' credit
standings and other factors.

15
<PAGE>
Bond Fund will invest, under normal circumstances, at least 65% of its total
assets in debt securities (i.e., bonds and notes) with an initial maturity of
more than one year. Bond Fund will invest primarily in debt securities rated at
least Baa by Moody's or BBB by S&P or, if unrated, of comparable quality as
determined by the Sub-Adviser, but may invest in lower quality debt securities,
provided that such investments do not meet or exceed 35% of the Fund's net
assets. If a subsequent change in a rating of any security causes the Fund to
have more than 35% of its net assets in securities rated lower than investment
grade, the Fund will sell, as soon as it is practicable, sufficient securities
to reduce the total to 35% or below. See "Special Risk Considerations--Risks of
Lower-Rated Debt Securities" and "Appendix." Some of the debt securities
purchased by Bond Fund may be convertible into common stock or be traded
together with warrants for the purchase of common stock. Bond Fund can invest in
securities of any type of issuer including governmental, supranational and
private issuers. Up to 35% of the Fund's total assets may be invested in
mortgage-backed and asset-backed securities.

Bond Fund may invest in securities issued anywhere in the world, including
the U.S. Under normal market conditions, Bond Fund will be invested in at least
three different countries, one of which may be the U.S. Subject to the
requirement that Bond Fund may not invest 25% or more of its total assets in
obligations issued by the government of any one country, other than the U.S.,
there is no limit on the amount the Fund may invest in any one country, or in
securities denominated in the currency of any one country, to take advantage of
what the Sub-Adviser believes to be favorable yields, currency exchange
conditions or total investment return potential. The Sub-Adviser will actively
manage the allocation of Bond Fund's investments among countries, geographic
regions, currency denominations and issuers in an attempt to achieve a high
total investment return. In doing so, the Sub-Adviser will consider such factors
as the outlook for currency relationships, current and anticipated interest
rates, levels of inflation within various countries, prospects for relative
economic growth, government policies influencing currency exchange rates and
business conditions and the credit quality of individual issuers.

Although Bond Fund is not limited to any region, country or currency, the
Sub-Adviser currently expects to invest Bond Fund's assets primarily within
Australia, Canada, Europe, Eastern Europe, Japan, Latin America, New Zealand and
the United States, and in securities denominated in the currencies of these
countries or regions or denominated in multinational currency units such as the
European Currency Unit ("ECU"). Securities of issuers within a given country may
be denominated in the currency of another country. See "Special Risk
Considerations--Foreign Securities--Additional Risks Applicable to Investment in
Eastern Europe."

Under current market conditions, the Sub-Adviser expects that the
dollar-weighted average maturity of Bond Fund's investments will not exceed 15
years. Generally, Bond Fund's average maturity will be shorter when interest
rates worldwide or in a particular country are expected to rise, and longer when
interest rates are expected to fall. The Fund may use various techniques to
shorten or lengthen the dollar-weighted average maturity of its portfolio
including transactions in futures and options on futures, interest rate swaps
and short sales.

Bond Fund may purchase and sell forward foreign exchange contracts for
hedging purposes and for purposes of seeking to enhance portfolio returns and
managing portfolio risk more efficiently. See "Special Investment
Methods--Foreign Currency Transactions." The Sub-Adviser believes that active
currency management can enhance portfolio returns through opportunities arising
from interest rate differentials between currencies and/or changes in value
between currencies. Moreover, the Sub-Adviser believes active currency
management can be employed as an overall portfolio risk management tool. For
example, in its view, foreign currency management can provide overall portfolio
risk

16
<PAGE>
diversification when combined with a portfolio of foreign securities and the
market risks of investing in specific foreign markets can at times be reduced by
currency strategies which may not involve the currency in which the foreign
security is denominated. Use of foreign currency futures, options and forward
contracts will be subject to applicable limitations and requirements of the
Securities and Exchange Commission (the "SEC") and the Commodity Futures Trading
Commission (the "CFTC"). See "Special Risk Considerations--Risks of Transactions
in Futures Contracts and Options."

For temporary defensive purposes, the Fund may invest all or a portion of
its assets in U.S. dollar-or foreign currency-denominated cash or foreign or
domestic high-quality money market instruments.

MONEY MARKET FUND

Money Market Fund has an investment objective of maximizing current income
consistent with preservation of capital and maintenance of liquidity. Money
Market Fund will attempt to achieve its investment objective by investing in a
combination of money market securities described below and it may invest in
repurchase agreements and enter into reverse repurchase agreements (in an amount
not to exceed 5% of its total assets) with respect to such securities. See
"Special Investment Methods--Repurchase Agreements" and "--Reverse Repurchase
Agreements."

The Fund may invest in U.S. Government Securities. U.S. Government
Securities are obligations issued or guaranteed as to principal and interest by
the U.S. Government or one of its agencies or instrumentalities. These
securities include direct obligations of the U.S. Treasury, such as U.S.
Treasury bills, notes and bonds, and obligations of U.S. Government agencies or
instrumentalities, including, but not limited to, Federal Home Loan Banks, the
Farmers Home Administration, Federal Farm Credit Banks, the Federal National
Mortgage Association, the Government National Mortgage Association, the Federal
Home Loan Mortgage Corporation, the Financing Corporation and the Student Loan
Marketing Association. Certain U.S. Government Securities, such as Government
National Mortgage Association mortgage-backed securities, are backed by the full
faith and credit of the U.S. Treasury, while others, such as those of the
Federal Home Loan Banks, are backed by the right of the issuer to borrow from
the U.S. Treasury. In addition, other obligations, 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,
such as those of the Federal Home Loan Mortgage Corporation and the Student Loan
Marketing Association, are backed solely by the credit of the agency or
instrumentality issuing the obligations.

The Fund may also invest in other Eligible Securities. In addition to U.S.
Government Securities, Eligible Securities include securities rated in one of
the two highest short-term rating categories by at least two nationally
recognized statistical rating organizations ("NRSROs"). NRSROs currently include
Standard & Poor's Ratings Group, Moody's Investors Service, Inc., Duff and
Phelps, Inc., Fitch Investors Service, Inc., Thomson Bankwatch and, with respect
to debt issued by banks, bank holding companies, broker-dealers, broker-dealers'
parent companies, and bank-sponsored debt, IBCA Limited and its affiliate, IBCA,
Inc. See "Appendix" attached hereto for an explanation of the ratings issued by
these organizations. Eligible Securities also include (a) securities that at the
time of issuance were long-term securities but that have remaining maturities of
397 calendar days or less, provided the issuer has comparable outstanding
short-term debt rated in one of the two highest rating categories, and (b)
unrated securities of comparable quality, as determined by the Manager and the
Sub-Adviser pursuant to written guidelines and procedures adopted by the
Company's Board of Directors.

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The types of Eligible Securities in which the Fund may invest include bonds,
notes and commercial paper (including variable amount master demand notes) of
domestic issuers, certificates of deposits, bank notes, time deposits and
bankers' acceptances issued by domestic banks. Commercial paper is a short term
debt obligation of a domestic issuer. Variable amount master demand notes are
demand obligations that permit the investment of fluctuating amounts at varying
market rates of interest pursuant to arrangements between the issuer and a
commercial bank acting as agent for the payees of such notes, whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specified period of time. Time
deposits are non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Time deposits are not
transferable and are therefore illiquid prior to their maturity. The Fund will
not invest more than 10% of its net assets in time deposits of over 7 days and
other illiquid securities. See "Special Investment Methods--Illiquid
Securities." Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face amount
of the instrument upon maturity.

Money Market Fund may purchase from banks and securities dealers
participation interests in securities in which the Fund may invest. A
participation interest gives the Fund an undivided interest in the security in
the proportion that the Fund's participation interest bears to the total
principal amount of the security. These instruments may have fixed, floating or
variable rates of interest, with remaining maturities of one year or less. If
the participation interest is unrated, or has been given a rating below that
which is permissible for purchase by the Fund, the participation interest will
be backed by an irrevocable letter of credit or guarantee of a bank, or the
payment obligation otherwise will be collateralized by U.S. Government
Securities, or, in the case of unrated participation interests, the Sub-Adviser
must have determined that the instrument is of comparable quality to those
instruments in which the Fund may invest. For certain participation interests,
the Fund will have the right to demand payment, on not more than seven days'
notice, for all or any part of the Fund's participation interest in the
security, plus accrued interest. As to these instruments, the Fund intends to
exercise its right to demand payment only upon a default under the terms of the
security, as needed to provide liquidity to meet redemptions, or to maintain or
improve the quality of its investment portfolio. Participation interests that do
not have this demand feature are considered illiquid securities and subject to
the 10% limitation discussed below. See "Special Investment Methods--Illiquid
Securities."

RULE 2A-7. The Fund is subject to the investment restrictions of Rule 2a-7
under the Investment Company Act of 1940, as amended (the "1940 Act") in
addition to its other policies and restrictions discussed below. Rule 2a-7
requires that the Fund invests exclusively in securities that mature within 397
days and maintain an average weighted maturity of not more than 90 days. Rule
2a-7 also requires that all investments by the Fund be limited to U.S.
dollar-denominated investments that: (1) present "minimal credit risks," and (2)
are at the time of acquisition "Eligible Securities." It is the responsibility
of the Manager and the Sub-Adviser to determine that the Fund's investments
present only "minimal credit risks" and are Eligible Securities; such
determination will be made pursuant to written guidelines and procedures adopted
by the Company's Board of Directors.

Under Rule 2a-7, 95% of the assets of the Fund must be invested in Eligible
Securities that are deemed First Tier Securities, which include, among others,
securities rated by at least two NRSROs in the highest category for short-term
debt obligations. In addition, the Fund may not (1) invest (with

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certain limited exemptions) more than 5% of its total assets in securities of a
single issuer, other than U.S. Government Securities, (2) invest more than 5% of
its total assets in Second Tier Securities (I.E., Eligible Securities that are
not First Tier Securities) and (3) invest more than the greater of 1% of the
Fund's total assets or $1,000,000 in Second Tier Securities of a single issuer.

OTHER ELIGIBLE INVESTMENTS

DEPOSITORY RECEIPTS AND DEPOSITORY SHARES

Each Fund (other than Money Market Fund) may invest in American Depository
Receipts ("ADRs") or other similar securities, such as American Depository
Shares, convertible into securities of foreign issuers. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a U.S. bank or
trust company evidencing ownership of the underlying securities. Generally,
ADRs, in registered form, are designed for use in U.S. securities markets. As a
result of the absence of established securities markets and publicly owned
corporations in certain foreign countries as well as restrictions on direct
investment by foreign entities, the Funds may be able to invest in such
countries solely or primarily through ADRs or similar securities and government
approved investment vehicles. No more than 5% of each Fund's assets (other than
Latin American Value Fund) will be invested in ADRs sponsored by persons other
than the underlying issuers. Latin American Value Fund may invest up to 20% of
its assets in these unsponsored ADRs. Issuers of the stock of such unsponsored
ADRs are not obligated to disclose material information in the United States
and, therefore, there may not be a correlation between such information and the
market value of such ADRs.

The Funds may also invest in European Depository Receipts ("EDRs") which are
typically issued in bearer form and are designed for use in the European
securities markets.

INVESTMENT IN OTHER INVESTMENT COMPANIES

Under the 1940 Act, each of the Funds generally may invest up to 10% of its
total assets in the aggregate in shares of other investment companies and up to
5% of its total assets in any one investment company, as long as that investment
does not represent more than 3% of the voting stock of the acquired investment
company at the time such shares are purchased. Investment in other investment
companies or investment vehicles may be the sole or most practical means by
which the Funds can invest in certain countries. Such investments may involve
the payment of substantial premiums above the value of such issuers' portfolio
securities, and are subject to limitations under the 1940 Act and market
availability. There can be no assurance that investment companies or other
investment vehicles for investing in certain countries will be available for
investment. In addition, special tax considerations may apply. The Funds do not
intend to invest in such investment companies or vehicles unless, in the
judgment of the Manager and Sub-Adviser, the potential benefits of such
investment justify the payment of any applicable premium or sales charge. As a
shareholder in an investment company, each of the Funds would bear its ratable
share of the applicable investment company's expenses, including its advisory
and administrative fees. At the same time, the Funds would continue to pay their
own management and advisory fees and other expenses. See "Special Risk
Considerations--Foreign Securities--Investment and Repatriation Restrictions."

SUPRANATIONAL ORGANIZATIONS

Each of the Funds (other than Money Market Fund) may invest in debt
securities issued or guaranteed by supranational organizations. Such
organizations are entities designated or supported by a government or government
entity to promote economic development and include, among others,

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the Asian Development Bank, the European Coal and Steel Community, the European
Economic Community and the World Bank. These organizations do not have taxing
authority and are dependent upon their members for payments of interest and
principal. Each supranational entity's lending activities are limited to a
percentage of its total capital (including "callable capital" contributed by
members at the entity's call), reserves and net income. Securities issued by
supranational organizations may be denominated in U.S. dollars or in foreign
currencies.

FOREIGN INDEX LINKED INSTRUMENTS

Each of the Funds (other than Money Market Fund) may, subject to compliance
with its respective quality limitations applicable to its investment in debt
securities, invest up to 10% of its total assets in instruments issued by the
U.S. or a foreign government or by private issuers that return principal and/or
pay interest to investors in amounts which derive a portion of their return
based on the level of a particular foreign index ("Foreign Index Linked
Instruments"). A foreign index may be based upon the exchange rate of a
particular currency or currencies or the differential between two currencies, or
the level of interest rates in a particular country or countries or the
differential in interest rates between particular countries. In the case of
Foreign Index Linked Instruments linking the principal amount to a foreign
index, the amount of principal payable by the issuer at maturity will increase
or decrease in response to changes in the level of the foreign index during the
term of the Foreign Index Linked Instruments. In the case of Foreign Index
Linked Instruments linking the interest component to a foreign index, the amount
of interest payable will adjust periodically in response to changes in the level
of the foreign index during the term of the Foreign Index Linked Instrument.
Foreign Index Linked Instruments may be issued by a U.S. or foreign governmental
agency or instrumentality or by a private issuer.

MORTGAGE-BACKED SECURITIES

Each of the Funds may invest in securities which represent interests in
pools of mortgages ("Mortgage-Backed Securities"). These securities provide
investors with payments consisting of both interest and principal as the
mortgages in the underlying mortgage pools are repaid. Such securities may be
issued or guaranteed by governmental issuers or by private issuers. Unscheduled
or early payments on the underlying mortgages may shorten these securities'
effective maturities and lower their total returns. Because prepayments of
principal generally occur when interest rates are declining, it is likely that a
Fund will have to reinvest the proceeds of prepayments at lower interest rates
than those at which the assets were previously invested. The value of
Mortgage-Backed Securities may change due to changes in the market's perception
of issuers. In addition, the mortgage securities market in general may be
adversely affected by regulatory or tax changes.

ADJUSTABLE RATE MORTGAGE SECURITIES. Each of the Funds may also invest in
adjustable rate mortgage securities ("ARMS") which are issued by agencies or
instrumentalities of the U.S. Government. ARMS are pass-through mortgage
securities collateralized by mortgages with interest rates that are adjusted
from time to time. The adjustments usually are determined in accordance with a
predetermined interest rate index and may be subject to certain limits. While
the values of ARMS, like other debt securities, generally vary inversely with
changes in market interest rates (increasing in value during periods of
declining interest rates and decreasing in value during periods of increasing
interest rates), the values of ARMS should generally be more resistant to price
swings than other debt securities because the interest rates of ARMS move with
market interest rates. The adjustable rate feature of ARMS will not, however,
eliminate fluctuations in the prices of ARMS, particularly during periods of
extreme fluctuations in interest rates. Also, since many adjustable rate
mortgages only

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reset on an annual basis, it can be expected that the prices of ARMS will
fluctuate to the extent that changes in prevailing interest rates are not
immediately reflected in the interest rates payable on the underlying adjustable
rate mortgages.

CMOS. Each of the Funds may invest in collateralized mortgage obligations
("CMOs"). CMOs are securities collateralized by mortgages or Mortgage-Backed
Securities. CMOs are issued in classes and series that have different maturities
and often are retired in sequence although certain classes of CMOs may have
priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, depending on the type of CMOs in which a Fund invests, the
investment may be subject to a greater or lesser risk of prepayment than other
types of mortgage-related securities. CMOs are issued by government or
non-government entities such as banks, mortgage lenders, or other financial
institutions.

In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, often referred to as a "tranche," is issued at a specific
coupon rate and has a stated maturity or final distribution date. Principal
prepayments on collateral underlying a CMO may cause it to be retired
substantially earlier than the stated maturities or final distribution dates.
The principal and interest on the underlying mortgages may be allocated among
the several classes of a series of a CMO in many ways. One or more tranches of a
CMO may have coupon rates which reset periodically at a specified increment over
an index such as the London Interbank Offered Rate ("LIBOR"). These floating
rate CMOs are typically issued with lifetime caps on the coupon rate thereon.
Inverse or reverse floating CMOs ("inverse floaters") constitute a tranche of a
CMO with a coupon rate that moves in the reverse direction to an applicable
index such as LIBOR. Accordingly, the coupon rate thereon will increase as
interest rates decrease. Like most other fixed-income securities, the value of
inverse floaters will decrease as interest rates increase. Inverse floaters,
however, exhibit greater price volatility than the majority of Mortgage-Backed
Securities. Coupon rates on inverse floaters typically change at a multiple of
the changes in the relevant index rate. Thus, any rise in the index rate (as a
consequence of an increase in interest rates) causes a correspondingly greater
drop in the coupon rate of an inverse floater while any drop in the index rate
causes a correspondingly greater increase in the coupon of an inverse floater.
Some inverse floaters also exhibit extreme sensitivity to changes in
prepayments. As a result, the yield to maturity of an inverse floater is
sensitive not only to changes in interest rates but also to changes in
prepayment rates on the related underlying mortgage assets.

STRIPPED MORTGAGE-BACKED SECURITIES. Each of the Funds (other than Money
Market Fund) may also invest in Stripped Mortgage-Backed Securities ("SMBS").
SMBS are derivative multi-class mortgage securities which may entitle the
holders thereof to receive distributions consisting solely or primarily of all
or a portion of the interest (the "IO class") or the principal (the "PO class")
on the underlying pool of mortgage loans or Mortgage-Backed Securities. The cash
flows and yields on IO and PO classes are extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying pool of
mortgage loans or Mortgage-Backed Securities. For example, a rapid or slow rate
of principal payments may have a material adverse effect on the yield to
maturity of IOs or POs, respectively. If the underlying mortgage assets
experience greater than anticipated prepayments of principal, an investor in an
IO may incur substantial losses. Conversely, if the underlying mortgage assets
experience slower than anticipated prepayments of principal, the return on a PO
class will be adversely affected more severely than would be the case with a
traditional Mortgage-Backed Security. Under the Internal Revenue Code of 1986,
as amended, SMBS generate taxable income from the current accrual of original
issue discount, without a corresponding distribution of cash to the Funds. In
addition, the Staff of the Division of Investment Management of the SEC
considers privately issued SMBS to be illiquid securities.

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ASSET-BACKED SECURITIES

Each of the Funds may invest in asset-backed securities. Such securities
represent interests in pools of consumer loans (generally unrelated to mortgage
loans). Interest and principal payments ultimately depend on payment of the
underlying loans by individuals, although the securities may be supported by
letters of credit or other credit enhancements. The value of asset-backed
securities may also depend on the creditworthiness of the servicing agent for
the loan pool, the originator of the loans, or the financial institution
providing the credit enhancement.

BRADY BONDS

Each of the Funds (other than Money Market Fund) may invest in Brady Bonds
and other sovereign debt securities of countries that have restructured or are
in the process of restructuring sovereign debt pursuant to the Brady Plan. Brady
Bonds are debt securities issued under the framework of the Brady Plan, an
initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989
as a mechanism for debtor nations to restructure their outstanding external
indebtedness. The Brady Plan contemplates, among other things, the adoption by
debtor nations of certain economic reforms and the exchange of commercial bank
debt for newly issued bonds. In restructuring its external debt under the Brady
Plan framework, a debtor nation negotiates with its existing bank lenders as
well as the World Bank and/or the International Monetary Fund (the "IMF"). The
World Bank and/or the IMF support the restructuring by providing funds pursuant
to loan agreements or other arrangements which enable the debtor nation to
collateralize the new Brady Bonds or to replenish reserves used to reduce
outstanding bank debt. Under these loan agreements or other arrangements with
the World Bank or the IMF, debtor nations have been required to agree to the
implementation of certain domestic monetary and fiscal reforms. The Brady Plan
only sets forth general guiding principles for economic reform and debt
reduction, emphasizing that solutions must be negotiated on a case-by-case basis
between debtor nations and their creditors.

Brady Bonds have been issued only recently, and accordingly do not have a
long payment history. Agreements implemented under the Brady Plan to date are
designed to achieve debt and debt-service reduction through specific options
negotiated by a debtor nation with its creditors. As a result, the financial
packages offered by each country differ. The types of options have included the
exchange of outstanding commercial bank debt for bonds issued at 100% of face
value of such debt, bonds issued at a discount of face value of such debt, and
bonds bearing an interest rate which increases over time and the advancement of
the new money for bonds. The principal of certain Brady Bonds has been
collateralized by U.S. Treasury zero coupon bonds with a maturity equal to the
final maturity of such Brady Bonds. Collateral purchases are financed by the
IMF, the World Bank and the debtor nations' reserves. Interest payments may also
be collateralized in part in various ways.

FOREIGN LOAN PARTICIPATIONS AND ASSIGNMENTS

Each of the Funds (other than Money Market Fund) may invest in fixed and
floating rate loans ("Loans") arranged through private negotiations between a
foreign sovereign entity and one or more financial institutions ("Lenders"). The
Funds (other than Money Market Fund) may invest in such Loans in the form of
participations ("Participations") in Loans and assignments ("Assignments") of
all or a portion of Loans from third parties. Participations typically will
result in the Funds having a contractual relationship only with the Lender, not
with the borrower. The Funds will have the right to receive payments of
principal, interest and any fee to which they are entitled only from the Lender
selling the Participation and only upon receipt by the Lender of the payments
from the borrower. In

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<PAGE>
connection with purchasing Participations, the Funds generally will have no
right to enforce compliance by the borrower with the terms of the loan agreement
relating to the Loan, nor any rights or set-off against the borrower, and the
Funds may not benefit directly from any collateral supporting the Loan in which
they have purchased the Participations. As a result, the Funds will assume the
credit risk of both the borrower and the Lender that is selling the
Participation. In the event of the insolvency of the Lender selling a
Participation, a Fund may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. A Fund will
acquire a Participation only if the Lender interpositioned between the Fund and
the borrower is determined by the Sub-Adviser to be creditworthy. When the Funds
purchase Assignments from Lenders, the Funds will acquire direct rights against
the borrower on the Loan, except that under certain circumstances such rights
may be more limited than those held by the assigning Lender.

The Funds may have difficulty disposing of Assignments and Participations.
Because the market for such instruments is not highly liquid, the Funds
anticipate that such instruments could be sold only to a limited number of
institutional investors. The lack of a highly liquid secondary market will have
an adverse impact on the value of such instruments and on the Funds' ability to
dispose of particular Assignments or Participations in response to a specific
economic event, such as deterioration in the creditworthiness of the borrower.
Based upon the current position of the Staff of the SEC, the Funds will treat
investments in Assignments and Participations as illiquid for purposes of the
limitations on investments in illiquid securities. The Funds may revise this
policy based on any future change in the SEC's position. See "Special Investment
Methods--Illiquid Securities."

SPECIAL INVESTMENT METHODS

For risks associated with the following investment methods, see "Special
Risk Considerations."

FOREIGN CURRENCY TRANSACTIONS

Each of the Funds (other than Money Market Fund) may engage in currency
exchange transactions in connection with the purchase and sale of their
investments. Currency exchange transactions are necessary to enable the Funds to
purchase securities denominated in a foreign currency and to convert interest
and dividend payments or sales proceeds paid in a foreign currency into U.S.
dollars or into another currency.

The Funds may engage in "transaction hedging" to protect against a change in
foreign currency exchange rate between the date on which the Funds contract to
purchase or sell the security and the settlement date, or to "lock in" the U.S.
dollar equivalent (or other foreign currency equivalent to the extent needed for
purposes of purchasing securities) of a dividend or interest payment in a
foreign currency. For that purpose, the Funds may enter into forward foreign
currency exchange contracts ("Forward Contracts"). A Forward Contract is a
negotiated agreement to exchange currency at a future time at a rate or rates
that may be higher or lower than the spot rate.

For transaction hedging purposes, the Funds may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Funds the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Funds the
right to sell a currency at an exercise price until the expiration of the
option. A call option on a futures contract gives the Funds the right to assume
a long position in the futures contract until the expiration of the option. A
call option on currency gives the Funds the right to purchase a currency at the
exercise price until the expiration of the option.

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<PAGE>
The Funds may enter into Forward Contracts or foreign currency options or
futures to protect against a decline in the value relative to the U.S. dollar of
the currencies in which their portfolio securities are denominated or quoted (or
an increase in the value of currency for securities which the Funds intend to
buy when they hold cash reserves and short-term investments) ("position
hedging"). For position hedging purposes, the Funds may enter into a forward
contract to sell, for a fixed amount of U.S. dollars or other currency, an
amount of foreign currency approximating the value of some or all of the
portfolio securities to be hedged. In some cases, the Funds may enter into a
forward contract to sell a currency other than the currency in which the
Securities to be hedged are denominated ("cross-hedging"). The Funds will use
cross-hedging, when it is determined that the foreign currency in which the
portfolio securities are denominated have insufficient liquidity or are trading
at a discount as compared with some other foreign currency with which it tends
to move in tandem.

Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Funds own or intend to purchase or
sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency. In addition, currency transactions involve transaction costs. The
Funds may write covered call options on foreign currencies to offset some of the
costs of currency transactions. The Funds' ability to engage in currency and
related option transactions may be limited by tax considerations. See
"Taxation-- Consequences of Certain Investments" in the Statement of Additional
Information.

As noted above Bond Fund may enter into currency transactions other than
those described above with a view towards enhancing portfolio returns and
managing portfolio currency risk more efficiently. Such transactions may cause
the Fund to have a larger exposure to the movement of particular currencies than
would be the case if such techniques were not utilized. Therefore, if the
Sub-Adviser is incorrect in its assessment of currency rate movements, the Fund
may be adversely affected by such transactions. See "Special Risk
Considerations--Risks of Transactions in Futures Contracts and Options."

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with respect to debt
securities it holds. 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 domestic
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 applicable 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,
the Fund would suffer a loss. The Company's Board of Directors has established
procedures, which are periodically reviewed by the Board, pursuant to which the
Manager and the Sub-Advisers will monitor the creditworthiness of the dealers
and banks with which the Funds enter into repurchase agreement transactions.

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REVERSE REPURCHASE AGREEMENTS

Each Fund may engage in "reverse repurchase agreements" with banks and
securities dealers. Reverse repurchase agreements are ordinary repurchase
agreements in which the Fund is the seller of, rather than the investor in,
securities and agrees to repurchase them at an agreed upon time and price. Use
of a reverse repurchase agreement may be preferable to a regular sale and later
repurchase of the securities because it avoids certain market risks and
transaction costs. Because certain of the incidents of ownership of the security
are retained by the Fund, reverse repurchase agreements are considered a form of
borrowing by the Fund from the buyer, collateralized by the security. At the
time the Fund enters into a reverse repurchase agreement, cash, U.S. Government
securities or other liquid high-grade debt obligations having a value sufficient
to make payments for the securities to be repurchased will be segregated, and
will be maintained throughout the period of the obligation. Reverse repurchase
agreements will be used as a means of borrowing for investment purposes. This
speculative technique is referred to as leveraging. Leveraging may exaggerate
the effect on net asset value of any increase or decrease in the market value of
the Fund's portfolio. Money borrowed for leveraging will be subject to interest
costs which may or may not be recovered by income from or appreciation of the
securities purchased. No more than 25% of the total assets of each of the Funds
(other than Money Market Fund) will be subject to reverse repurchase agreements;
no more than 5% of the total assets of Money Market Fund will be subject to
reverse repurchase agreements.

BORROWING

Each of the Funds 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. With
respect to each Fund, reverse repurchase agreements are not included in this
limitation. See "Special Investment Methods-- Reverse Repurchase Agreements" in
the preceding paragraph. 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 of the Funds
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 with
respect to a Fund without the approval of a majority of that Fund's shares.

OPTIONS AND FUTURES TRANSACTIONS

Each Fund (other than Money Market Fund) may buy and sell put and call
options and futures contracts and options on futures contracts with respect to
financial instruments, stock and interest rate indexes and foreign currencies.
Any options sold (i.e., written) by a Fund must be "covered." Futures and
options will be used to facilitate allocation of a Fund's investment among asset
classes, for speculative purposes to generate income or to hedge against
declines in securities prices or increases in prices of securities proposed to
be purchased. Different uses of futures and options have different risk and
return characteristics. Generally, selling futures contracts, purchasing put
options and writing call options are strategies designed to protect against
falling securities prices and can limit potential gains if prices rise.
Purchasing futures contracts, purchasing call options and writing put options
are strategies whose returns tend to rise and fall together with securities
prices and can cause losses if prices fall. If securities prices remain
unchanged over time, option writing strategies tend to be profitable, while
option buying strategies tend to decline in value.

Options purchased and written by the Funds may be exchange traded or may be
options entered into by the Funds in negotiated transactions with investment
dealers and other financial institutions ("OTC Options") (such as commercial
banks or savings and loan associations) deemed creditworthy

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by the Manager. OTC Options are illiquid and it may not be possible for the
Funds to dispose of options they have purchased or terminate their obligations
under an option they have written at a time when the Manager and Sub-Adviser
believe it would be advantageous to do so.

Futures contracts and options on futures contracts will be entered into on
domestic and foreign exchanges and boards of trade, subject to applicable
regulations of the CFTC. These transactions may be entered into for bona fide
hedging and other permissible risk management purposes.

In connection with transactions in futures contracts and writing related
options, each Fund will be required to deposit as "initial margin" a specified
amount of cash or short-term U.S. Government securities. The initial margin
required for a futures contract is set by the exchange on which the contract is
traded. Thereafter, subsequent payments (referred to as "variation margin") are
made to and from the broker to reflect changes in the value of the futures
contract. No Fund will purchase or sell futures contracts or related options if,
as a result, the sum of the initial margin deposit on that Fund's existing
futures and related options positions and premiums paid for options on futures
contracts entered into for other than bona fide hedging purposes would exceed 5%
of the Fund's assets. With respect to futures and options on futures contracts,
segregated accounts will be maintained consisting of cash or high grade liquid
U.S. or foreign debt securities with a value (marked to market daily) equal to
the dollar amount of the Fund's purchase or sale obligation under such
contracts.

SWAP TRANSACTIONS

Each of the Funds (other than Money Market Fund) may enter into interest
rate swaps and purchase or sell interest rate caps and floors. Such transactions
will be entered into primarily to preserve a return or spread on a particular
investment or portion of its portfolio or as a duration management technique.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of floating
rate payments for fixed-rate payments. The purchase of an interest rate cap
entitles the purchaser, to the extent that a specified index exceeds a
predetermined interest rate cap, to receive payments of interest on a
contractually based principal amount from the party selling such interest rate
cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a contractually based principal amount from the
party selling such interest rate floor.

A Fund will usually enter into interest rate swaps on a net basis, i.e., the
two payment streams are netted out, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. The net amount of the
excess, if any, of the Fund's obligations over its entitlements with respect to
each interest rate swap will be accrued on a daily basis and an amount of cash
or high-quality liquid debt securities having an aggregate net asset value at
least equal to the accrued excess will be maintained in a segregated account by
the Fund's custodian. If the Fund enters into an interest rate swap on other
than a net basis, the Fund will maintain a segregated account in the full
amount, accrued on a daily basis, of the Fund's obligations with respect to the
swap. To the extent the Fund sells (i.e., writes) caps and floors, that Fund's
sub-custodian will maintain in a segregated account cash or high-quality liquid
debt securities having an aggregate net asset value at least equal to the full
amount, accrued on a daily basis, of the Fund's obligations with respect to any
caps or floors.

The Funds will not enter into any interest rate swap, interest rate cap or
floor transaction unless the unsecured senior debt or the claims paying ability
of the other party thereto is rated at least A by S&P. The Manager and the
applicable Sub-Advisers will monitor the creditworthiness of contra-

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parties on an ongoing basis. If there is a default by the other party to such a
transaction, the applicable Fund will have contractual remedies pursuant to the
agreements related to the transaction. The swap market has grown substantially
in recent years with a large number of banks and investment banking firms acting
both as principals and as agents utilizing standardized swap documentation. The
Manager and Sub-Advisers have determined that, as a result, the swap market has
become relatively liquid. Caps and floors are more recent innovations for which
standardized documentation has not yet been developed and, accordingly, they are
less liquid than swaps.

There is no limit on the amount of interest rate swap transactions that may
be entered into by the Funds. Interest rate swap transactions do not involve the
delivery of securities or other underlying assets or principal. Accordingly, the
risk of loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that the Fund contractually is entitled to
receive. The aggregate purchase price of caps and floors held by a Fund may not
exceed 5% of the Fund's total assets. The Funds may sell (i.e., write) caps and
floors without limitation, subject to the segregated account requirement.

WHEN-ISSUED SECURITIES

Each of the Funds, 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, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment and settlement,
no payment is made for the securities purchased by the purchaser and, thus, no
interest accrues to the purchaser from the transaction. If a Fund chooses to
dispose of the right to acquire a when-issued security prior to its acquisition
or dispose of its right to deliver or receive against a forward commitment, it
can incur a gain or loss. The use of when-issued transactions and forward
commitments enables the Funds to hedge against anticipated changes in interest
rates and prices. The Funds may also enter into such transactions to generate
incremental income. In some instances, the third-party seller of when-issued or
forward commitment securities may determine prior to the settlement date that it
will be unable to meet its existing transaction commitments without borrowing
securities. If advantageous from a yield perspective, a Fund may, in that event,
agree to resell its purchase commitment to the third-party seller at the current
market price on the date of sale and concurrently enter into another purchase
commitment for such securities at a later date. As an inducement for a Fund to
"roll over" its purchase commitment, such Fund may receive a negotiated fee. 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. These risks could result in an increase in the volatility of a Fund's
net asset value. A segregated account consisting of cash or high-grade liquid
U.S. or foreign debt securities, equal to the value of the when-issued or
forward commitment securities will be established and maintained with the
custodian and will be marked to market daily. The purchase of securities with a
settlement date occurring on the Public Securities Association approved
settlement date is considered a normal delivery and not a "when-issued" or
"forward commitment" purchase.

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<PAGE>
ZERO COUPON, DEFERRED INTEREST AND PAYMENT IN KIND BONDS

The Funds (other than Money Market Fund) may invest in zero coupon bonds,
deferred interest bonds and bonds on which the interest is payable in kind ("PIK
Bonds"). Zero coupon and deferred interest bonds are debt obligations which are
issued at a significant discount from face value. The discount approximates the
total amount of interest the bonds will accrue and compound over the period
until maturity or the first interest accrual date at a rate of interest
reflecting the market rate of the security at the time of issuance. While zero
coupon bonds do not require the periodic payment of interest, deferred interest
bonds provide for a period of delay before the regular payment of interest
begins. Although this period of delay is different for each deferred interest
bond, a typical period is approximately one-third of the bond's term to
maturity. PIK Bonds are debt obligations which provide that the issuer thereof
may, at its option, pay interest on such bonds in cash or in the form of
additional debt obligations. Such investments benefit the issuer by mitigating
its need for cash to meet debt service, but also require a higher rate of return
to attract investors who are willing to defer receipt of such cash. The Funds
will accrue income on such investments for tax and accounting purposes, in
accordance with applicable law, which income is distributable to shareholders.
Because no cash is received at the time such income is accrued, the Funds may be
required to liquidate portfolio securities to satisfy their distribution
obligations.

Zero coupon securities, PIK Bonds and debt securities acquired at a discount
tend to be subject to greater price fluctuations in response to changes in
interest rates than are ordinary interest-paying debt securities with similar
maturities. The value of zero coupon securities and debt securities acquired at
a discount appreciates more during periods of declining interest rates and
depreciates more during periods of rising interest rates. Under current federal
income tax law, the Funds are required to accrue as income each year the value
of securities received in respect of pay-in-kind bonds and a portion of the
original issue discount with respect to zero coupon securities and other
securities issued at a discount to the stated redemption price. In addition, the
Funds will elect similar treatment for any market discount with respect to debt
securities acquired at a discount. Accordingly, the Funds may have to dispose of
portfolio securities under disadvantageous circumstances in order to generate
current cash to satisfy certain distribution requirements.

SHORT SALES

Bond 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, the 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, the 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.

The 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. The 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 the Fund may be required to pay in connection with the
short sale.

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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 the 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. During the period of time the short position is open, the Fund will
establish a segregated account maintained by the Fund's custodian in an amount
of cash, U.S. Government Securities or other high-grade liquid debt obligations
equal to the difference between the market value of the securities sold short at
the time they were sold short and any cash or U.S. Government Securities
required to be deposited as collateral with the broker in connection with the
short sale (not including the proceeds from the short sale), marked to market
daily.

In addition to the short sales discussed above, Bond Fund may also make
short sales "against the box" of securities they own or have the right to obtain
at no added cost which are identical to those sold short. Not more than 50% of
the Fund's total assets (determined at the time of the short sale) 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

Each of the Funds (other than Money Market Fund) may invest up to 15% of its
net assets in illiquid securities; Money Market Fund may invest up to 10% of its
net assets in illiquid securities. Each Fund will treat repurchase agreements
and time deposits with a term of more than seven days, securities that are
subject to repatriation restrictions for more than seven days, any securities
issued in connection with debt conversion programs that are restricted as to
remittance of invested capital or profits, purchased OTC Options, the cover for
any options a Fund has written and foreign index linked instruments, as illiquid
securities for purposes of this limitation.

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 Manager and Sub-Adviser deem
it advisable to do so. In addition, in order to meet redemption requests, a Fund
may have to sell other assets, rather than such illiquid or restricted
securities, at a time which is not advantageous.

"Restricted securities" are securities which were originally sold in private
placements and which have not been registered under the Securities Act of 1933,
as amended (the "1933 Act"). Such securities generally have been considered
illiquid because 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 are not
subject to any limitation on their ability to invest in securities simply
because such securities are restricted. The Funds may therefore invest in Rule
144A securities and treat them as liquid when they have been determined to be
liquid by the Board of Directors of the Company or by the Manager, subject to
the oversight of and pursuant to procedures adopted by the Board of Directors.
Under these procedures, factors taken into account in determining the liquidity
of a Rule 144A security include (a) the frequency of trades and quotes for the
security, (b) the number of dealers willing to purchase or sell the security and
the number of other potential

29
<PAGE>
purchasers, (c) dealer undertakings to make a market in the security, and (d)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). Investing in Rule 144A securities could have the effect
of increasing the level of Fund illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.

PORTFOLIO TURNOVER

Bond Fund may actively use trading to benefit from yield disparities among
different issues of securities or otherwise to achieve its investment objective
and policies and therefore Bond Fund is expected to have a high portfolio
turnover rate (generally defined as being 100% or more). To the extent that
active trading will increase a Fund's rate of turnover, certain transaction
expenses will increase and the incidence of short-term gain may be taxable as
ordinary income. For the fiscal year ended June 30, 1995, the portfolio turnover
rates for Bond Fund, European Value Fund and Latin American Value Fund were
501%, 131% and 161%, respectively. The calculation of portfolio turnover does
not include securities maturing in less than 12 months. Accordingly, the
portfolio turnover rate for Money Market Fund will generally be insignificant.

While it is not the policy of any of the other 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 Manager and
Sub-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 Transactions and
Allocation of Brokerage."

INVESTMENT RESTRICTIONS

Each of the Funds has adopted certain investment restrictions, which are set
forth in detail in the Statement of Additional Information. The following
restriction is fundamental to each Fund and may not be changed without
shareholder approval: The Funds will not invest 25% or more of the value of its
total assets in the same industry or in the obligations of any one government
other than the U.S. All restrictions not defined as fundamental may be changed
without shareholder approval.

If a percentage restriction 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. However, with
respect to the investment restriction on borrowing, each Fund is prohibited from
purchasing portfolio securities while outstanding borrowing exceeds 5% of the
value of that Fund's total assets.

SPECIAL RISK CONSIDERATIONS

FOREIGN SECURITIES

Investment in foreign securities involves risks not typically associated
with investment in securities of U.S. issuers. Those include the following:

CURRENCY FLUCTUATIONS. The value of a Fund's portfolio securities computed
in U.S. dollars will vary with increases and decreases in the exchange rate
between the currencies in which the Fund has invested and the U.S. dollar. A
decline in the value of any particular currency against the U.S. dollar

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will cause a decline in the U.S. dollar value of the Fund's holdings of
securities denominated in such currency and, therefore, will cause an overall
decline in the Fund's net asset value and net investment income and capital
gains, if any, to be distributed in U.S. dollars to shareholders by the Fund.

The rate of exchange between the U.S. dollar and other currencies is
determined by several factors, including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the price of oil, the pace of activity in the industrial
countries, including the U.S., and other economic and financial conditions
affecting the world economy.

POLITICAL AND ECONOMIC RISKS. Nationalization, expropriation or
confiscatory taxation, currency blockage, political changes, government
regulation, social instability or diplomatic developments could affect adversely
the economy of a country or a Fund's investment in such country. A Fund may also
be adversely affected by exchange control regulations. The foregoing risks are
of particular concern in the case of issuers in emerging market countries
because such countries generally have less social, political and economic
stability than the U.S., Canada, Japan or Western Europe.

CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Non-U.S.
companies are not generally subject to uniform accounting, auditing and
financial reporting standards or to other regulatory requirements comparable to
those applicable to U.S. companies and in certain countries no reporting
standards currently exist. Thus, there may be less information available
concerning non-U.S. issuers of securities held by a Fund than is available
concerning U.S. companies.

MARKET CHARACTERISTICS. Securities of many non-U.S. companies may be less
liquid and their prices more volatile than securities of comparable U.S.
companies. In addition, securities of companies traded in many countries outside
the U.S., particularly those of emerging market countries, may be subject to
further risks due to the inexperience of local brokers and financial
institutions in less developed markets, the possibility of permanent or
temporary termination of trading, and greater spreads between bid and asked
prices for securities. Non-U.S. stock exchanges and brokers are subject to less
governmental supervision and regulation than in the U.S., and non-U.S. stock
exchange transactions are usually subject to fixed commissions, which are
generally higher than negotiated commissions on U.S. transactions. In addition,
there may in certain instances be delays in the settlement of non-U.S. stock
exchange transactions.

The limited size of some non-U.S. securities markets and limited trading
volume in issuers compared to volume of trading in U.S. securities could cause
prices to be erratic for reasons apart from factors that affect the quality of
the securities. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on fundamental analysis, may
decrease the value and liquidity of portfolio securities, especially in these
markets.

INVESTMENT AND REPATRIATION RESTRICTIONS. Several countries restrict, to
varying degrees, foreign investments in their securities markets. Government and
private restrictions take a variety of forms, including (a) limitations on the
amount of funds that may be introduced into or repatriated from the country
(including limitations on repatriation of investment income and capital gains);
(b) prohibitions or substantial restrictions on foreign investment in certain
industries or market sectors, such as defense, energy and transportation; (c)
restrictions (whether contained in the charter of an individual company or
mandated by the government) on the percentage of securities of a single issuer
which may be owned by a foreign investor; (d) limitations on the types of
securities which a foreign investor may purchase; and (e) restrictions on a
foreign investor's right to invest in companies

31
<PAGE>
whose securities are not publicly traded. In some circumstances, these
restrictions may limit or preclude investment in certain countries or may
increase the cost of investing in securities of particular companies.

FOREIGN TAXES. The Funds' interest and dividend income from foreign issuers
may be subject to non-U.S. withholding taxes. The Funds also may be subject to
taxes on trading profits or on transfers of securities in some countries. The
imposition of these taxes will increase the cost to the Funds of investing in
any country imposing such taxes. For U.S. tax purposes, U.S. shareholders may be
entitled to a credit or deduction to the extent of any foreign income taxes paid
by the Funds. See "Dividends, Distributions and Tax Status--Taxes."

RISKS OF SOVEREIGN DEBT OBLIGATIONS. Each of the Funds (other than Money
Market Fund) may purchase sovereign debt instruments issued or guaranteed by
foreign governments or their agencies. Sovereign debt may be in the form of
conventional securities or other types of debt instruments such as loans or loan
participations. Sovereign debt of Latin American nations or other developing or
emerging market countries may involve a high degree of risk, and may be in
default or present the risk of default. The governmental entity that controls
the repayment of sovereign debt may not be able or willing to repay the
principal and/or interest when due in accordance with the terms of such debt. A
governmental entity's willingness or ability to repay principal and interest due
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the governmental entity's policy
towards the IMF, and the political constraints to which a governmental entity
may be subject. Holders of sovereign debt, including the Funds, may be requested
to participate in the rescheduling of such debt and to extend further loans to
governmental entities.

If a governmental entity defaults on its sovereign debt, the Funds may have
limited recourse against the issuer and/or guarantor. Remedies must, in some
cases, be pursued in the courts of the defaulting party itself, and the ability
of the holder of sovereign debt securities to obtain recourse may be subject to
the political climate in the relevant country.

ADDITIONAL RISKS APPLICABLE TO INVESTMENT IN EASTERN EUROPE. Investments in
companies domiciled in Eastern European countries may be subject to potentially
greater risks than those of other foreign issuers. These risks include: (a)
potentially less social, political and economic stability; (b) the small current
size of the markets for such securities and the low volume of trading, which
result in less liquidity and in greater price volatility; (c) certain national
policies which may restrict a Fund's investment opportunities, including
restrictions on investment in issuers or industries deemed sensitive to national
interests; (d) foreign taxation; (e) the absence of developed legal structures
governing private or foreign investment or allowing for judicial redress for
injury to private property; (f) the absence, until recently in certain Eastern
European countries, of a capital market structure or market-oriented economy;
and (g) the possibility that recent favorable economic developments in Eastern
Europe may be slowed or reversed by unanticipated political or social events in
such countries, or in the Commonwealth of Independent States (formerly the Union
of Soviet Socialist Republics).

The Communist governments of a number of Eastern European countries
expropriated large amounts of private property in the past, in many cases
without adequate compensation, and there may be no assurance that such
expropriation will not occur in the future. In the event of such expropriation,
a Fund could lose a substantial portion of any investments it has made in the
affected

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<PAGE>
countries. Further, no accounting standards exist in Eastern European countries.
Finally, even though certain Eastern European currencies may be convertible into
U.S. dollars, the conversion rates may be artificial to the actual market values
and may be adverse to shareholders of the Fund.

ADDITIONAL RISKS APPLICABLE TO INVESTMENT IN LATIN AMERICAN COUNTRIES,
INCLUDING MEXICO. Many of the currencies of Latin American and certain other
emerging market countries have experienced steady devaluations relative to the
U.S. dollar, and major devaluations have historically occurred in certain
countries. Devaluations in the currencies in which the Funds' portfolio
securities are denominated may have a detrimental impact on the Funds.

Some Latin American countries also may have managed currencies which are not
free-floating against the U.S. dollar. In addition, there is a risk that certain
Latin American and other emerging market countries may restrict the free
conversion of their currencies into other currencies. Further, certain
currencies issued by Latin American countries may not be internationally traded.

Most Latin American countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain Latin American
countries.

Many Latin American governments have exercised and continue to exercise a
significant influence over many aspects of the private sector. Government
actions concerning the economy could have a significant effect on market
conditions and prices and/or yields of securities in which the Funds invest. For
more information on investment in Latin American and other emerging market
countries, see "Investment Objective and Policies--Special Risk
Considerations--Additional Risks Applicable to Investment in Countries in Latin
America" in the Statement of Additional Information.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND OPTIONS

Participation in the options or futures markets and in interest rate and
currency transactions involves investment risks and transaction costs to which
the Funds would not be subject absent the use of these strategies. If the
Manager's and Sub-Adviser's prediction of movements in the direction of the
securities, currency or interest rate markets are inaccurate, the adverse
consequences to a Fund (E.G., a reduction in a Fund's net asset value or a
reduction in the amount of income available for distribution) may leave that
Fund in a worse position than if such strategies were not used. Risks inherent
in the use of options, interest rate transactions, futures contracts and options
on futures contracts include (a) dependence on the Manager's and Sub-Advisers'
ability to predict correctly movements in the direction of interest rates and
security prices; (b) imperfect correlation between the price of options and
futures contracts and options thereon and movements in the prices of the
securities being hedged; (c) the fact that skills needed to use these strategies
are different from those needed to select portfolio securities; (d) the possible
absence of a liquid secondary market for any particular instrument at any time;
and (e) the possible need to defer closing out certain hedged positions to avoid
adverse tax consequences.

RISKS OF FIXED-INCOME SECURITIES

All fixed-income securities are subject to two types of risks: credit risk
and interest rate risk. Credit risk relates to the ability of the issuer to meet
interest or principal payments, or both, as they come due. Interest rate risk
refers to the fluctuations in the net asset value of any portfolio of fixed-
income securities resulting from the inverse relationship between price and
yield of fixed-income

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securities; that is, when the general level of interest rates rises, the prices
of outstanding fixed-income securities decline, and when interest rates fall,
prices rise. Fixed rate securities with longer term to maturity are generally
subject to greater volatility than shorter term instruments.

Each of the Funds may invest in bonds which are rated Baa by Moody's or BBB
by S&P. Such bonds are considered medium grade securities, and while normally
adequately secured, may be subject to adverse economic conditions which could
affect their ability to pay interest and repay principal and therefore have
speculative characteristics.

RISKS OF FOREIGN INDEX LINKED INSTRUMENTS

Foreign Index Linked Instruments may offer higher yields than comparable
securities linked to purely domestic indexes but also may be more volatile.
Foreign Index Linked Instruments are relatively recent innovations for which the
market has not yet been fully developed and, accordingly, they typically are
less liquid than comparable securities linked to purely domestic indexes. In
addition, the value of Foreign Index Linked Instruments will be affected by
fluctuations in foreign exchange rates or in foreign interest rates. If the
Manager and Sub-Adviser are incorrect in their prediction as to the movements in
the direction of particular foreign currencies or foreign interest rates, the
return realized by a Fund on Foreign Index Linked Instruments may be lower than
if the Fund had invested in a similarly rated domestic security. Foreign
currency gains and losses with respect to Foreign Index Linked Instruments may
affect the amount and timing of income recognized by the Funds.

RISKS OF LOWER-RATED DEBT SECURITIES

Latin American Value Fund and Bond Fund may invest in debt securities rated
below Baa3 by Moody's or BBB- by S&P (commonly known as "high yield" or "junk"
bonds). Such securities are subject to higher risks and greater market
fluctuations than are lower-yielding, higher-rated securities. Under rating
agency guidelines, medium- and lower-rated securities and comparable unrated
securities will likely have some quality and protective characteristics that are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Certain of the debt securities in which the Fund may invest may have, or may be
considered comparable to securities having, the lowest ratings for
non-subordinated debt instruments assigned by Moody's or S&P. Under rating
agency guidelines, these securities are considered to have extremely poor
prospects of ever attaining any real investment standing, to have a current
identifiable vulnerability to default, to be unlikely to have the capacity to
pay interest and repay principal when due in the event of adverse business,
financial or economic conditions, and/or to be in default or not current in the
payment of interest or principal. Such securities are considered speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations. Unrated securities deemed
comparable to these lower- and lowest-rated securities will have similar
characteristics. Accordingly, it is possible that these types of factors could,
in certain instances, reduce the value of securities held by the Fund with a
commensurate effect on the value of their respective shares.

The price of high yield securities has been found to be less sensitive to
changes in prevailing interest rates than higher-rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers (which issuers of these securities
often are) may experience financial stress which would adversely affect their
ability to service their principal and interest payment obligations, to meet
their projected business goals or to obtain additional financing. If the issuers
of a fixed-income security owned by a Fund were to default, the Fund might incur
additional expenses to seek recovery. The risk of loss due to default by issuers
of high yield securities is

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significantly greater than that associated with higher-rated securities because
such securities generally are unsecured and frequently are subordinated to the
prior payment of senior indebtedness. In addition, periods of economic
uncertainty and change can be expected to result in an increased volatility of
market prices of high yield securities and a corresponding volatility in the net
asset value of a share of a Fund.

The secondary market for high yield securities is less liquid than the
markets for higher quality securities and, as such, may have an adverse effect
on the market prices of certain securities. In addition, the trading volume for
high yield, high risk debt securities is generally lower than that for
higher-rated securities and the secondary markets could contract under adverse
market or economic conditions independent of any specific adverse changes in the
condition of a particular issuer. These factors may also adversely affect the
ability of the Company's Board of Directors to arrive at a fair value for
certain high yield securities at certain times and could make it difficult for a
Fund to sell certain securities. Furthermore, adverse publicity and investor
perceptions about lower-rated securities, whether or not based on fundamental
analysis, may tend to decrease the market value and liquidity of such
lower-rated securities. Less liquid secondary markets may also affect each
Fund's ability to sell securities at their fair value. In addition, each of the
Funds may invest up to 15% of its net assets, measured at the time of
investment, in illiquid securities, which may be more difficult to value and to
sell at fair value. If the secondary markets for high yield, high risk debt
securities contract due to adverse economic conditions or for other reasons,
certain previously liquid securities in a Fund's portfolio may become illiquid
and the proportion of the Fund's assets invested in illiquid securities may
increase.

Many fixed income securities, including certain U.S. corporate fixed income
securities in which a Fund may invest, contain call or buy-back features which
permit the issuer of the security to call or repurchase it. Such securities may
present risks based on payment expectations. If an issuer exercises such a "call
option" and redeems the security, a Fund may have to replace the called security
with a lower yielding security, resulting in a decreased rate of return for such
Fund.

DIVERSIFICATION STATUS

Each of the Funds (other than Money Market Fund) is "non-diversified" and,
accordingly, will be able to invest more than 5% of the value of its assets in
the obligations of a single issuer, subject to the diversification requirements
of subchapter M of the Internal Revenue Code of 1986, as amended, applicable to
the Funds. To the extent the Funds invest a relatively high percentage of their
assets in obligations of a limited number of issuers, the Funds may be more
susceptible than more widely diversified funds to any single economic, political
or regulatory occurrence or to changes in an issuer's financial condition or in
the market's assessment of the issuers. Pursuant to the requirements of Rule
2a-7 of the 1940 Act, Money Market Fund is "diversified" and, accordingly, may
not (except under certain circumstances) invest more than 5% of the value of its
assets in the obligations of a single issuer (other than U.S. Government
Securities).

MANAGEMENT

BOARD OF DIRECTORS

As in all corporations, the Company's Board of Directors has the primary
responsibility for overseeing the overall management of the Company and electing
its officers.

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INVESTMENT MANAGER

Piper Capital Management Incorporated (the "Manager") has been retained
under an Investment Advisory and Management Agreement (the "Advisory Agreement")
with the Company to act as investment adviser for each Fund subject to the
authority of the Board of Directors.

The Manager 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 June 30, 1995,
the Manager rendered investment advice regarding approximately $10 billion of
assets. The Manager 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 Manager
is 222 South Ninth Street, 20th Floor, Minneapolis, Minnesota 55402-3804.

Under the Advisory Agreement, the Manager is to provide administrative
services, manage the business affairs and supervise the investment of the
Company's assets.

SUB-ADVISERS

Under Sub-Advisory Agreements between the Manager and the following
Sub-Advisers, each Sub-Adviser provides the respective Fund with investment
advice and portfolio management relating to the Fund's investment in securities
issued by issuers in the particular geographical region in which the applicable
Fund is authorized to invest, subject to the overall supervision of the Manager:

NORTH AMERICAN FUND--The Manager is responsible for investments in U.S.
securities. The individual who is primarily responsible for the day-to-day
management of the U.S. portion of North American Fund is Paul Dow. Mr. Dow has
been a Senior Vice President of the Manager since February 1989 and Chief
Investment Officer of the Manager since December 1989. Prior to joining the
Manager, Mr. Dow was a Vice President of Centerre Trust Company of St. Louis,
Missouri, serving as a senior equity and balanced portfolio manager since 1983.

In addition to Mr. Dow, John K. Schonberg is responsible for the day-to-day
management of the U.S. portion of North American Fund. Mr. Schonberg has been a
vice president, equity portfolio manager and quantitative analyst for the
Manager since 1989. He also manages several institutional separately managed
stock portfolio accounts.

Acci Worldwide, S.A. de C.V. ("Acci") (regarding investments in Mexican
securities), Paseo de la Reforma 398-4 Piso, 06600 Mexico, D.F. Acci, an
investment adviser registered under the Advisers Act, was organized in June 1990
as a controlled subsidiary of Acciones y Valores de Mexico, S.A. de C.V. ("AVM")
for the purpose of providing investment advice to non-Mexican investment funds
investing in Mexican securities. AVM, founded in 1971, has been involved in
equity underwriting and trading, portfolio investment and management of equity
mutual funds in Mexico and participates in the fixed-income markets. AVM is a
subsidiary of Grupo Financiero Banamex--Accival ("Banacci") which owns over 99%
of the voting stock of AVM and of Banamex, Mexico's largest bank. As of June 30,
1995, Banacci managed assets of approximately $964 million.

The individual at Acci who is responsible for the day-to-day management of
North American Fund is Maru Eugenia Pichardo. Ms. Pichardo has been associated
with AVM for fourteen years and is currently a managing director of AVM.

AGF Investment Advisors, Inc. ("AGF") (regarding investments in Canadian
securities), 31st Floor, Toronto-Dominion Bank Tower, Toronto, Ontario, Canada
M5K 1E9. AGF, an investment

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adviser registered under the Advisers Act, is a wholly owned subsidiary of AGF
Management Limited ("AGF Ltd."), an Ontario corporation incorporated in 1960,
located at Toronto-Dominion Bank Tower, Suite 3100, Toronto, Ontario, Canada M5K
1E9. As of June 30, 1995, AGF Ltd. and its subsidiaries had approximately $3.2
Billion under management.

The individual at AGF who is responsible for the day-to-day management of
North American Fund is Robert Farquharson. Mr. Farquharson has been associated
with AGF for over thirty years, and is currently a Vice Chairman of AGF Ltd. and
oversees strategy for the AGF equity funds.

EUROPEAN VALUE FUND--Pictet International Management Ltd. ("Pictet"),
Cutlers Garden, 5 Devonshire Square, London EC2M 4LD, England. Pictet, founded
in 1980 and based in London, is an investment adviser registered under the
Advisers Act and is regulated by the Investment Management Regulatory
Organisation Limited in the United Kingdom. Pictet is a wholly owned subsidiary
of Pictet (London) Limited ("Pictet London") which is a holding company wholly
owned by Pictet (Canada) and Company Ltd. ("Pictet Canada"). Pictet Canada is a
partnership, whose principal activities are investment accounting, custody and
securities brokerage. The Pictet group of companies provides a wide range of
services to individual and institutional clients including portfolio management,
administrative and custodian services, financial and economic research,
brokerage services and advice and counselling on legal, tax and accountancy
matters. As of June 30, 1995, the Pictet group managed assets in excess of $45
billion.

The individual at Pictet who is responsible for the day-to-day management of
European Value Fund is Christian Simond. Mr. Simond joined Pictet in 1986 and is
currently a Senior Investment Manager with Pictet (London) Limited. In addition,
Nils Francke assists Mr. Simond in the day-to-day management of European Value
Fund. Mr. Francke joined Pictet in 1994 as an Investment Manager with the Pictet
European equities team. Prior to 1994, Mr. Francke served for three years as an
Executive Officer with Schroder Munchmeyer Hengst in Germany, advising
institutions on European capital and equities markets.

PACIFIC VALUE FUND--Edinburgh Fund Managers plc ("EFM"), Donaldson House, 97
Haymarket Terrace, Edinburgh, EH12 5HD, Scotland. EFM is a public limited
company that was incorporated in 1969. EFM is a majority-owned subsidiary of The
British Investment Trust plc, a Scottish closed-end investment company founded
in 1889, for which EFM serves as investment manager. EFM, an investment adviser
registered under the Advisers Act, currently furnishes investment management
services, directly or through subsidiaries, to several closed-end and open-end
investment companies, pension plans, charitable organizations and other
individual/corporate clients. EFM is also a partner with U.S.-based Wilmington
Trust Company in a partnership known as Edinburgh-Wilmington International
Capital Management, which is a registered investment adviser providing
international equity management to U.S. investors. As of June 30, 1995, EFM
managed assets of approximately $5.7 billion.

The individual at EFM who is responsible for the day-to-day management of
Pacific Value Fund is Helen Fallow. Ms. Fallow joined EFM in 1990, and she
currently serves as Manager of its Pacific Rim Department. Prior to joining EFM,
Ms. Fallow was Vice President of Equity Sales with Crosby Securities Ltd.

In addition to Ms. Fallow, David Currie is responsible for the day-to-day
management of the Japanese portion of the Pacific Value Fund. Mr. Currie has
been a portfolio manager for EFM since 1988. Since 1991 he has been employed in
its Japanese Department; prior to that time he was employed in its United
Kingdom Department.

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LATIN AMERICAN VALUE FUND--Bankers Trust Company ("Bankers Trust"), a New
York banking corporation with executive offices at 130 Liberty Street, New York,
New York 10006, is a wholly owned subsidiary of Bankers Trust New York
Corporation. Bankers Trust conducts a variety of general banking and trust
activities and is a major wholesale supplier of financial services to the
international and domestic institutional market. As of December 31, 1994,
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States with total assets of approximately $72 billion. Bankers
Trust is a worldwide merchant bank dedicated to servicing the needs of
corporations, governments, financial institutions and private clients through a
global network of 83 offices in 36 countries. As of March 31, 1995, Bankers
Trust and its subsidiaries had assets under management of over $164.7 billion
worldwide and is one of the largest investment managers in the United States.
Bankers Trust's officers have had extensive experience in managing investment
portfolios having objectives similar to those of Latin American Value Fund.

The individual at Bankers Trust who is responsible for the day-to-day
management of the Fund is Maria-Elena Carrion. Since mid-1993, Ms. Carrion has
been a Vice President of Bankers Trust and is the head of its Latin American
Investment Team. Prior to joining Bankers Trust, Ms. Carrion was associated with
Latin American Securities, a London-based specialty fund management company.
From 1986 through July 1991 Ms. Carrion was a Vice President at U.S. Trust.

In addition to Ms. Carrion, Emily Alejos is responsible for the day-to-day
management of Latin American Value Fund. Ms. Alejos joined Bankers Trust in 1993
as a portfolio manager for the Latin American Investment Team. Prior to that
time she was an investment analyst for GT Capital Management where she
specialized in Latin American equitites.

BOND FUND--Salomon Brothers Asset Management Limited ("SBAM Limited"),
Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB England. SBAM
Limited is based in London and specializes in the management of global
multicurrency fixed income securities and currency transactions. SBAM Limited is
an indirect, wholly owned subsidiary of Salomon Inc, the parent of Salomon
Brothers Inc ("SBI"). SBI is one of the largest international investment houses
in the world, with offices and affiliates in 19 countries and assets at June 30,
1995 of approximately $164 billion. SBAM Limited is registered as an investment
adviser under the Advisers Act and is regulated by the Investment Management
Regulatory Organisation Limited in the United Kingdom. In connection with SBAM
Limited's service as Sub-Adviser to Bond Fund, SBAM Limited's affiliate, Salomon
Brothers Asset Management Inc ("SBAM Inc") will provide certain advisory
services to SBAM Limited for the benefit of Bond Fund. SBAM Inc will be
compensated by SBAM Limited at no additional expense to Bond Fund. Like SBAM
Limited, SBAM Inc is registered as an investment adviser under the Advisers Act
and is an indirect, wholly owned subsidiary of Salomon Inc. The business address
of SBAM Inc is Seven World Trade Center, New York, New York 10048. SBAM Limited
provides a broad range of fixed income investment advisory services for
institutional clients located around the world, and provides investment advisory
services for one U.S. registered investment company (including portfolios
thereof). As of June 30, 1995, SBAM Limited, SBAM Inc and their advisory
affiliates had in excess of $12 billion of assets under management of which
approximately $2.7 billion is in global fixed income portfolios.

David J. Griffiths and David Scott are responsible for the day-to-day
management of Bond Fund. David J. Griffiths assumed such responsibilities since
March 1995. Mr. Griffiths joined SBAM Limited in 1991 as a portfolio manager.
Prior to that time he was associated with Salomon's International

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<PAGE>
Bond Market Research Group where he monitored European economic and interest
rate developments. Mr. Scott joined SBAM Limited in March 1994 as a portfolio
manager. Before joining SBAM Limited, he was a portfolio manager for J.P. Morgan
Investment Management in London. Prior to that, Mr. Scott was a portfolio
manager for Mercury Asset Management in London.

MONEY MARKET FUND. SBAM Inc, Seven World Trade Center, New York, New York
10048, has a professional staff with extensive experience in the securities and
investment industry in both portfolio and securities analysis. This staff has
been innovative in developing and managing funds for U.S. and non-U.S.
investors. SBAM Inc provides a broad range of fixed income and equity investment
advisory services for its individual and institutional clients located around
the world, and provides investment advisory services for 21 registered
investment companies (including portfolios thereof). SBAM Inc is an indirect
wholly owned subsidiary of Salomon Inc, the parent of SBI. SBI is one of the
largest international investment houses in the world with offices and affiliates
in 19 countries with assets at June 30, 1995 of approximately $164 billion.

Mary Beth Whyte will be responsible for the day-to-day management of Money
Market Fund's portfolio. Ms. Whyte, who joined SBAM Inc in 1994, is a Vice
President and Portfolio Manager responsible for directing SBAM Inc's investment
policy for all municipal portfolios and money market activities. Prior to
joining SBAM Inc, Ms. Whyte was a Senior Vice President and head of the
Municipal Bond Area at Fiduciary Trust Company International from 1987-1994.
Prior to that, she was associated with U.S. Trust Company from 1986-1987 and
Bernstein-Macaulay Inc. from 1985-1986.

RATE OF COMPENSATION. Under the Advisory Agreement, the Manager receives a
monthly fee computed separately for each Fund. Fees for North American Fund,
European Value Fund, Pacific Value Fund, Latin American Value Fund and Bond Fund
are paid monthly at an annual rate of 1.0% of average daily net assets of the
applicable Fund. These fees are higher than fees paid by most other investment
companies. The fees for Money Market Fund are paid monthly at an annual rate of
.50% of average daily net assets.

As compensation for their services provided pursuant to the respective
Sub-Advisory Agreements, the Manager pays each Sub-Adviser monthly compensation
payable over the same time periods and calculated in the same manner as the
investment advisory fee of the applicable Fund of .50% of net assets of such
Fund, except that with respect to Money Market Fund, the Sub-Adviser is paid by
the Manager a fee of .25% of daily net assets of the applicable Fund. In the
case of North American Fund, the fee is split equally among each of the
Sub-Advisers without regard to the amount of assets under their respective
management at any one time.

CUSTODIAN

Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, 14th
Floor, Kansas City, Missouri 64105, (816) 474-8786, serves as custodian for each
Fund's portfolio securities and cash.

Rules adopted under the 1940 Act permit the Funds to maintain their
securities and cash in the custody of certain eligible banks and securities
depositories. IFTC has entered into a Sub-Custodian Agreement with Bankers Trust
Company with respect to the Company's foreign portfolio securities and related
cash. Rule 17f-5 adopted under the Act permits the Company to maintain such
securities and cash in the custody of certain eligible foreign banks and foreign
securities depositories. The

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Funds' foreign securities are held by such entities who are approved by the
Board of Directors in accordance with such rules. Determinations are made
pursuant to such rules following consideration of a number of factors including,
but not limited to, the reliability and financial stability of the institutions;
the ability of the institutions to perform custodial services for the Funds; the
reputation of the institutions in national markets; the countries in which the
institutions are located; and the risks of potential nationalization or
expropriation of assets of the Funds.

ACCOUNTING AGENT, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

IFTC has been retained to provide certain accounting and bookkeeping
services to the Funds. In addition, IFTC serves as Transfer Agent and Dividend
Disbursing Agent for the Company.

EXPENSES

The expenses of each Fund are deducted from their total income before
dividends are paid. These expenses include, but are not limited to,
organizational costs, fees paid to the Manager, distribution expenses pursuant
to a Rule 12b-1 plan, fees and expenses of officers and directors who are not
affiliated with the Manager, taxes, interest, legal fees, transfer agent,
dividend disbursing agent, accounting agent and custodian fees, auditing fees,
brokerage fees and commissions, fees and expenses of registering and qualifying
the Funds and their shares for distribution under federal and state securities
laws, expenses of preparing prospectuses and statements of additional
information and of printing and distributing prospectuses and statements of
additional information annually to existing shareholders, the expense of reports
to shareholders, shareholders' meetings and proxy solicitations, and other
expenses which are not expressly assumed by the Manager under the Investment
Advisory and Management Agreement. Any general expenses of the Company that are
not readily identifiable as belonging to a particular Fund will be allocated
among the Funds based upon the relative net assets of the Funds at the time such
expenses were accrued.

For each Fund's current fiscal year the Manager has voluntarily limited
total expenses (including the Manager's compensation and amounts paid pursuant
to the Rule 12b-1 plan discussed below but excluding interest, taxes, brokerage
fees and commissions and extraordinary expenses) on a per annum basis to 2% with
respect to average daily net assets of North American Fund, European Value Fund,
Pacific Value Fund and Latin American Value Fund, 1.8% with respect to average
daily net assets of Bond Fund and 1.00% with respect to average daily net assets
of Money Market Fund. After each Fund's current fiscal year, these limitations
may be revised or terminated at any time.

BROKERAGE COMMISSIONS

The Manager and Sub-Advisers may consider a number of factors in determining
which brokers or futures commission merchants to use for the respective Fund's
portfolio transactions (including transactions in futures contracts and options
on futures contracts). These factors, which are more fully discussed in the
Statement of Additional Information, include, but are not limited to, research
services, the reasonableness of commissions and quality of services and
execution. A broker's sales of a Fund's shares may also be considered a factor
if the Manager and/or Sub-Adviser is satisfied that such 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 or the Sub-Advisers (or the Manager with respect to the U.S. portion
of North American Fund) or their affiliates on a securities exchange if the
commissions, fees or other remuneration received by such persons are reasonable
and fair compared to the commissions, fees or other remuneration paid to other
brokers or other futures commission merchants in connection with comparable
transactions involving similar securities or similar futures contracts or
options on futures contracts being purchased or sold on an

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exchange during a comparable period of time. In effecting portfolio transactions
through the Distributor or the Sub-Advisers (or the Manager with respect to the
U.S. portion of North American Fund) or their affiliates, the Funds intend to
comply with Section 17(e) of the 1940 Act.

DISTRIBUTION OF FUND SHARES

Piper Jaffray Inc. ("Piper Jaffray" or the "Distributor") acts as the
principal distributor of the Funds' shares. From the date of this prospectus,
shares of each Fund are being offered to the public on a continuous basis. The
address of the Distributor is that of the Company.

The Company has adopted a Distribution Plan pursuant to Rule 12b-1 under the
1940 Act (the "Plan"), pursuant to which the Distributor is entitled to
reimbursement each month for its actual expenses incurred in connection with
servicing of the Funds' shareholder accounts and in connection with
distribution-related services provided with respect to each Fund in an amount
not to exceed .70% per annum of the average daily net assets with respect to
North American Fund, Pacific Value Fund, European Value Fund and Latin American
Value Fund, and .50% with respect to Bond Fund. The Plan also authorizes
payments by Money Market Fund in an amount not to exceed .10% per annum of its
average daily net assets. However, the Board of Directors of the Company has
determined to discontinue payments under the Plan with respect to Money Market
Fund effective as of June 19, 1995. For each of the applicable Funds payments
under the Plan are currently limited voluntarily by the Distributor to amounts
not in excess of an annual rate of .50% with respect to North American Fund,
Pacific Value Fund, European Value Fund and Latin American Value Fund and .30%
with respect to Bond Fund. These limitations may be revised or terminated at any
time after the conclusion of each Fund's current fiscal year.

The Distributor is reimbursed under the Plan for Distribution Expenses and
Shareholder Servicing Costs. Distribution Expenses include, but are not limited
to, initial and ongoing sales compensation (in addition to sales loads) paid to
investment executives of the Distributor and to other broker-dealers; expenses
incurred in the printing of prospectuses, statements of additional information
and reports used for sales purposes; expenses of preparation and distribution of
sales literature; expenses of advertising of any type; an allocation of the
Distributor's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distribution-related expenses. Shareholder Servicing Costs include all expenses
of the Distributor incurred in connection with providing administrative or
accounting services including payments made to persons, including employees of
the Distributor, who respond to inquiries of shareholders of the Funds regarding
their ownership of shares or their accounts with the Funds or who provide other
administrative or accounting services not otherwise required to be provided by
the Funds' Adviser, Sub-Advisers or transfer agent. The Manager, the
Sub-Advisers and the Distributor may, out of their own assets, pay for certain
expenses incurred in connection with the distribution of shares of the Fund. In
particular, the Distributor may make payments out of its own assets to its
investment executives and other broker-dealers in connection with their sales of
shares of the Fund. See "Purchase of Shares--Public Offering Price."

The Distributor's Shareholder Servicing Costs include payments to its
investment executives and to other broker-dealers who have entered into sales
agreements with the Distributor as follows: If shares of a Fund (other than
Money Market Fund) are sold by a representative of a broker-dealer other than
the Distributor, that portion of .25% of the average daily net assets of the
Fund which is attributable to shares sold by such representative is paid to such
broker-dealer. If shares of a Fund

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<PAGE>
(other than Money Market Fund) are sold by an investment executive of the
Distributor, compensation will be paid to the investment executive in the manner
set forth in a written agreement, in an amount not to exceed that portion of
.25% of the average daily net assets of the Fund which is attributable to shares
sold by such investment executive. In addition, the Distributor pays an amount
equal to .25% of the average daily net assets of North American Fund, European
Value Fund, Pacific Value Fund and Latin American Value Fund (.05% with respect
to Bond Fund) as ongoing sales compensation to investment executives of the
Distributor and to broker-dealers which have entered into sales agreements with
the Distributor. Such payments are considered Distribution Expenses of the
Distributor and are reimbursable under the Plan.

Further information regarding the Plan is contained in the Statement of
Additional Information.

PURCHASE OF SHARES

GENERAL

The Funds' shares may be purchased at the public offering price from the
Distributor and from certain other broker-dealers who have sales agreements with
the Distributor. The net asset value per share for the Money Market Fund is
normally expected to be $1.00. See "Valuation of Shares." The address of the
Distributor is that of the Funds. Shareholders will receive written confirmation
of their purchases. Stock certificates will not be issued in order to facilitate
redemptions and transfers between the Funds. The Distributor reserves the right
to reject any purchase order. Shareholders should be aware that, because the
Company does not issue stock certificates, Fund shares must be kept in an
account with the Distributor or with IFTC in the case of Fund shares purchased
through another broker-dealer that has a sales agreement with the Distributor.
Purchases of shares of Money Market Fund may be made by wire transfer for next
day settlement. A prospective shareholder must have an account with the Company
prior to wiring money for a purchase. For information concerning this method of
purchase contact your broker or call IFTC at (800) 245-7087.

PUBLIC OFFERING PRICE

Shares of the Funds are offered to the public at the net asset value per
share next determined after an order is received by either the Distributor or
IFTC. While no sales charge is imposed at the time shares are purchased, a
contingent deferred sales charge ("CDSC") may be imposed at the time of
redemption. See "Redemption of Shares--Contingent Deferred Sales Charge."

The Manager and the Sub-Adviser of the applicable Fund (other than Money
Market Fund) will advance to broker-dealers through which a sale of shares is
made, on each sale, a sales commission in the aggregate of 2% of the net asset
value of the shares purchased. The Distributor or the Manager, at its expense,
may also 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 Company and other investment companies
for which the Manager acts as investment adviser. In some instances, such
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, incurred
in connection with educational seminars.

MINIMUM INVESTMENTS

A minimum initial investment of $250 is required. The minimum subsequent
investment is $100. The Distributor may waive any such minimums in the case of
purchases by certain payroll deduction

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or other employee benefit plan investments. In addition, these minimums are not
applicable to purchases made under certain automatic investment programs offered
by the Distributor and other participating brokerage firms.

SPECIAL PURCHASE PLANS

For information on any of the following special purchase plans, contact your
broker-dealer.

TAX SHELTERED RETIREMENT PLANS. Contact your broker-dealer for prototype
plans for Individual Retirement Accounts ("IRAs"), Simplified Employee Pension
Accounts ("SEP IRAs") and Keogh, Pension and Profit Sharing Accounts and will
act as custodian for such Accounts.

AUTOMATIC MONTHLY INVESTMENT PROGRAM. Any shareholder may arrange to make
additional purchases of shares of the Company by having $100 or more per month
automatically transferred from his or her bank, savings and loan, or other
financial institution. Shareholders should contact their investment executive or
IFTC to obtain authorization forms or for additional information.

EXCHANGE PRIVILEGE

Shares of one Fund may be exchanged for shares of another Fund, provided
that the shares to be acquired in the exchange are eligible for sale in the
shareholder's state of residence. Exchanges are made on the basis of the net
asset values of the Funds involved. All exchanges are subject to the minimum
investment requirements and any other applicable terms set forth in the
prospectus relating to the Fund being acquired. An exchange will be treated for
federal income tax purposes as a redemption of shares (followed by a purchase of
new shares) on which the shareholder may realize a capital gain or loss (see
"Taxes", below). No CDSC is imposed at the time of any exchange, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in Money Market Fund the holding period (for the
purpose of determining the rate of the CDSC) is frozen. If those shares are
subsequently reexchanged for shares of another Fund, the holding period
previously frozen when the first exchange was made resumes on the next day.
Thus, the CDSC is based upon the time (calculated as described above) the
shareholder was invested in any Fund other than Money Market Fund.

A shareholder may make an exchange by contacting his or her investment
executive. Other shareholders must contact IFTC. Shareholders who have
authorized telephone exchanges in their Account Application and Services Form
will be able to effect exchanges from a Fund into an identically registered
account in one of the other available Funds by calling IFTC at (800) 245-7087.
The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. The procedures include requiring various
forms of personal identification such as name, mailing address, social security
or other tax identification number and account number. Telephone instructions
will also be recorded. If such procedures are not employed, the applicable Fund
may be liable for any losses due to unauthorized or fraudulent transactions.
Otherwise, exchanges must be made by mail by following the procedures applicable
to redemption of the Funds' shares (see "Redemption of Shares--Normal
Redemption," below) except that, with respect to an exchange transaction between
accounts registered in identical names, no signature guarantee is required
unless the amount being exchanged exceeds $25,000.

An investor may make twelve exchanges per year without payment of a service
charge. Thereafter, there is a $50 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.

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<PAGE>
REDEMPTION OF SHARES

NORMAL REDEMPTION

Shares of each Fund, in any amount, may be redeemed at any time at their
current net asset value next determined after a request is received by the
Distributor or IFTC; however, such redemption proceeds may be reduced by the
amount of any applicable contingent deferred sales charge (see below). A written
redemption request (discussed below) will not be considered received unless it
is in proper form. To redeem shares of the Funds, an investor may make an oral
redemption request through his or her investment executive.

Shareholders may also redeem shares by written request to IFTC at the
address set forth above. See "Management--Custodian." To be considered in proper
form, written requests for redemption should indicate the dollar amount or
number of shares to be redeemed, should refer to the shareholder's Fund account
number, and should give either a social security or tax identification number
(as applicable). The request should be signed in exactly the same way the
account is registered. If there is more than one owner of the shares, all owners
must sign. If shares to be redeemed have a value of $25,000 or more or
redemption proceeds are to be paid to someone other than the shareholder at such
shareholder's address of record, the signature(s) must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is a
member of the Federal Deposit Insurance Corporation, a trust company, a member
firm of a domestic stock exchange, a savings association or a credit union that
is authorized by its charter to provide a signature guarantee. IFTC may reject
redemption instructions if the guarantor is neither a member of nor a
participant in a signature guarantee program. Signature guarantees by notaries
public are not acceptable. The purpose of a signature guarantee is to protect
shareholders against the possibility of fraud. Further documentation will be
requested from corporations, administrators, executors, personal
representatives, trustees or custodians. Redemption requests given by facsimile
will not be accepted. Unless other instructions are given in proper form, a
check for the proceeds of the redemption will be sent to the shareholder's
address of record.

CONTINGENT DEFERRED SALES CHARGE

Shares that are held for more than two years after purchase will not be
subject to any charge upon redemption, except as described below. Shares of such
Funds redeemed sooner than two years after purchase may, however, be subject to
a charge upon redemption. This charge is called a contingent deferred sales
charge (or CDSC), which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF AMOUNT
NUMBER OF DAYS SINCE PURCHASE REDEEMED
- - - - ----------------------------------------------------------------------- -----------------------
<S> <C>
first 365 days......................................................... 2.0%
next 365 days.......................................................... 1.0%
thereafter............................................................. None
</TABLE>

For purposes of calculating the time periods set forth in the preceding table,
any day in which shares of Money Market Fund are held is excluded. No CDSC will
be imposed on shares purchased prior to June 19, 1995.

44
<PAGE>
A CDSC will not be imposed when a Shareholder redeems: (a) shares
representing amounts attributable to increases in the value of an account above
the net cost of the investment due to increases in the net asset value per
share; (b) shares held for more than two years; (c) shares acquired through
reinvestment of income dividends or capital gain distributions; and (d) shares
acquired by exchange where the exchanged shares would not be assessed a CDSC
upon redemption. Moreover, in determining whether a CDSC is applicable, the
calculation will be made in a manner that results in the lowest possible rate.
It will be assumed that amounts described in (a), (b), (c) and (d) above are
redeemed in that order. In addition, as stated above, no CDSC will be assessed
on shares of Money Market Fund if they were not acquired in an exchange for
shares of another Fund.

The CDSC, if otherwise applicable, will be waived in the case of purchases
made by (a) employee benefit plans containing an actively maintained qualified
cash or deferred arrangement under Section 401(k) of the Internal Revenue Code
(the "Code"); (b) custodial accounts qualified under Section 403(b)(7) of the
Code; (c) 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; (d) the following
persons associated with the Manager and the Distributor: (i) officers, directors
and partners; (ii) employees and retirees; (iii) spouses, or children under the
age of 21, of any such persons; or (iv) any trust, pension, profit-sharing or
other benefit plan for any of the foregoing persons; and (e) sales
representatives of broker-dealers who have entered into sales agreements with
the Distributor, and spouses and children under the age of 21 of such sales
representatives. In addition, the CDSC will be waived in the event of (a) the
death or disability of the Shareholder; (b) 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; (c) systematic withdrawals from
any plans set forth in (b), above, if the Shareholder is at least 59 1/2 years
old; (d) a tax-free return of the excess contribution to an individual
retirement account under Section 408(a) of the Code; or (e) involuntary
redemptions effected pursuant to the right of the Company to liquidate
Shareholder accounts having an aggregate net asset value of less than $200 or
such other amount as set forth in the then current prospectus.

In determining whether a Shareholder is "disabled" for purposes of waiving
the CDSC, the definition of the term contained in Section 72(m)(7) of the Code
will be utilized. The Company will apply the waiver for death or disability 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. All waivers will be
granted only following receipt by the Distributor of confirmation of the
Shareholder's entitlement.

REDEMPTIONS BY TELEPHONE

Redemption requests may be made by telephone by calling IFTC at (800)
245-7087. Telephone redemption requests over $25,000 are not allowed. Redemption
requests over this amount must be made in the Normal Redemption manner as
described above. Telephone redemptions will not be allowed if the shareholder
has changed his or her address of record in the preceding thirty days. Each Fund
will employ reasonable procedures to confirm that instructions received by
telephone are genuine. These procedures include requiring various forms of
personal identification such as name, mailing address, social security or other
tax identification number and shareholder account number. Telephone instructions
will also be recorded. If such procedures are not employed, each Fund may be
liable for any losses due to unauthorized or fraudulent transactions.

45
<PAGE>
EXPEDITED REDEMPTIONS

Expedited redemptions may be requested by telephone by contacting IFTC at
(800) 245-7087. The proceeds of the expedited redemption will be wired to a bank
account designated by the shareholder. The shareholder must make the election to
use expedited redemptions and provide the appropriate bank information to his or
her broker-dealer or directly to IFTC at the time the shareholder's Fund account
is opened. The minimum amount for expedited redemptions is $25,000. Expedited
redemptions will not be allowed if the shareholder has changed his or her bank
instructions within the preceding thirty days. Each Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
These procedures are described in the Redemptions by Telephone section above.

SYSTEMATIC WITHDRAWAL PLAN

If your account has a value of $5,000, you may establish a Systematic
Withdrawal Plan for any of the Funds and receive regular periodic payments. A
request to establish a Systematic Withdrawal Plan must be submitted in writing
to an investor's broker-dealer. There are no service charges for maintenance;
the minimum amount that you may withdraw each period is $100. (This is merely
the minimum amount allowed and should not be interpreted as a recommended
amount.) The holder of a Systematic Withdrawal Plan will have any income
dividends and any capital gains distributions reinvested in full and fractional
shares at net asset value. To provide funds for payment, the appropriate Fund
will redeem as many full and fractional shares as is necessary at the redemption
price, which is net asset value. Redemption of shares may reduce or possibly
exhaust the shares in your account, particularly in the event of a market
decline. As with other redemptions, a redemption to make a withdrawal payment is
a sale for federal income tax purposes. Payments made pursuant to a Systematic
Withdrawal Plan cannot be considered as actual yield or income since part of
such payments may be a return of capital. Any applicable CDSC will be imposed on
shares redeemed under the Systematic Withdrawal Plan. Therefore, any shareholder
participating in the Systematic Withdrawal Plan will have sufficient shares
redeemed from his or her account so that the proceeds (net of any applicable
CDSC) to the shareholder will be the designated monthly or quarterly amount.

You will ordinarily not be allowed to make additional investments of less
than $5,000 or three times the annual withdrawals under the Systematic
Withdrawal Plan during the time you have the plan in effect. You will receive a
confirmation of each transaction showing the sources of the payment and the
share and cash balance remaining in your plan. The plan may be terminated on
written notice by the shareholder or the appropriate Fund, and it will terminate
automatically if all shares are liquidated or withdrawn from the account or upon
the death or incapacity of the shareholder. You may change the amount and
schedule of withdrawal payments or suspend such payments by giving written
notice to your broker-dealer at least ten business days prior to the end of the
month preceding a scheduled payment.

PAYMENT OF REDEMPTION PROCEEDS

Normally, the Funds will make payment for all shares redeemed within three
business days, but in no event will payment be made more than seven days after
receipt by the Distributor or IFTC of a redemption request in proper order.
However, payment may be postponed or the right of redemption (by each of the
methods described above) suspended for more than seven days under unusual
circumstances, such as when trading is not taking place on the New York Stock
Exchange (the "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, which may be up to 15 days from the purchase date.

46
<PAGE>
INVOLUNTARY REDEMPTION

The Company reserves the right to redeem a shareholder's account at any time
the net asset value of the account falls below $200 as the result of a
redemption or transfer request. Shareholders 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.

VALUATION OF SHARES

Each Fund determines its net asset value on each day the Exchange is open
for business, provided that the net asset value need not be determined for a
Fund on days on which changes in the value of the Fund's portfolio securities
will not materially affect the current net asset value of the Fund's shares and
days when no Fund shares are tendered for redemption and no order for Fund
shares is received. The calculation is made as of the primary closing time 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 as obtained from one or more dealers that make markets in
the securities. To the extent dealer quotes are used in pricing securities,
quotes are always sought from more than one dealer. However, from time to time,
it may not as a practical matter be possible to obtain bid and asked quotations
from more than one dealer. Under such circumstances, one dealer quote will be
used as a basis for valuing the security unless the Manager, subject to the
supervision of the Board of Directors, believes based on market prices of
comparable securities, developments in the marketplace or otherwise, that the
quote is not reflective of the market value of the security in which case such
security will be valued at fair value. 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

47
<PAGE>
decided upon in good faith by the Company's 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.

Any assets or liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars by the pricing service retained by the Funds
or, to the extent that an exchange rate is not available through such pricing
service, at the mean of current bid and asked prices of such currencies against
the U.S. dollar last quoted by a major bank that is a regular participant in the
foreign exchange market. The Funds have been advised that the pricing service
translates foreign currencies into U.S. dollars on the basis of the official
exchange rate or by taking into account the quotes provided by a number of major
banks that are regular participants in the foreign exchange market. Trading in
securities on Latin American, European and Pacific Basin securities exchanges
and in over-the-counter markets is normally completed well before the close of
business on each business day of the Funds. In addition, securities trading in a
particular country in which a Fund invests may not take place on all business
days in New York. Furthermore, trading takes place in various foreign markets on
days which are not business days of the Funds and on which the Funds' net asset
value is not calculated. Therefore, the net asset value of a Fund might be
significantly affected on days when the investor has no access to the Fund. The
Funds calculate net asset value per share as of the close of the regular trading
session on the Exchange. Such calculation does not generally take place
contemporaneously with the determination of the prices of the majority of the
portfolio securities used in such calculation. If events materially affecting
the value of such securities occur between the time when their price is
determined and the time when the Funds' net asset value is calculated, such
securities will be valued at fair value as determined in good faith by or under
the direction of the Board of Directors.

The Board of Directors expects that the net asset value per share for Money
Market Fund will ordinarily be $1.00. Total assets for the Fund is determined by
valuing the portfolio securities at amortized cost in accordance with Rule 2a-7
under the 1940 Act. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is higher
or lower than the price the Fund would receive if the Fund sold its portfolio.
Under the direction of the Board of Directors, certain procedures have been
adopted to monitor and stabilize the price per share. Calculations are made to
compare the value of the Fund's portfolio valued at amortized cost with market
values. Market valuations are obtained from yield data relating to classes of
money market instruments published by reputable sources at the bid prices for
the instruments. In the event that a deviation of one-half of 1% or more exists
between the $1.00 per share net asset value for the Fund and the net asset value
calculated by reference to market quotations, or if there is any other deviation
which the Board of Directors believes would result in a material dilution to
shareholders or purchasers, the Board of Directors will promptly consider what
action, if any, should be initiated. See "Net Asset Value and Public Offering
Price" in the Statement of Additional Information.

DIVIDENDS, DISTRIBUTIONS AND TAX STATUS

DIVIDENDS AND DISTRIBUTIONS

Net investment income and net realized long-term and short-term capital
gains will be determined separately for each Fund. Bond Fund intends to declare
and pay dividends from investment income quarterly. Bond Fund may at times pay
out more or less than the entire amount of net investment income in any
particular period in order to permit such Fund to maintain a stable level of

48
<PAGE>
distributions. Any such amount retained by Bond Fund would be available to
stabilize future distributions. As a result, the distributions paid by Bond Fund
for any particular period may be more or less than the amount of net investment
income earned by such Fund during such period. Distributions may also include
amounts attributable to net short-term capital gains if necessary to maintain a
stable level of distributions. This may result in a portion of the distributions
constituting a return of capital to the extent Bond Fund subsequently realize
capital losses. Dividends from net investment income earned by the remaining
Funds (other than Money Market Fund) will be declared and paid annually.
Distributions of any net realized long-term and short-term gains (except as
noted above with respect to Bond Fund) earned by a Fund will be made annually.

Money Market Fund intends to declare dividends on a daily basis which will
be reinvested in additional Fund shares on a monthly basis. Each daily dividend
is payable to Fund shareholders of record at the time of its declaration.

On the record date for a distribution, a Fund's share price is reduced by
the amount of the distribution. If an investor buys shares just before the
record date ("buying a dividend"), the investor will pay the full price for the
shares and then receive a portion of the price back as a taxable distribution.

All net investment income dividends and net realized capital gains
distributions with respect to the shares of any Fund will be payable in
additional shares of such Fund at net asset value unless the shareholder
notifies his or her broker-dealer of an election to receive cash. Shareholders
may elect either to receive income dividends in cash and capital gains in
additional shares of the Fund at net asset value, or to receive both income
dividends and capital gains in cash. The taxable status of income dividends
and/or net capital gains distributions is not affected by whether they are
reinvested or paid in cash.

TAXES

Each of the Funds is treated as a separate corporation for federal tax
purposes. Therefore, each Fund is treated separately in determining whether it
qualifies as a regulated investment company 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 of the Funds expects to qualify as a regulated investment
company during the current taxable year. If qualified as a regulated investment
company, 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 Funds. 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. In general, individuals are taxed on long-term
capital gains at a maximum rate of 28% and on ordinary income at a maximum rate
of 39.6%. Corporations are taxed at a maximum rate of 35%.

A shareholder will recognize a capital gain or loss upon the sale or
exchange of shares in a Fund (including upon a sale or exchange of Fund shares
pursuant to the Exchange Privilege) 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.

A Fund may be subject to foreign income taxes including withholding taxes.
If a Fund has more than 50% of its assets invested in the stock or securities of
foreign corporations at the end of the

49
<PAGE>
Fund's taxable year, the Fund may make an election to allow shareholders either
to claim U.S. foreign tax credits with respect to foreign taxes paid by the Fund
or to deduct such amounts as an itemized deduction on their tax return. In the
event such an election is made, shareholders would have to increase their
taxable income by the amount of such taxes and the Fund would not be able to
deduct such taxes in computing its taxable income.

For federal income tax purposes, North American Fund, Pacific Basin Value
Fund, Latin American Value Fund and Bond Fund had capital loss carryovers at
June 30, 1995 of $838,953; $1,546,411; $10,643,620; and $338,380, respectively.
If these capital loss carryovers are not offset by subsequent capital gains,
they will expire in the years 2002 through 2004. It is unlikely the board of
directors of the Company will authorize a distribution of any net realized
capital gains until the available capital loss carryovers have been offset or
expire.

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. Distributions may also be subject to state
and local taxes. Before investing in any of the Funds, you should check the
consequences of your local and state tax laws. The tax discussion set forth in
this Prospectus and in the Statement of Additional Information does not purport
to address all of the federal income tax consequences applicable to an
investment in the Funds, or to all categories of investors, some of which may be
subject to special rules. Investors should consult their tax advisors as to the
applicability of the foregoing to their situation.

PERFORMANCE COMPARISONS

Advertisements and other sales literature for a Fund may refer to a Fund's
"average annual total return" and "cumulative total return." In addition, North
American Fund, Bond Fund and Money Market Fund may provide yield calculations in
advertisements and other sales literature. All such yield and total return
quotations are not intended to predict or represent 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 other than for Money Market Fund 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.

The "yield" of Money Market Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the compounding
effect of this assumed reinvestment.

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

50
<PAGE>
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.

In addition to advertising total return and yield, comparative performance
information may be used from time to time in advertising the Funds' shares,
including data from Lipper Analytical Services, Inc., the S&P 500, NASDAQ
Composite, Wilshire 5000, Russell 2000 and Value Line Composite indexes and
other industry publications. Performance of the Funds may also be compared to
the performance of comparable Funds, as reported by Lipper Analytical Services.

For additional information regarding the calculation of yield, average
annual total return and cumulative total return, see "Calculation of Performance
Data" in the Statement of Additional Information. The Company's annual report
will contain performance information that will be made available to shareholders
upon request and without charge.

LEGAL EXPERTS

The validity of the shares offered hereby will be passed upon for the
Company by Gordon Altman Butowsky Weitzen Shalov & Wein, New York, New York.
With regard to matters of Minnesota law, Gordon Altman Butowsky Weitzen Shalov &
Wein may rely upon the opinion of Dorsey & Whitney, Minneapolis, Minnesota.

PENDING LITIGATION

Complaints have been filed in U.S. District Court against the Manager and
the Distributor relating to other investment companies managed by the Manager.
These lawsuits do not involve the Company. The Manager and the Distributor have
entered into a settlement agreement which represents a consolidation of a number
of complaints. The settlement is subject to court approval. The Manager and
Distributor do not believe that the lawsuits will have a material adverse effect
upon their ability to perform under their agreements with the Manager or the
Company and they intend to defend the lawsuits vigorously. See "Pending Legal
Proceedings" in the Statement of Additional Information.

GENERAL INFORMATION

The Company is authorized to issue a total of 10 trillion shares of common
stock, with a par value of $.01 per share. 260 billion of these shares have been
authorized by the Board of Directors to be issued in 8 separate series: 10
billion shares designated as North American Fund shares, 10 billion shares as
European Value Fund shares, 10 billion shares as Pacific Value Fund shares, 10
billion shares as Latin American Value Fund shares, 10 billion shares as Bond
Fund shares, 100 billion shares as Money Market Fund shares and 110 billion
shares allocated among the other two series of the Company that are not
currently being offered for sale. The Board of Directors is empowered under the
Company's Articles of Incorporation to issue other series of the Company's
common stock without shareholder approval.

51
<PAGE>
Each share of a series has one vote (with proportionate voting for
fractional shares) irrespective of the relative net asset value of the series'
shares. On some issues, such as the election of directors, all shares of the
Company vote together as one series. Cumulative voting is not authorized. This
means that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and, in such
event, the holders of the remaining shares will be unable to elect any
directors.

On an issue affecting only a particular series, the shares of the affected
Fund vote as a separate series. An example of such an issue would be a
fundamental investment restriction pertaining to only one series. In voting on
the Investment Management and Advisory Agreement and the Sub-Advisory Agreement,
approval of the Agreements by the shareholders of a particular series would make
the Agreements effective as to that series whether or not it had been approved
by the shareholders of the other series.

The assets received by the Company for the issue or sale of shares of each
series, and all income, earnings, profits and proceeds thereof, subject only to
the rights of creditors, are allocated to such series, and constitute the
underlying assets of such series. The underlying assets of each series are
required to be segregated on the books of account, and are to be charged with
the expenses in respect to such series and with a share of the general expenses
of the Company. Any general expenses of the Company not readily identifiable as
belonging to a particular series shall be allocated among the series based upon
the relative net assets of the series at the time such expenses were accrued.

The 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 various other matters
such as amendments to investment advisory contracts or to fundamental investment
policies and restrictions.

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APPENDIX

RATINGS OF INVESTMENTS

MOODY'S INVESTORS SERVICE INC. ("MOODY'S")

BOND RATINGS

<TABLE>
<S> <C>
Aaa....... Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa........ Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
A......... Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa....... Bonds which are rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba........ Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times in the future. Uncertainty
of position characterizes bonds in this class.
B......... Bonds which are rated B generally lack characteristics of desirable
investments. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa....... Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca........ Bonds which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
</TABLE>

A-1
<PAGE>
<TABLE>
<S> <C>
C......... Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
</TABLE>

CONDITIONAL RATING: Municipal bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.

RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its corporate and
municipal bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and a modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1, Prime-2, Prime-3.

Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.

STANDARD & POOR'S RATINGS GROUP ("STANDARD & POOR'S")

BOND RATINGS

A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.

The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.

Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.

A-2
<PAGE>

<TABLE>
<S> <C>
AAA....... Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA........ Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A......... Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher-rated
categories.
BBB....... Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB........ Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B......... Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC....... Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC........ The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C......... The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC - debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1........ The rating C1 is reserved for income bonds on which no interest is being
paid.
D......... Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payment will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
NR........ Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
</TABLE>

A-3
<PAGE>
<TABLE>
<S> <C>
Bonds rated BB, B, CCC, CC and C are regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the least degree of speculation and C the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the
major ratings categories.
In the case of municipal bonds, the foregoing ratings are sometimes
followed by a "p" which indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful
and timely completion of the project. This rating, however, while
addressing credit quality subsequent to completion of the project, makes
no comment on the likelihood or risk of default upon failure of such
completion.
</TABLE>

COMMERCIAL PAPER RATINGS

Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
The categories are as follows:

Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 and 3 to indicate the relative degree of safety.

<TABLE>
<S> <C>
A-1....... indicates that the degree of safety regarding timely payment is very
strong.
A-2....... indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as
for issues designated "A-1."
A-3....... indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations.
</TABLE>

A-4
<PAGE>
FITCH INVESTORS SERVICE, INC. ("FITCH")

BOND RATINGS

<TABLE>
<S> <C>
AAA....... Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA........ Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA.

Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated F-1+.
</TABLE>

COMMERCIAL PAPER RATINGS

The rating F-1+ is the highest commercial paper rating assigned by Fitch.
Paper rated F-1+ is regarded as having the strongest degree of assurance for
timely payment. The rating F-1 is the second highest commercial paper rating
assigned by Fitch which reflects an assurance of timely payment only slightly
less in degree than the strongest issues.

DUFF & PHELPS, INC. ("DUFF")

BOND RATINGS

<TABLE>
<S> <C>
AAA....... Bonds rated AAA are considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than U.S. Treasury
debt.
AA........ Bonds rated AA are considered by Duff to be of high credit quality with
strong protection factors. Risk is modest and may vary slightly from time
to time because of economic conditions.
</TABLE>

COMMERCIAL PAPER RATINGS

The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets, and sound liquidity factors
and company fundamentals. Risk factors are small.

IBCA LIMITED AND IBCA INC. ("IBCA")

BOND RATINGS

<TABLE>
<S> <C>
AAA....... Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or financial
conditions are unlikely to increase investment risk significantly.
</TABLE>

A-5
<PAGE>
<TABLE>
<S> <C>
AA........ Obligations rated AA by IBCA have a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial condition
may increase investment risk, albeit not very significantly.
</TABLE>

IBCA also assigns a rating to certain international and U.S. banks. An IBCA
bank rating represents IBCA's current assessment of the strength of the bank and
whether such bank would receive support should it experience difficulties. In
its assessment of a bank, IBCA uses a dual rating system comprised of Legal
Ratings and Individual Ratings. In addition, IBCA assigns banks Long- and Short-
Term Ratings as used in the corporate ratings discussed above. Legal Ratings,
which range in gradation from 1 through 5, address the question of whether the
bank would receive support provided by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be a prime
factor in its assessment of credit risk. Individual Ratings, which range in
gradations from A through E, represent IBCA's assessment of a bank's economic
merits and address the question of how the bank would be viewed if it were
entirely independent and could not rely upon support from state authorities or
its owners.

COMMERCIAL PAPER RATINGS

The designation A1 by IBCA indicates that the obligation is supported by a
very strong capacity for timely repayment. Those obligations rated A1+ are
supported by the highest capacity for timely repayment. Obligations rated A2 are
supported by a strong capacity for timely repayment, although such capacity may
be susceptible to adverse changes in business, economic or financial conditions.

THOMSON BANKWATCH, INC. ("BANKWATCH")

BOND RATINGS

BankWatch assigns a rating to each issuer it rates, in gradations of A
through E. BankWatch examines all segments of the organization, including, where
applicable, the holding company, member banks or associations, and other
subsidiaries. In those instances where financial disclosure is incomplete or
untimely, a qualified rating (QR) is assigned to the institution. BankWatch also
assigns, in the case of foreign banks, a country rating which represents an
assessment of the overall political and economic stability of the country in
which the bank is domiciled.

COMMERCIAL PAPER RATINGS

The rating TBW-1 is the highest short-term obligation rating assigned by
BankWatch. Obligations rated TBW-1 are regarded as having the strongest capacity
for timely repayment. Obligations rated TBW-2 are supported by a strong capacity
for timely repayment, although the degree of safety is not as high as for issues
rated TBW-1.

A-6
<PAGE>
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.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Introduction....................... 2
Fees and Expenses.................. 6
Financial Highlights............... 8
Investment Objectives and
Policies.......................... 11
Other Eligible Investments......... 19
Special Investment Methods......... 23
Investment Restrictions............ 31
Special Risk Considerations........ 30
Management......................... 35
Distribution of Fund Shares........ 41
Purchase of Shares................. 42
Redemption of Shares............... 44
Valuation of Shares................ 47
Dividends, Distributions and Tax
Status............................ 48
Performance Comparisons............ 50
Legal Experts...................... 51
Pending Litigation................. 51
General Information................ 51
Ratings of Investments................Appendix
</TABLE>

[LOGO]

HERCULES FUNDS INC.

August 29, 1995

HERC-05X
<PAGE>

[LOGO] HERCULES 1995
- - - - ------------------- ANNUAL
INTERNATIONAL FUNDS REPORT

[WORLD GRAPHIC BACKGROUND]

A WORLD OF
INVESTMENT CHOICES

<PAGE>

TABLE OF CONTENTS

NORTH AMERICAN
GROWTH AND INCOME FUND
- - - - --------------------------------------------------------------------------------
Seeks to provide long-term capital growth and current income primarily through
investments in securities of issuers in Mexico, Canada and the United States.

Letter to Shareholders . . . . . . . . . . .4
Financial Statements and Notes . . . . . . 16
Investments in Securities. . . . . . . . . 31
Federal Tax Information. . . . . . . . . . 41
Shareholder Update . . . . . . . . . . . . 43

EUROPEAN
VALUE FUND
- - - - --------------------------------------------------------------------------------
Seeks to provide long-term capital growth and, to a lesser extent current
income, primarily through investments in securities of issuers located in
Europe.

Letter to Shareholders . . . . . . . . . . .6
Financial Statements and Notes . . . . . . 16
Investments in Securities. . . . . . . . . 33
Federal Tax Information. . . . . . . . . . 41
Shareholder Update . . . . . . . . . . . . 43

PACIFIC BASIN
VALUE FUND
- - - - --------------------------------------------------------------------------------
Seeks to provide long-term capital growth and, to a lesser extent current
income, primarily through investments in regions bordering the Pacific Ocean.

Letter to Shareholders . . . . . . . . . . .8
Financial Statements and Notes . . . . . . 16
Investments in Securities. . . . . . . . . 35
Federal Tax Information. . . . . . . . . . 41
Shareholder Update . . . . . . . . . . . . 43

LATIN AMERICAN
VALUE FUND
- - - - --------------------------------------------------------------------------------
Seeks to provide long-term capital growth and, to a lesser extent current
income, primarily through investments in securities of issuers in Mexico,
Central America and South America.

Letter to Shareholders . . . . . . . . . . 10
Financial Statements and Notes . . . . . . 16
Investments in Securities. . . . . . . . . 37
Federal Tax Information. . . . . . . . . . 41
Shareholder Update . . . . . . . . . . . . 43

WORLD BOND
FUND
- - - - --------------------------------------------------------------------------------
Seeks to provide a high level of total investment return through investments in
debt securities of issuers located anywhere in the world.

Letter to Shareholders . . . . . . . . . . 12
Financial Statements and Notes . . . . . . 17
Investments in Securities. . . . . . . . . 38
Federal Tax Information. . . . . . . . . . 42
Shareholder Update . . . . . . . . . . . . 43

GLOBAL SHORT-TERM
FUND
- - - - --------------------------------------------------------------------------------
Seeks to provide a high level of total return through investments in securities
(primarily short-term securities) of issuers located around the world.

Letter to Shareholders . . . . . . . . . . 14
Financial Statements and Notes . . . . . . 17
Investments in Securities. . . . . . . . . 39
Federal Tax Information. . . . . . . . . . 42
Shareholder Update . . . . . . . . . . . . 43

MONEY MARKET
FUND
- - - - --------------------------------------------------------------------------------
Seeks to maximize current income consistent with the preservation of capital and
maintenance of liquidity by investing exclusively in high-quality U.S. money
market instruments.

Letter to Shareholders . . . . . . . . . . 15
Financial Statements and Notes . . . . . . 17
Investments in Securities. . . . . . . . . 39
Federal Tax Information. . . . . . . . . . 42
Shareholder Update . . . . . . . . . . . . 43

<PAGE>

[WILLIAM H. ELLIS PHOTO]

WILLIAM H. ELLIS
PRESIDENT
HERCULES FAMILY OF FUNDS

HERCULES INTERNATIONAL FUNDS

LETTER TO
SHAREHOLDERS

August 15, 1995

Dear Shareholders:

It has been a dynamic year in international markets. From natural disasters like
the earthquake in Kobe, Japan, to currency issues in Mexico, Japan and the U.S.,
the past 12 months have produced both ups and downs in investment markets. It is
particularly in this environment that I believe the Hercules funds'
multi-manager approach makes sense. Utilizing the investment expertise of eight
independent subadvisers, each selected for their experience in a specific world
region, adds yet another element of diversification to international investing.

The Hercules funds have undergone some important changes during the past fiscal
year which I'd like to review with you. Although you received information about
these developments earlier this summer, I'll bring you up-to-date on their
progress.

At a special shareholder meeting on July 18, 1995, shareholders approved a
change in the Company's investment manager from Hercules International
Management L.L.C. to Piper Capital Management Incorporated, a subsidiary of
Piper Jaffray Companies Inc. (For specific voting results, turn to page 43.)
This change emanated from a mutual agreement between Piper Jaffray Companies and
Midland Walwyn in Toronto to dissolve their partnership in Hercules
International. With the partnership now dissolved, there are two separate
Hercules families of funds: one in the United States, managed by Piper Capital
Management, and one in Canada, managed by Atlas Capital Management, a subsidiary
of Midland Walwyn. The separation will enable each company to concentrate
exclusively on their respective markets and to focus on those elements most
attractive to their domestic investors.

We also changed the pricing structure of the Hercules funds this year, as we
became concerned that shareholders unfamiliar with fluctuations in international
markets may react too quickly and evaluate performance based on a time frame
that is too short. As you know, that's a formula for buying high

<PAGE>

and selling low. As a result, in June, we implemented a pricing structure
designed to encourage the long-term perspective that's so important when
investing globally:

- - - - - You continue to pay no front-end load, so 100% of your money goes to work
immediately.
- - - - - There is no fee for exchanging between funds in the Hercules family up to 12
times per year.
- - - - - The new pricing structure does not apply to money invested in the Hercules
funds before June 19, 1995. You may redeem those shares at any time and will
not be assessed a sales charge.
- - - - - For money invested after June 19, 1995, you may pay a deferred sales charge
if you redeem shares within the first 24 months. There will be a 2% fee for
redemptions within the first 12 months of investment and a 1% fee for
redemptions in the second 12 months.
- - - - - Time spent in the Money Market Fund does not count toward eliminating the
deferred sales charge.

This pricing structure is attractive compared to other global and international
mutual funds on the market. The deferred sales charge is lower and has a shorter
phase-out than many other funds with deferred sales charges. According to Lipper
Analytical Services, an independent rating service, only 11% of the 123 global
equity funds it tracks offer sales charges lower than 4.5%. And, you pay no
sales charge on the Hercules funds if you hold your investment for two years
(with the exception of time invested in the Hercules Money Market Fund).*

This is an exciting time for the Hercules funds. These changes enable us to
focus exclusively on the needs of our U.S. shareholders, and provide those
investors with an appropriate long-term investment horizon an excellent
opportunity to invest around the world. If you have any questions about these
changes or about the Hercules funds, I encourage you to contact your investment
professional or call Hercules toll-free at 800 584-1317. Thank you for your
investment in the Hercules family of funds.

Sincerely,

/s/ William H.Ellis

William H. Ellis
President

* FUNDS ARE SUBJECT TO 12B-1 FEES.

<PAGE>

[PHOTO]

MARU EUGENIA PICHARDO
PORTFOLIO MANAGER, MEXICO
ACCI WORLDWIDE,
S.A. DE C.V.

[PHOTO]

STEPHEN UZIELLI
PORTFOLIO MANAGER, CANADA
AGF INVESTMENT
ADVISORS, INC.

[PHOTO]

JOHN SCHONBERG
PORTFOLIO MANAGER, UNITED STATES
PIPER CAPITAL MANAGEMENT INCORPORATED

HERCULES INTERNATIONAL FUNDS

NORTH AMERICAN
GROWTH AND INCOME FUND

August 15, 1995

Dear Shareholders:

FOR THE 12 MONTHS ENDED JUNE 30, 1995, NORTH AMERICAN GROWTH AND INCOME FUND
PROVIDED A 5.4% TOTAL RETURN. During the same period, the S&P 500 Index returned
26%; the Mexico Stock Exchange Index declined -46.9%, and the Toronto Stock
Exchange 300 Index returned 15.2% (all in U.S. dollar terms). Net asset value
(NAV) stood at $9.92 per share on June 30, 1995, up from $9.46 per share on June
30, 1994.

IMPORTANT ADVANCEMENTS WERE MADE IN MEXICO DURING 1994, HOWEVER EVENTS DID NOT
TURN OUT AS FORECASTED. Favorable developments such as inflation reduction, real
GDP growth, and an orderly election were negatively affected by the uprising in
Chiapas and crimes with political overtones. High interest rates abroad reversed
capital inflows to emerging markets and to Mexico, and at the end of 1994 the
country faced a massive flight of foreign currency which resulted in a strong
devaluation of the peso versus the U.S. dollar. In the first quarter of 1995, a
new economic program was introduced to restore confidence and promote the
economy's capacity for growth. The anchor of the program was the implementation
of tight fiscal and monetary policies. A U.S. financial package supported the
program and helped resolve Mexico's liquidity crisis.

DURING THE SECOND QUARTER OF 1995, STABILIZATION SEEMED TO RETURN TO MEXICAN
MARKETS. Indicators such as the exchange rate, inflation, and the Consumer Price
Index improved and stabilized, pointing toward economic firmness and the
possible end of the financial crisis sometime in August. The government has made
substantial advances with issues involving financial institutions and highways,
principally helping to create a climate of greater stability, and the feared
social upheaval has failed to materialize.

THE FUND'S MEXICAN PORTFOLIO HOLDS A 63% POSITION IN STOCKS AND 37% IN FIXED
INCOME INVESTMENTS and is balanced between cyclical and non-cyclical, domestic
and multinational companies. Our strategy continues to focus on undervalued
stocks and also includes stocks with a one- to two-year horizon which should
benefit from a second phase of privatization. Over the past year, the fund has
increased its holdings of industrial conglomerates, mining, paper and forest,
and chemical sectors, and has reduced its emphasis in construction, food,
beverage, tobacco and communications industries.

<PAGE>

THE FUND'S U.S. PORTFOLIO SERVED TO OFFSET SOME OF THE VOLATILITY EXPERIENCED IN
THE MEXICAN MARKET. First quarter 1995 was one of the S&P 500's best quarters
for the past three years, and the U.S. portion of the fund outperformed the
index for the quarter. The U.S. economy showed signs of weakening during the
second quarter, prompting the Federal Reserve to reduce the federal funds rate
from 6% to 5.75% in July. The markets gave a rousing welcome, with all major
stock indexes reaching record-breaking highs. The technology sector performed
especially well and now appears to be somewhat overpriced.

WE ARE NOT ANTICIPATING A MAJOR U.S. STOCK MARKET DECLINE SOON, AS EARNINGS ARE
STILL STRONG. Yet, it's unlikely the market will continue rising without some
type of correction. When the market does pull back, we anticipate investors will
move away from the technology sector and toward others that have not done as
well. We currently favor the retail trade and energy sectors, which appear
undervalued and due for a rebound.

CANADA IS ENTERING THE LATTER STAGES OF THE ECONOMIC CYCLE, WHICH TENDS TO BE
DOMINATED BY INDUSTRIAL AND RESOURCE-BASED STOCKS. These sectors also happen to
be strengths underpinning the Canadian market. In fact, stock growth thus far
in 1995 has been led by resources. Strong energy prices have created
appreciation in the oil and gas sector, and paper and forestry stocks also have
grown impressively. The stabilization of the Canadian dollar and an improvement
in fiscal policy have made stocks more attractive to foreign investors. As
recessionary fears subside, we believe there is room for further capital
appreciation in Canadian markets.

STEVE UZIELLI, PORTFOLIO MANAGER FOR THE CANADIAN PORTION OF THE FUND, LEFT AGF
IN JUNE. Until his replacement is named, Robert Farquharson has assumed
responsibility for portfolio management. Mr. Farquharson has over 30 years of
investment experience, having joined AGF in 1963. He holds a B. Comm. degree
from the University of Toronto and is a Chartered Financial Analyst (CFA).

Thank you for your investment in the North American Growth and Income Fund.

Sincerely,

/s/ M. Pichardo /s/ S. Uzielli /s/ John Schonberg

Maru Eugenia Pichardo Stephen Uzielli John Schonberg
Portfolio Manager Portfolio Manager Portfolio Manager

COUNTRY ALLOCATION JUNE 30, 1995

U.S. 57%

Mexico 22%
[PIE CHART]
Canada 20%

Cash 1%

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

VALUE OF $10,000 INVESTED

[GRAPH]

THE HERCULES FUNDS RECENTLY INTRODUCED A CONTINGENT DEFERRED SALES CHARGE (CDSC)
APPLICABLE TO SHARES PURCHASED AFTER JUNE 19, 1995. HAD THIS STRUCTURE BEEN IN
EFFECT SINCE THE FUND'S INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993
AND REDEEMED ON JUNE 30, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD HAVE
BEEN WORTH $9,868. HOWEVER, BECAUSE THE CDSC DOES NOT APPLY TO SHARES PURCHASED
BEFORE JUNE 19, 1995, YOUR ACTUAL PROCEEDS WOULD HAVE BEEN $9,967. IN COMPARING
A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE UNMANAGED, THEIR RETURNS DO NOT
REFLECT MANAGEMENT FEES, AND THEY ARE NOT OPEN TO INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS.
- - - - --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTALRETURN
(THROUGH 6/30/95 ASSUMING CDSC FEES WERE APPLICABLE)

One-Year . . . . . . . . . . . . . . . .3.36%
Since Inception (11/93 ) . . . . . . . -0.81%

DURING SOME PERIODS, THE FUND'S MANAGER AND DISTRIBUTOR WAIVED OR ABSORBED FUND
EXPENSES WHICH MAY OR MAY NOT BE WAIVED IN THE FUTURE. OTHERWISE, THE AVERAGE
ANNUAL TOTAL RETURNS WOULD HAVE BEEN 1.97% AND -2.34%, RESPECTIVELY.

<PAGE>

[PHOTO]

CHRISTIAN SIMOND
PORTFOLIO MANAGER
PICTET INTERNATIONAL
MANAGEMENT LTD.

[PHOTO]

NILS FRANCKE
PORTFOLIO MANAGER
PICTET INTERNATIONAL
MANAGEMENT LTD.

HERCULES INTERNATIONAL FUNDS

EUROPEAN
VALUE FUND

August 15, 1995

Dear Shareholders:

EUROPEAN VALUE FUND ENJOYED STRONG PERFORMANCE OVER THE PAST YEAR, RETURNING
13.5% THROUGH THE END OF JUNE 1995. This compares to the benchmark Morgan
Stanley Capital International (MSCI) Europe Index's return of 18.8% and the
Lipper European Region Funds Average of 13.4%. The fund's net asset value was
$11.10 per share on June 30, 1995, up from $9.86 per share on June 30, 1994.

OVER THE PAST YEAR, EUROPEAN STOCK PERFORMANCE WAS LARGELY DRIVEN BY U.S.
CAPITAL MARKETS AND CURRENCY FLUCTUATIONS. In the latter half of 1994, many
European stock markets suffered from rising short-term interest rates in the
United States, a decline in the U.S dollar, and signs of a stronger-than-
expected European recovery. Subsequently, investors sold European bonds in line
with U.S. bonds, and European stocks weakened because they already carried a
substantial recovery premium for corporate earnings and became unattractive
compared to rising bond yields.

ACCORDINGLY, WE REPOSITIONED THE FUND TO BENEFIT FROM THE BETTER BOND
ENVIRONMENT AND TO PROTECT IT AGAINST NEGATIVE CURRENCY EXPOSURE. We moved more
into smaller, "non-core" European countries, especially in Scandinavia, which
generally performed better than core countries like Germany and Switzerland,
whose currencies strengthened more dramatically. We also added a 10% exposure to
European bonds.

THE RELATIVE ATTRACTIVENESS OF STOCKS WAS FURTHER REDUCED IN THE FIRST QUARTER
OF 1995 when the U.S. dollar depreciated another 10% versus core European
currencies, and European analysts again had to cut back their growth and
earnings expectations. Performance improved when translated into a weaker U.S.
dollar, however, and on average, European markets advanced by a satisfactory 6%
in the second quarter. As the fund remained unhedged until this spring, it
benefitted fully from the appreciation of most European currencies against the
dollar.

<PAGE>

OVERALL, OUR OUTLOOK FOR EUROPEAN STOCKS IMPROVED IN THE SPRING OF THIS YEAR AND
IS NOW VERY POSITIVE. Europe currently lags the United States in the economic
cycle, and we see leaner companies emerging out of the recession. As companies
improve their profitability through further restructuring and European interest
rates continue to fall, we expect stocks to outperform bonds. The U.S. dollar
has bounced several times from its current levels and now looks relatively
undervalued in our opinion. We have therefore initiated a 20% currency hedge
against the European Currency Unit (ECU), the basket of European currencies, in
anticipation of a strengthening U.S. dollar. We also recently sold our 10% bond
holdings and are now 100% in stocks.

IN TERMS OF STOCK SELECTION, WE INCREASED THE FUND'S WEIGHTING IN INTEREST-RATE-
SENSITIVE AND QUALITY GROWTH STOCKS, ESPECIALLY IN THE TELECOMMUNICATIONS
SECTOR. We particularly like the Finnish company Nokia, which is #2 in the
market for worldwide cellular phones after Motorola. We also have investments in
Ericsson, Siemens and Philips, three major worldwide players in the technology
sector.

We thank you for your investment in the European Value Fund.

Sincerely,

/s/ Christian Simond /s/ Nils Francke

Christian Simond Nils Francke
Portfolio Manager Portfolio Manager

COUNTRY ALLOCATION JUNE 30, 1995

United Kingdom 35%
Belgium 3%
Denmark 2%
Switzerland 11%
Sweden 4%
Spain 3% [PIE CHART]
Austria 2%
France 11%
Germany 12%
Italy 3%
Netherlands 8%
Other 6%

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

VALUE OF $10,000 INVESTED

[GRAPH]

THE HERCULES FUNDS RECENTLY INTRODUCED A CONTINGENT DEFERRED SALES CHARGE (CDSC)
APPLICABLE TO SHARES PURCHASED AFTER JUNE 19, 1995. HAD THIS STRUCTURE BEEN IN
EFFECT SINCE THE FUND'S INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993
AND REDEEMED ON JUNE 30, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD HAVE
BEEN WORTH $11,093. HOWEVER, BECAUSE THE CDSC DOES NOT APPLY TO SHARES PURCHASED
BEFORE JUNE 19, 1995, YOUR ACTUAL PROCEEDS WOULD HAVE BEEN $11,193. IN COMPARING
A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE UNMANAGED, THEIR RETURNS DO NOT
REFLECT MANAGEMENT FEES, AND THEY ARE NOT OPEN TO INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS.

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

AVERAGE ANNUAL TOTAL RETURN
(THROUGH 6/30/95 ASSUMING CDSC FEES WERE APPLICABLE)

One-Year . . . . . . . . . . . . . . . 11.52%
Since Inception (11/93 ) . . . . . . . .6.54%

<PAGE>

[PHOTO]

LLOYD BEAT
INVESTMENT MANAGER
EDINBURGH FUND MANAGERS PLC

[PHOTO]

DAVID CURRIE
PORTFOLIO MANAGER, JAPAN
EDINBURGH FUND MANAGERS PLC

[PHOTO]

JAMIE SANDISON
PORTFOLIO MANAGER, PACIFIC RIM
EDINBURGH FUND MANAGERS PLC

HERCULES INTERNATIONAL FUNDS

PACIFIC BASIN
VALUE FUND

August 15, 1995

Dear Shareholders:

OVER THE PAST YEAR ENDED JUNE 30, 1995, PACIFIC BASIN VALUE FUND DECLINED
- - - - -14.25%. This compares to a decline for Japan of -14.2% and a return for the
MSCI Pacific Ex-Japan Index of 7.9%. The fund's benchmark index, the MSCI
Pacific Index, declined -10.8% over the period. At June 30, 1995, the fund's net
asset value was $9.02 per share, down from $10.68 on June 30, 1994. Pacific
Basin Value Fund maintains a 58% weighting in Japan, which is the primary
reason for our relative underperformance.

THE JAPANESE MARKET HAS HAD A DIFFICULT TIME, ESPECIALLY OVER THE FIRST SIX
MONTHS OF 1995. Despite encouraging signs of an improvement in the economy,
Japanese investors have remained very negative. Authorities have continued to
run a relatively tight monetary policy despite the low level of nominal interest
rates. This has shown through in terms of the very strong yen. Concerns that the
economy will dip back into recession, along with voter dissatisfaction with the
management of the economy, have created a situation where investor sentiment is
very poor. Recently, we hedged approximately 40% of the fund's yen exposure to
protect against adverse currency movements.

HOWEVER, WE BELIEVE THIS IS THE DARKNESS BEFORE THE DAWN! THERE HAS BEEN VISIBLE
IMPROVEMENT IN THE JAPANESE ECONOMY AND IN RESTRUCTURING BY JAPANESE COMPANIES.
What we believe is required now is clear signs that the Japanese authorities can
rise to the present situation and revive the economy. Essentially, this requires
"printing" money to solve the deflationary situation. We believe there are signs
that the authorities are moving in the right direction, and when this becomes
apparent to the market, share prices should be strong.

ELSEWHERE IN THE PACIFIC BASIN THE SCENE IS NOW MUCH BETTER THAN IT WAS AT THE
END OF 1994. U.S. interest rates seem to have reached their peak, and so have
interest rates in most Pacific Rim markets. Hong Kong and Singapore have been on
a rising trend since February 1995, and although some of the smaller markets had
a poor quarter on the back of the Mexican devaluation, they rallied strongly in
the second quarter of 1995.

<PAGE>

INVESTORS ARE RETURNING TO THE PACIFIC RIM MARKETS because, in our opinion, they
see:
- - - - - Long-term economic growth that is well above the sustainable rates of the
developed world
- - - - - A structure and dynamics in the region that should ensure growth for years
to come
- - - - - Attractive valuations (many markets are at a discount compared to Wall
Street)

WE BELIEVE PACIFIC RIM MARKETS WILL PERFORM WELL, ALTHOUGH THEY MAY STOP FOR
BREATH IF THE U.S. ECONOMY ACCELERATES LATER IN THE YEAR AND THERE ARE CONCERNS
ABOUT INTEREST RATES. We believe Japan offers the best opportunities for strong
price appreciation over the medium term and, consequently, the fund will
maintain a sizeable weighting in Japan for the time being.

IN JUNE, JAMIE SANDISON, PORTFOLIO MANAGER FOR THE PACIFIC RIM REGION, ASSUMED
NEW RESPONSIBILITIES AS HEAD OF EDINBURGH'S CONTINENTAL EUROPEAN TEAM. Until a
replacement is named, his position covering Pacific equities for the fund will
be taken on by Helen Fallow, head of the Pacific Department. Ms. Fallow joined
Edinburgh in 1990 and is a specialist in Asian markets -- Hong Kong and China,
particularly. Prior to joining the company, she was Head of Emerging Markets
Research at Crosby Securities Limited, based in Hong Kong. Ms. Fallow earned an
MA with honors from the University of Dundee.

We thank you for your continued support of the Pacific Basin Value Fund and
would be happy to hear your comments or answer any questions you may have.

Sincerely,

/s/ Lloyd C. Beat /s/ David W. Currie /s/ Jamie R. Sandison

Lloyd Beat David Currie Jamie Sandison
Investment Manager Portfolio Manager Portfolio Manager

COUNTRY ALLOCATION JUNE 30, 1995

Japan 58%
South Korea 3%
Singapore 4%
Malaysia 5%
India 3%
Taiwan 2% [PIE CHART]
Thailand 8%
Australia 3%
Hong Kong 9%
Indonesia 2%
Cash/Other 3%

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

VALUE OF $10,000 INVESTED

[GRAPH]

THE HERCULES FUNDS RECENTLY INTRODUCED A CONTINGENT DEFERRED SALES CHARGE (CDSC)
APPLICABLE TO SHARES PURCHASED AFTER JUNE 19, 1995. HAD THIS STRUCTURE BEEN IN
EFFECT SINCE THE FUND'S INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993
AND REDEEMED ON JUNE 30, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD HAVE
BEEN WORTH $9,028. HOWEVER, BECAUSE THE CDSC DOES NOT APPLY TO SHARES PURCHASED
BEFORE JUNE 19, 1995, YOUR ACTUAL PROCEEDS WOULD HAVE BEEN $9,118. IN COMPARING
A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE UNMANAGED, THEIR RETURNS DO NOT
REFLECT MANAGEMENT FEES, AND THEY ARE NOT OPEN TO INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS.

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

AVERAGE ANNUAL TOTAL RETURN
(THROUGH 6/30/95 ASSUMING CDSC FEES WERE APPLICABLE)

One-Year . . . . . . . . . . . . . . .-16.31%
Since Inception (11/93 ) . . . . . . . -6.05%

<PAGE>

[PHOTO]

MARIA-ELENA CARRION
PORTFOLIO MANAGER
BANKERS TRUST COMPANY

[PHOTO]

EMILY ALEJOS
PORTFOLIO MANAGER
BANKERS TRUST COMPANY

HERCULES INTERNATIONAL FUNDS

LATIN AMERICAN
VALUE FUND

August 15, 1995

Dear Shareholders:

LATIN AMERICAN VALUE FUND STAGED A STRONG COMEBACK IN THE SECOND QUARTER OF
1995, returning 15% after a first quarter decline of -30.1%. For the year ended
June 30, the fund declined -21.2%, compared to declines of -17.6% for the
benchmark IFC Latin America Investable Index and -19.7% for the Lipper Latin
American Funds Average. The fund's net asset value declined from $9.14 on
June 30, 1994 to $7.20 on June 30, 1995.

THE LAST 12 MONTHS HAVE BEEN CHARACTERIZED BY EXTREMELY HIGH VOLATILITY IN LATIN
AMERICAN MARKETS. After a strong third quarter in 1994, the following six months
saw a pronounced downward trend in all markets, exacerbated by the December
Mexican devaluation. In the second quarter of 1995, Latin American markets
staged a strong rally, with major markets advancing between 18% and 30% as
dedicated fund managers reacted to the deeply oversold condition. Despite strong
gains during the quarter, however, the only Latin American market to post
positive performance year-to-date in 1995 was Chile, which advanced an
impressive 23% in U.S. dollar terms. Other major markets were still down
significantly year-to-date: Argentina -12%, Brazil -24%, and Mexico -25% in U.S.
dollar terms.

WE BELIEVE THE WORST IS BEHIND US FOR LATIN AMERICAN MARKETS. Our outlook for
the next 12 months is positive given the attractive valuations produced by the
recent market declines and an improved global environment. Specifically, as the
U.S. economy decelerates and interest rates continue to decline, capital should
once again flow into all emerging markets.

OUR STRATEGY OVER THE NEXT QUARTER IS TO CONTINUE EMPHASIZING HIGH-GROWTH
MARKETS WHILE DOWNPLAYING CONTRACTING OR DECELERATING-GROWTH MARKETS. We
therefore continue to emphasize Brazil and the Andean Pact (Colombia, Peru and
Venezuela) and to de-emphasize Argentina and Mexico. Within Brazil, our
portfolio continues to be structured around three major themes:

- - - - - Efficiency improvement stories, such as the recently-privatized steel
industry
- - - - - Sectors with strong export potential, such as the pulp and iron ore
industries
- - - - - Sectors with strong privatization potential, such as the telecommunications
and electricity industries

<PAGE>

Within Mexico, we have restructured the portfolio to emphasize companies with
significant earnings in U.S. dollars and low credit risk. Overall, we are
maintaining a fully invested position in the portfolio.

LOOKING OUT 12 MONTHS, WE EXPECT THE LATIN AMERICAN REGION TO GENERATE
ATTRACTIVE RETURNS GIVEN HIGH EARNINGS GROWTH PROSPECTS IN SELECTIVE MARKETS AND
LOW OVERALL VALUATIONS. Returns should be in line with expected average earnings
growth of 15% for the region over the next 12 months and price-to-earnings
expansion in the Brazilian market. Overall, all the Latin American markets
should benefit from the recent improvement in global liquidity resulting from
interest rate cuts in the United States and Japan.

Thank you for your patience as we ride out the recent market volatility and stay
focused on the long-term prospects for the region.

Sincerely,

/s/ Maria-Elena Carrion /s/ Emily Alejos

Maria-Elena Carrion Emily Alejos
Portfolio Manager Portfolio Manager

COUNTRY ALLOCATION JUNE 30, 1995

Columbia 9%
Chile 7%
Cash Equiv. 8%
Argentina 2% [PIE CHART]
Mexico 16%
Venezuela 5%
Peru 8%
Brazil 45%

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

VALUE OF $10,000 INVESTED

THE HERCULES FUNDS RECENTLY INTRODUCED A CONTINGENT DEFERRED SALES CHARGE (CDSC)
APPLICABLE TO SHARES PURCHASED AFTER JUNE 19, 1995. HAD THIS STRUCTURE BEEN IN
EFFECT SINCE THE FUND'S INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993
AND REDEEMED ON JUNE 30, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD HAVE
BEEN WORTH $7,128. HOWEVER, BECAUSE THE CDSC DOES NOT APPLY TO SHARES PURCHASED
BEFORE JUNE 19, 1995, YOUR ACTUAL PROCEEDS WOULD HAVE BEEN $7,200. IN COMPARING
A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE UNMANAGED, THEIR RETURNS DO NOT
REFLECT MANAGEMENT FEES, AND THEY ARE NOT OPEN TO INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS.

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

AVERAGE ANNUAL TOTAL RETURN
(THROUGH 6/30/95 ASSUMING CDSC FEES WERE APPLICABLE)

One-Year . . . . . . . . . . . . . . .-22.80%
Since Inception (11/93). . . . . . . -18.67%

<PAGE>

[DAVID SCOTT PHOTO]
DAVID SCOTT
PORTFOLIO MANAGER
SALOMON BROTHERS
ASSET MANAGEMENT LTD.

[DAVID GRIFFITHS PHOTO]
DAVID GRIFFITHS
PORTFOLIO MANAGER
SALOMON BROTHERS
ASSET MANAGEMENT LTD.

HERCULES INTERNATIONAL FUNDS

WORLD BOND
FUND

August 15, 1995

Dear Shareholders:

PERFORMANCE OF THE WORLD BOND FUND HAS IMPROVED SIGNIFICANTLY IN 1995, AS GLOBAL
BOND YIELDS GENERALLY DECLINED FOLLOWING A SHARPER-THAN-EXPECTED SLOWDOWN IN
WORLDWIDE ECONOMIC ACTIVITY. The fund returned 7.2% for the year ended June 30,
1995, compared to a total return of 11.6% for the benchmark Salomon Brothers
World Government Bond Index and 8.7% for the Lipper General World Income Funds
Average. The fund's net asset value increased from $9.35 on June 30, 1994, to
$9.82 on June 30, 1995, and the fund paid dividends of 20.15 cents per share
during the fiscal year.*

U.S. TREASURY YIELDS FELL 1.5% TO 2% THIS YEAR FOLLOWING EVIDENCE THAT THE PACE
OF ACTIVITY IN THE U.S. ECONOMY HAD DECLINED SHARPLY FROM THE HECTIC RATE OF
1994. A large part of the slowdown seems related to an unwanted buildup in
corporate inventories, however, the slowdown has led to surprisingly sharp
declines in employment. This in turn prompted speculation that the Fed would
begin to lower interest rates -- which it in fact did in early July. We have
several observations regarding this move:

- - - - - The Fed is probably biased in favor of further rate reductions; they would be
unlikely to sanction a move which would have to be reversed in a few months.
- - - - - The scale of any future reductions may be limited by evidence, already
emerging, that the economy is responding to the large decline in bond yields
and strong stock markets seen this year. Mortgage applications are up strongly
and auto production schedules are increasing.
- - - - - The current pricing of the Treasury market already reflects the expectation
of another 0.50% to 0.75% reduction in rates. Thus, further improvements in
the Treasury market will depend on evidence of renewed economic weakening.

JAPANESE BOND YIELDS ALSO DECLINED SIGNIFICANTLY DURING THE YEAR AS THE EXTREME
OVERVALUATION OF THE YEN RAISED THE RISK OF A SERIOUS ECONOMIC DEPRESSION. A
near-bankrupt banking sector and a collapsing stock market attest to the
problems currently facing Japan. The Bank of Japan has steered money rates below
1% and long bond yields have collapsed from 4.5% at the beginning of the year to
just 2.5% recently. Yields at these levels appear to reflect an extended period
of deflation. Such a situation does not appear to us to be

* THE 12-CENT DIVIDEND DECLARED FOR SHAREHOLDERS OF RECORD ON JUNE 29, 1995 WAS
CLASSIFIED AS A RETURN OF CAPITAL FOR TAX PURPOSES. BECAUSE IT WAS PAID FROM
SOURCES OTHER THAN THE FUND'S NET INVESTMENT INCOME, IT IS NOT TAXABLE AS
INCOME. PLEASE CONSULT A TAX ADVISER ON HOW TO REPORT THESE DISTRIBUTIONS ON
YOUR TAX FORMS.

<PAGE>

tolerable for Japanese politicians, and any collapse in the banking sector
should be a concern for politicians around the world. We expect a bail-out of
the banking sector accompanied by further stimulus and deregulation packages,
with coordinated intervention to weaken the yen. This is likely to undermine
bond market sentiment in Japan over the coming months.

GROWTH IN EUROPE HAS ALSO UNDERSHOT EXPECTATIONS THIS YEAR, ALTHOUGH TO A LESSER
EXTENT THAN IN THE U.S. Growth in domestic demand remains sedated by large-scale
fiscal consolidation, and hopes of a recovery led by exports have been
disappointed by two factors: The strength of the Deutsche mark has damaged
Germany's global competitiveness, and there has been a slowdown in demand for
exports outside the European Community. Worries over the sustainability of a
relatively recent German economic recovery led the Bundesbank to reduce interest
rates in March, and further rate cuts may be forthcoming if the economy remains
lackluster.

THE FUND HAS EMPHASIZED EUROPEAN BOND MARKETS RELATIVE TO THOSE IN BOTH THE U.S.
AND JAPAN, where current yield levels do not appear to be attractive. We feel
that the higher yields available in European markets offer the greatest
opportunity for further capital appreciation and income gains for the fund.

FOREIGN EXCHANGE EXPOSURE REMAINS FULLY HEDGED BACK INTO THE U.S. DOLLAR. This
policy of hedging the currency reduces the volatility of investments, in our
opinion, and protects shareholders from foreign currency losses should the U.S.
dollar strengthen. We believe the outlook for the U.S. dollar -- which fell
precipitously during the first quarter of 1995 -- is now more constructive, and
we expect a significant rally in the dollar over the rest of this year.

Thank you for your investment in the World Bond Fund.

Sincerely,

/s/ David J. Scott /s/ David Griffiths

David Scott David Griffiths
Portfolio Manager Portfolio Manager

COUNTRY ALLOCATION* JUNE 30, 1995
Germany 32%
Australia 4%
Cash 7%
U.S. 17%
Denmark 12% [PIE CHART]
Japan 11%
Spain 9%
Austria 3%
U.K. 5%

* INCLUDES EXPOSURE TO FUTURES CONTRACTS

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

VALUE OF $10,000 INVESTED

[GRAPH]

THE HERCULES FUNDS RECENTLY INTRODUCED A CONTINGENT DEFERRED SALES CHARGE (CDSC)
APPLICABLE TO SHARES PURCHASED AFTER JUNE 19, 1995. HAD THIS STRUCTURE BEEN IN
EFFECT SINCE THE FUND'S INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993
AND REDEEMED ON JUNE 30, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD HAVE
BEEN WORTH $9,985. HOWEVER, BECAUSE THE CDSC DOES NOT APPLY TO SHARES PURCHASED
BEFORE JUNE 19, 1995, YOUR ACTUAL PROCEEDS WOULD HAVE BEEN $10,085. IN COMPARING
A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE UNMANAGED, THEIR RETURNS DO NOT
REFLECT MANAGEMENT FEES, AND THEY ARE NOT OPEN TO INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS.

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

AVERAGE ANNUAL TOTAL RETURN
(THROUGH 6/30/95 ASSUMING CDSC FEES WERE APPLICABLE)

One-Year . . . . . . . . . . . . . . . .5.24%
Since Inception (11/93). . . . . . . . -0.09%

<PAGE>

DAVID SCOTT
(PICTURED ON PAGE 12)
PORTFOLIO MANAGER
SALOMON BROTHERS
ASSET MANAGEMENT LTD.

DAVID GRIFFITHS
(PICTURED ON PAGE 12)
PORTFOLIO MANAGER
SALOMON BROTHERS
ASSET MANAGEMENT LTD.

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

VALUE OF $10,000 INVESTED

[GRAPH]

IF YOU HAD INVESTED $10,000 IN THE FUND ON NOVEMBER 9, 1993, AND HELD IT THROUGH
JUNE 30, 1995, REINVESTING ALL DISTRIBUTIONS, YOUR INVESTMENT WOULD BE WORTH
$10,155. IN COMPARING A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE
UNMANAGED, THEIR RETURNS DO NOT REFLECT MANAGEMENT FEES, AND THEY ARE NOT OPEN
TO INVESTMENT. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

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

AVERAGE ANNUAL TOTAL RETURN
(THROUGH 6/30/95)

One-Year . . . . . . . . . . . . . . . .1.89%
Since Inception (11/93). . . . . . . . .0.95%

HERCULES INTERNATIONAL FUNDS

GLOBAL SHORT-TERM
FUND

August 15, 1995

Dear Shareholders:

GLOBAL SHORT-TERM FUND PROVIDED A RETURN OF 1.89% FOR THE 12 MONTHS ENDED JUNE
30, 1995. Its net asset value increased to $10 per share on June 30, 1995, up
from $9.91 on June 30, 1994. The Salomon Brothers Three-Month U.S. Treasury Bill
Index, by comparison, increased 5.38% over the period and the benchmark Salomon
World Government Bond Index returned 11.57%. The fund paid dividends of 9.51
cents for the year ended June 30, 1995.

SINCE THE HERCULES MONEY MARKET FUND WAS INTRODUCED IN JANUARY, INVESTORS HAVE
SHOWN LESS INTEREST IN THE GLOBAL SHORT-TERM FUND. At June 30, 1995, the fund's
net assets were just $212,000 and its only investment was a U.S.
Treasury bill.

AS A RESULT, THE FUND'S INVESTMENT ADVISER HAS DISCONTINUED NEW SALES AND
EXCHANGES INTO THE GLOBAL SHORT-TERM FUND, and we do not anticipate significant
dividend distributions from the fund in the future. We encourage shareholders to
talk with their investment professional about exchanging into the Money Market
Fund, or any of the other Hercules funds, at no charge.

/s/ David J. Scott /s/ David Griffiths

David Scott David Griffiths
Portfolio Manager Portfolio Manager

<PAGE>

[MARYBETH WHYTE PHOTO]
MARYBETH WHYTE
PORTFOLIO MANAGER
SALOMON BROTHERS
ASSET MANAGEMENT INC

HERCULES INTERNATIONAL FUNDS

MONEY MARKET
FUND

August 15, 1995

Dear Shareholders:

AS OF JUNE 30, 1995, THE SEVEN-DAY EFFECTIVE (COMPOUND) YIELD OF THE MONEY
MARKET FUND WAS 4.69%, and its 30-day effective yield was 4.63%. The fund's
average maturity was 76 days.

BOTH LONG-TERM AND SHORT-TERM U.S. INTEREST RATES FELL DURING THE FIRST QUARTER
OF 1995 despite a 0.50% increase in the federal funds rate in February. Market
participants believed the Federal Reserve had raised interest rates for the last
time, and thus short-term yields fell as investors no longer felt the need to be
compensated for future rate increases.

SECOND QUARTER ACTIVITY SAW FAVORABLE RESULTS FOR MONEY MARKET SECURITIES as
weakness on the employment front ignited a rally in the short-term market. While
other economic data was decidedly mixed during the quarter, most market pundits
continued to believe the Fed would not raise rates again, and were proven
correct in July when the federal funds rate was lowered from 6% to 5.75%.

THE PORTFOLIO REMAINS INVESTED COMPLETELY IN U.S. TREASURY BILLS,
and its average maturity was extended from 20 days to 76 days in anticipation of
declining short-term interest rates. The Federal Reserve's move to lower
interest rates, along with renewed signs of life from consumers, have increased
the chances of a "soft landing" for the current economic expansion. Barring an
unexpected shock, neither boom nor recession is on the horizon. The potential
for large budget cuts later this year could hamper economic growth in the short
run, however the effects of a credible budget plan on the financial markets and
the possibility of further rate cuts by the Fed should outweigh any negative
impact. We believe the federal funds rate may decline another 0.25% by year-end.

Thank you for your investment in the Money Market Fund.

/s/ Marybeth Whyte

Marybeth Whyte
Portfolio Manager

<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1995

<TABLE>
<CAPTION>
North
American Pacific Latin
Growth and European Basin American
Income Value Value Value
Fund Fund Fund Fund
- - - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

ASSETS:
Investments in securities, at market value*
(note 2) $13,170,154 17,558,689 31,272,381 22,259,248
Cash in bank on demand deposit 132,829 -- 905,633 36,930
Foreign cash in bank on demand deposit 1,000 81,339 62,891 8,873
Receivable for investment securities sold 84,407 819,145 9,254 177,117
Receivable for fund shares sold 2,621 -- 241,559 78,140
Organization costs (note 2) 64,091 64,091 64,091 64,091
Dividends and accrued interest receivable 20,913 137,323 36,800 98,286
- - - - ----------------------------------------------------------------------------------------------------------------
Total assets 13,476,015 18,660,587 32,592,609 22,722,685
- - - - ----------------------------------------------------------------------------------------------------------------

LIABILITIES:
Bank overdraft -- 726,758 -- --
Payable for investment securities purchased -- 98,868 737,371 --
Payable for fund shares redeemed 238,101 101,144 107,405 63,453
Unrealized depreciation of forward foreign
currency contracts held (notes 2 and 4) -- 185,581 147,351 --
Accrued distribution fee 5,489 7,113 13,050 8,925
Accrued investment management fee 11,253 14,862 27,282 18,645
Accrued expenses and other liabilities 3,752 6,005 32,928 7,630
- - - - ----------------------------------------------------------------------------------------------------------------
Total liabilities 258,595 1,140,331 1,065,387 98,653
- - - - ----------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital
stock $13,217,420 17,520,256 31,527,222 22,624,032
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------

REPRESENTED BY:
Capital stock - 10 billion shares of $.01 par
value authorized for each fund; outstanding,
1,332,763; 1,578,787; 3,495,770; 3,140,348
shares, respectively $ 13,328 15,788 34,958 31,403
Additional paid-in capital 13,943,781 15,930,770 36,465,491 35,243,185
Undistributed net investment income (accumulated
net investment loss) (note 2) (393,668) 223,075 (211,925) (153,624)
Accumulated net realized gain (loss) on
investments and foreign currency
transactions (850,994) 604,008 (1,552,376) (11,147,882)
Unrealized appreciation (depreciation) of
investments and on
translation of other assets and liabilities
in foreign currencies
(notes 4 and 7) 504,973 746,615 (3,208,926) (1,349,050)
- - - - ----------------------------------------------------------------------------------------------------------------
Total - representing net assets applicable to
outstanding capital stock $13,217,420 17,520,256 31,527,222 22,624,032
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------
Net asset value per share of outstanding capital
stock $ 9.92 11.10 9.02 7.20
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------
*INVESTMENTS IN SECURITIES, AT IDENTIFIED COST $12,665,204 16,632,313 34,333,691 23,607,434
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

16
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1995

<TABLE>
<CAPTION>
World Global Money
Bond Short-Term Market
Fund Fund Fund
- - - - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>

ASSETS:
Investments in securities, at market value*
(note 2) $ 12,655,163 99,299 1,301,196
Cash in bank on demand deposit 1,030,953 48,823 196
Organization costs (note 2) 64,091 64,091 38,851
Dividends and accrued interest receivable 416,925 -- --
- - - - -----------------------------------------------------------------------------------------------
Total assets 14,167,132 212,213 1,340,243
- - - - -----------------------------------------------------------------------------------------------

LIABILITIES:
Payable for fund shares redeemed 263,253 -- 109,588
Net unrealized depreciation of forward foreign
currency contracts held
(notes 2 and 4) 71,507 -- --
Dividends payable to shareholders (note 2) 14,101 -- 23
Accrued distribution fee 3,819 -- 58
Accrued investment management fee 12,460 101 541
Accrued expenses and other liabilities 25,541 6 94
- - - - -----------------------------------------------------------------------------------------------
Total liabilities 390,681 107 110,304
- - - - -----------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital
stock $ 13,776,451 212,106 1,229,939
- - - - -----------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------
REPRESENTED BY:
Capital stock - 10 billion (100 billion for
Global Short-Term Fund and Money Market Fund
each) shares of $.01 par value authorized for
each fund; outstanding, 1,402,574; 21,201;
1,229,939 shares, respectively (note 1) $ 14,026 212 12,299
Additional paid-in capital 14,366,681 213,143 1,217,640
Undistributed net investment income (accumulated
net investment loss) (note 2) (632,506) 3,740 --
Accumulated net realized (loss) on
investments and foreign currency
transactions (362,726) (4,989) --
Unrealized appreciation of investments and on
translation of other assets and liabilities
in foreign currencies
(notes 4 and 7) 390,976 -- --
- - - - -----------------------------------------------------------------------------------------------
Total - representing net assets applicable to
outstanding capital stock $ 13,776,451 212,106 1,229,939
- - - - -----------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------
Net asset value per share of outstanding capital
stock $ 9.82 10.00 1.00
- - - - -----------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------
*INVESTMENTS IN SECURITIES, AT IDENTIFIED COST $ 12,176,942 99,299 1,301,196
- - - - -----------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

17
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED
JUNE 30, 1995

INCOME:
Dividends (net of foreign withholding taxes of
$7,348; $69,136; $49,616; $17,639,
respectively) $ 281,754 468,490 362,205 377,995
Interest (net of foreign withholding taxes of
$14,422; $2,149; $0; $0, respectively) 333,841 101,024 2,368 173,973
- - - - ------------------------------------------------------------------------------------------------------------
Total investment income 615,595 569,514 364,573 551,968
- - - - ------------------------------------------------------------------------------------------------------------

EXPENSES (NOTE 6):
Investment management fee 160,455 183,817 385,858 280,401
Distribution fee 112,319 128,672 270,101 196,280
Custodian, accounting and transfer agent fees 164,237 172,683 179,117 359,665
Audit and legal fees 43,614 43,463 52,517 52,238
Amortization of organization costs 17,845 17,845 17,845 17,845
Directors' fees 5,909 5,909 5,909 5,909
Reports to shareholders 7,657 7,693 14,571 14,588
Registration fees 16,308 15,891 25,867 23,441
Other expenses 15,546 14,701 26,004 22,094
- - - - ------------------------------------------------------------------------------------------------------------
Total expenses 543,890 590,674 977,789 972,461
Less expenses waived or absorbed by manager (190,889) (186,196) (128,856) (355,579)
Less expenses waived or absorbed by
distributor (32,091) (36,763) (77,172) (56,080)
- - - - ------------------------------------------------------------------------------------------------------------
Net expenses 320,910 367,715 771,761 560,802
- - - - ------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 294,685 201,799 (407,188) (8,834)
- - - - ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on investments (note 3) (1,333,951) 825,508 (1,237,693) (8,891,338)
Net realized gain (loss) on foreign currency
transactions (58,915) 2,976 (225,442) (133,054)
- - - - ------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and
foreign currency transactions (1,392,866) 828,484 (1,463,135) (9,024,392)
- - - - ------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments and on
translation of other assets and liabilities
in foreign currencies 1,612,010 1,175,631 (4,415,354) 2,849,640
- - - - ------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign
currency 219,144 2,004,115 (5,878,489) (6,174,752)
- - - - ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations $ 513,829 2,205,914 (6,285,677) (6,183,586)
- - - - ------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

18
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED
JUNE 30, 1995

<TABLE>
<CAPTION>
World Global Money
Bond Short-Term Market
Fund Fund Fund*
- - - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>

INCOME:
Interest (net of foreign withholding taxes of
$11,100; $0; $0, respectively) $ 1,664,619 43,821 20,832
- - - - -------------------------------------------------------------------------------------------

EXPENSES (NOTE 6):
Investment management fee 253,709 5,312 1,882
Distribution fee 126,855 3,187 376
Custodian, accounting and transfer agent fees 108,238 91,782 64,570
Audit and legal fees 74,993 42,426 18,685
Amortization of organization costs 17,845 17,845 2,782
Directors' fees 5,909 5,909 3,159
Reports to shareholders 6,070 627 47
Registration fees 24,141 10,254 1,057
Other expenses 23,099 13,569 3,170
- - - - -------------------------------------------------------------------------------------------
Total expenses 640,859 190,911 95,728
Less expenses waived or absorbed by manager (133,203) (177,099) (91,965)
Less expenses waived or absorbed by
distributor (50,742) (531) --
- - - - -------------------------------------------------------------------------------------------
Net expenses 456,914 13,281 3,763
- - - - -------------------------------------------------------------------------------------------
Investment income - net 1,207,705 30,540 17,069
- - - - -------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments (note 3) 1,626,510 15,432 --
Net realized loss on foreign currency
transactions (2,594,888) (50,156) --
Net realized loss on futures contracts (249,444) -- --
- - - - -------------------------------------------------------------------------------------------
Net realized loss on investments and foreign
currency transactions (1,217,822) (34,724) --
- - - - -------------------------------------------------------------------------------------------
Net change in unrealized appreciation or
depreciation of investments and on
translation of other assets and liabilities
in foreign currencies 1,524,955 19,538 --
- - - - -------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign
currency 307,133 (15,186) --
- - - - -------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations $ 1,514,838 15,354 17,069
- - - - -------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------
</TABLE>

*FOR THE PERIOD FROM DECEMBER 13, 1994, COMMENCEMENT OF OPERATIONS, TO JUNE 30,
1995.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

19
<PAGE>
-------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
North American Growth and
Income Fund European Value Fund
------------------------------- -------------------------------
Period from Period from
For the Year 11/9/93* to For the Year 11/9/93* to
Ended 6/30/95 6/30/94 Ended 6/30/95 6/30/94
- - - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

OPERATIONS:
Investment income - net $ 294,685 67,387 201,799 33,204
Net realized gain (loss) on investments and
foreign currency transactions (1,392,866) (164,207) 828,484 (106,879)
Net change in unrealized appreciation or
depreciation of investments and on
translation of other assets and liabilities
in foreign currencies 1,612,010 (1,107,037) 1,175,631 (429,016)
- - - - -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting
from operations 513,829 (1,203,857) 2,205,914 (502,691)
- - - - -----------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net (74,603) -- (41,687) --
Net realized gains -- -- (112,779) --
- - - - -----------------------------------------------------------------------------------------------------------------------
Total distributions (74,603) -- (154,466) --
- - - - -----------------------------------------------------------------------------------------------------------------------

CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold 2,581,949 18,792,081 4,213,199 17,517,578
Reinvestment of distributions 72,165 -- 148,816 --
Payments for shares redeemed (6,731,426) (749,385) (5,467,416) (457,345)
- - - - -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions (4,077,312) 18,042,696 (1,105,401) 17,060,233
- - - - -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (3,638,086) 16,838,839 946,047 16,557,542
- - - - -----------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period (note 1) 16,855,506 16,667 16,574,209 16,667
- - - - -----------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 13,217,420 16,855,506 17,520,256 16,574,209
- - - - -----------------------------------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (accumulated
net
investment loss) $ (393,668) (62,566) 223,075 (6,026)
- - - - -----------------------------------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

20
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
Pacific Basin Value Fund Latin American Value Fund
------------------------------ ------------------------------
Period from Period from
For the Year 11/9/93* to For the Year 11/9/93* to
Ended 6/30/95 6/30/94 Ended 6/30/95 6/30/94
- - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

OPERATIONS:
Investment income (loss) - net $ (407,188) (167,901) (8,834) 18,072
Net realized gain (loss) on investments and
foreign currency transactions (1,463,135) 677,669 (9,024,392) (2,388,607)
Net change in unrealized appreciation or
depreciation of investments and on
translation of other assets and liabilities
in foreign currencies (4,415,354) 1,206,428 2,849,640 (4,198,690)
- - - - ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (6,285,677) 1,716,196 (6,183,586) (6,569,225)
- - - - ---------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income - net -- -- -- --
Net realized gains (428,688) -- -- --
- - - - ---------------------------------------------------------------------------------------------------------------------
Total distributions (428,688) -- -- --
- - - - ---------------------------------------------------------------------------------------------------------------------

CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold 8,508,368 40,734,038 11,516,745 37,811,581
Reinvestment of distributions 418,184 -- -- --
Payments for shares redeemed (11,512,632) (1,639,234) (10,459,488) (3,508,662)
- - - - ---------------------------------------------------------------------------------------------------------------------
Increase in net assets from capital share
transactions (2,586,080) 39,094,804 1,057,257 34,302,919
- - - - ---------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (9,300,445) 40,811,000 (5,126,329) 27,733,694
- - - - ---------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period (note 1) 40,827,667 16,667 27,750,361 16,667
- - - - ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 31,527,222 40,827,667 22,624,032 27,750,361
- - - - ---------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (accumulated
net investment loss) $ (211,925) -- (153,624) --
- - - - ---------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

21
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
Money Market
World Bond Fund Global Short-Term Fund Fund
----------------------------- ----------------------------- -------------
For the Year Period From For the Year Period From Period from
Ended 11/9/93* to Ended 11/9/93* to 12/13/94*
6/30/95 6/30/94 6/30/95 6/30/94 to 6/30/95
- - - - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>

OPERATIONS:
Investment income - net $ 1,207,705 425,848 30,540 18,250 17,069
Net realized loss on investments and
foreign currency transactions (1,217,822) (1,475,275) (34,724) (5,260) --
Net change in unrealized appreciation
or depreciation of investments and
on translation of other assets and
liabilities in foreign currencies 1,524,955 (1,133,979) 19,538 (19,538) --
- - - - --------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,514,838 (2,183,406) 15,354 (6,548) 17,069
- - - - --------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:
From investment income - net (249,747) (194,474) (12,663) (12,833) (17,069)
Tax return of capital (152,655) -- -- -- --
- - - - --------------------------------------------------------------------------------------------------------------------------
Total distributions (402,402) (194,474) (12,663) (12,833) (17,069)
- - - - --------------------------------------------------------------------------------------------------------------------------

CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold 1,176,394 39,113,811 655,611 3,715,535 2,793,880
Reinvestment of distributions 444,626 89,327 12,864 9,642 14,739
Payments for shares redeemed (21,316,988) (4,478,942) (2,501,571) (1,679,952) (1,579,180)
- - - - --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital share transactions (19,695,968) 34,724,196 (1,833,096) 2,045,225 1,229,439
- - - - --------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net
assets (18,583,532) 32,343,316 (1,830,405) 2,025,844 1,229,439
- - - - --------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period
(note 1) 32,359,983 16,667 2,042,511 16,667 500
- - - - --------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 13,776,451 32,359,983 212,106 2,042,511 1,229,939
- - - - --------------------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
(accumulated net investment loss) $ (632,506) (414,774) 3,740 12,904 --
- - - - --------------------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------------------
</TABLE>

* COMMENCEMENT OF OPERATIONS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

22
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

1 ORGANIZATION

Hercules Funds Inc. (the company) was incorporated on July 29,
1993, and is registered under the Investment Company Act of
1940 (as amended) as a non-diversified, open-end management
investment company, the shares of which are comprised of a
series of seven funds: North American Growth and Income Fund,
European Value Fund, Pacific Basin Value Fund, Latin American
Value Fund, World Bond Fund, Global Short-Term Fund and Money
Market Fund (the funds). The company's articles of
incorporation permit the board of directors to create
additional funds in the future. On November 9, 1993
(commencement of operations) the registration statement for the
company's shares became effective under the Securities Act of
1933. The only transaction of the funds (except Money Market
Fund), prior to commencement of operations was the initial sale
on October 12, 1993, of 1,667 shares of each fund at $10 per
share to Hercules International Management LLC. On December 13,
1994, the Money Market Fund commenced operations. The only
transaction of the fund prior to commencement of operations was
the sale of 500 shares at $1 per share to Hercules
International Management LLC. On April 17, 1995, the company
discontinued sale of shares and exchanges into the Global
Short-Term Fund.
2 SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
Significant accounting policies of the funds are as follows:

INVESTMENTS IN SECURITIES
Securities traded on U.S. or foreign securities exchanges or
included in a national market system are valued at the last
quoted sales price; securities for which there were no sales
reported are valued at the mean between the bid and ask prices;
exchange listed options are valued at the last sales price and
futures contracts are valued at the last settlement price;
bonds and other securities for which market quotations are not
readily available are valued at fair value according to methods
selected in good faith by the board of directors. Securities
with maturities of 60 days or less when acquired or
subsequently within 60 days of maturity are valued at amortized
cost, which approximates market value.

Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are
calculated on an identified cost basis. Dividend income is
recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign
securities. Interest income, including level yield amortization
of premium and discount, is accrued daily.

Pursuant to Rule 2a-7 of the Investment Company Act of 1940 (as
amended), securities in the Money Market Fund are valued at
amortized cost, which approximates market value, in order to
maintain a constant net asset value of $1 per share.

OPTION TRANSACTIONS
In order to produce incremental earnings, protect gains, and
facilitate buying and selling of securities for investment
purposes, the funds (except Money Market Fund) may buy and sell
put and call options and write covered call and cash-secured
put options on securities, stock and interest rate indexes and
foreign currencies. The risk in writing a call option is that
the fund gives up the opportunity of profit if the market price
of the security, index or currency increases. The risk in
writing a put option is that the fund may incur a loss if the
market price of the security, index or currency decreases and
the option is exercised. The risk in buying an option is that
the fund pays a premium whether or not the option is exercised.
The fund also has the additional risk of not being able to
enter into a closing transaction if a liquid secondary market
does not exist. Option contracts are valued daily and
unrealized appreciation or depreciation is recorded. The fund
will realize a gain or loss upon expiration or closing of the
option transaction. When an option is exercised, the proceeds
on sale of a written call option, the purchase cost of a
written put option, or the cost of a security for a purchased
put or call option is adjusted by the amount of premium
received or paid.

FUTURES TRANSACTIONS
In order to gain exposure to or protect from changes in the
market, the funds (except Money Market Fund) may buy and sell
financial futures contracts and related options. Risks of
entering into futures contracts and related options include the
possibility that there may be an illiquid market and that a
change in the value of the contract or option may not correlate
with changes in the value of the underlying securities.

Upon entering into a futures contract, the fund is required to
deposit initial margin, either cash or securities in an amount
equal to a certain percentage of the contract value. Subsequent
payments (variation margin) are made or received by the fund
each day. The variation margin payments are equal to the daily
changes in the contract value and are recorded as unrealized
gains and losses. The funds recognize a realized gain or loss
when the contract is closed or expires.

23
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

FEDERAL TAXES
Each fund within the company is treated as a separate entity
for federal income tax purposes. Each fund's
policy is to comply with the requirements of the Internal
Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to
shareholders. Therefore, no income or excise tax provision is
required.

Net investment income and net realized gains (losses) differ
for financial statement and tax purposes primarily because of
the recognition of certain foreign currency gains (losses) as
ordinary income (loss) for tax purposes, "mark-to-market" of
certain passive foreign investment companies (PFICs), foreign
currency and futures positions for tax purposes, and losses
deferred due to "wash sale" and "straddle" transactions. The
character of distributions made during the year from net
investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the funds.

On the statements of assets and liabilities, as a result of
permanent book-to-tax differences, accumulated net realized
gain (loss) and undistributed net investment income
(accumulated net investment loss) have been increased
(decreased), resulting in net reclassification adjustments to
additional paid-in-capital as follows:

<TABLE>
<CAPTION>
NORTH
AMERICAN
GROWTH PACIFIC LATIN GLOBAL
AND EUROPEAN BASIN AMERICAN WORLD SHORT-
INCOME VALUE VALUE VALUE BOND TERM
FUND FUND FUND FUND FUND FUND
- - - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accumulated net
realized gain
(loss) $ 568,880 (51,294) (177,567) 235,489 1,679,977 35,236
Undistributed net
investment
income
(accumulated net
investment loss) $ (551,184) 68,989 195,263 (144,790) (1,175,690) (27,041)
Additional
paid-in-capital
reduction
(increase) $ (17,696) (17,695) (17,696) (90,699) (504,287) (8,195)
</TABLE>

On the statement of assets and liabilities, accumulated net
investment losses result from certain foreign currency losses
which will be recognized for tax purposes as ordinary losses in
the subsequent fiscal year.

DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income for World
Bond Fund are declared and paid quarterly. For Money Market
Fund, distributions to shareholders from net investment income
are declared daily and paid monthly. For North American Growth
and Income, European Value, Pacific Basin Value and Latin
American Value Funds, dividends from net investment income are
declared and paid annually. For Global Short-Term Fund,
dividends to shareholders from net investment income were
declared and paid monthly through March 1995 and are now paid
as necessary to avoid federal income and excise taxes.
Distributions from net realized gains, if any, will be made on
an annual basis for all funds. Shareholders may elect to have
distributions paid in cash or reinvested at net asset value.

ORGANIZATION COSTS
Organization costs were incurred in connection with the start
up and initial registration of the funds. These costs are being
amortized over 60 months on a straight-line basis. If any or
all of the shares representing initial capital of the funds are
redeemed prior to the end of the amortization period, the
proceeds will be reduced by the unamortized organization cost
balance in the proportion as the number of shares redeemed
bears to the number of initial shares outstanding immediately
preceding the redemption.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
Securities and other assets and liabilities denominated in
foreign currencies are translated into U.S. dollars at the
daily closing rate of exchange. Foreign currency amounts
related to the purchase or sale of securities and income and
expense are translated at the exchange rate on the transaction
date. The funds do not separately identify that portion of
realized and unrealized gain (loss) arising from changes in the
exchange rates from the portion arising from changes in the
market value of investments.

The funds (except Money Market Fund) also may enter into
forward foreign currency exchange contracts for transaction or
position hedging purposes, and in the case of World Bond and
Global Short-Term Funds, for the

24
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

purpose of enhancing portfolio returns. The net U.S. dollar
value of foreign currency underlying all contractual
commitments held by the funds and the resulting unrealized
appreciation or depreciation, are determined using foreign
currency exchange rates from independent pricing sources. The
funds are subject to the credit risk that the counterparty will
not complete the obligations of the contract.
3 INVESTMENT
SECURITY
TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities (for all
funds except Money Market Fund) for the year ended June 30,
1995, (period from December 13, 1994 to June 30, 1995 for the
Money Market Fund) were as follows:

<TABLE>
<CAPTION>
NORTH
AMERICAN
GROWTH PACIFIC LATIN GLOBAL
AND EUROPEAN BASIN AMERICAN WORLD SHORT- MONEY
INCOME VALUE VALUE VALUE BOND TERM MARKET
FUND FUND FUND FUND FUND FUND FUND
- - - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

Purchases $ 7,678,158 22,693,640 25,116,675 42,528,018 105,244,181 1,391,262 6,663,689

Sales proceeds $ 10,783,837 22,318,954 25,482,751 41,984,644 122,990,708 1,760,101 5,383,326
</TABLE>

For the year ended June 30, 1995, brokerage commissions paid to
affiliated broker-dealers amounted to $24,276, $4,191, $4,849
and $10,523 for the North American Growth and Income Fund,
European Value Fund, Pacific Basin Value Fund and Latin
American Value Fund, respectively.
4 FORWARD FOREIGN
CURRENCY CONTRACTS
On June 30, 1995, the European Value Fund, Pacific Basin Value
Fund and World Bond Fund had open foreign currency exchange
contracts which obligate the funds to deliver or receive
foreign currencies at specified future dates. The unrealized
appreciation (depreciation) on these contracts is included in
the accompanying financial statements. The terms of the open
contracts are as follows:

<TABLE>
<CAPTION>
U.S. $ VALUE U.S. $ VALUE
SETTLEMENT CURRENCY TO BE AS OF CURRENCY TO AS OF APPRECIATION
FUND DATE DELIVERED 6/30/95 BE RECEIVED 6/30/95 (DEPRECIATION)
- - - - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EUROPEAN 03-Jul-95 106,043 ATS $ 10,887 10,837 USD $ 10,837 $ (50)
VALUE FUND 03-Jul-95 57,340 CHF 49,867 49,679 USD 49,679 (188)
03-Jul-95 11,352 DEM 8,211 8,184 USD 8,184 (27)
03-Jul-95 193,530 GBP 308,584 307,345 USD 307,345 (1,239)
05-Jul-95 376,471 DEM 272,312 271,742 USD 271,742 (570)
05-Jul-95 124,972 FIM 29,268 29,278 USD 29,278 10
22-Aug-95 2,841,133 ECU 3,783,517 3,600,000 USD 3,600,000 (183,517)
- - - - ------------------------------------------------------------------------------------------------------------------------------
$ 4,462,646 $ 4,277,065 $(185,581)
- - - - ------------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------------
PACIFIC
BASIN
VALUE FUND 22-May-96 376,200,000 JPY $ 4,647,351 4,500,000 USD $ 4,500,000 $(147,351)
- - - - ------------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------------
WORLD BOND 21-Jul-95 1,203,135 USD $ 1,203,135 1,663,936 DEM $ 1,203,570 $ 435
FUND 21-Jul-95 645,450 DEM 467,668 474,596 USD 474,596 6,928
21-Jul-95 2,500,000 DEM 1,811,400 1,815,541 USD 1,815,541 4,141
21-Jul-95 271,890 DEM 197,001 189,470 USD 189,470 (7,531)
21-Jul-95 2,740,790 DEM 1,985,866 1,954,914 USD 1,954,914 (30,952)
21-Jul-95 9,182,575 DKK 1,701,212 1,666,529 USD 1,666,529 (34,683)
21-Jul-95 150,046,521 ESP 1,242,657 1,188,393 USD 1,188,393 (54,264)
21-Jul-95 164,812 USD 164,812 104,048 GBP 165,904 1,092
21-Jul-95 855,400 USD 855,400 535,965 GBP 853,820 (1,580)
21-Jul-95 530,367 GBP 844,902 856,542 USD 856,542 11,640
21-Jul-95 800,093 GBP 1,274,590 1,268,947 USD 1,268,947 (5,643)
31-Aug-95 757,023 AUD 536,065 542,785 USD 542,785 6,720
31-Aug-95 120,000,000 JPY 1,429,442 1,461,632 USD 1,461,632 32,190
- - - - ------------------------------------------------------------------------------------------------------------------------------
$ 13,714,150 $ 13,642,643 $ (71,507)
- - - - ------------------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<S> <C> <C>
ATS - Austrian Schilling GBP - British Pound ECU - European Currency
CHF - Swiss Franc DKK - Danish Krone JPY - Japanese Yen
DEM - German Deutschemark FIM - Finnish Mark ESP - Spanish Peseta
AUD - Australian Dollar
</TABLE>

25
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

5 CAPITAL SHARE
TRANSACTIONS
Transactions in shares of each fund for the year ended June 30,
1995 (period from December 13, 1994 to June 30, 1995 for the
Money Market Fund) were as follows:

Sold 268,278 399,899 832,267 1,321,613 124,891 66,680 2,793,880
Distribution Reinvestment 8,127 14,618 42,071 -- 46,856 1,306 14,739
Redeemed (725,259) (515,858) (1,201,579) (1,216,683) (2,231,574) (252,893) (1,579,180)
- - - - ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) (448,854) (101,341) (327,241) 104,930 (2,059,827) (184,907) 1,229,439
- - - - ---------------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Transactions in shares of each fund for the period from
November 9, 1993 (commencement of operations), to June 30,
1994, were as follows:

<TABLE>
<CAPTION>
- - - - ---------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C>
Sold 1,856,326 1,723,375 3,979,994 3,370,590 3,917,436 372,155 --
Distribution Reinvestment -- -- -- -- 9,238 968 --
Redeemed (76,376) (44,914) (158,650) (336,839) (465,940) (168,682) --
- - - - ---------------------------------------------------------------------------------------------------------------------------
Increase (Decrease)...... 1,779,950 1,678,461 3,821,344 3,033,751 3,460,734 204,441 --
- - - - ---------------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

6 FEES AND EXPENSES
The company was managed by Hercules International Management
LLC (the manager), a limited liability company organized under
the laws of Delaware on July 26, 1993. On July 18, 1995,
shareholders approved a change in the funds investment manager
to Piper Capital Management Incorporated, a subsidiary of Piper
Jaffray Companies Inc. The fees paid by the fund's to Piper
Capital Management Incorporated will be at the same rates as
those previously paid to Hercules International Management LLC
as described below. Each fund paid the manager a fee for
managing its investment portfolio. Management fees for each
fund (except for Global Short-Term Fund and Money Market Fund)
were paid monthly at an annual rate of 1.00% of average daily
net assets. The fee for the Global Short-Term Fund and Money
Market Fund were paid monthly at an annual rate of .50% of
average daily net assets.

The manager entered into sub-advisory agreements pursuant to
which the subadvisers, subject to the supervision of the
manager, are responsible for certain investment functions,
including researching and developing an overall investment plan
and making and implementing investment decisions regarding
assets of the respective fund. For its services, the
subadvisers are paid by the manager over the same time periods
and calculated in the same manner as the investment advisory
fee of the applicable fund, 0.50% of average daily net assets
of each fund except Global Short-Term and Money Market Funds,
which are paid a fee of 0.25% of average daily net assets.

<TABLE>
<CAPTION>
FUND SUBADVISER(S)
- - - - ----------------------------------------------- ------------------------------------------
<S> <C>
NORTH AMERICAN GROWTH AND INCOME FUND Piper Capital Management Incorporated*
Acci Worldwide, S.A. de C.V.*
AGF Investment Advisors, Inc.*
EUROPEAN VALUE FUND Pictet International Management Limited
PACIFIC BASIN VALUE FUND Edinburgh Fund Managers plc
LATIN AMERICAN VALUE FUND Bankers Trust Company
WORLD BOND FUND Salomon Brothers Asset Management Limited
GLOBAL SHORT-TERM FUND Salomon Brothers Asset Management Limited
MONEY MARKET FUND Salomon Brothers Asset Management Inc
</TABLE>

*TOTAL FEE PAID TO SUBADVISERS SHARED EQUALLY.

26
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

Piper Jaffray Inc. (the distributor), a wholly-owned subsidiary
of Piper Jaffray Companies Inc. and an affiliate of the
manager, serves as the distributor of the funds' shares. For
its services as distributor, which include distributing shares
of the funds and for sales-related expenses, the distributor is
entitled to reimbursement each month for its actual expenses
incurred in the distribution and promotion of each fund's
shares pursuant to a Rule 12b-1 Distribution Plan adopted by
each of the funds. Reimbursement to the distributor is computed
separately for each fund and may not exceed 0.70% per annum of
the average daily net assets of North American Growth and
Income, European Value, Pacific Basin Value and Latin American
Value Funds, 0.50% with respect to average daily net assets of
World Bond Fund, 0.30% with respect to average daily net assets
of Global Short-Term Fund, and 0.10% with respect to average
daily net assets of Money Market Fund. For the year ended June
30, 1995 (period from November 14, 1994 to June 30, 1995 for
Money Market Fund), Piper Jaffray Inc. voluntarily agreed to
limit the reimbursement fee to an annual rate of 0.50% for
North American Growth and Income, European Value, Pacific Basin
Value, and Latin American Value Funds, 0.30% for World Bond
Fund, 0.25% for Global Short-Term Fund. Effective June 19,
1995, the company's board of directors discontinued payments
under the Rule 12b-1 Distribution Plan for the Money Market
Fund.

In addition to the fees above, the funds are responsible for
paying most other operating expenses, including directors'
fees, custodian fees, registration fees, printing of
shareholder reports, legal and audit services, organization
costs, taxes, interest and other miscellaneous expenses.

For the period, the manager and distributor have voluntarily
limited total expenses on a per annum basis to 2.00% of average
daily net assets of North American Growth and Income, European
Value, Pacific Basin Value and Latin American Value Funds,
1.80% of average daily net assets of World Bond Fund, 1.25% of
average daily net assets of Global Short-Term Fund, and 1.00%
of average daily net assets of Money Market Fund.
7 FUTURES CONTRACTS
The funds pledge securities or cash when making initial margin
deposits on futures contracts. On June 30, 1995, the World Bond
Fund had the following open futures contracts:

<TABLE>
<CAPTION>
COLLATERAL
PLEDGED TO
COVER MARKET
LONG (L) INITIAL VALUE OF NET
COUNTRY OF OR TYPE OF CONTRACT NUMBER OF MARGIN OPEN UNREALIZED
DENOMINATION SHORT (S) AND MATURITY CONTRACTS DEPOSITS CONTRACTS (LOSS)
- - - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
LIFFE German
WORLD BOND Bund Futures
FUND Germany L September (1995) 7 $ 15,212 $1,174,937 $ (20,778)
- - - - ----------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------
</TABLE>

8 CAPITAL LOSS
CARRYOVERS
For federal income tax purposes, North American Growth and
Income Fund, Pacific Basin Value Fund, Latin American Value
Fund, World Bond Fund and Global Short-Term Fund had capital
loss carryovers at June 30, 1995 of $838,953; $1,546,411;
$10,643,620; $338,380; and $4,989, respectively, which, if not
offset by subsequent capital gains will expire in 2002 through
2004. It is unlikely the board of directors will authorize a
distribution of any net realized capital gains until the
available capital loss carryovers have been offset or expire.

27
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
NORTH
AMERICAN
GROWTH AND EUROPEAN
INCOME FUND VALUE FUND
----------------------------------------------------
YEAR PERIOD FROM YEAR PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO
6/30/95 6/30/94 6/30/95 6/30/94
- - - - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.............. $ 9.46 10.00 9.86 10.00
- - - - ---------------------------------------------------------------------------------------------------------
Operations:
Investment income - net**....................... 0.17 0.04 0.12 0.02
Net realized and unrealized gains (losses)...... 0.33 (0.58) 1.21 (0.16)
- - - - ---------------------------------------------------------------------------------------------------------
Total from operations............................. 0.50 (0.54) 1.33 (0.14)
- - - - ---------------------------------------------------------------------------------------------------------
Distributions from:
Investment income - net......................... (0.04) -- (0.03) --
Net realized gains.............................. -- -- (0.06) --
- - - - ---------------------------------------------------------------------------------------------------------
Total distributions............................... (0.04) -- (0.09) --
- - - - ---------------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $ 9.92 9.46 11.10 9.86
- - - - ---------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... 5.36% (5.40%) 13.52% (1.40%)
Net assets, end of period (000s omitted).......... $13,217 16,856 17,520 16,574
Ratio of expenses to average daily net assets++... 2.00% 2.00%+ 2.00% 2.00%+
Ratio of net investment income to average daily
net assets++.................................... 1.84% 0.87%+ 1.10% 0.47%+
Portfolio turnover rate (excluding short-term
securities)..................................... 52% 23% 131% 60%
</TABLE>

* COMMENCEMENT OF OPERATIONS.

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

*** TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE
DURING THE PERIOD, ASSUMES REINVESTMENT OF ALL
DISTRIBUTIONS AND DOES NOT REFLECT THE CONTINGENT DEFERRED
SALES CHARGE APPLICABLE TO SHARES PURCHASED AFTER 6/19/95.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY WAIVED
OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE FUNDS
PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES AND NET
INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN AS FOLLOWS:

<TABLE>
<CAPTION>
NORTH
AMERICAN
GROWTH AND EUROPEAN
INCOME FUND VALUE FUND
- - - - -----------------------------------------------------------------
YEAR PERIOD FROM YEAR PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO
6/30/95 6/30/94 6/30/95 6/30/94
- - - - -----------------------------------------------------------------
<S> <C> <C> <C>
3.39%/0.45% 3.41%/(0.54%) 3.21%/(0.11%) 3.25%/(0.78%)
</TABLE>

28
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
LATIN
PACIFIC BASIN AMERICAN
VALUE FUND VALUE FUND
----------------------------------------------------
YEAR PERIOD FROM YEAR PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO
6/30/95 6/30/94 6/30/95 6/30/94
- - - - -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of
period...................... $ 10.68 10.00 9.14 10.00
- - - - -------------------------------------------------------------------------------------
Operations:
Investment income (loss) -
net**...................... (0.10) (0.04) -- 0.01
Net realized and unrealized
gains (losses)............. (1.45) 0.72 (1.94) (0.87)
- - - - -------------------------------------------------------------------------------------
Total from operations......... (1.55) 0.68 (1.94) (0.86)
- - - - -------------------------------------------------------------------------------------
Distributions from:
Net realized gains.......... (0.11) -- -- --
- - - - -------------------------------------------------------------------------------------
Total distributions........... (0.11) -- -- --
- - - - -------------------------------------------------------------------------------------
Net asset value, end of
period...................... $ 9.02 10.68 7.20 9.14
- - - - -------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***............... (14.63%) 6.80% (21.23%) (8.60%)
Net assets, end of period
(000s omitted).............. $31,527 40,828 22,624 27,750
Ratio of expenses to average
daily
net assets++................ 2.00% 2.00%+ 2.00% 2.00%+
Ratio of net investment income
(loss) to average daily net
assets++.................... (1.06%) (0.96%)+ (0.03)% .14%+
Portfolio turnover rate
(excluding short-term
securities)................. 68% 39% 161% 78%
</TABLE>

* COMMENCEMENT OF OPERATIONS.

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

+ ADJUSTED TO AN ANNUAL BASIS.

<TABLE>
<CAPTION>
LATIN
PACIFIC BASIN AMERICAN
VALUE FUND VALUE FUND
- - - - ------------------------------------------------------------------
YEAR PERIOD FROM YEAR PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO
6/30/95 6/30/94 6/30/95 6/30/94
- - - - ------------------------------------------------------------------
<S> <C> <C> <C>
2.53%/(1.59%) 2.36%/(1.32%) 3.47%/(1.50%) 3.10%/(0.96%)
</TABLE>

29
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
GLOBAL MONEY
WORLD BOND SHORT-TERM MARKET
FUND FUND FUND
----------------------------------------------------------------------
YEAR PERIOD FROM YEAR PERIOD FROM PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO 12/13/94* TO
6/30/95 6/30/94 6/30/95 6/30/94 6/30/95
- - - - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period.............. $ 9.35 10.00 9.91 10.00 1.00
- - - - ---------------------------------------------------------------------------------------------------------------------------
Operations:
Investment income - net**....................... 0.45 0.12 0.29 0.08 0.02
Net realized and unrealized gains (losses)...... 0.22 (0.71) (0.10) (0.11) --
- - - - ---------------------------------------------------------------------------------------------------------------------------
Total from operations............................. 0.67 (0.59) 0.19 (0.03) 0.02
- - - - ---------------------------------------------------------------------------------------------------------------------------
Distributions:
From investment income - net.................... (0.09) (0.06) (0.10) (0.06) (0.02)
Tax return of capital........................... (0.11) -- -- -- --
- - - - ---------------------------------------------------------------------------------------------------------------------------
Total distributions............................... (0.20) (0.06) (0.10) (0.06) (0.02)
- - - - ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $ 9.82 9.35 10.00 9.91 1.00
- - - - ---------------------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... 7.24% (5.96%) 1.89% (0.33%) 2.62%
Net assets, end of period (000s omitted).......... $13,776 32,360 212 2,043 1,230
Ratio of expenses to average daily net assets++... 1.80% 1.80%+ 1.25% 1.25%+ 1.00%+
Ratio of net investment income to average
daily net assets++................................ 4.76% 2.63%+ 2.87% 1.70%+ 4.53%+
Portfolio turnover rate (excluding short-term
securities)..................................... 501% 291% 407% 362% N/A
</TABLE>

* COMMENCEMENT OF OPERATIONS.

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY
WAIVED OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE
FUNDS PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES
AND NET INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS
WOULD HAVE BEEN AS FOLLOWS:

<TABLE>
<CAPTION>
GLOBAL MONEY
WORLD BOND SHORT-TERM MARKET
FUND FUND FUND
- - - - -----------------------------------------------------------------------------
YEAR PERIOD FROM YEAR PERIOD FROM PERIOD FROM
ENDED 11/9/93* TO ENDED 11/9/93* TO 12/13/94* TO
6/30/95 6/30/94 6/30/95 6/30/94 6/30/95
- - - - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2.53%/4.03% 2.03%/2.40% 17.97%/(13.85%) 6.25%/(3.30%) 25.44%/(19.91%)
</TABLE>

30
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES NORTH AMERICAN GROWTH AND INCOME FUND
JUNE 30, 1995
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCKS (91.6%)
CANADA (20.3%)
Abitibi Price (installment receipt) -
forest products and paper............ 2,700 $ 43,763
Agrium Incorporated - chemicals -
agricultural......................... 1,800 60,973
Alcan Aluminium - metals -
diversified.......................... 3,100 93,717
Avenor (installment receipt) - forest
products and paper................... 2,400 51,138
Bank of Montreal - bank............... 5,900 123,566
Bank of Nova Scotia - bank............ 6,700 144,591
Barrick Gold Corporation - mining..... 3,300 83,537
BCE - telecommunications.............. 2,500(b) 83,318
Bombardier Class B - diversified
industrials and conglomerates........ 3,300 80,231
Canadian Occidental Petroleum - oil
and gas.............................. 1,800 55,891
Canadian Pacific - diversified holding
company.............................. 3,200 55,072
Delrina - computer software........... 4,600(b) 62,830
Euro-Nevada Mining - mining........... 2,000 61,191
Finning Limited - industrial equipment
distributors......................... 1,800 27,536
Imasco - tobacco products/retailing... 4,000 71,025
Laidlaw Incorporated - environmental
services............................. 5,900 56,410
Linamar - automobile parts............ 2,900 40,931
Loblaw - retailing - grocery.......... 1,400 28,301
Loewen Group - funeral services....... 900 32,125
Magna International Class A -
automobile parts..................... 800 35,476
Methanex (installment receipt) -
chemicals............................ 3,000(b) 18,303
Noranda - metals - diversified........ 3,700 72,774
Nova - chemicals...................... 7,700 65,207
Pinnacle Resources - oil and gas...... 4,300(b) 45,811
Placer Dome - mining.................. 2,400 62,721
Plaintree Systems - computer -
networking products.................. 3,500(b) 37,607
Revenue Properties - real estate...... 13,100 29,583
Rio Algom - mining.................... 3,000 57,913
Rogers Cantel Mobile Communications -
telecommunications................... 2,300(b) 55,290
Rogers Communications Class B - cable
television........................... 5,900(b) 69,304
Royal Bank of Canada - bank........... 7,300 163,522
Seagram - brewers and distillers/
entertainment........................ 3,800 130,796
Sherritt - chemicals.................. 5,400(b) 56,547
Speedy Muffler King - automobile
parts................................ 4,500(b) 37,698
Stelco Class A - metal products....... 11,600(b) 57,039
Suncor - oil and gas.................. 5,900 61,783
Talisman Energy - oil and gas......... 3,400(b) 63,158
Teck Class B - mining................. 2,600 51,375
TELUS Corporation -
telecommunications................... 4,400 53,287
Thomson - publishing - newspapers..... 2,900 39,610
TransCanada Pipelines - oil and gas... 4,100 54,881
TVX Gold - mining..................... 5,500(b) 39,565
Wascana Energy - oil and gas.......... 7,700(b) 66,609
------------
2,682,005
------------

<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
MEXICO (14.0%)
ALFA Class A - diversified industrial
and conglomerates.................... 12,000 $ 145,612
Apasco - building construction and
cement............................... 12,000(b) 47,770
Cemex CPO - building construction and
cement............................... 12,000 40,480
Cifra Class C - retailing............. 85,000 111,974
Controladora Comercial Mexicana Class
B - retailing........................ 20,000(b) 15,028
Corporacion GEO Series B -
homebuilders......................... 20,000(b) 58,769
Cydsa Series A - chemicals............ 20,000(b) 66,827
Desc Sociedad de Fomento Industrial
Class B - diversified industrials.... 17,000(b) 56,803
Desc Sociedad de Fomento Industrial
Class C - diversified industrials.... 14,000(b) 45,212
Empresas ICA Sociedad Controladora -
engineering and construction......... 2,000 20,655
Empresas La Moderna Series A - tobacco
products............................. 4,000(b) 15,092
Fomento Economico Mexicano (Femsa)
Class B Ord - brewers/food and
beverage............................. 10,000 23,501
Grupo Industrial Minera Mexico Class B
- mining............................. 26,000(b) 124,700
Grupo Industrial Durango Class A -
forest products and paper............ 12,000(b) 49,784
Grupo Carso Class A1 - diversified
holding company...................... 14,000(b) 76,435
Grupo Elektra CPO - retailing......... 14,000 44,540
Grupo Embotelladoras de Mexico (Gemex)
CPO - food and beverage.............. 8,000(b) 41,567
Grupo Gigante Series B - retailing.... 30,000(b) 6,427
Grupo Industrial Maseca (Maseca) Class
B - food processing.................. 16,000 10,692
Grupo Modelo Class C -
brewers/distillers................... 10,500 140,168
Grupo Sidek Class B - diversified
industrial and conglomerates......... 22,000(b) 19,274
Grupo Simec Class B - steel........... 80,000(b) 39,265
Grupo Situr Class B - lodging, leisure
and entertainment.................... 10,139(b) 4,766
Corporacion Industrial Sanluis CPO -
diversified industrials and
conglomerate......................... 12,000 264,748
Industrias Penoles - mining........... 33,000 98,974
Kimberly Clark de Mexico Class A -
forest products and paper............ 8,000 91,446
Sistema Argos - Series B - food and
beverage............................. 50,000(b) 27,977
Tablex Class 2 - food and beverage.... 33,293(b) 39,919
Telefonos de Mexico (Telmex) Class L -
telecommunications................... 50,000 73,701
Transportacion Martima Mexicana A -
transportation - marine.............. 2,000(b) 11,031
Vitro - diversified industrial........ 12,000 34,149
------------
1,847,286
------------
UNITED STATES (57.3%)
A T & T Corporation -
telecommunications................... 3,700 196,562
Abbott Laboratories -
pharmaceuticals...................... 2,200 89,100
Air Products and Chemicals -
chemicals............................ 2,000 111,500
Airtouch Communications -
telecommunications................... 3,500(b) 99,750
</TABLE>

31
<PAGE>
----------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES NORTH AMERICAN GROWTH AND INCOME FUND
JUNE 30, 1995 (CONTINUED)
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
American Home Products -
pharmaceuticals...................... 100 $ 7,738
Anheuser-Busch - brewers and
distillers........................... 2,000 113,750
Baker Hughes - oil and gas -
equipment............................ 3,700 75,850
BankAmerica - bank - money center..... 2,900 152,612
BellSouth - telecommunications........ 3,000 190,500
Boeing - aerospace/defense............ 3,000 187,875
Bristol-Myers Squibb -
pharmaceuticals...................... 2,400 163,500
Burlington Northern - transportation -
rail................................. 2,900 183,788
Burlington Resources - oil and gas.... 2,900 106,938
cisco Systems - computer software and
services............................. 3,500(b) 176,969
Coca-Cola Company - food and
beverage............................. 3,500 223,125
DSC Communications -
telecommunications equipment......... 2,500(b) 116,250
Du Pont (E.I.) De Nemours -
chemicals............................ 1,800 123,750
Emerson Electric - electrical
equipment............................ 2,300 164,450
Englehard - chemicals................. 3,500 150,063
Enron - oil and gas................... 5,800 203,725
Exxon - oil and gas................... 3,500 247,187
Federal National Mortgage Association
- financial services................. 2,200 207,625
Fluor - engineering and
construction......................... 2,800 145,600
Ford Motor Company - auto and
trucks............................... 5,300 157,675
GTE - telecommunications.............. 4,900 167,213
Gannett - publishing - newspaper...... 2,700 146,475
Gap - retailing....................... 3,000 104,625
General Electric - diversified
industrial........................... 4,600 259,325
General Instrument - electrical
equipment............................ 3,400(b) 130,475
General Motors - auto and trucks...... 3,500 164,063
General Motors Class E - computer
software and services................ 2,200 95,700
Home Depot - retailing................ 3,000 121,875
Intel - electronics -
semiconductors....................... 2,600 164,612
International Paper - forest products
and paper............................ 1,600 137,200
Marsh and McLennan - insurance........ 2,000 162,250
McDonald's - restaurant/food
service.............................. 3,400 133,025
Medtronic - medical - biotechnology... 2,100 161,962
Merck and Company - pharmaceuticals... 3,900 191,100
Minnesota Mining and Manufacturing
(3M) - diversified industrial and
conglomerates........................ 3,800 217,550
Morton International - chemicals...... 5,200 152,100
Norwest Corporation - bank............ 6,600 189,750
Philip Morris - food products and
tobacco.............................. 1,700 126,437
Procter & Gamble - household
products............................. 3,400 244,375
Royal Dutch Petroleum ADR - oil and
gas.................................. 1,300 158,437
Schlumberger - oil and gas - equipment
and services......................... 1,700 105,613
Service Corporation International -
funeral services..................... 3,800 120,175
Tandy Corporation - retailing......... 3,800 197,125
The Limited - retailing............... 4,000 88,000
<CAPTION>
Number of
Shares or
Principal Market
Name of Issuer Amount Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
United Healthcare - insurance/HMO..... 2,000 $ 82,750
Wisconsin Energy - utilities.......... 5,800 162,400
------------
7,580,494
------------
Total Common Stocks
(cost: $11,609,521).................. 12,109,785
------------
RIGHTS AND WARRANTS (0.0%)
UNITED STATES
Viacom variable common rights -
broadcast, radio and television...... 3,000 4,500
------------
Total Rights and Warrants
(cost: $4,003)....................... 4,500
------------
BONDS (0.5%)
MEXICO (NEW PESO)
Grupo F Bancomer 95-2, 51.00%, due
4/28/02.............................. 400,000(c) 65,548
------------
Total Bonds
(cost: $64,864)...................... 65,548
------------
SHORT-TERM SECURITIES (7.5%)
MEXICO
Bancomer (New Peso), 42.50%, due
7/03/95.............................. 4,732,966(c) 756,669
Bancomer (New Peso), 43.75%, due
7/05/95.............................. 968,094(c) 154,771
Mexican Tesobono (U.S. dollar),
10.72%, due 8/17/95.................. 80,000(c) 78,881
------------

Total Short-Term Securities
(cost: $986,816)..................... 990,321
------------

Total Investments in Securities
(cost: $12,665,204)(d)............... $ 13,170,154
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) VALUE STATED IN U.S. DOLLARS; PRINCIPAL AMOUNT STATED IN THE CURRENCY
INDICATED.
(D) AT JUNE 30, 1995, THE COST OF SECURITIES FOR FEDERAL INCOME TAX PURPOSES WAS
$12,677,245. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF
INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION........ $ 1,518,637
GROSS UNREALIZED DEPRECIATION........ (1,025,728)
-----------
NET UNREALIZED APPRECIATION.......... $ 492,909
-----------
-----------
</TABLE>

32
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES EUROPEAN VALUE FUND
JUNE 30, 1995
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
COMMON STOCKS (95.0%)
AUSTRIA (2.0%)
Boehler - Uddeholm - metal
products............................. 400(b) $ 27,680
Burgenland Holding - diversified
holding company...................... 900 30,862
BWT - environmental control........... 150 18,172
EA-Generali - insurance............... 250 73,665
Flughafen Wien - transportation -
airport.............................. 800 42,546
Mayr-Melnhof Karton - forest products
and paper............................ 600 34,682
OMV - oil and gas..................... 400 46,119
VA Technologie - engineering and
construction......................... 225 28,160
Wienerberger Baustoffindustrie -
building construction and
materials............................ 150 57,598
------------
359,484
------------
BELGIUM (2.6%)
Compagnie Maritime Belge (CMB) -
transportation - marine.............. 1,160 89,198
Electrabel - utilities................ 500 105,753
Petrofina - oil and gas............... 220 66,506
Societe Generale de Belgique -
diversified holding company.......... 1,300 94,701
Solvay - chemicals.................... 170 94,227
------------
450,385
------------
DENMARK (1.6%)
Den Danske Bank - bank - money
center............................... 700 43,973
East Asiatic Company - diversified
holding company...................... 1,580(b) 45,674
Jacob Holm and Sonner Class B -
textiles............................. 1,097 189,053
------------
278,700
------------
FINLAND (2.1%)
Amer Group Class A - diversified
holding company...................... 1,720 31,298
Aspoyhtyma - electronics.............. 2,460 74,895
Finnair - transportation - air........ 10,200 67,602
Nokia - telecommunications -
equipment............................ 1,440 85,658
Pohjola Insurance Company -
insurance............................ 5,700 89,438
Rauma - forest products and paper..... 1,200(b) 21,667
------------
370,558
------------
FRANCE (11.1%)
Accor - hotels and leisure............ 1,050 140,029
Alcatel Alsthom - telecommunications
equipment............................ 1,560 140,671
Casino Guichard-Perrachon -
retailing............................ 4,300 125,609
Credit Local de France - banking and
financial services................... 1,530 142,135
Elf Aquitaine - oil and gas........... 3,400 251,631
Groupe Poliet - construction and
construction materials............... 1,375 125,039
Lagardere Groupe - diversified holding
company.............................. 5,875 121,890
Lyonnaise des Eaux-Dumez -
environmental control................ 1,310 124,077
Nord Est - diversified holding
company.............................. 4,900 124,624
Pernod Ricard - brewers and
distillers........................... 2,000 131,709
Schneider - electronics............... 1,700 134,659
Societe Eurafrance - financial
services............................. 380 125,673
Societe Nationale D'Exploitation
Industrielle des Tabacs et Allumettes
(SEITA) - tobacco products........... 4,500 135,445

<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>

Union Financiere de France Banque -
financial services................... 1,405 $ 121,531
------------
1,944,722
------------
GERMANY (9.8%)
Allianz Holding - insurance........... 90 161,382
Allianz Holding (new) - insurance..... 6 10,759
BASF - chemicals...................... 475 101,427
Bayer - chemicals..................... 300 74,582
Bayerische Motoren Werke (BMW) - auto
and trucks........................... 185 101,566
Bayerische Vereinsbank - bank......... 200 60,614
BayWa-Bayerische Warenvermit -
retailing............................ 240 55,031
CKAG Colonia Konzern - insurance...... 100(b) 88,824
Commerzbank - bank - money center..... 475 113,897
Deutsche Babcock - engineering and
construction......................... 650 71,464
Hoechst - chemicals................... 350 75,570
Karstadt - retailing.................. 215 94,242
Kiekert - automobile parts............ 1,600(b) 68,282
Linde - engineering................... 200 118,481
M.A.N. - autos and trucks............. 200 51,429
Munich RE - insurance................. 50 109,584
Preussag - diversified holding
company.............................. 200 59,892
RWE - oil and gas..................... 350 121,647
Schwarz Pharma - pharmaceuticals...... 1,100(b) 46,069
Siemens - diversified manufacturing... 200 99,139
Tarkett - construction and
construction material................ 1,000(b) 25,967
------------
1,709,848
------------
ITALY (2.6%)
Istituto Nazionale delle Assicurazioni
- insurance.......................... 47,000(b) 62,571
Italgas - utilities................... 42,000 109,208
Parmalat Finanziaria - food and
beverage............................. 60,000 53,374
Pininfarina - automobile and
automobile parts..................... 4,600 42,679
Societa Partecipazioni Finanziare
(SOPAF) - financial services......... 69,200 87,214
Telecom Italia-Di Risp -
telecommunications................... 44,700 94,623
------------
449,669
------------
NETHERLANDS (7.6%)
Fugro - environmental control......... 11,410 213,712
Koninlijke Gist-Brocades -
pharmaceuticals...................... 8,960 232,637
Internationale Nederlanden Groep (ING)
- insurance.......................... 3,800 210,334
Philips Electronics - electronics..... 5,100 216,082
Polynorm - metal products............. 1,250 136,117
Royal Dutch Petroleum - oil and gas... 1,390 169,856
VNU-Verenigde Nederlandse Uitgevbedri
Verigd Bezit - printing and
publishing........................... 1,290 154,553
------------
1,333,291
------------
NORWAY (2.1%)
Kvaerner - engineering and
construction......................... 1,850 84,098
Kverneland Gruppen - agribusiness..... 6,270 95,177
Norsk Hydro - chemicals............... 2,100 88,132
Orkla Borregaard - diversified
manufacturing........................ 1,110 49,738
UNI Storebrand - insurance............ 11,000 49,468
------------
366,613
------------
</TABLE>

33
<PAGE>
----------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES EUROPEAN VALUE FUND
JUNE 30, 1995 (CONTINUED)
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
PORTUGAL (0.7%)
Jornalgeste S.G.P.S. - printing and
publishing........................... 4,878(b) $ 82,107
Tertir-Terminais de Portugal -
transportation....................... 7,800(b) 46,111
------------
128,218
------------
SPAIN (2.9%)
Compania Sevillana de Electricidad -
utilities............................ 20,500(b) 126,401
Cortefiel - retailing................. 1,650 50,186
Inmobiliaria Urbis - engineering and
construction......................... 23,500(b) 118,643
Repsol - oil and gas.................. 3,300 104,060
Vallehermoso - real estate............ 6,100 104,759
------------
504,049
------------
SWEDEN (3.8%)
Electrolux Class B - furniture/home
appliance............................ 2,370 107,918
Ericsson - Class B -
telecommunications equipment......... 9,140 182,318
Hoganas Class B - industrial machinery
and manufacturing.................... 5,920 115,645
Pharmacia Class A - pharmaceuticals... 6,500 142,623
Skandia Forsakrings - insurance....... 6,300(b) 122,201
------------
670,705
------------
SWITZERLAND (10.7%)
BBC Brown Boveri - engineering........ 135 139,949
Bobst - forest products and paper..... 75 114,145
Ciba-Geigy Registered -
pharmaceuticals...................... 295 216,533
CS Holding - financial services....... 2,305 211,486
Forbo Holding - household products/
wares................................ 450 219,942
Fust Dipl. Ing - furniture/home
appliances........................... 340 99,056
Reiseburo Kuoni - miscellaneous
services............................. 65 104,578
Sandoz - pharmaceuticals.............. 335 231,326
Saurer Gruppe - diversified industrial
and conglomerates.................... 280 102,031
Swiss Bank Corporation Class B -
financial services................... 630 223,542
Winterthur Schweizerische Registered -
insurance............................ 345 207,627
------------
1,870,215
------------
UNITED KINGDOM (35.4%)
Aegis Group - advertising............. 660,000(b) 297,295
Barclays - bank - money center........ 9,000 96,938
B.A.T. Industries - tobacco........... 30,000 230,086
Blue Circle Industries - construction
and construction materials........... 26,100 116,942
British Petroleum - oil and gas....... 35,000 251,413
Cable and Wireless -
telecommunications................... 17,750 121,700
Cadbury Schweppes - food and
beverage............................. 21,414 156,724
Cantab Pharmaceuticals -
biopharmaceuticals................... 4,000(b) 8,802
Celltech Group - biopharmaceuticals... 38,000(b) 194,497
Daily Mail and General Trust -
printing and publishing.............. 10,000 169,017
Enterprise Oil - oil and gas.......... 25,000 158,055
General Electric Company plc -
electronics.......................... 34,500 168,881
Glaxo Wellcome - pharmaceuticals...... 22,000 270,634
Grand Metropolitan - food and
beverage............................. 25,000 153,670
Great Universal Stores - retailing.... 31,000 290,645
Guardian Royal Exchange - insurance... 20,000 66,012
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>

Guinness - brewers and distillers..... 19,000 $ 143,298
HSBC Holdings - bank - money
center............................... 9,000 116,454
International Business Communications
(Holdings) - printing and
publishing........................... 40,000 179,860
Marks & Spencer - retailing........... 20,000 128,995
Northumbrian Water Group -
utilities............................ 6,000 89,356
Peninsular and Oriental Steam
Navigation - transportation -
marine............................... 25,000 230,804
RAP Group - wholesale distributors.... 25,000 59,794
Reuters Holdings - communications..... 30,000 250,655
Rolls-Royce - aerospace/defense....... 35,000 97,384
Royal Doulton - household products/
wares................................ 15,000 62,425
Royal Insurance Holdings -
insurance............................ 28,500 140,420
Scotia Holdings - pharmaceuticals..... 10,000(b) 69,680
Scottish Power - utilities............ 14,000 72,327
SeaPerfect - fishery.................. 90,497(b) 173,157
Seeboard - utilities.................. 23,000 142,660
Shell Transport and Trading - oil and
gas.................................. 26,500 317,329
Smith New Court - financial
services............................. 30,000 210,952
TSB Group - financial services........ 40,000 154,348
Unilever - food/consumer goods........ 3,750 76,088
United News and Media - publishing -
newspapers........................... 8,000 66,331
Vendome Luxury Group Units - jewelry/
watch/gemstones...................... 17,000 129,569
Vosper Thornycroft Holdings -
shipbuilding......................... 8,000 106,513
S. G. Warburg Group - financial
services............................. 11,000 127,863
Wolseley - construction and
construction materials............... 10,100 55,882
Yorkshire Electricity - utilities..... 9,000 99,592
Zeneca Group - pharmaceuticals........ 8,700 147,322
------------
6,200,369
------------
Total Common Stocks
(cost: $15,850,100).................. 16,636,826
------------
PREFERRED STOCKS (4.4%)
AUSTRIA (0.1%)
Baumax - retailing.................... 400(b) 19,096
------------
GERMANY (2.4%)
Fielmann - retailing.................. 1,600(b) 72,911
Fresenius - pharmaceuticals........... 200 134,539
Friedrich Grohe - furniture/home
appliance............................ 325 109,431
Heidelberger Zement - construction and
construction materials............... 125 74,593
Krones AG Hermann Kronseder
Maschinenfabrik - industrial
machinery............................ 75 35,805
------------
427,279
------------
ITALY (0.3%)
Autostrade Concessioni E Construzione
- engineering and construction....... 50,000 55,950
------------
NETHERLANDS (0.9%)
Ballast Nedam - engineering and
construction......................... 3,200 153,148
------------
SWITZERLAND (0.7%)
Merck Preferred - pharmaceuticals..... 150 116,102
------------
Total Preferred Stocks
(cost: $654,672)...................... 771,575
------------
</TABLE>

34
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES EUROPEAN VALUE FUND
JUNE 30, 1995 (CONTINUED)

<TABLE>
<CAPTION>
Number of
Shares
or Principal Market
Name of Issuer Amount Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
RIGHTS AND WARRANTS (0.1%)
SWITZERLAND (0.0%)
Winterthur Schweizerische Rights -
insurance............................ 345 $ 2,670
------------
UNITED KINGDOM (0.1%)
Gartmore Micro Index Trust Warrants -
small cap index...................... 10,000 6,059
Herald Investment Trust Warrants -
multi-media fund..................... 10,000 5,740
------------
11,799
------------
Total Rights and Warrants
(cost: $6,017)....................... 14,469
------------
CORPORATE BONDS (0.7%)
DENMARK (0.7%)
Det Danske Traelastkompagni (Danish
krone), convertible, 5.25% due
1/01/02.............................. 685,000(c) 135,819
------------
Total Corporate Bonds
(cost: $121,524)..................... 135,819
------------
Total Investments in Securities
(cost: $16,632,313) (d).............. $ 17,558,689
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) VALUE STATED IN U.S. DOLLARS; PRINCIPAL AMOUNT STATED IN THE CURRENCY
INDICATED.
(D) AT JUNE 30, 1995, THE COST OF SECURITIES FOR FEDERAL INCOME TAX PURPOSES WAS
$16,655,127. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF
INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION............ $ 1,350,803
GROSS UNREALIZED DEPRECIATION............ (447,241)
-----------
NET UNREALIZED APPRECIATION............ $ 903,562
-----------
-----------
</TABLE>

HERCULES PACIFIC BASIN VALUE FUND
JUNE 30, 1995

<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCKS (98.0%)
AUSTRALIA (2.8%)
National Australia Bank - banking and
financial services................... 51,000 $ 402,853
Wesfarmers - diversified holding
company.............................. 75,000 475,224
------------
878,077
------------
HONG KONG (8.7%)
Dao Heng Bank Group - banking and
financial services................... 175,000 533,750
Esprit Asia Holdings - retailing...... 1,220,000 469,067
Giordano International - retailing.... 740,000 549,905
Hutchison Whampoa - diversified
holding company...................... 100,000 483,348
Sun Hung Kai Properties - real
estate............................... 50,000 369,941
Yizheng Chemical Fibre Company -
textiles............................. 950,000 331,494
------------
2,737,505
------------
INDIA (2.5%)
Hindalco Industries - metals -
diversified.......................... 25,000(b) 728,250
Videocon International GDR -
electronics.......................... 23,000 86,825
------------
815,075
------------
INDONESIA (2.0%)
Gadjah Tunggal - tires and rubber..... 241,000 346,295
Supreme Cable Manufacturing -
industrial machinery and
manufacturing........................ 89,000 280,748
------------
627,043
------------
JAPAN (58.0%)
Dainippon Ink and Chemical -
chemicals............................ 190,000 814,238
DDI Corporation -
telecommunications................... 154 1,236,291
Denki Kagaku Kogyo K.K. - chemicals... 300,000(b) 998,760
Geomatec Company - electronics........ 20,000 1,251,402
Ichiyoshi Securities - financial
services............................. 150,000 752,612
Kobe Steel - metal products........... 425,000(b) 1,013,518
Kumagai Gumi Company - engineering and
construction......................... 185,000 775,338
Maeda Road Construction - engineering
and construction..................... 40,000 774,453
Mitsubishi Heavy Industries -
industrial machinery
/manufacturing....................... 150,000 1,020,012
Mitsui Fudosan - real estate.......... 155,000 1,776,814
Mori Seiki - industrial machinery and
manufacturing........................ 70,000 1,247,860
Nichiei Company - financial
services............................. 19,000 1,173,130
Nissha Printing - printing and
publishing........................... 37,000 506,699
Sanwa Bank - bank..................... 36,000 680,007
Sony Music Entertainment - diversified
services............................. 18,900 801,027
Sumitomo Bank - bank.................. 70,000 1,214,804
Sumitomo Trust and Banking - bank..... 73,000 887,669
</TABLE>

35
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES PACIFIC BASIN VALUE FUND
JUNE 30, 1995 (CONTINUED)
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
Tokyo Steel Manufacturing - metal
products............................. 42,000 $ 718,965
Topre - automobile parts.............. 89,000 651,437
------------
18,295,036
------------
MALAYSIA (5.0%)
Genting - hotels, leisure and
entertainment........................ 45,000 444,831
Telekom Malaysia -
telecommunications................... 84,000 637,408
YTL Corporation - engineering and
construction......................... 100,000 488,106
------------
1,570,345
------------
PAKISTAN (1.1%)
Pakistan Telecommunications -
telecommunications................... 3,480(b) 353,220
------------
PHILIPPINES (2.0%)
Benpres Holdings GDR -
communications....................... 39,798 328,334
Philippine Long Distance Telephone -
telecommunications................... 4,110 293,686
------------
622,020
------------
SINGAPORE (4.2%)
City Developments - real estate....... 80,400 492,069
Clipsal Industries - electrical
equipment............................ 36,000 83,160
Fraser and Neave - beverage/brewers... 25,000 288,117
Osprey Maritime - transportation -
marine............................... 93,000(b) 183,210
Overseas-Chinese Banking Corporation -
bank................................. 25,000 277,380
------------
1,323,936
------------
SOUTH KOREA (2.9%)
Korea 1990 Trust - closed-end country
fund................................. 125 593,751
Korea International Trust IDR -
closed-end country fund.............. 3 157,500
Samsung Electronics - electronics..... 123 8,856
Samsung Electronics GDS -
electronics.......................... 2,969 158,099
------------
918,206
------------
THAILAND (7.9%)
Christiani and Nielsen - engineering
and construction..................... 165,000 397,712

<CAPTION>
Number of
Shares
or Principal Market
Name of Issuer Amount Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
Electricity Generating (Egcomp) -
utilities............................ 165,000(b) $ 497,975
Finance One Company - financial
services............................. 60,000 442,374
Siam Cement Company - construction and
construction materials............... 5,000 301,239
Sino Thai Engineering and Construction
- engineering and construction....... 41,500 490,905
Thai Farmers Bank - bank.............. 40,000 354,713
------------
2,484,918
------------
TAIWAN (0.9%)
ROC Taiwan Fund - closed-end country
fund................................. 25,000(b) 275,000
------------
Total Common Stocks
(cost: $33,933,691).................. 30,900,381
------------
BONDS (1.2%)
TAIWAN
Teco Electric and Machinery,
convertible, (U.S. dollar), 2.75% due
4/15/04.............................. 400,000(c) 372,000
------------
Total Bonds
(cost: $400,000)..................... 372,000
------------
Total Investments in Securities
(cost: $34,333,691)(d)............... $ 31,272,381
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) VALUE STATED IN U.S. DOLLARS; PRINCIPAL AMOUNT STATED IN THE CURRENCY
INDICATED.
(D) AT JUNE 30, 1995, THE COST OF SECURITIES FOR FEDERAL INCOME TAX PURPOSES WAS
$35,031,040. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF
INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION........... $ 1,214,213
GROSS UNREALIZED DEPRECIATION........... (4,972,872)
-----------
NET UNREALIZED DEPRECIATION............. $(3,758,659)
-----------
-----------
</TABLE>

36
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
HERCULES LATIN AMERICAN VALUE FUND
JUNE 30, 1995

<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - -------------------------------------------------- --------------- -----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCKS (57.2%)
ARGENTINA (2.3%)
Yacimientos Petrolifernas Fiscales Sociedad
Anonima (YPF) ADR - oil and gas.............. 28,498 $ 537,900
-----------
BRAZIL (11.7%)
Centrais Eletricas Brasileiras (Electrobras) -
utilities.................................... 4,664,139 1,266,741
Energetica de Sao Paulo - utilities........... 10,150,000(b) 330,798
Paulista de Forca e Luz (CPFL) - utilities.... 5,050,000 252,911
Siderurgica Nacional ADR - metal products..... 16,098 366,230
Telecomunicacoes Brasileiras (Telebras) -
telecommunications........................... 14,515,000 422,599
-----------
2,639,279
-----------
CHILE (6.5%)
Banco Osorno y La Union ADR - banking and
financial services........................... 7,277 100,968
Chile Fund - closed-end country fund.......... 12,257 658,814
Compania Chilena de Generacion Electrica
(Chilgener) ADR - utilities.................. 17,650 558,181
Compania de Distribucion Electrica de la V
Region (Chilquinta) ADR - utilities.......... 9,000 162,367
-----------
1,480,330
-----------
COLOMBIA (8.4%)
Carulla y Compania ADR - retailing............ 24,975 449,550
Cementos Paz del Rio 144A ADR - building
construction and materials................... 13,475(b,d) 227,391
Cementos Diamante 144A ADR - construction and
construction materials....................... 16,492(d) 478,268
Corporacion Financiera del Valle (Corfivalle)
ADR - diversified industrials and
conglomerates................................ 10,351 174,673
La Gran Cadena de Almacenes Colombianos
(Cadenalco) ADR - retailing.................. 26,923(c) 568,748
-----------
1,898,630
-----------
MEXICO (15.8%)
Cemex Class B ADR - construction and
construction materials....................... 17,664 132,480
Grupo Carso Class A1 - diversified holding
company...................................... 225,403(b) 1,230,617
Panamerican Beverages ADR Class A - food and
beverage..................................... 36,340 1,090,200
Telefonos de Mexico Class L ADR (Telmex) -
telecommunications........................... 27,882 826,004
Telefonos de Mexico Class L (Telmex) -
telecommunications........................... 200,000 294,804
-----------
3,574,105
-----------
PERU (8.0%)
Cerveceria Backus y Johnson Brewery Class T -
brewers and distillers....................... 146,083 345,502

<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - -------------------------------------------------- --------------- -----------
<S> <C> <C>
Banco de Credito del Peru - bank.............. 288,558 $ 506,015
Cementos Norte Pacasmayo Class T - building
construction and materials................... 66,485 191,921
Cerveceria San Juan Class C - brewers and
distillers................................... 20,033 31,590
Enrique Ferreyros - industrial machinery and
manufacturing................................ 114,216 160,231
Minsur Class T - mining....................... 1 13
Telefonica del Peru Class B -
telecommunications........................... 331,136 565,790
-----------
1,801,062
-----------
VENEZUELA (4.5%)
Ceramica Carabobo ADR Class B - building
construction and materials................... 155,520(c) 155,520
Corimon ADR - diversified industrials and
conglomerates................................ 23,182(b) 150,683
Mavesa 144A ADR - food and beverage........... 44,224(d) 153,674
Siderurgica Venezolana Sivensa ADR - metal
products..................................... 213,000(c) 330,150
Sudamtex de Venezuela ADR - textiles.......... 47,960 227,810
-----------
1,017,837
-----------
Total Common Stocks
(cost: $13,571,661).......................... 12,949,143
-----------
PREFERRED STOCKS (33.2%)
BRAZIL
Aracruz Celulose ADR - forest products and
paper........................................ 54,597 641,516
Banco Bradesco - banking and financial
services..................................... 75,876,230 642,949
Banco Itau - bank............................. 501,216 152,461
Centrais Eletricas Brasileiras (Electrobras)
Class B - utilities.......................... 600 165
Cervejaria Brahma - brewers and distillers.... 2,152,883 706,301
Companhia Energetica de Sao Paulo (CESP) ADR -
utilities.................................... 24,000(b) 273,120
Companhia Energetica de Sao Paulo (CESP) -
utilities.................................... 2,000,130(b) 79,093
Siderurgica Paulista (Cosipa) Class PNB -
metal products............................... 373,574(b) 592,524
Lojas Renner - retailing...................... 7,768,600 131,657
Mesbla - retailing............................ 1,300,000(b) 91,798
Refrigeracao Parana (Refripar) -
furniture/home appliance..................... 220,180,000 428,161
Tecidos Norte de Minas (Coteminas) -
textiles..................................... 699,844 220,483
Telecomunicacoes Brasileiras (Telebras) ADR -
telecommunications........................... 24,991 843,446
Telecomunicacoes Brasileiras (Telebras) -
telecommunications........................... 5,947,800 203,214
Telecomunicacoes de Sao Paulo (Telesp) -
telecommunications........................... 4,947,340 615,394
Usinas Siderurgicas de Minas Gerais (Usiminas)
144A ADR - metal products.................... 13,000(d) 146,250
Usinas Siderurgicas de Minas Gerais (Usiminas)
- metal products............................. 634,000,000 709,419
Vale do Rio Doce ADR - mining................. 17,758 681,849
</TABLE>

37
<PAGE>
- - - - --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES LATIN AMERICAN VALUE FUND
JUNE 30, 1995 (CONTINUED)

<TABLE>
<CAPTION>
Number of Shares
or Principal Market
Name of Issuer Amount Value (a)
- - - - ---------------------------------------- ---------------- ------------
<S> <C> <C>
Vale do Rio Doce Preferred -
mining............................. 2,224,110 $ 341,892
------------
Total Preferred Stocks
(cost: $8,233,265)................. 7,501,692
------------
OPTIONS (0.0%)
BRAZIL
Paulista de Forca e Luz, 1 call
option on 3,800,000 shares, strike
price of 70, Expires October 31,
1995............................... 3,800,000 5,905
------------
Total Options
(cost: $0)......................... 5,905
------------
SHORT-TERM SECURITY (8.0%)
UNITED STATES
CIBC Time Deposit, (U.S. dollar),
6.00%, due 7/03/95................. 1,802,508 1,802,508
------------
Total Short-Term Security (cost:
$1,802,508)........................ 1,802,508
------------
Total Investments in Securities
(cost: $23,607,434)(e)............. $ 22,259,248
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) SECURITY DEEMED TO BE ILLIQUID BY THE MANAGER. INVESTMENTS IN ILLIQUID
SECURITIES REPRESENT 4.66% OF NET ASSETS AT JUNE 30, 1995.
(D) REPRESENTS SECURITY SOLD UNDER RULE 144A AND IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SECURITY HAS BEEN
DETERMINED TO BE LIQUID UNDER GUIDELINES ESTABLISHED BY THE BOARD OF
DIRECTORS.
(E) AT JUNE 30, 1995, THE COST OF SECURITIES FOR FEDERAL INCOME TAX PURPOSES WAS
$24,111,695. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF
INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION........... $ 1,787,183
GROSS UNREALIZED DEPRECIATION........... (3,639,630)
-----------
NET UNREALIZED DEPRECIATION........... $(1,852,447)
-----------
-----------
</TABLE>

HERCULES WORLD BOND FUND
JUNE 30, 1995

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount (b) Value (a)
- - - - ------------------------------------ --------------- ---------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

BONDS (91.9%)
AUSTRALIA (4.0%)
Australian Government
(Australian dollar), 9.50%, due
8/15/03........................ 760,000 $ 552,283
---------------
AUSTRIA (2.9%)
Austrian Republic (British
pound), 9.00%, due 7/22/04..... 250,000 400,867
---------------
DENMARK (12.3%)
Danish Government (Danish
krone), 6.00%, due 12/10/99.... 9,750,000 1,689,291
---------------
GERMANY (23.5%)
Deutscheland Republic (German
deutschemark), 7.375%, due
1/03/05........................ 2,300,000 1,701,917
European Investment Bank (German
deutschemark), 6.50%, due
4/21/04........................ 800,000 557,830
Inter-American Development Bank
(German deutschemark), 7.00%,
due 6/08/05.................... 800,000 574,293
International Bank of
Reconstruction and Development
(German deutschemark), 5.875%,
due 11/10/03................... 600,000 400,665
---------------
3,234,705
---------------
JAPAN (10.5%)
Japanese Government (Japanese
yen), 4.60%, due 3/21/05....... 83,000,000 1,115,877
Japanese Government (Japanese
yen), 4.60%, due 9/20/04....... 24,000,000 323,315
---------------
1,439,192
---------------
SPAIN (8.5%)
Spanish Government (Spanish
peseta), 7.40%, due 7/30/99.... 164,000,000 1,177,488
---------------
UNITED KINGDOM (4.8%)
U.K. Government (British pound),
9.00%, due 7/12/11............. 400,000 665,504
---------------
UNITED STATES (25.4%)
U.S. Treasury Bond (U.S.
dollar), 7.75%, due 1/31/00.... 3,270,000(c) 3,495,833
---------------
Total Investments in Securities
(cost: $12,176,942) (d)........ $ 12,655,163
---------------
---------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) VALUE STATED IN U.S. DOLLARS; PRINCIPAL AMOUNT STATED IN THE CURRENCY
INDICATED.
(C) PARTIALLY PLEDGED AS INITIAL MARGIN DEPOSIT ON OPEN FUTURES POSITIONS (SEE
NOTE 7 TO THE FINANCIAL STATEMENTS).
(D) AT JUNE 30, 1995, THE COST OF SECURITIES FOR FEDERAL INCOME TAX PURPOSES WAS
$12,199,066. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF
INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION.............. $ 518,079
GROSS UNREALIZED DEPRECIATION.............. (61,982)
---------
NET UNREALIZED APPRECIATION.............. $ 456,097
---------
---------
</TABLE>

38
<PAGE>
- - - - --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES GLOBAL SHORT-TERM FUND
JUNE 30, 1995

<TABLE>
<CAPTION>
Principal Market
Name of Issuer Amount Value (a)
- - - - ------------------------------------ --------------- ---------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

SHORT-TERM SECURITY (46.8%)
UNITED STATES
U.S. Treasury Bill, 5.37%,
due 8/17/95.................... 100,000 $ 99,299
---------------
Total Investments in Securities
(cost: $99,299) (b)............ $ 99,299
---------------
---------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.

HERCULES MONEY MARKET FUND
JUNE 30, 1995

U.S. TREASURY BILLS (105.8%)
5.65%, due 7/13/95.............. 165,000 $ 164,689
5.57%, due 9/07/95.............. 50,000 49,474
5.35%, due 9/21/95.............. 180,000 177,807
5.37%, due 9/21/95.............. 427,000 421,777
5.38%, due 9/21/95.............. 4,000 3,951
5.40%, due 9/21/95.............. 100,000 98,770
5.45%, due 9/28/95.............. 106,000 104,572
5.47%, due 9/28/95.............. 284,000 280,156
---------------
Total Investments in Securities
(cost: $1,301,196) (b)........... $ 1,301,196
---------------
---------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.

39
<PAGE>
------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND SHAREHOLDERS
HERCULES FUNDS INC.:

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments in securities, of the North American Growth and
Income Fund, European Value Fund, Pacific Basin Value Fund, Latin American Value
Fund, World Bond Fund, Global Short-Term Fund and Money Market Fund (separate
funds within Hercules Funds Inc.) as of June 30, 1995, and the related
statements of operations for the year then ended (period from December 13, 1994
to June 30, 1995 for Money Market Fund), and statements of changes in net assets
and the financial highlights for the year ended June 30, 1995 and the period
from November 9, 1993 to June 30, 1994 (period from December 13, 1994 to June
30, 1995 for Money Market Fund). These financial statements and the financial
highlights are the responsibility of the funds' management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold, but not received or delivered,
we request confirmations from brokers, and where replies are not received, we
carry out other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and the financial highlights referred
to above present fairly, in all material respects, the financial position of
North American Growth and Income Fund, European Value Fund, Pacific Basin Value
Fund, Latin American Value Fund, World Bond Fund, Global Short-Term Fund and
Money Market Fund as of June 30, 1995, and the results of their operations,
changes in their net assets and the financial highlights for the periods stated
in the first paragraph above, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 18, 1995

40
<PAGE>
------------------------------------------------------------------------
FEDERAL TAX INFORMATION

Information for federal tax purposes is presented below to aid shareholders in
reporting taxable distributions made by the funds during the fiscal year ended
June 30, 1995. By early February 1996, each shareholder will receive a Form
1099-DIV reporting these and ony other distributions the funds may make this
calander year. Shareholders should consult a tax advisor on how to report these
distributions at the state and local levels.

NORTH AMERICAN GROWTH AND INCOME FUND

<TABLE>
<CAPTION>
S.T.
Capital
Income Gain Total
Payable Date Per Share Per Share Per Share
- - - - --------------------------------------------------------------------
<S> <C> <C> <C>
January 5, 1995.................. $ 0.04180* -- $ 0.04180
</TABLE>

EUROPEAN VALUE FUND

PACIFIC BASIN VALUE FUND

LATIN AMERICAN VALUE FUND

<TABLE>
<S> <C> <C> <C>
For the year ended June 30, 1995 .................. No declared dividends
</TABLE>

* 100% qualifying for corporate dividend received deduction.

41
<PAGE>
------------------------------------------------------------------------
FEDERAL TAX INFORMATION

WORLD BOND FUND

<TABLE>
<CAPTION>
Tax Return
Income of Capital Total
Payable Date Per Share Per Share Per Share
- - - - ---------------------------------------------------------------------
<S> <C> <C> <C>
October 5, 1994................... $ 0.03500 -- $ 0.03500
January 5, 1995................... 0.02350 -- 0.02350
April 5, 1995..................... 0.02303 -- 0.02303
July 6, 1995...................... 0.01017 0.10983 0.12000
---------
$ 0.20153
---------
---------
</TABLE>

GLOBAL SHORT-TERM FUND

<TABLE>
<CAPTION>
Income
Payable Date Per Share
- - - - ------------------------------------------------------------------
<S> <C>
August 3, 1994......................................... $ 0.01000
September 6, 1994...................................... 0.01250
October 5, 1994........................................ 0.01500
November 3, 1994....................................... 0.01500
December 5, 1994....................................... 0.01500
January 5, 1995........................................ 0.01000
February 3, 1995....................................... 0.00750
March 3, 1995.......................................... 0.01011
---------
$ 0.09511
---------
---------
</TABLE>

MONEY MARKET FUND

<TABLE>
<CAPTION>
Income
Payable Date Per Share
- - - - ------------------------------------------------------------------
<S> <C>
January 3, 1995........................................ $ 0.00203
January 31, 1995....................................... 0.00326
February 28, 1995...................................... 0.00326
March 31, 1995......................................... 0.00398
April 28, 1995......................................... 0.00381
May 31, 1995........................................... 0.00396
June 30, 1995.......................................... 0.00373
---------
$ 0.02403
---------
---------
</TABLE>

42
<PAGE>
------------------------------------------------------------------------
SHAREHOLDER UPDATE

Voting results for the special meeting of the Hercules Funds Inc. held on
7/18/95 were as follows:

APPROVAL OF NEW INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT BETWEEN HERCULES
FUNDS INC. AND PIPER CAPITAL MANAGEMENT INCORPORATED:

<TABLE>
<CAPTION>
For Against Abstain

<S> <C> <C> <C>
NORTH AMERICAN GROWTH AND INCOME FUND 717,988 16,140 67,569

EUROPEAN VALUE FUND 787,420 13,548 86,801

PACIFIC BASIN VALUE FUND 1,770,384 33,513 151,888

LATIN AMERICAN VALUE FUND 1,525,100 29,112 145,288

WORLD BOND FUND 902,088 22,049 75,873

GLOBAL SHORT-TERM FUND 16,793 -- --

MONEY MARKET FUND 1,104,107 18,161 2,267
</TABLE>

APPROVAL OF NEW SUB-INVESTMENT ADVISORY AGREEMENTS BETWEEN PIPER CAPITAL
MANAGEMENT AND EACH SUBADVISER:

<TABLE>
<CAPTION>
For Against Abstain

<S> <C> <C> <C>
NORTH AMERICAN GROWTH AND INCOME FUND

Acci Worldwide 710,372 19,685 71,640

AGF Investment Advisors 712,323 18,531 70,843

EUROPEAN VALUE FUND

Pictet International Mgmt. 778,330 17,201 92,237

PACIFIC BASIN VALUE FUND

Edinburgh Fund Managers 1,740,009 44,149 171,627

LATIN AMERICAN VALUE FUND

Bankers Trust 1,494,786 41,681 163,032

WORLD BOND FUND

SBAM Ltd. 877,292 29,335 93,384

GLOBAL SHORT-TERM FUND

SBAM Ltd. 16,691 101 --

MONEY MARKET FUND

SBAM Inc. 1,104,107 18,161 2,267
</TABLE>

43
<PAGE>

DIRECTORS AND OFFICERS

DIRECTORS David T. Bennett, Chairman, Highland Homes, Inc., USL
Products, Inc., and Kiefer Built, Inc., of Counsel,
Gray, Plant, Mooty, Mooty & Bennett, P.A.
Jaye F. Dyer, President, Dyer Management Company
Karol D. Emmerich, President, the Paraclete Group
Luella G. Goldberg, Director, TCF Financial, ReliaStar
Financial Corp., Hormel Foods Corp.
George A. Latimer, Director, Special Actions Office, Office
of the Secretary, Department of Housing and Urban
Development

BOARD OF The board of directors of an investment company is charged
DIRECTORS with extensive responsibilities under federal and state
RESPONSIBILITIES laws. Under common law and state statutes, all board members
are subject to general fiduciary duties including acting in
good faith and in the best interest of the company and its
shareholders. In addition, the Investment Company Act of
1940 (as amended) charges independent directors with
management supervision and financial oversight. Some of the
directors' key responsibilities include:

- To act in good faith and in a manner that is in the
best interest of the funds and their shareholders.
Directors have an obligation not to use their position
for personal gain and to prevent conflicts from arising
between personal interests and the interests of the
company.

- To approve the advisory contract between the investment
company and its subadviser(s) annually, ensuring that
it is fair to the fund and to shareholders.

- To review and approve other agreements such as custody
agreements, foreign custody arrangements and service
agreements with affiliates.

- To approve the fund's distribution plan annually.

- To monitor fund investments, ensuring that decisions
made are in accordance with the fund's investment
policies and restrictions.

- To monitor portfolio transactions, ensuring that fund
management executes transactions appropriately, that
transactions with affiliated broker dealers are
appropriate and in compliance, and that purchases or
sales between affiliated funds follow regulatory
restrictions.

OFFICERS William H. Ellis, President
Charles N. Hayssen, Treasurer
Robert H. Nelson, Vice President
David E. Rosedahl, Secretary

INVESTMENT Piper Capital Management Incorporated
ADVISER 222 South Ninth Street, Minneapolis, MN 55402-3804

DISTRIBUTOR Piper Jaffray Inc.
222 South Ninth Street, Minneapolis, MN 55402-3804

CUSTODIAN AND Investors Fiduciary Trust Company
TRANSFER AGENT 127 West 10th Street, Kansas City, MO 64105-1716

LEGAL COUNSEL Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street, New York, NY 10036

INDEPENDENT KPMG Peat Marwick LLP
AUDITORS 4200 Norwest Center, 90 South Seventh Street, Minneapolis,
MN 55402

<PAGE>

This report is intended for shareholders of the Hercules family of funds, but
is may also be used a sales literature if preceded or accompanied by a
prospectus. The prospectus gives details about the charges, investment
results, risks and operating policies of the funds.

[HERCULES LOGO]

222 South Ninth Street, Minneapolis, MN 55402-3804
Piper Jaffray Inc., fund distributor and NASD member.

Printed on recycled paper containing 50% recycled fiber with 10%
post-consumer waste.

<PAGE>

[LOGO] HERCULES 1995
INTERNATIONAL FUNDS SEMIANNUAL
REPORT

A WORLD OF
INVESTMENT CHOICES

<PAGE>

TABLE OF CONTENTS

NORTH AMERICAN
GROWTH AND INCOME FUND

Seeks to provide long-term capital Letter to Shareholders . . . . . . 2
growth and current income primarily Financial Statements and Notes . . 13
through investments in securities of Investments in Securities . . . . 32
issuers in Mexico, Canada and the
United States.

EUROPEAN
VALUE FUND

Seeks to provide long-term capital Letter to Shareholders . . . . . . 4
growth and, to a lesser extent Financial Statements and Notes . . 13
current income, primarily through Investments in Securities . . . . 34
investments in securities of issuers
located in Europe.

PACIFIC BASIN
VALUE FUND

Seeks to provide long-term capital Letter to Shareholders . . . . . . 6
growth and, to a lesser extent Financial Statements and Notes . . 13
current income, primarily through Investments in Securities . . . . 36
investments in regions bordering the
Pacific Ocean.

LATIN AMERICAN
VALUE FUND

Seeks to provide long-term capital Letter to Shareholders . . . . . . 8
growth and, to a lesser extent Financial Statements and Notes . . 13
current income, primarily through Investments in Securities . . . . 38
investments in securities of issuers
in Mexico, Central America and South
America.

WORLD BOND
FUND

Seeks to provide a high level of Letter to Shareholders . . . . . . 10
total investment return through Financial Statements and Notes . . 14
investments in debt securities of Investments in Securities . . . . 39
issuers located anywhere in the
world.

MONEY MARKET
FUND

Seeks to maximize current income Letter to Shareholders . . . . . . 12
consistent with the preservation of Financial Statements and Notes . . 14
capital and maintenance of liquidity Investments in Securities . . . . 40
by investing exclusively in
high-quality U.S. money market
instruments.

THIS REPORT IS INTENDED FOR SHAREHOLDERS OF THE HERCULES FAMILY OF FUNDS, BUT
IT MAY ALSO BE USED AS SALES LITERATURE IF PRECEDED OR ACCOMPANIED BY A
PROSPECTUS. THE PROSPECTUS GIVES DETAILS ABOUT THE CHARGES, INVESTMENT
RESULTS, RISKS AND OPERATING POLICIES OF THE FUNDS.

<PAGE>

HERCULES INTERNATIONAL FUNDS

LETTER TO
SHAREHOLDERS

February 15, 1996

Dear Shareholders:

Since we became the investment manager of the Hercules
[PHOTO] funds in July 1995, Piper Capital has focused on the
pricing and marketing of the Hercules funds in the
WILLIAM H. ELLIS United States in an attempt to promote asset growth and
PRESIDENT potentially reduce overall expense ratios.
HERCULES FUNDS INC.
To date, our efforts to attract sufficient assets have
not been successful. Net assets have declined further
over the six month period covered by this report, with
the exception of Money Market Fund, which remained
flat. As a result, we believe it is time to make some
major changes.

On February 6, 1996, we recommended to the Board of
Directors of Hercules Funds Inc. that it eliminate
Hercules as a separate fund family because we believe
the funds are too small to be economically viable. The
board unanimously agreed that it would be in the best
interests of shareholders to merge the four stock funds
into appropriate Piper fund alternatives and to
liquidate World Bond Fund. The proposed mergers and
proposed liquidation are subject to the approval of
shareholders of the respective funds.

In addition, because the costs associated with
operating Money Market Fund have become increasingly
prohibitive due to its small asset base, Piper Capital
has decided to stop waiving and absorbing fund expenses
effective July 1, 1996. Currently, we waive or absorb
expenses that are in excess of 1% of the fund's average
daily net assets.

We are preparing proxy materials which will provide you
with more complete information about the proposal,
including the basis for the board's recommendation. We
expect to mail these materials to you in late April.
Please read them thoroughly and contact your Investment
Executive if you have further questions.

Until we receive a majority vote, the Hercules funds
will continue to operate and be managed as they have
been in the past. We thank you for your investment in
the Hercules funds and look forward to helping you
reach your investment goals through international
markets.

Sincerely,

/S/ WILLIAM H. ELLIS

William H. Ellis
President

<PAGE>

HERCULES INTERNATIONAL FUNDS

NORTH AMERICAN
GROWTH AND INCOME FUND

[PHOTO] February 15, 1996

Dear Shareholders:
MARU EUGENIA PICHARDO
PORTFOLIO MANAGER, FOR THE SIX MONTHS ENDED DECEMBER 31, 1995, NORTH
MEXICO ACCI WORLDWIDE, AMERICAN GROWTH AND INCOME FUND PROVIDED A 10.15%
S.A. DE C.V. TOTAL RETURN, assuming distributions were reinvested
and not including any sales charges. During the same
[PHOTO] period, the S&P 500 Index returned 14.44%, the
Mexican Bolsa Index returned 2.99%, and the Toronto
ROBERT FARQUHARSON Stock Exchange 300 Index returned 5.80% (all in U.S.
PORTFOLIO MANAGER, dollar terms). The fund's primary strategy during
CANADA AGF INVESTMENT the period was to place heavier emphasis on the U.S.
ADVISORS, INC. market than on Canadian and Mexican markets.

[PHOTO] THE FUND BENEFITED FROM ITS EMPHASIS ON THE U.S.
MARKET, where the best performing sectors were
JOHN SCHONBERG health care and financial services. The U.S. portion
PORTFOLIO MANAGER, of the fund was positioned to take advantage of a
UNITED STATES slow growth, low inflationary economic environment.
PIPER CAPITAL Our most meaningful overweighting, compared to the
MANAGEMENT INCORPORATED S&P 500 Index, was in the capital goods and services
sector. During the third quarter, we increased our
weighting in the energy sector as we believed that
these stocks -- especially oil services -- were
particularly attractive. Many energy companies have
recently restructured, which should improve profits
going forward.

AFTER AN INCREDIBLE PERFORMANCE IN 1995, THE U.S.
STOCK MARKET HAS LIKELY REAPED MOST OF THE BENEFITS
FROM LOWER INTEREST RATES. We are maintaining a
conservative outlook given our belief that, at
current levels, the market is fairly valued.
Relative to the Canadian and Mexican markets,
however, we believe the U.S. market remains the most
attractive, so we are maintaining a heavy weighting
in U.S. stocks. Our largest emphasis continues to be
in the capital goods and services sector with
investments in companies such as Allied Signal,
Boeing, GE, 3M, and WMX Technologies.

ALTHOUGH 1995 WAS CHARACTERIZED BY GREAT VOLATILITY
IN MEXICAN FINANCIAL MARKETS, THERE ARE SIGNS THAT
THE ECONOMIC SLOWDOWN HAS BOTTOMED. Recent economic
indicators such as the level of retail sales,
inventories and domestic sales of gasoline seem to
indicate that the recovery is taking off, albeit
gradually. The Mexican stock market finished the
third quarter of 1995 up 6.38% even after reports
that Gross Domestic Product had contracted more than
10% during the second quarter. The financial markets
were very

<PAGE>
volatile for the fourth quarter mainly explained by speculative movements
against the peso. However, at the end of December, the market reached a
13-month high fueled by signs of stabilization of the peso and lower interest
rates. We anticipate investors will react positively to the potential for
economic growth, more attractive valuations and a drop in domestic and
non-domestic interest rates in 1996.

THE MEXICAN PORTION OF THE FUND REMAINS DEFENSIVE, with a balanced portfolio
that includes export-oriented companies which benefited from the decline in
the peso and domestic-oriented companies with strong cash flows and low debt.
At the end of 1995, the Mexican portion of the portfolio was 88% invested in
stocks and 12% in high-quality, short-term debt instruments, capitalizing on
the current high interest rates. Our investment strategy for 1996 includes a
gradual switch from cyclical stocks, which tend to rise and fall with the
economy and are currently showing price increases, to stocks expected to
benefit from the privatization process in the coming months -- for example,
industrial groups, construction and telecommunications companies.

THE CANADIAN MARKET UNDERPERFORMED THE U.S. MARKET IN 1995, HOWEVER, THE
FUNDAMENTALS OF THE CANADIAN ECONOMY REMAIN STRONG. Inflation remains
subdued, world economies are continuing to expand, and the undervalued
Canadian dollar should attract capital flows into the market due to the
competitiveness of Canadian companies. As investors begin to focus on the
strong potential inherent in the market, the Canadian portion of the fund
should be rewarded by a narrowing performance gap relative to the United
States and the return of the international investor.

Thank you for your investment in the North American Growth and Income Fund.

Sincerely,

/S/ MARU EUGENIA PICHARDO /S/ ROBERT FARQUHARSON /S/ JOHN SCHONBERG

Maru Eugenia Pichardo Robert Farquharson John Schonberg
Portfolio Manager Portfolio Manager Portfolio Manager

* THE S&P 500 INDEX IS AN UNMANAGED INDEX OF LARGE COMPANY U.S. STOCKS. THE
MEXICAN BOLSA INDEX IS AN UNMANAGED INDEX OF 38 COMPANY STOCKS AND IS
WEIGHTED BY MARKET VALUE AND INDUSTRY. THE TORONTO STOCK EXCHANGE IS AN
UNMANAGED INDEX THAT INCLUDES THE STOCKS OF 300 CANADIAN INCORPORATED
COMPANIES. THE BLENDED INDEX REPRESENTS AN UNMANAGED MIX OF 52% S&P 500,
22% TSE AND 26% MBI.

[GRAPHIC REPRESENTATION OF PIE CHART]

COUNTRY ALLOCATION
AS OF DECEMBER 31, 1995

United States 58%
Canada 18%
Mexico 23%
Cash & Equivalents 1%

VALUE OF $10,000 INVESTED
[GRAPH]

SHARES PURCHASED AFTER JUNE 19, 1995, ARE SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE (CDSC). HAD THIS STRUCTURE BEEN IN EFFECT SINCE THE FUND'S
INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993, AND REDEEMED ON
DECEMBER 31, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD HAVE GROWN TO
$10,779. IF SHARES WERE PURCHASED BEFORE JUNE 19, 1995 AND HELD THROUGH
DECEMBER 31, 1995, WITH DISTRIBUTIONS INVESTED, THE INVESTMENT WOULD HAVE
GROWN TO $10,979. IN COMPARING A FUND TO INDEXES, KEEP IN MIND THAT INDEXES
ARE UNMANAGED, THEIR RETURNS DO NOT REFLECT SALES OR MANAGEMENT FEES, AND
THEY ARE NOT OPEN TO INVESTMENT. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS.

AVERAGE ANNUAL TOTAL RETURNS
THROUGH DECEMBER 31, 1995
WITH WITHOUT
CDSC CDSC
One Year. . . . . . . . . . . . . . . 21.06%. . . . . . . 23.06%
Since Inception (11/93 ). . . . . . . 3.56%. . . . . . . 4.45%

DURING SOME PERIODS, THE FUND'S MANAGER AND DISTRIBUTOR WAIVED OR ABSORBED
FUND EXPENSES WHICH MAY OR MAY NOT BE WAIVED IN THE FUTURE. OTHERWISE, THE
AVERAGE ANNUAL TOTAL RETURNS WITH CDSC AND REINVESTED DISTRIBUTIONS WOULD
HAVE BEEN 20.03% AND 2.36%, RESPECTIVELY.

<PAGE>

[PHOTO] HERCULES INTERNATIONAL FUNDS

NILS FRANCKE EUROPEAN
PORTFOLIO MANAGER VALUE FUND
PICTET INTERNATIONAL
MANAGEMENT LTD. February 15, 1996

Dear Shareholders:
IN NOVEMBER, MR.
FRANCKE ASSUMED FOR THE SIX MONTHS ENDED DECEMBER 31, 1995, EUROPEAN
RESPONSIBILITY AS VALUE FUND RETURNED 5.82%, assuming distributions
LEAD MANAGER FOR were reinvested and not including any sales charges.
THE EUROPEAN VALUE This compares to the benchmark Morgan Stanley Capital
FUND. PREVIOUSLY, International (MSCI) Europe Index's return of 7.98%
HE CO-MANAGED THE and the Lipper European Region Funds Average of 4.34%
FUND WITH CHRISTIAN over the same period. Our strategy during the period
SIMOND, WHO favored smaller European markets, interest-rate-sensitive
CONTINUES TO MANAGE stocks, and growth-oriented stocks with good earnings
OTHER EUROPEAN- visibility.
REGION PORTFOLIOS
FOR PICTET OVERALL, EUROPEAN STOCK MARKETS ENDED THE THIRD
QUARTER OF 1995 WITH POSITIVE PERFORMANCE, WITH THE
INTERNATIONAL. EXCEPTION OF THE FRENCH AND ITALIAN MARKETS. France,
in particular, struggled with uncertainties over the
country's political elections, restrictive spending
programs and the resulting labor strikes. Not
surprisingly, the French stock market retreated to
five-year lows during the last quarter of 1995.

DISCUSSIONS ABOUT THE PENDING EUROPEAN MONETARY UNION
INTENSIFIED, resulting in renewed strength of the
German mark and Swiss franc during the third quarter.
While this had a negative effect on "cyclical"
stocks, which tend to rise and fall along with the
economy, there was also a positive side. Several
European governments responded to the discussions by
committing to additional spending cuts to reduce
their budget deficits. This new course of action
meant that previous expectations for European
economic growth were too high, and that central banks
would need to cut interest rates further.

AS WE ANTICIPATED, EVIDENCE OF A EUROPEAN ECONOMIC
SLOWDOWN BECAME APPARENT DURING THE FOURTH QUARTER OF
1995. Of particular importance was the emerging
weakness of the German economy, whose industrial
output in October 1995 declined 3.4% compared to
October 1994. Finally, on December 14, 1995, the
Bundesbank cut its discount rate to 3%. Though this
cut was expected, the actual move persuaded investors
that European monetary policy is moving into a
synchronized phase and that central banks across the
continent will support lower interest rates with
coordinated action.

<PAGE>

EUROPEAN VALUE FUND'S COUNTRY ALLOCATION CONTINUES TO FAVOR SMALLER
COUNTRIES, as they currently are not as affected by currency fluctuations as
are core countries like Germany. In the United Kingdom, we have remained
invested in mid-cap stocks with substantial overweighting in the medical and
pharmaceutical sectors. Holdings include Zeneca, Glaxo Wellcome, and
Celltech.

IN TERMS OF STOCK SELECTION, WE KEPT OUR EMPHASIS ON INTEREST-RATE-SENSITIVE
STOCKS AND GROWTH-ORIENTED STOCKS WITH GOOD EARNINGS VISIBILITY, due to a lot
of recent downward earnings revisions. Two stocks with positive recent
earnings reports are Fresenius, a German pharmaceutical company, and Bic, the
French company known for disposable pens and razors. Fresenius, which we have
owned since the fund's inception, announced a possible joint venture with
W.R. Grace's National Medical Care dialysis unit. At Bic, the son of the
firm's founder recently returned to France from the United States to become
the company's group chairman.

WE REMAIN POSITIVE FOR EUROPEAN STOCKS IN 1996, WHICH CONTINUE TO BE
SUPPORTED BY LOWER INTEREST RATES, AND ALSO ON THE OUTLOOK FOR THE DOLLAR. As
a result, we increased our dollar hedge with European countries from 20% in
the second quarter to 40% by September 30. We believe this is a good
medium-term strategy because the dollar currently appears undervalued in
terms of purchasing power parity. If we are right, and the dollar strengthens
over the next few months, we may move more into cyclical, export-oriented
stocks which would benefit in such an environment.

We appreciate your investment in the European Value Fund.

Sincerely,

/S/ NILS FRANCKE

Nils Francke
Portfolio Manager

* THE MSCI EUROPE 14 INDEX IS AN UNMANAGED INDEX OF SECURITIES LISTED ON THE
STOCK EXCHANGES OF AUSTRIA, BELGIUM, DENMARK, FINLAND, FRANCE, GERMANY,
IRELAND, ITALY, THE NETHERLANDS, NORWAY, SPAIN, SWEDEN, SWITZERLAND, AND THE
UNITED KINGDOM.

[GRAPHIC REPRESENTATION OF PIE CHART]

COUNTRY ALLOCATION
AS OF DECEMBER 31, 1995

United Kingdom 35%
Switzerland 11%
Sweden 4%
Netherlands 7%
France 11%
Czech Republic 3%
Germany 13%
Italy 4%
Other 12%

VALUE OF $10,000 INVESTED
[GRAPH]

SHARES PURCHASED AFTER JUNE 19, 1995, ARE SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE (CDSC). HAD THIS STRUCTURE BEEN IN EFFECT SINCE THE FUND'S
INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993, AND REDEEMED ON
DECEMBER 31, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD HAVE GROWN TO
$11,645. IF SHARES WERE PURCHASED BEFORE JUNE 19, 1995 AND HELD THROUGH
DECEMBER 31, 1995, WITH DISTRIBUTIONS INVESTED, THE INVESTMENT WOULD HAVE
GROWN TO $11,845. IN COMPARING A FUND TO INDEXES, KEEP IN MIND THAT INDEXES
ARE UNMANAGED, THEIR RETURNS DO NOT REFLECT SALES OR MANAGEMENT FEES, AND
THEY ARE NOT OPEN TO INVESTMENT. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS.

AVERAGE ANNUAL TOTAL RETURNS
THROUGH DECEMBER 31, 1995
WITH WITHOUT
CDSC CDSC
One Year. . . . . . . . . . . . . . . 13.39%. . . . . . . 15.39%
Since Inception (11/93 ). . . . . . . 7.37%. . . . . . . 8.22%

DURING SOME PERIODS, THE FUND'S MANAGER AND DISTRIBUTOR WAIVED OR ABSORBED
FUND EXPENSES WHICH MAY OR MAY NOT BE WAIVED IN THE FUTURE. OTHERWISE, THE
AVERAGE ANNUAL TOTAL RETURNS WITH CDSC AND REINVESTED DISTRIBUTIONS WOULD
HAVE BEEN 12.40% AND 6.15%, RESPECTIVELY.

<PAGE>

[PHOTO] HERCULES INTERNATIONAL FUNDS

LLOYD BEAT PACIFIC BASIN
INVESTMENT MANAGER VALUE FUND
EDINBURGH FUND
MANAGERS PLC February 15, 1996

Dear Shareholders:

[PHOTO] OVER THE SIX MONTHS ENDED DECEMBER 31, 1995, PACIFIC
BASIN VALUE FUND RETURNED 11.21%, assuming
DAVID CURRIE distributions were reinvested and not including any
PORTFOLIO MANAGER, sales charges. This compares favorably to returns of
JAPAN 9.92% for the MSCI Japan Index and 5.67% for the MSCI
EDINBURGH FUND Pacific Ex-Japan Index during the same period. The
MANAGERS PLC fund's benchmark, the MSCIPacific Index, returned
9.12% over the period. Over the past six months, our
[PHOTO] strategy has been to overweight Japan compared to the
MSCI Pacific Index, focus on smaller companies, and
HELEN FALLOW hedge approximately 40% of the yen into U.S. dollars.
PORTFOLIO MANAGER,
PACIFIC RIM THE JAPANESE STOCK MARKET, WHILE EXPERIENCING
EDINBURGH FUND CONSIDERABLE VOLATILITY, WITNESSED A STRONG RECOVERY
MANAGERS PLC DURING THE THIRD QUARTER WHICH CONTINUED INTO THE
FOURTH QUARTER. The market rose over 20% in local
currency terms from June 30 to September 30, and rose
another 10% by the end of December. The catalyst for
the turnaround was a sharp decline in the value of
the yen, which followed continuing loosening of
economic policy by the Japanese authorities and a
relaxation of certain overseas investment
restrictions -- both of which culminated in reduced
interest rates. The weaker yen and lower interest
rates contributed to an improvement in investor
sentiment and allowed the Japanese stock market to
focus on expectations for a further recovery in
earnings. During the fourth quarter, an improved
outlook for Japan's banking sector, growing
confidence that the current economic expansion will
continue, and encouraging earnings reports drove
markets higher.

WE WILL MAINTAIN OUR HEAVY WEIGHTING IN JAPAN GOING
FORWARD, as we believe the market remains a good
value and expansionary monetary and fiscal policies
should lead to a brightening economic picture for the
country. Though Prime Minister Murayama resigned the
first week of January 1996, we believe politics will
have little effect on the market as the current
monetary policy should remain in place regardless of
the successor.

<PAGE>

ELSEWHERE IN THE PACIFIC BASIN, SOME LARGER MARKETS PERFORMED WELL WHILE
SMALLER MARKETS CONTINUED TO SUFFER. Returns across the region were generally
mixed during the third quarter, though the strength of the U.S. dollar
resulted in particularly strong performance in Hong Kong. Many of the smaller
countries battled with inflationary fears and rapid growth. During the fourth
quarter, the Hong Kong market rose 3.8% and Singapore boasted a rally of
9.6%. Thailand and Indonesia both were rewarded for their proactive approach
to dealing with economic overheating.

MANY PACIFIC BASIN ECONOMIES APPEAR TO BE DEALING EFFECTIVELY WITH THEIR
INFLATION PROBLEMS, AND THEIR LONG-TERM FUNDAMENTAL OUTLOOKS REMAIN
EXCELLENT. Achieving a slower, more sustainable rate of economic growth,
combined with a strong U.S. dollar and lower interest rates worldwide, should
improve investor interest in the Pacific Basin as a whole and will likely
result in a recovery in some of the region's smaller markets.

We thank you for your continued support of the Pacific Basin Value Fund and
would be happy to hear your comments or answer any questions you may have.

Sincerely,

/S/ LLOYD BEAT /S/ DAVID CURRIE /S/ HELEN FALLOW

Lloyd Beat David Currie Helen Fallow
Investment Manager Portfolio Manager Portfolio Manager

* THE MSCI PACIFIC INDEX IS AN UNMANAGED INDEX OF SECURITIES LISTED ON THE
STOCK EXCHANGES OF AUSTRALIA, HONG KONG, JAPAN, MALAYSIA, NEW ZEALAND AND
SINGAPORE. THE BLENDED INDEX IS AN UNMANAGED MIX OF THE MSCI JAPAN (50%) AND
MSCI PACIFIC EX-JAPAN (50%) INDEXES.

[GRAPHIC REPRESENTATION OF PIE CHART]

COUNTRY ALLOCATION
AS OF DECEMBER 31, 1995

Japan 60%
South Korea 3%
Singapore 4%
Malaysia 5%
Taiwan 2%
Thailand 5%
Australia 2%
Hong Kong 15%
Indonesia 2%
Other 2%

VALUE OF $10,000 INVESTED
[GRAPH]

SHARES PURCHASED AFTER JUNE 19, 1995, ARE SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE (CDSC). HAD THIS STRUCTURE BEEN IN EFFECT SINCE THE FUND'S
INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993, AND REDEEMED ON
DECEMBER 31, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD BE WORTH $9,940.
IF SHARES WERE PURCHASED BEFORE JUNE 19, 1995 AND HELD THROUGH DECEMBER 31,
1995, WITH DISTRIBUTIONS INVESTED, THE INVESTMENT WOULD BE WORTH $10,140. IN
COMPARING A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE UNMANAGED, THEIR
RETURNS DO NOT REFLECT SALES OR MANAGEMENT FEES, AND THEY ARE NOT OPEN TO
INVESTMENT. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

AVERAGE ANNUAL TOTAL RETURNS
THROUGH DECEMBER 31, 1995
WITH WITHOUT
CDSC CDSC
One Year. . . . . . . . . . . . . . . -1.08%. . . . . . . 0.92%
Since Inception (11/93 ). . . . . . . -0.28%. . . . . . . 0.65%

DURING SOME PERIODS, THE FUND'S MANAGER AND DISTRIBUTOR WAIVED OR ABSORBED
FUND EXPENSES WHICH MAY OR MAY NOT BE WAIVED IN THE FUTURE. OTHERWISE, THE
AVERAGE ANNUAL TOTAL RETURNS WITH CDSC AND REINVESTED DISTRIBUTIONS WOULD
HAVE BEEN -1.59% AND -0.81%, RESPECTIVELY.

<PAGE>

HERCULES INTERNATIONAL FUNDS

LATIN AMERICAN
[PHOTO] VALUE FUND

MARIA-ELENA CARRION February 15, 1996

Dear Shareholders:

PORTFOLIO MANAGER
BANKERS TRUST COMPANY THE LATIN AMERICAN VALUE FUND WAS DOWN 1.67% OVER THE
SIX-MONTH PERIOD FROM JUNE 30, 1995, TO DECEMBER 31,
[PHOTO] 1995, assuming dividends were reinvested and not
including any sales charges. This compares to returns
EMILY ALEJOS of 0.13% for the Lipper Latin American Average and
PORTFOLIO MANAGER 0.64% for the IFC Latin American Investable Index
BANKERS TRUST COMPANY during the same period.

THESE RELATIVELY MODEST PERFORMANCE NUMBERS DISGUISE
THE EXTREME VOLATILITY SEEN IN THE MARKETS DURING
THIS TIME PERIOD. The major markets of Argentina,
Brazil and Mexico experienced a summer rally that
lasted from June until September, at which point
investors sold off considerably. After a sharp
decline, the markets began an extended rally again in
mid-November with prices rising in response to
attractive valuations and improving fundamental
strengths. These markets saw swings of 34%, 35% and
30% respectively from trough to peak during the
six-month period. Currency volatility was also a
principal theme as a result of political
uncertainties and changing country risk.

THE VOLATILITY IN THE MEXICAN PESO OCCURRED AS A
RESULT OF THE LACK OF POLICY DIRECTION FROM MEXICO
CITY AND CONCERNS ABOUT THE ECONOMIC OUTLOOK.
Inflation ticked up, suggesting the need for
continued high interest rates and causing decreased
estimates for economic growth. Interest rates also
remained high in an effort to defend the currency.
With the banking system vulnerable and the consumer
already overextended, a strategy of tight monetary
policy was quite risky, threatening the stability of
the private sector.

BRAZILIAN MARKET VOLATILITY OCCURRED AS INVESTORS
ADJUSTED TO SHARP SWINGS IN ECONOMIC GROWTH AND A
SIGNIFICANT INCREASE IN CORPORATE BANKRUPTCIES. The
worsening economic outlook, coupled with the lack of
progress in political reform, caused a sharp selloff
in the market.

THE WEAKNESS IN THE COLOMBIAN PESO OCCURRED AS
POLITICAL UNCERTAINTY STARTED TO IMPACT THE ECONOMY
due to higher interest rates and delayed government
spending. The threat of the forced resignation of
President Samper has resulted in the Colombian stock
market being one of the worst performing Latin
American markets for the year.

<PAGE>

IN ARGENTINA, WE SAW CONTINUED TENSION BETWEEN FINANCE MINISTER CAVALLO AND
PRESIDENT MENEM resulting in political paralysis, a general loss of
confidence and stalled economic activity. The market managed to end the year
with a bang, however, in reaction to convincing evidence that the worst of
the political and economic crisis was over.

OUR STRATEGY OVER THE SIX-MONTH PERIOD WAS TO UNDERWEIGHT MEXICO AND
ARGENTINA RELATIVE TO THE IFC INDEX AND TO HOLD A DEFENSIVE PORTFOLIO, as we
believed the short-term risk for the markets was quite high given their
valuations and significant political and economic risk across the region.
Looking out to the next year or two, however, we expect to see a dramatically
improved environment for Latin American stocks given the attractiveness of
their relative valuations in global portfolios, the favorable international
interest rate environment and the return to economic growth for the major
markets.

TWO YEARS OF A BEAR MARKET IN LATIN AMERICA HAVE CREATED STRONG OPPORTUNITIES
FOR LONG-TERM INVESTORS as we believe that expectations remain quite low and
the economic outlook for 1996 is significantly better for the region as a
whole.

We appreciate your long-term investment perspective for investing in Latin
American markets.

Sincerely,

/S/ MARIA-ELENA CARRION /S/ EMILY ALEJOS

Maria-Elena Carrion Emily Alejos
Portfolio Manager Portfolio Manager

* THE IFC LATIN AMERICA INVESTABLE INDEX IS AN UNMANAGED INDEX OF SECURITIES
FROM ARGENTINA, BRAZIL, CHILE, COLOMBIA, MEXICO, PERU AND VENEZUELA. THE
INDEX IS LIMITED TO THOSE SECURITIES IN WHICH FOREIGNERS MAY INVEST.

[GRAPHIC REPRESENTATION OF PIE CHART]

COUNTRY ALLOCATION
AS OF DECEMBER 31, 1995

Brazil 29%
Argentina 11%
Colombia 7%
Venezuela 6%
Peru 6%
Chile 15%
Mexico 22%
Cash/Equivalents 4%

VALUE OF $10,000 INVESTED
[GRAPH]

SHARES PURCHASED AFTER JUNE 19, 1995, ARE SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE (CDSC). HAD THIS STRUCTURE BEEN IN EFFECT SINCE THE FUND'S
INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993, AND REDEEMED ON
DECEMBER 31, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD BE WORTH $6,880.
IF SHARES WERE PURCHASED BEFORE JUNE 19, 1995 AND HELD THROUGH DECEMBER 31,
1995, WITH DISTRIBUTIONS INVESTED, THE INVESTMENT WOULD BE WORTH $7,080. IN
COMPARING A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE UNMANAGED, THEIR
RETURNS DO NOT REFLECT SALES OR MANAGEMENT FEES, AND THEY ARE NOT OPEN TO
INVESTMENT. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

AVERAGE ANNUAL TOTAL RETURNS
THROUGH DECEMBER 31, 1995
WITH WITHOUT
CDSC CDSC
One Year. . . . . . . . . . . . . . . -23.77%. . . . . . .-21.77%
Since Inception (11/93 ). . . . . . . -16.02%. . . . . . .-14.89%

DURING SOME PERIODS, THE FUND'S MANAGER AND DISTRIBUTOR WAIVED OR ABSORBED
FUND EXPENSES WHICH MAY OR MAY NOT BE WAIVED IN THE FUTURE. OTHERWISE, THE
AVERAGE ANNUAL TOTAL RETURNS WITH CDSC AND REINVESTED DISTRIBUTIONS WOULD
HAVE BEEN -24.65% AND -17.34%, RESPECTIVELY.

<PAGE>

HERCULES INTERNATIONAL FUNDS

WORLD BOND
FUND

[PHOTO] February 15, 1996

Dear Shareholders:
DAVID SCOTT
PORTFOLIO MANAGER WORLD BOND FUND RETURNED 9.36% FOR THE SIX MONTHS
SALOMON BROTHERS ENDED DECEMBER 31, 1995, compared to total returns of
ASSET MANAGEMENT LTD. 7.25% for the benchmark Salomon Brothers World
Government Bond Index and 6.72% for the Lipper
General World Income Funds Average during the same
period. The fund's net asset value increased from
$9.82 on June 30, 1995, to $10.45 on December 31,
1995, and the fund paid distributions of 28 cents per
[PHOTO] share during the six-month period.*

DAVID GRIFFITHS THE FUND BENEFITED PRIMARILY FROM ITS VERY LOW
PORTFOLIO MANAGER EXPOSURE TO THE JAPANESE BOND MARKET DURING THE PAST
SALOMON BROTHERS SIX MONTHS. The third quarter of 1995 was dominated
ASSET MANAGEMENT LTD. by Japan's attempts to reflate its economy.
Initially, substantial central bank intervention
weakened the yen and improved growth expectations. In
response, Japanese government bond yields rose and
the Nikkei stock index rallied. A number of bank and
credit union failures in August, however, underscored
the fact that a weaker yen alone may not solve
Japan's problems. The fiscal package introduced in
September failed to focus on consumer demand and
banking problems, and combined with a cut in the
discount rate, caused bond yields to decline. During
the fourth quarter, these factors conspired to keep
Japanese bond yields broadly unchanged in contrast to
other major bond markets which posted gains.

THE GERMAN BOND MARKET PERFORMED RELATIVELY WELL,
THOUGH CONCERNS OVER THE POTENTIAL DILUTION OF THE
DEUTSCHE MARK AS EUROPE MOVES TO A SINGLE CURRENCY
SEEM TO HAVE PREVENTED SOME OF THE ANTICIPATED GAINS.
Shorter-term bonds made progress during the third
quarter. With little economic data to rely on, the
market focused on weak business confidence surveys
and a decline in inflation. This, combined with
Deutsche mark strength early in the quarter, caused
the Bundesbank to lower its discount rate to 3.5%. In
December the discount rate was lowered again to 3%,
its lowest level since 1988. Weak consumer demand,
falling industrial production and very low inflation
provided a positive background for the German bond
market.

* THIS DIVIDEND WAS CLASSIFIED AS A RETURN OF CAPITAL FOR TAX PURPOSES.
BECAUSE IT WAS PAID FROM SOURCES OTHER THAN THE FUND'S NET INVESTMENT INCOME,
IT IS NOT TAXABLE AS INCOME. PLEASE CONSULT A TAX ADVISER ON HOW TO REPORT
THESE DISTRIBUTIONS ON YOUR TAX FORMS.

<PAGE>

IN THE UNITED STATES, SIGNS OF A SLOWDOWN IN GROWTH TOWARD THE END OF THE
YEAR HAS PROVIDED A POSITIVE BACKDROP FOR THE BOND MARKET. After the Federal
Reserve lowered the federal funds rate to 5.75% in July, subsequent reports
of stronger-than-expected economic data pushed yields higher. But with
inflation pressures abating and expectations (at the time) of a budget
resolution, yields dropped to end the third quarter little changed. During
the fourth quarter, inflation expectations lessened as leading inflation
indicators produced benign readings. This led to another reduction in the
federal funds rate in December. The prospect of fiscal restraint has also
supported market sentiment, despite the slow progress toward a compromise
between Congress and the Clinton Administration.

WORLD BOND FUND REMAINS CONCENTRATED IN THE UNITED STATES AND CORE EUROPEAN
MARKETS -- PRIMARILY GERMANY -- WHERE ECONOMIC CONDITIONS APPEAR WEAKEST. The
fund also continues to be fully hedged back to the U.S. dollar, as we believe
it limits the volatility of fund returns and protects U.S. investors from
foreign currency losses should the dollar strengthen.

We appreciate your investment in the World Bond Fund.

Sincerely,

/S/ DAVID SCOTT /S/ DAVID GRIFFITHS

David Scott David Griffiths
Portfolio Manager Portfolio Manager

* THE SALOMON WORLD GOVERNMENT BOND INDEX IS AN UNMANAGED INDEX DESIGNED TO
TRACK THE MAJOR GOVERNMENT DEBT FROM AUSTRIA, AUSTRALIA, BELGIUM, CANADA,
DENMARK, FRANCE, GERMANY, ITALY, JAPAN, NETHERLANDS, SPAIN, SWEDEN, UNITED
KINGDOM, AND THE UNITED STATES.

[GRAPHIC REPRESENTATION OF PIE CHART]

COUNTRY ALLOCATION
AS OF DECEMBER 31, 1995

Germany 27%
Italy 7%
Cash 6%
Canada 2%
Belgium 2%
Spain 17%
Austria 12%
United States 23%
United Kingdom 4%

VALUE OF $10,000 INVESTED
[GRAPH]

SHARES PURCHASED AFTER JUNE 19, 1995, ARE SUBJECT TO A CONTINGENT DEFERRED
SALES CHARGE (CDSC). HAD THIS STRUCTURE BEEN IN EFFECT SINCE THE FUND'S
INCEPTION, A $10,000 INVESTMENT MADE ON NOVEMBER 9, 1993, AND REDEEMED ON
DECEMBER 31, 1995, INCLUDING REINVESTED DISTRIBUTIONS, WOULD BE WORTH
$10,829. IF SHARES WERE PURCHASED BEFORE JUNE 19, 1995, AND HELD THROUGH
DECEMBER 31, 1995, WITH DISTRIBUTIONS INVESTED, THE INVESTMENT WOULD BE WORTH
$11,029. IN COMPARING A FUND TO INDEXES, KEEP IN MIND THAT INDEXES ARE
UNMANAGED, THEIR RETURNS DO NOT REFLECT SALES OR MANAGEMENT FEES, AND THEY
ARE NOT OPEN TO INVESTMENT. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE
RESULTS.

AVERAGE ANNUAL TOTAL RETURNS
THROUGH DECEMBER 31, 1995
WITH WITHOUT
CDSC CDSC
One Year. . . . . . . . . . . . . . . 15.04%. . . . . . . 17.04%
Since Inception (11/93 ). . . . . . . 3.79%. . . . . . . 4.68%

DURING SOME PERIODS, THE FUND'S MANAGER AND DISTRIBUTOR WAIVED OR ABSORBED
FUND EXPENSES WHICH MAY OR MAY NOT BE WAIVED IN THE FUTURE. OTHERWISE, THE
AVERAGE ANNUAL TOTAL RETURNS WITH CDSC AND REINVESTED DISTRIBUTIONS WOULD
HAVE BEEN 14.37% AND 3.22%, RESPECTIVELY.

<PAGE>

HERCULES INTERNATIONAL FUNDS

MONEY MARKET
FUND
[PHOTO]

MARYBETH WHYTE
PORTFOLIO MANAGER February 15, 1996
SALOMON BROTHERS
ASSET MANAGEMENT INC Dear Shareholders:

YIELDS AS OF DECEMBER 31, 1995, THE SEVEN-DAY EFFECTIVE
(COMPOUND) YIELD OF THE MONEY MARKET FUND WAS
BASED ON THE SEVEN AND 30 4.63% and its 30-day effective yield was 4.72%.
DAYS ENDED DECEMBER 31, The fund's average weighted maturity was 17 days.
1995.
THE THIRD QUARTER PRODUCED MIXED RESULTS FOR
SEVEN-DAY CURRENT . . 4.53% MONEY MARKET SECURITIES. Soft economic data in
SEVEN-DAY EFFECTIVE . 4.63% the second quarter had bolstered investors'
30-DAY CURRENT . . . 4.62% expectations for a swift series of interest rate
30-DAY EFFECTIVE . . 4.72% cuts by the Federal Reserve. While there was one
rate cut in July, the economic data began to
DURING ALL PERIODS, strengthen almost immediately thereafter,
PIPER CAPITAL WAIVED resulting in no more policy changes for the rest
OR PAID FUND EXPENSES of the quarter. We restructured the Money Market
AND/OR PIPER JAFFRAY, Fund in two ways during the quarter. First, we
THE FUND'S replaced the portfolio's Treasury bills with
DISTRIBUTOR, government agency discount notes to capture a
VOLUNTARILY LIMITED yield advantage. Second, we reduced the
12B-1 FEES FOR THE portfolio's average weighted maturity in light of
FUND. HAD THESE FEES our reduced expectations for further interest
AND EXPENSES NOT BEEN rate cuts.
WAIVED, THE FUND'S
CURRENT AND EFFECTIVE MONEY MARKET SECURITIES FINISHED THE FOURTH
YIELDS WOULD HAVE QUARTER ON A STRONG NOTE AFTER GETTING OFF TO A
BEEN 0%. PAST SLOW START. Investors were initially concerned
PERFORMANCE DOES NOT that a rebound in the economy would prevent the
GUARANTEE FUTURE Federal Reserve from reducing rates. However,
RESULTS. EFFECTIVE continued signs of economic weakness caused
YIELDS REFLECT THE investors to bid up money market securities in
REINVESTMENT OF anticipation of lower interest rates. By
DISTRIBUTIONS. December, even without a budget deal in place,
the Fed lowered the federal funds rate to 5.5%.
Investors finished 1995 confident that the Fed
would lower interest rates another 0.25%, which
it did in January. We further reduced the average
weighted maturity of the fund from 30 days to 17
days by December 31, given the interest rate
reduction and a yield advantage in shorter-term
securities. The fund remains fully invested in
government agency discount notes.

We appreciate the opportunity to help you meet
your investment goals.

Sincerely,

/S/ MARYBETH WHYTE

Marybeth Whyte
Portfolio Manager

<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 (UNAUDITED)

<TABLE>
<CAPTION>
North
American Pacific Latin
Growth and European Basin American
Income Value Value Value
Fund Fund Fund Fund
<S> <C> <C> <C> <C>
- - - - ------------------------------------------------------------------------------------------------------------------

ASSETS:
Investments in securities, at market value* (note 2) $9,581,198 14,173,663 26,530,108 17,414,100
Cash in bank on demand deposit 70,444 277,093 -- 2,924
Foreign cash in bank on demand deposit 9,845 3,595 72,316 7,516
Receivable for investment securities sold -- 190,270 316,127 --
Receivable for fund shares sold 1,550 600 31,870 6,100
Net unrealized appreciation of forward foreign
currency contracts held (notes 2 and 4) -- 121,546 1,560,757 --
Organization costs (note 2) 55,096 55,096 55,096 55,096
Dividends and accrued interest receivable 17,940 73,160 27,315 79,081
- - - - ------------------------------------------------------------------------------------------------------------------
Total assets 9,736,073 14,895,023 28,593,589 17,564,817
- - - - ------------------------------------------------------------------------------------------------------------------

LIABILITIES:
Bank overdraft -- -- 912,491 --
Payable for investment securities purchased 12,768 -- -- 173,233
Payable for fund shares redeemed 49,773 49,010 72,583 224,056
Accrued distribution fee 4,097 6,031 11,459 7,064
Accrued investment management fee 8,283 12,632 23,581 14,819
Accrued expenses and other liabilities 2,626 4,800 41,624 5,894
- - - - ------------------------------------------------------------------------------------------------------------------
Total liabilities 77,547 72,473 1,061,738 425,066
- - - - ------------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $9,658,526 14,822,550 27,531,851 17,139,751
- - - - ------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------

REPRESENTED BY:
Capital stock - 10 billion shares of $.01 par value
authorized for each fund; outstanding, 898,125;
1,412,567; 2,778,625 and 2,420,697 shares,
respectively $ 8,981 14,126 27,786 24,207
Additional paid-in capital 9,407,433 13,925,867 29,616,917 30,139,150
Accumulated net investment loss (note 2) (447,850) (32,030) (389,891) (130,896)
Accumulated net realized loss on
investments and foreign currency transactions (514,436) (192,247) (2,991,332) (11,328,016)
Unrealized appreciation (depreciation) of investments
and on
translation of other assets and liabilities in
foreign currencies
(notes 4 and 7) 1,204,398 1,106,834 1,268,371 (1,564,694)
- - - - ------------------------------------------------------------------------------------------------------------------
Total - representing net assets applicable to
outstanding capital stock $9,658,526 14,822,550 27,531,851 17,139,751
- - - - ------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------
Net asset value per share of outstanding capital stock $ 10.75 10.49 9.91 7.08
- - - - ------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------
*INVESTMENTS IN SECURITIES, AT IDENTIFIED COST $8,376,882 13,188,999 26,819,362 18,977,646
- - - - ------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

13
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 (UNAUDITED)

<TABLE>
<CAPTION>
World Money
Bond Market
Fund Fund
<S> <C> <C>
- - - - ----------------------------------------------------------------------------------

ASSETS:
- - - - ----------------------------------------------------------------------------------
Investments in securities, at market value* (note 2) $7,181,742 1,506,171
Cash in bank on demand deposit 375,614 43,789
Foreign cash in bank on demand deposit 54,594 --
Organization costs (note 2) 55,096 34,656
Unrealized gain on futures contracts (note 7) 16,443 --
Net unrealized appreciation of forward foreign
currency contracts held (notes 2 and 4) 10,934 --
Dividends and accrued interest receivable 208,490 --
- - - - ----------------------------------------------------------------------------------
Total assets 7,902,913 1,584,616
- - - - ----------------------------------------------------------------------------------

LIABILITIES:
Payable for fund shares redeemed 15,019 --
Dividends payable to shareholders (note 2) -- 6,080
Accrued distribution fee 2,266 --
Accrued investment management fee 6,842 652
Accrued expenses and other liabilities 1,943 --
- - - - ----------------------------------------------------------------------------------
Total liabilities 26,070 6,732
- - - - ----------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $7,876,843 1,577,884
- - - - ----------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------

REPRESENTED BY:
Capital stock - 10 billion and 100 billion shares,
respectively, of $.01 par value authorized;
outstanding, 754,060 and 1,577,884 shares, respec-
tively (note 1) $ 7,541 15,779
Additional paid-in capital 7,867,653 1,562,105
Accumulated net investment loss (note 2) (621,732) --
Accumulated net realized gain on investments and
foreign currency transactions 336,158 --
Unrealized appreciation of investments and on
translation of other assets and liabilities in
foreign currencies
(notes 4 and 7) 287,223 --
- - - - ----------------------------------------------------------------------------------
Total - representing net assets applicable to
outstanding capital stock $7,876,843 1,577,884
- - - - ----------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------
Net asset value per share of outstanding capital stock $ 10.45 1.00
- - - - ----------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------
*INVESTMENTS IN SECURITIES, AT IDENTIFIED COST $6,922,273 1,506,171
- - - - ----------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

14
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995 (UNAUDITED)

INCOME:
Dividends (net of foreign withholding taxes of
$2,797; $19,591; $10,986; $8,624, respectively) $ 93,185 130,050 123,968 126,788
Interest (net of foreign withholding taxes of $5,174;
$0; $0; $0, respectively) 123,854 3,120 4,511 105,188
- - - - -------------------------------------------------------------------------------------------------------------
Total investment income 217,039 133,170 128,479 231,976
- - - - -------------------------------------------------------------------------------------------------------------

EXPENSES (NOTE 6):
Investment management fee 56,834 82,058 153,223 104,624
Distribution fee 28,417 41,029 76,611 52,312
Custodian, accounting and transfer agent fees 87,404 102,651 115,043 110,977
Audit and legal fees 17,005 20,443 31,637 24,522
Amortization of organization costs 8,996 8,996 8,996 8,996
Directors' fees 1,879 1,879 1,879 1,879
Reports to shareholders 6,497 6,808 9,724 10,268
Registration fees 14,737 14,698 15,887 15,500
Other expenses 7,596 8,486 12,218 11,848
- - - - -------------------------------------------------------------------------------------------------------------
Total expenses 229,365 287,048 425,218 340,926
Less expenses waived or absorbed by manager (101,980) (105,316) (81,251) (110,754)
Less expenses waived or absorbed by distributor (11,367) (16,411) (30,645) (20,924)
Less expenses paid indirectly (2,350) (1,206) (6,877) --
- - - - -------------------------------------------------------------------------------------------------------------
Net expenses 113,668 164,115 306,445 209,248
- - - - -------------------------------------------------------------------------------------------------------------
Investment income (loss) - net 103,371 (30,945) (177,966) 22,728
- - - - -------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) on investments (note 3) 342,129 864,084 (1,072,982) (121,399)
Net realized loss on foreign currency transactions (5,571) (229,188) (29,864) (58,735)
- - - - -------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 336,558 634,896 (1,102,846) (180,134)
- - - - -------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
of investments and on translation of other assets
and liabilities in foreign currencies 699,425 360,219 4,477,297 (215,644)
- - - - -------------------------------------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currency 1,035,983 995,115 3,374,451 (395,778)
- - - - -------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $1,139,354 964,170 3,196,485 (373,050)
- - - - -------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

15
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995* (UNAUDITED)

<TABLE>
<CAPTION>
World Global Money
Bond Short-Term Market
Fund Fund Fund
<S> <C> <C> <C>
- - - - ----------------------------------------------------------------------------------------------

INCOME:
Interest (net of foreign withholding taxes of $3,694;
$0; $0, respectively) $ 338,443 380 47,429
- - - - ----------------------------------------------------------------------------------------------
Total investment income 338,443 380 47,429
- - - - ----------------------------------------------------------------------------------------------

EXPENSES (NOTE 6):
Investment management fee 50,280 131 4,223
Distribution fee 15,084 65 --
Custodian, accounting and transfer agent fees 76,789 30,307 52,352
Audit and legal fees 19,027 1,034 7,425
Amortization of organization costs 8,996 2,982 4,195
Directors' fees 1,879 1,879 1,879
Reports to shareholders 4,878 3,306 3,672
Registration fees 15,778 11,019 10,040
Other expenses 11,552 1,580 6,204
- - - - ----------------------------------------------------------------------------------------------
Total expenses 204,263 52,303 89,990
Less expenses waived or absorbed by manager (94,033) (51,424) (81,337)
Less expenses waived or absorbed by distributor (10,056) (13) --
Less expense paid indirectly (9,669) (540) (206)
- - - - ----------------------------------------------------------------------------------------------
Net expenses 90,505 326 8,447
- - - - ----------------------------------------------------------------------------------------------
Investment income - net 247,938 54 38,982
- - - - ----------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAINS
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments (note 3) 256,488 -- --
Net realized gain on foreign currency transactions 388,455 -- --
Net realized gain on futures contracts 53,941 -- --
- - - - ----------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions 698,884 -- --
- - - - ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation or depreciation
of investments and on translation of other assets
and liabilities in foreign currencies (103,753) -- --
- - - - ----------------------------------------------------------------------------------------------
Net gain on investments and foreign currency 595,131 -- --
- - - - ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from
operations $ 843,069 54 38,982
- - - - ----------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------
</TABLE>

*GLOBAL SHORT-TERM FUND WAS LIQUIDATED ON OCTOBER 20, 1995.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

16
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
North American Growth and
Income Fund European Value Fund
--------------------------- ---------------------------
Six Months Six Months
Ended Year Ended Year
12/31/95 Ended 12/31/95 Ended
(Unaudited) 6/30/95 (Unaudited) 6/30/95
<S> <C> <C> <C> <C>
- - - - ------------------------------------------------------------------------------------------------------------------

OPERATIONS:
Investment income (loss) - net $ 103,371 294,685 (30,945) 201,799
Net realized gain (loss) on investments and foreign
currency transactions 336,558 (1,392,866) 634,896 828,484
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and
liabilities in foreign currencies 699,425 1,612,010 360,219 1,175,631
- - - - ------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 1,139,354 513,829 964,170 2,205,914
- - - - ------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:
From investment income - net -- (74,603) (192,130) (41,687)
In excess of investment income - net (157,553) -- (32,030) --
From net realized gains -- -- (1,431,151) (112,779)
- - - - ------------------------------------------------------------------------------------------------------------------
Total distributions (157,553) (74,603) (1,655,311) (154,466)
- - - - ------------------------------------------------------------------------------------------------------------------

CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold 482,341 2,581,949 1,832,232 4,213,199
Reinvestment of distributions 153,043 72,165 1,607,628 148,816
Payments for shares redeemed (5,176,079) (6,731,426) (5,446,425) (5,467,416)
- - - - ------------------------------------------------------------------------------------------------------------------
Decrease in net assets from capital share
transactions (4,540,695) (4,077,312) (2,006,565) (1,105,401)
- - - - ------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (3,558,894) (3,638,086) (2,697,706) 946,047
- - - - ------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period 13,217,420 16,855,506 17,520,256 16,574,209
- - - - ------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 9,658,526 13,217,420 14,822,550 17,520,256
- - - - ------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
(accumulated net investment loss) $ (447,850) (393,668) (32,030) 223,075
- - - - ------------------------------------------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

17
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
Pacific Basin Value Fund Latin American Value Fund
---------------------------- ----------------------------
Six Months Six Months
Ended Ended
12/31/95 Year 12/31/95 Year
(Unaudited) Ended 6/30/95 (Unaudited) Ended 6/30/95
<S> <C> <C> <C> <C>
- - - - --------------------------------------------------------------------------------------------------------------------

OPERATIONS:
Investment income (loss) - net $ (177,966) (407,188) 22,728 (8,834)
Net realized loss on investments and foreign currency
transactions (1,102,846) (1,463,135) (180,134) (9,024,392)
Net change in unrealized appreciation or depreciation
of investments and on translation of assets and
liabilities in foreign currencies 4,477,297 (4,415,354) (215,644) 2,849,640
- - - - --------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 3,196,485 (6,285,677) (373,050) (6,183,586)
- - - - --------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains -- (428,688) -- --
In excess of net realized gains (336,110) -- -- --
- - - - --------------------------------------------------------------------------------------------------------------------
Total distributions (336,110) (428,688) -- --
- - - - --------------------------------------------------------------------------------------------------------------------

CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold 3,140,643 8,508,368 2,496,793 11,516,745
Reinvestment of distributions 332,042 418,184 565 --
Payments for shares redeemed (10,328,431) (11,512,632) (7,608,589) (10,459,488)
- - - - --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from capital share
transactions (6,855,746) (2,586,080) (5,111,231) 1,057,257
- - - - --------------------------------------------------------------------------------------------------------------------
Total decrease in net assets (3,995,371) (9,300,445) (5,484,281) (5,126,329)
- - - - --------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period 31,527,222 40,827,667 22,624,032 27,750,361
- - - - --------------------------------------------------------------------------------------------------------------------
Net assets at end of period $27,531,851 31,527,222 17,139,751 22,624,032
- - - - --------------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------------
Accumulated net investment loss $ (389,891) (211,925) (130,896) (153,624)
- - - - --------------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

18
<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
World Bond Fund Global Short-Term Fund Money Market Fund
---------------------------- ------------------------- ---------------------------
Six Months Period Six Months
Ended Year Ended Year Ended Period from
12/31/95 Ended 10/20/95* Ended 12/31/95 12/13/94**
(Unaudited) 6/30/95 (Unaudited) 6/30/95 (Unaudited) to 6/30/95
<S> <C> <C> <C> <C> <C> <C>
- - - - --------------------------------------------------------------------------------------------------------------------------------

OPERATIONS:
Investment income - net $ 247,938 1,207,705 54 30,540 38,982 17,069
Net realized gain (loss) on
investments and foreign currency
transactions 698,884 (1,217,822) -- (34,724) -- --
Net change in unrealized appreciation
or depreciation of investments and
on translation of other assets and
liabilities in foreign currencies (103,753) 1,524,955 -- 19,538 -- --
- - - - --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 843,069 1,514,838 54 15,354 38,982 17,069
- - - - --------------------------------------------------------------------------------------------------------------------------------

DISTRIBUTIONS TO SHAREHOLDERS:
From investment income - net -- (249,747) (3,794) (12,663) (38,982) (17,069)
In excess of investment income - net -- -- (2,722) -- -- --
Tax return of capital (237,164) (152,655) -- -- -- --
- - - - --------------------------------------------------------------------------------------------------------------------------------
Total distributions (237,164) (402,402) (6,516) (12,663) (38,982) (17,069)
- - - - --------------------------------------------------------------------------------------------------------------------------------

CAPITAL SHARE TRANSACTIONS (NOTE 5):
Proceeds from shares sold 647,179 1,176,394 -- 655,611 2,955,293 2,793,880
Reinvestment of distributions 215,588 444,626 6,516 12,864 25,138 14,739
Payments for shares redeemed (7,368,280) (21,316,988) (212,160) (2,501,571) (2,632,486) (1,579,180)
- - - - --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets from
capital share transactions (6,505,513) (19,695,968) (205,644) (1,833,096) 347,945 1,229,439
- - - - --------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net
assets (5,899,608) (18,583,532) (212,106) (1,830,405) 347,945 1,229,439
- - - - --------------------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period
(note 1) 13,776,451 32,359,983 212,106 2,042,511 1,229,939 500
- - - - --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 7,876,843 13,776,451 -- 212,106 1,577,884 1,229,939
- - - - --------------------------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income
(accumulated net investment loss) $ (621,732) (632,506) -- 3,740 -- --
- - - - --------------------------------------------------------------------------------------------------------------------------------
- - - - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* GLOBAL SHORT-TERM FUND WAS LIQUIDATED ON OCTOBER 20, 1995.

** COMMENCEMENT OF OPERATIONS.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

19
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

1 ORGANIZATION
Hercules Funds Inc. (the company) was incorporated on July 29,
1993, and is registered under the Investment Company Act of
1940 (as amended) as a non-diversified, open-end management
investment company, the shares of which are comprised of a
series of six funds: North American Growth and Income Fund,
European Value Fund, Pacific Basin Value Fund, Latin American
Value Fund, World Bond Fund and Money Market Fund (the funds).
The company's articles of incorporation permit the board of
directors to create additional funds in the future. On November
9, 1993 (commencement of operations) the registration statement
for the company's shares became effective under the Securities
Act of 1933. The only transaction of the funds (except Money
Market Fund), prior to commencement of operations was the
initial sale on October 12, 1993, of 1,667 shares of each fund
at $10 per share to Hercules International Management LLC. On
December 13, 1994, the Money Market Fund commenced operations.
The only transaction of the fund prior to commencement of
operations was the sale of 500 shares at $1 per share to,
Hercules International Management LLC. On July 18, 1995,
shareholders approved a change in the funds' investment manager
to Piper Capital Management Incorporated, a subsidiary of Piper
Jaffray Companies Inc. Global Short-Term Fund ceased operations
and liquidated all its net assets on October 20, 1995.
2 SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
Significant accounting policies of the funds are as follows:

Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are
calculated on an identified cost basis. Dividend income is
recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign
securities. Interest income, including level yield amortization
of premium and discount, is accrued daily.

20
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

Net investment income and net realized gains (losses) differ
for financial statement and tax purposes primarily because of
the recognition of certain foreign currency gains (losses) as
ordinary income (loss) for tax purposes, "mark-to-market" of
certain passive foreign investment companies (PFICs), foreign
currency and futures positions for tax purposes, and losses
deferred due to "wash sale" and "straddle" transactions. The
character of distributions made during the year from net
investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the funds.

DISTRIBUTIONS TO SHAREHOLDERS
Dividends to shareholders from net investment income for World
Bond Fund are declared and paid quarterly. For Money Market
Fund, distributions to shareholders from net investment income
are declared daily and paid monthly. For North American Growth
and Income, European Value, Pacific Basin Value and Latin
American Value Funds, dividends from net investment income are
declared and paid annually. Distributions from net realized
gains, if any, will be made on an annual basis for all funds.
Shareholders may elect to have distributions paid in cash or
reinvested at net asset value.

The funds (except Money Market Fund) also may enter into
forward foreign currency exchange contracts for transaction or
position hedging purposes, and in the case of World Bond Fund
for the purpose of enhancing portfolio returns. The net U.S.
dollar value of foreign currency underlying all contractual
commitments held by the funds and the resulting unrealized
appreciation or depreciation, are determined using foreign
currency exchange rates from independent pricing sources. The
funds are subject to the credit risk that the counterparty will
not complete the obligations of the contract.

USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of income, expenses, gains and losses during
the reporting period. Actual results could differ from those
estimates.

21
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

3 INVESTMENT
SECURITY
TRANSACTIONS
(UNAUDITED)
Cost of purchases and proceeds from sales of securities, other
than temporary investments in short-term securities (for all
funds except Money Market Fund) for the six months ended
December 31, 1995, (period from July 1, 1995 to October 20,
1995 for Global Short-Term Fund) were as follows:

<TABLE>
<CAPTION>
NORTH
AMERICAN
GROWTH PACIFIC LATIN GLOBAL
AND EUROPEAN BASIN AMERICAN WORLD SHORT- MONEY
INCOME VALUE VALUE VALUE BOND TERM MARKET
FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
- - - - ----------------------------------------------------------------------------------------------------------------

Purchases $ 1,750,211 8,766,242 7,178,454 11,733,661 14,311,977 -- 8,979,583

Sales proceeds $ 5,724,065 13,077,101 13,629,199 15,031,432 21,031,999 -- 8,821,971
</TABLE>

For the period from July 1, 1995 to December 31, 1995,
brokerage commissions paid to affiliated broker-dealers
amounted to $6,730, $4,860, $10,486 and $1,458 for the North
American Growth and Income Fund, European Value Fund, Pacific
Basin Value Fund and Latin American Value Fund, respectively.
4 FORWARD FOREIGN
CURRENCY CONTRACTS
(UNAUDITED)
On December 31, 1995, the European Value Fund, Pacific Basin
Value Fund and World Bond Fund had open foreign currency
exchange contracts which obligate the funds to deliver or
receive foreign currencies at specified future dates. The
unrealized appreciation (depreciation) on these contracts is
included in the accompanying financial statements. The terms of
the open contracts are as follows:

<TABLE>
<CAPTION>
U.S. $ U.S. $
SETTLEMENT CURRENCY TO BE VALUE AS OF CURRENCY TO BE VALUE AS OF APPRECIATION
FUND DATE DELIVERED 12/31/95 RECEIVED 12/31/95 (DEPRECIATION)
<S> <C> <C> <C> <C> <C> <C>
- - - - ----------------------------------------------------------------------------------------------------------
EUROPEAN 15-Feb-96 3,510,500DEM $2,448,014 2,500,000USD $2,500,000 $ 51,986
VALUE FUND 22-Feb-96 2,841,133ECU 3,625,334 3,694,894USD 3,694,894 69,560
- - - - ----------------------------------------------------------------------------------------------------------
$6,073,348 $6,194,894 $ 121,546
- - - - ----------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------
PACIFIC BASIN 5-Jan-96 32,719,124JPY $ 316,127 317,507USD $ 317,507 $ 1,380
VALUE FUND 22-May-96 376,200,000JPY 3,710,547 4,500,000USD 4,500,000 789,453
22-May-96 378,180,000JPY 3,730,076 4,500,000USD 4,500,000 769,924
- - - - ----------------------------------------------------------------------------------------------------------
$7,756,750 $9,317,507 $1,560,757
- - - - ----------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------
WORLD BOND 22-Jan-96 4,449,318BEF $ 150,991 151,337USD $ 151,337 $ 346
FUND 22-Jan-96 1,222,089DEM 851,276 862,673USD 862,673 11,397
22-Jan-96 449,613USD 449,613 647,443DEM 450,993 1,380
4-Mar-96 885,595USD 885,595 1,274,371DEM 889,551 3,956
4-Mar-96 150,046,521ESP 1,225,570 1,215,345USD 1,215,345 (10,225)
4-Mar-96 768,624GBP 1,189,430 1,177,147USD 1,177,147 (12,283)
4-Mar-96 770,635USD 770,636 503,026GBP 778,422 7,786
3-Apr-96 182,563CAD 133,800 134,494USD 134,494 694
3-Apr-96 836,600DEM 583,973 584,545USD 584,545 572
3-Apr-96 4,276,407DEM 2,985,067 2,992,378USD 2,992,378 7,311
- - - - ----------------------------------------------------------------------------------------------------------
$9,225,951 $9,236,885 $ 10,934
- - - - ----------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------
</TABLE>

BEF - Belgian Franc ESP - Spanish Peseta
CAD - Canadian Dollar GBP - British Pound
DEM - Deutschemark JPY - Japanese Yen
ECU - European Currency Unit USD - United States Dollar

22
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

5 CAPITAL SHARE
TRANSACTIONS
Transactions in shares of each fund for the six months ended
December 31, 1995 (period from July 1, 1995 to October 20, 1995
for Global Short-Term Fund) (unaudited) were as follows:

<TABLE>
<CAPTION>
NORTH
AMERICAN
GROWTH PACIFIC LATIN GLOBAL
AND EUROPEAN BASIN AMERICAN WORLD SHORT- MONEY
INCOME VALUE VALUE VALUE BOND TERM MARKET
FUND FUND FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
- - - - ---------------------------------------------------------------------------------------------------------------

Sold 45,918 161,499 324,986 351,638 63,201 -- 2,955,293
Distribution
Reinvestment 14,343 153,763 34,624 80 21,167 1,061 25,138
Redeemed (494,897) (481,482) (1,076,754) (1,071,368) (732,881) (22,262) (2,632,486)
- - - - ---------------------------------------------------------------------------------------------------------------
Increase (Decrease) (434,636) (166,220) (717,144) (719,650) (648,513) (21,201) 347,945
- - - - ---------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------
</TABLE>

Transactions in shares of each fund for the year ended June 30,
1995 (period from December 13, 1994 to June 30, 1995 for the
Money Market Fund) were as follows:

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- - - - ---------------------------------------------------------------------------------------------------------------

Sold 268,278 399,899 832,267 1,321,613 124,891 66,680 2,793,880
Distribution
Reinvestment 8,127 14,618 42,071 0 46,856 1,306 14,739
Redeemed (725,259) (515,858) (1,201,579) (1,216,683) (2,231,574) (252,893) (1,579,180)
- - - - ---------------------------------------------------------------------------------------------------------------
Increase (Decrease) (448,854) (101,341) (327,241) 104,930 (2,059,827) (184,907) 1,229,439
- - - - ---------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------
</TABLE>

6 FEES AND EXPENSES
The company was managed by Hercules International Management
LLC (the manager), a limited liability company organized under
the laws of Delaware on July 26, 1993. On July 18, 1995,
shareholders approved a change in the funds investment manager
to Piper Capital Management Incorporated, a subsidiary of Piper
Jaffray Companies Inc. The fees paid by the funds to Piper
Capital Management Incorporated will be at the same rates as
those previously paid to Hercules International Management LLC
as described below. Each fund paid the manager a fee for
managing its investment portfolio. Management fees for each
fund (except for Global Short-Term Fund and Money Market Fund)
were paid monthly at an annual rate of 1.00% of average daily
net assets. The fee for the Global Short-Term Fund and Money
Market Fund were paid monthly at an annual rate of .50% of
average daily net assets.

*TOTAL FEE PAID TO SUBADVISERS SHARED EQUALLY.

23
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

Piper Jaffray Inc. (the distributor), a wholly-owned subsidiary
of Piper Jaffray Companies Inc. and an affiliate of the
manager, serves as the distributor of the funds' shares. For
its services as distributor, which include distributing shares
of the funds and for sales-related expenses, the distributor is
entitled to reimbursement each month for its actual expenses
incurred in the distribution and promotion of each fund's
shares pursuant to a Rule 12b-1 Distribution Plan adopted by
each of the funds. Reimbursement to the distributor is computed
separately for each fund and may not exceed 0.70% per annum of
the average daily net assets of North American Growth and
Income, European Value, Pacific Basin Value and Latin American
Value Funds, 0.50% with respect to average daily net assets of
World Bond Fund and 0.30% with respect to average daily net
assets of Global Short-Term Fund. For the year ended June 30,
1996, Piper Jaffray Inc. voluntarily agreed to limit the
reimbursement fee to an annual rate of 0.50% for North American
Growth and Income, European Value, Pacific Basin Value, and
Latin American Value Funds, 0.30% for World Bond Fund and 0.25%
for Global Short-Term Fund. Effective June 19, 1995, the
company's board of directors discontinued payments under the
Rule 12b-1 Distribution Plan for the Money Market Fund.

For the period, the manager and distributor have voluntarily
limited total expenses on a per annum basis to 2.00% of average
daily net assets of North American Growth and Income, European
Value, Pacific Basin Value and Latin American Value Funds,
1.80% of average daily net assets of World Bond Fund, 1.25% of
average daily net assets of Global Short-Term Fund, and 1.00%
of average daily net assets of Money Market Fund.
7 FUTURES CONTRACTS
(UNAUDITED)
The funds pledge securities or cash when making initial margin
deposits on futures contracts. On December 31, 1995, the World
Bond Fund had the following open futures contracts:

<TABLE>
<CAPTION>
COLLATERAL
PLEDGED TO
COVER MARKET
LONG (L) NUMBER INITIAL VALUE OF NET
COUNTRY OF OR TYPE OF CONTRACT OF MARGIN OPEN UNREALIZED
DENOMINATION SHORT (S) AND MATURITY CONTRACTS DEPOSITS CONTRACTS GAIN
<S> <C> <C> <C> <C> <C> <C> <C>
LIFFE German
WORLD BOND Bund Futures
FUND Germany L September 1995 2 $11,331 $345,771 $ 2,869

LIFFE BTP
futures
Italy L March 1996 3 6,261 408,060 13,574
$17,592 $753,831 $16,443
</TABLE>

8 CAPITAL LOSS
CARRYOVERS
For federal income tax purposes, North American Growth and
Income Fund, Pacific Basin Value Fund, Latin American Value
Fund and World Bond Fund had capital loss carryovers at June
30, 1995 of $838,953; $1,546,411; $10,643,620 and $338,380,
respectively, which, if not offset by subsequent capital gains
will expire in 2002 through 2004. It is unlikely the board of
directors will authorize a distribution of any net realized
capital gains until the available capital loss carryovers have
been offset or expire.

24
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
NORTH
AMERICAN
GROWTH AND
INCOME FUND
---------------------------------------------
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C> <C>
- - - - -------------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of period.............. $ 9.92 9.46 10.00
- - - - -------------------------------------------------------------------------------------------------
Operations:
Investment income - net**....................... 0.09 0.17 0.04
Net realized and unrealized gains (losses)...... 0.92 0.33 (0.58)
- - - - -------------------------------------------------------------------------------------------------
Total from operations............................. 1.01 0.50 (0.54)
- - - - -------------------------------------------------------------------------------------------------
Distributions:
From investment income - net.................... -- (0.04) --
In excess of investment income - net............ (0.18) -- --
- - - - -------------------------------------------------------------------------------------------------
Total distributions............................... (0.18) (0.04) --
- - - - -------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $10.75 9.92 9.46
- - - - -------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... 10.15% 5.36% (5.40%)
Net assets, end of period (000s omitted).......... $9,659 13,217 16,856
Ratio of expenses to average daily net assets++... 2.04%+ TRIANGLE 2.00% 2.00%+
Ratio of net investment income to average daily
net assets++.................................... 1.82%+ 1.84% 0.87%+
Portfolio turnover rate (excluding short-term
securities)..................................... 18% 52% 23%
</TABLE>

* COMMENCEMENT OF OPERATIONS

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

*** TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE
DURING THE PERIOD AND ASSUMES REINVESTMENT OF ALL
DISTRIBUTIONS.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY WAIVED
OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE FUNDS
PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES AND NET
INVESTMENT INCOME (LOSS) TO AVERAGE DAILY NET ASSETS WOULD
HAVE BEEN AS FOLLOWS:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C>
-------------------------------------------
4.04%/(0.18%) 3.39%/0.45% 3.41%/(0.54%)
</TABLE>

TRIANGLE FOR THE SIX MONTHS ENDED 12/31/95, THE RATIO OF
EXPENSES TO AVERAGE DAILY NET ASSET INCLUDES EXPENSES
PAID INDIRECTLY BY THE FUND. PRIOR PERIOD EXPENSE
RATIOS HAVE NOT BEEN ADJUSTED.

25
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
EUROPEAN
VALUE FUND
---------------------------------------------
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C> <C>
- - - - -------------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of period.............. $ 11.10 9.86 10.00
- - - - -------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net**................ (0.02) 0.12 0.02
Net realized and unrealized gains (losses)...... 0.66 1.21 (0.16)
- - - - -------------------------------------------------------------------------------------------------
Total from operations............................. 0.64 1.33 (0.14)
- - - - -------------------------------------------------------------------------------------------------
Distributions:
From investment income - net.................... (0.15) (0.03) --
In excess of investment income-net.............. (0.02) -- --
From net realized gains......................... (1.08) (0.06) --
- - - - -------------------------------------------------------------------------------------------------
Total distributions............................... (1.25) (0.09) --
- - - - -------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $ 10.49 11.10 9.86
- - - - -------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... 5.82% 13.52% (1.40%)
Net assets, end of period (000s omitted).......... $14,823 17,520 16,574
Ratio of expenses to average daily net assets++... 2.02%+ TRIANGLE 2.00% 2.00%+
Ratio of net investment income (loss) to average
daily net assets++.............................. 0.38%+ 1.10% 0.47%+
Portfolio turnover rate (excluding short-term
securities)..................................... 58% 131% 60%
</TABLE>

* COMMENCEMENT OF OPERATIONS

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

*** TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE
DURING THE PERIOD AND ASSUMES REINVESTMENT OF ALL
DISTRIBUTIONS.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY WAIVED
OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE FUNDS
PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES AND NET
INVESTMENT (LOSS) TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN AS FOLLOWS:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C>
---------------------------------------------
3.51%/(1.87%) 3.21%/(0.11%) 3.25%/(0.78%)
</TABLE>

TRIANGLE FOR THE SIX MONTHS ENDED 12/31/95, THE RATIO OF
EXPENSES TO AVERAGE DAILY NET ASSETS INCLUDES
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD
EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.

26
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
PACIFIC BASIN
VALUE FUND
---------------------------------------------
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C> <C>
- - - - -------------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of period.............. $ 9.02 10.68 10.00
- - - - -------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net**................ (0.06) (0.10) (0.04)
Net realized and unrealized gains (losses)...... 1.07 (1.45) 0.72
- - - - -------------------------------------------------------------------------------------------------
Total from operations............................. 1.01 (1.55) 0.68
- - - - -------------------------------------------------------------------------------------------------
Distributions:
From net realized gains......................... -- (0.11) --
In excess of net realized gains................. (0.12) -- --
- - - - -------------------------------------------------------------------------------------------------
Total distributions............................... (0.12) (0.11) --
- - - - -------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $ 9.91 9.02 10.68
- - - - -------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... 11.21% (14.63%) 6.80%
Net assets, end of period (000s omitted).......... $27,532 31,527 40,828
Ratio of expenses to average daily net assets++... 2.05%+ TRIANGLE 2.00% 2.00%+
Ratio of net investment loss to average daily net
assets++........................................ (1.16)%+ (1.06)% (0.96%)+
Portfolio turnover rate (excluding short-term
securities)..................................... 24% 68% 39%
</TABLE>

* COMMENCEMENT OF OPERATIONS

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

*** TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE
DURING THE PERIOD AND ASSUMES REINVESTMENT OF ALL
DISTRIBUTIONS.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY WAIVED
OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE FUNDS
PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES AND NET
INVESTMENT (LOSS) TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN AS FOLLOWS:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C>
---------------------------------------------
2.78%/(1.89%) 2.53%/(1.59%) 2.36%/(1.32%)
</TABLE>

TRIANGLE FOR THE SIX MONTHS ENDED 12/31/95, THE RATIO OF
EXPENSES TO AVERAGE DAILY NET ASSETS INCLUDES
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD
EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.

27
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
LATIN AMERICAN
VALUE FUND
---------------------------------------------
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C> <C>
- - - - -------------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of period.............. $ 7.20 9.14 10.00
- - - - -------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net**................ 0.01 -- 0.01
Net realized and unrealized gains (losses)...... (0.13) (1.94) (0.87)
- - - - -------------------------------------------------------------------------------------------------
Total from operations............................. (0.12) (1.94) (0.86)
- - - - -------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $ 7.08 7.20 9.14
- - - - -------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... (1.67%) (21.23%) (8.60%)
Net assets, end of period (000s omitted).......... $17,140 22,624 27,750
Ratio of expenses to average daily net assets++... 2.00%+ TRIANGLE 2.00% 2.00%+
Ratio of net investment income (loss) to average
daily net assets++.............................. 0.22%+ (0.03)% 0.14%+
Portfolio turnover rate (excluding short-term
securities)..................................... 60% 161% 78%
</TABLE>

* COMMENCEMENT OF OPERATIONS

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

*** TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE
DURING THE PERIOD AND ASSUMES REINVESTMENT OF ALL
DISTRIBUTIONS.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY WAIVED
OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE FUNDS
PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES AND NET
INVESTMENT (LOSS) TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN AS FOLLOWS:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C>
---------------------------------------------
3.27%/(1.05%) 3.47%/(1.50%) 3.10%/(0.96%)
</TABLE>

TRIANGLE FOR THE SIX MONTHS ENDED 12/31/95, THE RATIO OF
EXPENSES TO AVERAGE DAILY NET ASSETS INCLUDES
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD
EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.

28
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
WORLD BOND
FUND
---------------------------------------------
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C> <C>
- - - - -------------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of period.............. $ 9.82 9.35 10.00
- - - - -------------------------------------------------------------------------------------------------
Operations:
Investment income (loss) - net**................ 0.25 0.45 0.12
Net realized and unrealized gains (losses)...... 0.66 0.22 (0.71)
- - - - -------------------------------------------------------------------------------------------------
Total from operations............................. 0.91 0.67 (0.59)
- - - - -------------------------------------------------------------------------------------------------
Distributions:
From investment income - net.................... -- (0.09) (0.06)
Tax return of capital........................... (0.28) (0.11) --
- - - - -------------------------------------------------------------------------------------------------
Total distributions............................... (0.28) (0.20) (0.06)
- - - - -------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $10.45 9.82 9.35
- - - - -------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... 9.36% 7.24% (5.96%)
Net assets, end of period (000s omitted).......... $7,877 13,776 32,360
Ratio of expenses to average daily net assets++... 1.99%+ TRIANGLE 1.80% 1.80%+
Ratio of net investment income to average daily
net assets++.................................... 4.93%+ 4.76% 2.63%+
Portfolio turnover rate (excluding short-term
securities)..................................... 168% 501% 291%
</TABLE>

* COMMENCEMENT OF OPERATIONS

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

*** TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE
DURING THE PERIOD AND ASSUMES REINVESTMENT OF ALL
DISTRIBUTIONS.

+ ADJUSTED TO AN ANNUAL BASIS.

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD FROM
12/31/95 ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C>
---------------------------------------
4.06%/2.86% 2.53%/4.03% 2.03%/2.40%
</TABLE>

TRIANGLE FOR THE SIX MONTHS ENDED 12/31/95, THE RATIO OF
EXPENSES TO AVERAGE DAILY NET ASSETS INCLUDES
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD
EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.

29
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
GLOBAL
SHORT-TERM
FUND
---------------------------------------------
PERIOD
ENDED YEAR PERIOD FROM
10/20/95# ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C> <C>
- - - - -------------------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of period.............. $ 10.00 9.91 10.00
- - - - -------------------------------------------------------------------------------------------------
Operations:
Investment income - net**....................... 0.00 0.29 0.08
Net realized and unrealized losses.............. (0.01) (0.10) (0.11)
- - - - -------------------------------------------------------------------------------------------------
Total from operations............................. (0.01) 0.19 (0.03)
- - - - -------------------------------------------------------------------------------------------------
Distributions:
From investment income - net.................... (2.24) (0.10) (0.06)
In excess of investment income - net............ (1.61) -- --
Payments upon liquidation of the fund........... (6.14) -- --
- - - - -------------------------------------------------------------------------------------------------
Total distributions............................... (9.99) (0.10) (0.06)
- - - - -------------------------------------------------------------------------------------------------
Net asset value, end of period.................... $ -- 10.00 9.91
- - - - -------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... (0.10%) 1.89% (0.33%)
Net assets, end of period (000s omitted).......... $ -- 212 2,043
Ratio of expenses to average daily net assets++... 3.29%+ TRIANGLE 1.25% 1.25%+
Ratio of net investment income to average daily
net assets++.................................... 0.20%+ 2.87% 1.70%+
Portfolio turnover rate (excluding short-term
securities)..................................... -- 407% 362%
</TABLE>

# GLOBAL SHORT-TERM FUND WAS LIQUIDATED ON OCTOBER 20, 1995.

* COMMENCEMENT OF OPERATIONS

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

*** TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE
DURING THE PERIOD AND ASSUMES REINVESTMENT OF ALL
DISTRIBUTIONS.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY WAIVED
OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE FUNDS
PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES AND NET
INVESTMENT (LOSS) TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN AS FOLLOWS:

<TABLE>
<CAPTION>
PERIOD
ENDED YEAR PERIOD FROM
10/20/95# ENDED 11/9/93* TO
(UNAUDITED) 6/30/95 6/30/94
<S> <C> <C>
---------------------------------------------------
198.54%/(195.05%) 17.97%/(13.85%) 6.25%/(3.30%)
</TABLE>

TRIANGLE FOR THE SIX MONTHS ENDED 12/31/95, THE RATIO OF
EXPENSES TO AVERAGE DAILY NET ASSETS INCLUDES
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD
EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.

30
<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

<TABLE>
<CAPTION>
MONEY
MARKET
FUND
---------------------------------
SIX MONTHS PERIOD FROM
ENDED 12/13/94*
12/31/95 TO
(UNAUDITED) 6/30/95
<S> <C> <C>
- - - - -------------------------------------------------------------------------------------
PER SHARE DATA
Net asset value, beginning of period.............. $ 1.00 1.00
- - - - -------------------------------------------------------------------------------------
Operations:
Investment income - net**....................... 0.02 0.02
- - - - -------------------------------------------------------------------------------------
Distributions:
From investment income - net.................... (0.02) (0.02)
- - - - -------------------------------------------------------------------------------------
Net asset value, end of period.................... $ 1.00 1.00
- - - - -------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------
SELECTED INFORMATION
Total return***................................... 2.33% 2.62%
Net assets, end of period (000s omitted).......... $1,578 1,230
Ratio of expenses to average daily net assets++... 1.02%+ TRIANGLE 1.00%+
Ratio of net investment income to average daily
net assets++.................................... 4.62%+ 4.53%+
Portfolio turnover rate (excluding short-term
securities)..................................... N/A N/A
</TABLE>

* COMMENCEMENT OF OPERATIONS

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

*** TOTAL RETURN IS BASED ON THE CHANGE IN NET ASSET VALUE
DURING THE PERIOD AND ASSUMES REINVESTMENT OF ALL
DISTRIBUTIONS.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY WAIVED
OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE FUNDS
PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES AND NET
INVESTMENT (LOSS) TO AVERAGE DAILY NET ASSETS WOULD HAVE
BEEN AS FOLLOWS:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD FROM
12/31/95 12/13/94* TO
(UNAUDITED) 6/30/95
<S> <C>
--------------------------------
10.66%/(5.02%) 25.44%/(19.91%)
</TABLE>

TRIANGLE FOR THE SIX MONTHS ENDED 12/31/95, THE RATIO OF
EXPENSES TO AVERAGE DAILY NET ASSETS INCLUDES
EXPENSES PAID INDIRECTLY BY THE FUND. PRIOR PERIOD
EXPENSE RATIOS HAVE NOT BEEN ADJUSTED.

31
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES NORTH AMERICAN GROWTH AND INCOME FUND
DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ -----------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCKS (95.6 %):
CANADA (17.9%)
Agrium Incorporated - chemicals....... 2,400 $ 36,051
Anderson Exploration - oil and gas.... 6,000(b) 61,550
Avenor (installment receipt) - forest
products............................. 1,900 32,543
Bank of Montreal - banking and
financial services................... 5,100 115,845
Bank of Nova Scotia - banking and
financial services................... 4,600 100,275
Barrick Gold - mining................. 3,000 79,135
BCE - telecommunications.............. 1,700 58,857
BCE Mobile Communications -
telecommunications................... 1,000(b) 33,797
Bombardier Class B - diversified
industrials and conglomerates........ 6,300 83,092
Cameco - metal products............... 900 33,468
Canadian Occidential Petroleum - oil
and gas.............................. 3,200 104,928
Canadian Pacific - diversified holding
company.............................. 3,400 61,971
Delrina - computer software........... 1,647(b) 37,713
Diamond Field Resources - mining...... 4,100 77,358
Euro-Nevada Mining - mining........... 2,200 80,198
Falconbridge (installment receipt) -
mining............................... 3,300 28,714
Imasco - tobacco products............. 3,400 66,019
Linamar - automobile parts............ 3,600 60,670
Lowen Group - funeral services........ 900 22,669
Noranda - metal products.............. 3,000 61,825
Petro-Canada (installment receipt) -
oil and gas.......................... 13,300 76,745
Royal Bank of Canada - banking and
financial services................... 4,100 93,506
Royal Plastics Group - construction
and construction materials........... 4,200(b) 60,780
Seagram - brewers and distillers...... 1,500 51,658
Sherritt - chemicals.................. 4,100 52,949
Sherritt International - mining....... 3,485(b) 15,960
Summit Resources - oil and gas........ 6,700 38,047
Thompson - printing and publishing.... 4,200 58,472
Wascana Energy - oil and gas.......... 800(b) 7,547
Western Star Truck Holdings -
automobile........................... 1,800 36,930
-----------
1,729,272
-----------
MEXICO (19.4%)
ALFA Class A - diversified industrial
and conglomerates.................... 8,000 102,375
Apasco - construction and construction
materials............................ 10,000 40,947
Bimbo ACP - food and beverage......... 11,000 44,971
Cementos de Mexico CPO (Cemex) -
construction and construction
materials............................ 22,000 73,095
Cifra Class C - retail................ 25,000(b) 25,308
Controladora Comercial Mexicana Class
B - retail........................... 20,000(b) 12,875
Corporation GEO Series B - real
estate............................... 32,200 94,448
Cydsa Series A - diversified holding
company.............................. 20,000 47,242
Desc Sociedad de Fomento Industrial
Class B - diversified industrials and
conglomerates........................ 19,000(b) 70,156

<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ -----------
<S> <C> <C>
Desc Sociedad de Fomento Industrial
Class C - diversified industrials and
conglomerates........................ 14,000(b) $ 49,968
Embotelladores del Valle de Anahuac -
food and beverage.................... 30,000(b) 27,255
Empresas ICA Sociedad Controladora -
construction and construction
materials............................ 4,000 41,791
Empresas La Moderna Series A - tobacco
products............................. 14,000(b) 53,965
Fomento Economico Mexicano (Femsa)
Class B - food and beverage.......... 10,000 23,102
Gruma Class B - food and beverage..... 12,000 33,796
Grupo Industrial Durango Class A -
forest products...................... 11,000(b) 35,263
Grupo Carso Class A1 - diversified
holding company...................... 6,000(b) 32,005
Grupo Elektra CPO - retail............ 14,000 60,688
Grupo Embotelladoras de Mexico (Gemex)
CPO - food and beverage.............. 24,000 40,182
Grupo Financiero Bancomer Class B -
banking and financial services....... 36,000 10,139
Grupo Financiero Banorte Class B -
financial services................... 13,000 11,912
Grupo Industrial Maseca (Maseca) Class
B - food and beverage................ 32,000 19,520
Grupo Industrial Minera Mexico Class B
- mining............................. 10,000(b) 42,440
Grupo Modelo Class C (Gmodelo) -
brewers and distillers............... 16,000 74,549
Grupo Simec Class B - metal
products............................. 40,000(b) 13,238
Indl Sanluis CPO - diversified
industrials and conglomerate......... 35,000 179,429
Industrias Penoles - mining........... 33,000 136,197
Kimberly Clark de Mexico Class A -
forest products...................... 2,000 30,240
Nadro Class L - consumer goods........ 15,000 50,616
Sigma Alimentos - tobacco products.... 8,000 50,876
Sistema Argos - Series B - food and
beverage............................. 75,000 38,254
Tablex Class 2 - food and beverage.... 33,293(b) 49,691
Telefonos de Mexico Class L (Telmex) -
telecommunications................... 45,000 71,836
Transportacion Maritima Mexicana Class
A - transportation................... 10,000(b) 75,925
Tubos de Acero de Mexico - metal
products............................. 12,000(b) 87,528
Vitro - diversified industrials and
conglomerates........................ 12,000 18,378
-----------
1,870,200
-----------
UNITED STATES (58.3%)
A T & T Corporation -
telecommunications................... 2,300 148,925
Air Products and Chemicals -
chemicals............................ 2,000 105,500
Airtouch Communications -
telecommunications................... 3,500(b) 98,875
American Home Products -
pharmaceuticals...................... 100 9,700
Baker Hughes - oil and gas............ 3,700 90,188
BankAmerica - banking and financial
services............................. 2,900 187,775
BellSouth - telecommunications........ 4,100 178,350
Boeing - aerospace.................... 2,000 156,750
Bristol-Myers Squibb -
pharmaceuticals...................... 600 51,525
Burlington Northern -
transportation....................... 1,400 109,200
Burlington Resources - oil and gas.... 2,100 82,425
</TABLE>

32
<PAGE>
----------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES NORTH AMERICAN GROWTH AND INCOME FUND
DECEMBER 31, 1995 (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ -----------
<S> <C> <C>
Coca-Cola Company - food and
beverage............................. 1,800 $ 133,650
DSC Communications - telecommunica-
tions................................ 1,600(b) 59,000
Du Pont (E.I.) De Nemours -
chemicals............................ 1,800 125,775
Emerson Electric - electronics........ 1,300 106,275
Enron - oil and gas................... 2,800 106,750
Exxon - oil and gas................... 2,200 176,275
Federal National Mortgage Association
- financial services................. 1,500 186,188
Fluor - engineering................... 1,800 118,800
Ford Motor Company - automobile....... 3,500 101,500
GAP - retail.......................... 1,300 54,600
General Electric - electronics........ 2,900 208,800
General Instrument - communications... 2,700(b) 63,113
General Motors - automobile........... 1,400 74,025
General Motors Class E - computer
software............................. 2,200 114,400
GTE - telecommunications.............. 2,700 118,800
H & R Block - financial services...... 3,000 121,500
Home Depot - retail................... 3,000 143,625
Intel - computer hardware............. 2,000 113,500
International Paper - forest
products............................. 3,200 121,200
Marsh and McLennan - insurance........ 1,400 124,250
McDonald's - food and beverage........ 2,600 117,325
Medtronic - health care............... 2,000 111,750
Merck and Company - pharmaceuticals... 2,900 190,672
Minnesota Mining and Manufacturing
(3M) - diversified industrial and
conglomerates........................ 2,300 152,375
Morton International - chemicals...... 4,200 150,675
Norwest Corporation - banking and fi-
nancial services..................... 4,600 151,800
Philip Morris - food and beverage..... 1,000 90,500
Procter & Gamble - consumer goods..... 2,400 199,200
Royal Dutch Petroleum ADR - oil and
gas.................................. 900 127,013
Schlumberger - oil and gas............ 1,700 117,725
Service Corporation International -
funeral services..................... 2,800 123,200
Tandy - retail........................ 2,000 83,000
Texaco - oil and gas.................. 800 62,800
The Limited - retail.................. 3,100 53,863
United Healthcare - health care....... 2,000 131,000
Viacom Class B - communications....... 68(b) 3,222
Wisconsin Energy - utilities.......... 3,500 107,188
</TABLE>

<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Name of Issuer Amount Value (a)
- - - - ------------------------------------------ ------------ -----------
<S> <C> <C>
WMX Technonogies - environmental con-
trol................................. 2,200 $ 65,725
-----------
5,630,272
-----------
Total Common Stocks
(cost: $8,001,551)................... 9,229,744
-----------
BONDS (.8%):
MEXICO (.8%)
Grupo Financiero Bancomer 95-2 (New
Peso), 57.46%, due 4/28/02........... 598,800(c) 77,910
-----------
Total Bonds
(cost: $98,554)...................... 77,910
-----------
SHORT-TERM SECURITIES (2.8%):
MEXICO (2.8%)
Bancomer (New Peso), 47.50%, due
1/3/96............................... 2,107,659(c) 273,544
-----------

Total Short-Term Securities
(cost: $276,777)..................... 273,544
-----------

Total Investments in Securities
(cost: $8,376,882)(d)................ $9,581,198
-----------
-----------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(b) PRESENTLY NON-INCOME PRODUCING.
(c) VALUE STATED IN U.S. DOLLARS, PRINCIPAL AMOUNT STATED IN THE CURRENCY
INDICATED.
(d) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION........ $ 1,818,728
GROSS UNREALIZED DEPRECIATION........ (614,412)
-----------
NET UNREALIZED APPRECIATION.......... $ 1,204,316
-----------
-----------
</TABLE>

33
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES EUROPEAN VALUE FUND
DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCKS (92.2%):
AUSTRIA (2.2%)
Austria Mikro Systeme International -
electronics.......................... 180 $ 29,117
Boehler Uddeholm - metal products..... 375(b) 28,568
Burgenland Holding - utilities........ 650 26,688
BWT - environmental control........... 150 15,360
EA-Generali - insurance............... 200 59,758
EVN Energie-Versorgung
Niederoesterreich - utilities........ 100 13,703
Flughafen Wien - air transportation... 475 31,956
Mayr-Melnhof Karton - forest
products............................. 450 22,483
VA Technologie - engineering.......... 225 28,494
Voest-Alpine Stahl - metal products... 500(b) 14,296
Vogel & Noot Waermetechnik -
engineering.......................... 350(b) 7,791
Wienerberger Baustoffindustrie -
construction and construction
materials............................ 96 18,996
Wolford - textiles.................... 175 27,529
------------
324,739
------------
BELGIUM (1.5%)
Electrabel - utilities................ 310 73,492
Fortis - insurance.................... 680 82,447
Kredietbank - banking and financial
services............................. 220 59,979
------------
215,918
------------
CZECH REPUBLIC (2.4%)
Elektrarny Opatovice - utilities...... 800(b) 95,852
Komercni Banka - banking and financial
services............................. 1,700 91,484
Severoceske Doly - mining............. 4,900(b) 78,831
SPT Telekom - telecommunications...... 900(b) 85,052
------------
351,219
------------
DENMARK (1.8%)
Den Danske Bank - banking and
financial services................... 700 48,202
Jacob Holm and Sonner Class B -
textiles............................. 497(b) 67,017
Novo Nordisk - pharmaceuticals........ 270 36,893
Scandinavian Mobility International -
health care.......................... 2,100(b) 50,216
Tele Danmark Class B -
telecommunications................... 1,200 65,372
------------
267,700
------------
FINLAND (1.9 %)
Aspoyhtyma - electronics.............. 2,460 92,020
Cultor - food and beverage............ 1,100 45,438
Nokia - telecommunications............ 2,740 108,153
Tietotehdas Class B - computer
software............................. 1,400 45,301
------------
290,912
------------
FRANCE (10.6%)
Accor - hotels, leisure and
entertainment........................ 600 77,530
Alcatel Alsthom -
telecommunications................... 685 58,944
Assurances Generales de France -
banking and financial services....... 1,200 40,110
AXA - insurance....................... 1,200 80,709
BIC - consumer goods.................. 500 50,749
Casino Guichard-Perrachon - retail.... 2,100 60,819
Compagnie Financiere de Paribas -
financial services................... 1,025 56,091
Credit Commercial de France - banking
and financial services............... 1,550 78,945
Credit Local de France - banking and
financial services................... 750 59,921

<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------- ------------
<S> <C> <C>
Elf Aquitaine - oil and gas........... 1,300 $ 95,596
Groupe Danone - food and beverage..... 150 24,702
Groupe Poliet - construction and
construction materials............... 875 70,942
Lafarge - construction and
construction materials............... 1,125 72,340
Lyonnaise des Eaux-Dumez -
environmental control................ 1,110 106,668
Nord Est - diversified holding
company.............................. 3,750 86,671
Pernod Richard - brewers and
distillers........................... 950 53,885
Primagaz Cie - oil and gas............ 450 35,677
PSA Peugeot Citroen - automobile and
automobile parts..................... 575 75,706
Schneider - electronics............... 2,100 71,648
Societe Eurafrance - financial
services............................. 230 77,112
Societe Generale - banking and
financial services................... 600 73,983
Union Financiere de France Banque -
financial services................... 1,175 97,707
Usinor Sacilor - metal products....... 4,900(b) 64,015
------------
1,570,470
------------
GERMANY (10.0%)
Adidas - consumer goods............... 1,750(b) 92,221
Allianz Holding - insurance........... 96 188,191
Altana - pharmaceuticals.............. 175 101,723
Bayer - chemicals..................... 375 99,408
Bayerische Vereinsbank - banking and
financial services................... 3,000 89,802
Deutsche Bank - banking and financial
services............................. 2,100 99,554
Hoechst - chemicals................... 400 108,597
Kiekert - automobile parts............ 1,600(b) 95,231
Merck KGaA - pharmaceuticals.......... 2,300(b) 93,265
Preussag - diversified holding
company.............................. 200 56,248
SGL Carbon - chemicals................ 1,350(b) 105,256
Siemens - electronics................. 250 137,139
Tarkett - construction and
construction material................ 2,700(b) 58,267
VEBA - utilities...................... 2,600 111,131
Volkswagen - automobile............... 150 50,226
------------
1,486,259
------------
ITALY (3.2%)
Istituto Mobiliare Italiano - banking
and financial services............... 11,000 69,270
Istituto Nazional delle Assicurazioni
- insurance.......................... 47,000 62,302
Italgas - utilities................... 20,100 61,135
Olivetti Group - computer software.... 53,200 42,647
Pininfarina - automobile.............. 4,600 39,975
SME Meridonale - food and beverage.... 31,702 64,781
Societa Partecipazioni Finanziare
(SOPAF) - financial services......... 69,200 77,567
Unicem - construction and construction
materials............................ 10,000 53,841
------------
471,518
------------
NETHERLANDS (7.0%)
Assurantieconcern Stad Rotterdam -
insurance............................ 4,900 145,659
Furgo - environmental control......... 11,410 122,757
Gist-Brocades - pharmaceuticals....... 5,660 168,251
Internationale Nederlanden Grope (ING)
- financial services & insurance..... 1,900 126,667
Philips Electronics - electronics..... 3,500 126,244
Polynorm - diversified industrials and
conglomerates........................ 1,250 106,499
</TABLE>

34
<PAGE>
----------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES EUROPEAN VALUE FUND
DECEMBER 31, 1995 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------- ------------
<S> <C> <C>
Royal Dutch Petroleum - oil and gas... 1,690 $ 235,633
------------
1,031,710
------------
NORWAY (1.4%)
Kvaerner - engineering &
construction......................... 1,850 65,364
Orkla Borregaard - diversified
industrials and conglomerate......... 1,710 84,962
UNI Storebrand - insurance............ 11,000(b) 60,727
------------
211,053
------------
PORTUGAL (.6%)
Jornalgeste SGPS - printing and
publishing........................... 4,878(b) 56,948
Tertir-Terminais de Portugal -
transportation....................... 7,800(b) 32,782
------------
89,730
------------
SPAIN (2.0%)
Amper - telecommunications............ 2,800(b) 33,014
Banco Santander - banking and
financial services................... 1,200(b) 60,047
Empresa Nacional Hidroelectrica del
Ribagorzana - utilities.............. 2,830 60,341
Inmobiliaria Urbis - real estate...... 5,977(b) 28,189
Telefonica De Espana -
telecommunications................... 4,100 56,596
Zardoya-Otis - industrial machinery
and and manufacturing................ 500 54,435
------------
292,622
------------
SWEDEN (3.8%)
Althin Medical - health care.......... 4,200 85,408
Ericsson Class B -
telecommunications................... 2,934 57,454
Hoganas Class B - metal products
manufacturing........................ 3,760 109,876
Skandia Forsakrings - insurance....... 3,350 90,578
Sparbanken Sverige - banking and
financial services................... 4,700 59,823
Svenska Handelsbanken Class B -
banking and financial services....... 3,470 69,518
Volvo - automobile.................... 4,460 91,367
------------
564,024
------------
SWITZERLAND (10.3%)
BBC Brown Boveri - diversified holding
company.............................. 85 98,700
Ciba-Geigy Registered -
pharmaceuticals...................... 225 197,899
CS Holding - financial services....... 1,650 169,075
Fust Dipl. Ing Bearer - consumer
goods................................ 240 60,312
Kuoni Reisen Holdings - miscellaneous
services............................. 45 72,140
Oerlikon-Buehrle Holding - diversified
holding company...................... 1,025(b) 83,492
Roche Holdings - pharmaceuticals...... 35 276,755
Sandoz - health care.................. 275 251,646
Swiss Bank Corporation Class B -
financial services................... 300 122,444
Winterthur Schweizerische Registered -
insurance............................ 275 194,454
------------
1,526,917
------------
UNITED KINGDOM (33.5%)
Aegis Group - advertising............. 510,000(b) 298,770
Blue Circle Industries - construction
and construction materials........... 26,100 138,724
British Petroleum - oil and gas....... 35,000 292,757
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------- ------------
<S> <C> <C>
British Telecommunications -
telecommunications................... 46,000 $ 252,703
Cable and Wireless -
telecommunications................... 15,750 112,432
Celltech Group - pharmaceuticals...... 13,900(b) 126,836
Daily Mail and General Trust -
printing and publishing.............. 10,000 179,239
Forte - hotels, leisure and
entertainment........................ 25,000 128,222
General Electric Company plc -
electronics.......................... 26,450 145,715
Glaxo Wellcome - pharmaceuticals...... 14,000 198,792
Grand Metropolitan - food and
beverage............................. 22,500 162,013
Great Universal Stores - retail....... 18,600 197,721
Guardian Royal Exchange - insurance... 20,000 85,662
Guiness - brewing and distillers...... 17,100 125,784
HSBC Holdings - financial services.... 9,000 140,504
International Business Communications
(Holdings) - printing and
publishing........................... 40,000 177,532
Legal & General Group - insurance..... 19,500 202,749
Marks & Spencer - retail.............. 20,000 139,667
Mercury Asset Management Group -
investment company................... 9,400 126,910
Rank Organisation - communications.... 15,000 108,474
Rolls-Royce - aerospace............... 15,000 43,995
Royal Insurance Holdings -
insurance............................ 24,200 143,459
SeaPerfect - food and beverage........ 90,497(b) 112,350
Shell Transport and Trading - oil and
gas.................................. 33,500 442,929
Standard Chartered - banking and
financial services................... 40,000 340,166
Tarmac - construction and construction
materials............................ 31,000 49,551
United Newspapers PLC - printing and
publishing........................... 8,000 68,902
Vendome Luxury Group Units - consumer
goods................................ 17,000 154,331
Vosper Thornycroft Holdings PLC -
diversified manufacturing............ 8,000 101,181
Zeneca Group - pharmaceuticals........ 8,700 168,224
------------
4,966,294
------------
Total Common Stocks
(cost: $12,758,132).................. 13,661,085
------------
PREFERRED STOCKS (2.8%):
GERMANY (2.4%)
Asko Deutsche Kaufhaus - retail....... 75 33,676
Fresenius AG - health care............ 1,750 166,655
Koegel Fahrzeugwerke AG -
automobile........................... 325 65,611
Systeme, Anwendungen, Produkte in der
Datenverarbeitung (SAP) - computer
hardware and software................ 625 94,762
------------
360,704
------------
ITALY (.4%)
Autostrade Concessioni E Construzione-
engineering.......................... 50,000 54,786
------------
Total Preferred Stocks
(cost: $343,950)..................... 415,490
------------
WARRANTS (.2%):
NETHERLANDS (.1%)
International Nederlanden Grope
Warrants - financial services........ 6,600(b) 22,779
------------
UNITED KINGDOM (.1%)
Gartmore Micro Index Trust Warrants -
financial services................... 10,000(b) 4,345
</TABLE>

35
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES EUROPEAN VALUE FUND
DECEMBER 31, 1995 (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Name of Issuer Amount Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
Herald Investment Trust Warrants -
financial services................... 10,000(b) $ 8,535
------------
12,880
------------
Total Warrants
(cost: $26,474)...................... 35,659
------------
CORPORATE BONDS (.4%):
DENMARK (.4%)
Det Danske Traelastkompagni (Danish
krone), convertible, 5.25%, due
1/1/02............................... 335,000(c) 61,429
------------
Total Corporate Bonds
(cost: $60,443)...................... 61,429
------------
Total Investments in Securities
(cost: $13,188,999)(d)............... $ 14,173,663
------------
------------
</TABLE>

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION........... $ 1,671,007
GROSS UNREALIZED DEPRECIATION........... (686,343)
-----------
NET UNREALIZED APPRECIATION............. $ 984,664
-----------
-----------
</TABLE>

HERCULES PACIFIC BASIN FUND
DECEMBER 31, 1995 (UNAUDITED)

<TABLE>
<CAPTION>
Number of Market Value
Name of Issuer Shares (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCKS (95.2%):
AUSTRALIA (1.7%)
National Australia Bank - banking and
financial services................... 36,000 $ 323,542
Wesfarmers - chemicals................ 25,000 153,007
------------
476,549
------------
HONG KONG (14.2%)
China Light & Power - utilities....... 55,000 253,217
Dao Heng Bank Group - banking and
financial services................... 175,000 629,163
Esprit Asia Holdings - retail......... 1,220,000 418,105
Giordano International - retail....... 500,000 426,770
Hutchison Whampoa - diversified
holding company...................... 100,000 609,117
New World Infrastructure - diversified
industrials and conglomerate......... 160,000(b) 306,240
Sung Hung Kai Properties - real
estate............................... 50,000 408,988
Wharf Holdings - real estate.......... 175,000 582,768
Yizherg Chemical Fibre Company -
textiles............................. 1,200,000 270,029
------------
3,904,397
------------
INDIA (1.2%)
Hindalco Industries - metal
products............................. 10,000(b) 340,000
------------
INDONESIA (1.6%)
Gadjah Tunggal - industrial
manufacturing........................ 482,000 268,773
Supreme Cable Manufacturing -
industrial manufacturing............. 133,500 179,538
------------
448,311
------------
JAPAN (57.5%)
Daimaru - retail...................... 100,000 772,947
Dainippon Ink and Chemical -
chemicals............................ 125,000 580,918
DDI Corporation -
telecommunications................... 55 425,121
Denki Kagaku Kogyo K.K. - chemicals... 115,000(b) 416,667
Dowa Mining - mining.................. 182,000 875,710
Ichiyoshi Securities - financial
services............................. 150,000 1,014,493
Kobe Steel - metal products........... 220,000(b) 678,068
Kumagai Gumi Company - engineering.... 185,000 741,787
Maeda Road Construction - construction
and construction materials........... 30,000 553,623
Mitsubishi Heavy Industries -
industrial machinery and
manufacturing........................ 88,000 699,749
Mitsui Fudosan - real estate.......... 70,000 858,937
Mori Seiki - industrial machinery and
manufacturing........................ 27,000 607,826
Murata Manufacturing - electronics.... 20,000 734,300
Nippon Telegraph and Telephone -
telecommunications................... 45 363,043
Nissha Printing - printing and
publishing........................... 37,000 546,957
Okuma - industrial machinery and
manufacturing........................ 80,000(b) 745,894
Sony Music Entertainment - consumer
goods................................ 15,900 829,565
Sumitomo Bank - financial services.... 30,000 634,783
Sumitomo Trust and Banking - financial
services............................. 73,000 1,029,758
TOA - engineering..................... 84,000 616,812
Tokyo Steel Manufacturing - metal
products............................. 33,000 605,797
</TABLE>

36
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES PACIFIC BASIN VALUE FUND
DECEMBER 31, 1995 (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
Topre - automobile parts.............. 92,000 $ 728,889
Yaskawa Electric - electronics........ 165,000(b) 776,377
------------
15,838,021
------------
MALAYSIA (4.6%)
Genting - hotels, leisure and
entertainment........................ 45,000 375,738
Telekom Malaysia -
telecommunications................... 54,000 421,111
YTL - construction and construction
materials............................ 75,000 472,627
------------
1,269,476
------------
PAKISTAN (.5%)
Pakistan Telecommunications -
telecommunications................... 1,500(b) 130,500
------------
PHILIPPINES (1.1%)
C & P Homes - real estate............. 425,000(b) 311,904
------------
SINGAPORE (4.4%)
City Developments - real estate....... 80,400 585,533
Fraser and Neave - food and
beverage............................. 25,000 318,179
Overseas-Chinese Banking Corporation -
banking and financial services....... 25,000 312,876
------------
1,216,588
------------
SOUTH KOREA (2.8%)
Korea 1990 Trust - closed-end fund.... 75(b) 375,000
Korea International Trust IDR -
closed-end fund...................... 3 157,500
Samsung Electronics - 1/2 Voting
Shares - electronics................. 39(b) 2,101
Samsung Electronics GDS - 1/2 Voting
Shares - electronics................. 121(b) 11,616
Samsung Electronics GDS - 1/2 Non-
Voting Shares - electronics.......... 2,968 190,694
Samsung Electronics GDS -
electronics.......................... 202(b) 19,392
------------
756,303
------------
TAIWAN (1.0%)
ROC Taiwan Fund - closed-end fund..... 25,000 262,500
------------
THAILAND (4.6%)
Electricity Generating (Egcomp) -
utilities............................ 140,000 465,895
</TABLE>

<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Name of Issuer Amount Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>
Finance One Compnay - financial
services............................. 30,000 $ 198,500
Siam Cement Company - construction and
construction materials............... 5,000 264,831
Sino Thai Engineering and Construction
- construction and construction
materials............................ 20,000 146,884
Thai Farmers Bank - banking and finan-
cial services........................ 20,000 185,949
------------
1,262,059
------------
Total Common Stocks
(cost: $26,419,362).................. 26,216,608
------------
CORPORATE BONDS (1.1%):
TAIWAN (1.1%)
Teco Electric and Machinery,
convertible, (U.S. dollar), 2.75%,
due 4/15/04.......................... 400,000(c) 313,500
------------
Total Corporate Bonds
(cost: $400,000)..................... 313,500
------------
Total Investments in Securities
(cost: $26,819,362)(d)............... $ 26,530,108
------------
------------
</TABLE>

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION........... $ 2,129,717
GROSS UNREALIZED DEPRECIATION........... (2,418,971)
-----------
NET UNREALIZED DEPRECIATION............. $ (289,254)
-----------
-----------
</TABLE>

37
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES LATIN AMERICAN VALUE FUND
DECEMBER 31, 1995 (UNAUDITED)

<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ --------------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
COMMON STOCKS (74.3%):
ARGENTINA (11.8%)
Banco del Sud Class B - banking and
financial services................... 19,500(b) $ 144,278
Banco Frances del Rio de la Plata ADR
- banking and financial services..... 16,578 445,534
Interamericana de Automo (Ciadea) -
automobile........................... 57,693(b) 295,921
Inversiones y Representaciones (IRSA)-
real estate.......................... 12,600 321,300
Juan Minetti - construction and
construction materials............... 53,205 178,210
Migor 144A ADR - automobile........... 65,116(b)(d) 154,651
Telefonica de Argentina - ADR -
utilities............................ 17,817 485,513
------------
2,025,407
------------
BRAZIL (7.5%)
Centrais Eletricas Brasileiras
(Electrobras) - utilities............ 1,305,458 353,244
Lojas Americanas - retail............. 17,054,667 371,993
Siderurgica Nacional - metal
products............................. 2,500,000 51,443
Siderurgica Nacional ADR - metal
products............................. 17,917 367,299
Telecomunicacoes Brasileiras
(Telebras) - telecommunications...... 3,415,000 132,110
------------
1,276,089
------------
CHILE (15.2%)
Banco Osorno y La Union ADR - banking
and financial services............... 10,987 152,445
Chile Fund - closed-end fund.......... 22,841 593,866
Chilgener ADR - utilities............. 24,928 623,200
Compania de Telefone Chile ADR -
broadcast, radio and TV.............. 10,291 852,867
Empresa Nacional Elec - ADR -
utilities............................ 16,933 385,226
------------
2,607,604
------------
COLUMBIA (5.2%)
Carulla 144A ADR - retail............. 29,970(d) 202,298
Cemetos Diamante 144A ADR -
construction and construction
materials............................ 20,492(d) 373,979
La Gran Cadena de Almacenes
Colombianos (Cadenalco) 144A ADR -
retail............................... 26,923(d) 316,345
------------
892,622
------------
MEXICO (22.6%)
Cemex - construction and construction
materials............................ 108,300 388,643
Empresas ICA Sociedad Controladora -
engineering.......................... 17,200 176,300
Gruma Class B - food and beverage..... 139,932(b) 394,098
Grupo Carso Class A1 - diversified
holding company...................... 69,779(b) 372,215
Grupo Elektra GDR - retail............ 24,300 212,625
Grupo Financiero Bancomer Class B -
banking and financial services....... 1,275,300(b) 359,170
Grupo Financiero Banorte Class B -
financial services................... 381,600(b) 349,656
Grupo Modelo Class C (Gmodelo) - food
and beverage......................... 96,475 449,507
Grupo Televisa GDR - communications... 18,500 416,250
Panamerican Beverages ADR Class A -
food and beverage.................... 13,840 442,880
</TABLE>

<TABLE>
<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ --------------- ------------
<S> <C> <C>
Telefonos de Mexico Class L (Telmex) -
telecommunications................... 200,000 $ 319,273
------------
3,880,617
------------
PERU (5.7%)
Cementos Norte Pacasmayo Class T -
construction and construction
materials............................ 76,421 138,977
Credicorp Limited - banking and
financial services................... 16,166(b) 275,630
Fabril Pacifico - insurance........... 180,000(b)(c) 201,082
Minsur Class T - mining............... 3 21
Telefonica del Peru Class B -
telecommunications................... 169,400 363,079
------------
978,789
------------
VENEZUELA (6.3%)
Ceramica Carabobo ADR Class B -
construction and construction
materials............................ 155,520 171,072
Corimon ADR - diversified industrials
and conglomerates.................... 23,182(b) 86,933
Mavesa 144A ADR - food and beverage... 44,224(d) 171,368
Siderurgica Venezolana Sivensa ADR -
metal products....................... 228,000 428,640
Sudamtex de Venezuela ADR -
textiles............................. 47,960 221,815
------------
1,079,828
------------
Total Common Stocks
(cost: $13,126,309).................. 12,740,956
------------
PREFERRED STOCKS (23.8%):
BRAZIL (22.0%)
Banco Bradesco - banking and financial
services............................. 41,795,427 365,514
Banco Itau - banking and financial
services............................. 1,501,216 418,570
Brasmotor - consumer goods............ 1,988,763 394,908
Centrais Eletricas Brasileiras
(Electrobras) Class B - utilities.... 600 162
Cervejaria Brahma - brewer and
distiller............................ 730,430 300,611
Cosipa Class PNB - metal products..... 218,885(b) 290,510
Iochpe Maxion - automobile and
automobile parts..................... 1,564,791 170,655
Lojas Americanas - retail............. 5,439,181(b) 127,592
Lojas Renner - retail................. 7,768,600 207,813
Mesbla - retail....................... 1,300,000(b) 16,050
Refrigeracao Parana (Refripar) -
consumer goods....................... 235,182,000 469,420
Tecidos Norte de Minas (Coteminas) -
textiles............................. 699,844 234,013
Telecomunicacoes Brasileiras
(Telebras) - telecommunications...... 3,547,800 170,829
Usinas Siderurgica de Minas Gerais
(Usiminas) 144A ADR - metal
products............................. 13,000(d) 105,625
Usinas Siderurgica de Minas Gerais
(Usiminas) - metal products.......... 423,731,474 344,409
Vale do Rio Doce - mining............. 918,600 151,218
------------
3,767,899
------------
COLUMBIA (1.8%)
Banco Indl Colombiano ADR - banking
and financial services............... 19,000 311,125
------------
Total Preferred Stocks
(cost: $5,257,694)................... 4,079,024
------------
</TABLE>

38
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES LATIN AMERICAN VALUE FUND
DECEMBER 31, 1995 (UNAUDITED) (CONTINUED)

<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Name of Issuer Amount Value (a)
- - - - ------------------------------------------ --------------- ------------
<S> <C> <C>
RIGHTS (.0%):
BRAZIL (.0%)
Banco Bradesco Rights................. 977,261(b) $ 0
------------
Total Rights
(cost: $0)........................... 0
------------
SHORT-TERM SECURITIES (3.5%):
UNITED STATES (3.5%)
U.S. Treasury Bill, 5.3%, due
3/14/96.............................. $ 600,000 594,120
------------
Total Short-Term Securities
(cost: $593,643)..................... 594,120
------------

Total Investments in Securities
(cost: $18,977,646)(e)............... $ 17,414,100
------------
------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(b) PRESENTLY NON-INCOME PRODUCING.
(c) SECURITY DEEMED TO BE ILLIQUID BY THE MANAGER. INVESTMENTS IN ILLIQUID
SECURITIES REPRESENT 1.17% OF NET ASSETS AT DECEMBER 31, 1995.
(d) REPRESENTS SECURITY SOLD UNDER RULE 144A AND IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS SECURITY HAS BEEN
DETERMINED TO BE LIQUID UNDER GUIDELINES ESTABLISHED BY THE BOARD OF
DIRECTORS.
(e) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION......... $ 1,247,924
GROSS UNREALIZED DEPRECIATION......... (2,811,470)
-----------
NET UNREALIZED DEPRECIATION........... $(1,563,546)
-----------
-----------
</TABLE>

HERCULES WORLD BOND FUND
DECEMBER 31, 1995 (UNAUDITED)

<TABLE>
<CAPTION>
Principal Market Value
Name of Issuer Amount (b) (a)
- - - - ------------------------------------ --------------- ---------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

BONDS (76.0%)
AUSTRIA (12.0%)
Otereich KontrollBank (Austrian
schilling), 7.00%, due
8/8/05......................... 1,300,000 $ 949,321
---------------
CANADA (1.8%)
Canadian Government Bond
(Canadian dollars), 8.75%, due
12/01/05....................... 170,000 139,531
---------------
BELGIUM (1.8%)
Kingdom of Belgium Bond (Belgian
franc), 6.50%, due 3/31/05..... 4,300,000 143,707
---------------
GERMANY (21.9%)
Deutschland Republic (German
deutschemark), 7.375%, due
1/3/05......................... 1,350,000 1,026,996
International Bank of
Reconstruction and Development
(German deutschemark), 5.875%,
due 11/10/03................... 600,000 419,478
Ontario Province (German
deutschemark), 6.25%, due
1/13/04........................ 400,000 278,037
---------------
1,724,511
---------------
SPAIN (16.2%)
Spanish Government (Spanish
peseta), 7.40%, due 7/30/99.... 164,000,000 1,273,542
---------------
UNITED KINGDOM (4.4%)
U.K. Government (British pound),
9.00%, due 7/12/11............. 200,000(c) 346,741
---------------
UNITED STATES (17.9%)
KFW International Finance
(German deutschemark), 7.75%,
due 10/6/04.................... 550,000 414,462
U.S. Treasury Note (U.S.
dollar), 7.50%, due 2/15/05.... 875,000(c) 993,398
---------------
1,407,860
---------------
Total Bonds
(cost: $5,725,745)............. 5,985,213
---------------
</TABLE>

39
<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES WORLD BOND FUND
DECEMBER 31, 1995 (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
Principal Market Value
Name of Issuer Amount (b) (a)
- - - - ------------------------------------ --------------- ---------------
<S> <C> <C>
SHORT-TERM SECURITIES (15.2%):
UNITED STATES (15.2%)
U.S. Treasury Bill, 5.30%, due
1/25/96........................ 1,200,000 $ 1,196,529
---------------
Total Short-Term Securities
(cost: $1,196,528)............. 1,196,529
---------------
Total Investments in Securities
(cost: $6,922,273)(d).......... $ 7,181,742
---------------
---------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(b) VALUE STATED IN U.S. DOLLARS, PRINCIPAL AMOUNT STATED IN THE CURRENCY
INDICATED.
(c) PLEDGED AS INITIAL MARGIN DEPOSIT ON OPEN FUTURES POSITIONS (SEE NOTE 7 TO
THE FINANCIAL STATEMENTS).
(d) ALSO APPROXIMATES COST FOR FEDERAL INCOME TAX PURPOSES. THE AGGREGATE GROSS
UNREALIZED APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED
ON THIS COST WERE AS FOLLOWS:

<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION........... $ 262,384
GROSS UNREALIZED DEPRECIATION........... (2,915)
-----------
NET UNREALIZED APPRECIATION............. $ 259,469
-----------
-----------
</TABLE>

HERCULES MONEY MARKET FUND
DECEMBER 31, 1995 (UNAUDITED)

<TABLE>
<CAPTION>
Principal
Name of Issuer Amount Value (a)
- - - - ------------------------------------ --------------- ---------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
DISCOUNT NOTES (95.5%):
Federal Farm Credit Bank, 6.84%,
due 1/18/96...................... $ 140,000 $ 139,627
Federal Farm Credit Bank, 6.71%,
due 2/5/96....................... 200,000 198,915
Federal Home Loan Bank, 6.02%, due
1/9/96........................... 135,000 134,831
Federal Home Loan Mortgage
Corporation, 6.20%, due 1/5/96... 375,000 374,763
Federal Home Loan Mortgage
Corporation, 6.20%, due
1/22/96.......................... 260,000 259,145
Federal National Mortgage
Association, 6.85%, due
1/19/96.......................... 400,000 398,890
---------------
Total Investments in Securities
(cost: $1,506,171)(b)........... $ 1,506,171
---------------
---------------
</TABLE>

NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(b) ALSO EQUALS COST FOR FEDERAL INCOME TAX PURPOSES.

40
<PAGE>

DIRECTORS AND OFFICERS

DIRECTORS

David T. Bennett, Chairman, Highland Homes, Inc., USL Products, Inc., and
Kiefer Built, Inc., of Counsel, Gray, Plant, Mooty, Mooty & Bennett, P.A.
Jaye F. Dyer, President, Dyer Management Company
William H. Ellis, President, Piper Jaffray Companies, Inc., Piper Capital
Management Incorporated
Karol D. Emmerich, President, The Paraclete Group
Luella G. Goldberg, Director, TCF Financial, ReliaStar Financial Corp., Hormel
Foods Corp.
George A. Latimer, Chief Executive Officer, National Equity Funds

BOARD OF DIRECTORS RESPONSIBILITIES
The board of directors of an investment company is charged with extensive
responsibilities under federal and state laws. Under common law and state
statutes, all board members are subject to general fiduciary duties including
acting in good faith and in the best interest of the company and its
shareholders. In addition, the Investment Company Act of 1940 (as amended)
charges independent directors with management supervision and financial
oversight. Some of the directors' key responsibilities include:

- - - - - To act in good faith and in a manner that is in the best interest of the
funds and their shareholders. Directors have an obligation not to use their
position for personal gain and to prevent conflicts from arising between
personal interests and the interests of the company.

- - - - - To approve the advisory contracts between the investment company and the
funds' manager, and between the funds' manager and subadvisers, ensuring
that they are fair to the funds and to shareholders.

- - - - - To review and approve other agreements such as custody agreements, foreign
custody arrangements and service agreements with affiliates.

- - - - - To approve the funds' distribution plan annually.

- - - - - To monitor fund investments, ensuring that decisions made are in accordance
with the funds' investment policies and restrictions.

- - - - - To monitor portfolio transactions, ensuring that fund management executes
transactions appropriately, that transactions with affiliated broker
dealers are appropriate and in compliance, and that purchases or sales
between affiliated funds follow regulatory restrictions.

OFFICERS
William H. Ellis, President
Robert H. Nelson, Vice President and Treasurer
Susan Sharp Miley, Secretary

INVESTMENT ADVISER
Piper Capital Management Incorporated
222 South Ninth Street, Minneapolis, MN 55402-3804

DISTRIBUTOR
Piper Jaffray Inc.
222 South Ninth Street, Minneapolis, MN 55402-3804

CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 West 10th Street, Kansas City, MO 64105-1716

LEGAL COUNSEL
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street, New York, NY 10036

INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
4200 Norwest Center, 90 South Seventh Street, Minneapolis, MN 55402

<PAGE>

[LOGO]HERCULES 222 SOUTH NINTH STREET, MINNEAPOLIS, MN 55402-3804
INTERNATIONAL FUNDS PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.

Bulk Rate
U.S. Postage
PAID
Permit No. 3008
Mpls., MN

Recycle THIS DOCUMENT IS PRINTED ON PAPER MADE FROM
Logo 100% TOTAL RECOVERED FIBER, INCLUDING 15% POST-CONSUMER WASTE.

In an effort to reduce costs to our shareholders, we have
implemented a process to reduce duplicate mailings of
the fund's annual and semiannual reports. This
householding process should allow us to mail one report
to each address where one or more registered shareholders
with the same last name reside. If you would like to have
additional reports mailed to your address, please call our
Shareholder Services area at 1 800 866-7778, or mail your
request to:

Corporate Communications
Piper Capital Management
222 South Ninth Street
Minneapolis, MN 55402-3804

073-96 HERC 02 2/96

<PAGE>

PIPER GLOBAL FUNDS INC.

PACIFIC-EUROPEAN GROWTH FUND

PART B
STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information relates to the shares of
common stock of Pacific-European Growth Fund ("Pacific-European Fund"), a
series of Piper Global Funds Inc. ("Piper Global"), to be issued by Piper
Global, pursuant to an Agreement and Plan of Reorganization, dated as of
____________, 1996, between Piper Global on behalf of Pacific-European Fund
and Hercules Funds Inc. (the "Company") on behalf of Hercules Pacific Basin
Value Fund (the "Fund") in connection with the acquisition by Pacific-European
Fund of substantially all of the assets, subject to stated liabilities, of
the Fund. This Statement of Additional information does not constitute a
prospectus. This Statement of Additional Information does not include all
information that a shareholder should consider before voting on the proposal
contained in the Proxy Statement/Prospectus, and, therefore, should be read
in conjunction with the related Proxy Statement/Prospectus, dated
_______________, 1996. A copy of the Proxy Statement/Prospectus may be
obtained without charge by mailing a written request to Piper Global at 222
South Ninth Street, Minneapolis, Minnesota 55402-3804. Please retain this
document for future reference.

The date of this Statement of Additional Information is ______________, 1996

<PAGE>

TABLE OF CONTENTS

Page
----

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 3

ADDITIONAL INFORMATION ABOUT PIPER GLOBAL. . . . . . . . 3

FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 5

-2-

<PAGE>

INTRODUCTION

This Statement of Additional Information is intended to supplement the
information provided in the Proxy Statement/Prospectus dated _____________,
1996 (the "Proxy Statement/Prospectus"). The Proxy Statement/Prospectus has
been sent to the Fund's shareholders in connection with the solicitation of
proxies by the Board of Directors of the Company to be voted at the Special
Meeting of Shareholders of the Fund to be held on ______, 1996. This
Statement of Additional information incorporates by reference the Statement
of Additional Information of Pacific-European Fund dated April 28, 1995.

ADDITIONAL INFORMATION ABOUT PIPER GLOBAL

INVESTMENT OBJECTIVES AND POLICIES

For additional information about Pacific-European Fund's investment
objectives and policies, see "Investment Objectives, Policies and
Restrictions" in Pacific-European Fund's Statement of Additional Information.

MANAGEMENT

For additional information about the Board of Directors, officers and
management personnel of Piper Global, see "Directors and Executive Officers"
and "Investment Advisory and Other Services" in Pacific-European Fund's
Statement of Additional Information.

INVESTMENT ADVISORY AND OTHER SERVICES

For additional information about Piper Capital Management Incorporated
and Edinburgh Fund Managers plc., Pacific-European Fund's investment adviser
and subadviser, respectively, advisory fees paid and advisory services
performed, see "Investment Advisory and Other Services" in Pacific-European
Fund's Statement of Additional Information. For additional information about
Pacific-European Fund's distributor and other service providers, see also
"Investment Advisory and Other Services." For additional information about
Pacific-European Fund's independent auditors, see "Financial Statements" in
Pacific-European Fund's Statement of Additional Information.

-3-

<PAGE>

PORTFOLIO TRANSACTIONS AND BROKERAGE

For additional information about brokerage practices, including
allocation policies, see "Portfolio Transactions and Allocation of Brokerage"
in Pacific-European Fund's Statement of Additional Information.

DESCRIPTION OF PACIFIC-EUROPEAN FUND SHARES

For additional information about the voting rights and other
characteristics of the shares of Pacific-European Fund, see "Capital Stock
and Ownership of Shares" in Pacific-European Fund's Statement of Additional
Information.

PURCHASE, REDEMPTION AND PRICING OF SHARES

For additional information about the purchase and redemption of
Pacific-European Fund's shares and the determination of its net asset value,
see "Purchase of Shares," "Redemption of Shares" and "Net Asset Value and
Public Offering Price" in Pacific-European Fund's Statement of Additional
Information.

TAXATION

For additional information about Pacific-European Fund's policies
regarding tax matters affecting Pacific-European Fund and its shareholders,
see "Taxation" in Pacific-European Fund's Statement of Additional Information.

DISTRIBUTION OF SHARES

For additional information about Pacific-European Fund's distributor and
the distribution agreement between Pacific-European Fund and its distributor,
see "Investment Advisory and Other Services" in Pacific-European Fund's
Statement of Additional Information.

-4-

<PAGE>

PERFORMANCE DATA

For additional information about Pacific-European Fund's performance
data, see "Calculation of Performance Data" in Pacific-European Fund's
Statement of Additional Information.

FINANCIAL STATEMENTS

Pacific-European Fund's most recent audited financial statements are
set forth in its Annual Report dated February 29, 1996, which is incorporated
by reference in the Proxy Statement/Prospectus. The Company's most recent
audited financial statements are set forth in its Annual Report dated June 30,
1995, which is incorporated by reference in the Proxy Statement/Prospectus.
In addition, the Company's updated unaudited financial statements are set forth
in its Semi-Annual Report for the six month period ended December 31, 1995,
which is incorporated by reference in the Proxy Statement/Prospectus.

-5-

<PAGE>

UNAUDITED COMBINING FINANCIAL STATEMENTS

AQUISITION OF THE ASSETS OF HERCULES EUROPEAN VALUE FUND
AND
HERCULES PACIFIC BASIN VALUE FUND
SERIES OF HERCULES FUNDS INC.

BY AND IN EXCHANGE FOR PACIFIC-EUROPEAN GROWTH FUND
A SERIES OF PIPER GLOBAL FUNDS INC.

FEBRUARY 29, 1996

The accompanying unaudited pro forma combining statements of assets and
liabilities, including the schedule of investments in securities, and the
statements of operations reflect the accounts of the Hercules European Value
Fund (European Fund), a series of Hercules Funds Inc., the Hercules Pacific
Basin Value Fund (Pacific Fund), a series of Hercules Funds Inc. (Hercules
Funds) and Pacific-European Growth Fund (Piper Fund), a series of Piper
Global Funds Inc. (collectively, the Funds) and combining statements as of
and for the twelve-month period ended February 29, 1996. These statements
have been derived from the annual report of Piper Fund dated February 29,
1996 and the underlying accounting records of Hercules Funds used in
calculating net asset values for the twelve-month period ended February 29,
1996. The pro forma combining statement of operations has been prepared
based upon the fee and expense structure of Piper Fund. The statements do
not reflect the effects of proposed differing investment objectives and
policies of the Funds.

The pro forma combining statements have been prepared assuming that both
of the Hercules Funds are merged into Piper Fund under the proposed Plan and
Agreement of Reorganization pursuant to which the assets and liabilities of
Hercules Funds would be exchanged for shares of Piper Fund. It is possible
that shareholders of one or both of the Hercules Funds will not approve the
Reorganization.

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Hercules Hercules
European Pacific Basin Pacific-European Pro-Forma
Value Value Growth Adjustments Pro Forma
Fund Fund Fund (note 3) Combined
- - - - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at market value*
(including repurchase agreement of $0, $0,
$7,701,000 and $7,701,000, respectively) $13,703,179 24,800,168 159,543,727 198,047,074
Cash in bank on demand deposit 87,709 4,484 253,608 104,324 (a) 450,125
Foreign cash in bank on demand deposit 1,679 17,473 518,197 537,349
Receivable for investment securities sold 724,654 454,735 141,493 1,320,882
Receivable for fund shares sold 1,500 28,022 159,838 189,360
Unrealized appreciation of forward foreign currency
contracts held - 1,751,988 5,078,658 6,830,646
Organization costs 52,162 52,162 - (104,324)(a) -
Dividends and accrued interest receivable 57,717 5,620 308,060 371,397
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total assets 14,628,600 27,114,652 166,003,581 207,746,833
- - - - ----------------------------------------------------------------------------------------------------------------------------------

LIABILITIES:
Payable for investment securities purchased 582,880 199,828 1,515,647 2,298,355
Payable for fund shares redeemed 119,021 370,855 100,535 590,411
Unrealized depreciation of forward foreign currency
contracts held 22,445 - - 22,445
Accrued distribution and shareholder account
servicing fee 17,864 34,259 126,340 178,463
Accrued investment management fee 11,279 21,904 118,372 151,555
Payable for foreign capital gains taxes 828,991 828,991
Accrued expenses and other liabilities 4,222 58,892 1,992 65,106
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total liabilities 757,711 685,738 2,691,877 4,135,326
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Net assets applicable to outstanding capital stock $13,870,889 26,428,914 163,311,704 203,611,507
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------

REPRESENTED BY:
Capital stock and additional paid-in capital
(note 2); outstanding, 1,270,453;
2,627,386; 11,782,881 and 14,690,515
shares, respectively $12,348,382 27,590,157 141,904,286 181,842,825
Accumulated net realized gain (loss) on
investments and foreign currency transactions 415,779 (2,846,493) 2,856,345 425,631
Unrealized appreciation of investments and on
translation of other assets and liabilities
in foreign currencies 1,106,728 1,685,250 18,551,073 21,343,051
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total - representing net assets applicable
to outstanding capital stock $13,870,889 26,428,914 163,311,704 203,611,507
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Net asset value per share of outstanding
capital stock $ 10.92 10.06 13.86 13.86
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
*Investments in securities, at identified cost $12,600,971 24,865,413 146,080,551 183,546,935
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying Notes to Pro Forma Combining Financial Statements.

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE TWELVE-MONTH PERIOD ENDED FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Hercules Hercules
European Pacific Basin Pacific-European Pro Forma
Value Value Growth Adjustments Pro Forma
Fund Fund Fund (note 3) Combined
- - - - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME:
Dividends $ 445,707 293,248 2,869,826 3,608,781
Interest 35,457 8,869 251,483 295,809
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total investment income 481,164 302,117 3,121,309 3,904,590
- - - - ----------------------------------------------------------------------------------------------------------------------------------

EXPENSES:
Investment management fee 166,308 314,028 1,216,305 (173,452)(b) 1,523,189
Distribution fee 116,416 219,819 812,754 (92,482)(c) 1,056,507
Custodian, accounting and transfer agent
fees 208,787 214,339 468,005 (285,443)(d) 605,688
Shareholder account servicing fees - - 135,878 135,878
Reports to shareholders 12,975 21,129 66,645 (14,496)(d) 86,253
Amortization of organization costs 17,894 17,894 - (35,788)(d) -
Directors' fees 6,182 6,182 15,434 (12,364)(d) 15,434
Audit and legal fees 46,388 57,745 55,634 (104,133)(d) 55,634
Other expenses 33,560 48,623 55,842 (16,529)(d) 121,496
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 608,510 899,759 2,826,497 (734,687) 3,600,079

Less expenses waived or absorbed
by manager (242,261) (207,423) - 449,684 (e)
Less expenses waived or absorbed
by distributor (33,262) (62,806) (298,512) 8,245 (e) (386,335)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 332,987 629,530 2,527,985 (276,758) 3,213,744
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Investment income- net 148,177 (327,413) 593,324 276,758 690,846
- - - - ----------------------------------------------------------------------------------------------------------------------------------

REALIZED AND UNREALIZED GAINS (LOSSES)
ON INVESTMENTS AND FOREIGN CURRENCY:

Net realized gain (loss) on investments 1,262,954 (919,804) 11,219,772 11,562,922
Net realized loss on foreign currency
transactions (436,928) (38,412) (405,039) (880,379)
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
and foreign currency transactions 826,026 (958,216) 10,814,733 10,682,543
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of
investments and on translation of other
assets and liabilities in foreign
currencies 5,495,385 7,644,412 13,491,482 26,631,279
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Net gain on investments and foreign
currency 6,321,411 6,686,196 24,306,215 37,313,822
- - - - ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations $6,469,588 6,358,783 24,899,539 276,758 38,004,668
- - - - ----------------------------------------------------------------------------------------------------------------------------------
- - - - ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying Notes to Pro Forma Combining Financial Statements.

<PAGE>

PIPER GLOBAL FUNDS INC.
PACIFIC-EUROPEAN GROWTH FUND
NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS
(UNAUDITED)

(1) BASIS OF COMBINATION
The accompanying unaudited pro forma combining statements of assets and
liabilities, including the schedule of investments in securities, and the
statements of operations reflect the accounts of the Hercules European
Value Fund (European Fund), a series of Hercules Funds Inc., the Hercules
Pacific Basin Value Fund (Pacific Fund), a series of Hercules Funds Inc.
(Hercules Funds) and Pacific-European Growth Fund (Piper Fund), a series of
Piper Global Funds Inc. (collectively, the Funds) and combining statements
as of and for the twelve-month period ended February 29, 1996. These
statements have been derived from the annual report of Piper Fund dated
February 29, 1996 and the underlying accounting records of Hercules Funds
used in calculating net asset values for the twelve-month period ended
February 29, 1996. The pro forma combining statement of operations has
been prepared based upon the fee and expense structure of Piper Fund. The
historical cost of the investments in securities would be carried forward
to Piper Fund as the reorganization will be accounted for as a tax-free
exchange.

The pro forma combining statements have been prepared assuming that both
Hercules Funds are merged into Piper Fund under the proposed Plan and
Agreement of Reorganization pursuant to which the assets and liabilities of
Hercules Funds would be exchanged for shares of Piper Fund. It is possible
that shareholders of one or both of the Hercules Funds will not approve the
Reorganization. The accompanying Pro Forma Combining Schedule of Total
Return and Expense Ratios presents historical combining pro forma total
return and expense ratio information under all possible scenarios.

The pro forma combining financial statements and accompanying schedule of
investments in securities should be read in conjunction with the historical
financial statements of the Funds and the notes thereto incorporated by
reference in the Statement of Additional Information.

(2) CAPITAL SHARES
The pro forma combining statement of assets and liabilities assumes the
issuance of 1,000,786 and 1,906,848 shares of Piper Fund to shareholders
of European Fund and Pacific Fund, respectively, as if the reorganization
had taken place on February 29, 1996 and is based on the net asset value of
Piper Fund on that date.

(3) PRO FORMA ADJUSTMENTS
(A) ORGANIZATION COSTS - Deferred organizational costs have been adjusted
to reflect reimbursement of unamortized Hercules Funds organization costs
by Piper Capital Management Inc. (the manager).

<PAGE>

(B) INVESTMENT MANAGEMENT FEE - The investment management fee has been
adjusted to reflect the fee structure of Piper Fund. The investment
management agreement of Piper Global Funds Inc. provides for a management
fee at a per annum rate of 1.00% on the first $100 million of average daily
net assets, 0.875% on the next $100 million of average daily net assets and
0.75% of average daily net assets in excess of $200 million, paid to the
manager. The basic fee structure is subject to a performance adjustment
based upon the performance of the fund relative to the Morgan Stanley
Capital International EAFE Index. For each percentage point the Piper Fund
outperforms or underperforms the EAFE Index, during the applicable rolling
12-month performance period, the monthly fee is increased or decreased by
0.05% (on an annualized basis) up to a maximum of 1/12 of 0.25% of the
fund's average daily net assets during the month for which the calculation
is made. During the year ended February 29, 1996, the performance
adjustment decreased the management fee by $337,288 or 0.21% of Piper
Fund's average daily net assets. Hercules Funds pay a per annum rate of
1.00% of average daily net assets to the manager, with no performance
adjustment.

(C) DISTRIBUTION FEE - The distribution fee has been adjusted to reflect
the 12b-1 fee structure of Piper Fund. Pursuant to distribution plans
adopted in accordance with Rule 12b-1 of the Investment Company Act of
1940, reimbursement to Piper Jaffray Inc. (the distributor), may not exceed
0.50% and 0.70% per annum of the average daily net assets of Piper Fund and
Hercules Funds, respectively. During the twelve-month period ended
February 29, 1996, the distributor voluntarily agreed to limit the fees to
an annual rate of 0.32% and 0.50% for Piper Fund and Hercules Funds,
respectively.

(D) OTHER FEES AND EXPENSES - The pro forma adjustments to custodian,
accounting and transfer agent fees, reports to shareholders, amortization
of organizational costs, Directors fees, audit and legal fees and other
expenses reflects the reimbursement of the Hercules Fund's organizational
costs and savings due to a decreases in certain expenses duplicated between
the Funds.

(E) NET EXPENSES - The expenses waived or absorbed by the manager and the
distributor have been adjusted to reflect the voluntary expense limitation
by the distributor for Piper Fund and no voluntary expense limitation by
the manager of Piper Fund. During the twelve-month period ended February
29, 1996, the manager and distributor voluntarily agreed to limit total
expenses on a per annum basis to 2.00% of average daily net assets for
Hercules Funds.

(4) INVESTMENT OBJECTIVES AND POLICIES
These statements do not reflect the effects of proposed differing
investment objectives and policies of the Funds.

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF TOTAL RETURNS AND EXPENSE RATIOS (UNAUDITED)

As discussed in footnote 1 to the Pro Forma Combining Financial Statements, it
is possible that shareholders of one or both of the Hercules Funds will not
approve the Reorganization, in which case the combined fund will be comprised
only of the Piper Fund and the Hercules Fund which approves the Reorganization.
Presented below is combining pro forma total return and expense ratio
information for the twelve month period ended February 29, 1996 and the two most
recent preceding periods under all possible combination scenarios.

<TABLE>
<CAPTION>
Twelve month period Ended
---------------------------------------------------------
February 29, 1996 February 28, 1995 February 28, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Scenario 1 - European Fund, Pacific
Fund and Piper Fund

Total Return (a) 17.05% (11.12%) 42.53%

Gross Expense Ratio (b) 1.70% 1.94% 2.00%

Net Expense Ratio (b) 1.52% 1.72% 1.79%

Scenario 2 - European Fund and
Piper Fund

Total Return (a) 16.93% (9.93%) 43.10%

Gross Expense Ratio (b) 1.72% 1.97% 2.02%

Net Expense Ratio (b) 1.54% 1.75% 1.82%

Scenario 3 - Pacific Fund and
Piper Fund

Total Return (a) 16.86% (12.16%) 42.89%

Gross Expense Ratio (b) 1.71% 1.95% 2.00%

Net Expense Ratio (b) 1.53% 1.73% 1.80%
</TABLE>

(a) Total return is based on the change in net asset value during the period,
assumes reinvestment of distributions at actual reinvestment prices and
does not reflect a sales charge. The combining pro forma total returns
were computed assuming the applicable Funds had been combined since their
respective inceptions.

(b) Distribution fees and expenses were voluntarily limited by the distributor
of Piper Fund. Gross expense ratio represents the ratio of expenses before
voluntary waivers to average daily net assets. Net expense ratio
represents the ratio of expenses after voluntary waivers to average daily
net assets. The combined pro forma expense ratios were computed assuming
the applicable Funds had been combined since their respective inceptions
and reflects the revised investment management and distribution fee
structures and savings due to duplicated expenses between the Funds as
described in note 3 to the Pro Forma Combining Financial Statements.

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Number of Fund Value Fund Growth Fund Combined
Name of Issuer Shares Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
Common Stocks (93.2%)
Argentina (.4%)
Inversiones Y Representaciones (IRSA) ADR -
real estate company 28,806(b) 788,564 788,564
------------ ------------ -------------- -----------
- - 788,564 788,564
------------ ------------ -------------- -----------
Austria (.2%)
Austria Mikro Systeme International -
electronics 180 26,242 26,242
Boehler Uddeholm - metal products 375(b) 28,820 28,820
Burgenland Holding - diversified holding
company 650 29,307 29,307
EA-Generali - insurance 200 69,109 69,109
EVN Energie-Versorgung Niederoesterreich -
utilities 120 15,884 15,884
Flughafen Wien - air transportation 475 32,423 32,423
Mayr-Melnhof Karton - forest products 450 22,462 22,462
VA Technologie - automobile 225 28,392 28,392
Voest-Alpine Stahl - metal products 500(b) 16,848 16,848
Wienerberger Baustoffindustrie -
construction and construction materials 96 21,642 21,642
Wolford - textiles 175 31,595 31,595
------------ ------------ -------------- -----------
322,724 - - 322,724
------------ ------------ -------------- -----------
Belgium (.2%)
Electrabel - utilities 510 116,790 116,790
Quick Restaurents - food and beverage 1,300 138,755 138,755
Solvay - chemicals 200 117,805 117,805
------------ ------------ -------------- -----------
373,350 - - 373,350
------------ ------------ -------------- -----------
Brazil (1.7%)
Cia Acos Especia Itab ADR - steel manufacturer 95,000 1,128,600 1,128,600
Refrigeracao Prana ADR - consumer durable goods 122,000 1,653,832 1,653,832
Telecomunicacoes Brasileiras ADR -
telecommunications and cellular 12,500 656,250 656,250
------------ ------------ -------------- -----------
- - 3,438,682 3,438,682
------------ ------------ -------------- -----------
Chile (.3%)
Five Arrows Chile Fund - closed-end fund 200,000 - - 537,500 537,500
------------ ------------ -------------- -----------
Columbia (.1%)
Carulla 144A ADS - retail stores 30,780 - - 284,715 284,715
------------ ------------ -------------- -----------
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Number of Fund Value Fund Growth Fund Combined
Name of Issuer Shares Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
Czech Republic (.1%)
Elektrarny Opatovice - utilities 800(b) 111,514 111,514
Komercni Banka - banking and financial services 1,700 116,306 116,306
------------ ------------ -------------- -----------
227,820 - - 227,820
------------ ------------ -------------- -----------
Denmark (.1%)
Bang & Olufsen Holding - electronics 2,400 72,570 72,570
Danisco - food and beverage 1,060 51,991 51,991
Jacob Holm and Sonner Class B - textiles 497 55,045 55,045
Novo Nordisk - pharmaceuticals 270 36,786 36,786
------------ ------------ -------------- -----------
216,392 - - 216,392
------------ ------------ -------------- -----------
Finland (.2%)
Aspoyhtyma - electronics 460 14,650 14,650
Cultor - food and beverage 1,100 47,353 47,353
Enso-Gutzeit Oy - forest products 4,600 32,128 32,128
Nokia - telecommunications 2,740 94,784 94,784
Talentum - printing and publishing 4,700(b) 43,356 43,356
Tietotehdas Class B - computer software 2,100 86,020 86,020
------------ ------------ -------------- -----------
318,291 - - 318,291
------------ ------------ -------------- -----------
France (4.1%)
Accor - hotels, leisure and entertainment 600 84,344 84,344
Alcatel Alsthom - telecommunications 17,249 1,526,907 1,526,907
Assurances Generales de France - banking
and financial services 2,000 56,625 56,625
AXA - insurance 1,371 88,410 88,410
BIC - consumer goods 950 105,895 105,895
Casino Guichard-Perrachon - retail 2,650 91,818 91,818
Credit Commercial de France - banking and
financial services 1,550 73,622 73,622
Elf Aquitaine - oil company 24,094 96,405 1,562,733 1,659,138
Eridania Berghim Say - sugar company 6,880 1,179,643 1,179,643
Essilor International - pharmaceuticals 450 107,093 107,093
Groupe Danone - food and beverage 400 63,832 63,832
Lafarge - construction and construction
material 1,125 77,224 77,224
L'Air Liquide - chemicals 750 132,456 132,456
Legrand - electronics 300 53,695 53,695
Lyonnaise des Eaux-Dumez - environmental
control 1,110 102,610 102,610
Michelin Class B - automobile 2,600 116,236 116,236
Moet-Hennessy Louis Vuitton - brewers and
distillers 650 147,740 147,740
Pernod Richard - brewers and distillers 950 59,568 59,568
Pinaul Printemps - retail stores 8,880 2,100,995 2,100,995
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Number of Fund Value Fund Growth Fund Combined
Name of Issuer Shares Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
Primagaz Cie - oil and gas 1,150 111,909 111,909
PSA Peugeot Citroen - automobile and
automobile parts 675 100,767 100,767
Schneider - electronics 2,100 92,303 92,303
Societe Eurafrance - financial services 12 4,397 4,397
Societe Generale - banking and financial
services 600 68,307 68,307
Total Class B - oil and gas 1,500 98,807 98,807
Union Financiere de France Banque - financial
services 1,175 117,948 117,948
------------ ------------ -------------- -----------
2,052,011 - 6,370,278 8,422,289
------------ ------------ -------------- -----------
Germany (3.3%)
Adidas - consumer goods 1,750(b) 112,643 112,643
Allianz Holding - insurance 65 125,339 125,339
Altana - pharmaceuticals 275 182,985 182,985
BASF - chemicals 650 162,765 162,765
Bayer - retail 550 168,271 168,271
Deutsche Bank - bank 35,200 1,771,950 1,771,950
Hoechst - chemicals 500 157,523 157,523
Kiekert - automobile parts 1,300(b) 66,200 66,200
Mannesmann AG - industrial machinery/
manufacturing 2,670 106,939 844,819 951,758
Merck KGaA - pharmaceuticals 2,300(b) 97,837 97,837
SGL Carbon - chemicals 1,200(b) 106,898 106,898
Siemens - electronic capital goods 2,990 142,874 1,565,900 1,708,774
VEBA - electricity and chemical company 21,200 122,338 875,191 997,529
Volkswagen - automobile 325 123,574 123,574
------------ ------------ -------------- -----------
1,676,186 - 5,057,860 6,734,046
------------ ------------ -------------- -----------
Hong Kong (9.5%)
China Light & Power - electric utilities 370,000 327,750 1,404,643 1,732,393
Dao Heng Bank Group - banking and financial
services 699,574 574,015 2,294,315 2,868,330
Esprit Asia Holdings - retail 3,720,000 469,443 961,974 1,431,417
Giordano International - retail 500,000 533,532 533,532
Hutchison Whampoa - diversified holding
company 475,000 475,328 2,535,084 3,010,412
Ka Wah Bank - commercial bank 3,000,000 1,096,165 1,096,165
Sun Hung Kai Properties - real estate 280,000 446,226 2,052,642 2,498,868
Swire Pacific - holding company 250,000 2,182,630 2,182,630
Wharf Holdings - real estate 635,000 522,958 1,936,882 2,459,840
Yizheng Chemical - chemicals and plastics 5,690,000 333,700 1,248,592 1,582,292
------------ ------------ -------------- -----------
- 3,682,952 15,712,927 19,395,879
------------ ------------ -------------- -----------
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Number of Fund Value Fund Growth Fund Combined
Name of Issuer Shares Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
Ireland (.5%)
Irish Life - life insurance 250,000 - - 999,490 999,490
------------ ------------ -------------- -----------
India (.4%)
Hindalco Industries ADR - aluminium
manufacturer 25,000(b) - 179,350 717,400 896,750
------------ ------------ -------------- -----------
Indonesia (2.4%)
Bukaka Teknik Utama - industrial machinery
and manufacturing 200,000(b) 362,616 362,616
Hanjaya Mandala Sampoerna - tobacco 93,000 196,395 818,314 1,014,709
PT Andayani Megah - tire and rubber 850,000 733,866 733,866
PT Bank International Indonesia - banking 500,000 2,099,072 2,099,072
Pt Indocement - construction materials 160,000 637,167 637,167
Supreme Cable Manufacturing - industrial
machinery and manufacturing 133,500 162,805 162,805
------------ ------------ -------------- -----------
- 721,816 4,288,419 5,010,235
------------ ------------ -------------- -----------
Italy (1.5%)
Edison - utilities 24,700 124,134 124,134
Ente Nazionale Idrocaburi - oil and gas 23,100(b) 87,626 87,626
Istituto Mobiliare Italiano - banking and
financial services 22,700 159,541 159,541
Italgas - utilities 356,900 115,015 991,421 1,106,436
Mondadori (Arnoldo) Editore - printing and
publishing 10,000 86,842 86,842
Olivetti Group - computer software 82,300(b) 48,809 48,809
Societa Partecipazioni Finanziare (SOPAF) -
financial services 69,200 79,949 79,949
Stet-societa Finanz Telefon -
telecommunications and cellular 421,050 1,286,392 1,286,392
Unicem - construction and construction
materials 12,700(b) 81,841 81,841
------------ ------------ -------------- -----------
783,757 - 2,277,813 3,061,570
------------ ------------ -------------- -----------
Japan (35.0%)
Amada Metrecs - electronic capital goods 108,000 1,631,932 1,631,932
Circle K Japan Company - retail stores 22,000(b) 932,478 932,478
DDI - telecommunications 337 600,827 1,868,425 2,469,252
Daifuku - machine tool manufacturer 78,000 1,156,379 1,156,379
Daimaru - retail 100,000 687,099 687,099
Dainippon Ink & Chemical - chemical and
plastics 655,000 567,831 2,407,603 2,975,434
Daiwa Securities - finance 150,000 2,109,765 2,109,765
Dowa Mining - mining 172,000 866,334 866,334
Denki Kagaku - chemical and plastics 415,000(b) 460,109 1,200,285 1,660,394
H.I.S. Company - leisure and entertainment 22,000(b) 1,045,379 1,045,379
Honda Motor - motor vehicles 89,000 1,886,149 1,886,149
Ichiyoshi Securities - securities broker 275,000 962,224 801,853 1,764,077
Isetan - retail stores 184,000 2,308,197 2,308,197
Kobe Steel - iron/steel and aluminum 965,000(b) 637,681 2,159,420 2,797,101
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Number of Fund Value Fund Growth Fund Combined
Name of Issuer Shares Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
Kumagai Gumi - engineering and construction 585,000 755,999 1,634,593 2,390,592
Maeda Road Construction - transportation 120,000 521,739 1,565,217 2,086,956
Marubeni Corporation - distributer -wholesale 420,000 2,271,133 2,271,133
Matsushita Electric Works - electricals 237,000 2,545,118 2,545,118
Mitsubishi Heavy Industries - industrial
machinery and manufacturing 78,000 630,820 630,820
Mitsubishi Materials - metal mining company 430,000 2,227,132 2,227,132
Mitsui Fudosan - real estate 250,000 701,354 2,220,955 2,922,309
Mori Seiki - machine tool manufacturer 159,000 790,877 2,518,318 3,309,195
Murata Manufacturing - electronics 20,000 657,638 657,638
Nihon Cement Company, LTD - cement
manufacturing 344,000 2,288,430 2,288,430
Nippon Telegraph and Telephone -
telecommunications 336 342,124 2,210,121 2,552,245
Nissha Printing - print media/publishing 112,000 545,023 1,104,775 1,649,798
Nomura - stock broker 118,000 2,422,238 2,422,238
Nippon Yusen - shipping 392,000 2,235,210 2,235,210
Okuma - industrial machinery and
manufacturing 40,000(b) 402,946 402,946
Sony Music Entertainment - consumer goods 15,900 788,767 788,767
Sony Corporation - electronics 40,000 2,341,649 2,341,649
Sumitomo Bank - commercial bank 106,000 570,207 1,444,524 2,014,731
Sumitomo Trust & Banking - bank 188,000 746,971 1,593,538 2,340,509
TOA - engineering 84,000 581,953 581,953
Topre - automobile parts 92,000 699,454 699,454
Tokyo Steel Manufacturing - steel manufacturer 117,000 605,274 1,540,699 2,145,973
Topy Industries - tires and auto parts 279,000 1,206,415 1,206,415
Toshiba - electronics 350,000 2,704,205 2,704,205
Tsudakoma - machine tool manufacturer 101,000 662,294 662,294
Yaskawa Electric - electronics 165,000(b) 843,621 843,621
------------ ------------ -------------- -----------
- 14,966,872 56,244,429 71,211,301
------------ ------------ -------------- -----------
Malaysia (1.8%)
Genting - hotels, leisure and entertainment 33,000 295,232 295,232
Kim Hin Industries - ceramic tile manufacturer 150,000 300,177 300,177
Telekom Malaysian - telecommunications 200,000 343,732 1,374,926 1,718,658
YTL Corporation - construction 300,000 282,519 1,130,077 1,412,596
------------ ------------ -------------- -----------
- 921,483 2,805,180 3,726,663
------------ ------------ -------------- -----------
Mexico (1.1%)
Cementos De Mexico Class A (Cemex) - building
construction and materials 155,000 527,204 527,204
Telefonos De Mexico Class L ADR -
telecommunications and cellular 52,700 1,607,350 1,607,350
------------ ------------ -------------- -----------
- - 2,134,554 2,134,554
------------ ------------ -------------- -----------
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Number of Fund Value Fund Growth Fund Combined
Name of Issuer Shares Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
Netherlands (2.2%)
ASM Lithography Holding - diversified
industrials and conglomerate 1,500(b) 72,408 72,408
Amev NV - bank 18,000 1,198,545 1,198,545
Furgo - McClelland - engineering 11,410 124,548 124,548
Gist-Brocades - pharmaceuticals 5,660 171,276 171,276
Klondike Post Netherland NV -
telecommunications and cellular 17,000 681,443 681,443
Philips Electronics - electronics 3,500 145,391 145,391
Polynorm - diversified industrial and
conglomerate 1,250 118,253 118,253
Royal Dutch Petroleum - oil and gas 590 81,505 81,505
Vnu - Ver Ned Uitgev Ver Bezit - publishing
company 110,000 1,794,421 1,794,421
------------ ------------ -------------- -----------
713,381 - 3,674,409 4,387,790
------------ ------------ -------------- -----------
Norway (.1%)
Kvaerner - engineering and construction 1,850 59,161 59,161
Orkla Borregaard - diversified industrials
and conglomerate 1,710 77,357 77,357
UNI Storebrand - insurance 11,000(b) 59,371 59,371
------------ ------------ -------------- -----------
195,889 - - 195,889
------------ ------------ -------------- -----------
Philippines (1.1%)
C & P Homes - real estate 425,000(b) 329,048 329,048
Philippine Long Distance Telephone -
telecommunications & cellular 15,990 944,544 944,544
Philippine National Bank - commercial bank 75,000(b) 1,060,983 1,060,983
------------ ------------ -------------- -----------
- 329,048 2,005,527 2,334,575
------------ ------------ -------------- -----------
Portugal (.1%)
Jornalgeste SGPS - printing and publishing 4,878(b) 48,818 48,818
Tertir-Terminais de Portugal - transportation 7,800(b) 28,010 28,010
------------ ------------ -------------- -----------
76,828 - - 76,828
------------ ------------ -------------- -----------
Singapore (4.5%)
City Development - real estate 330,400 654,816 2,036,119 2,690,935
Development Bank Of Singapore - financial
services 150,000 2,135,269 2,135,269
Genting Berhad - hotels and leisure 150,000 1,341,966 1,341,966
Overseas-Chinese Banking Corporation -
banking and financial services 25,000 347,025 347,025
United Overseas Bank - bank 249,200 320,822 2,344,136 2,664,958
------------ ------------ -------------- -----------
- 1,322,663 7,857,490 9,180,153
------------ ------------ -------------- -----------
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Number of Fund Value Fund Growth Fund Combined
Name of Issuer Shares Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
South Korea (2.3%)
Korea 1990 Trust - closed-end fund 75(b) 393,750 393,750
Korea International Turst IDR - closed-end fund 3 157,500 157,500
Pohang Iron And Steel - steel manufacturer 18,000 1,383,517 1,383,517
Samsung Electronics 1/2 Non-Voting Shares -
electronics 2,968(b) 161,014 161,014
Samsung Electronics 1/2 Voting Shares -
electronics 462(b) 42,491 42,491
Shinhan Bank - commercial bank 44,977 1,110,415 1,110,415
Shinsegae Department Store - retail stores 292(b) 19,898 19,898
Shinsegae Department Store - retail stores 14,478 987,126 987,126
Yukong - oil company 15,000(b) 465,785 465,785
------------ ------------ -------------- -----------
- 754,755 3,966,741 4,721,496
------------ ------------ -------------- -----------
Spain (1.6%)
Amper - telecommunications 2,800(b) 36,261 36,261
Cubiertas y Mzov - engineering 1,800 116,190 116,190
Empresa Nacional Hidroelectrica del
Ribagorzana - utilities 2,830 63,937 63,937
Iberdrola - utilities 150,000 118,126 1,358,454 1,476,580
Inmobiliaria Urbis - real estate 5,977(b) 25,078 25,078
Repsol Sa - oil & gas 37,800 65,647 1,312,946 1,378,593
Telefonica De Espana -
telecommunications 4,100 67,322 67,322
Zardoya-Otis - industrial machinery
and manufacturing 500 53,617 53,617
------------ ------------ -------------- -----------
546,178 - 2,671,400 3,217,578
------------ ------------ -------------- -----------
Sweden (1.2%)
Althin Medical - health care 4,200 80,705 80,705
AssiDoman - forest products 3,100 69,420 69,420
Astra Class A - pharmaceuticals 1,900 87,061 87,061
Atlas Copco Class B - industrial
machinery and manufacturing 3,900 67,447 67,447
Ericsson - Class B - telecommunications 2,934 63,534 63,534
Frontec Class B - computer hardware
and software 2,000(b) 73,019 73,019
Getinge Industrier Class B - health care 1,300 68,407 68,407
Hoganas Class B - metal products and
manufacturing 1,960 54,176 54,176
Nordbanken AB - regional bank 97,000(b) 1,699,025 1,699,025
Skandia Forsakrings - insurance 4,250 99,256 99,256
------------ ------------ -------------- -----------
663,025 - 1,699,025 2,362,050
------------ ------------ -------------- -----------
Switzerland (2.3%)
Brown Boveri - general engineering 1,135 101,657 1,255,768 1,357,425
Ciba-Geigy Registered - pharmaceuticals 75 66,898 66,898
CS Holding - financial services 500 47,576 47,576
Kuoni Reisen Holdings - miscellaneous
services 45 82,452 82,452
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Number of Fund Value Fund Growth Fund Combined
Name of Issuer Shares Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
Nestle-Registered - food and beverage/
processing 820 896,011 896,011
Oerlikon-Buehrle Holding - diversified
holding company 1,025(b) 97,745 97,745
Roche Holdings - pharmaceuticals 235 232,864 1,591,238 1,824,102
Sandoz - health care 275 257,891 257,891
Saurer - diversified industrials and
conglomerate 100(b) 42,059 42,059
Winterthur Schweizerische Registered -
insurance 125 81,203 81,203
------------ ------------ -------------- -----------
1,010,345 - 3,743,017 4,753,362
------------ ------------ -------------- -----------
Thailand (5.3%)
Bank of Ayudhya Public Company - commercial
bank 320,000 405,418 1,746,265 2,151,683
Electricity General Public Company - electric
utility 370,000 271,345 1,127,026 1,398,371
Finance One Compnay - financial services 50,000 360,595 360,595
General Finance and Securities Company -
financial services 350,000(b) 207,878 1,285,204 1,493,082
General Finance and Securities Company -
foreign - financial serevices 50,000 215,811 215,811
Land And Houses - residential property 75,200 1,490,251 1,490,251
Siam Cement - construction and construction
materials 26,400 253,891 1,106,724 1,360,615
Srithai Superware - consumer durable goods 100,000 670,302 670,302
Telecomasia Corporation - utilities 500,000(b) 1,418,087 1,418,087
Thai Farmers Bank - banking and financial
services 20,000 206,291 206,291
------------ ------------ -------------- -----------
- 1,921,229 8,843,859 10,765,088
------------ ------------ -------------- -----------
United Kingdom (9.6%)
Abbott Mead Vickers Plc - communications 57,000 460,469 460,469
Aegis Group - advertising 510,000(b) 386,249 386,249
Antofagasta Holdings - diversified
industrial 60,000 344,250 344,250
Bluebird Toys PLC - toy manufacturer 119,600 585,562 585,562
British Aerospace - air transportation 10,000 133,110 133,110
British Petroleum - oil and gas 147,000 189,850 1,023,539 1,213,389
British Telecom - telecommunications 240,000 261,462 1,102,686 1,364,148
BTR - conglomerate 193,700 955,764 955,764
Cable & Wireless - telecommunications &
cellular 135,750 107,113 816,102 923,215
Compass Group - contract catering 115,600 861,347 861,347
Dixons Group - department stores 160,000 1,130,976 1,130,976
Glaxo Wellcome - pharmaceuticals 14,000 193,530 193,530
Grand Metropolitan - food and beverage 22,500 149,405 149,405
Great Universal Stores - retail 18,600 188,392 188,392
Guiness - brewing and distillers 10,600 74,441 74,441
International Business Communications
(Holdings) - printing and publishing 40,000 184,212 184,212
Jupiter Split Trust - investment fund 963,716(b) 1,216,451 1,216,451
Legal & General Group - insurance 19,500 213,022 213,022
Marks & Spencer - retail 161,400 128,214 906,473 1,034,687
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

Preferred Stocks (.2%)
Germany (.2%)
Fresenius AG - health care 1,750 256,660 256,660
Koegel Fahrzeugwerke AG - automobile 325(b) 63,552 63,552
Systeme, Anwendungen, Produkte in der
Datenverarbeitung (SAP) - computer hardware 725 113,564 113,564
------------ ------------ -------------- -----------
Total Preferred Stocks 433,776 - - 433,776
(cost: $259,496) ------------ ------------ -------------- -----------
</TABLE>

<PAGE>

PIPER GLOBAL FUNDS INC. - PACIFIC-EUROPEAN GROWTH FUND
PRO FORMA COMBINING SCHEDULE OF INVESTMENTS (UNAUDITED)
FEBRUARY 29, 1996

<TABLE>
<CAPTION>
Pro Forma Hercules Hercules
Combined European Value Pacific Basin Pacific-European Pro Forma
Principal Fund Value Fund Growth Fund Combined
Name of Issuer Amount Market Value Market Value Market Value Market Value
- - - - -------------------------------------------------- ---------- --------------- -------------- ----------------- ------------
(PERCENTAGES OF EACH INVESTMENT CATEGORY
RELATE TO TOTAL NET ASSETS)
<S> <C> <C> <C> <C> <C>
Corporate Bonds (-%)
Denmark (-%)
Det Danske Traelastkompagni (Danish krone),
convertible - corporate bonds 335,000 55,948 - - 55,948
------------ ------------ -------------- -----------
Total Corporate Bonds 55,948 - - 55,948
(cost: $60,292) ------------ ------------ -------------- -----------

Rights/Warrants (.07%)
International Nederlanden Grope Warrants -
financial services 24,630(b) 87,825 87,825
Five Arrow Chile Warrants - mutual fund 80,000(b) 46,000 46,000
Gartmore Micro Index Trust Warrants -
financial services 10,000(b) 3,366 3,366
Herald Investment Trust Warrants -
financial services 10,000(b) 10,251 10,251
------------ ------------ -------------- -----------
Total Rights/Warrants 101,442 - 46,000 147,442
(cost: $95,529) ------------ ------------ -------------- -----------

Short-Term Securities (3.8%)
Repurchase agreement with Goldman Sachs,
5.20%, 3/1/96 $7,701,000 7,701,000 7,701,000
------------ ------------ -------------- -----------
Total Short Term Securities - - 7,701,000 7,701,000
(cost: $7,701,000) ------------ ------------ -------------- -----------

Total Investments in Securities $13,703,179 24,800,168 159,543,727 198,047,074
(cost: $183,546,935) ------------ ------------ -------------- -----------
------------ ------------ -------------- -----------
</TABLE>

Notes to Investments in Securities:

(a) See historical financial statements and footnotes thereto of each fund
regarding valuation of securities
(b) Presently non-income producing.

<PAGE>

PART B

PACIFIC-EUROPEAN GROWTH FUND
A Series of Piper Global Funds Inc.

STATEMENT OF ADDITIONAL INFORMATION

April 28, 1995

Table of Contents

Page
----
Investment Objective, Policies and Restrictions..... 2
Directors and Executive Officers.................... 10
Investment Advisory and Other Services.............. 15
Portfolio Transactions and Allocation of Brokerage.. 21
Capital Stock and Ownership of Shares............... 23
Net Asset Value and Public Offering Price........... 23
Calculation of Performance Data..................... 24
Purchase of Shares.................................. 25
Redemption of Shares................................ 25
Taxation............................................ 27
General Information................................. 31
Financial Statements................................ 31
Pending Litigation.................................. 31
Appendix A - Corporate Bond, Preferred Stock and
Commercial Paper Ratings.......................... A-1
Appendix B - General Characteristics and Risks of
Options and Futures............................... B-1

This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the prospectus dated April 28,
1995, and should be read in conjunction therewith. A copy of the prospectus may
be obtained from the Fund at Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402-3804.

1
<PAGE>

INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
-----------------------------------------------

The investment objective and policies of the Fund are set forth in the
prospectus. Certain additional investment information is set forth below.

INVESTMENT BACKGROUND

THE PACIFIC BASIN. Management believes that there are significant
investment opportunities available in the Pacific Basin. Its reasons for this
view include the following:

(a) HISTORIC ECONOMIC GROWTH. Many countries in the Pacific Basin have,
over approximately the last 25 years, experienced an economic growth rate
superior to that of the U.S. Management believes that, based on its evaluation
of the factors which in its view have contributed to the high level of growth
experienced by countries in the Pacific Basin, the rapid growth rate of
countries in the region should continue.

(b) ATTRACTIVE RELATIVE VALUATIONS. Management believes that the
potential future values of companies within the region have not been reflected
in stock market prices to as great an extent as in other areas of the world.
Accordingly, Management believes that a significant number of undervalued
companies are located in the region.

(c) EXPANSION OF EQUITY MARKETS. Management believes that the stock
markets of countries in the Pacific Basin are maturing, that the strong economic
growth of the region will continue and that foreign investment will increase
substantially.

(d) CONSUMER DEMAND. Approximately 50% of the world's population lives
within the Pacific Basin, including China and India. Management believes that,
to the extent that economic growth within the region continues and per capita
income rises, consumer demand within the region should expand, which in turn
would provide further impetus to economic development.

EUROPE. The European economy as represented by the Gross Domestic Product
of Europe, including the United Kingdom, is greater than that of the U.S. and
almost twice the size of Japan. Management is of the view that the economic
growth of countries within Europe has not to date been fully reflected in stock
prices. Thus, the stock market capitalization of the European countries is
generally smaller relative to the size of their respective economies than are
the stock markets of the U.S. and Japan. Management believes that recent
developments in Europe will contribute to a significant increase in domestic and
foreign investment in the European stock markets, resulting in European stock
market capitalizations more reflective of the size of the respective European
economies and in turn a corresponding increase in stock market prices generally.

2
<PAGE>

In Management's view, the action of the European Union, consisting of
twelve Western European countries, in adopting the Single European Act, is of
particular importance. In Management's view, the dismantling of controls and
barriers and harmonization of laws and regulations will result in the
achievement of a higher economic growth rate and lower inflation in the region
as a whole than would otherwise have been the case. Management believes that
the progressive development of a single European market could be beneficial for
economic growth, investment and the control of inflation. In addition, recent
political developments in Eastern Europe are expected to result in an opening up
of these markets. Management anticipates that the development of market
oriented economies by Eastern European countries will contribute to economic
growth in Western Europe and extend the consumer market place of the whole
region.

Eastern European Developments. Although the changes taking place in
Eastern Europe are a continuing process and direct access to most of these
potential markets by foreign investors is limited, Management may in the future
seek to invest in the business opportunities that may emerge from the changing
political, economic and legal environment in Eastern Europe, particularly in
Hungary, Poland and the Czech and Slovak Republics. However, Management
believes that at the present time there are very few appropriate investments
available for the Fund in Eastern Europe and Management does not intend to make
any such investments in the near future. While Management expects that
additional investments will become available in the future, there can be no
assurance that this will be the case. Certain Eastern European countries are
currently implementing reforms directed at political and economic
liberalization, including efforts to move toward more market-oriented economies
and to foster multi-party political systems. For example, Hungary and Poland
have adopted reforms to stimulate their economies and encourage foreign
investment. Specifically, laws have been or are being enacted to allow private
individuals to own and operate businesses and to protect the property rights of
investors. Such laws seek to assure foreign investors of the right to own
interests in and, under certain circumstances, control local companies and to
repatriate capital and profits, and in certain cases grant favorable tax
treatment to companies with foreign participation.

As a result of these and other measures, Management expects that foreign
direct investment in Eastern Europe may increase. In addition, the World Bank,
the International Monetary Fund and various national governments and private
banks are providing financing to companies based in, and governments of, certain
Eastern European countries. The European Union has entered into trade and
cooperation agreements with most Eastern European countries and has provided
technical and financial assistance to such countries. Further, the United
States has granted many Eastern European nations "most favored nation" status
with respect to trade matters.

ALLOCATION OF INVESTMENTS BETWEEN THE PACIFIC BASIN AND EUROPE. As noted
above under "Investment Background -- The Pacific Basin," the Pacific Basin
includes several countries that have experienced high economic growth rates in

3
<PAGE>

recent years. Also, Management believes that there are more attractive values
in the region as compared to other areas of the world. Consequently, Management
believes that the opportunities for long-term capital appreciation in the
Pacific Basin are generally superior to those presently available in the
economically more mature areas of the world. Accordingly, while the Fund has no
specific policy or restriction on the allocation of its funds between Europe and
the Pacific Basin, as of March 31, 1995, approximately 64% of the Fund's
investments were in companies in the Pacific Basin and approximately 26% were in
companies in Europe. The relative emphasis of the Fund's investments as
between the Pacific Basin and Europe may change over time to the extent
Management identifies greater investment opportunities in Europe as a result of
more attractive values, recent developments in Eastern Europe, the removal of
most intra-European trade barriers or otherwise.

ALLOCATION AMONG COUNTRIES. Investment is made in those countries where
Management believes that economic and political factors, including currency
movements, are likely to produce above average investment returns. There is no
limitation on the percentage of the Fund's assets that may be invested at any
one time in securities of companies in one or more of the countries in the
Pacific Basin or in Europe, except insofar as the Fund is limited in its ability
to invest in other investment companies; provided, however, that in normal
market conditions the Fund's investments will be allocated among at least three
different countries in the Pacific Basin and/or Europe. To the extent the Fund
invests a significant portion of its assets in any one country, it will be more
susceptible to factors adversely affecting issuers in such country than would a
comparable fund having a lesser percentage of its assets so invested.

SELECTION OF INVESTMENTS. Emphasis is placed on identifying securities of
companies believed to be undervalued in the marketplace in relation to such
factors as the company's assets, earnings and growth potential or which are
believed best positioned within a particular industry to take advantage of
specific economic and political factors likely to result in growth for such
industry. The Fund does not, however, concentrate its investments in companies
of a particular asset size or in a particular industry, but instead selects its
investments based on the characteristics of the particular markets and economies
of the countries in which it invests.

FOREIGN CURRENCY TRANSACTIONS

As discussed in the prospectus, the Fund engages in currency exchange
transactions in connection with the purchase and sale of its investments. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract as agreed by the parties, at a price set at the
time of the contract. In the case of a cancelable forward contract, the holder
has the unilateral right to cancel the contract at maturity by paying a
specified fee. The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A

4
<PAGE>

foreign currency futures contract is a standardized contract for the future
delivery of a specified amount of a foreign currency at a future date at a price
set at the time of the contract. Foreign currency futures contracts traded in
the United States are designated by and traded on exchanges regulated by the
Commodity Futures Trading Commission ("CFTC"), such as the New York Mercantile
Exchange. The Fund would enter into foreign currency futures contracts solely
for hedging or other appropriate risk management purposes as defined in CFTC
regulations.

Forward foreign currency exchange contracts differ from foreign currency
futures contracts in certain respects. For example, the maturity date of a
forward contract may be any fixed number of days from the date of the contract
agreed upon by the parties, rather than a predetermined date in any given month.
Forward contracts may be in any amounts agreed upon by the parties rather than
predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A
forward contract generally requires no margin or other deposit.

At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.

Positions in foreign currency futures contracts may be closed out only on
an exchange or board of trade which provides a secondary market in such
contracts. Although the Fund purchases or sells foreign currency futures
contracts only on exchanges or boards of trade where there appears to be an
active secondary market, there is no assurance that a secondary market on an
exchange or board of trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin.

Options on foreign currencies operate similarly to options on securities,
and are traded primarily in the over-the-counter market, although options on
foreign currencies have recently been listed on several exchanges. Options
traded in the over-the-counter market are illiquid and it may not be possible
for the Fund to dispose of an option it has purchased or terminate its
obligations under an option it has written at a time when the Adviser believes
it would be advantageous to do so. Options on foreign currencies are affected
by all of those factors which influence foreign exchange rates and investments
generally.

The value of a foreign currency option is dependent upon the value of the
foreign currency and the U.S. dollar, and may have no relationship to the

5
<PAGE>

investment merits of a foreign debt security. Because foreign currency
transactions occurring in the interbank market involve substantially larger
amounts than those that may be involved in the use of foreign currency options,
investors may be disadvantaged by having to deal in an odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots. There is no
systematic reporting of last sale information for foreign currencies and there
is no regulatory requirement that quotations available through dealers or other
market sources be provided on a timely basis. Available quotation information
is generally representative of very large transactions in the interbank market
and thus may not reflect relatively smaller transactions (less than $1 million)
where rates may be less favorable. The interbank market in foreign currencies
is a global, around-the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that cannot be reflected in the options markets.

Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based upon the difference between prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer.

REVERSE REPURCHASE AGREEMENTS

The Fund has the right to enter into reverse repurchase agreement
transactions. However, the Fund does not currently enter into or intend to
enter into such transactions during the coming year.

The Fund may enter into reverse repurchase agreements with the same parties
with whom it may enter into repurchase agreements. See "Special Investment
Methods - Repurchase Agreements" in the prospectus. Under a reverse repurchase
agreement, the Fund sells securities and agrees to repurchase them at a mutually
agreed date and price. Because certain of the incidents of ownership of the
security are retained by the Fund, reverse repurchase agreements are considered
a form of borrowing by the Fund from the buyer, collateralized by the security.
At the time the Fund enters into a reverse repurchase agreement, it will
establish and maintain a segregated account with an approved custodian
containing high grade liquid debt securities having a value not less than the
repurchase price (including accrued interest). Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by the Fund may decline below the price of the securities the Fund has sold
but is obligated to repurchase. In the event the buyer of securities under a
reverse repurchase agreement files for bankruptcy or becomes insolvent, such
buyer or its trustee or receiver may receive an extension of time to determine
whether to enforce the Fund's obligation to repurchase the securities and the
Fund's use of the proceeds of the reverse repurchase agreement may effectively
be restricted pending such decisions. Reverse repurchase agreements will be
used as a means of borrowing for investment

6
<PAGE>

purposes. This speculative technique is referred to as leveraging. Leveraging
may exaggerate the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging will be
subject to interest costs which may or may not be recovered by income from or
appreciation of the securities purchased. The Fund's Board of Directors has
established procedures, which are periodically reviewed by the Board, pursuant
to which the Adviser will monitor the creditworthiness of the dealers and banks
with which the Fund enters into reverse repurchase agreement transactions.

The Securities and Exchange Commission views reverse repurchase agreement
transactions as collateralized borrowings by the Fund. Therefore, pursuant to
the Investment Company Act of 1940 (the "1940 Act"), the Fund must maintain
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of at least 300% of the amount
borrowed.

ILLIQUID SECURITIES

As a fundamental investment restriction that may not be changed without
shareholder approval, the Fund will invest no 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. The 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, the 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 Fund 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 (as discussed below). Similar determinations may

7
<PAGE>

be made with respect to securities issued in reliance on the so-called
"private placement" exemption from registration under Section 4(2) of the
1933 Act.

Under the procedures adopted by the Board of Directors, factors taken into
account in determining the liquidity of a security include (a) the frequency of
trades and quotes for the security; (b) the number of dealers willing to
purchase or sell the security and the number of other potential purchasers; (c)
dealer undertakings to make a market in the security; and (d) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
transfer). With respect to Rule 144A securities, investing in such securities
could have the effect of increasing the level of Fund illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities.

PORTFOLIO TURNOVER

Portfolio turnover is the ratio of the lesser of annual purchases or sales
of portfolio securities to the average monthly value of portfolio securities,
not including securities maturing in less than 12 months. A 100% portfolio
turnover rate would occur, for example, if the lesser of the value of purchases
or sales of portfolio securities for a particular year were equal to the average
monthly value of the portfolio securities owned during such year.

INVESTMENT RESTRICTIONS

The Fund's investment objective and the following investment restrictions
are fundamental and cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities (defined in the 1940 Act
as the lesser of (a) more than 50% of the outstanding shares or (b) 67% or more
of the shares represented at a meeting where more than 50% of the outstanding
shares are represented). All other investment policies or practices are
considered by the Fund not to be fundamental and, accordingly, may be changed
without shareholder approval. If a percentage restriction on investment or use
of assets set forth below is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing market values will not be
considered a deviation from policy. The Fund may not:

(1) With respect to 75% of its total assets, invest more than 5% of the
value of its total assets (taken at market value at the time of purchase) in the
outstanding securities of any one issuer, or own more than 10% of the
outstanding voting securities of any one issuer, in each case other than
securities issued or guaranteed by the United States government or any agency or
instrumentality thereof. For purposes of these restrictions, the government of
any country (other than the U.S.), including its governmental subdivisions, is
each considered a single issuer.

(2) Invest 25% or more of the value of its total assets in the securities
of issuers in the same industry, provided that this limitation does not apply to

8
<PAGE>

securities issued or guaranteed by the United States government or its agencies
or instrumentalities.

(3) Borrow money (provided that the Fund may enter into reverse repurchase
agreements) except from banks for temporary or emergency purposes. The amount
of such borrowing may not exceed 10% of the value of the Fund's total assets.
The Fund will not purchase portfolio securities while outstanding borrowing
exceeds 5% of the value of the Fund's total assets. The Fund will not borrow
money for leverage purposes (provided that the Fund may enter into reverse
repurchase agreements for such purposes).

(4) Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure issuances or borrowings permitted by restriction 3 above (collateral
arrangements with respect to reverse repurchase agreements or to margin for
future contracts and options are not deemed to be pledges or other encumbrances
for purposes of this restriction).

(5) Make loans of money or property to any person, except through loans of
portfolio securities, the purchase of debt obligations in which the Fund may
invest consistently with the Fund's investment objective and policies or the
acquisition of securities subject to repurchase agreements.

(6) Underwrite the securities of other issuers, except to the extent that
in connection with the disposition of portfolio securities or the sale of its
own shares the Fund may be deemed to be an underwriter.

(7) Invest for the purpose of exercising control over management of any
company.

(8) Purchase real estate or interests therein other than securities backed
by mortgages and similar instruments.

(9) Purchase or sell commodities or commodity contracts except for hedging
purposes.

(10) Make any short sales of securities.

(11) Issue any senior securities (as defined in the 1940 Act), other than
as set forth in restriction number 3 above and except to the extent that using
options and futures contracts or purchasing or selling securities on a when-
issued or forward commitment basis may be deemed to constitute issuing a senior
security.

(12) Invest more than 15% of the value of its net assets in illiquid
securities.

In addition, the following are non-fundamental investment restrictions of
the Fund which may be changed without shareholder approval:

9
<PAGE>

(a) The Fund will not purchase or sell interests in oil, gas or mineral
leases or interests in oil, gas or other mineral exploration or development
programs.

(b) The Fund will not invest more than 5% of the value of its total assets
in the securities of any issuers which, with their predecessors, have a record
of less than three years' continuous operation. (Securities of such issuers
will not be deemed to fall within this limitation if they are guaranteed by an
entity in continuous operation for more than three years. The value of all
securities issued or guaranteed by such guarantor and owned by the Fund shall
not exceed 10% of the value of the total assets of the Fund.)

(c) The Fund will not purchase any securities on margin except to obtain
such short-term credits as may be necessary for the clearance of transactions
and except that the Fund may make margin deposits in connection with futures
contracts.

(d) The Fund will not purchase or retain the securities of any issuer if,
to the Fund's knowledge, those officers or directors of Piper Global or its
affiliates or of its investment adviser who individually own beneficially more
than 0.5% of the outstanding securities of such issuer, together own more than
5% of such outstanding securities.

(e) The Fund will not invest in real estate limited partnerships.

(f) The Fund will treat repurchase agreements with remaining maturities in
excess of seven days as illiquid securities.

(g) The Fund will not invest more than 5% of its net assets in warrants,
valued at the lower of cost or market. Included within this amount, but not to
exceed 2% of the value of the Fund's net assets, may be warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange.

DIRECTORS AND EXECUTIVE OFFICERS
--------------------------------

The directors and officers of Piper Global and their principal occupations
during the past five years are set forth below. Each of Piper Global's
directors and officers, other than Mr. Watt and Mr. Balfour, also serves as a
director or officer of various closed-end and open-end investment companies
managed by the Adviser.

10
<PAGE>

Principal Occupations
Position With During The Past Five Years
Name And Address Piper Global And Other Affiliations
- - - - ---------------- ------------- --------------------------

William H. Ellis* Chairman of President of Piper Jaffray Companies
Piper Jaffray Tower the Board of Inc. and Piper Jaffray Inc. since
222 South Ninth Street Directors September 1982 and Chief Operating
Minneapolis, MN 55402 Officer of the same two companies
since August 1983; Director and
Chairman of the Board of the
Adviser since October 1985 and
President of the Adviser since
December 1994.

Jaye F. Dyer Director President of Dyer Management
4670 Norwest Center Company, a private management
90 South Seventh Street company, since January 1, 1991;
Minneapolis, MN 55402 prior thereto, Mr. Dyer was
President and Chief Executive
Officer of Dyco Petroleum
Corporation, a Minneapolis based
oil and natural gas development
subsidiary of Arkla, Inc., from
1971, when he founded the company,
until March 1, 1989, and Chairman
of the Board until December 31,
1990. Mr. Dyer serves on the board
of directors of Northwestern
National Life Insurance Company,
The ReliaStar Financial Corp. (the
holding company of Northwestern
National Life Insurance Company)
and various privately held and
nonprofit corporations.

Karol D. Emmerich Director President of The Paraclete Group,
7302 Claredon Drive a consultant to nonprofit and other
Edina, MN 55439 organizations, since May 1993;
prior thereto, Ms. Emmerich was
Vice President and Treasurer of
Dayton Hudson Corporation from 1980
to May 1993 and Chief Accounting
Officer from 1989 to May 1993.
Ms. Emmerich also serves on the
board of directors of a number of
privately held and nonprofit
corporations.

Luella G. Goldberg Director
7019 Tupa Drive
Edina, MN 55435 Ms. Goldberg serves on the board
of directors of Northwestern
National Life Insurance Company
(since 1976), The ReliaStar
Financial Corp. (since 1989), TCF
Bank Savings fsb (since 1986), TCF
Financial Corporation, the holding
company of TCF Bank Savings fsb
(since 1988) and Hormel Foods Corp.
(since 1993). Ms. Goldberg also
serves as a Trustee of Wellesley
College and as a director of a
number of other organizations,
including the Minnesota Orchestral
Association and the University of
Minnesota Foundation. Ms. Goldberg
was Chairman of the Board of
Trustees of Wellesley College from
1985 to 1993 and acting President
from July 1, 1993 to October 1,
1993.

11
<PAGE>

Principal Occupations
Position With During The Past Five Years
Name And Address Piper Global And Other Affiliations
- - - - ---------------- ------------- --------------------------

John T. Golle Director Chairman and Chief Executive
1600 West 82nd Street Officer of Education Alternatives,
Minneapolis, MN 55431 Inc., a company in the business of
providing private management for
public schools since 1986; formerly
a partner and director of Golle &
Holmes Companies, a holding company
located in Minneapolis, Minnesota
engaged through its subsidiaries in
various aspects of the training and
development services industry. Mr.
Golle also serves on the board of
directors of the Children's
Broadcasting Corporation.

George Latimer Director Director, Special Actions Office,
754 Linwood Office of the Secretary, Department
St. Paul, MN 55105 of Housing and Urban Development
since 1993, prior thereto, Mr.
Latimer had been Dean of Hamline Law
School, Saint Paul, Minnesota, since
1990. Mr. Latimer serves on the
board of directors of Digital
Biometrics, Inc. and Payless
Cashways, Inc.

Iain A. Watt* Director Managing Director of the Sub--
Edinburgh Fund Managers plc Adviser since 1991, prior to which
Donaldson House he had been Director since 1986.
97 Haymarket Terrace Mr. Watt is also a director of
Edinburgh, EH12 5HD Edinburgh Dragon Trust plc,
Edinburgh New Tiger Trust plc,
Edinburgh Unit Trust Managers
Limited, Edinburgh Oil Management
Limited and Private Fund Managers
Limited.

Michael W. Balfour* Director Director of Overseas Investments
Edinburgh Fund Managers plc of the Sub-Adviser since 1992, prior
Donaldson House to which he was the assistant
97 Haymarket Terrace director and head of the Pacific
Edinburgh, EH12 5HD Department of the Sub-Adviser from
1988 to 1992. Mr. Balfour is also a
director of the Sub-Adviser, Credit
Capital Asset Management Company
Limited, Edinburgh Inca Trust plc
and Edinburgh Java Trust plc.

Paul A. Dow President Chief Investment Officer of the
Piper Jaffray Tower Adviser since December 1989 and
222 South Ninth Street Senior Vice President of the Adviser
Minneapolis, MN 55402 since February 1989.

Robert H. Nelson Vice President Senior Vice President of the Adviser
Piper Jaffray Tower since November 1993, prior to which
222 South Ninth Street he had been a Vice President of the
Minneapolis, MN 55402 Adviser since November 1991 and an
Assistant Vice President since 1989.

12
<PAGE>

Principal Occupations
Position With During The Past Five Years
Name And Address Piper Global And Other Affiliations
- - - - ---------------- ------------- --------------------------

Nancy S. Olsen Vice President Senior Vice President of the
Piper Jaffray Tower Adviser since November 1991;
222 South Ninth Street prior to which Ms. Olsen had
Minneapolis, MN 55402 been a Vice President of the
Adviser since May 1987.

Charles N. Hayssen Treasurer Managing Director of Piper
Piper Jaffray Tower Jaffray Inc. since 1986 and of
222 South Ninth Street Piper Jaffray Companies Inc.
Minneapolis, MN 55402 since 1987; Chief Financial
Officer of Piper Jaffray Inc.
since 1988; Director and Chief
Financial Officer of the
Adviser since 1989 and Chief
Operating Officer of the
Adviser since December 1994.

David E. Rosedahl Secretary Managing Director, Secretary
Piper Jaffray Tower and General Counsel for Piper
222 South Ninth Street Jaffray Inc.; Managing
Minneapolis, MN 55402 Director and General Counsel
for Piper Jaffray Companies
Inc.; Secretary and a
Director of the Adviser.

__________________
* Directors who are "interested persons" of the Fund, as defined in the 1940
Act, of Piper Capital and the Fund.

Two of the Fund's directors, Mr. Balfour and Mr. Watt, reside outside of
the United States and substantially all of the assets of such persons are
located outside of the United States. Neither Mr. Balfour nor Mr. Watt has
appointed an agent for service of process in the United States. It may not be
possible, therefore, for investors to effect service of process within the
United States upon such persons or to enforce against them, in the United States
courts or foreign courts, judgments obtained in the United States courts
predicated upon the civil liability provisions of the federal securities laws of
the United States. In addition, it is not certain that a foreign court would
enforce, in original actions, liabilities against such persons predicated solely
upon United States securities laws.

Ms. Goldberg, Ms. Emmerich and Mr. Dyer are members of the Fund's Audit
Committee. Ms. Goldberg acts as the chairperson of such committee. The Audit
Committee oversees the Fund's financial reporting process, reviews audit
results and recommends annually to the Fund a firm of independent certified
public accountants.

The Board of Directors also has a Committee of the Independent
Directors, consisting of Messrs. Dyer, Golle and Latimer, Ms. Emmerich and
Ms. Goldberg, and a Derivatives Committee consisting of Ms. Emmerich, who
serves as chairperson of such committee, Ms. Goldberg and Mr. Dyer. The
functions of the Committee of the Independent Directors are: (a)
recommendation to the full Board of approval of any management, advisory,
sub-advisory and/or administration agreements; (b) recommendation to the full
Board of approval of any underwriting and/or

13
<PAGE>

distribution agreements; (c) review of the fidelity bond and premium allocation;
(d) review of errors and omissions and any other joint insurance policies and
premium allocation; (e) review of, and monitoring of compliance with, procedures
adopted pursuant to certain rules promulgated under the 1940 Act; and (f) such
other duties as the independent directors shall, from time to time, conclude are
necessary or appropriate to carry out their duties under the 1940 Act. The
functions of the Derivatives Committee are: (a) to oversee practices, policies
and procedures of the Adviser in connection with the use of derivatives; (b) to
receive periodic reports from management and independent accountants; and (c) to
report periodically to the Committee of the Independent Directors and the Board
of Directors.

The directors of the Fund who are officers or employees of the Adviser or
Sub-Adviser or any of their affiliates receive no remuneration from the Fund.
Each of the other directors receives from the Fund an annual retainer of $1,000,
plus a fee of $250 for each regular quarterly Board of Directors meeting
attended. In addition, members of the Audit Committee not affiliated with the
Adviser or Sub-Adviser receive $1,000 for each Audit Committee meeting attended
($2,000 with respect to the chairperson of the Committee), with such fee being
allocated between the Fund and all other publicly-held investment companies
managed by the Adviser. Members of the Committee of the Independent Directors
and the Derivatives Committee currently receive no additional compensation.
Directors are also reimbursed for expenses incurred in connection with attending
meetings.

The following table sets forth the aggregate compensation received by each
director from Piper Global during the fiscal year ended February 28, 1995, as
well as the total compensation received by each director from Piper Global and
all other registered investment companies managed by the Adviser or an affiliate
of the Adviser during the calendar year ended December 31, 1994. Directors who
are officers or employees of the Adviser or any of its affiliates did not
receive any such compensation and are not included in the table. No other
individuals received compensation from Piper Global during the fiscal year ended
February 28, 1995.

Pension or
Retirement Estimated Total
Aggregate Benefits Annual Benefits Compensation
Compensation Accrued as Part Upon from Fund
Director from Piper Global of Fund Expenses Retirement Complex*
- - - - -------- ----------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>

Jaye F. Dyer $2,053 None None $61,500
Karol D. Emmerich $2,053 None None $61,500
Luella G. Goldberg $2,105 None None $63,500
John T. Golle $2,000 None None $59,500
George Latimer $2,000 None None $59,500

</TABLE>

- - - - ---------------
* Consists of 26 registered investment companies managed by the Adviser or an
affiliate of the Adviser, including Piper Global. Each director included in the
table serves on the board of each such registered investment company.

<PAGE>

INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------

GENERAL

The investment adviser for the Fund is Piper Capital Management
Incorporated (the "Adviser"). Its affiliate, Piper Jaffray Inc. (the
"Distributor"), acts as the Fund's distributor. The Sub-Adviser for the Fund is
Edinburgh Fund Managers plc (the "Sub-Adviser"). Each of the Adviser and Sub-
Adviser acts as such pursuant to a written agreement which is periodically
approved by the directors or the shareholders of the Fund. The address of both
the Adviser and the Distributor is Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402-3804. The address of the Sub-Adviser is Donaldson
House, 97 Haymarket Terrace, Edinburgh, Scotland, EH12 5HD.

CONTROL OF THE ADVISER, THE SUB-ADVISER AND THE DISTRIBUTOR

The Adviser and the Distributor are both wholly owned subsidiaries of Piper
Jaffray Companies Inc., a publicly held corporation which is engaged through its
subsidiaries in various aspects of the financial services industry. The Sub-
Adviser is a public limited company incorporated in 1969. It is a majority-owned
subsidiary of The British Investment Trust plc, a Scottish closed-end investment
company, for which the Sub-Adviser serves as investment manager and adviser.

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

The Adviser acts as the investment adviser of the Fund under an Investment
Advisory and Management Agreement which has been approved by the Board of
Directors of Piper Global (including a majority of the directors who are not
parties to the agreement, or interested persons of any such party, other than as
directors of Piper Global) and the shareholders of the Fund.

The Investment Advisory and Management Agreement will terminate
automatically in the event of its assignment. In addition, the agreement is
terminable at any time, without penalty, by the Board of Directors of Piper
Global or by vote of a majority of the Fund's outstanding voting securities on
not more than 60 days' written notice to the Adviser, and by the Adviser on 60
days' written notice to Piper Global. The agreement may be terminated at any
time by a vote of the holders of a majority of the outstanding voting securities
of the Fund, upon 60 days' written notice to the Adviser. Unless sooner
terminated, the agreement shall continue in effect for more than two years after
its execution only so long as such continuance is specifically approved at least
annually by either the Board of Directors or by a vote of a majority of the
outstanding voting securities of the Fund, provided that in either event such
continuance is also approved by a vote of a majority of the directors who are
not parties to such agreement, or interested persons of such parties, cast in
person at a meeting called for the purpose of voting on such approval.

<PAGE>

Pursuant to the Investment Advisory and Management Agreement, the Fund pays
the Adviser monthly advisory fees as set forth in the prospectus. Adjustments to
the Basic Fee are made by comparison of the Fund's investment performance for
the applicable period with the investment record of the EAFE Index. The Basic
Fee for each month may be increased or decreased by up to .25% (on an annualized
basis) of the Fund's average daily net assets depending upon the extent by which
the Fund's performance varies from the EAFE Index over the applicable
performance period. For each percentage point by which the investment
performance of the Fund exceeds that of the EAFE Index for the applicable
performance period, the Basic Fee is increased by .05% (on an annualized basis)
of the Fund's average daily net assets, and for each percentage point amount by
which the Fund underperforms the EAFE Index, the Basic Fee is decreased by .05%
(on an annualized basis) of the Fund's average daily net assets. The maximum
monthly increase for performance is 1/12 of .25% of the Fund's average daily net
assets and will be payable if the investment performance of the Fund exceeds
that of the EAFE Index by five or more percentage points for the performance
period, and the maximum decrease for performance is 1/12 of .25% of the Fund's
average daily net assets, which will occur if the Fund underperforms the EAFE
Index by five or more percentage points for the performance period. For purposes
of calculation of the performance adjustment, average daily net assets are equal
to the Fund's average daily net assets during the month for which the
calculation is being made. The advisory fees paid by the Fund for the fiscal
years ended February 28, 1993, 1994 and 1995 were $505,350, $1,068,330 and
$1,731,719, respectively.

The Adviser and Sub-Adviser intend, although not required under the
Investment Advisory and Management Agreement and Sub-Investment Advisory
Agreement (discussed below), to reimburse the Fund for the amount, if any, by
which the total operating and management expenses of the Fund (including the
Adviser's compensation and amounts paid pursuant to the Fund's Rule 12b-1 plan,
but excluding interest, taxes, brokerage fees and commissions, and extraordinary
expenses) for the fiscal year exceed 2.25%. This arrangement may be modified or
discontinued at any time after fiscal year end, at the Adviser's discretion.
Even in the event of discontinuance of this arrangement the Fund will still be
subject to the laws of certain states, which require that if a mutual fund's
expenses (including advisory fees but excluding interest, taxes, brokerage
commissions and extraordinary expenses) exceed certain percentages of average
net assets, the fund must be reimbursed for such excess expenses. The Investment
Advisory and Management Agreement provides that the Adviser must make any
expense reimbursements to the Fund required under state law. The laws of
California provide that aggregate annual expenses of a mutual fund shall not
normally exceed 2-1/2% of the first $30 million of the average net assets, 2% of
the next $70 million of the average net assets and 1-1/2% of the remaining
average net assets. Such expenses include the Adviser's compensation, but
exclude interest, taxes, brokerage fees and commissions, extraordinary expenses
and amounts paid under the Fund's Rule 12b-1 Plan. The Adviser does not believe
that the laws of any other state in which the Fund's shares may be offered for
sale contain expense reimbursement requirements.

<PAGE>

Under the Investment Advisory and Management Agreement, the Adviser
provides the Fund with advice and assistance in the selection and disposition of
the Fund's investments. All investment decisions are subject to review by the
Board of Directors of the Fund. The Adviser is obligated to pay the salaries and
fees of any affiliates of the Adviser serving as officers or directors of the
Fund.

SUB-ADVISORY AGREEMENT

Under the Sub-Investment Advisory Agreement, the Sub-Adviser is responsible
for the investment and reinvestment of the Fund's assets in non-U.S. securities
and the placement of brokerage transactions in connection therewith. For its
services, the Sub-Adviser is paid by the Adviser a fee, payable over the same
time periods and calculated in the same manner as the Adviser's fee, equal to
65% of the Adviser's Basic Fee plus or minus 90% of the performance fee
adjustment. The fee received by the Sub-Adviser will be reduced by a portion of
the excess, if any, of certain of the Fund's annual expenses over the expense
limitations set by California law, as described above, and any other applicable
state expense limitations. The Sub-Adviser's fee shall be reduced by an amount
which bears the same ratio to the fee reductions absorbed by the Adviser under
the Investment Advisory and Management Agreement as the sub-advisory fees which
the Sub-Adviser would otherwise be entitled to receive bear to the advisory fees
which the Adviser would be entitled to receive had the Fund not exceeded state
expense limitations.

The fees paid by the Adviser to the Sub-Adviser (such amounts are payable
out of the advisory fees received by the Adviser for the same periods and are
not in addition to such amounts) for the fiscal years ended February 28, 1993,
1994 and 1995 were $364,557, $691,438 and $1,149,751, respectively.

The Sub-Investment Advisory Agreement will terminate automatically in the
event of its assignment. In addition, the Sub-Investment Advisory Agreement is
terminable at any time, without penalty, by the Board of Directors on 60 days'
written notice to the Adviser and the Sub-Adviser or by a vote of the holders of
a majority of the outstanding shares of the Fund. Unless sooner terminated, the
Sub-Investment Advisory Agreement shall continue in effect until two years from
the date of its execution and thereafter from year to year provided it is
specifically approved at least annually by either the Board of Directors or by a
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Fund, provided that, in either event, such continuance is also
approved by a vote of a majority of the Directors who are not parties to such
Sub-Investment Advisory Agreement, or interested persons of such parties, cast
in person at a meeting called for the purpose of voting on such approval.

EXPENSES

The expenses of the Fund are deducted from its income before dividends
are paid. These expenses include, but are not limited to, organizational
costs, fees paid to the Adviser, fees and expenses of officers and directors
who are not affiliated with to the Adviser, fees and expenses of officers and
directors who are not affiliated with

17
<PAGE>

the Adviser, taxes, interest, legal fees, transfer agent, dividend disbursing
agent and custodian fees, audit fees, brokerage fees and commissions, fees
and expenses of registering and qualifying the Fund and its shares for
distribution under federal and state securities laws, expenses of preparing
prospectuses and statements of additional information and of printing and
distributing prospectuses and statements of additional information annually
to existing shareholders, the expenses of reports to shareholders,
shareholders' meetings and proxy solicitations, distribution expenses
pursuant to the Rule 12b-1 plan, and other expenses which are not expressly
assumed by the Adviser under the Investment Advisory and Management
Agreement.

DISTRIBUTION PLAN

Rule 12b-1(b) under the 1940 Act provides that any payments made by the
Fund in connection with financing the distribution of its shares may only be
made pursuant to a written plan describing all aspects of the proposed financing
of distribution, and also requires that all agreements with any person relating
to the implementation of the plan must be in writing. The Fund has entered
into an Underwriting and Distribution Agreement with the Distributor pursuant to
a Distribution Plan adopted in accordance with such Rule. The Fund's
Distribution Plan became effective upon the Fund's conversion to an open-end
investment company on August 31, 1992.

Rule 12b-1(b)(1) requires that such plan be approved by a majority of a
Fund's outstanding shares, and Rule 12b-1(b)(2) requires that such plan,
together with any related agreements, be approved by a vote of the Board of
Directors of Piper Global and of the Directors who are not interested persons of
Piper Global and who have no direct or indirect interest in the operation of the
plan or in the agreements related to the plan, cast in person at a meeting
called for the purpose of voting on such plan or agreement. Rule 12b-1(b)(3)
requires that the plan or agreement provide, in substance:

(a) that it shall continue in effect for a period of more than one
year from the date of its execution or adoption only so long as such
continuance is specifically approved at least annually in the manner
described in paragraph (b)(2) of Rule 12b-1;

(b) that any person authorized to direct the disposition of moneys
paid or payable by the Fund pursuant to the plan or any related agreement
shall provide to the Board of Directors, and the directors shall review, at
least quarterly, a written report of the amounts so expended and the
purposes for which such expenditures were made; and

(c) in the case of a plan, that it may be terminated at any time by a
vote of a majority of the members of the Board of Directors of Piper Global
who are not interested persons of Piper Global and who have no direct or
indirect financial interest in the operation of the plan or in any
agreements related to the plan or by a vote of a majority of the
outstanding voting securities of the Fund.

18
<PAGE>

Rule 12b-1(b)(4) requires that such a plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and that all material amendments of the plan must be approved in the manner
described in paragraph (b)(2) of Rule 12b-1.

Rule 12b-1(c) provides that the Fund may rely upon Rule 12b-1(b) only if
the selection and nomination of Piper Global's disinterested directors are
committed to the discretion of such disinterested directors. Rule 12b-1(e)
provides that the Fund may implement or continue a plan pursuant to Rule 12b-
1(b) only if the directors who vote to approve such implementation or
continuation conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under state law, and under Sections 36(a) and
(b) of the 1940 Act, that there is a reasonable likelihood that the plan will
benefit the Fund and its shareholders. The Board of Directors has concluded
that there is a reasonable likelihood that the Distribution Plan will benefit
the Fund and its shareholders.

Pursuant to the provisions of the Distribution Plan, the Fund pays a
monthly fee to the Distributor equal, on an annual basis, to up to .50% of the
Fund's average daily net assets in order to reimburse the Distributor for its
actual expenses incurred to cover shareholder servicing costs and distribution
expenses. In the event expenses for any one year exceed the maximum
reimbursable under the Plan, such expenses may not be carried forward to the
following year. Shareholder Servicing Costs include all expenses of the
Distributor incurred in connection with providing administrative or accounting
services to shareholders, including, but not limited to, an allocation of the
Distributor's overhead and payments made to persons, including employees of the
Distributor, who respond to inquiries of shareholders of the Fund regarding
their ownership of shares or their accounts with the Fund, or who provide other
administrative or accounting services not otherwise required to be provided by
the Fund's Adviser or transfer agent. Distribution Expenses under the Plan
include, but are not limited to, initial and ongoing sales compensation (in
addition to sales charges) paid to investment executives of the Distributor and
to other broker-dealers; expenses incurred in the printing of prospectuses,
statements of additional information and reports used for sales purposes;
expenses of preparation and distribution of sales literature; expenses of
advertising of any type; an allocation of the Distributor's overhead; and
payments to and expenses of persons who provide support services in connection
with the distribution of Fund shares. Distribution fees paid by the Fund for
the fiscal year ended February 28, 1995 were $476,639. During this period, the
Distributor voluntarily agreed to limit the reimbursement fee to an annual rate
of .28% of average daily net assets. Of the distribution fees paid for the
fiscal year ended February 28, 1995, the Distributor used $200,188 for
compensation to underwriters (fees to investment executives) and $276,451 for
printing and mailing of prospectuses to other than current shareholders.

19
<PAGE>

UNDERWRITING AND DISTRIBUTION AGREEMENT

Pursuant to the Underwriting and Distribution Agreement, the Distributor
has agreed to act as the principal underwriter for the Fund in the sale and
distribution to the public of shares of the Fund, either through dealers or
otherwise. The Distributor has agreed to offer such shares for sale at all
times when such shares are available for sale and may lawfully be offered for
sale and sold. As compensation for its services, in addition to being
reimbursed for its shareholder servicing and distribution expenses pursuant to
the Distribution Plan discussed above, the Distributor receives the sales load
on sales of Fund shares as set forth in the prospectus. The Distributor waived
such payment for purchases of Fund shares during fiscal 1993. The total
underwriting commissions paid by the Fund during the fiscal years ended
February 28, 1994 and 1995 were $556,904 and $459,632, respectively, and the
Distributor retained underwriting commissions of $323,004 and $266,587,
respectively.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Investors Fiduciary Trust Company ("IFTC"), the transfer agent for Piper
Global, maintains certain omnibus shareholder accounts for the Fund. Each
such omnibus account represents the accounts of a number of individual
shareholders of the Fund. Piper Global has entered into a Shareholder Account
Servicing Agreement with the Distributor, pursuant to which the Distributor
provides certain transfer agent and dividend disbursing agent services for
the underlying individual shareholder accounts. Pursuant to such Agreement,
the Distributor has agreed to perform the usual and ordinary services of
transfer agent and dividend disbursing agent not performed by IFTC with
respect to the underlying individual shareholder accounts, including, without
limitation, the following: maintaining all shareholder accounts, preparing
shareholder meeting lists, mailing shareholder reports and prospectuses,
tracking shareholder accounts for blue sky and Rule l2b-1 purposes,
withholding taxes on nonresident alien and foreign corporation accounts,
preparing and mailing checks for disbursement of income dividends and capital
gains distributions, preparing and filing U.S. Treasury Department Form 1099
for all shareholders, preparing and mailing confirmation forms to
shareholders and dealers with respect to all purchases, exchanges and
liquidations of series shares and other transactions in shareholder accounts
for which confirmations are required, recording reinvestments of dividends
and distributions in series shares, recording redemptions of series shares,
and preparing and mailing checks for payments upon redemption and for
disbursements to withdrawal plan holders. As compensation for such services,
the Distributor is paid an annual fee of $6.00 per active shareholder account
for the Fund and $1.60 per inactive account for the Fund (defined as an
account that has a balance of shares in the Fund but that does not require a
client statement for the current month). There is no charge for a closed
shareholder account (defined as an account that has been inactive for at
least three consecutive months). Such fee is payable on a monthly basis at a
rate of 1/12 of the annual per-account charge. Such fee covers all services
listed above, with the exception of preparing shareholder meeting lists and
mailing shareholder reports

20
<PAGE>

and prospectuses. These services, along with proxy processing (if applicable)
and other special service requests, are billable as performed at a mutually
agreed upon fee in addition to the annual fee noted above, provided that such
mutually agreed upon fee shall be fair and reasonable in light of the usual and
customary charges made by others for services of the same nature and quality.
The Agreement was in effect for a portion of the fiscal year ended February 28,
1995. Fees accrued from December 1, 1994 to February 28, 1995 were $23,704.

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
--------------------------------------------------

The Fund has no obligation to enter into transactions in portfolio
securities with any dealer, issuer, underwriter or other entity. The Fund does
not purchase securities from, or sell securities to, the Adviser, the Sub-
Adviser or their respective affiliates acting as principal. In placing orders,
it is the policy of the Fund to obtain the best price and execution for its
transactions. Where best price and execution may be obtained from more than one
broker-dealer, the Adviser or the Sub-Adviser may, in their discretion, purchase
and sell securities through broker-dealers who provide research, statistical and
other information to the Adviser or the Sub-Adviser, as the case may be. The
Fund will not purchase at a higher price or sell at a lower price in connection
with transactions effected with a dealer, acting as principal, who furnishes
research services to the Adviser or Sub-Adviser than would be the case if no
weight were given by the Adviser or Sub-Adviser, as the case may be, to the
dealer's furnishing of such services.

The supplemental information received from a broker-dealer is in addition
to the services required to be performed by the Adviser under the Advisory
Agreement, and by the Sub-Adviser under the Sub-Advisory Agreement, and the
expenses of the Adviser and/or the Sub-Adviser will not necessarily be reduced
as a result of the receipt of such information. Consistent with the Rules of
Fair Practice of the National Association of Securities Dealers, Inc., and
subject to seeking the best price and execution, the Fund may consider sales of
Shares of the Fund as a factor in the selection of broker-dealers to enter into
portfolio transactions with the Fund.

21
<PAGE>

The investment information provided to the Adviser or the Sub-Adviser, as
the case may be, is of the types described in Section 28(e)(3) of the Securities
Exchange Act of 1934 and is designed to augment the Adviser's or the Sub-
Adviser's own internal research and investment strategy capabilities. Research
and statistical services furnished by brokers through which the Fund effects
securities transactions are used by the Adviser or the Sub-Adviser in carrying
out its investment management responsibilities with respect to all its client
accounts, but not all such services may be used by the Adviser or the Sub-
Adviser in connection with the Fund.

Certain other clients of the Adviser and/or the Sub-Adviser may have
investment objectives and policies similar to those of the Fund. The Adviser
and/or the Sub-Adviser may, from time to time, make recommendations that result
in the purchase or sale of a particular security by its other clients
simultaneously with the Fund. ("Security" is defined for these purposes to
include options, futures contracts and options on futures contracts.) If
transactions on behalf of more than one client during the same period increase
the demand for securities being purchased or the supply of securities being
sold, there may be an adverse affect on price or quantity. In addition, it is
possible that the number of options or futures transactions that the Fund may
enter into may be affected by options or futures transactions entered into by
other investment advisory clients of the Adviser. It is the policy of the
Adviser and the Sub-Adviser to allocate advisory recommendations and the placing
of orders in a manner that is deemed equitable by the Adviser or the Sub-Adviser
to the accounts involved, including the Fund. When two or more of the clients of
the Adviser or Sub-Adviser (including the Fund) are purchasing or selling the
same security on a given day from the same broker-dealer, such transactions may
be averaged as to price.

Transactions in securities, options on securities, futures contracts and
options on futures contracts may be effected through Piper Jaffray Inc. if the
commissions, fees or other remuneration received by Piper Jaffray Inc. are
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers or other futures commission merchants in connection with
comparable transactions involving similar securities or similar futures
contracts or options thereon being purchased or sold on an exchange or contract
market during a comparable period of time. In effecting portfolio transactions
through Piper Jaffray Inc., the Fund intends to comply with Section 17(e)(1) of
the 1940 Act.

The Fund paid brokerage commissions for the fiscal years ended
February 28, 1993, 1994 and 1995 of $274,000, $735,400 and $683,910,
respectively. No commissions were paid to affiliates of the Fund, the Adviser
or the Sub-Adviser, or to affiliates of such affiliates during such periods.

From time to time the Fund may acquire the securities of its regular
brokers or dealers or affiliates of such brokers or dealers. During the fiscal
year ended February 28, 1995, no such securities were acquired by the Fund.

22
<PAGE>

OPTION TRADING LIMITS

The writing by the Fund of options on securities will be subject to
limitations established by each of the registered securities exchanges on which
such options are traded. Such limitations govern the maximum number of options
in each class which may be written by a single investor or group of investors
acting in concert, regardless of whether the options are written on the same or
different securities exchanges or are held or written in one or more accounts or
through one or more brokers. Thus, the number of options which the Fund may
write may be affected by options written by other investment companies managed
by and other investment advisory clients of the Adviser and the Sub-Adviser. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.

CAPITAL STOCK AND OWNERSHIP OF SHARES
-------------------------------------

The Fund's shares of common stock have a par value of $.01 per share, and
have equal rights to share in dividends and assets. The shares possess no
preemptive or conversion rights. 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.

As of March 31, 1995, no shareholder was known by the Fund to own
beneficially 5% or more of the outstanding shares of the Fund. The directors
and officers of the Fund as a group owned less than 1% of the outstanding shares
of the Fund as of such date.

NET ASSET VALUE AND PUBLIC OFFERING PRICE
-----------------------------------------

The method for determining the public offering price of Fund shares is
summarized in the prospectus in the text following the headings "How to
Purchase Shares - Public Offering Price" and "Valuation of Shares." The net
asset value of the Fund's shares is determined on each day on which the New
York Stock Exchange is open, provided that the net asset value need not be
determined on days when no Fund shares are tendered for redemption and no order
for Fund shares is received. The New York Stock Exchange is not open for
business on the following holidays (or on the nearest Monday or Friday if the
holiday falls on a weekend): New Year's Day, Presidents' Day, Good Friday,
Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas.

The portfolio securities in which the Fund invests fluctuate in value, and
hence the net asset value per share of the Fund also fluctuates. On
February 28, 1995, the net asset value per share for the Fund was calculated as
follows:

Net Assets ($154,392,852) = Net Asset Value Per Share ($12.73)
-------------------------
Shares Outstanding (12,130,925)
-----------
23
<PAGE>

A sales charge of 4% of the net asset value (in the case of sales of less
than $100,000) will be added to the net asset value per share to determine the
public offering price per share.

CALCULATION OF PERFORMANCE DATA
-------------------------------

Advertisements and other sales literature for the Fund may refer to
"average annual total return" and "cumulative total return." Average annual
total return figures are computed by finding the average annual compounded rates
of return over the periods indicated in the advertisement that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:

P(1+T)/n/ = ERV

Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period.

This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

The average annual total returns on an investment in the Fund for various
periods ending February 28, 1995 were:

One Year: (14.64)% Since Inception (4/27/90): 4.66%

The Adviser has waived or paid certain expenses of the Fund, thereby
increasing total return. These expenses may or may not be waived or paid in the
future in the Adviser's discretion. Absent any voluntary expense payments or
waivers, the average annual total return since inception for the period ended
February 28, 1995, would have been 4.49%.

Cumulative total return is computed by finding the cumulative compounded
rate of return over the period indicated in the advertisement that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:

24
<PAGE>

CTR = (/ERV-P/) 100
-----
/P/

Where: CTR = Cumulative total return;
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of
such period; and
P = initial payment of $1,000.

This calculation assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the prospectus and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

The Fund's cumulative total return from inception (April 27, 1990) through
February 28, 1995 was 24.67%. Absent any voluntary expense payments or
waivers, the cumulative total return would have been 23.79%.

PURCHASE OF SHARES
------------------

An investor may qualify for a reduced sales charge immediately by signing a
nonbinding Letter of Intent stating the investor's intention to invest within a
13-month period, beginning not earlier than 90 days prior to the date of
execution of the Letter, a specified amount which, if made at one time, would
qualify for a reduced sales charge. Reinvested dividends will be treated as
purchases of additional shares. Any redemptions made during the term of the
Letter of Intent will be subtracted from the amount of purchases in determining
whether the Letter of Intent has been completed. During the term of a Letter of
Intent, IFTC will hold shares representing 5% of the amount that the investor
intends to invest during the 13-month period in escrow for payment of a higher
sales charge if the full amount indicated in the Letter of Intent is not
purchased. Dividends on the escrowed shares will be paid to the shareholder.
The escrowed shares will be released when the full amount indicated has been
purchased. If the full indicated amount is not purchased within the 13-month
period, the investor will be required to pay, either in cash or by liquidating
escrowed shares, an amount equal to the difference in the dollar amount of sales
charge actually paid and the amount of sales charge the investor would have paid
on his or her aggregate purchases if the total of such purchases had been made
at a single time.

REDEMPTION OF SHARES
--------------------

General

25
<PAGE>

reasonably practicable, or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or (d) during any other period when
the Securities and Exchange Commission, by order, so permits, provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist.

Shareholders who purchased shares through a broker-dealer other than the
Distributor may also redeem such shares by written request to IFTC at the
address set forth in the Prospectus. To be considered in proper form, written
requests for redemption should indicate the dollar amount or number of shares to
be redeemed, refer to the shareholder's Fund account number, and give either a
social security or tax identification number. The request should be signed in
exactly the same way the account is registered. If there is more than one owner
of the shares, all owners must sign. If shares to be redeemed have a value of
$10,000 or more or redemption proceeds are to be paid to someone other than the
shareholder at the shareholder's address of record, the signature(s) must be
guaranteed by an "eligible guarantor institution," which includes a commercial
bank that is a member of the Federal Deposit Insurance Corporation, a trust
company, a member firm of a domestic stock exchange, a savings association or a
credit union that is authorized by its charter to provide a signature guarantee.
IFTC may reject redemption instructions if the guarantor is neither a member of
nor a participant in a signature guarantee program. Signature guarantees by
notaries public are not acceptable. The purpose of a signature guarantee is to
protect shareholders against the possibility of fraud. Further documentation
will be requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by
facsimile will not be accepted. Unless other instructions are given in proper
form, a check for the proceeds of the redemption will be sent to the
shareholder's address of record.

REINSTATEMENT PRIVILEGE

A shareholder who has redeemed shares of the Fund may reinvest all or part
of the redemption proceeds in shares of the Fund within 30 days without payment
of an additional sales charge. The Distributor will refund to any shareholder a
pro rata amount of any contingent deferred sales charge paid by such shareholder
in connection with a redemption of Fund shares if and to the extent that the
redemption proceeds are reinvested within 30 days of such redemption in any
mutual fund managed by the Adviser. Such refund will be based upon the ratio of
the net asset value of shares purchased in the reinvestment to the net asset
value of shares redeemed. Reinvestments will be allowed at net asset value
without the payment of a front-end sales charge, irrespective of the amounts of
the reinvestment, but shall be subject to the same pro rata contingent deferred
sales charge that was applicable to the earlier investment; however, the period
during which the contingent deferred sales charge shall apply on the newly
issued shares shall be the period applicable to the redeemed shares extended by
the number of days between the redemption and the reinvestment dates
(inclusive).

26
<PAGE>

SYSTEMATIC WITHDRAWAL PLAN

To establish a Systematic Withdrawal Plan for the Fund and receive regular
periodic payments, an account must have a value of $5,000 or more. A request to
establish a Systematic Withdrawal Plan must be submitted in writing to an
investor's Piper Jaffray investment executive or other broker-dealer. There are
no service charges for maintenance; the minimum amount that may be withdrawn
each period is $100. (This is merely the minimum amount allowed and should not
be interpreted as a recommended amount.) The holder of a Systematic Withdrawal
Plan will have any income dividends and any capital gains distributions
reinvested in full and fractional shares at net asset value. To provide funds
for payment, the appropriate Fund will redeem as many full and fractional shares
as necessary at the redemption price, which is net asset value. Redemption of
shares may reduce or possibly exhaust the shares in your account, particularly
in the event of a market decline. As with other redemptions, a redemption to
make a withdrawal payment is a sale for federal income tax purposes. Payments
made pursuant to a Systematic Withdrawal Plan cannot be considered as actual
yield or income since part of such payments may be a return of capital.

The maintenance of a Systematic Withdrawal Plan for the Fund concurrent
with purchases of additional shares of the Fund would be disadvantageous because
of the sales commission involved in the additional purchases. Additional
investments of less than $5,000 or three times the annual withdrawals under the
Systematic Withdrawal Plan will ordinarily not be allowed during the time the
plan is in effect. A confirmation of each transaction showing the sources of the
payment and the share and cash balance remaining in the account will be sent.
The plan may be terminated on written notice by the shareholder or the Fund, and
it will terminate automatically if all shares are liquidated or withdrawn from
the account or upon the death or incapacity of the shareholder. The amount and
schedule of withdrawal payments may be changed or suspended by giving written
notice to your Piper Jaffray investment executive or other broker-dealer at
least seven business days prior to the end of the month preceding a scheduled
payment.

TAXATION
--------
GENERAL

The Fund has qualified and intends to qualify in the future as a regulated
investment company for federal income tax purposes. In order to so qualify, the
Fund must meet certain requirements imposed by the Code as to the sources of the
Fund's income and the diversification of the Fund's assets. The Fund must,
among other things, (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to loans of securities,
gains from the sale or other disposition of securities or other income derived
with respect to its business of investing in such securities (including, but not
limited to, gains from options, futures or forward contracts); (b) generally
derive in each taxable year less than 30% of its gross income from gains from
the sale or other disposition of securities, options, futures or forward
contracts held for less than three months; and

27
<PAGE>

(c) diversify its holdings so that, at the end of each fiscal quarter, (i) at
least 50% of the value of the Fund's assets is represented by (A) cash, United
States government securities or securities of other regulated investment
companies, and (B) other securities that, with respect to any one issuer, do not
represent more than 5% of the value of the Fund's assets or more than 10% of
the voting securities of such issuer, and (ii) not more than 25% of the value of
the Fund's assets is invested in the securities of any issuer (other than
United States government securities or the securities of other regulated
investment companies) or two or more issuers controlled by the Fund and
determined to be engaged in the same trade or business.

If the Fund qualifies as a regulated investment company and satisfies a
minimum distribution requirement, the Fund will not be subject to federal income
tax on income and gains to the extent that it distributes such income and gains
to its shareholders. The minimum distribution requirement is satisfied if the
Fund distributes at least 90% of its net investment income (including tax-exempt
interest and net short-term capital gains) for the taxable year. Although the
Fund intends to satisfy the above minimum distribution requirement, it may elect
to retain its remaining net investment income. The Fund would be subject to
corporate tax (at rates up to 35%) on any undistributed income. The Fund will
be subject to a nondeductible 4% excise tax to the extent that it does not
distribute by the end of each calendar year (or is not subjected to regular
corporate tax in such year on) an amount equal to the sum of (a) 98% of the
Fund's ordinary income for such calendar year; (b) 98% of the excess of capital
gains over capital losses for the one-year period ending on October 31 of each
year; and (c) the undistributed income and gains from the preceding years (if
any).

As discussed above, the Fund intends to continue to distribute sufficient
income to qualify as a regulated investment company. However, the Fund may
retain all or a portion of its net investment income in excess of such amount,
which net investment income may be subject to the corporate income or the excise
tax. In addition, the Fund may in the future decide to retain all or a portion
of its net capital gain, as described under "Federal Tax Treatment of
Shareholders - Distributions to Shareholders," below.

FEDERAL TAX TREATMENT OF SHAREHOLDERS

DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders attributable
to the Fund's net investment income (including interest income and net short-
term capital gains) are taxable as ordinary income whether paid in cash or
reinvested in additional shares of the Fund. It is not anticipated that any of
the Fund's distributions will qualify for the dividends received deduction for
corporate shareholders.

Distributions of any net capital gain (i.e., the excess of net long-term
capital gain over net short-term capital loss, if any) that are designated as
capital gain dividends are taxable as long-term capital gains, whether paid in
cash or additional shares of the Fund, regardless of how long the shares have
been held.

28
<PAGE>

The Fund may elect to retain all or a portion of its net capital gain and
be taxed at the corporate tax rate for such capital gains, which is currently
35%. In such event, the Fund would most likely make an election that would
require each shareholder of record on the last day of the Fund's taxable year
to include in income for tax purposes his proportionate share of the Fund's
undistributed net capital gain. If such an election is made, each shareholder
would be entitled to credit his proportionate share of the tax paid by the Fund
against his federal income tax liabilities and to claim refunds to the extent
that the credit exceeds such liabilities. In addition, the shareholder would be
entitled to increase the basis of his shares for federal tax purposes by an
amount equal to 65% of his proportionate share of the undistributed net capital
gain.

Dividends and distributions by the Fund are generally taxable to the
shareholders at the time the dividend or distribution is made (even if
reinvested in additional shares of the Fund). However, any dividend declared by
the Fund in October, November or December of any calendar year which is payable
to shareholders of record on a specified date in such a month will be treated as
received by the shareholders on December 31 of such year if the dividend is paid
during January of the following year. The realization by the Fund of original
issue or market discount will increase the investment income of the Fund and the
amount required to be distributed.

FOREIGN TAX CREDIT ELECTION. The Fund may be subject to taxes on its
income imposed by foreign countries. If at the end of the Fund's fiscal year
more than 50% of its total assets consist of securities of foreign corporations,
the Fund will be eligible to file an election with the Internal Revenue Service
pursuant to which shareholders of the Fund will be required to include their
respective pro rata portions of such foreign taxes as gross income, treat such
amounts as foreign taxes paid by them, and deduct such amounts in computing
their taxable incomes or, alternatively, use them as foreign tax credits against
their federal income taxes.

SALE OF SHARES. In general, if a share of common stock is sold or
exchanged, the seller will recognize gain or loss equal to the difference
between the amount realized in the sale or exchange and the seller's adjusted
basis in the share of common stock. Any gain or loss realized upon a sale or
exchange of shares of common stock will be treated as long-term capital gain or
loss if the shares have been held for more than one year, and otherwise as
short-term capital gain or loss. Further, if such shares are held for six
months or less, loss realized by a shareholder will be treated as long-term
capital loss to the extent of the total of any capital gain dividend received by
the shareholder. In addition, any loss realized on a sale or exchange of shares
of common stock will be disallowed to the extent the shares disposed of are
replaced within a period of 61 days beginning 30 days before and ending 30 days
after disposition of the shares. In such case, the basis of the shares acquired
will be adjusted to reflect the disallowed loss.

29
<PAGE>

Backup Withholding. The Fund may be required to withhold federal income
tax at the rate of 31% of all taxable distributions payable to shareholders who
fail to provide the Fund with their correct taxpayer identification number or to
make required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate shareholders and
certain other shareholders specified in the Code are generally exempt from such
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's federal income tax
liability.

OTHER TAXES. Distributions may also be subject to state, local and foreign
taxes depending on each shareholder's particular situation.

FOREIGN SHAREHOLDERS. The foregoing discussion relates solely to United
States federal income tax law as applicable to "U.S. persons," i.e., U.S.
citizens and residents and U.S. domestic corporations, partnerships, trusts and
estates. Shareholders who are not U.S. persons should consult their tax
advisers regarding the U.S. and non-U.S. tax consequences of ownership of shares
of the Fund, including the fact that such a shareholder may be subject to U.S.
withholding tax at a rate of 30% (or at a lower rate under an applicable U.S.
income tax treaty) on amounts constituting ordinary income from U.S. sources,
including ordinary dividends paid by the Fund.

CONSEQUENCES OF CERTAIN FUND INVESTMENTS

The Fund engages in various hedging transactions. Under various provisions
of the Code, the result of such transactions may be to change the character of
recognized gains and losses, accelerate the recognition of certain gains and
losses, and defer the recognition of certain losses. The extent to which the
Fund may be able to use such hedging techniques may be limited by the
requirement that generally less than 30% of the Fund's gross income consist of
gains from the sale or disposition of certain assets held for less than three
months.

Under Section 988 of the Code, all or a portion of gains and losses from
certain transactions is treated as ordinary income or loss. These rules
generally apply to transactions in certain securities denominated in foreign
currencies, forward contracts in foreign currencies, futures contracts in
foreign currencies that are not "regulated futures contracts," certain
unlisted options and foreign currency swaps. The rules under Section 988 may
also affect the timing of income recognized by the Fund.

The Fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company ("PFIC"). A foreign corporation is a PFIC when 75%
or more of its gross income for the taxable year is passive income or 50% or
more of the average value of its assets consists of assets that produce or could
produce passive income. The Fund has no current intention to invest in PFICs.

30
<PAGE>

GENERAL INFORMATION
-------------------

Minnesota has enacted legislation which authorizes corporations to
eliminate or limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of the fiduciary duty of "care"
(the duty to act with the care an ordinarily prudent person in a like position
would exercise under similar circumstances). Minnesota law does not, however,
permit a corporation to eliminate or limit the liability of a director (a) for
any breach of the director's duty of "loyalty" to the corporation or its
shareholders (the duty to act in good faith and in a manner reasonably believed
to be in the best interest of the corporation), (b) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(c) for authorizing a dividend, stock repurchase or redemption or other
distribution in violation of Minnesota law or for violation of certain
provisions of Minnesota securities laws, or (d) for any transaction from which
the director derived an improper personal benefit. Minnesota law does not
permit elimination or limitation of a director's liability under the 1933 Act or
the Securities Exchange Act of 1934, and the 1940 Act prohibits elimination or
limitation of a director's liability for acts involving willful malfeasance, bad
faith, gross negligence or reckless disregard of the duties of a director. The
Articles of Incorporation of Piper Global limit the liability of directors to
the fullest extent permitted by Minnesota law and the 1940 Act.

FINANCIAL STATEMENTS
--------------------

The audited financial statements and supplementary schedules for the Fund
as of February 28, 1995, are incorporated by reference into this Statement of
Additional Information in reliance upon the report of KPMG Peat Marwick LLP,
4200 Norwest Center, Minneapolis, Minnesota 55402, independent auditors, given
upon the authority of said firm as experts in accounting and auditing.

PENDING LITIGATION
------------------

Complaints have been filed in federal court relating to another open-end
investment company managed by the Adviser and to six closed-end investment
companies managed by the Adviser and to two open-end funds for which the Adviser
acts as sub-adviser. A complaint was filed on October 5, 1994 in the United
States District Court, District of Minnesota, against the Institutional
Government Income Portfolio (a series of Piper Funds Inc.), the Adviser, the
Distributor, William H. Ellis and Edward J. Kohler alleging certain violations
of federal and state securities laws, including the making of materially
misleading statements in the prospectus, common law negligent misrepresentation
and breach of fiduciary duty. Plaintiffs in the complaint, which purports to be
a class action and represents the consolidation of a number of previously filed
complaints, are Richard J. Rodney, Jr., Doug Shonka, Carl Patrick Monahan, Jerry
Hoehnen, Rosemary Boris, Thomas W. Newcome, Delvin D. Junker, Printing Mailing
Trade District, affiliated with the Newspaper Drivers' Division of the
International Brotherhood of the Teamsters, The History Theatre, Inc., Paul
Gold, and Bernard Friedman. Piper Jaffray

31
<PAGE>

Companies and attorneys representing the plaintiffs in the complaint recently
reached a $70 million agreement in principle to settle the lawsuit. The
agreement requires court approval and the acceptance of the settlement by a
large percentage of Institutional Government Income Portfolio shareholders.

Three additional complaints, which are based on claims similar to those
asserted in the first complaint, have been filed relating to Institutional
Government Income Portfolio. The first of such complaints was filed in the same
court against the same parties on October 21, 1994, by Eltrax Systems, Inc. A
second additional complaint was filed against Piper Funds Inc., the Adviser, the
Distributor and Piper Jaffray Companies Inc. on September 30, 1994 in the United
States District Court, District of Colorado. Plaintiffs in the complaint are
Gary Pashel and Gregg S. Hayutin, Trustees of the Mae Pashel Trust; Mae Pashel,
individually; Gary Pashel and Michael H. Feinstein, Trustees of the Robert
Hayutin Insurance Trust; and Dennis E. Hayutin, Gregg S. Hayutin and Gary
Pashel, Trustees of the Marie Ellen Hayutin Trust. The third additional
complaint, a putative class action, was filed on November 1, 1994 in the United
States District Court, District of Idaho by the Idaho Association of Realtors,
Inc., a non-profit Idaho corporation. The complaint was filed against
Institutional Government Income Portfolio, the Adviser, the Distributor, Piper
Jaffray Companies Inc., William H. Ellis and Edward J. Kohler.

A complaint was filed by Herman D. Gordon on October 20, 1994, in the
United States District Court, District of Minnesota, against American Adjustable
Rate Term Trust Inc. - 1998, American Adjustable Rate Term Trust Inc. - 1999,
the Adviser, the Distributor, Piper Jaffray Companies Inc., Benjamin Rinkey,
Jeffrey Griffin, Charles N. Hayssen and Edward J. Kohler. The complaint, which
purports to be a class action, alleges that the defendants violated the federal
securities laws by making materially misleading statements in prospectuses and
other disclosure documents.

A complaint was filed by Carson H. Bradley on February 3, 1995 in the Sixth
Judicial District of the State of Idaho against American Government Income Fund
Inc., American Government Income Portfolio Inc., the Adviser, the Distributor
and Worth Bruntjen. The complaint alleges negligent misrepresentation, breach
of fiduciary duty and breach of contract.

A complaint was filed on April 14, 1995 in the United States District
Court, District of Minnesota, against American Adjustable Rate Term Trust Inc. -
1996, American Adjustable Rate Term Trust Inc. - 1997, American Adjustable Rate
Term Trust Inc. - 1998, American Adjustable Rate Term Trust Inc. - 1999, Piper
Jaffray Companies Inc., the Adviser, the Distributor, Benjamin Rinkey, Jeffrey
Griffin, Charles N. Hayssen, Edward J. Kohler and William H. Ellis. The
complaint, which is a putative class action, was filed by Frank Donio, I.R.A.,
Jane Mazzagatte, I.R.A., Myra Smith, John M. Gobble, I.R.A. and Morgan
Properties, Inc. The complaint alleges certain violations of federal and state
securities laws, including the dissemination or approval of misleading
prospectuses, reports and releases.

32
<PAGE>

Complaints have also been filed relating to two open-end funds for which
the Adviser has acted as sub-adviser, Managers Intermediate Mortgage Fund and
Managers Short Government Fund. A complaint was filed on September 26, 1994 in
the United States District Court, District of Connecticut, by Florence R. Hosea,
Bobby W. Hosea, Getrud B. Dale and Peter M. Dale, Andrew Poffel and Diane Poffel
as tenants by the Entireties, Myrone Sarone, Donna M. DiPalo, Bernard B. Geltner
and Gail Geltner and Paul Delman. The complaint was filed against The Managers
Funds, the Managers Funds, L.P., Robert P. Watson, the Adviser, the Distributor,
an individual associated with the Adviser, Evaluation Associates, Inc. and
Managers Intermediate Mortgage Fund. The complaint, which is a putative class
action, alleges certain violations of federal securities laws, including the
making of false and misleading statements in the prospectus, and alleges
negligent misrepresentation, breach of fiduciary duty and common law fraud. A
similar complaint filed as a putative class action in the same court on
November 4, 1994 was consolidated with the first complaint on December 13, 1994.
The complaint was filed by Karen E. Kopelman against The Managers Fund, The
Managers Funds, L.P., Robert P. Watson, the Adviser, the Distributor, Worth
Bruntjen, Evaluation Associates, Inc. and Managers Intermediated Mortgage Fund.
A complaint was filed on November 18, 1994 in the United States District Court,
District of Minnesota. The complaint was filed by Robert Fleck as a putative
class action against The Managers Funds, The Managers Funds, L.P., the Adviser,
the Distributor, Worth Bruntjen, Evaluation Associates, Inc., Robert P. Watson,
John E. Rosati, William M. Graulty, Madeline H. McWhinney, Steven J. Pasggioli,
Thomas R. Schneeweis and Managers Short Government Fund, F/K/A/ Managers Short
Government Income Fund. The complaint alleges certain violations of federal
securities laws, including the making of false and misleading statements in the
prospectus, and negligent misrepresentation.

The Adviser and Distributor do not believe that the settlement reached in
connection with the first lawsuit described above, or any other of the above
lawsuits, will have a material adverse effect upon their ability to perform
under their agreements with the Funds and they intend to defend the remaining
lawsuits vigorously.

33
<PAGE>

APPENDIX A
CORPORATE BOND, PREFERRED STOCK AND
COMMERCIAL PAPER RATINGS

COMMERCIAL PAPER RATINGS
- - - - ------------------------

STANDARD & POOR'S CORPORATION. Commercial paper ratings are graded
into four categories, ranging from "A" for the highest quality obligations to
"D" for the lowest. Issues assigned the A rating are regarded as having the
greatest capacity for timely payment. Issues in this category are further
refined with designation 1, 2 and 3 to indicate the relative degree of safety.
The "A-1" designation indicates that the degree of safety regarding timely
payment is very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus sign designation.

MOODY'S INVESTORS SERVICE, INC. Moody's commercial paper ratings
are opinions of the ability of the issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation that such obligations are exempt from registration under
the Securities Act of 1933, nor does it represent that any specific note is a
valid obligation of a rated issuer or issued in conformity with any applicable
law. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:

Prime-1 Superior capacity for repayment of short-term promissory
obligations

Prime-2 Strong capacity for repayment of short-term promissory obligations

Prime-3 Acceptable capacity for repayment of short-term promissory
obligations

CORPORATE BOND RATINGS
- - - - ----------------------

STANDARD & POOR'S CORPORATION. Standard & Poor's ratings for
corporate bonds have the following definitions:

Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.

Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree.

Debt rated "A" has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

A-1
<PAGE>

Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

MOODY'S INVESTORS SERVICE, INC. Moody's ratings for corporate bonds
include the following:

Bonds which are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.

Bonds which are rated "A" possess many favorable attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.

PREFERRED STOCK RATING
- - - - ----------------------

STANDARD & POOR'S CORPORATION. Standard & Poor's ratings for
preferred stock have the following definitions:

An issue rated "AAA" has the highest rating that may be assigned by
Standard & Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.

A-2
<PAGE>

A preferred stock issue rated "AA" also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated "AAA."

An issue rated "A" is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.

An issue rated "BBB" is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the "A" category.

MOODY'S INVESTORS SERVICE, INC. Moody's ratings for preferred stock
include the following:

An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.

An issue which is rated "aa" is considered a high grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.

An issue which is rate "a" is considered to be an upper medium grade
preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are,
nevertheless, expected to be maintained at adequate levels.

An issue which is rated "baa" is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.

A-3
<PAGE>

APPENDIX B
GENERAL CHARACTERISTICS AND RISKS
OF OPTIONS AND FUTURES

OPTIONS ON SECURITIES

The Fund may write covered put and call options and purchase put and call
options on the securities in which it may invest that are traded on U.S. and
foreign securities exchanges and in over-the-counter markets.

The writer of an option may have no control over when the underlying
securities must be sold, in the case of a call option, or purchased, in the case
of a put option; the writer may be assigned an exercise notice at any time prior
to the termination of the obligation. Whether or not an option expires
unexercised, the writer retains the amount of the premium. This amount, of
course, may, in the case of a covered call option, be offset by a decline in the
market value of the underlying security during the option period. If a call
option is exercised, the writer experiences a profit or loss from the sale of
the underlying security. If a put option is exercised, the writer must fulfill
the obligation to purchase the underlying security at the exercise price which
will usually exceed the then market value of the underlying security.

The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be canceled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.

Effecting a closing transaction in the case of a written call option will
permit the Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both, or in the case of
a written put option will permit the Fund to write another put option to the
extent that the exercise price thereof is secured by deposited cash or short-
term securities. Also, effecting a closing transaction will permit the cash or
proceeds from the concurrent sale of any securities subject to the option to be
used for other Fund investments. If the Fund desires to sell a particular
security from its portfolio on which it has written a call option, it will
effect a closing transaction prior to or concurrent with the sale of the
security.

The Fund will realize a profit from a closing transaction if the price of
the transaction is less than the premium received from writing the option or is
more than the premium paid to purchase the option; the Fund will realize a loss
from a closing transaction if the price of the transaction is more than the
premium received from writing the option or is less than the premium paid to
purchase the option.

B-1
<PAGE>

Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security owned by the Fund.

An option position may be closed out only where there exists a secondary
market for an option of the same series. If a secondary market does not exist,
it might not be possible to effect closing transactions in particular options
with the result that the Fund would have to exercise the options in order to
realize any profit. If the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market include the
following: (i) there may be insufficient trading interest in certain options,
(ii) restrictions may be imposed by a national securities exchange ("Exchange")
on opening transactions or closing transactions or both, (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities, (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange, (v) the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume, or (vi) one or more
Exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the Options Clearing
Corporation as a result of trades on that Exchange would continue to be
exercisable in accordance with their terms.

The Fund may purchase put options to hedge against a decline in the value
of its portfolio. By using put options in this way, the Fund will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and by transaction costs.

The Fund may purchase call options to hedge against an increase in the
price of securities that the Fund anticipates purchasing in the future. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
worthless to the Fund.

FUTURES CONTRACTS

The Fund may, for hedging purposes, enter into contracts for the purchase
or sale for future delivery of securities or foreign currencies, or contracts
based on securities or financial indices including any index of the types of
securities in which the Fund may invest. U.S. futures contracts have been
designed by exchanges which have been designated "contracts markets" by the
Commodity Futures Trading Commission and must be executed through a futures
commission merchant, or brokerage firm, which is a member of the relevant
contract market. Futures contracts trade on a number of exchange markets, and,
through their clearing

B-2
<PAGE>

corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange.

At the same time a futures contract is purchased or sold, the Fund must
allocate cash or securities as a deposit payment ("initial deposit"). It is
expected that the initial deposit would be approximately 1-1/2% to 5% of a
contract's face value. Daily thereafter, the futures contract is valued and the
payment of "variation margin" may be required, since each day the Fund would
provide or receive cash that reflects any decline or increase in the contract's
value.

At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.

Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the date of the contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is accomplished by
buying (or selling, as the case may be) on a commodities exchange an identical
futures contract calling for delivery in the same month. Such a transaction,
which is effected through a member of an exchange, cancels the obligation to
make or take delivery of the securities. Since all transactions in the futures
market are made, offset or fulfilled through a clearing house associated with
the exchange on which the contracts are traded, the Fund will incur brokerage
fees when it purchases or sells futures contracts.

The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by Management may still not
result in a successful transaction.

In addition, futures contracts entail risks. Although Management will only
enter into futures contracts if it believes that use of such contracts will
benefit the Fund, if Management's investment judgment about the general
direction of securities prices is incorrect, the Fund's overall performance
would be poorer than if

B-3
<PAGE>

it had not entered into any such contract. For example, if the Fund has
hedged against the possibility of a decrease in securities prices which would
adversely affect the price of securities held in its portfolio and securities
prices increase instead, the Fund will lose part or all of the benefit of the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations,
if the Fund has insufficient cash, it may have to sell securities from its
portfolio to meet daily variation margin requirements. Such sales of
securities may be, but will not necessarily be, at increased prices which
reflect the rising market. The Fund may have to sell securities at a time
when it may be disadvantageous to do so.

OPTIONS ON FUTURES CONTRACTS

The Fund may purchase and write options on futures contracts for hedging
purposes. The purchase of a call option on a futures contract is similar in
some respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the underlying debt
securities, it may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of futures
contracts, when the Fund is not fully invested it may purchase a call option on
a futures contract to hedge against an anticipated increase in securities
prices.

The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is below the exercise price, the Fund will retain the full amount of the
option premium which provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The writing of a put option on a
futures contract constitutes a partial hedge against increasing prices of the
security which is deliverable upon exercise of the futures contract. If the
futures price at expiration of the option is higher than the exercise price, the
Fund will retain the full amount of the option premium which provides a partial
hedge against any increase in the price of securities which the Fund intends to
purchase. If a put or call option the Fund has written is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
receives. Depending on the degree of correlation between changes in the value
of its portfolio securities and changes in the value of its futures positions,
the Fund's losses from existing options may to some extent be reduced or
increased by changes in the value of portfolio securities.

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may purchase a put option on a futures contract to hedge the
Fund's portfolio against the risk of a decline in securities prices.

The amount of risk the Fund assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also

B-4
<PAGE>

entails the risk that changes in the value of the underlying futures contract
will not be fully reflected in the value of the option purchased.

The Fund's ability to engage in the options and futures strategies
described above will depend on the availability of liquid markets in such
instruments. Markets in options and futures with respect to many types of
securities in which the Fund invests are relatively new and still developing.
It is impossible to predict the amount of trading interest that may exist in
various types of options or futures. Therefore no assurance can be given that
the Fund will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, the Fund's ability to engage in options and
futures transactions may be limited by tax considerations. See "Taxation-
Consequences of Certain Fund Investments."

ADDITIONAL RISKS OF OPTIONS ON SECURITIES AND OPTIONS ON FUTURES CONTRACTS

Options on securities may be traded over-the-counter. In an over-the-
counter trading environment, much of the protection afforded to exchange
participants will not be available. For example, there are no daily price
fluctuation limits, and adverse market movements could therefore continue to an
unlimited extent over a period of time. Although the purchaser of an option
cannot lose more than the amount of the premium plus related transaction costs,
this entire amount could be lost. Moreover, the option writer could lose
amounts substantially in excess of its initial investment, due to the margin
requirements associated with such positions.

In addition, options on securities, futures contracts and options on
futures contracts may be traded on foreign exchanges. Such transactions are
subject to the risk of governmental actions affecting trading in or the prices
of foreign currencies or securities. The value of such positions also could be
adversely affected by (a) other complex foreign political and economic factors;
(b) lesser availability than in the United States of data on which to make
trading decisions; (c) delays in the Fund's ability to act upon economic events
occurring in foreign markets during nonbusiness hours in the United States; (d)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the United States; and (e) lesser trading volume.

FUTURE DEVELOPMENTS

The Fund may, following written notice thereof to its shareholders, take
advantage of opportunities in the area of options and futures contracts and
options on futures contracts which are not currently contemplated for use by the
Fund or which are not currently available but which may be developed, to the
extent such opportunities are both consistent with the Fund's investment
objective and legally permissible for the Fund. Such opportunities, if they
arise, may involve risks which exceed those involved in the options and
futures activities described above.

B-5

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

August 29, 1995

TABLE OF CONTENTS

PAGE

INVESTMENT OBJECTIVES AND POLICIES. . . . . . . . . . . . . . . . . . . 1

INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 26

DIRECTORS AND EXECUTIVE OFFICERS. . . . . . . . . . . . . . . . . . . . 30

INVESTMENT ADVISORY AND OTHER SERVICES. . . . . . . . . . . . . . . . . 34

PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE. . . . . . . . . . . 45

CAPITAL STOCK AND OWNERSHIP OF SHARES . . . . . . . . . . . . . . . . . 49

NET ASSET VALUE AND PUBLIC OFFERING PRICE . . . . . . . . . . . . . . . 50

CALCULATION OF PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . 51

REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

TAXATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

PENDING LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 60

AUDITORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

Financial Statements at June 30, 1995 (Audited). . . . . . . . . . . . . . . F-1

Investments in Securities at June 30, 1995 . . . . . . . . . . . . . . . . .F-16

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . .F-25

This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to the Prospectus dated August 29,
1995, and should be read in conjunction therewith. A copy of the Prospectus may
be obtained from Hercules Funds Inc. at Piper Jaffray Tower, 222 South Ninth
Street, Minneapolis, Minnesota 55402-3804.

<PAGE>
INVESTMENT OBJECTIVES AND POLICIES

Hercules Funds (the "Company") is comprised of eight funds: Hercules North
American Growth and Income Fund ("North American Fund"), Hercules European Value
Fund ("European Value Fund"), Hercules Pacific Basin Value Fund ("Pacific Value
Fund"), Hercules Latin American Value Fund ("Latin American Value Fund"),
Hercules World Bond Fund ("Bond Fund"), Hercules Global Short-Term Fund ("Short-
Term Fund"), Hercules Emerging Markets Debt Fund ("Emerging Markets Fund") and
Hercules Money Market Fund ("Money Market Fund") (each sometimes referred to
herein as a "Fund" or, collectively, as the "Funds"). This Statement of
Additional Information relates to each of the above Funds other than Short-Term
Fund and Emerging Markets Fund, which are not currently being offered for sale.
As described in the Prospectus, the Company's investment manager, Piper Capital
Management Incorporated (the "Manager") has retained an advisory organization on
behalf of each Fund to act as its sub-adviser (the "Sub-Adviser(s)"). See
"Investment Advisory and Other Services" below.

Piper Jaffray Inc. is the distributor of shares of each of the Funds.

POTENTIAL BENEFITS OF INTERNATIONAL INVESTING

OPPORTUNITIES FOR INCREASED RETURN

Currently, more than 60% of the world's stock market capitalization is
located overseas. Europe alone is the world's third largest source of equity
capital. Many foreign countries are experiencing growth rates higher than the
United States. For example, the Pacific Basin is one of the world's fastest
growing economic regions. And many foreign equity and bond markets have
outperformed the U.S. market over the past few years.

VARIOUS INVESTMENT OPPORTUNITIES

Foreign stock and bond markets do not always move in step with one another
or with U.S. markets. Therefore, a portfolio invested in a number of markets
worldwide is not subject to the movements of any single market.

INVESTMENT OBJECTIVES

The investment objectives of each Fund are set forth in the Prospectus.
Certain additional information is set forth below. There can be no assurance
that any Fund will achieve its investment objectives.

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<PAGE>

HIGH-QUALITY MONEY MARKET INSTRUMENTS

As discussed in the Prospectus, each of the Funds (other than Money Market
Fund) may invest without limitation for temporary defensive purposes in high-
quality money market instruments. Such investments include obligations issued
or guaranteed by the U.S. and foreign governments, their agencies, and
instrumentalities. These include direct obligations of the U.S. Treasury, such
as Treasury bills and notes; obligations supported by the right of the issuer to
borrow from the U.S. Treasury, such as those of the Federal Home Loan Banks;
instruments supported solely by the credit of the issuer, such as those of the
Federal Intermediate Credit Banks; and similar U.S.-dollar denominated
instruments of foreign governments, their agencies authorities and
instrumentalities; obligations of U.S. and non-U.S. banks, including
certificates of deposit, bankers' acceptances and similar instruments, when such
banks have total assets at the time of purchase equal to at least $1 billion;
interest-bearing deposits in U.S. commercial and savings banks having total
assets of $1 billion or less, in principal amounts at each such bank not greater
than are insured by an agency of the U.S. Government, provided that the
aggregate amount of such deposits (including interest earned) does not exceed 5%
of the Fund's assets; commercial paper and other short-term debt obligations of
U.S. and foreign companies, rated at least A-1 by Standard & Poor's Ratings
Group ("S&P"), Prime-1 by Moody's Investors Service Inc. ("Moody's"), or, if not
rated, judged by the applicable Sub-Adviser to be of equivalent quality,
provided that any outstanding intermediate- or long-term debt of the issuer is
rated at least AA by S&P or Aa by Moody's and repurchase agreements secured by
any of the foregoing. These instruments may include corporate bonds and notes
(corporate obligations that mature, or that may be redeemed, in one year or
less). These corporate obligations include variable rate master notes, which
are redeemable upon notice and permit investment of fluctuating amounts at
varying rates of interest pursuant to direct arrangements with the issuer of the
instrument.

INVESTMENT POLICIES

OPTIONS AND FUTURES TRANSACTIONS

OPTIONS. Each of the Funds (other than Money Market Fund) may buy and sell
put and call options and futures contracts and options on futures contracts with
respect to financial instruments, stock and interest rate indexes and foreign
currencies. Futures and options will be used to facilitate allocation of a
Fund's investment among asset

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<PAGE>

classes, to generate income or to hedge against declines in securities prices or
increases in prices of securities proposed to be purchased. Different uses of
futures and options have different risk and return characteristics. Generally,
selling futures contracts, purchasing put options and writing call options are
strategies designed to protect against falling securities prices and can limit
potential gains if prices rise. Purchasing futures contracts, purchasing call
options and writing put options are strategies whose returns tend to rise and
fall together with securities prices and can cause losses if prices fall. If
securities prices remain unchanged over time option writing strategies tend to
be profitable, while option buying strategies tend to decline in value.

WRITING COVERED OPTIONS - Each of the Funds (other than Money Market 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 Funds write only "covered" options. This means that so long as a Fund
is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). A Fund will be considered "covered" with
respect to a put option it writes if, so long as it is obligated as the writer
of a put option, it deposits and maintains with its custodian cash, U.S.
Government securities or other liquid high-grade debt obligations having a value
equal to or greater than the exercise price of the option.

Through the writing of call or put options, a Fund may obtain 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, 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.

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<PAGE>

PURCHASING OPTIONS - Each of the Funds (other than Money Market Fund) may
purchase put options in order to protect portfolio holdings in an underlying
security against a decline in the market value of such holdings. 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.

A Fund may wish to protect certain portfolio securities against a decline
in market value at a time when no put options on those particular securities are
available for purchase. The Fund may therefore purchase a put option on
securities other than those it wishes to protect even though it does not hold
such other securities in its portfolio. While the Funds will only purchase put
options on securities where, in the opinion of the Funds' Sub-Adviser, changes
in the value of the put option should generally offset changes in the value of
the securities to be hedged, the correlation will be less than in transactions
in which the Funds purchase put options on underlying securities they own.

Each of the Funds (other than Money Market Fund) may also purchase call
options. During the life of the call option, 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 securities exchanges have established limitations governing the maximum
number of options which may be written by an investor or group of investors
acting in concert. These position limits may restrict a Fund's ability to
purchase or sell options on a particular security. It is possible that with
respect to a Fund, the Fund and other clients of the Manager or of the Sub-
Adviser may be considered to be a group of investors acting in concert. Thus,
the number of options

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<PAGE>

which a Fund may write may be affected by options written by other investment
advisory clients of the Manager or of the Sub-Advisers.

SECURITIES INDEX OPTION TRADING - Each of the Funds (other than Money
Market Fund) may purchase and write put and call options on securities indexes.
Options on securities indexes are similar to options on securities except that,
rather than the right to take or make delivery of a security at a specified
price, an option on an index gives the holder the right to receive, upon
exercise of the option, an amount of cash if the closing level of the 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 effectiveness of purchasing or writing 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 index selected. Because the value of an
index option depends upon movements in the level of the index rather than the
price of a particular security, whether a Fund will realize a gain or loss from
the purchase or writing of options on an index depends upon movements in the
level of prices in the stock or bond markets generally or, in the case of
certain indexes, in an industry or market segment, rather than movements in the
price of a particular security. Accordingly, successful use by a Fund of
options on security indexes will be subject to the Manager's and/or Sub-
Adviser's ability to predict correctly movements in the direction of the stock
market or interest rates market generally or of a particular industry. This
requires different skills and techniques than predicting changes in the price of
individual securities. In the event the Manager and/or Sub-Adviser are
unsuccessful in predicting the movements of an index, a Fund could be in a worse
position than had no hedge been attempted.

Because exercises of index options are settled in cash, a Fund cannot
determine the amount of its settlement obligations in advance and, with respect
to call writing, cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. When a Fund
writes an option on an index, the Fund will segregate or put into escrow with
its custodian or pledge to a broker as collateral for the option, cash, high-
grade liquid debt securities or "qualified securities" with a market value
determined on a daily basis of not less than 100% of the current market value of
the option.

-5-
<PAGE>

Options purchased and written by a Fund may be exchange traded or may be
options entered into by the Fund in negotiated transactions with investment
dealers and other financial institutions ("OTC Options") (such as commercial
banks or savings and loan associations) deemed creditworthy by the Sub-Adviser.
OTC Options are illiquid and it may not be possible for the Fund to dispose of
options it has purchased or to terminate its obligations under an option it has
written at a time when the Sub-Adviser believes it would be advantageous to do
so.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Each of the Funds
(other than Money Market Fund) may enter into futures contracts and purchase and
write options on these contracts, including but not limited to interest rate,
securities index and foreign currency futures contracts and put and call options
on these futures contracts. These contracts will be entered into on domestic
and foreign exchanges and boards of trade, subject to applicable regulations of
the Commodity Futures Trading Commission. These transactions may be entered
into for bona fide hedging and other permissible risk management purposes.

In connection with transactions in futures contracts and writing related
options, each Fund will be required to deposit as "initial margin" a specified
amount of cash or short-term U.S. Government securities. The initial margin
required for a futures contract is set by the exchange on which the contract is
traded. It is expected that the initial margin would be approximately 1-1/2% to
5% of a contract's face value. Thereafter, subsequent payments (referred to as
"variation margin") are made to and from the broker to reflect changes in the
value of the futures contract. No Fund will purchase or sell futures contracts
or related options if, as a result, the sum of the initial margin deposit on
that Fund's existing futures and related options positions and premiums paid for
options on futures contracts entered into for other than bona fide hedging
purposes would exceed 5% of the Fund's assets.

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<PAGE>

all transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded,
the Fund will incur brokerage fees when it purchases or sells futures contracts.

FOREIGN CURRENCY TRANSACTIONS. As discussed in the Prospectus, each of the
Funds (other than Money Market Fund) may engage in currency exchange
transactions in connection with the purchase and sale of their investments. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract as agreed by the parties, at a price set at the
time of the contract. In the case of a cancelable forward contract, the holder
has the unilateral right to cancel the contract at maturity by paying a
specified fee. The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.

At the maturity of a forward or futures contract, the Funds may either
accept or make delivery of the currency specified in the contract, or, at or
prior to maturity, enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.

Options on foreign currencies operate similarly to options on securities
(discussed above), and are traded primarily in the over-the-counter market,
although options on foreign currencies have recently been listed on several

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<PAGE>

exchanges. Options traded in the over-the-counter market are illiquid and it
may not be possible for a Fund to dispose of an option it has purchased or
terminate its obligations under an option it has written at a time when its Sub-
Adviser believes it would be advantageous to do so. Options on foreign
currencies are affected by all of those factors which influence foreign exchange
rates and investments generally.

The value of a foreign currency option is dependent upon the value of the
foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign debt security. Because foreign currency
transactions occurring in the interbank market involve substantially larger
amounts than those that may be involved in the use of foreign currency options,
investors may be disadvantaged by having to deal in an odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots. There is no
systematic reporting of last sale information for foreign currencies and there
is no regulatory requirement that quotations available through dealers or other
market sources be provided on a timely basis. Available quotation information
is generally representative of very large transactions in the interbank market
and thus may not reflect relatively smaller transactions (less than $1 million)
where rates may be less favorable. The interbank market in foreign currencies
is a global, around-the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that cannot be reflected in the options markets.

Although foreign exchange dealers do not charge a fee for currency
conversion, they do realize a profit based upon the difference between prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to a Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer.

INTEREST RATE SWAPS, CAPS AND FLOORS. Each of the Funds (other than Money
Market Fund) may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending upon whether they are hedging
their assets or their liabilities, and will usually enter into interest rate
swaps on a net basis, I.E., the two payment streams are netted out, with the
Funds receiving or paying, as the case may be, only the net amount of the two
payments. The net amount of the excess, if any, of a Fund's obligations over
its entitlement with respect to each interest rate swap will

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<PAGE>

be accrued on a daily basis and an amount of cash or high-quality liquid
securities having an aggregate net asset value at least equal to the accrued
excess will be maintained in a segregated account by the Fund's custodian. If a
Fund enters into an interest rate swap where the contract does not otherwise
specify, the contract will be deemed to have been entered into on a gross basis
and the Fund would maintain a segregated account in the full amount accrued on a
daily basis of the Fund's obligations with respect to the swap. To the extent a
Fund sells (I.E., writes) caps and floors, it will maintain in a segregated
account cash or high-quality liquid debt securities having an aggregate net
asset value at least equal to the full amount, accrued on a daily basis, of the
Fund's obligations with respect to any caps or floors.

REVERSE REPURCHASE AGREEMENTS

Each Fund may enter into reverse repurchase agreement transactions to the
extent set forth in the Prospectus. Each Fund may enter into reverse repurchase
agreements with the same parties with whom it may enter into repurchase
agreements. See "Special Investment Methods-Repurchase Agreements" in the
Prospectus. Under a reverse repurchase agreement, a Fund sells securities and
agrees to repurchase them at a mutually agreed date and price. Because certain
of the incidents of ownership of the security are retained by the Fund, reverse
repurchase agreements are considered a form of borrowing by the Fund from the
buyer, collateralized by the security. At the time a Fund enters into a reverse
repurchase agreement, it will establish and maintain a segregated account with
an approved custodian containing high-grade liquid debt securities having a
value not less than the repurchase price (including accrued interest). Reverse
repurchase agreements involve the risk that the market value of the securities
retained in lieu of sale by the Fund may decline below the price of the
securities the Fund has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce the Fund's obligation to
repurchase the securities and the Fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decisions.
Reverse repurchase agreements will be used as a means of borrowing for
investment purposes. This speculative technique is referred to as leveraging.
Leveraging may exaggerate the effect on net asset value of any increase or
decrease in the market value of the Fund's portfolio. Money borrowed for
leveraging will be subject to interest costs which may or may not be recovered
by income from or appreciation of the securities purchased. The

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<PAGE>

Company's Board of Directors has established procedures, which are periodically
reviewed by the Board, pursuant to which the Manager and Sub-Advisers will
monitor the creditworthiness of the dealers and banks with which the Fund enters
into reverse repurchase agreement transactions.

MORTGAGE-BACKED SECURITIES

As discussed in the Prospectus the Funds may invest in mortgage backed
securities. The mortgage-related securities in which the Funds may invest
include Mortgage-Backed Securities and Stripped Mortgage-Backed Securities.
Mortgage-Backed Securities are securities that, directly or indirectly,
represent participations in, or are secured by and payable from, loans secured
by real property, including government guaranteed pass-through securities such
as Government National Mortgage Association ("Ginnie Mae" or "GNMA"), Federal
National Mortgage Association ("Fannie Mae" or "FNMA") and Federal Home Loan
Mortgage Corporation ("Freddie Mac" or "FHLMC") Certificates, private pass-
through securities, commercial mortgage-backed securities, and certain
collateralized mortgage obligations and multi-class pass-through securities.
Mortgage-Backed Securities may have fixed or adjustable interest rates. There
are currently three basic types of Mortgage-Backed Securities: (a) those issued
or guaranteed by the United States Government or one of its agencies or
instrumentalities, such as Ginnie Mae, Fannie Mae and Freddie Mac; (b) those
issued by non-governmental issuers that represent interests in, or are
collateralized by, Mortgage-Backed Securities issued or guaranteed by the United
States Government or one of its agencies or instrumentalities; and (c) those
issued by non-governmental issuers that represent an interest in, or are
collateralized by, whole mortgage loans or Mortgage-Backed Securities without a
government guarantee but usually with over-collateralization or some other form
of private credit enhancement. Non-governmental issuers referred to in (b) and
(c) above include originators of and investors in mortgage loans, including
savings and loan associations, mortgage bankers, commercial banks, investment
banks and special purpose subsidiaries of the foregoing.

The investment characteristics of Mortgage-Backed Securities differ from
those of traditional debt securities. The major differences include the fact
that interest payments and principal repayments on Mortgage-Backed Securities
are made more frequently (usually monthly), and principal may be prepaid at any
time because the underlying mortgage loans or other assets generally may be
prepaid at any time. These differences can result in significantly greater
price and

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<PAGE>

yield volatility than is the case with traditional debt securities. As a
result, if a Fund purchases Mortgage-Backed Securities at a premium, a
prepayment rate that is faster than expected will reduce both the market value
and the yield to maturity from that which was anticipated, while a prepayment
rate that is slower than expected will have the opposite effect of increasing
yield to maturity and market value. Conversely, if a Fund purchases Mortgage-
Backed Securities at a discount, faster than expected prepayments will increase,
while slower than expected prepayments will reduce, yield to maturity and market
value.

The government guaranteed mortgage pass-through securities in which the
Fund may invest will include certificates issued or guaranteed by Ginnie Mae,
Fannie Mae and Freddie Mac, which represent interests in underlying residential
mortgage loans. These mortgage pass-through securities provide for the pass-
through to investors of their pro-rata share of monthly payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and the servicer of the
underlying mortgage loans. Each of GNMA, FNMA and FHLMC guarantee timely
distributions of interest to certificate holders. GNMA and FNMA guarantee
timely distributions of scheduled principal. FHLMC generally guarantees only
ultimate collection of principal of the underlying mortgage loans.

Private mortgage pass-through securities ("Private Pass-Throughs") are
structured similarly to Ginnie Mae, Fannie Mae and Freddie Mac mortgage pass-
through securities and are issued by originators of and investors in mortgage
loans, including savings and loan associations, mortgage bankers, commercial
banks, investment banks and special purpose subsidiaries of the foregoing.
Since Private Pass-Throughs typically are not guaranteed by an entity having the
credit status of Ginnie Mae, Fannie Mae or Freddie Mac, such securities
generally are structured with one or more types of credit enhancement.

Collateralized mortgage obligations ("CMOs") are debt instruments issued by
special purpose entities which are secured by pools of mortgage loans or other
Mortgage-Backed Securities. Multi-class pass-through securities are equity
interests in a trust composed of mortgage loans or other Mortgage-Backed
Securities. Payments of principal and interest on underlying collateral provide
the funds to pay debt service on the CMO or make scheduled distributions on the
multi-class pass-through security. CMOs and multi-class pass-through securities
(collectively CMOs unless the context

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<PAGE>

indicates otherwise) may be issued by agencies or instrumentalities of the
United States Government or by private organizations.

Subordinated Mortgage-Backed Securities. Credit enhancement in the form of
subordination provides for the issuance of a senior class of certificates that
are generally rated at least AA by S&P and one or more classes of subordinated
certificates that bear ratings lower than the senior certificates or are non-
rated. Holders of either the senior or the subordinated certificates will
ordinarily be entitled to a pro-rata share of distributions of principal and
interest. However, in the event that delinquencies and defaults on the
underlying loans cause a shortfall in the distributions to the senior
certificates, distributions otherwise payable to the subordinated certificates
will be distributed to the senior certificates to the extent required. The
characteristics of the mortgage loans and other credit enhancement features will
determine the size of the subordinated interest required to obtain the desired
rating on the senior securities.

To the extent that actual delinquency and loss experience is greater than
that anticipated, the return on the subordinated certificates will be adversely
affected and, in extreme cases, a portion of the principal could be lost; to the
extent that such experience is more favorable than anticipated, the return on
the subordinated certificates will be increased. The Trust may invest in
subordinated certificates, which securities, at the time of investment, are
rated BBB or higher by S&P, or, if unrated, determined by a Sub-Adviser to be of
comparable quality.

Stripped Mortgage-Backed Securities ("SMBS") are derivative multi-class
mortgage securities. SMBS may be issued by agencies or instrumentalities of the
United States Government or by private originators of, or investors in, mortgage
loans, including savings and loan associations, mortgage bankers, commercial
banks, investment banks and special purpose subsidiaries of the foregoing.

There are generally two classes of SMBS, one of which (the "IO class")
entitles the holders thereof to receive distributions consisting solely or
primarily of all or a portion of the interest on the underlying pool of mortgage
loans or Mortgage-Backed Securities ("Mortgage Assets") and the other of which
(the "PO class") entitles the holders thereof to receive distributions
consisting solely or primarily of all or a portion of the principal of the
underlying pool of Mortgage Assets. The cash flows and yields

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<PAGE>

on IO and PO classes are extremely sensitive to the rate of principal payments
(including prepayments) on the related underlying Mortgage Assets.

REPURCHASE AGREEMENTS

The Funds may invest in repurchase agreements. The Funds' custodian will
hold the securities underlying any repurchase agreement or such securities will
be part of the Federal Reserve Book Entry System. The market value of the
collateral underlying the repurchase agreement will be determined on each
business day. If at any time the market value of the collateral falls below the
repurchase price of the repurchase agreement (including any accrued interest)
the applicable Fund will promptly receive additional collateral (equal to the
repurchase price plus accrued interest).

U.S. GOVERNMENT SECURITIES

The U.S. Government securities in which the Funds may invest include
securities issued or guaranteed as to payment of principal and interest by the
U.S. Government or its agencies or instrumentalities. The Funds may invest in
direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes and
bonds, and in obligations of U.S. Government agencies or instrumentalities,
including, but not limited to, Federal Home Loan Banks, the Farmers Home
Administration, Federal Farm Credit Banks, the Federal National Mortgage
Association ("FNMA"), the Government National Mortgage Association ("GNMA"), the
Federal Home Loan Mortgage Corporation ("FHLMC") and the Financing Corporation.
The maturities of U.S. Government securities usually range from three months to
30 years. Some U.S. Government securities are backed by full faith and credit
of the U.S. Government (E.G., GNMA securities), while others may be backed
solely by the credit of the issuing agency (E.G., FNMA and FHLMC securities).

VARIABLE AND FLOATING RATE OBLIGATIONS

Certain of the obligations in which Money Market Fund may invest may be
variable or floating rate obligations in which the interest rate is adjusted
either at predesignated periodic intervals (variable rate) or when there is a
change in the index rate of interest on which the interest rate payable on the
obligation is based (floating rate). Variable or floating rate obligations may
include a demand feature which is a put that entitles the holder to receive the
principal amount of the underlying security or securities and which may be
exercised either at any time on no more than 30 days' notice

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<PAGE>

or at specified intervals not exceeding 397 calendar days on more than 30 days'
notice. Variable or floating rate instruments with a demand feature enable
Money Market Fund to purchase instruments with a stated maturity in excess of
397 calendar days. The Fund will determine the maturity of variable or floating
rate instruments in accordance with the Securities and Exchange Commission
("SEC") rules which allow the Fund to consider certain of such instruments as
having maturities that are less than the maturity date on the face of the
instrument and which can reasonably be expected to have a market value that
approximates its par value.

LOWER-RATED DEBT SECURITIES

Latin American Value Fund and Bond Fund may each invest in lower-rated debt
securities, I.E., securities rated lower than BBB by S&P or Baa by Moody's or,
if unrated, of comparable quality as determined by the Sub-Adviser. The market
for lower-rated debt securities may be thinner and less active than that for
high rated debt securities, which can adversely affect the prices at which the
former are sold. If market quotations are not available, lower-rated debt
securities will be valued in accordance with procedures established by the Board
of Directors, including the use of outside pricing services. Judgment plays a
greater role in valuing high yield corporate debt securities than is the case
for securities for which more external sources for quotations and last sale
information are available. Adverse publicity and changing investor perception
may affect the ability of outside pricing services to value lower rated debt
securities and the Funds' ability to dispose of these securities.

Since the risk of default is high for lower-rated debt securities, research
and credit analysis are an especially important part of managing securities of
this type. The Sub-Advisers will attempt to identify those issuers of high
yielding debt securities whose financial condition is adequate to meet future
obligations, has improved or is expected to improve in the future. The Sub-
Advisers' analysis will focus on relative values based on such factors as
interest and dividend coverage, asset coverage, earnings prospects and the
experience and managerial strength of the issuer. For the risks associated with
lower-rated or unrated sovereign debt obligations, see "Special Risk
Considerations--Risks of Sovereign Debt Obligations" herein and in the
Prospectus.

ILLIQUID SECURITIES

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on

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<PAGE>

resale because they have not been registered under the Securities Act of 1933,
as amended (the "1933 Act"), securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are referred
to as private placements or restricted securities and are purchased directly
from the issuer or in the secondary market. Mutual funds do not typically hold
a significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a Fund might be unable to dispose of restricted or other illiquid securities
promptly or at a reasonable price and might thereby experience difficulty
satisfying redemptions within seven days. A Fund might also have to register
such restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public
offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.

The SEC has adopted Rule 144A, which allows a broader institutional trading
market for securities otherwise subject to restriction on their resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the 1933 Act of resales of certain securities to qualified
institutional buyers. The Manager and the Sub-Advisers anticipate that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this regulation and the development of
automated systems for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers, Inc.

The Manager and the applicable Sub-Adviser will monitor the liquidity of
Rule 144A Securities in each Fund's portfolio under the supervision of the
Company's Board of Directors. In reaching liquidity decisions, the Manager and
applicable Sub-

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<PAGE>

Adviser will consider, among other things, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers and
other potential purchasers wishing to purchase or sell the security; (3) dealer
undertakings to make a market in the security and (4) the nature of the security
and of the marketplace trades (E.G., the time needed to dispose of the security,
the method of soliciting offer and the mechanics of the transfer).

SPECIAL RISK CONSIDERATIONS

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND OPTIONS. HEDGING RISKS IN
FUTURES CONTRACTS TRANSACTIONS - There are several risks associated with using
stock index or interest rate futures contracts as hedging devices. One risk
arises because the prices of futures contracts may not correlate perfectly with
movements in the underlying index or financial instrument due to certain market
distortions. First, all participants in the futures market are subject to
initial margin and variation margin requirements. Rather than making additional
variation margin payments, investors may close the contracts through offsetting
transactions which could distort the normal relationship between the index or
security and the futures market. Second, the margin requirements in the futures
market are lower than margin requirements in the securities market, and as a
result the futures market may attract more speculators than does the securities
market. Increased participation by speculators in the futures market may also
cause temporary price distortions. Because of possible price distortion in the
futures market and because of imperfect correlation between movements in stock
indexes or securities and movements in the prices of futures contracts, even a
correct forecast of general market trends may not result in a successful hedging
transaction over a very short period.

Another risk arises because of imperfect correlation between movements in
the value of the futures contracts and movements in the value of securities
subject to the hedge. With respect to index futures contracts, the risk of
imperfect correlation increases as the composition of a Fund's portfolio
diverges from the financial instruments included in the applicable index.

Successful use of futures contracts by a Fund is subject to the ability of
the Manager and/or Sub-Adviser to predict correctly movements in the direction
of interest rates or the stock market. If a Fund has hedged against the
possibility of a decline in the value of the stocks held in its portfolio or an
increase in interest rates adversely affecting the value of

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<PAGE>

fixed-income securities held in its portfolio and stock prices increase or
interest rates decrease instead, the Fund will lose part or all of the benefit
of the increased value of its security which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may, but will not
necessarily, be at increased prices which reflect the rising market or decline
in interest rates. The Fund may have to sell securities at a time when it may
be disadvantageous to do so.

LIQUIDITY OF FUTURES CONTRACTS - A Fund may elect to close some or all of
its contracts prior to expiration. The purpose of making such a move would be
to reduce or eliminate the hedge position held by the Fund. A Fund may close
its positions by taking opposite positions. Final determinations of variation
margin are then made, additional cash as required is paid by or to the Fund, and
the Fund realizes a loss or a gain.

Positions in futures contracts may be closed only on an exchange or board
of trade providing a secondary market for such futures contracts. Although the
Funds intend to enter into futures contracts only on exchanges or boards of
trade where there appears to be an active secondary market, there is no
assurance that a liquid secondary market will exist for any particular contract
at any particular time.

In addition, most domestic futures exchanges and boards of trade limit the
amount of fluctuation permitted in futures contract prices during a single
trading day. The daily limit establishes the maximum amount that the price of a
futures contract may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular contract, no trades may be made that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses because the limit may prevent
the liquidation of unfavorable positions. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting some futures traders to substantial losses. In such event, it
will not be possible to close a futures position and, in the event of adverse
price movements, the Fund would be required to make daily cash payments of
variation margin. In such circumstances, an increase in the value of the
portion of the portfolio being hedged, if any, may partially or completely

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<PAGE>

offset losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities being hedged will, in fact, correlate
with the price movements in the futures contract and thus provide an offset to
losses on a futures contract.

RISKS OF OPTIONS - The use of options on financial instruments and indexes
and interest rate and stock index futures contracts also involves additional
risk. Compared to the purchase or sale of futures contracts, the purchase of
call or put options involves less potential risk to a Fund because the maximum
amount at risk is the premium paid for the options (plus transactions costs).
The writing of a call option generates a premium which may partially offset a
decline in the value of a Fund's portfolio assets. By writing a call option,
the Fund becomes obligated to sell an underlying instrument or a futures
contract, which may have a value higher than the exercise price. Conversely,
the writing of a put option generates a premium, but the Fund becomes obligated
to purchase the underlying instrument or futures contract, which may have a
value lower than the exercise price. Thus, the loss incurred by a Fund in
writing options may exceed the amount of the premium received.

The effective use of options strategies is dependent, among other things,
on a Fund's ability to terminate options positions at a time when the Sub-
Adviser deems it desirable to do so. Although a Fund will enter into an option
position only if the Sub-Adviser believes that a liquid secondary market exists
for such option, there is no assurance that the Fund will be able to effect
closing transactions at any particular time or at an acceptable price. The
Funds' transactions involving options on futures contracts will be conducted
only on recognized exchanges.

A Fund's purchase or sale of put or call options will be based upon
predictions as to anticipated interest rates or market trends by the Sub-
Adviser, which could prove to be inaccurate. Even if the expectations of the
Sub-Adviser are correct, there may be an imperfect correlation between the
change in the value of the options and of the Fund's portfolio securities.

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<PAGE>

covered call option, be offset by a decline in the market value of the
underlying security during the option period. If a call option is exercised,
the writer experiences a profit or loss from the sale of the underlying
security. If a put option is exercised, the writer must fulfill the obligation
to purchase the underlying security at the exercise price which will usually
exceed the then market value of the underlying security.

A Fund will realize a profit from a closing transaction if the price of the
transaction is less than the premium received from writing the option or is more
than the premium paid to purchase the option; the Fund will realize a loss from
a closing transaction if the price of the transaction is more than the premium
received from writing the option or is less than the premium paid to purchase
the option. Because increases in the market price of a call option will
generally reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be offset in
whole or in part by appreciation of the underlying security owned by the Fund.

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<PAGE>

The Funds may purchase put options to hedge against a decline in the value
of their portfolios. By using put options in this way, the Funds will reduce
any profit they might otherwise have realized in the underlying security by the
amount of the premium paid for the put option and by transaction costs.

The Funds may purchase call options to hedge against an increase in the
price of securities that the Funds anticipate purchasing in the future. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by a Fund upon exercise of the option, and, unless the
price of the underlying security rises sufficiently, the option may expire
worthless to the Fund.

As discussed above, options may be traded over-the-counter ("OTC options").
In an over-the counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements

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<PAGE>

could therefore continue to an unlimited extent over a period of time. The
Funds may purchase and write OTC options deemed creditworthy by the Manager.
OTC options are illiquid and it may not be possible for the Funds to dispose of
options they have purchased or terminate their obligations under an option they
have written at a time when the Manager and Sub-Adviser believe it would be
advantageous to do so. Accordingly, OTC options are subject to the Funds'
limitation that a maximum of 15% of its net assets be invested in illiquid
securities. In the event of the bankruptcy of the writer of an OTC option, the
Funds could experience a loss of all or part of the value of the option.

FOREIGN TRANSACTIONS - Transactions in options and futures contracts may be
conducted outside of the U.S. Such transactions are subject to the risk of
governmental actions affecting trading in or the prices of foreign currencies or
securities. The value of such positions also could be adversely affected by (a)
other complex foreign political and economic factors; (b) lesser availability
than in the United States of data on which to make trading decisions; (c) delays
in a Fund's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States; (d) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (e) lesser trading volume. In addition, such transactions
may not involve a clearing mechanism and related guarantee.

FUTURE DEVELOPMENTS - A Fund may, following written notice thereof to its
shareholders, take advantage of opportunities in the area of options and futures
contracts and options on futures contracts which are not currently contemplated
for use by the Fund or which are not currently available but which may be
developed, to the extent such opportunities are both consistent with the Fund's
investment object and legally permissible for the Fund. Such opportunities, if
they arise, may involve risks which exceed those involved in the options and
futures activities described above.

RISKS OF SOVEREIGN DEBT OBLIGATIONS

Each of the Funds (other than Money Market Fund) may invest in debt
obligations of governments within the region or regions in which they are
authorized to invest ("sovereign debt"). Investment in sovereign debt can
involve a high degree of risk. The governmental entity that controls the
repayment of sovereign debt may be dependent on expected disbursements from
foreign governments, multilateral agencies

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<PAGE>

and others abroad to reduce principal and interest arrearages on their debt.
The commitment on the part of these governments, agencies and others to make
such disbursements may be conditioned on a governmental entity's implementation
of economic reforms and/or economic performance and the timely service of such
debtor's obligations. Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due may result in the
cancellation of such third parties' commitments to lend funds to the
governmental entity, which may further impair such debtor's ability or
willingness to service its debts in a timely manner.

Investments in the sovereign debt of emerging market countries involve
special risks. Certain government obligors in which the Funds may invest have
in the past experienced substantial difficulties in servicing their external
debt obligations and the restructuring of certain indebtedness. Restructuring
arrangements have included, among other things, reducing and rescheduling
interest and principal payments by negotiating new or amended credit agreements
or converting outstanding principal and unpaid interest to Brady Bonds and
obtaining new credit to finance interest payments.

The risks of default are particularly great in the case of certain emerging
market countries which have historically experienced, and may continue to
experience, high rates of inflation, high interest rates, exchange rate
fluctuations, large amounts of external debt, balance of payments and trade
difficulties and extreme poverty and unemployment. Government obligors in
developing and emerging market countries are among the world's largest debtors
to commercial banks, other governments, international financial organizations
and other financial institutions. Certain government obligors in which the
Funds may invest have in the past experienced substantial difficulties in
servicing their external debt obligations, which led to defaults on certain
obligations and the restructuring of certain indebtedness.

BRADY BONDS - Brady Bonds are debt securities issued under the framework of
the Brady Plan, an initiative announced by former U.S. Treasury Secretary
Nicholas F. Brady as a mechanism for debtor nations to restructure their
outstanding external indebtedness. Brady Plan debt restructuring has been
implemented to date in Argentina, Brazil, Bulgaria, Costa Rica, Jordan, Mexico,
Nigeria, Philippines, Uruguay and Venezuela (collectively, the "Brady
Countries"). As of August 1994 the Brady Countries have issued Brady Bonds
aggregating approximately $83 billion, based on current estimates. It is
expected that other countries will undertake a Brady Plan in

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<PAGE>

the future, including Dominican Republic, Ecuador, Panama, Peru and Poland.
Interest payments on these Brady Bonds generally are collateralized on a one-
year or longer rolling-forward basis by cash or securities in an amount that, in
the case of fixed rate bonds, is equal to at least one year of interest payments
or, in the case of floating rate bonds, initially is equal to at least one year
of interest payments or, in the case of floating rate bonds, initially is equal
to at least one year's interest payments based on the applicable interest rate
at that time and is adjusted at regular intervals thereafter. Certain Brady
Bonds are entitled to "value recovery payments" in certain circumstances, which
in effect constitute supplemental interest payments but generally are not
collateralized.

Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral in other currencies) and interest coupon payments collateralized on
an 18-month rolling-forward basis by funds held in escrow by an agent for the
bondholders. A significant portion of the Venezuelan Brady Bonds and the
Argentine Brady Bonds issued to date have principal repayments at final maturity
collateralized by U.S. Treasury zero coupon bonds or comparable collateral in
other currencies) and/or interest coupon payments collateralized on a 14-month
(for Venezuela) or 12-month (for Argentina) rolling-forward basis by securities
held by the Federal Reserve Bank of New York as collateral agent.

ADDITIONAL RISKS APPLICABLE TO INVESTMENT IN CANADA

The economy of Canada is strongly influenced by the activities of companies
and industries involved in the production and processing of natural resources.
The companies may include those involved in the energy industry, industrial
materials (chemicals, base metals, timber and paper) and agricultural materials
(grain cereals). The securities of companies in the energy industry are subject
to changes in value and dividend yield which depend, to a large extent, on the
price and supply of energy fuels. Rapid price and supply fluctuations may be
caused by events relating to international politics, energy conservation and the
success of exploration projects. Economic prospects are changing due to recent
government attempts to reduce restrictions against foreign investment.

Many factors affect and could have an adverse impact on the financial
condition of Canada, including, social, environmental and economic conditions;
factors which are not within

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<PAGE>

the control of Canada. The Manager and Sub-Adviser are unable to predict what
effect, if any, such factors would have on instruments held in North American
Fund's portfolio.

ADDITIONAL RISKS APPLICABLE TO INVESTMENT IN COUNTRIES IN LATIN AMERICA,
INCLUDING MEXICO

Investing in securities of issuers located in Latin American countries may
entail risks relating to the potential political and economic instability of
those countries and the risks of expropriation, nationalization, confiscation or
the imposition or restrictions on foreign investment and on repatriation of
capital invested. In the event of expropriation, nationalization or other
confiscation by any country, a Fund could lose its entire investment in any such
country.

The securities markets of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major securities
markets in the U.S. Disclosure and regulatory standards are in many respects
less stringent than U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of investors in such
markets.

The limited size of many Latin American securities markets and limited
trading volume in the securities of Latin American issuers compared to volume of
trading in the securities of U.S. issuers could cause prices to be erratic for
reasons apart from factors that affect the soundness and competitiveness of the
issuers. For example, limited market size may cause prices to be unduly
influenced by traders who control large positions. Adverse publicity and
investors' perceptions, whether or not based on in-depth fundamental analysis,
may decrease the value and liquidity of portfolio securities.

Some Latin American countries also may have managed currencies, which are
not free floating against the U.S. dollar. In addition, there is risk that
certain Latin American countries may restrict the free conversion of their
currencies into other currencies. Further, certain Latin American currencies
may not be internationally traded. Certain of these currencies have experienced
a steep devaluation relative to the U.S. dollar. Any devaluations in the
currencies in which the Funds' securities are denominated may have a detrimental
impact on the Funds' net asset value.

The economies of individual Latin American countries may differ favorably
or unfavorably from the U.S. economy in such respects as the rate of growth of
gross domestic product, the

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<PAGE>

rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments positions. Certain Latin American countries have experienced high
levels of inflation which can have a debilitating effect on an economy.
Furthermore, certain Latin American countries may impose withholding taxes on
dividends payable to the Funds at a higher rate than those imposed by other
foreign countries. This may reduce the Funds' investment income available for
distribution to shareholders.

Although a number of Latin American countries are currently experiencing
lower rates of inflation and higher rates of real growth in gross domestic
product than they have in the past, other such countries continue to experience
significant problems, including high inflation rates and high interest rates.
Capital flight has proven a persistent problem and external debt has been
forcibly rescheduled. Political turmoil, high inflation, capital repatriation
restrictions and nationalization have further exacerbated conditions.

Governments of many Latin American countries have exercised and continue to
exercise substantial influence over many aspects of the private sector through
the ownership or control of many companies, including some of the largest in
those countries. As a result, government actions in the future could have a
significant effect on economic conditions which may adversely affect prices of
certain portfolio securities. Political, economic or social instability or
other similar developments, such as military coups, have occurred in the past
and could also adversely affect the Funds' investments in these countries.

Changes in political leadership, the implementation of market oriented
economic policies, such as privatization, trade reform and fiscal and monetary
reform are among the recent steps taken to renew economic growth. External debt
is being restructured and flight capital (domestic capital that has left home
country) has begun to return. Inflation control efforts have also been
implemented. Free Trade Zones are being discussed in various areas in Latin
America, the most notable being a free zone between Mexico and the U.S. Latin
American equity markets can be extremely volatile and in the past have shown
little correlation with the U.S. market. Currencies are typically weak, but
most are now relatively free floating, and it is not unusual for the currencies
to undergo wide fluctuations in value over short periods of time due to changes
in the market.

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<PAGE>

Latin America is a region rich in natural resources such as oil, copper,
tin, silver, iron ore, forestry, fishing, livestock and agriculture. The region
has a large population (roughly 300 million) representing a large domestic
market. Economic growth was strong in the 1960's and 1970's, but slowed
dramatically (and in some instances was negative) in the 1980's as a result of
poor economic policies, higher international interest rates, and the denial of
access to new foreign capital.

INVESTMENT RESTRICTIONS

Each of the Funds has adopted certain investment restrictions, which are
set forth below. All other investment policies or practices are considered by
each Fund not to be fundamental and, accordingly, may be changed without
shareholder approval. If a percentage restriction on investment or use of
assets set forth below is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing market values will not be
considered a deviation from policy. However, with respect to the investment
restriction on borrowing from banks (excluding reverse repurchase agreements),
each Fund is prohibited from purchasing portfolio securities while outstanding
borrowing exceeds 5% of the value of that Fund's total assets.

The following restrictions are fundamental and may not be changed with
respect to a Fund without the approval of the holders of a majority of the
Fund's outstanding voting securities (defined in the 1940 Act as the lesser of
(a) more than 50% of the outstanding shares or (b) 67% or more of the shares
represented at a meeting where more than 50% of the outstanding shares are
represented). Each Fund may not:

(1) Invest 25% or more of the value of its total assets in the same
industry or groups of industries or in the obligations of any one
government other than the U.S. (The various types of utility companies,
such as gas, electric, telephone, telegraph, satellite and microwave
communication companies, are considered as separate industries.)
Notwithstanding the foregoing, Money Market Fund may invest more than 25%
of the value of its total assets in debt obligations issued by U.S. banks.

(2) Borrow money (provided that a Fund may enter into reverse repurchase
agreements) except from banks for temporary or emergency purposes. The
amount of such borrowing may not exceed 10% of the value of the Fund's
total assets. The Fund will not purchase portfolio

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<PAGE>

securities while outstanding borrowing exceeds 5% of the value of the
Fund's total assets. The Fund will not borrow money for leverage purposes
(provided that each Fund (other than Money Market Fund) may enter into
reverse repurchase agreements for such purposes in an amount not to exceed
25% of its total assets; Money Market Fund may enter into reverse
repurchase agreements for such purposes in an amount not to exceed 5% of
its total assets).

(3) Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure issuances or borrowings permitted by restriction 2 above
(collateral arrangements with respect to reverse repurchase agreements or
margin for futures contracts and options are not deemed to be pledges or
other encumbrances for purposes of this restriction).

(4) Make loans of money or property to any person, except through the
purchase of debt obligations in which the Fund may invest consistent with
the Fund's investment objective and policies or the acquisition of
securities subject to repurchase agreements.

(5) Underwrite the securities of other issuers, except to the extent that
in connection with the disposition of portfolio securities or the sale of
its own shares, the Fund may be deemed to be an underwriter.

(6) Invest for the purpose of exercising control over management of any
company.

(7) Purchase real estate (including limited partnership interests, but
excluding readily marketable interests in real estate investment trusts or
readily marketable securities of companies which invest in real estate) or
interests therein or real estate mortgage loans other than securities
backed by mortgages and similar instruments.

(8) Issue any senior securities (as defined in the 1940 Act), other than as
set forth in restriction number (2) above and except to the extent that
using options and futures contracts or purchasing or selling securities on
a when-issued or forward commitment basis may be deemed to constitute
issuing a senior security.

(9) Invest more than 15% of the value of its net assets in illiquid
securities or, in the case of Money Market

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<PAGE>

Fund, invest more than 10% of the value of its net assets in illiquid
securities.

(10) Purchase commodities, except that (with the exception of Money Market
Fund) the Fund may engage in futures and options on futures as described in
"Investment Policies."

Money Market Fund may not invest in any foreign securities.

The following are non-fundamental investment restrictions of each Fund
(unless otherwise indicated) which may be changed without shareholder approval:

(a) The Funds will not purchase or sell interests in oil, gas, mineral leases
or other mineral exploration or development programs.

(b) Each Fund will not invest more than 5% of the value of its total assets in
the securities of any issuers which, with their predecessors, have a record of
less than three years' continuous operation. (Securities of such issuers will
not be deemed to fall within this limitation if they are guaranteed by an entity
in continuous operation for more than three years. The value of all securities
issued or guaranteed by such guarantor and owned by a Fund shall not exceed 10%
of the value of the total assets of such Fund.)

(c) Each Fund will not purchase any securities on margin except to obtain such
short-term credits as may be necessary for the clearance of transactions and
except that each Fund may make margin deposits in connection with options and
futures contracts.

(d) Each Fund will not purchase or retain the securities of any issuer if, to
such Fund's knowledge, those officers or directors of the Company or its
affiliates or of its investment adviser who individually own beneficially more
than 0.5% of the outstanding securities of such issuer, together own more than
5% of such outstanding securities.

(e) The Funds (other than Bond Fund) may not engage in the short sales of
securities.

(f) Money Market Fund is not permitted to write, purchase or sell puts, calls
or combinations thereof, provided that the Fund may purchase securities with
demand or put features.

(g) Money Market Fund may not loan portfolio securities.

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<PAGE>

(h) Money Market Fund will not purchase the securities of other investment
companies except as part of a merger, consolidation, or acquisition of assets,
nor invest in warrants.

(i) The Funds will limit to 5% of net assets investments in warrants valued at
the lower of cost or market, with no more than 2% of net assets invested in
unlisted warrants. For purposes of this restriction, warrants acquired by any
Fund in units or attached to other securities are deemed to be without value.

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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS

The names, addresses and principal occupations during the past five years
of the directors and executive officers of the Company are given below.

Each of the Fund's directors also serves as a director of American
Opportunity Income Fund Inc. ("OIF"), American Government Income Fund Inc.
("AGF"), American Government Term Trust Inc. ("AGT"), American Government Income
Portfolio Inc. ("AAF"), American Municipal Term Trust Inc. ("AXT"), American
Municipal Term Trust Inc. - II ("BXT"), Minnesota Municipal Term Trust Inc.
("MNA"), American Strategic Income Portfolio Inc. ("ASP"), Minnesota Municipal
Term Trust Inc. - II ("MNB"), American Strategic Income Portfolio Inc.- II
("BSP"), American Municipal Term Trust Inc. - III ("CXT"), American Strategic
Income Portfolio Inc. - III ("CSP"), American Municipal Income Portfolio Inc.
("XAA"), Minnesota Municipal Income Portfolio Inc. ("MXA"), American Select
Portfolio Inc. ("SLA"), Americas Income Trust Inc. ("XUS") and Highlander Income
Fund Inc. ("HLA"), closed-end investment companies managed by the Manager and of
Piper Funds Inc., Piper Institutional Funds Inc., Piper Global Funds Inc. and
Piper Funds Inc. - II, open-end investment companies managed by the Manager.
Messrs. Hayssen and Rosedahl are officers of the above closed- and open-end
investment companies. Mr. Bennett is not a director of Piper Global Funds Inc.

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<PAGE>

NAME AND ADDRESS POSITION WITH THE FUND

Charles N. Hayssen Treasurer
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402-3804

William H. Ellis President
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402-3804

David T. Bennett Director
Gray, Plant, Mooty, Mooty
& Bennett
3400 City Center
33 South 6th Street
Minneapolis, MN 55402

Jaye F. Dyer Director
4670 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402

Luella G. Goldberg Director
7019 Tupa Drive
Edina, MN 55435

George Latimer Director
1536 Hewitt Avenue
Saint Paul, MN 55105

Karol D. Emmerich Director
7302 Clareton Drive
Edina, MN 55439

Robert H. Nelson Vice President
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402-3804

David E. Rosedahl Secretary
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402-3804

Charles N. Hayssen has been a Managing Director of Piper Jaffray Inc. since
November 1986 and of Piper Jaffray Companies Inc. since November 1987, Chief
Financial Officer of Piper Jaffray Inc. from April 1988 until July 1995,
Director

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<PAGE>

and Chief Financial Officer of the Manager since January 1989 and Chief
Operating Officer of that company since December 1994.

William H. Ellis has been President of Piper Jaffray Companies Inc. and
Piper Jaffray Inc. since September 1982 and has been Chief Operating Officer of
the same two companies since August 1983. Mr. Ellis has been President and
Chief Executive Officer of the Manager since November 1994 and Director and
Chairman of the Board of the Manager since October 1985.

Mr. Bennett has been of counsel to the law firm of Gray, Plant, Mooty,
Mooty & Bennett, P.A., located in Minneapolis, Minnesota since January 1967.
Mr. Bennett also serves on the board of directors of a number of privately held
and nonprofit corporations.

Jaye F. Dyer has been President of Dyer Management Company, a private
investment management company, since 1991; prior thereto, Mr. Dyer was President
and Chief Executive Officer of Dyco Petroleum Corporation, an oil and natural
gas development subsidiary of Arkla Inc. located in Minneapolis, Minnesota from
1971, when he founded the company, until March 1, 1989 and Chairman of the Board
until December 31, 1990. Mr. Dyer serves on the boards of directors of
Northwestern National Life Insurance Company and various privately held and
nonprofit corporations.

Luella G. Goldberg has served as a director of Northwestern National Life
Insurance Company since 1976, a director of The NWNL Companies, Inc. (the
holding company of Northwestern National Life Insurance Company) since January
1989, a director of TCF Banking and Savings, F.A. since 1986 and a director of
TCF Financial Corporation (the holding company of TCF Banking and Savings, F.A.)
since December 1988 and a director of Hormel Foods Corp. since September 1993.
Ms. Goldberg serves as Chairman of the Board of Trustees of Wellesley College
and also serves on the board of directors of a number of other organizations,
including the Minnesota Orchestral Association, the University of Minnesota
Foundation and Abbott-Northwestern Hospital in Minneapolis.

George Latimer has been Special Consultant to the Department of Housing and
Urban Development since 1993, prior to which he had been Dean of Hamline Law
School from 1990 to 1993; prior thereto, Mr. Latimer was Mayor of the City of
Saint Paul from 1976 to 1989. Mr. Latimer serves on the board of directors of
Digital Biometrics, Inc.

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<PAGE>

Karol D. Emmerich has been President of Paraclete Group, a consultant to
nonprofit and other organizations since 1993, prior to which she had been a
Vice President and Treasurer of Dayton Hudson Corporation, from 1980 to May 1993
and Chief Accounting Officer from 1989 to May 1993. Ms. Emmerich also serves on
the board of directors of Metropolitan Financial Corporation.

Robert H. Nelson joined the Manager in 1988. He has served as Senior Vice
President of the Manger since November 1993, prior to which he had served as
Vice President for the same company.

David E. Rosedahl has been Secretary of the Manager since October 1983, a
Director of Piper Capital Management Inc. since October 1985, a Managing
Director and Assistant Secretary of Piper Jaffray Inc. since November 1986 and
of Piper Jaffray Companies Inc. since November 1987 and General Counsel for
Piper Jaffray Inc. and Piper Jaffray Companies Inc. since 1977.

The directors of the Company who are officers or employees of the Manager
or any of its affiliates receive no remuneration from the Company. Each of the
other directors receives from the Company a quarterly retainer of $1,000.00. In
addition, each director who is not affiliated with the Manager shall receive a
fee for each in-person meeting attended, such per-meeting fee to be based upon
the net asset value of the Company as follows:

NET ASSET VALUE PER-MEETING FEE

Under $200 million $ 250
Under $500 million $ 500
Under $1 billion $ 750
Under $5 billion $1000
$5 billion and over $1500

In addition, members of the Audit Committee not affiliated with the Manager
receive $1,000 for each Audit Committee meeting attended ($2,000 with respect to
the chairperson of the Committee), with such fee being paid by the Company.
Directors are also reimbursed for expenses incurred in connection with attending
meetings.

The following table sets forth the aggregate compensation received by each
Director from the Company during the fiscal year ended June 30, 1995, as well as
the total compensation received by each Director (during such fiscal year) from
all other open-end and closed-end investment companies managed by

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<PAGE>

the Manager. Directors who are officers or employees of the Manager or any
of its affiliates did not receive any such compensation and are not
included in the table. No other individuals received compensation from the
Company during the fiscal year ended June 30, 1995.

<TABLE>
<CAPTION>
- - - - -------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------
Pension or
Retirement Estimated
Aggregate Benefits Annual Total
Compensation Accrued as Part Benefits Compensation
from the of Company Upon From Fund
Director Company Expenses Retirement Complex*
- - - - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
David Bennett $1,750.00 None None $63,000
- - - - -------------------------------------------------------------------------------------------------
Jaye F. Dyer $7,250.00 None None $72,500
- - - - -------------------------------------------------------------------------------------------------
Karol D. Emmerich $7,250.00 None None $72,500
- - - - -------------------------------------------------------------------------------------------------
Luella G. Goldberg $9,250.00 None None $76,500
- - - - -------------------------------------------------------------------------------------------------
George Latimer $5,250.00 None None $53,750
- - - - -------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------
</TABLE>

*Consists of 22 open-end and closed-end investment companies managed by the
Manager or an affiliate of the Manager, including the Company. Each director
included in the table, other than Mr. Bennett, serves on the board of each
such open-end and closed-end investment company. Mr. Bennett serves on the
board of 21 of such open-end and closed-end investment companies.

INVESTMENT ADVISORY AND OTHER SERVICES

GENERAL

The investment adviser for the Funds is Piper Capital Management
Incorporated (the "Manager"). Its affiliate, Piper Jaffray Inc. (the
"Distributor"), acts as the Funds' distributor. Each acts as such pursuant
to a written agreement which is periodically approved by the directors or
the shareholders of the Company.

The address of the Manager and the Distributor is Piper Jaffray Tower,
222 South Ninth Street, Minneapolis, Minnesota 55402-3804.

CONTROL OF THE MANAGER AND THE DISTRIBUTOR

The Manager and the Distributor are wholly owned subsidiaries of Piper
Jaffray Companies Inc., a publicly held corporation which is engaged
through its subsidiaries in various aspects of the financial services
industry.

-34-
<PAGE>

INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT

The Manager acts as the investment adviser of the Funds under an Investment
Advisory and Management Agreement which has been approved by the Board of
Directors (including a majority of the directors who are not parties to the
agreement, or interested persons of any such party, other than as directors of
the Company) and by the shareholders of each Fund at a special meeting of the
Company held on July 18, 1995. The prior manager was Hercules International
Management L.L.C. (the "Prior Manager").

The Investment Advisory and Management Agreement will terminate
automatically in the event of its assignment. In addition, the agreement is
terminable at any time, without penalty, by the Board of Directors of the
Company or by vote of a majority of the Company's outstanding voting securities
on not more than 60 days' written notice to the Manager, and by the Manager on
60 days' written notice to the Company. The agreement may be terminated with
respect to a particular Fund at any time by a vote of the holders of a majority
of the outstanding voting securities of such Fund, upon 60 days' written notice
to the Manager. Unless sooner terminated, the agreement shall continue in
effect for more than two years after its execution only so long as such
continuance is specifically approved at least annually by either the Board of
Directors or by a vote of a majority of the outstanding voting securities of the
Company, provided that in either event such continuance is also approved by a
vote of a majority of the directors who are not parties to such agreement, or
interested persons of such parties, cast in person at a meeting called for the
purpose of voting on such approval. If a majority of the outstanding voting
securities of any of the Funds approves the agreement, the agreement shall
continue in effect with respect to such approving Fund whether or not the
shareholders of any other Fund approve the agreement.

Pursuant to the Investment Advisory and Management Agreement, the Funds pay
the Manager monthly advisory fees equal, on an annual basis, to 1.0% of each
Fund's (except for Money Market Fund) average daily net assets. These fees are
higher than fees paid by most other investment companies. The fees for Money
Market Fund are paid monthly at an annual rate of .50% of average daily net
assets of the Fund. For the fiscal year ended June 30, 1994 the advisory fees
accrued or paid by the Funds were as follows: North American Fund -- $77,277;
European Value Fund -- $70,390; Pacific Value Fund -- $174,540; Latin American
Value Fund -- $133,200; and Bond Fund -- $161,843. No advisory fees were
accrued or paid by Money Market Fund during this period because that Fund did
not

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<PAGE>

commence operations until December 13, 1994. For the fiscal year ended June 30,
1995 the advisory fees accrued or paid by the Funds were as follows: North
American Fund -- $160,455; European Value Fund -- $183,817; Pacific Value Fund
- - - - -- $385,858; Latin American Value Fund -- $280,401; Bond Fund -- $253,709; and
Money Market Fund -- $1,882.

As discussed in the Prospectus, for each Fund's current fiscal year the
Manager and the Distributor have voluntarily limited total expenses on a per
annum basis to 2% with respect to average daily net assets of North American
Fund, European Value Fund, Pacific Value Fund and Latin American Value Fund,
1.8% with respect to average daily net assets of Bond Fund and 1.00% with
respect to average daily net assets of Money Market Fund. After each Fund's
current fiscal year, these limitations may be revised or terminated at any time.

The Investment Advisory and Management Agreement and the Sub-Investment
Advisory Agreements between the Manager and each Sub-Adviser provide that the
Manager and Sub-Advisers must make any expense reimbursements to the Funds
required under state law. The laws of California provide that aggregate annual
expenses of a mutual fund shall not normally exceed 2 1/2% of the first $30
million of the average net assets, 2% of the next $70 million of the average net
assets and 1 1/2% of the remaining average net assets. Such expenses include
the Manager's compensation and the Sub-Adviser's compensation but exclude
interest, taxes, brokerage fees and commissions, extraordinary expenses and
amounts paid under the Company's Rule 12b-1 plan. The Manager does not believe
that the laws of any other state in which the Funds' shares may be offered for
sale contain expense reimbursement requirements. The Funds did not exceed such
limitation during the fiscal year ended June 30, 1995.

Under the Investment Advisory and Management Agreement, the Manager
provides each Fund with advice and assistance in the selection and disposition
of that Fund's investments. All investment decisions are subject to review by
the Board of Directors of the Company. The Manager is obligated to pay the
salaries and fees of any affiliates of the Manager serving as officers or
directors of the Funds.

The same security may be suitable for more than one of the Funds and/or for
other series of the Company or other funds or private accounts managed by the
Manager, the Sub-Advisers or their affiliates. If and when two or more funds or
accounts simultaneously purchase or sell the same security, the transactions
will be allocated as to price and amount in accordance with arrangements
equitable to each fund or

-36-
<PAGE>

account. The simultaneous purchase or sale of the same securities by more than
one of the Funds or other funds or accounts may have a detrimental effect on a
Fund, as this may affect the price paid or received by that Fund or the size of
the position obtainable or able to be sold by that Fund.

SUB-ADVISERS

Under Sub-Investment Advisory Agreements between the Manager and the
following Sub-Advisers, each Sub-Adviser provides the respective Fund with
investment advice and portfolio management relating to the Fund's investment in
securities issued by issuers in the particular region or regions in which the
applicable Fund is authorized to invest, subject to the overall supervision of
the Manager:

NORTH AMERICAN FUND - The Manager is responsible for investments in U.S.
securities.

Acci Worldwide, S.A. de C.V. ("Acci") (regarding investment in Mexican
securities) Paseo de la Reforma 398-4 Piso 06600 Mexico, D.F. Acci, an
investment adviser registered under the Advisers Act was organized in June, 1990
as a controlled subsidiary of Acciones y Valores de Mexico, S.A. de C.V. ("AVM")
for the purpose of providing investment advice to non-Mexican investment funds
investing in Mexican securities. AVM, founded in 1971, has been involved in
equity underwriting and trading, portfolio investment and management of equity
mutual funds in Mexico and participates in the fixed-income markets. The
address of AVM is that of Acci. AVM is a subsidiary of Grupo Financiero Banamex
- - - - - Accival ("Accival"), a holding company that owns over 99% of the voting stock
of AVM and of Banamex, one of Mexico's largest bank. The address of Accival is
Paseo de la Reforma 420, 06600 Mexico, D.F.

AGF Investment Advisors, Inc. ("AGF") (regarding investment in Canadian
securities) 31st Floor, Toronto-Dominion Bank Tower, Toronto, Ontario Canada M5K
1E9. AGF, an investment adviser registered under the Advisers Act, is a wholly
owned subsidiary of A.G.F. Management Limited ("A.G.F. Ltd."), an Ontario
corporation incorporated in 1960, Toronto-Dominion Bank Tower, Suite 3100,
Toronto, Ontario, Canada M5K 1E9.

EUROPEAN VALUE FUND - Pictet International Management Ltd. ("Pictet"),
Cutlers Gardens, 5 Devonshire Square, London, England EC2M 4LD. Pictet,
founded in 1980 and based in London, is an adviser registered under the Advisers
Act and is a wholly owned subsidiary of Pictet (London) Limited, a

-37-
<PAGE>

holding company wholly owned by Pictet (Canada) and Company Limited ("Pictet
Canada"). Pictet Canada is a partnership, whose principal activities are
investment accounting, custody and securities brokerage. The general partners
of Pictet Canada are Pictet Advisory Services Overseas and FINGEST Company, each
of whose interest in Pictet Canada amounts to .1%. The Pictet group of
companies provides a wide range of services to individual and institutional
clients including portfolio management, administrative and custodian services,
financial and economic research, brokerage services and advice and counselling
on legal, tax and accountancy matters.

PACIFIC VALUE FUND - Edinburgh Fund Managers plc ("EFM"), Donaldson House,
97 Haymarket Terrace, Edinburgh EH12 5HD, Scotland. EFM is a public limited
company that was incorporated in 1969. EFM is a majority-owned (approximately
53%) subsidiary of The British Investment Trust plc ("BIT"), a Scottish closed-
end investment company founded in 1889, for which EFM serves as investment
manager. The address of BIT is that of EFM. EFM, an investment adviser
registered under the Advisers Act, currently furnishes investment management
services, directly or through subsidiaries, to several closed-end and open-end
investment companies, pension plans, charitable organizations and other
individual/corporate clients. EFM is also a partner with U.S. based Wilmington
Trust Company in a partnership known as Edinburgh-Wilmington International
Capital Management, which is a registered investment adviser providing
international equity management to U.S. investors.

LATIN AMERICAN VALUE FUND - Bankers Trust Company ("Bankers Trust"), a New
York banking corporation with executive offices at 130 Liberty Street, New York,
New York 10017, is a wholly owned subsidiary of Bankers Trust New York
Corporation. Bankers Trust conducts a variety of general banking and trust
activities and is a major wholesale supplier of financial services to the
international and domestic institutional market. As of December 31, 1994
Bankers Trust New York Corporation was the seventh largest bank holding company
in the United States. Bankers Trust is a worldwide merchant bank dedicated to
servicing the needs of corporations, governments, financial institutions and
private clients through a global network of 83 offices in 36 countries.

BOND FUND - Salomon Brothers Asset Management Limited ("SBAM Limited"),
Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB England. SBAM
Limited is based in London and specializes in the management of global
multicurrency fixed income securities and currency transactions. SBAM Limited
is an indirect, wholly owned subsidiary of Salomon Inc, the

-38-
<PAGE>

parent of Salomon Brothers Inc ("SBI"). SBI is one of the largest international
investment houses in the world, with offices and affiliates in 19 countries and
assets at June 30, 1995 of approximately $164 Billion. SBAM Limited is
registered as an investment adviser under the Advisers Act and is a member of
the Investment Management Regulatory Organization Limited in the United Kingdom.
In connection with SBAM Limited's services as Sub-Adviser to Bond Fund, SBAM
Limited's affiliate, Salomon Brothers Asset Management Inc ("SBAM Inc"), will
provide certain advisory services to SBAM Limited for the benefit of Bond Fund.
SBAM Inc will be compensated by SBAM Limited at no additional expense to Bond
Fund. Like SBAM Limited, SBAM Inc is registered as an investment adviser under
the Advisers Act and is an indirect, wholly owned subsidiary of Salomon Inc.
SBAM Inc acts as Sub-Adviser to Money Market Fund. The business address of SBAM
Inc is Seven World Trade Center, New York, New York 10048. SBAM Limited and
SBAM Inc together provide a broad range of fixed income and equity investment
advisory services for their individual and institutional clients located around
the world, and provide investment advisory services for twenty-one registered
investment companies (including portfolios thereof).

MONEY MARKET FUND - SBAM Inc, Seven World Trade Center, New York, New York
10048, has a professional staff with extensive experience in securities and the
investment industry in both portfolio and securities analysis. This staff has
been innovative in developing and managing funds for U.S. and non-U.S.
investors. In addition, SBAM Inc has access to the quantitative analytical and
research capabilities of SBI and its affiliates, which have a staff of over 250
research professionals including a substantial group dedicated to emerging
markets sovereign and corporate credit research. SBAM Inc provides a broad
range of fixed income and equity investment advisory services for its individual
and institutional clients located around the world, and provides investment
advisory services for 21 registered investment companies (including portfolios
thereof). SBAM Inc is an indirect wholly-owned subsidiary of Salomon Inc, the
parent of SBI. SBI is one of the largest international investment houses in the
world with offices and affiliates in 19 countries with assets at June 30, 1995
of approximately $164 Billion.

RATE OF COMPENSATION. As compensation for their services provided pursuant
to the respective Sub-Advisory Agreements, the Manager pays each Sub-Adviser
monthly compensation payable

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<PAGE>

over the same time periods and calculated in the same manner as the investment
advisory fee of the applicable Fund of .50% of net assets of such Fund, except
that with respect to Money Market Fund, the applicable Sub-Adviser is paid by
the Manager a fee of .25% of daily net assets of such Funds. In the case of
North American Fund, the fee is split equally among each of the two Sub-Advisers
and the Manager without regard to the amount of assets under their respective
management at any one time. For the fiscal year ended June 30, 1994 the sub-
advisory fees accrued or paid pursuant to the Sub-Investment Advisory Agreements
were as follows: North American Fund -- $38,638 (split equally among each of
the Sub-Advisers); European Value Fund -- $35,195; Pacific Value Fund --
$87,270; Latin American Value Fund -- $66,600; and Bond Fund -- $80,921. No
sub-advisory fees were accrued or paid by Money Market Fund during this period
because that Fund did not commence operations until December 13, 1994. For the
fiscal year ended June 30, 1995 the sub-advisory fees accrued or paid pursuant
to the Sub-Investment Advisory Agreements were as follows: North American Fund
- - - - -- $80,228 (split equally among each of the Sub-Advisers); European Value Fund -
- - - - - $91,909; Pacific Value Fund -- $192,929; Latin American Value Fund --
$140,201; Bond Fund -- $126,855; and Money Market Fund -- $941.

DISTRIBUTION PLAN

Rule 12b-1(b) under the Investment Company Act of 1940 provides that any
payments made by the Funds in connection with financing the distribution of
their shares may only be made pursuant to a written plan describing all aspects
of the proposed financing of distribution, and also requires that all agreements
with any person relating to the implementation of the plan must be in writing.
Because some of the payments described below to be made by the Funds are
distribution expenses within the meaning of Rule 12b-1, the Company has entered
into an Underwriting and Distribution Agreement with the Distributor pursuant to
a Distribution Plan adopted in accordance with such Rule.

In addition, Rule 12b-1(b)(1) requires that such plan be approved by a
majority of each Fund's outstanding shares and Rule 12b-1(b)(2) requires that
such plan, together with any related agreements, be approved by a vote of the
Board of Directors and of the directors who are not interested persons of the
Company and who have no direct or indirect interest in the in the operation of
the plan or in the agreements related to the plan, cast in person at a meeting
called for the

-40-
<PAGE>

purpose of voting on such plan or agreement. Rule 12b-1(b)(3) requires that the
plan or agreement provide, in substance:

(b) that any person authorized to direct the disposition of moneys
paid or payable by the Company pursuant to the plan or any related
agreement shall provide to the Company's Board of Directors, and the
directors shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made; and

(c) in the case of a plan, that it may be terminated at any time by a
vote of a majority of the members of the Board of Directors of the Company
who are not interested persons of the Company and who have no direct or
indirect financial interest in the operation of the plan or in any
agreements related to the plan or by a vote of a majority of the
outstanding voting securities of a Fund.

The Distribution Plan has been approved by the Board of Directors
(including a majority of the directors who are not interested persons of the
Company) and the initial shareholder of each Fund.

Rule 12b-1(c) provides that the Company may rely upon Rule 12b-1(b) only if
the selection and nomination of the Company's disinterested directors are
committed to the discretion of such disinterested directors. Rule 12b-1(e)
provides that the Company may implement or continue a plan pursuant to Rule 12b-
1(b) only if the directors who vote to approve such implementation or
continuation conclude, in the exercise of reasonable business judgment and in
light of their fiduciary duties under state law, and under Sections 36(a) and
(b) of the Investment Company Act of 1940, that there is a reasonable likelihood
that the plan will benefit the Company

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<PAGE>

and its shareholders. The Board of Directors has concluded that there is a
reasonable likelihood that the Distribution Plan will benefit the Company and
its shareholders.

Pursuant to the provisions of the Distribution Plan, each of the Funds pays
a fee to the Distributor on a monthly basis at the annual rate of up to .70% of
average daily net assets of the North American Fund, European Value Fund,
Pacific Value Fund and Latin American Value Fund; and .50% of Bond Fund's
average daily net assets, in order to reimburse the Distributor for its actual
expenses incurred in the distribution and promotion of such Fund's shares. The
Distribution Plan also authorizes payments by Money Market Fund in an amount not
to exceed .10% per annum of average daily net assets. However, the Board of
Directors of the Company has determined to discontinue payments under the Plan
with respect to Money Market Fund effective as of June 19, 1995. Currently,
reimbursement to the Distributor is limited for each Fund other than Money
Market Fund on a per annum basis to .50% per annum with respect to average daily
net assets of North American Fund, European Value Fund, Pacific Value Fund and
Latin American Value Fund and .30% with respect to average daily net assets of
Bond Fund. Those limitations may be revised or terminated at any time. For the
fiscal year ended June 30, 1994 the distribution fees accrued or paid by the
Funds were as follows: North American Fund -- $38,638; European Value Fund --
$35,195; Pacific Basin Value Fund -- $87,270; Latin American Value Fund --
$66,600; and Bond Fund -- $48,553. No distribution fees were accrued or paid by
Money Market Fund during this period because that Fund did not commence
operations until December 13, 1994. For the fiscal year ended June 30, 1995 the
distribution fees accrued or paid by the Funds were as follows: North American
Fund -- $112,319; European Value Fund -- $128,672; Pacific Basin Value Fund --
$270,101; Latin American Value Fund -- $196,280; Bond Fund -- $126,855; and
Money Market Fund -- $376, not including amounts waived or absorbed by the
Distributor. The amounts actually paid by each Fund, taking into effect the
amounts waived or absorbed by the Distributor, were as follows: North American
Fund -- $80,228; European Value Fund -- $91,909; Pacific Basin Value Fund --
$192,929; Latin American Value Fund -- $140,200; Bond Fund -- $76,113; and Money
Market Fund -- $376.

Distribution fees for the fiscal year ended June 30, 1995, were used by the
Distributor as follows:

-42-
<PAGE>
<TABLE>
<CAPTION>

North American European Pacific Value Latin American Bond Fund Money
Fund Value Fund Fund Value Fund Market Fund
- - - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Advertising 0 0 0 0 0 0

- - - - ------------------------------------------------------------------------------------------------------------------------------------
Printing and Mailing of 0 0 0 0 0 0
Prospectuses to Other
than Current Shareholders
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Compensation
to $112,319 $128,672 $270,101 $196,280 $126,855 $76
Underwriters(trail fees
to investment executives)
- - - - -----------------------------------------------------------------------------------------------------------------------------------
Compensation to Dealers 0 0 0 0 0 0

- - - - ------------------------------------------------------------------------------------------------------------------------------------
Compensation to Sales 0 0 0 0 0 0
Personnel
-----------------------------------------------------------------------------------------------------------------------------------
Interest, Carrying or 0 0 0 0 0 0
Other Financial Charge
- - - - ------------------------------------------------------------------------------------------------------------------------------------
Other (Specify) 0 0 0 0 0 0

- - - - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The Distributor is reimbursed under the Plan for Distribution Expenses and
Shareholder Servicing Costs. Distribution Expenses include, but are not limited
to, initial and ongoing sales compensation (in addition to sales loads) paid to
investment executives of the Distributor and to other broker-dealers; expenses
incurred in the printing of prospectuses, statements of additional information
and reports used for sales purposes; expenses of preparation and distribution of
sales literature; expenses of advertising of any type; an allocation of the
Distributor's overhead; payments to and expenses of persons who provide support
services in connection with the distribution of Fund shares; and other
distribution-related expenses. Shareholder Servicing Costs include all expenses
of the Distributor incurred in connection with providing administrative or
accounting services including payments made to persons, including employees of
the Distributor, who respond to inquiries of shareholders of the Funds regarding
their ownership of shares or their accounts with the Funds or who provide other
administrative or accounting services not otherwise required to be provided by
the Funds' Adviser, Sub-Advisers or transfer agent. The Manager, the Sub-
Advisers and the Distributor may, out of their own assets, pay for certain
expenses incurred in connection with the distribution of shares of the Fund. In
particular, the Distributor may make payments out of its own assets to its
investment executives and other broker dealers in connection with their sales of

-43-
<PAGE>

shares of the Fund. See "Purchase of Shares - Public Offering Price."

The Distributor's Shareholder Servicing Costs include payments to its
investment executives and to other broker-dealers which have entered into sales
agreements with the Distributor as follows: If shares of a Fund are sold by a
representative of a broker-dealer other than the Distributor, that portion of
.25% of the average daily net assets of the Fund which is attributable to shares
sold by such representative is paid to such broker-dealer. If shares of a Fund
are sold by an investment executive of the Distributor, compensation will be
paid to the investment executive in the manner set forth in a written agreement,
in an amount not to exceed that portion of .25% of the average daily net assets
of the Fund which is attributable to shares sold by such investment executive.
In addition, the Distributor pays an amount equal to .25% of the average daily
net assets of the North American Fund, the European Value Fund, the Pacific
Value Fund and the Latin American Value Fund (.05% with respect to the Bond
Fund) as ongoing sales compensation to investment executives of the Distributor
and to broker-dealers which have entered into sales agreements with the
Distributor. Such payments are considered Distribution Expenses of the
Distributor and are reimbursable under the Plan.

UNDERWRITING AND DISTRIBUTION AGREEMENT

Pursuant to the Underwriting and Distribution Agreement, the Distributor
has agreed to act as the principal underwriter for the Funds in the sale and
distribution to the public of shares of the Funds, either through dealers or
otherwise. The Distributor has agreed to offer such shares for sale at all
times when such shares are available for sale and may lawfully be offered for
sale and sold.

-44-
<PAGE>
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE

Transactions on stock exchanges involve the payment of brokerage
commissions. In transactions on stock exchanges in the United States,
commissions are negotiated whereas on many foreign stock exchanges, commissions
are fixed, often at levels higher than those available in the United States. In
the case of securities traded on the over-the-counter markets, there is
generally no stated commission but the price usually includes a commission paid
by the issuer to the underwriters (I.E., these are net prices which include a
markup). Commissions are paid with respect to the purchase of certain other
securities in which the Funds may invest, and with respect to options on
securities, futures contracts and options on futures contracts purchased by the
Funds. Subject to the general supervision of the Directors of the Company, the
Manager and the respective Sub-Advisers are responsible for the investment
decisions and the placing of the orders for portfolio transactions for the
Funds. During the fiscal year ended June 30, 1994, the brokerage commissions
paid by the Funds (other than Money Market Fund) were as follows: North American
Fund -- $62,242; European Value Fund -- $66,725; Pacific Value Fund -- $296,670;
Latin American Value Fund -- $160,209; and Bond Fund -- $2,470. During the
fiscal year ended June 30, 1995, the brokerage commissions paid by the Funds
(other than Money Market Fund) were as follows: North American Fund -- $54,181;
European Value Fund -- $99,038; Pacific Value Fund -- $222,407; Latin American
Value Fund -- $217,281; and Bond Fund -- $1,796.

During the fiscal year ended June 30, 1994, information with respect to
brokerage commissions paid by the Funds to affiliated brokers was as follows:

-45-
<PAGE>

<TABLE>
<CAPTION>
- - - - ----------------------------------------------------------------------------------------------------------------
Name of Fund Name of Brokerage Total Amount of
Affiliated Commission Transactions
Broker Paid Where
Commissions Paid
to Affiliate
--------------------------------------------------------------------
Dollar % Dollar %
Amount Amount
- - - - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North Acciones y $25,765 31 $4,929,047 24
American Valores
Fund
- - - - ----------------------------------------------------------------------------------------------------------------
North Piper 85 0 45,000 0
American Jaffray
Fund Inc.
- - - - ----------------------------------------------------------------------------------------------------------------
European Pictet & 5,281 8 1,708,530 6
Value Fund Cie
- - - - ----------------------------------------------------------------------------------------------------------------

Latin Salomon 4,208 3 1,661,720 3
American Brothers Inc
Value Fund
- - - - -----------------------------------------------------------------------------------------------------------------
- - - - -----------------------------------------------------------------------------------------------------------------
</TABLE>

During the fiscal year ended June 30, 1995, information with respect to
brokerage commissions paid by the Funds to affiliated brokers is as follows:

<TABLE>
<CAPTION>
- - - - -------------------------------------------------------------------------------------------------------------
Name of Name of Brokerage Total Amount of
Fund Affiliated Commission Transactions
Broker Paid Where
Commissions
Paid to
Affiliate
--------------------------------------------------------
Dollar % Dollar %
Amount Amount
- - - - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
North Acciones y $24,276 44.81 $4,858,121 28.33
American Valores
Fund
- - - - -------------------------------------------------------------------------------------------------------------
European Pictet & Cie $ 4,191 4.23 $1,353,868 4.04
Value Fund
- - - - -------------------------------------------------------------------------------------------------------------
Latin Salomon $10,523 4.84 $3,105,766 6.28
American Brothers Inc.
Value Fund
- - - - -------------------------------------------------------------------------------------------------------------
Pacific Salomon $ 4,849 2.18 $1,285,191 2.61
Basin Fund Brothers
Inc
- - - - --------------------------------------------------------------------------------------------------------------
- - - - ---------------------------------------------------------------------------------------------------------------
</TABLE>

Brokerage commissions in Mexico generally are higher than in the U.S. and
Canada and, therefore, brokerage commissions

-46-
<PAGE>

paid to Acciones y Valores represent a higher percentage of total commissions
than such transactions represent in terms of dollars.

From time to time the Funds may acquire the securities of their regular
brokers or dealers or parent companies of such brokers or dealers. As of June
30, 1995, European Value Fund owned $210,952 of securities issued by Smith New
Court and $127,863 of securities issued by S.G. Warburg Group.

The Funds have no obligation to enter into transactions in portfolio
securities with any dealer, issuer, underwriter or other entity. The Funds do
not purchase securities from, or sell securities to, the Manager, the Sub-
Advisers or their respective affiliates acting as principal. In placing orders,
it is the policy of the Funds to obtain the best price and execution for its
transactions. Where best price and execution may be obtained from more than one
broker-dealer, the Manager and/or the Sub-Advisers may, in their discretion,
purchase and sell securities through broker/dealers who provide research,
statistical and other information to the Manager or the Sub-Advisers, as the
case may be. The Funds will not purchase at a higher price or sell at a lower
price in connection with transactions effected with a dealer, acting as
principal, who furnishes research services to the Manager and/or a Sub-Adviser
than would be the case if no weight were given by the Manager and/or Sub-
Adviser, as the case may be, to the dealer's furnishing of such services.

The supplemental information received from a broker-dealer is in addition
to the services required to be performed by the Manager under the Investment
Advisory Agreement, and by the Sub-Investment Advisers under the Sub-Advisory
Agreements, and the expenses of the Manager and/or the Sub-Advisers will not
necessarily be reduced as a result of the receipt of such information.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking the best price and execution,
the Funds may consider sales of shares of the Funds as a factor in the selection
of broker-dealers to enter into portfolio transactions with the Funds.

The investment information provided to the Manager and/or the Sub-Advisers,
as the case may be, is of the types described in Section 28(e)(3) of the
Securities Exchange Act of 1934 and is designed to augment the Manager's and/or
a Sub-Adviser's own internal research and investment strategy capabilities.
Research and statistical services furnished by

-47-
<PAGE>

brokers through which the Funds effect securities transactions are used by the
Manager and/or a Sub-Adviser in carrying out its investment management
responsibilities with respect to all its client accounts, but not all such
services may be used by the Manager and/or a Sub-Adviser in connection with the
Funds.

Certain other clients of the Manager and/or a Sub-Adviser may have
investment objectives and policies similar to those of the Company. The Manager
and/or a Sub-Adviser may, from time to time, make recommendations that result in
the purchase or sale of a particular security by its other clients
simultaneously with a Fund. ("Security" is defined for these purposes to
include options, futures contracts and options on futures contracts.) If
transactions on behalf of more than one client during the same period increase
the demand for securities being purchased or the supply of securities being
sold, there may be an adverse effect on price or quantity. In addition, it is
possible that the number of options or futures transactions that a Fund may
enter into may be affected by options or futures transactions entered into by
other investment advisory clients of the Manager and/or Sub-Advisor. It is the
policy of the Manager and/or the Sub-Advisers to allocate advisory
recommendations and the placing of orders in a manner that is deemed equitable
by the Manager or the Sub-Adviser to the accounts involved, including the Funds.
When two or more of the clients of the Manager and/or a Sub-Adviser (including
the Funds) are purchasing or selling the same security on a given day from the
same broker-dealer, such transactions may be averaged as to price.
Transactions in securities, options on securities, futures contracts and options
on futures contracts may be effected through Piper Jaffray Inc. or affiliates of
the Sub-Advisers if the commissions, fees or other remuneration received by
Piper Jaffray Inc. and such other entities are reasonable and fair compared to
the commissions, fees or other remuneration paid to other brokers or other
futures commission merchants in connection with comparable transactions
involving similar securities or similar futures contracts or options thereon
being purchased or sold on an exchange or contract market during a comparable
period of time. In effecting portfolio transactions through Piper Jaffray Inc.,
the Company intends to comply with Section 17(e)(1) of the 1940 Act.

-48-
<PAGE>

CAPITAL STOCK AND OWNERSHIP OF SHARES

As of July 31, 1995, Piper Jaffray Inc., the Company's distributor, owned
54.39% of Money Market Fund and therefore controls Money Market Fund. The
effect of this control is that Piper Jaffray Inc. currently holds a sufficient
number of shares to constitute a quorum and approve or disapprove any proposal
presented to shareholders of Money Market Fund. Piper Jaffray Inc., a
corporation organized under the laws of the state of Delaware, is a wholly owned
subsidiary of Piper Jaffray Companies Inc. Its address is that of the Company.
As of June 31, 1995, no other person owned 5% or more of the outstanding shares
of any of the Funds. As of July 31, 1995, the directors and officers of the
Company as a group owned less than 1% of the outstanding shares of the Company
as of such date.

-49-
<PAGE>
NET ASSET VALUE AND PUBLIC OFFERING PRICE

The method for determining the public offering price of a Fund's shares is
summarized in the Prospectus section entitled "Valuation of Shares." The net
asset value of a Fund's shares is determined on each day on which the New York
Stock Exchange is open, provided that the net asset value need not be determined
on days when no Fund shares are tendered for redemption and no order for Fund
shares is received. The New York Stock Exchange is not open for business on the
following holidays (or on the nearest Monday or Friday if the holiday falls on a
weekend): New Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4th,
Labor Day, Thanksgiving and Christmas.

-50-
<PAGE>
CALCULATION OF PERFORMANCE DATA

As discussed in the Prospectus, from time to time certain of the Funds may
quote its "yield" and/or its "total return" in advertisements and sales
literature. Other than for Money Market Fund, yield is calculated for any 30-
day period as follows: the amount of interest and/or dividend income for each
security in the Fund's portfolio is determined in accordance with regulatory
requirements; the total for the entire portfolio constitutes the Fund's gross
income for the period. Expenses accrued during the period are subtracted to
arrive at "net investment income." The resulting amount is divided by the
product of the maximum offering price per share on the last day of the period
multiplied by the average number of Fund shares outstanding during the period
that were entitled to dividends. This amount is added to 1 and raised to the
sixth power. 1 is then subtracted from the result and the difference is
multiplied by 2 to arrive at the annualized yield.

YIELD FOR 30-DAY PERIOD ENDED JUNE 30, 1995

Bond Fund . . . . . . . . . . . . . . . . . . . . . . 5.09%

Various portfolio fees and expenses were voluntarily waived or absorbed by the
Prior Manager. Had the Funds paid all expenses, the yield for Bond Fund would
have been 4.50%.

For Money Market Fund, yield is computed by determining the net change,
exclusive of capital changes, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of a recent seven
calendar day period, subtracting a hypothetical charge reflecting deductions
from shareholder accounts, and dividing the difference by the value of the
account at the beginning of the base period to obtain the base period return,
and then multiplying the base period return by 365/7. The resulting yield
figure will be carried to at least the nearest hundredth of one percent.
Effective yields are computed by determining the net change, exclusive of
capital changes, in the value of a hypothetical pre-existing account having a
balance of one share at the beginning of a recent seven calendar day period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by

-51-
<PAGE>

7, and subtracting 1 from the result, according to the following formula:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1) ] - 1

When calculating the foregoing yield or effective yield quotations, the
calculation of net change in account value will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, and all fees, other
than nonrecurring accounts or sales charges, that are charged to all shareholder
accounts in proportion to the length of the base period. Realized gains and
losses from the sale of securities and unrealized appreciation and depreciation
are excluded from the calculation of yield and effective yield.

Money Market Fund's yield and effective yield, based on the seven days
ended June 30, 1995, are set forth below:

Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.41%

Effective Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.51%

Average annual total return figures are computed by finding the average
annual compounded rates of return over the periods indicated in the
advertisement that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
n
P(1+T) =ERV
Where: P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such period.

This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gains distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus, and includes all recurring fees, such as investment advisory
and management fees, charged to all shareholder accounts.

-52-
<PAGE>

The average annual total returns on an investment in the Funds for various
periods ending June 30, 1995 were:

Since inception
One Year (11/9/93) ("Since
("1995 PERIOD") Inception Period")
---------------- ---------------------
<S> <C> <C>
North American Fund 3.36% -0.81%

European Value Fund 11.52% 6.54%

Pacific Value Fund -16.31% -6.05%

Latin American Value Fund -22.80% -18.67%

Bond Fund 5.24% 0.09%
</TABLE>

Various portfolio fees and expenses were voluntarily waived or absorbed by the
Prior Manager. Had the Funds paid all expenses, the average annual total return
for the 1995 Period for each of North American Fund, European Value Fund and
Pacific Value Fund, Latin American Value Fund and Bond Fund would have been
1.97%, 10.31%, -16.82%, -24.25% and 4.51%. Had the Funds paid all expenses, the
average annual total return during the Since Inception Period for each of North
American Fund, European Value Fund, Pacific Value Fund, Latin American Value
Fund and Bond Fund would have been -2.34%, 5.02%, -6.56, -20.22 and -0.49%,
respectively.

Cumulative return is computed by finding the cumulative compounded rate of
return over the period indicated in the advertisement that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:

CTR=((ERV-P)/P)100

Where: CTR = Cumulative total return;

ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such period;
and

P = initial payment of $1,000.

This calculation deducts the maximum sales charge from the initial hypothetical
$1,000 investment, assumes all dividends and capital gain distributions are
reinvested at net asset value on the appropriate reinvestment dates as described
in the Prospectus and

-53-
<PAGE>

includes all recurring fees, such as investment advisory and management fees,
charged to all shareholder accounts.

Cumulative Total Return
For the Since Inception Period

North American Fund. . . . . . . . . . . . . . . . . . . . . . . .-1.33%
European Value Fund. . . . . . . . . . . . . . . . . . . . . . . +10.93%
Pacific Value Fund . . . . . . . . . . . . . . . . . . . . . . . .-9.72%
Latin American Value Fund. . . . . . . . . . . . . . . . . . . . -28.72%
Bond Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-0.13%

Various portfolio fees and expenses were voluntarily waived or absorbed by the
Prior Manager. Had the Funds paid all expenses, the cumulative total return
for the Since Inception Period for each of North American Fund, European Value
Fund, Pacific Value Fund, Latin American Value Fund and Bond Fund would have
been -3.83%, +8.32%, -10.55%, -30.95% and -0.83%, respectively.

As discussed in the Prospectus, the Company recently introduced a
contingent deferred sales charge ("CDSC"), applicable to shares of each Fund
(other than Money Market Fund) purchased after June 19, 1995. The performance
information set forth above for such Funds assumes the effect of the CDSC as if
it were applicable to all shares purchased throughout the periods shown.

REDEMPTION

Redemption of shares, or payment, may be suspended at times (a) when the
New York Stock Exchange is closed for other than customary weekend or holiday
closings, (b) when trading on said Exchange is restricted, (c) when an emergency
exists, as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable, or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Securities and Exchange Commission, by order, so permits, provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist.

-54-
<PAGE>
TAXATION

General

Each of the Funds intends to qualify as a regulated investment company
for federal income tax purposes. In order for a Fund to so qualify, the Fund
must meet certain requirements imposed by the Code as to the sources of the
Fund's income and the diversification of the Fund's assets. The Fund must,
among other things, (a) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to loans of securities,
gains from the sale or other disposition of securities or other income derived
with respect to its business of investing in such securities (including, but not
limited to, gains from options, futures or forward contracts); (b) generally
derive in each taxable year less than 30% of its gross income from gains from
the sale or other disposition of securities, options, futures or forward
contracts held for less than three months; and (c) diversify its holdings so
that, at the end of each fiscal quarter, (i) at least 50% of the value of the
Fund's assets is represented by (A) cash, United States government securities or
securities of other regulated investment companies, and (B) other securities
that, with respect to any one issuer, do not represent more than 5% of the value
of the Fund's assets or more than 10% of the voting securities of such issuer,
and (ii) not more than 25% of the value of the Company's assets is invested in
the securities of any issuer (other than United States government securities or
the securities of other regulated investment companies) or two or more issuers
controlled by the Fund and determined to be engaged in the same trade or
business.

If a Fund qualifies as a regulated investment company and satisfies a
minimum distribution requirement, the Fund will not be subject to federal income
tax on income and gains to the extent that it distributes such income and gains
to its shareholders. The minimum distribution requirement is satisfied if the
Fund distributes at least 90% of its net investment income (including tax exempt
interest and net short-term capital gains) for the taxable year. Although the
Fund intends to satisfy the above minimum distribution requirement, it may elect
to retain its remaining net investment income. The Fund would be subject to
corporate tax (currently at a 35% rate) on any undistributed income. The Fund
will be subject to a nondeductible 4% excise tax to the extent that the Fund
does not distribute by the end of each calendar year (or is not subjected to
regular corporate tax in such year on) an amount equal to the sum of (a) 98% of
the Fund's ordinary income for such calendar year; (b)98% of the excess of
capital gains over capital losses for the one year period generally

-55-
<PAGE>

ending on October 31 of each year; and (c) the undistributed income and gains
from the preceding years (if any).

As discussed above, each of the Funds intends to continue to distribute
sufficient income to qualify as a regulated investment company. However, a Fund
may retain all or a portion of its net investment income in excess of such
amount, which net investment income may be subject to the corporate income or
the excise tax. In addition, a Fund may in the future decide to retain all or a
portion of its net capital gain, as described under "Federal Tax Treatment of
Shareholders," below.

FEDERAL TAX TREATMENT OF SHAREHOLDERS

DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders
attributable to a Fund's net investment income (including interest income and
net short-term capital gains) are taxable as ordinary income whether paid in
cash or reinvested in additional shares of the Fund. In general, distributions
will qualify for the dividends received deduction for corporate shareholders
only to the extent that such distributions are attributable to dividends which
are received from U.S. corporations and which satisfy certain other
requirements.

Distributions of any net capital gain (I.E., the excess of net long-term
capital gain over net short-term capital loss, if any) that are designated as
capital gain dividends are taxable as long-term capital gains, whether paid in
cash or additional shares of a Fund, regardless of how long the shares have been
held. For individuals, long-term capital gains are generally subject to a
maximum tax rate of 28% while ordinary income is generally subject to a maximum
rate of 39.6%. For corporations, long-term capital gains are currently subject
to the same rates of tax as ordinary income (maximum rate of 35%).

A Fund may elect to retain all or a portion of its net capital gain and
be taxed at the corporate tax rate for such capital gains, which is currently
35%. In such event, the Fund would most likely make an election that would
require each shareholder of record on the last day of the Fund's taxable year to
include in income for tax purposes his proportionate share of the Fund's
undistributed net capital gain.

If such an election is made, each shareholder would be entitled to credit
his proportionate share of the tax paid by the Fund against his federal income
tax liabilities and to claim refunds to the extent that the credit exceeds such
liabilities. In addition, the shareholder would be entitled to increase the

-56-
<PAGE>

basis of his shares for federal tax purposes by an amount equal to 65% of his
proportionate share of the undistributed net capital gain.

Dividends and distributions by a Fund are generally taxable to the
shareholders at the time the dividend or distribution is made (even if
reinvested in additional shares of the Fund). However, any dividend declared by
a Fund in October, November or December of any calendar year which is payable to
shareholders of record on a specified date in such a month will be treated as
received by the shareholders as of December 31 of such year if the dividend is
paid during January of the following year. The accrual by a Fund of original
issue or market discount will increase the investment income of the Fund and the
amount required to be distributed.

SALE OF SHARES. In general, if a share of common stock is sold or
exchanged, the seller will recognize gain or loss equal to the difference
between the amount received in the sale or exchange and the seller's adjusted
basis in the share of common stock. Any gain or loss realized upon a sale or
exchange of shares of common stock will be treated as long-term capital gain or
loss if the shares have been held for more than one year, and otherwise as
short-term capital gain or loss. Further, if such shares are held for six
months or less, loss realized by a shareholder will be treated as long-term
capital loss to the extent of the total of any capital gain dividend received by
the shareholder. In addition, any loss realized on a sale or exchange of shares
of common stock will be disallowed to the extent the shares disposed of are
replaced within a period of 61 days beginning 30 days before and ending 30 days
after disposition of the shares. In such case, the basis of the shares acquired
will be adjusted to reflect the disallowed loss.

BACKUP WITHHOLDING. A Fund may be required to withhold federal income
tax at the rate of 31% of all taxable distributions payable to shareholders who
fail to provide the Fund with their correct taxpayer identification number or to
make required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate shareholders and
certain other shareholders specified in the Code are generally exempt from such
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's federal income tax liability.

OTHER TAXES. Distributions may also be subject to state, local and
foreign taxes depending on each shareholder's particular situation.

-57-

<PAGE>

FOREIGN SHAREHOLDERS. The foregoing discussion relates solely to United
States federal income tax law as applicable to "U.S. persons" (I.E., U.S.
citizens and residents and U.S. domestic corporations, partnerships, trusts and
estates). Shareholders who are not U.S. persons should consult their tax
advisers regarding the U.S. and non-U.S. tax consequences of ownership of shares
of the Company, including the fact that such a shareholder may be subject to
U.S. withholding tax at a rate of 30% (or at a lower rate under an applicable
U.S. income tax treaty) on amounts constituting ordinary income from U.S.
sources, including ordinary dividends paid by the Company.

CONSEQUENCES OF CERTAIN INVESTMENTS

The Funds may engage in various hedging transactions. Under various
provisions of the Code, the result of such transactions may be to change the
character of recognized gains and losses, accelerate the recognition of certain
gains and losses, and defer the recognition of certain losses. The extent to
which the Funds may be able to use such hedging techniques may be limited by the
requirement that generally less than 30% of a Fund's gross income consist of
gains from the sale or disposition of certain assets held for less than three
months.

Under Section 988 of the Code, all or a portion of gains and losses from
certain transactions is treated as ordinary income or loss. These rules
generally apply to transactions in certain securities denominated in foreign
currencies, forward contracts in foreign currencies, futures contracts in
foreign currencies that are not "regulated futures contracts," certain unlisted
options and foreign currency swaps. The rules under Section 988 may also affect
the timing of income recognized by a Fund.

A Fund may be subject to U.S. taxes resulting from holdings in a passive
foreign investment company ("PFIC"). A foreign corporation is a PFIC when 75%
or more of its gross income for the taxable year is passive income or 50% or
more of the average value of its assets consists of assets that produce or could
produce passive income. Because of the expansive definition of a PFIC, it is
possible that a Fund may invest a portion of its assets in PFICs. It is not
anticipated, however, that the portion of the Fund's assets (if any) invested in
PFICs will be material.

PASS-THROUGH OF FOREIGN TAX CREDITS

Foreign taxes paid by a Fund will not be eligible to be passed through to
shareholders unless such taxes are imposed on the Fund. Certain taxes deducted
from gross dividends paid to the Fund

-58-
<PAGE>

may, for U.S. federal income tax purposes, be treated as imposed on the issuing
corporation rather than the Fund. Any such taxes would not be included in the
Fund's income, would not be eligible to be "passed through" by the Fund to its
shareholders, and would not be eligible to be claimed as a foreign tax credit or
deduction by the Fund's shareholders.

Generally, a credit for foreign taxes may not exceed a United States
shareholder's U.S. tax attributable to its foreign source taxable income.
Generally, the source of the Fund's income flows through to its shareholders.
Thus, dividends and interest received by the Fund will give rise to foreign
source income to the shareholders. However, certain items of the Fund's income,
including income and gains from securities transactions (including foreign
securities), as well as certain foreign currency gains, will be treated as U.S.
source income to shareholders. Accordingly, a United States shareholder will be
unable to claim a foreign tax credit with respect to these items of income and
gain unless such holder has other foreign source income. This limitation on
foreign tax credits is applied separately to specific categories of foreign
source income, among which is "passive income", which includes foreign source
dividends, interest and capital gains. As a result of these rules, certain
United States shareholders may be unable to claim a credit for the full amount
of their proportionate share of the foreign taxes paid by the Fund.

-59-
<PAGE>
PENDING LEGAL PROCEEDINGS

Complaints have been filed in federal court relating to one open-end and
six closed-end investment companies managed by the Manager and to two open-end
funds for which the Manager acts as sub-adviser. A complaint was filed on
October 5, 1994 in the United States District Court, District of Minnesota,
against the Institutional Government Income Portfolio (a series of Piper Funds
Inc.), the Manager, the Distributor, William H. Ellis and Edward J. Kohler
alleging certain violations of federal and state securities laws, including the
making of materially misleading statements in the prospectus, common law
negligent misrepresentation and breach of fiduciary duty. Plaintiffs in the
complaint, which purports to be a class action and represents the consolidation
of a number of previously filed complaints, are Richard J. Rodney, Jr., Doug
Shonka, Carl Patrick Monahan, Jerry Hoehnen, Rosemary Boris, Thomas W. Newcome,
Delvin D. Junker, Printing Mailing Trade District (affiliated with the Newspaper
Drivers' Division of the International Brotherhood of the Teamsters), The
History Theatre, Inc., Paul Gold, and Bernard Friedman. Piper Jaffray Companies
and attorneys representing the plaintiffs in the complaint recently reached a
$70 million agreement in principle to settle the lawsuit. The agreement
requires court approval and the acceptance of the settlement by a large
percentage of Institutional Government Income Portfolio shareholders.

Four additional complaints, which are based on claims similar to those
asserted in the first complaint, have been filed relating to Institutional
Government Income Portfolio. The first of such complaints was filed in the same
court against the same parties on October 21, 1994, by Eltrax Systems, Inc. A
second additional complaint was filed against the Company, the Manager, the
Distributor and Piper Jaffray Companies Inc. on September 30, 1994 in the United
States District Court, District of Colorado. Plaintiffs in the complaint are
Gary Pashel and Gregg S. Hayutin, Trustees of the Mae Pashel Trust; Mae Pashel,
individually; Gary Pashel and Michael H. Feinstein, Trustees of the Robert
Hayutin Insurance Trust; and Dennis E. Hayutin, Gregg S. Hayutin and Gary
Pashel, Trustees of the Marie Ellen Hayutin Trust. The third additional
complaint, a putative class action, was filed on November 1, 1994 in the United
States District Court, District of Idaho by the Idaho Association of Realtors,
Inc., a non-profit Idaho corporation. The complaint was filed against
Institutional Government Income Portfolio, the Manager, the Distributor, Piper
Jaffray Companies Inc., William H. Ellis and Edward J. Kohler. The fourth
complaint was brought on April 11, 1995 and in the future may be filed in the
Minnesota State district Court, Hennepin

-60-
<PAGE>

County. The Plaintiff, Frank R. Berman, Trustee of Frank R. Berman Professional
CP Pension Plan Trust, sued individually and not on behalf of any putative
class. Defendants are the Distributor, Piper Funds Inc., Morton Silverman and
Worth Bruntjen. In addition to the above complaints, a number of actions have
been commenced in arbitration by individual investors in the Institutional
Government Income Portfolio. The complaints discussed in this paragraph
generally have been consolidated with the IN RE: PIPER FUNDS INC. action for
pretrial purposes, and the arbitrations have been stayed pending the decision by
class members to either participate in the settlement or opt out of the IN RE:
PIPER FUNDS INC. action.

A complaint was filed by Herman D. Gordon on October 20, 1994, in the
United States District Court, District of Minnesota, against American Adjustable
Rate Term Trust Inc. -- 1998, American Adjustable Rate Term Trust Inc. -- 1999,
the Manager, the Distributor, Piper Jaffray Companies Inc., Benjamin Rinkey,
Jeffrey Griffin, Charles N. Hayssen and Edward J. Kohler ("Gordon"). The
complaint, which purports to be a class action, alleges that the defendants
violated the federal securities laws by making materially misleading statements
in prospectuses and other disclosure documents.

A complaint was filed by Frank Donio, I.R.A. and other plaintiffs on
April 14, 1995, in United States District Court, District of Minnesota, against
American Adjustable Rate Term Trust Inc. -- 1996, American Adjustable Rate Term
Trust Inc. -- 1997, American Adjustable Rate Term Trust Inc. -- 1998, American
Adjustable Rate Term Trust Inc. -- 1999, the Manager, the Distributor, Piper
Jaffray Companies Inc. and certain associated individuals ("Donio"). The
complaint, which purports to be a class action, alleges that the defendants
violated certain federal and state securities laws by making materially
misleading statements in prospectuses and other disclosure documents and by
breaching their fiduciary duties. A complaint, consolidating Gordon and Donio,
was filed on May 23, 1995, in the United States District Court, District of
Minnesota.

A complaint was filed by Carson H. Bradley on February 3, 1995 in the
Sixth Judicial District of the State of Idaho against American Government Income
Fund Inc., American Government Income Portfolio Inc., the Manager, the
Distributor and Worth Bruntjen. The complaint alleges negligent
misrepresentation, breach of fiduciary duty and breach of contract.

A complaint was filed by Gary E. Nelson on June 28, 1995, in the United
States District Court, Western District of Washington,

-61-
<PAGE>

against American Strategic Income Portfolio - II, the Manager, the Distributor,
Piper Jaffray Companies Inc., and certain associated individuals. The
complaint, which purports to be a class action, alleges that the defendants
violated certain federal and state securities laws by making materially
misleading statements in prospectuses and other disclosure documents and by
breaching their fiduciary duties.

Complaints have also been filed relating to two open-end funds for which
the Manager has acted as sub-adviser, Managers Intermediate Mortgage Fund and
Managers Short Government Fund. A complaint was filed on September 26, 1994 in
United States District Court, District of Connecticut, by Florence R. Hosea,
Bobby W. Hosea, Getrud B. Dale and Peter M. Dale, Andrew Poffel and Diane Poffel
as tenants by the Entireties, Myrone Sarone, Donna M. DiPalo, Bernard B. Geltner
and Gail Geltner and Paul Delman. The complaint was filed against The Managers
Funds, the Managers Funds, L.P., Robert P. Watson, the Manager, the Distributor,
an individual associated with the Manager, Evaluation Associates, Inc. and
Managers Intermediate Mortgage Fund. The complaint, which is a putative class
action, alleges certain violations of federal securities laws, including the
making of false and misleading statements in the prospectus, and alleges
negligent misrepresentation, breach of fiduciary duty and common law fraud. A
similar complaint filed as a putative class action in the same court on November
4, 1994 was consolidated with the first complaint on December 13, 1994. The
complaint was filed by Karen E. Kopelman against The Managers Fund, The Managers
Funds, L.P., Robert P. Watson, the Manager, the Distributor, Worth Bruntjen,
Evaluation Associates, Inc. and Managers Intermediate Mortgage Fund. A
complaint was filed on November 18, 1994 in the United States District Court,
District of Minnesota. The complaint was filed by Robert Fleck as a putative
class action against The Managers Funds, The Managers Funds, L.P., the Manager,
the Distributor, Worth Bruntjen, Evaluation Associates, Inc., Robert P. Watson,
John E. Rosati, William M. Graulty, Madeline M. McWhinney, Steven J. Pasggioli,
Thomas R. Schneeweis and Managers Short Government Fund, F/K/A Managers Short
Government Income Fund. The complaint alleges certain violations of federal
securities laws, including the making of false and misleading statements in the
prospectus, and negligent misrepresentation.

In addition, there are several New York Stock Exchange and National
Association of Securities Dealers arbitrations pending against the Manager
relating to both investment companies and private accounts managed by the
Manager.

-62-
<PAGE>

The Manager and the Distributor do not believe that the settlement
reached in connection with the first lawsuit described above, any other of the
above lawsuits or the arbitrations will have a material adverse effect upon
their ability to perform under their agreements with the Funds, and they intend
to defend such actions vigorously.

-63-

<PAGE>

AUDITORS

KPMG Peat Marwick LLP, 4200 Norwest Center, Minneapolis, Minnesota
55402, acts as the independent auditors for the Company and in such capacity
examines the Company's annual financial statements.

The annual financial statements of the Company for the fiscal year ended
June 30, 1995 included in this Statement of Additional Information have been
included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent auditors, located elsewhere herein, and upon the authority of
said firm as experts in accounting and auditing.

The annual financial statements of the Company for the fiscal year
ended June 30, 1995 contain information with respect to the Short-Term Fund.
Because this Fund is not currently being offered for sale to new investors,
additional information relating to this Fund is not included in this
Statement of Additional Information.

-64-

<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1995

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

F-1

<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1995

<TABLE>
<CAPTION>
World Global Money
Bond Short-Term Market
Fund Fund Fund
- - - - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

F-2

<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED
JUNE 30, 1995

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

F-3

<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED
JUNE 30, 1995

<TABLE>
<CAPTION>
World Global Money
Bond Short-Term Market
Fund Fund Fund*
- - - - -------------------------------------------------------------------------------------------
<S> <C> <C> <C>

*FOR THE PERIOD FROM DECEMBER 13, 1994, COMMENCEMENT OF OPERATIONS, TO JUNE 30,
1995.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

F-4

<PAGE>
-------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

* COMMENCEMENT OF OPERATIONS.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

F-5

<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

* COMMENCEMENT OF OPERATIONS.

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

F-6

<PAGE>
------------------------------------------------------------------------
FINANCIAL STATEMENTS

STATEMENTS OF CHANGES IN NET ASSETS

* COMMENCEMENT OF OPERATIONS.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

F-7

<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

1 ORGANIZATION

Securities transactions are accounted for on the date the
securities are purchased or sold. Realized gains and losses are
calculated on an identified cost basis. Dividend income is
recognized on the ex-dividend date or upon receipt of
ex-dividend notification in the case of certain foreign
securities. Interest income, including level yield amortization
of premium and discount, is accrued daily.

F-8

<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

Net investment income and net realized gains (losses) differ
for financial statement and tax purposes primarily because of
the recognition of certain foreign currency gains (losses) as
ordinary income (loss) for tax purposes, "mark-to-market" of
certain passive foreign investment companies (PFICs), foreign
currency and futures positions for tax purposes, and losses
deferred due to "wash sale" and "straddle" transactions. The
character of distributions made during the year from net
investment income or net realized gains may differ from their
ultimate characterization for federal income tax purposes.
Also, due to the timing of dividend distributions, the fiscal
year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the funds.

F-9

<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

Purchases $ 7,678,158 22,693,640 25,116,675 42,528,018 105,244,181 1,391,262 6,663,689

Sales proceeds $ 10,783,837 22,318,954 25,482,751 41,984,644 122,990,708 1,760,101 5,383,326
</TABLE>

<TABLE>
<CAPTION>
U.S. $ VALUE U.S. $ VALUE
SETTLEMENT CURRENCY TO BE AS OF CURRENCY TO BE AS OF APPRECIATION
FUND DATE DELIVERED 6/30/95 RECEIVED 6/30/95 (DEPRECIATION)
- - - - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EUROPEAN 03-Jul-95 106,043ATS $ 10,887 10,837USD $ 10,837 $ (50)
VALUE FUND 03-Jul-95 57,340CHF 49,867 49,679USD 49,679 (188)
03-Jul-95 11,352DEM 8,211 8,184USD 8,184 (27)
03-Jul-95 193,530GBP 308,584 307,345USD 307,345 (1,239)
05-Jul-95 376,471DEM 272,312 271,742USD 271,742 (570)
05-Jul-95 124,972FIM 29,268 29,278USD 29,278 10
22-Aug-95 2,841,133ECU 3,783,517 3,600,000USD 3,600,000 (183,517)
- - - - -------------------------------------------------------------------------------------------------------------------
$ 4,462,646 $ 4,277,065 $ (185,581 )
- - - - -------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------------
PACIFIC BASIN
VALUE FUND 22-May-96 376,200,000 JPY $ 4,647,351 4,500,000 USD $ 4,500,000 $ (147,351 )
- - - - -------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------------
WORLD BOND 21-Jul-95 1,203,135 USD $ 1,203,135 1,663,936 DEM $ 1,203,570 $ 435
FUND 21-Jul-95 645,450 DEM 467,668 474,596 USD 474,596 6,928
21-Jul-95 2,500,000 DEM 1,811,400 1,815,541 USD 1,815,541 4,141
21-Jul-95 271,890 DEM 197,001 189,470 USD 189,470 (7,531 )
21-Jul-95 2,740,790 DEM 1,985,866 1,954,914 USD 1,954,914 (30,952 )
21-Jul-95 9,182,575 DKK 1,701,212 1,666,529 USD 1,666,529 (34,683 )
21-Jul-95 150,046,521 ESP 1,242,657 1,188,393 USD 1,188,393 (54,264 )
21-Jul-95 164,812 USD 164,812 104,048 GBP 165,904 1,092
21-Jul-95 855,400 USD 855,400 535,965 GBP 853,820 (1,580 )
21-Jul-95 530,367 GBP 844,902 856,542 USD 856,542 11,640
21-Jul-95 800,093 GBP 1,274,590 1,268,947 USD 1,268,947 (5,643 )
31-Aug-95 757,023 AUD 536,065 542,785 USD 542,785 6,720
31-Aug-95 120,000,000 JPY 1,429,442 1,461,632 USD 1,461,632 32,190
- - - - -------------------------------------------------------------------------------------------------------------------
$ 13,714,150 $ 13,642,643 $ (71,507 )
- - - - -------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------------
</TABLE>

F-10

<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

5 CAPITAL SHARE
TRANSACTIONS
Transactions in shares of each fund for the year ended June 30,
1995 (period from December 13, 1994 to June 30, 1995 for the
Money Market Fund) were as follows:

Transactions in shares of each fund for the period from
November 9, 1993 (commencement of operations), to June 30,
1994, were as follows:

<TABLE>
<CAPTION>
- - - - ---------------------------------------------------------------------------------------------------------------------------

*TOTAL FEE PAID TO SUBADVISERS SHARED EQUALLY.

F-11

<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

F-12

<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

* COMMENCEMENT OF OPERATIONS.

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

+ ADJUSTED TO AN ANNUAL BASIS.

F-13

<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

* COMMENCEMENT OF OPERATIONS.

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

+ ADJUSTED TO AN ANNUAL BASIS.

F-14

<PAGE>
---------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS

9 FINANCIAL
HIGHLIGHTS
(CONTINUED)
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each period
are as follows:

* COMMENCEMENT OF OPERATIONS.

** BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
DURING THE PERIOD.

+ ADJUSTED TO AN ANNUAL BASIS.

++ VARIOUS PORTFOLIO FEES AND EXPENSES WERE VOLUNTARILY
WAIVED OR ABSORBED BY THE MANAGER AND DISTRIBUTOR. HAD THE
FUNDS PAID ALL EXPENSES THE ANNUALIZED RATIOS OF EXPENSES
AND NET INVESTMENT INCOME TO AVERAGE DAILY NET ASSETS
WOULD HAVE BEEN AS FOLLOWS:

F-15

<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

F-16

<PAGE>
----------------------------------------------------------------
INVESTMENTS IN SECURITIES

Total Short-Term Securities
(cost: $986,816)..................... 990,321
------------

Total Investments in Securities
(cost: $12,665,204)(d)............... $ 13,170,154
------------
------------
</TABLE>

F-17

<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

<CAPTION>
Number of Market
Name of Issuer Shares Value (a)
- - - - ------------------------------------------ ------------ ------------
<S> <C> <C>

F-18

<PAGE>
----------------------------------------------------------------
INVESTMENTS IN SECURITIES

F-19

<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES EUROPEAN VALUE FUND
JUNE 30, 1995 (CONTINUED)

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) VALUE STATED IN U.S. DOLLARS; PRINCIPAL AMOUNT STATED IN THE CURRENCY
INDICATED.
(D) AT JUNE 30, 1995, THE COST OF SECURITIES FOR FEDERAL INCOME TAX PURPOSES WAS
$16,655,127. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF
INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS:

HERCULES PACIFIC BASIN VALUE FUND
JUNE 30, 1995

F-20

<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) CURRENTLY NON-INCOME PRODUCING.
(C) VALUE STATED IN U.S. DOLLARS; PRINCIPAL AMOUNT STATED IN THE CURRENCY
INDICATED.
(D) AT JUNE 30, 1995, THE COST OF SECURITIES FOR FEDERAL INCOME TAX PURPOSES WAS
$35,031,040. THE AGGREGATE GROSS UNREALIZED APPRECIATION AND DEPRECIATION OF
INVESTMENTS IN SECURITIES BASED ON THIS COST WERE AS FOLLOWS:

F-21

<PAGE>
------------------------------------------------------------------------
INVESTMENTS IN SECURITIES
HERCULES LATIN AMERICAN VALUE FUND
JUNE 30, 1995

<TABLE>
<CAPTION>
Market
Name of Issuer Number of Shares Value (a)
- - - - ---------------------------------------- ---------------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)

COMMON STOCKS (57.2%)
ARGENTINA (2.3%)
Yacimientos Petrolifernas Fiscales
Sociedad Anonima (YPF) ADR - oil
and gas............................ 28,498 $ 537,900
------------
BRAZIL (11.7%)
Centrais Eletricas Brasileiras
(Electrobras) - utilities.......... 4,664,139 1,266,741
Energetica de Sao Paulo -
utilities.......................... 10,150,000(b) 330,798
Paulista de Forca e Luz (CPFL) -
utilities.......................... 5,050,000 252,911
Siderurgica Nacional ADR - metal
products........................... 16,098 366,230
Telecomunicacoes Brasileiras
(Telebras) - telecommunications.... 14,515,000 422,599
------------
2,639,279
------------
CHILE (6.5%)
Banco Osorno y La Union ADR -
banking and financial services..... 7,277 100,968
Chile Fund - closed-end country
fund............................... 12,257 658,814
Compania Chilena de Generacion
Electrica (Chilgener) ADR -
utilities.......................... 17,650 558,181
Compania de Distribucion Electrica
de la V Region (Chilquinta) ADR -
utilities.......................... 9,000 162,367
------------
1,480,330
------------
COLOMBIA (8.4%)
Carulla y Compania ADR -
retailing.......................... 24,975 449,550
Cementos Paz del Rio 144A ADR -
building construction and
materials.......................... 13,475(b,d) 227,391
Cementos Diamante 144A ADR -
construction and construction
materials.......................... 16,492(d) 478,268
Corporacion Financiera del Valle
(Corfivalle) ADR - diversified
industrials and conglomerates...... 10,351 174,673
La Gran Cadena de Almacenes
Colombianos (Cadenalco) ADR -
retailing.......................... 26,923(c) 568,748
------------
1,898,630
------------
MEXICO (15.8%)
Cemex Class B ADR - construction and
construction materials............. 17,664 132,480
Grupo Carso Class A1 - diversified
holding company.................... 225,403(b) 1,230,617
Panamerican Beverages ADR Class A -
food and beverage.................. 36,340 1,090,200
Telefonos de Mexico Class L ADR
(Telmex) - telecommunications...... 27,882 826,004
Telefonos de Mexico Class L (Telmex)
- telecommunications............... 200,000 294,804
------------
3,574,105
------------
PERU (8.0%)
Cerveceria Backus y Johnson Brewery
Class T - brewers and distillers... 146,083 345,502

<CAPTION>
Market
Name of Issuer Number of Shares Value (a)
- - - - ---------------------------------------- ---------------- ------------
<S> <C> <C>
Banco de Credito del Peru - bank.... 288,558 $ 506,015
Cementos Norte Pacasmayo Class T -
building construction and
materials.......................... 66,485 191,921
Cerveceria San Juan Class C -
brewers and distillers............. 20,033 31,590
Enrique Ferreyros - industrial
machinery and manufacturing........ 114,216 160,231
Minsur Class T - mining............. 1 13
Telefonica del Peru Class B -
telecommunications................. 331,136 565,790
------------
1,801,062
------------
VENEZUELA (4.5%)
Ceramica Carabobo ADR Class B -
building construction and
materials.......................... 155,520(c) 155,520
Corimon ADR - diversified
industrials and conglomerates...... 23,182(b) 150,683
Mavesa 144A ADR - food and
beverage........................... 44,224(d) 153,674
Siderurgica Venezolana Sivensa ADR -
metal products..................... 213,000(c) 330,150
Sudamtex de Venezuela ADR -
textiles........................... 47,960 227,810
------------
1,017,837
------------
Total Common Stocks
(cost: $13,571,661)................ 12,949,143
------------
PREFERRED STOCKS (33.2%)
BRAZIL
Aracruz Celulose ADR - forest
products and paper................. 54,597 641,516
Banco Bradesco - banking and
financial services................. 75,876,230 642,949
Banco Itau - bank................... 501,216 152,461
Centrais Eletricas Brasileiras
(Electrobras) Class B -
utilities.......................... 600 165
Cervejaria Brahma - brewers and
distillers......................... 2,152,883 706,301
Companhia Energetica de Sao Paulo
(CESP) ADR - utilities............. 24,000(b) 273,120
Companhia Energetica de Sao Paulo
(CESP) - utilities................. 2,000,130(b) 79,093
Siderurgica Paulista (Cosipa) Class
PNB - metal products............... 373,574(b) 592,524
Lojas Renner - retailing............ 7,768,600 131,657
Mesbla - retailing.................. 1,300,000(b) 91,798
Refrigeracao Parana (Refripar) -
furniture/home appliance........... 220,180,000 428,161
Tecidos Norte de Minas (Coteminas) -
textiles........................... 699,844 220,483
Telecomunicacoes Brasileiras
(Telebras) ADR -
telecommunications................. 24,991 843,446
Telecomunicacoes Brasileiras
(Telebras) - telecommunications.... 5,947,800 203,214
Telecomunicacoes de Sao Paulo
(Telesp) - telecommunications...... 4,947,340 615,394
Usinas Siderurgicas de Minas Gerais
(Usiminas) 144A ADR - metal
products........................... 13,000(d) 146,250
Usinas Siderurgicas de Minas Gerais
(Usiminas) - metal products........ 634,000,000 709,419
Vale do Rio Doce ADR - mining....... 17,758 681,849
</TABLE>

F-22

<PAGE>
- - - - --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES LATIN AMERICAN VALUE FUND
JUNE 30, 1995 (CONTINUED)

HERCULES WORLD BOND FUND
JUNE 30, 1995

F-23

<PAGE>
- - - - --------------------------------------------------------------------------------
INVESTMENTS IN SECURITIES

HERCULES GLOBAL SHORT-TERM FUND
JUNE 30, 1995

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.

HERCULES MONEY MARKET FUND
JUNE 30, 1995

NOTES TO INVESTMENTS IN SECURITIES:
(A) SECURITIES ARE VALUED BY PROCEDURES DESCRIBED IN NOTE 2 TO THE FINANCIAL
STATEMENTS.
(B) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.

F-24

<PAGE>
------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT

THE BOARD OF DIRECTORS AND SHAREHOLDERS
HERCULES FUNDS INC.:

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Investment securities held in custody are confirmed to us by the
custodian. As to securities purchased and sold, but not received or delivered,
we request confirmations from brokers, and where replies are not received, we
carry out other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 18, 1995

F-25

<PAGE>

PIPER GLOBAL FUNDS INC.

PACIFIC-EUROPEAN GROWTH FUND

PART C
OTHER INFORMATION

ITEM 15. INDEMNIFICATION

The response to this item is incorporated by reference to (a) Item 27 of
Post-Effective Amendment No. 4 to Registrant's Registration Statement on Form
N-1A, which was filed electronically pursuant to Regulation S-T on April 28,
1995, as an amendment to its Registration Statement on Form N-1A (File Nos.
33-33534; 811-06046), filed on November 17, 1986, and (b) Exhibits 1.a, 1.b
and 2 hereto.

ITEM 16. EXHIBITS

1.a Articles of Incorporation (1)
1.b Articles of Amendment to Articles of Incorporation (3)
2. Amended and Restated Bylaws (3)
3. Not applicable
4. Copy of Agreement and Plan of Reorganization (filed
herewith as Exhibit A to the Proxy Statement/Prospectus)
5. Not applicable
6.a Investment Advisory and Management Agreement (3)
6.b Sub-Investment Advisory Agreement (3)
7. Underwriting and Distribution Agreement (3)
8. Not applicable
9. Form of Custody and Investment Accounting Agreement
10. Amended and Restated Plan of Distribution (3)
11. Opinion and Consent of Dorsey & Whitney
12. Opinion and Consent of Gordon Altman Butowsky Weitzen
Shalov & Wein regarding tax matters
13. Not applicable
14. Consent of KPMG Peat Marwick LLP
15. Not applicable
16. Not applicable

<PAGE>

17.a Registrant's Rule 24f-2 Notice pursuant to Rule 24f-2
under the Investment Company Act of 1940, for its fiscal
year ended February 28, 1995 as filed on April 18, 1995
17.b Powers of Attorney
17.c Form of Proxy
17.d Additional Solicitation Material
_______________
(1) Incorporated by reference to the Registrant's Registration Statement on
Form N-2, filed February 16, 1990, File No. 33-33534

(2) Incorporated by reference to Amendment No. 2 to the Registrant's
Registration Statement on Form N-2, filed April 19, 1990, File No.
33-33534.

(3) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A filed June 28, 1993.

ITEM 17.

1. The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of the prospectus which is a part
of this registration statement on Form N-14 by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act of 1933, the reoffering prospectus will contain the
information called for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.

2. The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to this
registration statement on Form N-14 and will not be used until the amendment
is effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial BONA FIDE
offering of them.

<PAGE>

SIGNATURES

As required by the Securities Act of 1933, this registration statement
has been signed on behalf of the registrant, in the City of Minneapolis and
State of Minnesota, on the 29th day of March, 1996.

PIPER GLOBAL FUNDS INC.

By: /s/ Paul A. Dow
---------------------------
Paul A. Dow
President

As required by the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.

Signature Title Date
--------- ----- ----

/s/ Paul A. Dow President (principal March 29, 1996
- - - - ----------------------------- executive officer)
Paul A. Dow

/s/ Robert H. Nelson Treasurer (principal March 29, 1996
- - - - ----------------------------- financial and accounting
Robert H. Nelson officer)

/s/ Michael W. Balfour Director March 29, 1996
- - - - -----------------------------
Michael W. Balfour

/s/ David T. Bennett Director March 29, 1996
- - - - -----------------------------
David T. Bennett

/s/ Jaye F. Dyer Director March 29, 1996
- - - - -----------------------------
Jaye F. Dyer

/s/ William H. Ellis Director March 29, 1996
- - - - -----------------------------
William H. Ellis

/s/ Karol E. Emmerich Director March 29, 1996
- - - - -----------------------------
Karol E. Emmerich

/s/ Luella G. Goldberg Director March 29, 1996
- - - - -----------------------------
Luella G. Goldberg

/s/ George T. Latimer Director March 29, 1996
- - - - -----------------------------
George T. Latimer

/s/ Iain A. Watt Director March 29, 1996
- - - - -----------------------------
Iain A. Watt

<PAGE>

EXHIBIT INDEX

EXHIBIT PAGE
NUMBER EXHIBIT NUMBER
------- ------- ------

9. Form of Custody and Investment Accounting Agreement
11. Opinion and consent of Dorsey & Whitney

12. Opinion and consent of Gordon Altman Butowsky
Weitzen Shalov & Wein regarding tax matters

14. Consent of KPMG Peat Marwick LLP

17. a Registrant's Rule 24f-2 Notice pursuant to
Rule 24f-2 under the Investment Company
Act of 1940, for its fiscal year ended
February 28, 1995, as filed on April 18, 1995
b Powers of Attorney
c Form of Proxy
d Additional Solicitation Material

I-1

<PAGE>

CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT

THIS AGREEMENT made and effective as the 1st day of January, 1996, by and
between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the
laws of the state of Missouri, having its trust office located at l27 West 10th
Street, Kansas City, Missouri 64105 ("Custodian"), and each registered
investment company which is listed on Schedule I hereto or which hereafter
agrees with Custodian in writing to be bound by the terms, conditions and
provisions hereof, each having its principal office and place of business at
Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota 55402-3804
(each a "Fund" and collectively the "Funds").

WITNESSETH:

WHEREAS, except as otherwise indicated on Exhibit A hereto, each Fund
desires to appoint Investors Fiduciary Trust Company as custodian of the
securities and monies of its investment portfolio and as its agent to perform
certain investment accounting and recordkeeping functions; and

WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;

NOW, THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:

1. APPOINTMENT OF CUSTODIAN. Except as otherwise set forth on Exhibit A, each
Fund hereby constitutes and appoints Custodian as:

A. Custodian of the securities and monies at any time owned by the Fund;
and

B. Agent to perform certain accounting and recordkeeping functions
relating to portfolio transactions required of a duly registered
investment company under Rule 31a of the Investment Company Act of
1940 (the "1940 Act") and to calculate the net asset value of the
Fund.

2. REPRESENTATIONS AND WARRANTIES.

A. Each Fund hereby represents, warrants and acknowledges to Custodian:

<PAGE>

1. That it is a corporation duly organized and existing and in good
standing under the laws of Minnesota, and that it is registered
under the 1940 Act; and

2. That it has the requisite power and authority under applicable
law, its articles of incorporation and its bylaws to enter into
this Agreement; that it has taken all requisite action necessary
to appoint Custodian as custodian and investment accounting and
recordkeeping agent for the Fund; that this Agreement has been
duly executed and delivered by the Fund; and that this Agreement
constitutes a legal, valid and binding obligation of the Fund,
enforceable in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, reorganization, insolvency
or other similar laws relating to or affecting creditors' rights
generally and to equitable principles of public policy that may
restrict the availability of remedies.

B. Custodian hereby represents, warrants and acknowledges to each Fund:

1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; provided,
that it is understood that Custodian intends to merge with a
newly chartered national association which shall be the surviving
entity of such merger and the successor to Custodian hereunder
without further act of the parties; and

2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by Custodian; and that this Agreement constitutes a
legal, valid and binding obligation of Custodian, enforceable in
accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, reorganization, insolvency or other
similar laws relating to or affecting creditors' rights generally
and to equitable principles and principles of public policy that
may restrict the availability of remedies.

2
<PAGE>

3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.

A. DELIVERY OF ASSETS

Except as permitted by the 1940 Act, each Fund will deliver or cause
to be delivered to Custodian on the effective date of this Agreement,
or as soon thereafter as practicable, and from time to time
thereafter, all portfolio securities acquired by it and monies then
owned by it or from time to time coming into its possession during the
time this Agreement shall continue in effect. Custodian shall have no
responsibility or liability whatsoever for or on account of securities
or monies not so delivered.

B. DELIVERY OF ACCOUNTS AND RECORDS

Each Fund shall turn over or cause to be turned over to Custodian all
of the Fund's relevant accounts and records previously maintained.
Custodian shall be entitled to rely conclusively on the completeness
and correctness of the accounts and records turned over to it, and the
applicable Fund shall indemnify and hold Custodian harmless of and
from any and all expenses, damages and losses whatsoever arising out
of or in connection with any error, omission, inaccuracy or other
deficiency of such accounts and records or in the failure of such Fund
to provide, or to provide in a timely manner, any accounts, records or
information needed by the Custodian to perform its functions
hereunder.

C. DELIVERY OF ASSETS TO THIRD PARTIES

Custodian will receive delivery of and keep safely the assets of each
Fund delivered to it from time to time segregated in a separate
account, and as to each Fund which is comprised of more than one
portfolio of investment securities (each a "Portfolio") Custodian
shall keep the assets of each Portfolio segregated in a separate
account. Custodian will not deliver, assign, pledge or hypothecate
any such assets to any person except as permitted by the provisions of
this Agreement or any agreement executed by it according to the terms
of Section 3.S. of this Agreement. Upon delivery of any such assets
to a subcustodian pursuant to

3
<PAGE>

Section 3.S. of this Agreement, Custodian will create and maintain
records identifying those assets which have been delivered to the
subcustodian as belonging to the applicable Fund, by Portfolio if
applicable. The Custodian is responsible for the safekeeping of the
securities and monies of each Fund only until they have been
transmitted to and received by other persons as permitted under the
terms of this Agreement, except for securities and monies transmitted
to subcustodians appointed under Section 3.S. of this Agreement, for
which Custodian remains responsible to the extent provided in Section
3.S. hereof. Custodian may participate directly or indirectly through
a subcustodian in the Depository Trust Company (DTC), Treasury/Federal
Reserve Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the applicable Fund (as such
entities are defined at 17 CFR Section 270.17f-4(b)) (each a
"Depository" and collectively, the "Depositories").

D. REGISTRATION OF SECURITIES

The Custodian shall at all times hold registered securities of the
Funds in the name of the Custodian, the applicable Fund, or a nominee
of either of them, unless specifically directed by instructions to
hold such registered securities in so-called "street name," provided
that, in any event, all such securities and other assets shall be held
in an account of the Custodian containing only assets of each
individual Fund, or only assets held by the Custodian as a fiduciary
or custodian for customers, and provided further, that the records of
the Custodian at all times shall indicate the Fund or other customer
for which such securities and other assets are held in such account
and the respective interests therein. If, however, any Fund directs
the Custodian to maintain securities in "street name", notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and the
ownership thereof by the Funds, which are held by Custodian hereunder,
however,

4
<PAGE>

shall at all times be identifiable on the records of the Custodian.
Each Fund agrees to hold Custodian and its nominee harmless for any
liability as a shareholder of record of securities held in custody for
such Fund.

E. EXCHANGE OF SECURITIES

Upon receipt of instructions as defined herein in Section 4, Custodian
will exchange, or cause to be exchanged, portfolio securities held by
it for the account of a Fund for other securities or cash issued or
paid in connection with any reorganization, recapitalization, merger,
consolidation, split-up of shares, change of par value, conversion or
otherwise, and will deposit any such securities in accordance with the
terms of any reorganization or protective plan. Without instructions,
Custodian is authorized to exchange securities held by it in temporary
form for securities in definitive form, to effect an exchange of
shares when the par value of the stock is changed, and, upon receiving
payment therefor, to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption, except that
Custodian shall receive instructions prior to surrendering any
convertible security.

F. PURCHASES OF INVESTMENTS - OTHER THAN OPTIONS AND FUTURES

Each Fund will, on each business day on which a purchase of securities
(other than options and futures) shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase:

1. If applicable, the name of the Portfolio making such purchase;

2. The name of the issuer and description of the security;

3. The number of shares and the principal amount purchased, and
accrued interest, if any;

4. The trade date;

5. The settlement date;

6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;

7. The total amount payable upon such purchase;

5
<PAGE>

8. The name of the person from whom or the broker or dealer through
whom the purchase was made; and

9. Whether the security is to be received in certificated form or
via a specified Depository.

In accordance with such instructions, Custodian will pay for, out of
monies held for the account of such Fund, but only insofar as such
monies are available for such purpose, and receive the portfolio
securities so purchased by or for the account of the Fund, except that
Custodian may in its sole discretion advance funds to the Fund which
may result in an overdraft because the monies held by the Custodian on
behalf of the Fund are insufficient to pay the total amount payable
upon such purchase. Except as otherwise instructed by the applicable
Fund, such payment shall be made by the Custodian only upon receipt of
securities: (a) by the Custodian; (b) by a clearing corporation of a
national exchange of which the Custodian is a member; or (c) by a
Depository. Notwithstanding the foregoing, (i) in the case of a
repurchase agreement, the Custodian may release funds to a Depository
prior to the receipt of advice from the Depository that the securities
underlying such repurchase agreement have been transferred by book-
entry into the account maintained with such Depository by the
Custodian, on behalf of its customers, provided that the Custodian's
instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the
securities underlying the repurchase agreement in such account; (ii)
in the case of time deposits, call account deposits, currency deposits
and other deposits, foreign exchange transactions, futures contracts
or options, the Custodian may make payment therefor before receipt of
an advice or confirmation evidencing said deposit or entry into such
transaction; and (iii) in the case of the purchase of securities, the
settlement of which occurs outside of the United States of America,
the Custodian may make, or cause a subcustodian appointed pursuant to
Section 3.S.2. of this Agreement to make, payment therefor in
accordance with generally accepted local custom and market practice.

6
<PAGE>

G. SALES AND DELIVERIES OF INVESTMENTS - OTHER THAN OPTIONS AND FUTURES

Each Fund will, on each business day on which a sale of investment
securities (other than options and futures) of the Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sale:

1. If applicable, the name of the Portfolio making such sale;

2. The name of the issuer and description of the securities;

3. The number of shares and principal amount sold, and accrued
interest, if any;

4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;

5. The trade date;

6. The settlement date;

7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;

8. The total amount to be received by Fund upon such sale; and

9. The name and address of the broker or dealer through whom or
person to whom the sale was made.

In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of the Fund to the broker or other person specified in the
instructions relating to such sale. Except as otherwise instructed by
the applicable Fund, such delivery shall be made upon receipt of
payment therefor: (a) in such form as is satisfactory to the
Custodian; (b) credit to the account of the Custodian with a clearing
corporation of a national securities exchange of which the Custodian
is a member; or (c) credit to the account of the Custodian, on behalf
of its customers, with a Depository. Notwithstanding the foregoing:
(i) in the case of securities held in physical form, such securities
shall be delivered in accordance with "street delivery custom" to a
broker or its clearing agent; or (ii) in the case of the sale of
securities, the settlement of which occurs outside of the United
States of America, the Custodian

7
<PAGE>

may make, or cause a subcustodian appointed pursuant to Section 3.S.2.
of this Agreement to make, payment therefor in accordance with
generally accepted local custom and market practice.

H. PURCHASES OR SALES OF OPTIONS AND FUTURES

Each Fund will, on each business day on which a purchase or sale of
the following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:

1. If applicable, the name of the Portfolio making such purchase or
sale;

2. Security Options

a. The underlying security;

b. The price at which purchased or sold;

c. The expiration date;

d. The number of contracts;

e. The exercise price;

f. Whether the transaction is an opening, exercising, expiring
or closing transaction;

g. Whether the transaction involves a put or call;

h. Whether the option is written or purchased;

i. Market on which option traded; and

j. Name and address of the broker or dealer through whom the
sale or purchase was made.

3. Options on Indices

a. The index;

b. The price at which purchased or sold;

c. The exercise price;

d. The premium;

e. The multiple;

f. The expiration date;

8
<PAGE>

g. Whether the transaction is an opening, exercising, expiring
or closing transaction;

h. Whether the transaction involves a put or call;

i. Whether the option is written or purchased; and

j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions.

4. Security Index Futures Contracts

a. The last trading date specified in the contract and, when
available, the closing level, thereof;

b. The index level on the date the contract is entered into;

c. The multiple;

d. Any margin requirements;

e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, the Fund shall deliver a substantially complete
and executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and

f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.

5. Options on Index Future Contracts

a. The underlying index future contract;

b. The premium;

c. The expiration date;

d. The number of options;

e. The exercise price;

f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;

9
<PAGE>

g. Whether the transaction involves a put or call;

h. Whether the option is written or purchased; and

i. The market on which the option is traded.

I. SECURITIES PLEDGED OR LOANED

If specifically allowed for in the prospectus of the applicable Fund,
and subject to such additional terms and conditions as Custodian may
require:

1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by the Fund; provided, however, that the
securities shall be released only upon payment to Custodian of
the monies borrowed, except that in cases where additional
collateral is required to secure a borrowing already made,
further securities may be released or caused to be released for
that purpose upon receipt of instructions. Upon receipt of
instructions, Custodian will pay, but only from funds available
for such purpose, any such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender of
the note or notes evidencing such loan.

2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned securities, Custodian
will release the cash collateral to the borrower.

J. ROUTINE MATTERS

Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of the
Funds except as may be otherwise provided in this Agreement or
directed from time to time by any Fund in writing.

10
<PAGE>

K. DEPOSIT ACCOUNTS

Custodian will open and maintain one or more special purpose deposit
accounts for each Fund in the name of Custodian ("Accounts"), subject
only to draft or order by Custodian upon receipt of instructions. All
monies received by Custodian from or for the account of the Funds
shall be deposited in said Accounts. Barring events not in the
control of the Custodian such as strikes, lockouts or labor disputes,
riots, war or equipment or transmission failure or damage, fire,
flood, earthquake or other natural disaster, action or inaction of
governmental authority or other causes beyond its control, at 9:00
a.m., Kansas City time, on the second business day after deposit of
any check into an Account, Custodian agrees to make Fed Funds
available to the applicable Fund in the amount of the check. Deposits
made by Federal Reserve wire will be available to the Funds
immediately and ACH wires will be available to the Funds on the next
business day. Income earned on the portfolio securities will be
credited to the Funds based on the schedule attached as Exhibit A.
The Custodian will be entitled to reverse any credited amounts where
credits have been made and monies are not finally collected. If
monies are collected after such reversal, the Custodian will credit
the applicable Fund in that amount. Custodian may open and maintain
Accounts in its own banking department, in State Street Bank and Trust
Company, or in such other banks or trust companies as may be
designated by it or by a Fund in writing, all such Accounts, however,
to be in the name of Custodian and subject only to its draft or order.
Funds received and held for the account of different Portfolios shall
be maintained in separate Accounts established for each Portfolio.

L. INCOME AND OTHER PAYMENTS TO THE FUNDS

Custodian will:

1. Collect, claim and receive and deposit for the account of the
Funds all income and other payments which become due and payable
on or after the effective date of this Agreement with respect to
the securities deposited under this Agreement, and credit the
account of the applicable Fund in

11
<PAGE>

accordance with the schedule attached hereto as Exhibit A. If,
for any reason, any Fund is credited with income that is not
subsequently collected, Custodian may reverse that credited
amount.

2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and

3. Take such other action as may be necessary or proper in
connection with:

a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:

1. all coupons and other income items requiring
presentation; and

2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
should reasonably be expected to have knowledge; and

b. the endorsement for collection, in the name of the
applicable Fund, of all checks, drafts or other negotiable
instruments.

Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and other
similar items and will deal with the same pursuant to instructions.
Unless prior instructions have been received to the contrary,
Custodian will, without further instructions, sell any rights held for
the account of a Fund on the last trade date prior to the date of
expiration of such rights.

M. PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS

On the declaration of any dividend or other distribution on the shares
of capital stock of a Fund ("Fund Shares") by the Board of Directors
of a Fund, such Fund

12
<PAGE>

shall deliver to Custodian instructions with respect thereto. On the
date specified in such instructions for the payment of such dividend
or other distribution, Custodian will pay out of the monies held for
the account of such Fund, insofar as the same shall be available for
such purposes, and credit to the account of the Dividend Disbursing
Agent for such Fund, such amount as may be specified in such
instructions.

N. SHARES OF A FUND PURCHASED BY THE FUND

Whenever any Fund Shares are repurchased or redeemed by a Fund, the
Fund or its agent shall advise Custodian of the aggregate dollar
amount to be paid for such shares and shall confirm such advice in
writing. Upon receipt of such advice, Custodian shall charge such
aggregate dollar amount to the account of the Fund and either deposit
the same in the account maintained for the purpose of paying for the
repurchase or redemption of Fund Shares or deliver the same in
accordance with such advice. Custodian shall not have any duty or
responsibility to determine that Fund Shares have been removed from
the proper shareholder account or accounts or that the proper number
of Fund Shares have been cancelled and removed from the shareholder
records.

O. SHARES OF A FUND PURCHASED FROM THE FUND

Whenever Fund Shares are purchased from a Fund, the Fund will deposit
or cause to be deposited with Custodian the amount received for such
shares. Custodian shall not have any duty or responsibility to
determine that Fund Shares purchased from any Fund have been added to
the proper shareholder account or accounts or that the proper number
of such shares have been added to the shareholder records.

P. PROXIES AND NOTICES

Custodian will promptly deliver or mail or have delivered or mailed to
the applicable Fund all proxies properly signed, all notices of
meetings, all proxy statements and other notices, requests or
announcements affecting or relating to securities held by Custodian
for such Fund and will, upon receipt of instructions, execute and
deliver or cause its nominee to execute and deliver or mail or have

13
<PAGE>

delivered or mailed such proxies or other authorizations as may be
required. Except as provided by this Agreement or pursuant to
instructions hereafter received by Custodian, neither it nor its
nominee will exercise any power inherent in any such securities,
including any power to vote the same, or execute any proxy, power of
attorney, or other similar instrument voting any of such securities,
or give any consent, approval or waiver with respect thereto, or take
any other similar action.

Q. DISBURSEMENTS

Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements and other obligations of each Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by the Fund,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of the Fund) pursuant to instructions of the Fund setting
forth the name of the person to whom payment is to be made, the amount
of the payment, and the purpose of the payment.

R. DAILY STATEMENT OF ACCOUNTS

Custodian will, within a reasonable time, render to each Fund a
detailed statement of the amounts received or paid and of securities
received or delivered for the account of the Fund during each business
day. Custodian will, from time to time, upon request by any Fund,
render a detailed statement of the securities and monies held for such
Fund under this Agreement, and Custodian will maintain such books and
records as are necessary to enable it to do so. Custodian will permit
such persons as are authorized by any Fund, including such Fund's
independent public accountants, reasonable access to such records or
will provide reasonable confirmation of the contents of such records,
and if demanded, Custodian will permit federal and state regulatory
agencies to examine the securities, books and records. Upon the
written instructions of any Fund or as demanded by federal or

14
<PAGE>

state regulatory agencies, Custodian will instruct any subcustodian to
permit such persons as are authorized by such Fund, including such
Fund's independent public accountants, reasonable access to such
records or to provide reasonable confirmation of the contents of such
records, and to permit such agencies to examine the books, records and
securities held by such subcustodian which relate to such Fund.

S. APPOINTMENT OF SUBCUSTODIANS

1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of the Funds may be held in
Custodian's own custody or in the custody of one or more other
banks or trust companies acting as subcustodians as may be
selected by Custodian. Any such subcustodian selected by the
Custodian must have the qualifications required for a custodian
under the 1940 Act, as amended. Custodian shall be responsible
to the applicable Fund for any loss, damage or expense suffered
or incurred by the Fund resulting from the actions or omissions
of any subcustodians selected and appointed by Custodian (except
subcustodians appointed at the request of the Fund and as
provided in Subsection 2 below) to the same extent Custodian
would be responsible to the Fund under Section 5. of this
Agreement if it committed the act or omission itself. Upon
request of any Fund, Custodian shall be willing to contract with
other subcustodians reasonably acceptable to the Custodian for
purposes of (i) effecting third-party repurchase transactions
with banks, brokers, dealers, or other entities through the use
of a common custodian or subcustodian, or (ii) providing
depository and clearing agency services with respect to certain
variable rate demand note securities, or (iii) for other
reasonable purposes specified by the Fund; provided, however,
that the Custodian shall be responsible to the Fund for any loss,
damage or expense suffered or incurred by the Fund resulting from
the actions or omissions of any such subcustodian only to the
same extent such subcustodian is responsible to the Custodian.
The Fund

15
<PAGE>

shall be entitled to review the Custodian's contracts with any
such subcustodians appointed at its request. Custodian shall be
responsible to the applicable Fund for any loss, damage or
expense suffered or incurred by the Fund resulting from the
actions or omissions of any Depository only to the same extent
such Depository is responsible to Custodian.

2. Notwithstanding any other provisions of this Agreement, each
Fund's foreign securities (as defined in Rule 17f-5(c)(1) under
the 1940 Act) and the Fund's cash or cash equivalents, in amounts
deemed by the Fund to be reasonably necessary to effect the
Fund's foreign securities transactions, may be held in the
custody of one or more banks or trust companies acting as
subcustodians, and thereafter, pursuant to a written contract or
contracts as approved by the Fund's Board of Directors, may be
transferred to accounts maintained by any such subcustodian with
eligible foreign custodians, as defined in Rule 17f-5(c)(2).
Custodian shall be responsible to the Fund for any loss, damage
or expense suffered or incurred by the Fund resulting from the
actions or omissions of any foreign subcustodian only to the same
extent the foreign subcustodian is liable to the domestic
subcustodian with which the Custodian contracts for foreign
subcustody purposes.

T. ACCOUNTS AND RECORDS

Custodian will prepare and maintain, with the direction and as
interpreted by each Fund, the Fund's accountants and/or other
advisors, in complete, accurate and current form all accounts and
records (i) required to be maintained by the Fund with respect to
portfolio transactions under Rule 31a of the 1940 Act, including but
not limited to the records needed to comply with Rule 31a-1(b)(1) of
the 1940 Act, (ii) required to be maintained as a basis for
calculation of the Fund's net asset value, and (iii) as otherwise
agreed upon between the parties. Custodian will preserve said records
in the manner and for the periods prescribed in the 1940 Act or for
such longer period as is agreed upon by the parties. Custodian relies
upon

16
<PAGE>

each Fund to furnish, in writing or its electronic or digital
equivalent, accurate and timely information needed by Custodian to
complete such Fund's records and perform daily calculation of the
Fund's net asset value. Custodian shall incur no liability and each
Fund shall indemnify and hold harmless Custodian from and against any
liability arising from any failure of such Fund to furnish such
information in a timely and accurate manner, even if the Fund
subsequently provides accurate but untimely information. It shall be
the responsibility of each Fund to furnish Custodian with the
declaration, record and payment dates and amounts of any dividends or
income and any other special actions required concerning each of its
securities when such information is not readily available from
generally accepted securities industry services or publications.

U. ACCOUNTS AND RECORDS PROPERTY OF THE FUNDS

Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of each
respective Fund, and will be made available to the applicable Fund for
inspection or reproduction within a reasonable period of time, upon
demand. Custodian will assist each Fund's independent auditors, or
upon approval of the Fund, or upon demand, any regulatory body, in any
requested review of the Fund's accounts and records but shall be
reimbursed by the Fund for all expenses and employee time invested in
any such review outside of routine and normal periodic reviews. Upon
receipt from the applicable Fund of the necessary information or
instructions, Custodian will supply information from the books and
records it maintains for the Fund that the Fund needs for tax returns,
questionnaires, periodic reports to shareholders and such other
reports and information requests as the Fund and Custodian shall agree
upon from time to time.

V. ADOPTION OF PROCEDURES

Custodian and each Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved or directed by any Fund or its accountants or other advisors
conflicts with or violates

17
<PAGE>

any requirements of its prospectus, articles of incorporation, bylaws,
any applicable law, rule or regulation, or any order, decree or
agreement by which the Fund may be bound. Each Fund will be
responsible to notify Custodian of any changes in statutes,
regulations, rules, requirements or policies which might necessitate
changes in Custodian's responsibilities or procedures as to such Fund.

W. CALCULATION OF NET ASSET VALUE

Custodian will calculate each Fund's net asset value, in accordance
with such Fund's prospectus. Custodian will price the securities and
foreign currency holdings of the Funds for which market quotations are
available by the use of outside services designated by each Fund which
are normally used and contracted with for this purpose; all other
securities and foreign currency holdings will be priced in accordance
with the applicable Fund's instructions. Custodian will have no
responsibility for the accuracy of the prices quoted by these outside
services or for the information supplied by any Fund or for acting
upon such instructions.

X. ADVANCES

In the event Custodian or any subcustodian shall, in its sole
discretion, advance cash or securities for any purpose (including but
not limited to securities settlements, purchase or sale of foreign
exchange or foreign exchange contracts and assumed settlement) for the
benefit of any Fund, the advance shall be payable by the Fund on
demand. Any such cash advance shall be subject to an overdraft charge
at the rate set forth in the then-current fee schedule from the date
advanced until the date repaid. As security for each such advance,
each Fund hereby grants Custodian and such subcustodian a lien on and
security interest in all property at any time held for the account of
the Fund, including without limitation all assets acquired with the
amount advanced. Should the Fund fail to promptly repay the advance,
the Custodian and such subcustodian shall be entitled to utilize
available cash and to dispose of such Fund's assets pursuant to
applicable law to the extent necessary to obtain reimbursement of the
amount advanced and any related overdraft charges.

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<PAGE>

Y. EXERCISE OF RIGHTS; TENDER OFFERS

Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new securities, cash or
other assets, if any, are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that
the consideration for such securities is to be paid or delivered to
the Custodian or the tendered securities are to be returned to the
Custodian.

4. INSTRUCTIONS.

A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of the applicable
Fund. Each Fund shall deliver to Custodian, prior to delivery of any
assets to Custodian and thereafter from time to time as changes
therein are necessary, written instructions naming one or more
designated representatives to give instructions in the name and on
behalf of each Fund, which instructions may be received and accepted
by Custodian as conclusive evidence of the authority of any designated
representative to act for the Fund and may be considered to be in full
force and effect (and Custodian will be fully protected in acting in
reliance thereon) until receipt by Custodian of notice to the
contrary. Unless such written instructions delegating authority to
any person to give instructions specifically limit such authority to
specific matters or require that the approval of anyone else will
first have been obtained, Custodian will be under no obligation to
inquire into the right of such person, acting alone, to give any
instructions whatsoever which Custodian may receive from such person.
If any Fund fails to provide Custodian any such instructions naming
designated representatives, any instructions received by Custodian
from a person reasonably believed to be an appropriate representative
of such Fund shall constitute valid and proper instructions hereunder.

19
<PAGE>

B. No later than the next business day immediately following each oral
instruction, the applicable Fund will send Custodian written
confirmation of such oral instruction. At Custodian's sole
discretion, Custodian may record on tape, or otherwise, any oral
instruction whether given in person or via telephone, each such
recording identifying the parties, the date and the time of the
beginning and ending of such oral instruction.

C. If Custodian shall provide any Fund direct access to any computerized
recordkeeping and reporting system used hereunder or if Custodian and
any Fund shall agree to utilize any electronic system of
communication, the Fund shall be fully responsible for any and all
consequences of the use or misuse of the terminal device, passwords,
access instructions and other means of access to such system(s) which
are utilized by, assigned to or otherwise made available to the Fund.
Each such Fund agrees to implement and enforce appropriate security
policies and procedures to prevent unauthorized or improper access to
or use of such system(s). Custodian shall be fully protected in
acting hereunder upon any instructions, communications, data or other
information received by Custodian by such means as fully and to the
same effect as if delivered to Custodian by written instrument signed
by the requisite authorized representative(s) of the Fund. Each Fund
shall indemnify and hold Custodian harmless from and against any and
all losses, damages, costs, charges, counsel fees, payments, expenses
and liability which may be suffered or incurred by Custodian as a
result of the use or misuse, whether authorized or unauthorized, of
any such system(s) by the Fund or by any person who acquires access to
such system(s) through the terminal device, passwords, access
instructions or other means of access to such system(s) which are
utilized by, assigned to or otherwise made available to the Fund,
except to the extent attributable to any negligence or willful
misconduct by Custodian.

5. LIMITATION OF LIABILITY OF CUSTODIAN.

A. Custodian shall at all times use reasonable care and due diligence and
act in good faith in performing its duties under this Agreement.
Custodian shall indemnify and

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<PAGE>

hold each Fund harmless from and against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability which
may be asserted against the Fund, incurred by the Fund or for which
the Fund may be held to be liable, arising out of or attributable to:

1. All actions taken by Custodian pursuant to this Agreement which
relate to such Fund, or any instructions provided to Custodian by
or on behalf of such Fund hereunder, provided that Custodian has
failed to act in good faith and with due diligence and reasonable
care; and

2. Custodian's refusal or failure to comply with the terms of this
Agreement (including without limitation Custodian's failure to
pay or reimburse the Fund under this indemnification provision)
or the failure of any representation or warranty of Custodian
hereunder to be and remain true and correct in all respects at
all times.

Custodian shall not be responsible for, and each Fund shall indemnify
and hold Custodian harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and
liability which may be asserted against Custodian, incurred by
Custodian or for which Custodian may be held to be liable, arising out
of or attributable to:

1. All actions taken by Custodian pursuant to this Agreement which
relate to such Fund, or any instructions provided to Custodian by
or on behalf of such Fund hereunder, provided that Custodian has
acted in good faith and with due diligence and reasonable care;
and

2. Such Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.

21
<PAGE>

B. Custodian may request and obtain at the expense of the applicable Fund
the advice and opinion of counsel for the Fund or of its own counsel
with respect to questions or matters of law, and it shall be without
liability to the Fund for any action taken or omitted by it in good
faith, in conformity with such advice or opinion. If Custodian
reasonably believes that it could not prudently act according to the
instructions of a Fund or the Fund's accountants or counsel, it may in
its discretion, with notice to the Fund, not act according to such
instructions.

C. Custodian may rely upon the advice and statements of any Fund, such
Fund's accountants and officers or other authorized individuals, and
other persons believed by it in good faith to be expert in matters
upon which they are consulted, and Custodian shall not be liable for
any actions taken, in good faith, upon such advice and statements.

D. If any Fund requests Custodian in any capacity to take any action
which involves the payment of money by Custodian, or which might make
it or its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by the Fund against
any liability on account of such action; provided, however, that
nothing herein shall obligate Custodian to take any such action except
in its sole discretion.

E. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed. Custodian shall be entitled to receive upon
request as conclusive proof of any fact or matter required to be
ascertained from a Fund hereunder a certificate signed by an officer
or designated representative of the Fund. Each Fund shall also
provide Custodian instructions with respect to any matter concerning
this Agreement requested by Custodian.

F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:

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<PAGE>

1. The validity of the issue of any securities purchased by or for
any Fund, the legality of the purchase of any securities or
foreign currency positions or evidence of ownership required by
any Fund to be received by Custodian, or the propriety of the
decision to purchase or amount paid therefor;

2. The legality of the sale of any securities or foreign currency
positions by or for any Fund, or the propriety of the amount for
which the same are sold;

3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;

4. The legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor; or

5. The legality of the declaration of any dividend by any Fund, or
the legality of the issue of any Fund Shares in payment of any
stock dividend.

G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by it on behalf of any Fund until Custodian
actually receives such money; provided, however, that it shall advise
the affected Fund promptly if it fails to receive any such money in
the ordinary course of business and shall cooperate with the Fund
toward the end that such money shall be received.

H. Except as provided in Section 3.S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.

I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly, by circumstances beyond the affected
entity's reasonable control, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,

23
<PAGE>

computer (hardware or software) or communication service; inability
to obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection.

J. EXCEPT FOR VIOLATIONS OF SECTION 9, IN NO EVENT AND UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO
ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY, FOR
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY ACT OR FAILURE TO
ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF ADVISED OF THIS
POSSIBILITY THEREOF.

6. COMPENSATION. In consideration for its services hereunder as Custodian and
investment accounting and recordkeeping agent, each Fund will pay to
Custodian such compensation as shall be set forth in a separate fee
schedule to be agreed to by each Fund and Custodian from time to time.
Custodian shall also be entitled to receive, and each Fund agrees to pay to
Custodian, on demand, reimbursement for Custodian's cash disbursements and
reasonable out-of-pocket costs and expenses, including attorney's fees,
incurred by Custodian in connection with the performance of services
hereunder for such Fund. Custodian may charge such compensation against
monies held by it for the account of such Fund. Custodian will also be
entitled to charge against any monies held by it for the account of the
applicable Fund the amount of any loss, damage, liability, advance,
overdraft or expense for which it shall be entitled to reimbursement from
such Fund, including but not limited to fees and expenses due to Custodian
for other services provided to the Fund by Custodian. Custodian will be
entitled to reimbursement by the Funds for the losses, damages,
liabilities, advances, overdrafts and expenses of subcustodians only to the
extent that (i) Custodian would have been entitled to reimbursement
hereunder if it

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<PAGE>

had incurred the same itself directly, and (ii) Custodian is obligated to
reimburse the subcustodian therefor.

7. TERMINATION. Each Fund and IFTC may terminate this agreement by notice in
writing, delivered or mailed, postage prepaid, to the other party and
received not less than ninety (90) days prior to the date upon which such
termination will take effect. Upon termination of this Agreement, each
Fund will pay Custodian its fees and compensation due hereunder and its
reimbursable disbursements, costs and expenses paid or incurred to such
date and the Fund shall designate a successor custodian by notice in
writing to Custodian by the termination date. In the event no written
order designating a successor custodian has been delivered to Custodian on
or before the date when such termination becomes effective, then Custodian
may, at its option, deliver the securities, funds and properties of the
Fund to a bank or trust company at the selection of Custodian, and meeting
the qualifications for custodian set forth in the 1940 Act and having not
less that Two Million Dollars ($2,000,000) aggregate capital, surplus and
undivided profits, as shown by its last published report, or apply to a
court of competent jurisdiction for the appointment of a successor
custodian or other proper relief, or take any other lawful action under the
circumstances; provided, however, that the Fund shall reimburse Custodian
for its costs and expenses, including reasonable attorney's fees, incurred
in connection therewith. Custodian will, upon termination of this
Agreement and payment of all sums due to Custodian from the Fund hereunder
or otherwise, deliver to the successor custodian so specified or appointed,
or as specified by the court, at Custodian's office, all securities then
held by Custodian hereunder, duly endorsed and in form for transfer, and
all funds and other properties of the Fund deposited with or held by
Custodian hereunder, and Custodian will co-operate in effecting changes in
book-entries at all Depositories. Upon delivery to a successor custodian
or as specified by the court, Custodian will have no further obligations or
liabilities under this Agreement. Thereafter such successor will be the
successor custodian under this Agreement and will be entitled to reasonable
compensation for its services. In the event that securities, funds and
other properties remain in the possession of the Custodian after the date
of termination hereof owing to

25
<PAGE>

failure of the Fund to appoint a successor custodian, the Custodian shall
be entitled to compensation as provided in the then-current fee schedule
hereunder for its services during such period as the Custodian retains
possession of such securities, funds and other properties, and the
provisions of this Agreement relating to the duties and obligations of the
Custodian shall remain in full force and effect.

8. NOTICES. Notices, requests, instructions and other writings addressed to
the Funds, or any of them, at Piper Jaffray Tower, 222 South Ninth Street,
Minneapolis, Minnesota 55402-3804, or at such other address as the Funds
may have designated to Custodian in writing, will be deemed to have been
properly given to the Funds hereunder; and notices, requests, instructions
and other writings addressed to Custodian at its offices at 127 West 10th
Street, Kansas City, Missouri 64105, Attention: Custody Department, or to
such other address as it may have designated to the Funds in writing, will
be deemed to have been properly given to Custodian hereunder.

9. CONFIDENTIALITY.

A. Each Fund shall preserve the confidentiality of the computerized
investment portfolio recordkeeping and accounting system used by
Custodian (the "Portfolio Accounting System") and the tapes, books,
reference manuals, instructions, records, programs, documentation and
information of, and other materials relevant to, the Portfolio
Accounting System and the business of Custodian ("Confidential
Information"). Each Fund agrees that it shall not voluntarily
disclose any such Confidential Information to any other person other
than its own employees who reasonably have a need to know such
information pursuant to this Agreement. Each Fund shall return all
such Confidential Information to Custodian upon termination or
expiration of this Agreement.

B. The Funds have been informed that the Portfolio Accounting System is
licensed for use by Custodian from DST Systems, Inc. ("Licensor"), and
each Fund acknowledges that Custodian and Licensor have proprietary
rights in and to the Portfolio Accounting System and all other
Custodian or Licensor programs, code, techniques, know-how, data
bases, supporting documentation, data formats, and

26
<PAGE>

procedures, including without limitation any changes or modifications
made at the request or expense or both of any Fund (collectively, the
"Protected Information"). Each Fund acknowledges that the Protected
Information constitutes confidential material and trade secrets of
Custodian and Licensor. Each Fund agrees to preserve the
confidentiality of the Protected Information, and each Fund hereby
acknowledges that any unauthorized use, misuse, disclosure or taking
of Protected Information, residing or existing internal or external to
a computer, computer system, or computer network, or the knowing and
unauthorized accessing or causing to be accessed of any computer,
computer system, or computer network, may be subject to civil
liabilities and criminal penalties under applicable law. Each Fund
shall so inform employees and agents who have access to the Protected
Information or to any computer equipment capable of accessing the
same. Licensor is intended to be and shall be a third party
beneficiary of each Fund's obligations and undertakings contained in
this paragraph.

C. Custodian agrees that, except as otherwise required by law, Custodian
will keep confidential all records of and information in its
possession relating to the Funds and will not disclose the same to any
person except at the request or with the consent of each affected
Fund.

10. MULTIPLE FUNDS AND PORTFOLIOS.

A. Each Fund and Portfolio shall be regarded for all purposes hereunder
as a separate party apart from each other. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to a Fund shall be deemed to relate
solely to the particular Fund and, if applicable, the particular
Portfolio to which such transaction relates. Under no circumstances
shall the rights, obligations or remedies with respect to a particular
Fund or Portfolio constitute a right, obligation or remedy applicable
to any other. The use of this single document to memorialize the
separate agreement of each Fund is understood to be for clerical
convenience only and shall not constitute any basis for joining the
Funds or any Portfolios for any reason.

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<PAGE>

B. Additional Funds may be added to this Agreement by the execution of a
written agreement by each such additional Fund and Custodian, agreeing
to be bound by the terms, conditions, and provisions hereof. Rates
and charges for each additional Fund shall be as agreed upon by
Custodian and such Fund in writing.

C. Additional Portfolios of any Fund may be added to this Agreement,
provided that Custodian consents to such addition. Rates or charges
for each additional Portfolio shall be as agreed upon by Custodian and
the applicable Fund in writing.

11. MISCELLANEOUS.

A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.

B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.

C. The representations and warranties, the indemnifications extended
hereunder, and the provisions of Section 9. hereof are intended to and
shall continue after and survive the expiration, termination or
cancellation of this Agreement.

D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.

E. The failure of any party to insist upon the performance of any terms
or conditions of this Agreement or to enforce any rights resulting
from any breach of any of the terms or conditions of this Agreement,
including the payment of damages, shall not be construed as a
continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
effective unless contained in a written instrument signed by the party
sought to be charged.

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<PAGE>

F. The captions in the Agreement are included for convenience of
reference only, and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.

G. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.

H. If any provision of this Agreement shall be determined to be invalid
or unenforceable, the remaining provisions of this Agreement shall not
be affected thereby, and every provision of this Agreement shall
remain in full force and effect and shall remain enforceable to the
fullest extent permitted by applicable law.

I. This Agreement may not be assigned by any party hereto without the
prior written consent of the other party; provided, however, that the
foregoing shall not apply to the planned merger of Custodian with
State Street Bank and Trust Company of Missouri, N.A., which shall
continue the business of Custodian under the name Investors Fiduciary
Trust Company, n.a., and which shall succeed to Custodian's rights,
duties and obligations hereunder without further act of the parties.

J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and any Fund.

K. All prior contracts between Custodian and each Fund for custody and
investment accounting services are hereby cancelled and superseded
effective as of the date hereof, except that all rights, duties and
liabilities which may have arisen under such contracts prior to the
effectiveness hereof shall continue and survive. Otherwise, this
Agreement does not in any way affect any other agreements entered into
among any parties hereto and any actions taken or omitted by any party
hereunder shall not affect any rights or obligations of any other
party hereunder.

29
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers.

INVESTORS FIDUCIARY TRUST COMPANY

By: /s/ Allen N. Strain
-----------------------------------------------

Title: EVP
-------------------------------------------

EACH FUND LISTED ON
SCHEDULE I HERETO

By:/s/ Robert H. Nelson
-----------------------------------------------

Title: SVP
-------------------------------------------

30
<PAGE>

EXHIBIT A

INVESTORS FIDUCIARY TRUST COMPANY
AVAILABILITY SCHEDULE BY TRANSACTION TYPE

TRANSACTION DTC PHYSICAL FED

- - - - -------------------------------------------------------------------------------------------------------------------
TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE CREDIT DATE FUNDS TYPE
- - - - ---- ----------- ---------- ----------- ---------- ----------- ----------
- - - - -------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Calls Puts As Received C or F* As Received C or F*
- - - - -------------------------------------------------------------------------------------------------------------------

Maturities As Received C or F* Mat. Date C or F* Mat. Date F
- - - - -------------------------------------------------------------------------------------------------------------------

Tender Reorgs. As Received C As Received C N/A
- - - - -------------------------------------------------------------------------------------------------------------------

Dividends Paydate C Paydate C N/A
- - - - -------------------------------------------------------------------------------------------------------------------

Floating Rate Int. Paydate C Paydate C N/A
- - - - -------------------------------------------------------------------------------------------------------------------

Floating Rate Int. N/A As Rate Received C N/A
(No Rate)
- - - - -------------------------------------------------------------------------------------------------------------------

Mtg. Backed P&I Paydate C Paydate + 1 C Paydate F
Bus. Day
- - - - -------------------------------------------------------------------------------------------------------------------

Fixed Rate Int. Paydate C Paydate C Paydate F
- - - - -------------------------------------------------------------------------------------------------------------------

Euroclear N/A C Paydate C
- - - - -------------------------------------------------------------------------------------------------------------------
- - - - -------------------------------------------------------------------------------------------------------------------
</TABLE>

LEGEND

C = Clearinghouse Funds
F = Fed Funds
N/A = Not Applicable
* Availability based on how received.

31
<PAGE>

SCHEDULE I
INITIAL LIST OF FUNDS

Piper Institutional Funds Inc.
Institutional Government Adjustable Portfolio
Institutional Money Market Fund

Piper Funds Inc. - II
Adjustable Rate Mortgage Securities Fund

Piper Global Funds Inc.
Pacific-European Growth Fund*

Piper Funds Inc.
National Tax Exempt Fund
Emerging Growth Fund
Growth & Income Fund
U.S. Government Money Market Fund
Tax-Exempt Money Market Fund
Institutional Government Income Portfolio
Value Fund
Equity Strategy Fund
Balanced Fund
Government Income Fund
Money Market Fund
Minnesota Tax-Exempt Fund
Short-Intermediate Bond Fund

American Government Income Fund Inc.
American Government Income Portfolio Inc.
American Opportunity Income Fund Inc.
American Government Term Trust Inc.
American Municipal Term Trust Inc.
American Municipal Term Trust Inc. II
American Municipal Term Trust Inc. III
Minnesota Municipal Term Trust Inc.
Minnesota Municipal Term Trust Inc. II
American Strategic Income Portfolio*
American Strategic Income Portfolio II*
American Strategic Income Portfolio III*
American Municipal Income Portfolio
Minnesota Municipal Income Portfolio Inc.
American Select Portfolio*
The Americas Income Trust*
Highlander Income Fund Inc.

*Investment accounting services only; no custody services

<PAGE>

EXHIBIT 11

DORSEY & WHITNEY LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402-1498

April 1, 1996

Piper Global Funds Inc.
222 South Ninth Street
Minneapolis, Minnesota 55402-3804

Re: Pacific-European Growth Fund, a Series of Piper Global Funds Inc.
Shares to be Issued Pursuant to Agreement and Plan of Reorganization

Ladies and Gentlemen:

We have acted as counsel to Piper Global Funds Inc., a Minnesota
corporation ("Piper Global"), in connection with its authorization and
proposed issuance of its Series A common shares, par value $.01 per share
(the "Shares"). The Shares are to be issued pursuant to an Agreement and Plan
of Reorganization (the "Agreement"), by and between Piper Global, on behalf
of its Pacific-European Growth Fund series, and Hercules Funds Inc., a
Minnesota corporation, on behalf of its Hercules Pacific Basin Value Fund
series, the form of which Agreement is included as Exhibit A to the
Prospectus/Proxy Statement relating to the transactions contemplated by the
Agreement included in Piper Global's Registration Statement on Form N-14
filed with the Securities and Exchange Commission (the "Registration
Statement").

In rendering the opinions hereinafter expressed, we have reviewed
the corporate proceedings taken by Piper Global in connection with the
authorization and issuance of the Shares, and we have reviewed such questions
of law and examined copies of such corporate records of Piper Global,
certificates of public officials and of responsible officers of Piper Global,
and other documents as we have deemed necessary as a basis for such opinions.
As to the various matters of fact material to such opinions, we have, when
such facts were not independently established, relied to the extent we deem
proper on certificates of public officials and of responsible officers of
Piper Global. In connection with such review and examination, we have assumed
that all copies of documents provided to us conform to the originals; that
all signatures are genuine; and that prior to the consummation of the
transactions contemplated thereby, the Agreement will have been duly and
validly executed and delivered on behalf of each of the parties thereto in
substantially the form included in the Registration Statement.

<PAGE>

Based on the foregoing, it is our opinion that:

1. Piper Global is validly existing as a corporation in good
standing under the laws of the State of Minnesota.

2. The Shares, when issued and delivered by Piper Global pursuant
to, and upon satisfaction of the conditions contained in, the Agreement, will
be duly authorized, validly issued, fully paid and non-assessable.

In rendering the foregoing opinions (a) we express no opinion as to
the laws of any jurisdiction other than the State of Minnesota; and (b) we
have assumed, with your concurrence, that the conditions to closing set forth
in the Agreement will have been satisfied.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in Piper Global's final Prospectus/Proxy Statement relating
to the Shares included in the Registration Statement.

Very truly yours,

KLP /s/ Dorsey & Whitney LLP

<PAGE>

April 1, 1996

Piper Global Funds Inc.
Pacific-European Growth Fund
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402-3804

Hercules Funds Inc.
Hercules Pacific Basin Value Fund
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402-3804

Gentlemen:

You have requested our opinion as to the Federal income tax
consequences of the transaction (the "Reorganization") described below pursuant
to which (i) Pacific-European Growth Fund ("Pacific-European"), a series of
Piper Global Funds Inc., will acquire all of the assets of Hercules Pacific
Basin Value Fund ("Pacific Basin"), a series of Hercules Funds Inc., in exchange
for shares of Pacific-European (the "Pacific-European Shares"), and the
assumption by Pacific-European of certain liabilities of Pacific Basin (the
"Liabilities"), (ii) Pacific Basin will be liquidated, and (iii) the Pacific-
European Shares will be distributed to the holders ("Pacific Basin
Shareholders") of shares in Pacific Basin ("Pacific Basin Shares") pursuant to
such liquidation.

We have examined and are familiar with such documents, records and
other instruments as we have deemed appropriate for purposes of this opinion
letter, including the Registration Statement being filed with the Securities and
Exchange Commission under the Securities Act of 1933 on Form N-14, relating to
the Pacific-European Shares (the "Registration Statement") which includes, as a
part thereof, the proxy statement of Pacific Basin (the "Pacific Basin Proxy")
which will be used to solicit proxies of Pacific Basin Shareholders in
connection with the Special Meeting of Pacific Basin Shareholders and the
proposed Agreement and

<PAGE>

April 1, 1996
Page 2

Plan of Reorganization by and between Pacific Basin and Pacific-European (the
"Plan"). In rendering this opinion, we have assumed that such documents as yet
unexecuted will, when executed, conform to the proposed forms of such documents
that we have examined. We have further assumed that the Reorganization will be
carried out pursuant to the terms of the Plan, that factual statements and
information contained in the Registration Statement, the Pacific Basin Proxy and
other documents, records, and instruments supplied to us are correct and that
there will be no material change with respect to such facts or information prior
to the time of the Reorganization. In rendering our opinion we have also relied
on the representations and facts discussed below which have been provided to us
by Piper Capital Management Incorporated ("Piper Capital"), Pacific-European and
Pacific Basin, and we have assumed that such representations and facts will
remain correct at the time of the Reorganization.

FACTS

Pacific-European is an open-end diversified management investment
company engaged in the continuous offering of its shares to the public. Since
its inception, Pacific-European has conducted its affairs so as to qualify, and
has elected to be taxed, as a regulated investment company under Section 851 of
the Internal Revenue Code of 1986, as amended (the "Code").

Pacific Basin is an open-end non-diversified management investment
company engaged in the continuous offering of its shares to the public. Since
its inception, Pacific Basin has conducted its affairs so as to qualify, and has
elected to be taxed, as a regulated investment company under Section 851 of the
Code.

The Board of Directors of Pacific-European and of Pacific Basin have
each determined, for valid business reasons, that it is advisable to combine the
assets of Pacific Basin and Pacific-European into one fund.

<PAGE>

April 1, 1996
Page 3

In view of the above, the Board of Directors of Pacific Basin adopted
the Plan, subject to, among other things, approval by Pacific Basin
Shareholders.

Pursuant to the Plan, Pacific Basin will transfer all of its assets to
Pacific-European in exchange for the Pacific-European Shares (including
fractional Pacific-European Shares) and the assumption by Pacific-European of
the Liabilities. Immediately thereafter, Pacific Basin will distribute the
Pacific-European Shares to Pacific Basin Shareholders in exchange for and in
cancellation of their Pacific Basin Shares and in complete liquidation of
Pacific Basin.

Each of the following representations, among other representations,
has been made to us in connection with the Reorganization by Piper Capital,
Pacific Basin and Pacific-European.

(1) To the best of the knowledge of the management of Piper Capital,
Pacific Basin, Pacific-European, and their affiliates (collectively,
"Management"), there is no plan or intention on the part of Pacific Basin
Shareholders, to redeem, sell, exchange or otherwise dispose of a number of
Pacific-European Shares that would reduce Pacific Basin Shareholders' ownership
of Pacific-European Shares to a number of Pacific-European Shares having a
value, as of the date of the Reorganization, of less than 50 percent of the
value of all of the formerly outstanding Pacific Basin Shares as of such date;

(2) Pacific-European has no plan or intention to reacquire any of the
Pacific-European Shares to be issued pursuant to the Reorganization except to
the extent necessary to comply with its legal obligation to redeem its own
shares;

(3) The Liabilities to be assumed by or transferred to Pacific-
European were incurred by Pacific Basin in the ordinary course of business and
are associated with the assets being transferred to Pacific-European;

<PAGE>

April 1, 1996
Page 4

(4) The amount of the Liabilities will not exceed the aggregate
adjusted basis of Pacific Basin for its assets transferred to Pacific-European;

(5) Pacific-European has no plan or intention to sell or otherwise
dispose of more than fifty percent of the assets of Pacific Basin acquired in
the Reorganization, except for dispositions made in the ordinary course of
business;

(6) There is no indebtedness between Pacific Basin and Pacific-
European that was issued, acquired or will be settled at a discount;

(7) Pacific Basin has been a regulated investment company within the
meaning of Section 851 of the Code since the date of its organization through
the end of its last complete taxable year and will qualify as a regulated
investment company for its taxable year ending on the date of the
Reorganization;

(8) Pacific-European has been a regulated investment company within
the meaning of Section 851 of the Code since the date of its organization
through the date hereof and will qualify as a regulated investment company for
its taxable year ending February 28, 1997; and

(9) Pacific Basin will have no accumulated earnings and profits as of
the close of its taxable year ending on the date of the Reorganization.

OPINION

Based on the Code, Treasury Regulations issued thereunder, Internal
Revenue Service Rulings and the relevant case law, as of the date hereof, and on
the facts, representations and assumptions set forth above, and the documents,
records and other instruments we have reviewed, it is our opinion that the
Federal income tax consequences

<PAGE>

April 1, 1996
Page 5

of the Reorganization to Pacific-European, Pacific Basin, and the Pacific Basin
Shareholders will be as follows:

(1) The transfer of substantially all of Pacific Basin's assets in
exchange for Pacific-European Shares and the assumption by Pacific-European of
the Liabilities, followed by the distribution by Pacific Basin of the Pacific-
European Shares to the Pacific Basin Shareholders in exchange for their Pacific
Basin Shares, will constitute a "reorganization" within the meaning of Section
368(a)(1) of the Code, and Pacific Basin and Pacific-European 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 Pacific-European upon the
receipt of the assets of Pacific Basin solely in exchange for Pacific-European
Shares and the assumption of the Liabilities by Pacific-European;

(3) No gain or loss will be recognized by Pacific Basin upon the
transfer of the assets of Pacific Basin to Pacific-European, in exchange for the
Pacific-European Shares and the assumption of the Liabilities by Pacific-
European, or upon the distribution of the Pacific-European Shares to Pacific
Basin Shareholders in exchange for their Pacific Basin Shares as provided in the
Plan;

(4) No gain or loss will be recognized by Pacific Basin Shareholders
upon the exchange of their Pacific Basin Shares for the Pacific-European Shares;

(5) The aggregate tax basis for the Pacific-European Shares received
by each Pacific Basin Shareholder pursuant to the Reorganization will be the
same as the aggregate tax basis of the Pacific Basin Shares held by each such
Pacific Basin Shareholder immediately prior to the Reorganization;

(6) The holding period of the Pacific-European Shares to be received
by each Pacific Basin Shareholder will include the period during which the
Pacific Basin Shares

<PAGE>

April 1, 1996
Page 6

surrendered in exchange therefor were held (provided such Pacific Basin Shares
were held as capital assets on the date of the Reorganization);

(7) The tax basis of the assets of Pacific Basin acquired by Pacific-
European will be the same as the tax basis of such assets to Pacific Basin
immediately prior to the Reorganization; and

(8) The holding period of the assets of Pacific Basin in the hands of
Pacific-European will include the period during which those assets were held by
Pacific Basin.

We are not expressing an opinion as to any aspect of the
Reorganization other than those opinions expressly stated above.

As noted above, this opinion is based upon our analysis of the Code,
Treasury Regulations issued thereunder, Internal Revenue Service Rulings and
case law which we deem relevant as of the date hereof. No assurances can be
given that there will not be a change in the existing law or that the Internal
Revenue Service will not alter its present views, either prospectively or
retroactively, or adopt new views with regard to any of the matters upon which
we are rendering this opinion, nor can any assurances be given that the Internal
Revenue Service will not audit or question the treatment accorded to the
Reorganization on the

<PAGE>

April 1, 1996
Page 7

Federal income tax returns of Pacific-European, Pacific Basin, or the Pacific
Basin Shareholders.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name and any reference to our firm
in the Registration Statement and the Pacific Basin Proxy constituting a part
thereof.

Very truly yours,

/s/ Gordon Altman Butowsky
Weitzen Shalov & Wein

<PAGE>
[LETTERHEAD-KPMG PEAT MARWICK LLP]

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Piper Global Funds Inc. and
Hercules Funds Inc.:

We consent to the incorporation by reference in the registration statement on
Form N-14 (the "Registration Statement") of Pacific-European Growth Fund (a
series of Piper Global Funds Inc.) of (a) our report, dated March 14, 1996,
relating to the February 29, 1996 financial statements and financial highlights
of Pacific-European Growth Fund, and (b) our report, dated August 18, 1995,
relating to the June 30, 1995 financial statements and financial highlights of
Hercules Funds Inc. We also consent to the reference to our Firm under the
headings (a) "Financial Statements and Experts" in the Registration Statement,
(b) "Financial Highlights" in the prospectus of Pacific-European Growth Fund
dated April 28, 1995, which is incorporated by reference in the Registration
Statement, (c) "Financial Statements" in the statement of additional information
of Pacific-European Growth Fund dated, April 28, 1995, which is incorporated by
reference in the Registration Statement, (d) "Financial Highlights" in the
prospectus of Hercules Funds Inc. dated August 29, 1995, which is incorporated
by reference in the Registration Statement, and (e) "Auditors" in the statement
of additional information of Hercules Funds Inc. dated August 29, 1995, which is
incorporated by reference in the Registration Statement.

KPMG Peat Marwick LLP

Minneapolis, Minnesota
April 2, 1996

<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Rule 24f-2 Notice for Piper Global Funds Inc.

1. This notice is filed for the fiscal period ended February 28, 1995, for
Piper Global Funds Inc.

2. No securities of the same class or series have been registered under the
Securities Act of 1933 other than pursuant to Rule 24f-2 of the Investment
Company Act of 1940 (the "1940 Act") which remained unsold at the beginning
of such period.

3. No securities have been registered during such period other than pursuant to
Rule 24f-2 of the 1940 Act.

4. 4,222,396 shares were sold during such period, at an aggregate price of
$61,107,260.*

5. All 4,222,396 shares sold during such period were sold in reliance upon
registration pursuant to Rule 24f-2 of the 1940 Act.

* Includes 774,367 shares sold by reinvestment of dividends, at an aggregate
purchase price of $10,384,329. 2,819,369 shares were redeemed during such
period at an aggregate price of $41,129,910. The aggregate sales price of
shares sold during the period, $61,107,260, reduced by the aggregate price
at which shares were redeemed during such period, ($41,129,910), equals
$19,977,350. This amount multiplied by one twenty-ninth of one percent
equals $6,888.79, the registration fee which is enclosed with this notice.

April 18, 1995

PIPER GLOBAL FUNDS INC.

/s/ Robert H. Nelson

Robert H. Nelson
Vice President

<PAGE>

POWER OF ATTORNEY

The undersigned members of the Board of Directors of Piper Global Funds
Inc. (the "Fund") hereby each appoint Stuart M. Strauss as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to the Registration Statement on Form N-14 of the Fund, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue
hereof.

Signature Title Date
--------- ----- ----

/s/ David T. Bennett Director March 29, 1996
- - - - -----------------------------
David T. Bennett

/s/ Karol D. Emmerich Director March 29, 1996
- - - - -----------------------------
Karol D. Emmerich

/s/ Luella G. Goldberg Director March 29, 1996
- - - - -----------------------------
Luella G. Goldberg

/s/ George Latimer Director March 29, 1996
- - - - -----------------------------
George Latimer

/s/ Jaye F. Dyer Director March 29, 1996
- - - - -----------------------------
Jaye F. Dyer

<PAGE>

POWER OF ATTORNEY

The undersigned members of the Board of Directors of Piper Global Funds
Inc. (the "Fund") hereby each appoint William H. Ellis as his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to the Registration Statement on Form N-14 of the Fund, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitutes, may lawfully do or cause to be done by virtue
hereof.

Signature Title Date
--------- ----- ----

/s/ Michael W. Balfour Director March 29, 1996
- - - - -----------------------------
Michael W. Balfour

/s/ Iain A. Watt Director March 29, 1996
- - - - -----------------------------
Iain A. Watt

<PAGE>
HERCULES FUNDS INC.
HERCULES PACIFIC BASIN VALUE FUND

PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD , 1996

The undersigned shareholder of Hercules Pacific Basin Value Fund ("Pacific
Basin Value 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 Pacific
Basin Value Fund to be held on , 1996, at Piper Jaffray Tower, 222
South Ninth Street, Third Floor, Minneapolis, Minnesota at a.m./p.m.,
Minnesota 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
, 1996 (the "Plan"), by and between the Company, on behalf of
Pacific Basin Value Fund, and Piper Global Funds Inc., on behalf of
Pacific-European Growth Fund ("Pacific-European Fund"), pursuant to which
substantially all of the assets of Pacific Basin Value Fund will be combined
with those of Pacific-European Fund and shareholders of Pacific Basin Value Fund
will become shareholders of Pacific-European Fund receiving shares of
Pacific-European Fund with a value equal to the value of their holdings in
Pacific Basin Value 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.

<PAGE>

- - - - --------------------------------------------------------------------------------
PIPER FAMILY OF FUNDS
- - - - --------------------------------------------------------------------------------

[Piper International Funds Logo]

PACIFIC-EUROPEAN
GROWTH FUND

[Pacific-European Growth Fund Wrapper Cover Photo -- beach and sunset]

AN INTERNATIONAL FUND

<PAGE>

- - - - --------------------------------------------------------------------------------
FOUR REASONS TO EXPAND YOUR INVESTMENT HORIZONS
- - - - --------------------------------------------------------------------------------

TODAY, GROWING NUMBERS OF AMERICAN INVESTORS LOOK OVERSEAS TO BROADEN THEIR
INVESTMENT HORIZONS - AND FOR GOOD REASON. INTERNATIONAL INVESTING OFFERS
IMPORTANT BENEFITS TO U.S. INVESTORS. CONSIDER THESE FOUR COMPELLING REASONS:

1 TODAY NEARLY TWO-THIRDS OF THE WORLD'S INVESTMENT OPPORTUNITIES ARE LOCATED
OUTSIDE THE UNITED STATES. The U.S. market isn't shrinking - it's just that
foreign markets are growing, altering the United States' role in global finance
and trade.

WORLD STOCK MARKET CAPITALIZATION

[PIE CHARTS]

1970

NON-UNITED STATES 34%
UNITED STATES 66%

1995

PACIFIC BASIN 30%
CANADA 2%
UNITED STATES 42%
EUROPE 26%

SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI). BASED ON THE WORLD'S 22
DEVELOPED MARKETS AS REPRESENTED BY THE MSCI WORLD INDEX.

2 MANY OF THE PRODUCTS AND SERVICES YOU USE EVERY DAY ARE PRODUCED OR PROVIDED
BY COMPANIES THAT ARE INTERNATIONALLY OWNED AND OPERATED. Investing
internationally allows you to invest in these global companies and their
products.

3 INTERNATIONAL INVESTING CAN ENHANCE RETURNS. The economies of many countries
are dramatically expanding - particularly in the Pacific Basin (the area from
Japan to Australia) and other developing areas of the world. And while past
performance does not guarantee future results, over the past 10 years, many
world stock markets have significantly outperformed the U.S. market. In exchange
for their greater long-term growth potential, however, foreign markets may
experience greater volatility on a yearly basis. Other risks of international
investing include adverse currency fluctuations, potential political and
economic instability of certain countries, limited liquidity, volatile prices of
certain non-U.S. securities and foreign taxation. See your prospectus for more
information about these risks.

WORLD STOCK MARKETS
AVERAGE ANNUAL RETURNS FOR THE 10 YEARS ENDED DECEMBER 29, 1995

[BAR CHART]

23.83% HONG KONG
20.67 BELGIUM
20.21 SINGAPORE
19.43 SWEDEN
19.33 NETHERLANDS
17.91 SPAIN
15.30 FRANCE
15.02 UNITED KINGDOM
14.90 S&P 500 INDEX
13.72 MSCI WORLD INDEX
12.82 JAPAN

SOURCE: MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI). THE MSCI WORLD INDEX IS AN
UNMANAGED INDEX OF 1,579 COMPANIES LISTED ON THE STOCK EXCHANGES OF THE U.S.,
CANADA, MEXICO, AUSTRALIA AND THE FAR EAST. THE S&P 500 INDEX IS AN UNMANAGED
INDEX OF 500 LARGE-CAP STOCKS GENERALLY CONSIDERED TO BE REPRESENTATIVE OF THE
U.S. STOCK MARKET.

4 INTERNATIONAL DIVERSIFICATION CAN REDUCE RISK.
By not putting "all your eggs in one basket," you are taking steps to reduce
risk. Because stock markets around the world often move in different directions
than the U.S. market, adding an international component to your portfolio can
reduce your portfolio's overall market risk.

<PAGE>

- - - - --------------------------------------------------------------------------------
PACIFIC-EUROPEAN GROWTH FUND
- - - - --------------------------------------------------------------------------------

Pacific-European Growth Fund is an open-end mutual fund with an investment
objective of long-term capital appreciation. It offers investors convenient
access to the attractive long-term growth opportunities provided by companies
located predominantly in the markets of the Pacific Basin and Europe (including
Eastern Europe). The fund has the added flexibility to invest up to 25% of its
total assets in other parts of the world. However, it does not invest in common
stocks of U.S. companies. No assurance can be made that the fund's objective
will be achieved. Dividends, if any, will be paid annually.

PACIFIC-EUROPEAN GROWTH FUND PROVIDES INVESTORS WITH A WORLD OF ATTRACTIVE
BENEFITS:

- - - - - LOW-COST INTERNATIONAL INVESTING
Investors can initially purchase shares for as little as $250 with no minimum
for subsequent investments. Automatic monthly investment plan participants can
purchase shares for as little as $100 per month.

- - - - - EXCHANGE PRIVILEGES
Shareholders can revise their investment plan without incurring a sales charge
by exchanging their shares for shares of other Piper funds with the same fee
structure.

- - - - - CONVENIENT SERVICES
Shareholders enjoy a range of convenient services such as automatic monthly
investing, reinvestment and withdrawal plans, and comprehensive record keeping
and reporting.

- - - - - RETIREMENT PLANS AND IRA INVESTING
Investors can build their retirement assets faster by investing them
tax-deferred.

LIFETIME RESULTS OF A $10,000 INVESTMENT

[GRAPH]

DATE PGPEX EAFE

4/90 9635 10000
9793 11049
7885 8714
12/90 8347 9641
9269 10366
9072 9808
8902 10658
12/91 9286 10845
9205 9567
9766 9778
9187 9935
12/92 9205 9560
10055 10715
10742 11802
11610 12593
12/93 13840 12710
13168 13163
13640 13844
14149 13867
12/94 13427 13735
13172 14001
13035 14114
13633 14714
12/95 14234 15321
2/96 14549 15443

ALL RETURNS INCLUDE REINVESTED DISTRIBUTIONS.

If you had invested $10,000 in the fund in April 1990 and held it through
February 29, 1996, reinvesting all distributions, your investment would have
grown to $14,549. Pacific-European Growth Fund results reflect the fund's
maximum 4% sales charge, as if it was applied since the fund's inception.
This fund operated as a closed-end fund until August 31, 1992. In comparing
the fund to the EAFE Index, keep in mind that the fund's performance reflects
the sales charge, while no such charges are reflected in the index.

AVERAGE ANNUAL TOTAL RETURNS
(THROUGH 2/29/96, INCLUDING 4% SALES CHARGE)

One Year................................12.03%
Five Year................................8.90%
Since Inception (4/27/90)................6.62%

DURING THESE PERIODS, THE FUND'S ADVISER WAIVED OR PAID CERTAIN FUND EXPENSES
AND/OR THE FUND'S DISTRIBUTOR VOLUNTARILY LIMITED 12b-1 FEES FOR THE FUND.
OTHERWISE, THE AVERAGE ANNUAL TOTAL RETURNS WOULD HAVE BEEN 11.79% FOR ONE
YEAR, 8.71% FOR FIVE YEARS AND 6.46% SINCE INCEPTION. ALL RETURNS INCLUDE
REINVESTED DISTRIBUTIONS AND THE 4% SALES CHARGE.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. THE RETURN AND PRINCIPAL
VALUE OF YOUR INVESTMENT WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THIS MAY BE USED AS SALES
LITERATURE WHEN PRECEDED OR ACCOMPANIED BY A CURRENT PACIFIC-EUROPEAN GROWTH
FUND PROSPECTUS. THE PROSPECTUS GIVES DETAILS ABOUT CHARGES, THE INVESTMENT
OBJECTIVE, RISKS, AND INVESTMENT POLICIES OF THE FUND. PLEASE READ IT
CAREFULLY BEFORE INVESTING.

<PAGE>

- - - - --------------------------------------------------------------------------------
PLANNING FOR RETIREMENT
- - - - --------------------------------------------------------------------------------

[Photo: Mark]

MARK, A SUCCESSFUL 40-YEAR-OLD ATTORNEY, HAS ONE PRIMARY GOAL: TO ENJOY A SECOND
"CAREER" SAILING THE WORLD AFTER HIS RETIREMENT. BECAUSE MARK NEEDS HIS
INVESTMENTS TO PROVIDE MAXIMUM GROWTH POTENTIAL IN ORDER TO HELP ACHIEVE THIS
GOAL, HE USES EVERY OPPORTUNITY TO INVEST FOR HIS FUTURE. THAT'S WHY HE INVESTS
A PORTION OF HIS 401(K) CONTRIBUTIONS IN PACIFIC-EUROPEAN GROWTH FUND. PACIFIC-
EUROPEAN GROWTH FUND OFFERS LONG-TERM GROWTH POTENTIAL WHILE ALSO PROVIDING
GLOBAL DIVERSIFICATION THAT IS SO IMPORTANT TO EQUITY INVESTING TODAY. AND
BECAUSE MARK INVESTS IN THE FUND THROUGH HIS EMPLOYER'S QUALIFIED RETIREMENT
PLAN, HIS INVESTMENT EARNINGS COMPOUND TAX-DEFERRED UNTIL WITHDRAWN AT
RETIREMENT. MARK UNDERSTANDS THAT OVER TIME, THE POWER OF TAX-DEFERRAL CAN BE
SUBSTANTIAL, HELPING HIM ACHIEVE HIS LONG-TERM GOAL.

THE HYPOTHETICAL ILLUSTRATION BELOW ASSUMES YOU SET ASIDE $5,000 PER YEAR IN A
TAX-DEFERRED ACCOUNT, SUCH AS YOUR EMPLOYER'S 401(K) PLAN, WITH AN AVERAGE 9%
ANNUAL RETURN ON YOUR INVESTMENTS. FURTHER ASSUME THAT YOU ARE IN THE 31%
FEDERAL TAX BRACKET. EVEN AFTER TAXES, YOU WILL COME OUT AHEAD OVER THE LONG RUN
BY POSTPONING YOUR TAX BURDEN UNTIL YOU RETIRE. THIS ILLUSTRATION SHOULD NOT BE
CONSIDERED REPRESENTATIVE OF AN INVESTMENT IN PACIFIC-EUROPEAN GROWTH FUND OR
ANY PARTICULAR INVESTMENT. INVESTMENT PERFORMANCE MAY DIFFER SUBSTANTIALLY.

TAX-DEFERRED VS. TAXABLE INVESTING

[GRAPH]

TAX
DEFE-
YEARS RRED TAXABLE

0 1278 882
2585 1784
3921 2706
5288 3648
6685 4612
8113 5598
9574 6606
11067 7637
12595 8690
14156 9768
15753 10869
17385 11996
19055 13148
20761 14325
22507 15530
24291 16761
26116 18020
27982 19307
29889 20624
5 31840 21970
33835 23346
35874 24753
37959 26192
40091 27663
42272 29167
44501 30706
46790 32278
49111 33887
51494 35531
53931 37212
56422 38931
58970 40689
61575 42487
64239 44325
66962 46204
69747 48125
72594 50090
75506 52099
78483 54153
10 81527 56253
84639 58401
87822 60597
91076 62842
94403 65138
97805 67486
101284 69886
104841 72340
108478 74850
112197 77416
116000 80040
119888 82723
123863 85466
127928 88271
132085 91139
136335 94071
140681 97070
145124 100136
149667 103271
154313 106476
15 159063 109754
163920 113105
168887 116532
173965 120036
179157 123618
184466 127282
189895 131027
195446 134857
201121 138774
206925 142778
212858 146872
218926 151059
225130 155340
231473 159717
237960 164192
244592 168768
251373 173448
258307 178232
265397 183124
272647 188126
280060 193241
20 287639 198471
295389 203818
303313 209286
311416 214877
319701 220594
328173 226439
336835 232416
345691 238527
354748 244776
364008 251165
373476 257698
383157 264378
393056 271209
403178 278193
413528 285334
424110 292636
434931 300102
445995 307737
457308 315543
25 468876 323524
480704 331685
492797 340030
505164 348563
517808 357287
530737 366208
543956 375330
557473 384657
571295 394193
585427 403945
599877 413915
614653 424110
629760 434535
645208 445194
661003 456092
677154 467236
693668 478631
710554 490282
727820 502195
745474 514377
30 763525 526832

<PAGE>

- - - - --------------------------------------------------------------------------------
INTERNATIONAL EXPERTISE
- - - - --------------------------------------------------------------------------------

EDINBURGH FUND MANAGERS PLC (EDINBURGH)
Edinburgh, the fund's subadviser, brings substantial international investing
expertise to the daily management of the fund.

A TRADITION OF EQUITY MANAGEMENT
Located in Edinburgh, Scotland, Europe's third largest money management center,
the firm's international presence gives it easy access to foreign markets. By
focusing completely on international equity management, the firm has developed a
tradition of capitalizing on emerging international opportunities. Edinburgh
began investing in the United States in the early 1900s, Japan in the 1960s, the
Pacific Basin in the 1970s, and Latin America in the 1990s.

PROVEN PROFESSIONAL MANAGEMENT
Edinburgh has more than 90 years of money management experience and a staff of
approximately 50 investment managers. With more than $11 billion under
management, Edinburgh provides investment management services to more than 70
other international funds. The fund's management team continuously monitors
interest rates, currency fluctuations, economic conditions and other factors
inherent in international investing.

PIPER CAPITAL MANAGEMENT INCORPORATED
As investment adviser to Pacific-European Growth Fund, Piper Capital oversees
the fund's operations. Piper Capital is a wholly-owned subsidiary of
Piper Jaffray Companies Inc., an investment firm founded in 1895.

<PAGE>

- - - - --------------------------------------------------------------------------------
PIPER FAMILY OF FUNDS
- - - - --------------------------------------------------------------------------------

We invite you to contact your Piper Jaffray Investment Executive for more
complete information and a prospectus for any of
the Piper funds or call 1 800 866-7778.

- - - - --------------------------------------------------------------------------------
GROWTH FUNDS
- - - - --------------------------------------------------------------------------------

PIPER EMERGING GROWTH FUND
PIPER EQUITY STRATEGY FUND
PIPER GROWTH FUND

- - - - --------------------------------------------------------------------------------
TOTAL RETURN FUNDS
- - - - --------------------------------------------------------------------------------

PIPER GROWTH AND INCOME FUND
PIPER BALANCED FUND

- - - - --------------------------------------------------------------------------------
INCOME FUNDS
- - - - --------------------------------------------------------------------------------

PIPER GOVERNMENT INCOME FUND
PIPER SHORT-INTERMEDIATE BOND FUND
ADJUSTABLE RATE MORTGAGE SECURITIES FUND

- - - - --------------------------------------------------------------------------------
TAX-EXEMPT FUNDS
- - - - --------------------------------------------------------------------------------

PIPER NATIONAL TAX-EXEMPT FUND
PIPER MINNESOTA TAX-EXEMPT FUND

- - - - --------------------------------------------------------------------------------
INTERNATIONAL FUNDS
- - - - --------------------------------------------------------------------------------

PACIFIC-EUROPEAN GROWTH FUND

- - - - --------------------------------------------------------------------------------
INSTITUTIONAL FUNDS
- - - - --------------------------------------------------------------------------------

INSTITUTIONAL GOVERNMENT INCOME PORTFOLIO*
INSTITUTIONAL GOVERNMENT ADJUSTABLE PORTFOLIO
INSTITUTIONAL MONEY MARKET FUND

- - - - --------------------------------------------------------------------------------
CASH MANAGEMENT FUNDS
- - - - --------------------------------------------------------------------------------

PIPER MONEY MARKET FUND
PIPER TAX-EXEMPT MONEY MARKET FUND
PIPER U.S. GOVERNMENT MONEY MARKET FUND

*FUND NOT AVAILABLE TO NEW INVESTORS.
AN INVESTMENT IN A PIPER MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT
THE FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1 PER SHARE.

PIPER CAPITAL
MANAGEMENT

PIPER CAPITAL MANAGEMENT INCORPORATED
222 SOUTH NINTH STREET, MPLS, MN 55402-3804 1 800 866-7778

PIPER JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.

0125-96 PGPEX.36 4/96