<PAGE>
U.S. Growth Funds - 1997 Annual Report
[LOGO]
U.S. GROWTH FUNDS
1997 Annual Report
SMALL COMPANY GROWTH FUND
EMERGING GROWTH FUND
GROWTH FUND
INSIDE: ACTION OR REACTION --
Which Guides Your Approach to Investing?
[PICTURE]
<PAGE>
[LOGO]
CONTENTS
President's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Federal Tax Information . . . . . . . . . . . . . . . . . . . . . . . . . .30
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . .31
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Glossary***. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
SMALL COMPANY GROWTH FUND
Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . . . . . 4
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . .13
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . .25
EMERGING GROWTH FUND
Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . . . . . 7
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . .13
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . .27
GROWTH FUND
Portfolio Managers' Letter . . . . . . . . . . . . . . . . . . . . . . . . .10
Financial Statements and Notes . . . . . . . . . . . . . . . . . . . . . . .13
Investments in Securities. . . . . . . . . . . . . . . . . . . . . . . . . .29
This report is intended for shareholders of Small Company Growth Fund, Emerging
Growth Fund and 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 funds.
*** This report includes a glossary to help you understand financial terms used
in the portfolio managers' letters. When you see this symbol, it indicates a
word that is defined in the glossary.
ACTION
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WHICH GUIDES YOUR APPROACH TO INVESTING?
The market soars 150 points. The market plummets 150 points. One financial
commentator urges investors to sell stocks and buy bonds. Another promotes a
"can't miss" investment opportunity. One thing is for sure -- in today's
financial markets, it's easy to get the impression that investment experts
possess a secret formula for success. Yet many successful investors realize
there are no short-term secrets to investing. While others heed market
soothsayers and prophets, savvy investors work with investment professionals who
help them remain calm in the face of volatility. Guided by long-term investment
plans rather than by emotions, these investors stay the course while others
react to the latest trend. More important, successful investors employ several
time-tested investment strategies to help reach their goals, including
diversification and systematic investing.*
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WALL STREET'S WILD RIDE
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Dow Jones Industrial Average
[EDGAR REPRESENTATION OF CHART]
8/1 8194
8/4 8198
8/5 8188
8/6 8259
High 8/6/97 8,259
8/7 8188
8/8 8031
8/11 8062
8/12 7961
8/13 7928
8/14 7942
8/15 7695
8/18 7803
8/19 7918
8/20 8021
8/21 7894
8/22 7888
8/25 7860
8/26 7782
8/27 7787
8/28 7694
8/29 7622
9/2 7880
9/3 7895
9/4 7867
9/5 7822
9/8 7835
9/9 7852
9/10 7719
9/11 7661
9/12 7743
9/15 7721
9/16 7896
9/17 7886
9/18 7923
9/19 7917
9/22 7997
9/23 7970
9/24 7907
9/25 7848
9/26 7922
9/29 7991
9/30 7945
10/1 8016
10/2 8028
10/3 8039
10/6 8100
10/7 8178
10/8 8095
10/9 8061
10/10 8045
10/13 8072
10/14 8096
10/15 8058
10/16 7939
10/17 7847
10/20 7921
10/21 8060
10/22 8035
10/23 7848
10/24 7715
10/27 7161
Low 10/27/97 7,161
10/28 7498
10/29 7507
10/30 7382
10/31 7442
Source: Bloomberg. The Dow Jones industrial average is a price-weighted average
of the 30 largest blue-chip stocks on the New York Stock Exchange.
DO YOUR EXPECTATIONS REFLECT MARKET REALITIES?
Investors' expectations have risen with the market -- and are in sharp contrast
to market realities. In the words of Federal Reserve Chairman Alan Greenspan,
there is an "irrational exuberance" based on unprecedented growth in recent
years. During the past few years, returns -- especially from stocks -- have been
much higher than at any other time in history. The chart below shows long-term
returns of various securities compared to the highly inflated results of the
past year.
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SHORT-TERM RETURNS VS. LONG-TERM RETURNS THROUGH SEPTEMBER 30, 1997
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The past year has provided investors with unusually high returns
[EDGAR REPRESENTATION OF GRAPH]
THE PAST YEAR PAST 71 YEARS
total return average annualized
total return, 1926-1997
Large-Company Stocks 40.49% 10.98%
Long-Term Corporate Bonds 12.67% 5.67%
Source: Ibbotson Associates. Past performance does not guarantee future results.
Stocks generally exhibit more volatility than bonds.
<PAGE>
OR REACTION:
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What actions do successful investors take to weather the market's normal ups and
downs? First, they realize that markets move in cycles. In addition, they
diversify their holdings among a mix of funds that mirror their investment
objectives and risk tolerance and continue to purchase fund shares
systematically. By investing regularly* -- consistently buying shares through
market fluctuations -- educated investors steadily increase the number of shares
they own, while evening out their average cost per share over time.
THE MISGUIDED REACTIVE INVESTOR
The reactive investor believes that a shortcut to success is to chase today's
best-performing funds. After all, what could go wrong when you invest in these
winners? Plenty. The lure of a quick profit could fade to the reality of poor
returns for reactive investors who buy in at the peak of a fund's rally. They
often buy when prospects look bright and sell when prices drop -- behavior that
can devastate an investor's returns even while the market makes solid gains.
In contrast, educated investors don't succumb to emotions that could undermine
rational decisions. They're aware that few, if any, mutual funds can
significantly outperform their peers year after year. They also realize that
long-term investing helps reduce volatility. A buy-and-hold philosophy protects
investors against wild swings triggered by short-term market fluctuations -- and
helps them sleep better at night, too.
IT'S A FACT: INVESTORS PROFIT FROM THEIR ACTIONS, NOT THEIR REACTIONS
If you want to be successful in the financial marketplace, don't be swayed by
emotions or speculation. Keep in mind that markets change daily, yet your goals
may not change for years. Work with your Piper Jaffray Investment Executive to
develop an investment plan or to fine-tune your investment strategies as your
objectives change. A professional can help you ignore short-term volatility and
focus on long-term results. Your actions -- not your reactions -- ultimately
represent the difference between getting by ... and getting ahead.
* Keep in mind, investing regularly does not assure a profit and does not
protect against loss in declining markets.
TAKE THE GUESSWORK OUT OF INVESTING WITH THESE TRIED-AND-TRUE INVESTMENT
STRATEGIES
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X GET AN INVESTMENT PLAN An investment plan maps out your goals and
identifies effective ways to pursue them.
X INVEST SYSTEMATICALLY* Systematic investing is an effective way to build
wealth over time and helps you avoid hitting only market peaks and valleys.
X DIVERSIFY Diversification helps reduce volatility within your portfolio
and may also give you better long-term results.
X REASSESS YOUR RISK TOLERANCE Life's events may affect the amount of risk
that's comfortable.
A "BUY-AND-HOLD" PHILOSOPHY HELPS REDUCE YOUR RISK
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Your chance of losing money decreases the longer you hold stocks
[EDGAR REPRESENTATION OF GRAPH]
HOLDING STOCKS FOR ONE YEAR 29%
HOLDING STOCKS FOR FIVE YEARS 11%
HOLDING STOCKS FOR 10 YEARS 3%
Source: Based on rolling annual returns of the S&P 500 Index through 1996. The
S&P 500 is an unmanaged index of large-capitalization stocks. Past performance
does not guarantee future results.
<PAGE>
PRESIDENT'S LETTER
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[PHOTO]
PAUL A. DOW, CFA
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President
Piper Funds
November 17, 1997
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DEAR SHAREHOLDERS:
An athlete is sometimes said to be "in the zone." That's the time when the
difficult seems easy, the fast seems slow; essentially, the time when everything
comes together and performance soars. For the past few years, the investment
environment has been in the zone. The economy has maintained a steady growth
rate without increasing inflationary pressures. In fact, economic
prognosticators have consistently underestimated growth and overestimated
inflation -- traditionally considered an impossible feat.
This robust economic environment, supplemented by company earnings that have
grown at even faster rates than the economy due to widening profit margins, has
provided extraordinary returns for equity investors. As you can see in the chart
below, the Dow Jones Industrial Average appreciation in recent years has been
far above the normal experience of the past 100 years. In fact, the past 15- and
20-year periods are in the top one percentile of all periods.
The most significant event for the stock market during the funds' fiscal year
was the shift in performance leadership from large stocks to small- and mid-cap
stocks. In the first six months of the fiscal year, small- and mid-cap stock
returns (as measured by S&P's SmallCap 600 and MidCap 400 indexes) were -0.18%
and 4.48%, compared to 11.23% for the S&P 500 Index. In the second half of the
fiscal year, small- and mid-cap stocks surged ahead with returns of 37.22% and
33.13%, compared to 26.25% for large-company stocks.** With this outstanding
performance, small- and midsize company stocks' fiscal year returns through
September 30 closed the gap with large-company stock returns, as shown below.
This trend was also evident within the S&P 500. During the quarter, the average
stock in the S&P 500 outperformed the weighted index for the first time since
the
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THE DOW JONES INDUSTRIAL AVERAGE CAPITAL APPRECIATION*
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Median Annualized
Annualized Appreciation for
Appreciation Rolling Periods
as of 8/29/97 Since 1896
3 years 24.9% 5.8%
- ------------------------------------------------------------
10 years 11.1% 3.9%
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15 years 15.3% 4.1%
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20 years 11.5% 3.5%
- ------------------------------------------------------------
* The Dow Jones Industrial Average is a price-weighted average of the 30 largest
blue-chip stocks on the New York Stock Exchange. Performance does not include
reinvested dividends. Past performance does not guarantee future results.
Sources: Dow Jones & Company; Crandall, Pierce & Company
[EDGAR REPRESENTATION OF GRAPH]
TOTAL RETURNS (INCLUDING REINVESTED DISTRIBUTIONS)**
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For the fiscal year ended September 30, 1997
S&P SmallCap 600 Ixdex 36.98%
S&P MidCap 400 Index 39.09%
S&P 500 Ixdex 40.45%
The S&P 600, 400 and 500 indexes are unmanaged indexes of small-, mid- and
large-capitalization stocks, respectively. Performance includes no expenses or
transaction charges.
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2 1997 Annual Report - U.S. Growth Funds
<PAGE>
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quarter ending March 31, 1996. This means the market was less driven by the
"nifty fifty," the 50 largest stocks in the S&P 500 as measured by market
capitalization. It appears the prolonged period of only the largest stocks
providing the highest returns has ended, and investors are focusing more on
companies selling at attractive relative values.
At this time of high valuations and buoyant investor confidence, it is
particularly important to be watchful of significant changes that may alter the
markets. A negative event in the marketplace would likely bring on a period of
lower performance.
During the past few months, several events developed that could alter the
generally positive condition of the investment environment. The aftermath of the
UPS strike could have an effect on corporate profit margins, as the strength of
labor improves while the labor pool is shrinking. The recently publicized Boeing
and Union Pacific production and transportation backlogs could indicate an
economy that is reaching some stress points. Most significantly, the turmoil in
Asia recently has spread to U.S. markets, causing a high level of volatility.
The decline in Asian currencies and the high level of excess manufacturing
capacity could bring increasing competitive pressures on U.S. companies,
threatening their strong earnings growth. So far, none of these events appear
significant enough to change our overall view of continued slow inflation and a
growing economy. However, the Asian situation is the biggest challenge to "the
zone" yet.
When markets change, it is important to clearly understand, and be disciplined
in, your investment strategy. At Piper Funds, we believe that maintaining sound,
disciplined investment strategies is essential to achieving consistent,
competitive performance in an ever-changing environment. We also believe in
providing a higher level of quality service to shareholders. That means going
the extra step to make sure you understand your investments. Take a look at the
fund prospectus that accompanies this shareholder report. We've revised it to
make it simpler and easier to read. We hope the information in your new
prospectus, and in this shareholder report, is useful to you, and we look
forward to continuing to provide you with exceptional service. Thank you for
your continued confidence in the Piper Funds family.
Sincerely,
/s/ Paul A. Dow
Paul A. Dow
President, Piper Funds
** Past performance does not guarantee future results. Small- and
mid-capitalization stocks are more volatile than stocks of larger companies.
They often involve higher risks because they lack the management expertise,
operating history, financial resources, product diversification and
competitive strengths of larger companies.
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3 1997 Annual Report - U.S. Growth Funds
<PAGE>
SMALL COMPANY GROWTH FUND
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[PHOTO]
SANDRA SHREWSBURY, CFA
is primarily responsible for the management of Small Company Growth Fund. She
has 14 years of financial experience. Other management team members are shown on
pages 5-9.
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November 17, 1997
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DEAR SHAREHOLDERS:
FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1997, SMALL COMPANY GROWTH FUND
CLASS A ACHIEVED A TOTAL RETURN OF 45.66%* WITH ALL DISTRIBUTIONS REINVESTED
BUT NOT INCLUDING THE FUND'S SALES CHARGE. The fund's performance compares
favorably with the Standard & Poor's SmallCap 600 Index,+ which returned
36.98%. We are also pleased that the fund outperformed the Lipper Small Cap
Funds Average,** which gained 29.79% during the same period. During this very
challenging environment for small-cap stocks, we remained true to our
strategy of buying carefully selected smaller companies that we believe are
poised for above-average earnings growth.
A CONTRIBUTING FACTOR TO THE FUND'S OUTPERFORMANCE OF THE BENCHMARK AND
PEER-GROUP RETURNS WAS OUR OVERWEIGHTED*** POSITION IN TECHNOLOGY COMPANIES.
In particular, the fund enjoyed strong gains from its holdings in
semiconductor stocks, which began rallying late last year after a severe
correction.*** We must also acknowledge that when our team took over
management of the fund in September 1996, small-capitalization stock prices
were severely depressed. As such, we were able to take advantage of many
attractive opportunities in the small-cap growth group.
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PERFORMANCE THROUGH SEPTEMBER 30, 1997*
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Growth of $10,000 Invested Since Inception
[EDGAR REPRESENTATION OF CHART]
Small Company Growth S&P SmallCap Lipper Small Cap
Fund Class A, reflects 600 Index+ Funds Average**
the fund's 4%
sales charge
3/87 9,600 10,000 10,000
3/87 9,514 10,000 10,000
4/87 9,571 9,615 9,774
5/87 9,504 9,471 9,772
6/87 9,648 9,657 9,906
7/87 10,091 9,963 10,199
8/87 10,284 10,305 10,560
9/87 10,321 10,038 10,385
10/87 7,634 7,047 7,572
11/87 7,277 6,590 7,128
12/87 7,763 7,160 7,861
1/88 7,880 7,441 8,018
2/88 8,366 8,041 8,641
3/88 8,427 8,321 8,892
4/88 8,524 8,432 9,084
5/88 8,446 8,241 8,914
6/88 8,765 8,796 9,559
7/88 8,560 8,667 9,355
8/88 8,335 8,366 9,056
9/88 8,261 8,560 9,348
10/88 7,899 8,546 9,224
11/88 7,918 8,273 8,964
12/88 8,092 8,555 9,357
1/89 8,592 8,775 9,855
2/89 8,455 8,823 9,870
3/89 8,434 8,976 10,100
4/89 8,760 9,409 10,661
5/89 9,233 9,761 11,188
6/89 8,936 9,645 10,878
7/89 9,722 9,971 11,489
8/89 10,000 10,183 11,849
9/89 10,099 10,189 12,001
10/89 10,039 9,582 11,450
11/89 10,160 9,673 11,529
12/89 10,342 9,743 11,650
1/90 9,432 8,845 10,624
2/90 10,005 9,063 10,935
3/90 10,614 9,345 11,438
4/90 10,348 8,956 11,181
5/90 11,404 9,588 12,241
6/90 11,815 9,581 12,323
7/90 11,373 9,074 11,858
8/90 10,190 7,955 10,358
9/90 9,443 7,214 9,463
10/90 9,350 6,706 9,117
11/90 9,772 7,192 9,811
12/90 10,293 7,436 10,353
1/91 11,358 7,970 11,239
2/91 11,886 8,872 12,191
3/91 12,437 9,429 12,996
4/91 12,633 9,451 12,882
5/91 13,368 9,823 13,500
6/91 12,082 9,400 12,780
7/91 13,179 9,770 13,552
8/91 13,407 10,198 14,115
9/91 13,272 10,284 14,220
10/91 13,355 10,646 14,680
11/91 13,086 10,168 14,095
12/91 14,477 11,041 15,766
1/92 14,997 11,879 16,475
2/92 15,256 12,128 16,707
3/92 14,467 11,790 15,966
4/92 14,384 11,315 15,248
5/92 14,550 11,445 15,234
6/92 13,958 11,007 14,538
7/92 14,623 11,417 15,062
8/92 14,176 11,092 14,720
9/92 14,093 11,408 15,102
10/92 14,820 11,883 15,790
11/92 15,724 12,905 17,119
12/92 16,137 13,364 17,685
1/93 16,585 13,722 18,040
2/93 16,283 13,332 17,329
3/93 16,481 13,841 17,956
4/93 16,200 13,337 17,395
5/93 16,669 14,053 18,402
6/93 16,804 14,142 18,541
7/93 16,898 14,289 18,671
8/93 17,325 15,043 19,659
9/93 17,555 15,589 20,401
10/93 17,607 15,888 20,719
11/93 17,315 15,319 19,953
12/93 17,906 15,874 20,806
1/94 18,209 16,249 21,321
2/94 18,125 16,201 21,304
3/94 17,801 15,038 20,106
4/94 17,843 15,264 20,161
5/94 18,073 14,962 19,758
6/94 17,227 14,406 19,008
7/94 17,499 14,586 19,366
8/94 18,073 15,579 20,601
9/94 17,927 15,499 20,716
10/94 17,624 15,344 21,103
11/94 17,185 14,758 20,332
12/94 17,465 15,117 20,778
1/95 17,182 14,903 20,485
2/95 17,696 15,518 21,376
3/95 18,032 15,832 22,024
4/95 17,833 16,185 22,366
5/95 17,591 16,438 22,720
6/95 18,441 17,340 24,275
7/95 19,355 18,665 26,249
8/95 19,491 19,070 26,635
9/95 20,415 19,557 27,400
10/95 20,079 18,591 26,652
11/95 20,761 19,327 27,685
12/95 20,998 19,646 27,906
1/96 21,010 19,689 27,636
2/96 21,661 20,333 28,757
3/96 21,387 20,769 29,330
4/96 21,959 21,962 31,658
5/96 22,393 22,742 32,938
6/96 21,490 21,850 31,486
7/96 20,014 20,347 28,479
8/96 20,769 21,604 30,222
9/96 21,513 22,552 31,903
10/96 21,094 22,396 30,997
11/96 21,975 23,559 31,784
12/96 23,444 23,834 32,108
1/97 23,935 24,230 32,907
2/97 22,887 23,729 31,324
3/97 20,988 22,511 29,489
4/97 20,988 22,788 29,276
5/97 23,673 25,465 32,700
6/97 25,867 26,590 34,314
7/97 27,733 28,263 36,445
8/97 28,617 28,975 36,880
9/97 31,335 30,890 39,643
+ An unmanaged index, that includes no expenses or transaction charges, of
small-capitalization stocks.
** The average total return, not including sales charges, of similar funds as
characterized by Lipper Analytical Services.
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Class A Average Annualized Total Returns
Includes the fund's maximum 4% front-end sales charge
One Year 39.83%
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Five Year 16.36%
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Ten Year 11.28%
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Since Inception (3/16/87) 11.43%
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Class B Cumulative Total Returns
Includes the fund's maximum 4% contingent deferred sales charge
Since Inception (2/18/97) 27.77%
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* PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of
an investment will fluctuate so that fund shares, when sold, may be worth more
or less than their original cost. Safety of principal is not guaranteed. The
fund operated as Equity Strategy Fund until September 13, 1996, with an
objective of high total investment return consistent with prudent investment
risk. Stocks of small companies are more volatile than stocks of larger
companies. They often involve higher risks because small companies lack the
management expertise, financial resources, product diversification and
competitive strengths of larger companies. See the prospectus for more complete
information regarding risks. During most periods, the fund's advisor waived or
paid certain expenses and/or the fund's distributor voluntarily waived certain
12b-1 fees. Without waivers, returns would have been lower.
All fund and benchmark returns include reinvested distributions.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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4 1997 Annual Report - U.S. Growth Funds
<PAGE>
SMALL COMPANY GROWTH FUND (CONTINUED)
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[PHOTO]
JILL THOMPSON, CFA
assists with the management of Small Company Growth Fund and Emerging Growth
Fund. She has eight years of financial experience.
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AFTER WE RESTRUCTURED THE FUND LAST FALL, THE FUND'S SECTOR*** WEIGHTINGS
REMAINED LARGELY UNCHANGED DURING THE REST OF THE REPORTING PERIOD, ALTHOUGH
WE MODESTLY REDUCED OUR HOLDINGS IN TECHNOLOGY STOCKS EARLIER THIS YEAR.
Despite our decrease in the fund's technology weighting, we remain optimistic
about the sector's long-term potential. In fact, the fund continues to be
overweighted in technology companies, as well as in consumer services, health
care and commercial services. We anticipate that each of these industries
will enjoy strong earnings growth that is generated primarily by gains in
unit volume. In the current disinflationary environment, we believe it is
risky to depend on price increases to grow revenues. We are underweighted in
such slower-growth industries as finance, transportation and consumer
non-durables.
STRENGTH IN THE FUND'S PORTFOLIO WAS BROAD BASED OVER THE 12-MONTH REPORTING
PERIOD. ChiRex, in the basic materials sector (2.0% of the fund's total
assets as of September 30), Daou Systems, in the health care sector (2.6%),
and AMRESCO, in the financial services sector (1.3%) were particularly strong
performers. The fund also benefited from gains in several new issues,
including semiconductor equipment maker Cymer. The fund bought Cymer at under
$10 per share (before a 2-1 stock split) on the company's initial public
offering,*** then held on as its price climbed more than eight-fold. (Keep in
mind that few initial public offerings experience that rate of appreciation.)
The fund subsequently sold its position in Comer before the fiscal year end
after our research indicated a potential risk to future orders.
WE BELIEVE THE ECONOMIC ENVIRONMENT WILL REMAIN POSITIVE FOR DOMESTIC STOCKS.
Interest rates are likely to remain moderate for the immediate future as the
economy continues to slow. Despite a modest reduction in the overall rate of
economic growth, however, corporate profits should continue to
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PORTFOLIO COMPOSITION BY SECTOR
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As a percentage of total assets on September 30, 1997
[EDGAR REPRESENTATION OF CHART]
Small Company Growth Fund S&P SmallCap 600 Index+
Basic Materials 7% 7%
Capital Goods & Services 7% 8%
Commercial Services 10% 7%
Consumer Durables 2% 5%
Consumer Non-Durables 1% 4%
Consumer Services 6% 5%
Energy 5% 6%
Financial Services 10% 17%
Health Care 15% 10%
Retail Trade 5% 6%
Short-Term 8% 0%
Technology 21% 17%
Transportation 1% 3%
Utilities 0% 5%
Other Assets 2% 0%
+ An unmanaged index, that includes no expenses or transaction charges,
of small-capitalization stocks.
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TOP 10 HOLDINGS
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As a percentage of total assets on September 30, 1997
1 Daou Systems 2.6%
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2 Sipex 2.6%
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3 TCF Financial 2.4%
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4 ReliaStar Financial 2.2%
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5 Comverse Technology 2.1%
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6 Natural MicroSystems 2.1%
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7 Herman Miller 2.0%
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8 ChiRex 2.0%
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9 DuPont Photomasks 2.0%
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10 Newpark Resources 1.9%
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*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
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5 1997 Annual Report - U.S. Growth Funds
<PAGE>
SMALL COMPANY GROWTH FUND (CONTINUED)
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[PHOTO]
JOYCE HALBE, CFA
assists with the management of Emerging Growth Fund and Small Company Growth
Fund. She has 12 years of financial experience.
- --------------------------------------------------------------------------------
provide a solid underpinning to equity prices. Recent turmoil in Southeast Asian
currency and financial markets could also contribute to increased global demand
for U.S. equities.
WE ARE PARTICULARLY OPTIMISTIC ABOUT THE LONGER-TERM OUTLOOK FOR
SMALL-CAPITALIZATION STOCKS. Over the short term, global political
uncertainty could add to the group's inherently greater volatility. But the
relatively minimal exposure of small companies to foreign economies may
protect them from events unfolding in Southeast Asia. And while small stocks
have rallied substantially since April, we believe small-cap stocks are still
attractively valued*** relative to larger companies. We are prepared to use
periods of market weakness to add to the fund's holdings in technology stocks
as companies with solid earnings prospects become available at reasonable
prices.
Thank you for your investment in Small Company Growth Fund. We are dedicated to
providing you with superior service and look forward to helping you achieve your
investment goals.
Sincerely,
/s/ Sandra Shrewsbury
Sandra Shrewsbury
Portfolio Manager
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
6 1997 Annual Report - U.S. Growth Funds
<PAGE>
EMERGING GROWTH FUND
- --------------------------------------------------------------------------------
[PHOTO]
SANDRA SHREWSBURY, CFA
is primarily responsible for the management of Emerging Growth Fund. She has 14
years of financial experience. Other management team members are shown on
pages 5-9.
- --------------------------------------------------------------------------------
November 17, 1997
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1997, EMERGING GROWTH FUND CLASS A
ACHIEVED A TOTAL RETURN OF 21.04%* WITH ALL DISTRIBUTIONS REINVESTED BUT NOT
INCLUDING THE FUND'S SALES CHARGE. During the same period, the Standard & Poor's
MidCap 400 Index** gained 39.09%, while the Lipper Mid Cap Funds Average+
returned 26.88%.
SEVERAL FACTORS CONTRIBUTED TO THE FUND'S UNDERPERFORMANCE DURING THE
REPORTING PERIOD. First, a number of companies we owned failed to meet our
earnings expectations last year. In the market environment that prevailed for
small- and mid-cap companies at that time, negative earnings surprises were
severely punished. Also, the fund typically holds companies that are smaller
and more growth oriented than those comprising the S&P MidCap 400 benchmark.
The fourth quarter of 1996 was an especially difficult period for our
preferred type of company. Despite the troublesome market environment for
mid-cap growth stocks early in the reporting period, we remained true to our
strategy of buying carefully selected midsize companies that we believe are
poised for above-average earnings growth.
- --------------------------------------------------------------------------------
PERFORMANCE THROUGH SEPTEMBER 30, 1997*
- --------------------------------------------------------------------------------
Growth of $10,000 Invested Since Inception
[EDGAR REPRESENTATION OF CHART]
Emerging Growth Fund
Class A, reflects the fund's S&P MidCap Lipper Mid Cap
4% sales charge 400 Index ** Funds Average+
4/90 9,600 10,000 10,000
4/90 9,600 10,000 10,000
5/90 10,291 10,977 10,971
6/90 10,406 11,021 11,031
7/90 10,570 10,769 10,705
8/90 8,736 9,653 9,575
9/90 8,255 9,062 8,901
10/90 7,957 8,786 8,620
11/90 8,890 9,631 9,387
12/90 9,226 10,189 9,844
1/91 10,199 10,995 10,611
2/91 11,307 11,982 11,462
3/91 11,880 12,529 12,035
4/91 11,754 12,525 11,970
5/91 12,641 13,102 12,560
6/91 11,940 12,437 11,910
7/91 12,923 13,185 12,607
8/91 13,501 13,665 13,081
9/91 13,357 13,621 13,075
10/91 13,925 14,154 13,527
11/91 13,289 13,677 13,053
12/91 15,263 15,294 14,576
1/92 15,350 15,565 14,978
2/92 15,408 15,812 15,222
3/92 14,672 15,217 14,562
4/92 14,061 15,035 14,091
5/92 14,381 15,177 14,155
6/92 13,722 14,744 13,577
7/92 14,216 15,476 14,143
8/92 13,606 15,106 13,751
9/92 13,964 15,317 14,029
10/92 14,633 15,684 14,570
11/92 15,874 16,560 15,534
12/92 16,377 17,116 16,088
1/93 16,678 17,330 16,395
2/93 16,164 17,088 15,776
3/93 16,823 17,678 16,343
4/93 16,019 17,215 15,806
5/93 17,153 17,999 16,680
6/93 17,318 18,090 16,825
7/93 17,376 18,055 16,863
8/93 18,316 18,800 17,599
9/93 19,120 18,999 18,106
10/93 19,023 19,061 18,288
11/93 18,451 18,639 17,816
12/93 19,401 19,505 18,551
1/94 20,070 19,958 19,126
2/94 19,837 19,675 19,017
3/94 18,761 18,764 17,975
4/94 18,548 18,904 17,959
5/94 17,957 18,725 17,708
6/94 17,230 18,080 16,980
7/94 17,608 18,692 17,355
8/94 18,858 19,671 18,438
9/94 18,665 19,304 18,421
10/94 18,791 19,515 18,644
11/94 18,035 18,635 17,897
12/94 18,442 18,806 18,216
1/95 18,122 19,001 18,133
2/95 18,965 19,998 18,867
3/95 19,847 20,346 19,463
4/95 20,283 20,754 19,607
5/95 20,622 21,255 19,952
6/95 21,707 22,120 21,047
7/95 23,781 23,274 22,533
8/95 24,188 23,704 22,807
9/95 25,138 24,279 23,424
10/95 24,411 23,654 22,823
11/95 25,526 24,687 23,635
12/95 25,701 24,626 23,856
1/96 25,990 24,983 23,983
2/96 27,123 25,832 24,904
3/96 27,807 26,142 25,329
4/96 29,175 26,940 26,724
5/96 30,243 27,305 27,475
6/96 29,624 26,895 26,625
7/96 26,781 25,075 24,425
8/96 27,978 26,521 25,779
9/96 29,624 27,678 27,443
10/96 28,544 27,758 26,940
11/96 29,414 29,322 28,028
12/96 28,755 29,354 27,881
1/97 29,508 30,456 28,712
2/97 28,332 30,206 27,620
3/97 26,522 28,918 26,088
4/97 26,686 29,667 26,479
5/97 29,390 32,261 29,098
6/97 31,365 33,168 30,141
7/97 33,881 36,448 32,411
8/97 33,481 36,404 32,259
9/97 35,856 38,498 34,289
** An unmanaged index, that includes no expenses or transaction charges, of
mid-capitalization stocks.
+ The average total return, not including sales charges, of similar funds as
characterized by Lipper Analytical Services.
Class A Average Annualized Total Returns
Includes the fund's maximum 4% front-end sales charge
One Year 16.20%
- --------------------------------------------------------------------------------
Five Year 19.76%
- --------------------------------------------------------------------------------
Since Inception (4/23/90) 18.71%
- --------------------------------------------------------------------------------
Class B and Y Cumulative Total Returns
Class B share returns include the fund's maximum 4% contingent deferred sales
charge. Sales charges do not apply to Class Y shares.
Class B Since Inception (2/18/97) 17.21%
- --------------------------------------------------------------------------------
Class Y Since Inception (2/18/97) 21.93%
- --------------------------------------------------------------------------------
* PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of
an investment will fluctuate so that fund shares, when sold, may be worth more
or less than their original cost. Safety of principal is not guaranteed. Stocks
of mid-sized companies are more volatile than stocks of larger companies. These
companies may have limited product lines and operating histories and may rely on
narrower management teams. See the prospectus for more complete information
regarding risks. During most periods, the fund's advisor waived or paid certain
expenses and/or the fund's distributor voluntarily waived certain 12b-1 fees.
Without waivers, class A returns would have been lower.
All fund and benchmark returns include reinvested distributions.
- --------------------------------------------------------------------------------
7 1997 Annual Report - U.S. Growth Funds
<PAGE>
EMERGING GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------
[PHOTO]
MARY HOYME, CFA
assists with the management of Emerging Growth Fund and Small Company Growth
Fund. She has 14 years of financial experience.
- --------------------------------------------------------------------------------
THE FUND MADE ONLY MODEST CHANGES IN SECTOR*** WEIGHTINGS DURING THE
REPORTING PERIOD. We took advantage of strengthening fundamentals in the
energy industry to add to our position in that sector, and we also increased
our holdings in financial companies early this year as concerns about higher
interest rates abated. As the reporting period ended, the fund continued to
be overweighted*** in technology, health care and consumer services. We
anticipate that each of these industries will enjoy solid earnings growth
that is generated largely by gains in unit volume. In the current
disinflationary environment, it is risky to depend on price increases to grow
revenues. We are underweighted in such slower-growth industries as utilities,
basic materials and consumer durables.
STRONG-PERFORMING HOLDINGS WERE SPREAD ACROSS MANY SECTORS IN THE FUND'S
PORTFOLIO. Stage Stores in the retail sector (1.8% of the fund's total assets
as of September 30), ASM Litho
graphy in the technology sector (1.9%), and
AMRESCO in the financial services sector (1.3%) were particularly strong
performers. The fund also achieved solid returns from its investment in
health-care provider Daou Systems. We bought Daou on its initial public
offering*** at $9 per share, held on as the stock tripled in value and then
sold the stock before the end of the period. (Keep in mind that few initial
public offerings experience that rate of appreciation.) We also sold our
holdings in two technology firms, FORE Systems and INSO Corp., and replaced
them with software companies Vantive Corp. (0.7%) and VERITAS Software (0.5%).
WE BELIEVE THE ECONOMIC ENVIRONMENT WILL REMAIN POSITIVE FOR DOMESTIC STOCKS.
Interest rates are likely to remain moderate for the immediate future as the
economy continues to slow. Despite a modest reduction in the overall rate of
economic growth, corporate profits should continue to provide a solid
underpinning to equity prices. Recent turmoil in Southeast Asian currency and
financial markets could also contribute to increased global demand for U.S.
equities.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY SECTOR
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1997
[EDGAR REPRESENTATION OF CHART]
Emerging Growth Fund S&P MidCap 400 Index**
Basic Materials 5% 9%
Capital Goods & Services 7% 9%
Commercial Services 6% 6%
Consumer Durables 1% 2%
Consumer Non-Durables 5% 5%
Consumer Services 8% 4%
Energy 7% 7%
Financial Services 15% 16%
Health Care 13% 9%
Retail Trade 6% 6%
Short-Term 6% 0%
Technology 19% 13%
Transportation 1% 2%
Utilities 0% 12%
Other Assets 1% 0%
** An unmanaged index, that includes no expenses or transaction charges, of
mid-capitalization stocks.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1997
1 The FINOVA Group 2.4%
- --------------------------------------------------------------------------------
2 TCF Financial 2.3%
- --------------------------------------------------------------------------------
3 Green Tree Financial 2.1%
- --------------------------------------------------------------------------------
4 Elan Corporation, ADR 1.9%
- --------------------------------------------------------------------------------
5 ASM Lithography 1.9%
- --------------------------------------------------------------------------------
6 Kohl's 1.9%
- --------------------------------------------------------------------------------
7 Stewart Enterprises Class A 1.8%
- --------------------------------------------------------------------------------
8 Smith International 1.8%
- --------------------------------------------------------------------------------
9 Stage Stores 1.8%
- --------------------------------------------------------------------------------
10 Sealed Air 1.7%
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
8 1997 Annual Report - U.S. Growth Funds
<PAGE>
EMERGING GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------
[PHOTO]
ADAM BENSON
assists with the management of Emerging Growth Fund and Small Company Growth
Fund. He has three years of financial experience.
- --------------------------------------------------------------------------------
[PHOTO]
TIMOTHY MCSWEENEY
(NOT PICTURED)
assists with the management of Emerging Growth Fund and Small Company Growth
Fund. He has three years of financial experience.
- --------------------------------------------------------------------------------
WE ARE PARTICULARLY OPTIMISTIC ABOUT THE LONGER-TERM OUTLOOK FOR
MID-CAPITALIZATION STOCKS. Over the short term, global political uncertainty
could add to the group's inherently greater volatility. But the relatively
minimal exposure of many midsize companies to foreign economies may protect
them from events unfolding in Southeast Asia. And while midsize stocks have
rallied substantially since April, we believe that the mid-cap group is still
attractively valued*** relative to larger companies. We are prepared to use
periods of market weakness to add to the fund's holdings in technology stocks
as companies with solid earnings prospects become available at reasonable
prices.
Thank you for your investment in Emerging Growth Fund. We are dedicated to
providing you with superior service and look forward to helping you achieve your
investment goals.
Sincerely,
/s/ Sandra Shrewsbury
Sandra Shrewsbury
Portfolio Manager
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
9 1997 Annual Report - U.S. Growth Funds
<PAGE>
GROWTH FUND
- --------------------------------------------------------------------------------
[PHOTO]
STEVE MARKUSEN, CFA
is primarily responsible for the management of Growth Fund's portfolio. He has
13 years of financial experience.
- --------------------------------------------------------------------------------
November 17, 1997
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
FOR THE ONE-YEAR PERIOD ENDED SEPTEMBER 30, 1997, GROWTH FUND CLASS A
RETURNED 34.09%,* WHICH INCLUDES REINVESTED DISTRIBUTIONS BUT NOT THE FUND'S
SALES CHARGE. This compares to a 33.52% return for the Lipper Growth Funds
Average+ and a 40.45% return for the S&P 500 Index.** The fund's focus on
growth stocks with smaller average market capitalizations*** than the S&P 500
caused it to underperform the index. The S&P 500 benefited from the strong
performance of a relatively small group of large, blue-chip companies. We
outperformed the Lipper Growth Funds Average due to our stock selection and
sector*** weightings. We are pleased to note that we have outperformed the
Lipper average in each of the two fiscal years ending September 30, 1996,++
and 1997, achieving our goal of delivering consistent, competitive
performance.
THE FUND'S PERFORMANCE BENEFITED FROM BOTH STOCK SELECTION AND SECTOR
WEIGHTINGS. Our investments in the energy sector, particularly Schlumberger
(5.2% of the fund's total assets as of September 30) and Transocean Offshore
(4.7%), continued to deliver strong performance. A tight supply situation
combined with strong demand led to sharply higher revenues and margins for
oil service companies. We believe this trend will continue over the next
several years. Our decision to increase our technology investments in the
March/April market correction*** had a positive impact on
- --------------------------------------------------------------------------------
PERFORMANCE THROUGH SEPTEMBER 30, 1997*
- --------------------------------------------------------------------------------
Growth of $10,000 Invested Since Inception
[EDGAR REPRESENTATION OF CHART]
Growth Fund Class A,
reflects the fund's 4% Lipper Growth
sales charge S&P 500 Index** Funds Average+
3/87 9,600 10,000 10,000
3/87 9,629 10,000 10,000
4/87 9,446 9,911 9,851
5/87 9,494 9,997 9,915
6/87 9,950 10,502 10,241
7/87 10,298 11,034 10,686
8/87 10,713 11,446 11,039
9/87 10,602 11,195 10,865
10/87 8,336 8,784 8,382
11/87 7,707 8,060 7,824
12/87 8,337 8,673 8,516
1/88 8,640 9,038 8,709
2/88 9,127 9,459 9,215
3/88 8,901 9,167 9,147
4/88 9,107 9,268 9,226
5/88 8,999 9,349 9,163
6/88 9,490 9,778 9,669
7/88 9,343 9,740 9,533
8/88 9,087 9,410 9,248
9/88 9,456 9,811 9,609
10/88 9,485 10,084 9,693
11/88 9,189 9,940 9,505
12/88 9,354 10,114 9,752
1/89 10,020 10,854 10,373
2/89 9,831 10,584 10,241
3/89 10,303 10,831 10,489
4/89 10,912 11,393 11,025
5/89 11,400 11,854 11,500
6/89 11,180 11,787 11,353
7/89 12,151 12,851 12,188
8/89 12,531 13,102 12,505
9/89 12,512 13,049 12,547
10/89 12,200 12,746 12,141
11/89 12,502 13,006 12,325
12/89 13,020 13,318 12,445
1/90 11,981 12,424 11,620
2/90 12,142 12,584 11,818
3/90 12,748 12,918 12,172
4/90 12,475 12,595 11,899
5/90 13,964 13,823 13,048
6/90 14,095 13,730 13,090
7/90 13,801 13,686 12,855
8/90 12,410 12,449 11,648
9/90 11,910 11,843 10,967
10/90 11,757 11,793 10,752
11/90 12,746 12,555 11,490
12/90 13,174 12,905 11,891
1/91 14,148 13,467 12,692
2/91 15,266 14,430 13,611
3/91 15,933 14,779 14,064
4/91 15,902 14,814 14,037
5/91 16,796 15,453 14,662
6/91 15,973 14,745 13,893
7/91 17,127 15,433 14,656
8/91 17,776 15,798 15,117
9/91 17,416 15,534 14,977
10/91 17,819 15,743 15,292
11/91 17,013 15,109 14,696
12/91 19,483 16,837 16,398
1/92 19,473 16,523 16,422
2/92 19,634 16,737 16,669
3/92 18,871 16,411 16,145
4/92 18,634 16,893 16,060
5/92 18,710 16,976 16,192
6/92 18,183 16,723 15,715
7/92 18,538 17,406 16,288
8/92 17,892 17,050 15,935
9/92 18,420 17,250 16,219
10/92 18,873 17,310 16,538
11/92 19,780 17,899 17,388
12/92 20,038 18,119 17,709
1/93 20,449 18,271 17,964
2/93 20,146 18,520 17,678
3/93 20,525 18,910 18,188
4/93 19,473 18,453 17,663
5/93 20,059 18,947 18,352
6/93 20,092 19,002 18,412
7/93 19,853 18,926 18,353
8/93 20,634 19,644 19,156
9/93 20,971 19,493 19,359
10/93 20,884 19,897 19,632
11/93 20,439 19,707 19,242
12/93 21,059 19,945 19,800
1/94 21,844 20,623 20,444
2/94 21,266 20,064 20,113
3/94 20,165 19,189 19,143
4/94 20,263 19,435 19,230
5/94 20,579 19,754 19,331
6/94 19,902 19,270 18,660
7/94 20,459 19,903 19,176
8/94 21,464 20,719 20,074
9/94 20,655 20,212 19,657
10/94 20,939 20,666 19,975
11/94 20,043 19,913 19,216
12/94 20,329 20,209 19,407
1/95 20,098 20,733 19,546
2/95 21,197 21,541 20,320
3/95 21,770 22,176 20,909
4/95 22,156 22,830 21,393
5/95 22,662 23,742 22,048
6/95 23,477 24,294 22,992
7/95 24,380 25,099 24,115
8/95 24,539 25,162 24,306
9/95 24,910 26,224 25,012
10/95 24,092 26,130 24,636
11/95 25,728 27,277 25,500
12/95 26,067 27,803 25,659
1/96 26,259 28,749 26,214
2/96 27,056 29,016 26,785
3/96 28,217 29,295 27,017
4/96 29,027 29,727 27,824
5/96 29,357 30,494 28,483
6/96 28,729 30,610 28,107
7/96 27,037 29,257 26,503
8/96 28,316 29,875 27,414
9/96 29,114 31,556 28,925
10/96 29,975 32,426 29,247
11/96 31,864 34,877 31,078
12/96 30,949 34,186 30,663
1/97 31,712 36,322 32,251
2/97 31,346 36,607 31,892
3/97 30,186 35,103 30,498
4/97 30,705 37,199 31,627
5/97 32,994 39,463 33,881
6/97 34,215 41,231 35,220
7/97 38,092 44,509 38,092
8/97 37,145 42,017 36,880
9/97 39,038 44,319 38,933
** An unmanaged index, that includes no expenses or transaction charges, of
large-capitalization stocks.
+ The average total return, not including sales charges, of similar funds as
characterized by Lipper Analytical Services.
- --------------------------------------------------------------------------------
Class A Average Annualized Total Returns
Includes the fund's maximum 4% front-end sales charge
One Year 28.72%
- --------------------------------------------------------------------------------
Five Year 15.26%
- --------------------------------------------------------------------------------
Ten Year 13.45%
- --------------------------------------------------------------------------------
Since Inception (3/16/87) 13.78%
- --------------------------------------------------------------------------------
Class B Cumulative Total Returns
Includes the fund's maximum 4% contingent deferred sales charge
Since Inception (2/18/97) 17.08%
- --------------------------------------------------------------------------------
* PLEASE REMEMBER, YOU COULD LOSE MONEY WITH THIS INVESTMENT. PAST PERFORMANCE
DOES NOT GUARANTEE FUTURE RESULTS. The investment return and principal value of
an investment will fluctuate so that fund shares, when sold, may be worth more
or less than their original cost. Safety of principal is not guaranteed. During
most periods, the fund's advisor waived or paid certain expenses and/or the
fund's distributor voluntarily waived certain 12b-1 fees. Without waivers, class
A returns would have been lower.
All fund and benchmark returns include reinvested distributions.
++ Total returns for the year ended September 30, 1996, for Growth Fund and the
Lipper average were: 16.87% and 15.89%, respectively (including reinvested
distributions but not sales charges).
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
10 1997 Annual Report - U.S. Growth Funds
<PAGE>
GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------
[PHOTO]
BRENT MELLUM, CFA
assists with the management of Growth Fund. He has three years of financial
experience.
- --------------------------------------------------------------------------------
performance. Investments in companies like Compaq Computer (1.1%), Oracle
(1.1%), Cisco Systems (1.1%) and International Business Machines (1.6%) have
delivered superior returns. Financial services stocks, another area where we
increased our investments, also performed well with excellent gains in American
International Group (3.1%) and Norwest (3.0%). Stocks in the capital goods
sector benefited from continued economic growth. Auto parts manufacturer Magna
International (3.4%), aerospace company AlliedSignal (4.2%), and truck trailer
manufacturer, Wabash National (1.1%), all delivered superior returns during the
past 12 months. In other areas, retailer Gap (4.3%) was a great stock during the
past year and in the past six months our investment in AirTouch Communications
(4.0%) has begun to have a significantly positive impact on performance.
OVER THE PAST YEAR, WE MADE A NUMBER OF CHANGES IN THE PORTFOLIO. As
previously mentioned, we used the market correction last spring to increase
our portfolio holdings in technology and financial stocks. We see growth
continuing in these sectors with the stocks attractively valued.*** New
investments in technology include ADC Telecommunications (1.0%), a broad line
telecommunications equipment supplier and EMC Corp. (2.0%), a vendor of data
storage products. In financial services, we added U.S. Bancorp (2.4%,
formerly First Bank Systems). We believe all of these stocks offer
above-average growth, yet are good values based on our fundamental research.
In the health care area, we added to our investment in St. Jude Medical
(1.7%), a company we believe is on track to grow earnings beginning mid-1998.
On the sell side, we eliminated our positions in Columbia/HCA Healthcare and
WMX Technologies. For both companies, our research indicated diminished
long-term growth prospects.
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY SECTOR
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1997
[EDGAR REPRESENTATION OF CHART]
Growth Fund S&P 500 Index**
Basic Materials 10% 6%
Capital Goods & Services 12% 10%
Commerical Services 0% 1%
Consumer Durables 3% 3%
Consumer Non-Durables 3% 11%
Consumer Services 0% 4%
Energy 16% 9%
Financial Services 16% 16%
Health Care 6% 11%
Retail Trade 7% 5%
Technology 15% 14%
Transportation 4% 1%
Utilities 6% 9%
Other Assets 2% 0%
** An unmanaged index, that includes no expenses or transaction charges,
of large-capitalization stocks.
- --------------------------------------------------------------------------------
TOP 10 HOLDINGS
- --------------------------------------------------------------------------------
As a percentage of total assets on September 30, 1997
1 Schlumberger Limited 5.2%
- --------------------------------------------------------------------------------
2 Transocean Offshore 4.7%
- --------------------------------------------------------------------------------
3 Gap 4.3%
- --------------------------------------------------------------------------------
4 AlliedSignal 4.2%
- --------------------------------------------------------------------------------
5 AirTouch Communications 4.0%
- --------------------------------------------------------------------------------
6 Baker Hughes 3.8%
- --------------------------------------------------------------------------------
7 Magna International Class A 3.4%
- --------------------------------------------------------------------------------
8 American International Group 3.1%
- --------------------------------------------------------------------------------
9 Norwest 3.0%
- --------------------------------------------------------------------------------
10 Reebok International 3.0%
- --------------------------------------------------------------------------------
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
11 1997 Annual Report - U.S. Growth Funds
<PAGE>
GROWTH FUND (CONTINUED)
- --------------------------------------------------------------------------------
OUR OUTLOOK CALLS FOR CONTINUED ECONOMIC GROWTH, BUT AN INCREASE IN MARKET
VOLATILITY. We believe that economic growth in the United States and the rest of
the world will continue at a moderate pace despite the problems in Southeast
Asia. Recent declines in global markets and the U.S. stock market are due in our
opinion to the high valuation*** of global equities. As we have written
previously, any deviation from the moderate growth, low inflation environment of
today will have a negative impact on stock prices.
OUR STRATEGY IN THIS MARKET ENVIRONMENT IS TO FOCUS ON THE INVESTMENT
FUNDAMENTALS OF INDIVIDUAL STOCKS.
We will closely monitor the progress of our existing holdings and look for
opportunities to add new investments that meet our criteria for long-term growth
and good value. We will maintain a well diversified portfolio consistent with
the fund's primary objective of long-term capital appreciation and the secondary
objective of current income.
Thank you for your investment in Growth Fund. As managers we appreciate your
confidence, and we will continue to diligently pursue our goal of providing our
shareholders with consistent, competitive investment performance.
Sincerely,
/s/ Steve Markusen /s/ Brent Mellum
Steve Markusen Brent Mellum
Portfolio Manager Portfolio Manager
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
12 1997 Annual Report - U.S. Growth Funds
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES September 30, 1997
................................................................................
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH GROWTH GROWTH
FUND FUND FUND
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS:
Investments in securities at market value* (note 2)
(including repurchase agreements of $2,842,000;
$20,019,000 and $457,000, respectively) .................. $ 36,281,948 $ 340,056,171 $ 199,054,313
Cash in bank on demand deposit ............................. 117,132 25,853 25,768
Receivable for investment securities sold .................. 331,989 3,319,889 3,554,031
Receivable for fund shares sold ............................ 184,965 1,354,163 90,709
Dividends and accrued interest receivable .................. 2,787 80,933 105,587
Other assets ............................................... 1,683 2,616 --
------------- -------------- --------------
Total assets ............................................. 36,920,504 344,839,625 202,830,408
------------- -------------- --------------
LIABILITIES:
Payable for investment securities purchased ................ 676,625 8,724,027 --
Payable for fund shares redeemed ........................... 85,798 659,302 493,579
Accrued investment management fee .......................... 20,928 180,196 116,468
Accrued distribution and service fees ...................... 9,695 75,736 56,717
------------- -------------- --------------
Total liabilities ........................................ 793,046 9,639,261 666,764
------------- -------------- --------------
Net assets applicable to outstanding capital stock ....... $ 36,127,458 $ 335,200,364 $ 202,163,644
------------- -------------- --------------
------------- -------------- --------------
COMPOSITION OF NET ASSETS:
Capital stock and additional paid-in capital ............... $ 24,368,913 $ 163,184,341 $ 96,506,615
Accumulated net realized gain on investments ............... 281,765 32,397,483 20,723,315
Unrealized appreciation of investments ..................... 11,476,780 139,618,540 84,933,714
------------- -------------- --------------
Total - representing net assets applicable to outstanding
capital stock .......................................... $ 36,127,458 $ 335,200,364 $ 202,163,644
------------- -------------- --------------
------------- -------------- --------------
* Investments in securities at identified cost ........... $ 24,805,168 $ 200,437,631 $ 114,120,599
------------- -------------- --------------
------------- -------------- --------------
NET ASSET VALUE AND OFFERING PRICE:
CLASS A (NOTE 1):
Net assets ............................................... $ 35,647,823 $ 274,779,473 $ 201,954,257
Shares outstanding (authorized four billion shares for
each fund of $0.01 par value) .......................... 3,725,085 18,019,878 15,788,836
Net asset value .......................................... $ 9.57 $ 15.25 $ 12.79
Maximum offering price per share (net asset value plus 4%
of offering price) ..................................... $ 9.97 $ 15.89 $ 13.32
CLASS B:
Net assets ............................................... $ 479,635 $ 1,028,098 $ 209,387
Shares outstanding (authorized two billion shares for each
fund of $0.01 par value) ............................... 50,254 67,644 16,426
Net asset value and offering price per share ............. $ 9.54 $ 15.20 $ 12.75
CLASS Y:
Net assets ............................................... -- $ 59,392,793 --
Shares outstanding (authorized one billion shares of $0.01
par value) ............................................. -- 3,885,302 --
Net asset value and offering price per share ............. -- $ 15.29 --
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
13 1997 Annual Report - U. S. Growth Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Year Ended September 30,
1997
................................................................................
<TABLE>
<CAPTION>
SMALL
COMPANY EMERGING
GROWTH GROWTH GROWTH
FUND FUND FUND
------------ ------------- ------------
<S> <C> <C> <C>
INCOME:
Dividends (net of foreign withholding taxes of $0; $0 and
$15,469, respectively) ................................... $ 84,603 $ 903,320 $ 2,334,335
Interest ................................................... 92,386 1,123,736 262,807
------------ ------------- ------------
Total income ............................................. 176,989 2,027,056 2,597,142
------------ ------------- ------------
EXPENSES (NOTE 5):
Investment management fee .................................. 223,793 2,034,041 1,314,478
Distribution and service fees:
CLASS A .................................................. 148,666 1,344,972 933,969
CLASS B .................................................. 1,040 3,309 559
CLASS Y .................................................. -- -- --
Transfer agent and dividend disbursing agent fees .......... 50,477 188,044 120,419
Custodian and accounting fees .............................. 44,656 214,266 146,701
Registration fees .......................................... 36,661 51,921 34,945
Reports to shareholders .................................... 23,692 51,827 38,124
Directors' fees ............................................ 7,968 7,968 7,968
Audit and legal fees ....................................... 48,299 41,414 41,654
Other expenses ............................................. 7,990 30,424 20,223
------------ ------------- ------------
Total expenses ........................................... 593,242 3,968,186 2,659,040
Less Class A expenses waived by the distributor ........ (47,801) (430,769) (299,188)
Less expenses waived by the adviser .................... (143,996) -- --
------------ ------------- ------------
Net expenses before expenses paid indirectly ............. 401,445 3,537,417 2,359,852
Less expenses paid indirectly .......................... (439) (936) (45)
------------ ------------- ------------
Total net expenses ....................................... 401,006 3,536,481 2,359,807
------------ ------------- ------------
Net investment income (loss) ............................. (224,017) (1,509,425) 237,335
------------ ------------- ------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gain on investments (note 3) .................. 3,716,140 34,831,105 24,239,313
Net change in unrealized appreciation or depreciation of
investments .............................................. 8,021,635 25,682,866 30,823,801
------------ ------------- ------------
Net gain on investments .................................. 11,737,775 60,513,971 55,063,114
------------ ------------- ------------
Net increase in net assets resulting from operations ... $11,513,758 $ 59,004,546 $55,300,449
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
14 1997 Annual Report - U. S. Growth Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND
EMERGING GROWTH FUND GROWTH FUND
---------------------------- ----------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
9/30/97 9/30/96 9/30/97 9/30/96 9/30/97 9/30/96
------------ ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ... $ (224,017) $ 84,218 $ (1,509,425) $ (1,124,687) $ 237,335 $ 498,018
Net realized gain on
investments .................. 3,716,140 7,564,663 34,831,105 32,003,899 24,239,313 16,132,322
Net change in unrealized
appreciation or depreciation
of investments ............... 8,021,635 (5,498,330) 25,682,866 13,771,971 30,823,801 10,738,269
------------ ------------- ------------- ------------- ------------- -------------
Net increase in net assets
resulting from
operations ................. 11,513,758 2,150,551 59,004,546 44,651,183 55,300,449 27,368,609
------------ ------------- ------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
CLASS A:
From net investment income ... (82,567) (175,841) -- -- (284,304) (511,937)
From net realized gains ...... (8,846,691) (3,725,755) (27,377,820) (23,854,784) (17,945,057) (19,384,717)
CLASS B:
From net investment income ... -- -- -- -- -- --
From net realized gains ...... -- -- -- -- -- --
CLASS Y:
From net investment income ... -- -- -- -- -- --
From net realized gains ...... -- -- -- -- -- --
------------ ------------- ------------- ------------- ------------- -------------
Total distributions .......... (8,929,258) (3,901,596) (27,377,820) (23,854,784) (18,229,361) (19,896,654)
------------ ------------- ------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE
4):
CLASS A ........................ 2,174,732 (15,702,321) (50,186,524) 30,340,269 (13,397,914) (1,655,157)
CLASS B ........................ 400,314 -- 860,466 -- 188,390 --
CLASS Y ........................ -- -- 49,131,008 -- -- --
------------ ------------- ------------- ------------- ------------- -------------
Increase (decrease) in net
assets from capital share
transactions ............... 2,575,046 (15,702,321) (195,050) 30,340,269 (13,209,524) (1,655,157)
------------ ------------- ------------- ------------- ------------- -------------
Total increase (decrease) in
net assets ................. 5,159,546 (17,453,366) 31,431,676 51,136,668 23,861,564 5,816,798
Net assets at beginning of
year ......................... 30,967,912 48,421,278 303,768,688 252,632,020 178,302,080 172,485,282
------------ ------------- ------------- ------------- ------------- -------------
Net assets at end of year ...... $ 36,127,458 $ 30,967,912 $ 335,200,364 $ 303,768,688 $ 202,163,644 $ 178,302,080
------------ ------------- ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- ------------- -------------
Undistributed net investment
income ....................... $ -- $ 80,672 $ -- $ -- $ -- $ 46,969
------------ ------------- ------------- ------------- ------------- -------------
------------ ------------- ------------- ------------- ------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
15 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) ORGANIZATION
................................
Piper Funds Inc. (the company) is registered under the
Investment Company Act of 1940 (as amended) as a single,
open-end management investment company. The company
currently has 12 series, including Small Company Growth
Fund, Emerging Growth Fund and Growth Fund (the funds).
Each fund is classified as a diversified series. The
company's articles of incorporation permit the board of
directors to create additional series in the future.
The funds commenced offering Class B shares and Emerging
Growth Fund commenced offering Class Y shares on February
18, 1997. All shares existing prior to that date were
classified as Class A shares. Key features of each class
are:
CLASS A:
- Subject to a front-end sales charge
- Lower distribution and service fees than Class B
CLASS B:
- No front-end sales charge
- Subject to a contingent deferred sales charge upon
redemption
- Higher distribution and service fees than Class A
- Automatic conversion to Class A shares at the beginning
of the sixth calendar year after issuance
CLASS Y:
- Requires a minimum initial investment of $1 million
- No front-end or contingent deferred sales charges
- No distribution and service fees
The classes of shares have the same rights and are
identical in all respects except that each class bears
different distribution expenses, has exclusive voting
rights with respect to matters affecting that class and
has different exchange privileges.
Small Company Growth Fund invests primarily in common
stocks of small-capitalization companies believed to
possess superior growth potential.
Emerging Growth Fund invests primarily in common stocks
and securities convertible into common stocks of emerging
growth companies.
Growth Fund invests primarily in a broadly diversified
portfolio of stocks or securities convertible into or
carrying rights to buy common stocks.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
Portfolio securities for which market quotations are
readily available are valued at current market value. If
market quotations or valuations are not available, or if
such quotations or valuations are believed to be
inaccurate, unreliable or not reflective of market value,
portfolio securities are valued
- --------------------------------------------------------------------------------
16 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
according to procedures adopted by the funds' board of
directors in good faith at "fair value", that is, a price
that the fund might reasonably expect to receive for the
security or other asset upon its current sale.
Pricing services value domestic and foreign equity
securities (and occasionally fixed-income securities)
traded on a securities exchange or Nasdaq at the last
reported sale price, up to the time of valuation. If there
are no reported sales of a security on the valuation date,
it is valued at the mean between the published bid and
asked prices reported by the exchange or Nasdaq. If there
are no sales and no published bid and asked quotations for
a security on the valuation date or the security is not
traded on an exchange or Nasdaq, the pricing service may
obtain market quotations directly from broker-dealers.
Securities transactions are accounted for on the date
securities are purchased or sold. Realized gains and
losses are calculated on the identified-cost basis.
Dividend income is recognized on the ex-dividend date and
interest income, including amortization of bond discount
and premium, is recorded on an accrual basis.
FEDERAL TAXES
Each fund is treated separately for federal income tax
purposes. Each fund intends to comply with the
requirements of the Internal Revenue Code applicable to
regulated investment companies and not be subject to
federal income tax. Therefore, no income tax provision is
required. The funds also intend to distribute their
taxable net investment income and realized gains, if any,
to avoid the payment of any federal excise taxes.
Net investment income and net realized gains (losses) may
differ for financial statement and tax purposes primarily
because of losses deferred due to "wash sale"
transactions. The character of distributions made during
the year from net investment income or net realized gains
may differ from its ultimate characterization for federal
income tax purposes. In addition, due to the timing of
dividend distributions, the fiscal year in which amounts
are distributed may differ from the year that the income
or realized gains (losses) were recorded by the funds.
On the statements of assets and liabilities, as a result
of permanent book-to-tax differences, reclassification
adjustments have been made as follows:
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH GROWTH GROWTH
FUND FUND FUND
-------------- ------------ -------
<S> <C> <C> <C>
Decrease distributions in excess of net
investment income .................... $ 225,912 $ 1,509,425 $--
Decrease accumulated net realized gain
on investments ....................... $(225,912) $ (806,040) $--
Decrease additional paid in capital .... $ -- $ (703,385) $--
</TABLE>
ALLOCATION OF INCOME, EXPENSES AND GAINS (LOSSES)
Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses are allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Class-specific expenses, which include distribution and
service fees, are charged directly to such class.
- --------------------------------------------------------------------------------
17 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income
will be declared separately for each class and paid at
least annually. Net realized gains distributions, if any,
will be made at least annually. Distributions are payable
in cash or reinvested in additional shares of the same
class.
REPURCHASE AGREEMENTS
For repurchase agreements entered into with certain
broker-dealers, the funds, along with other affiliated
registered investment companies, may transfer uninvested
cash balances to a joint trading account, the daily
aggregate of which is invested in repurchase agreements
secured by U.S. government or agency obligations.
Securities pledged as collateral for all individual and
joint repurchase agreements are held by the funds'
custodian bank until maturity of the repurchase agreement.
Provisions for all agreements ensure that the daily market
value of the collateral is in excess of the repurchase
amount, including accrued interest, to protect the funds
in the event of a default.
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 in the financial statements. Actual
results could differ from these 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 September 30, 1997, were as follows:
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
-------------- ------------- -------------
<S> <C> <C> <C>
Purchases .............................. $30,790,132 $ 141,190,612 $ 80,956,179
Proceeds from sales .................... $37,580,125 $ 174,268,383 $ 115,885,832
</TABLE>
During the year ended September 30, 1997, brokerage
commissions paid to Piper Jaffray Inc., an affiliated
broker, amounted to $4,020, $0 and $0 for Small Company
Growth Fund, Emerging Growth Fund, and Growth Fund,
respectively.
(4) CAPITAL SHARE
TRANSACTIONS
................................
Small Company Growth Fund, Emerging Growth Fund, and
Growth Fund declared 100% stock dividends on October 21,
1996, December 23, 1995, and October 21, 1996,
respectively. Shareholders received one additional share
of capital stock for each share they owned and the net
asset value of each share was reduced by half.
- --------------------------------------------------------------------------------
18 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Capital share transactions for the funds were as follows:
<TABLE>
<CAPTION>
YEAR ENDED Year Ended
SEPTEMBER 30, 1997 (a) September 30, 1996
------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
SMALL COMPANY GROWTH FUND:
CLASS A
Sales of fund shares ................. 1,030,455 $ 7,678,103 77,719 $ 1,445,527
Issued for reinvested
distributions ...................... 1,298,315 8,636,664 211,527 3,901,679
Redemptions of fund shares ........... (1,806,030) (14,140,035) (1,130,511) (21,049,527)
Issued for stock dividend ............ 1,555,872 -- -- --
---------- ------------ ----------- ------------
2,078,612 $ 2,174,732 (841,265) $(15,702,321)
---------- ------------ ----------- ------------
CLASS B
Sales of fund shares ................. 53,821 $ 424,004
Redemptions of fund shares ........... (3,567) (23,690)
---------- ------------
50,254 $ 400,314
---------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED Year Ended
SEPTEMBER 30, 1997 (a) September 30, 1996
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
EMERGING GROWTH FUND:
CLASS A
Sales of fund shares ................. 4,214,135 $ 52,588,314 4,424,067 $ 65,931,347
Issued for reinvested
distributions ...................... 2,159,866 26,933,532 986,585 23,845,752
Redemptions of fund shares ........... (6,351,382) (80,423,986) (3,766,383) (59,436,830)
Redemptions in exchange for Class Y
shares ............................. (3,914,798) (49,284,384) -- --
Issued for stock dividend ............ -- -- 10,529,165 --
---------- ------------ ---------- ------------
(3,892,179) $(50,186,524) 12,173,434 $ 30,340,269
---------- ------------ ---------- ------------
CLASS B
Sales of fund shares ................. 81,216 $ 1,045,576
Redemptions of fund shares ........... (13,572) (185,110)
---------- ------------
67,644 $ 860,466
---------- ------------
CLASS Y
Sales of fund shares ................. 907,255 $ 12,792,132
Sales in exchange from Class A
shares ............................. 3,914,209 49,284,384
Redemptions of fund shares ........... (936,162) (12,945,508)
---------- ------------
3,885,302 $ 49,131,008
---------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED Year Ended
SEPTEMBER 30, 1997 (a) September 30, 1996
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
GROWTH FUND:
CLASS A
Sales of fund shares ................. 1,726,718 $ 18,865,295 909,407 $ 18,395,008
Issued for reinvested
distributions ...................... 1,772,740 17,663,981 1,050,275 19,897,268
Redemptions of fund shares ........... (4,513,968) (49,927,190) (1,987,117) (39,947,433)
Issued for stock dividend ............ 8,376,464 -- -- --
---------- ------------ ---------- ------------
7,361,954 $(13,397,914) (27,435) $ (1,655,157)
---------- ------------ ---------- ------------
CLASS B
Sales of fund shares ................. 16,775 $ 191,828
Redemptions of fund shares ........... (349) (3,438)
---------- ------------
16,426 $ 188,390
---------- ------------
</TABLE>
(a) REPRESENTS PERIOD FROM FEBRUARY 18 (COMMENCEMENT OF OFFERING OF SHARES) TO
SEPTEMBER 30, 1997, FOR CLASS B AND CLASS Y.
- --------------------------------------------------------------------------------
19 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Sales charges received by Piper Jaffray Inc. (Piper
Jaffray), the funds' distributor, for distributing the
funds' shares for the year ended September 30, 1997 were
as follows:
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
----------------- -------------------------------- -------------------
CLASS A CLASS B CLASS A CLASS B CLASS Y CLASS A CLASS B
------- -------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Front-end sales charges ................ $46,124 $-- $ 120,434 $ -- $ -- $ 48,128 $ --
Contingent deferred sales charges ...... 5,241 13 15,880 4,733 -- 3,703 132
------- --- ---------- -------- -------- -------- --------
$51,365 $13 $ 136,314 $4,733 $ -- $ 51,831 $132
------- --- ---------- -------- -------- -------- --------
------- --- ---------- -------- -------- -------- --------
</TABLE>
(5) EXPENSES
................................
INVESTMENT MANAGEMENT FEE
The company has entered into an investment management
agreement with Piper Capital Management Incorporated
(Piper Capital) under which Piper Capital manages each
fund's assets and furnishes related office facilities,
equipment, research and personnel. The agreement requires
each fund to pay Piper Capital a monthly fee based on
average daily net assets. The fee for each fund is equal
to an annual rate of 0.75% of the first $100 million in
net assets, 0.65% of the next $200 million and decreasing
percentages thereafter to 0.50% of net assets in excess of
$500 million. For the year ended September 30, 1997, the
effective investment management fee paid by the funds was
.75%, .69% and .70% on an annual basis for Small Company
Growth Fund, Emerging Growth Fund and Growth Fund,
respectively.
DISTRIBUTION AND SERVICE FEES
Each fund also pays Piper Jaffray fees accrued daily and
paid quarterly for providing shareholder services and
distribution-related services. The fees for each class,
which were being voluntarily limited for Class A for the
year ended September 30, 1997, are stated below as a
percent of average daily net assets attributable to such
shares.
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
------------------- ------------------------------ -------------------
CLASS A CLASS B CLASS A CLASS B CLASS Y CLASS A CLASS B
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Distribution fee ....................... 0.25% 0.75% 0.25% 0.75% -- 0.25% 0.75%
Service fee ............................ 0.25% 0.25% 0.25% 0.25% -- 0.25% 0.25%
-------- -------- -------- -------- --- -------- --------
Total distribution and service
fees ............................... 0.50% 1.00% 0.50% 1.00% -- 0.50% 1.00%
-------- -------- -------- -------- --- -------- --------
-------- -------- -------- -------- --- -------- --------
Total distribution and service fees
after voluntary limitation ......... 0.34% 1.00% 0.34% 1.00% -- 0.34% 1.00%
-------- -------- -------- -------- --- -------- --------
-------- -------- -------- -------- --- -------- --------
</TABLE>
- --------------------------------------------------------------------------------
20 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNT SERVICING FEES
The company has also entered into shareholder account
servicing agreements under which Piper Jaffray and Piper
Trust Company (Piper Trust) perform various transfer and
dividend disbursing agent services for accounts held at
the respective company. The fees, which are paid monthly
to Piper Jaffray and Piper Trust for providing these
services, are equal to an annual rate of $6.00 per active
shareholder account and $1.60 per closed account. For the
year ended September 30, 1997, Piper Jaffray and Piper
Trust received the following amounts in connection with
the shareholder account servicing agreements:
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
-------------- ------------ ------------
<S> <C> <C> <C>
Piper Jaffray .......................... $28,521 $131,958 $76,219
Piper Trust ............................ 840 26,866 20,219
-------------- ------------ ------------
$29,361 $158,824 $96,438
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
OTHER FEES AND EXPENSES
In addition to the investment management, distribution and
shareholder account servicing fees, each fund is
responsible for paying most other operating expenses
including: outside directors' fees and expenses; custodian
fees; registration fees; printing and shareholder reports;
transfer agent fees and expenses; legal, auditing and
accounting services; insurance; interest; taxes and other
miscellaneous expenses. For the year ended September 30,
1997, Piper Capital voluntarily limited total fees and
expenses for Small Company Growth Fund to annual rates of
1.34% and 2.00% of average daily net assets attributable
to such shares for Class A and Class B, respectively.
Expenses paid indirectly represent a reduction of
custodian fees for earnings on miscellaneous cash balances
maintained by the funds.
- --------------------------------------------------------------------------------
21 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA (a)
Net asset value, beginning of period ... $ 9.41 $ 9.73 $ 8.59 $ 8.42 $ 6.79
--------- --------- --------- --------- ---------
Operations:
Net investment income (loss) ......... (0.09) 0.03 0.05 0.04 0.01
Net realized and unrealized gains on
investments ........................ 3.11 0.48 1.14 0.15 1.65
--------- --------- --------- --------- ---------
Total from operations .............. 3.02 0.51 1.19 0.19 1.66
--------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income ........... (0.02) (0.04) (0.05) (0.02) (0.03)
From net realized gains .............. (2.84) (0.79) -- -- --
--------- --------- --------- --------- ---------
Total distributions to
shareholders ..................... (2.86) (0.83) (0.05) (0.02) (0.03)
--------- --------- --------- --------- ---------
Net asset value, end of period ......... $ 9.57 $ 9.41 $ 9.73 $ 8.59 $ 8.42
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SELECTED INFORMATION
Total return (b) ....................... 45.66% 5.38% 13.88% 2.12% 24.56%
Net assets at end of period (in
millions) ............................ $ 36 $ 31 $ 48 $ 78 $ 84
Ratio of expenses to average daily net
assets ............................... 1.34% 1.32% 1.40% 1.32% 1.28%
Ratio of net investment income (loss) to
average daily net assets ............. (0.75)% 0.20% 0.43% 0.37% 0.50%
Average commission rate paid on
portfolio transactions (c) ........... $ 0.0600 $ 0.0600 n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) ............... 109% 125% 182% 177% 154%
Ratios before waivers by the adviser
and/or distributor:
Ratio of expenses to average daily net
assets before waivers .............. 1.98% 1.79% 1.63% 1.54% 1.86%
Ratio of net investment income (loss)
to average daily net assets before
waivers ............................ (1.39)% (0.27)% 0.20% 0.15% (0.08)%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
----------------------------
Period Ended
September 30, 1997(d)
--------------------
<S> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 7.24
----------
Operations:
Net investment loss .................. (0.03)
Net realized and unrealized gains on
investments ........................ 2.33
----------
Total from operations .............. 2.30
----------
Net asset value, end of period ......... $ 9.54
----------
----------
SELECTED INFORMATION
Total return (b) ....................... 31.77%
Net assets at end of period (in
thousands) ........................... $ 480
Ratio of expenses to average daily net
assets ............................... 1.98%(e)
Ratio of net investment loss to average
daily net assets ..................... (1.49)%(e)
Average commission rate paid on
portfolio transactions (c) ........... $0.0600
Portfolio turnover rate (excluding
short-term securities) ............... 109%
Ratios before waivers by the adviser:
Ratio of expenses to average daily net
assets before waivers .............. 2.15%(e)
Ratio of net investment loss to
average daily net assets before
waivers ............................ (1.66)%(e)
</TABLE>
(a) PER-SHARE AMOUNTS HAVE BEEN ADJUSTED TO REFLECT THE EFFECT OF THE STOCK
DIVIDEND DECLARED ON OCTOBER 21, 1996. SEE NOTE 4 IN THE NOTES TO FINANCIAL
STATEMENTS.
(b) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(c) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996.
(d) COMMENCEMENT OF OFFERING OF CLASS B SHARES WAS FEBRUARY 18, 1997.
(e) ANNUALIZED.
- --------------------------------------------------------------------------------
22 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
EMERGING GROWTH FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
Year Ended September 30,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA (a)
Net asset value, beginning of period ....................... $ 13.86 $ 12.97 $ 9.63 $ 9.87 $ 7.21
-------- -------- -------- -------- --------
Operations:
Net investment loss ...................................... (0.08) (0.05) (0.06) (0.04) (0.03)
Net realized and unrealized gains (losses) on
investments ............................................ 2.72 2.18 3.40 (0.20) 2.69
-------- -------- -------- -------- --------
Total from operations .................................. 2.64 2.13 3.34 (0.24) 2.66
-------- -------- -------- -------- --------
Distributions to shareholders:
From net realized gains .................................. (1.25) (1.24) -- -- --
-------- -------- -------- -------- --------
Net asset value, end of period ............................. $ 15.25 $ 13.86 $ 12.97 $ 9.63 $ 9.87
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SELECTED INFORMATION
Total return (b) ........................................... 21.04% 17.84% 34.68% (2.38)% 36.92%
Net assets at end of period (in millions) .................. $ 275 $ 304 $ 253 $ 224 $ 191
Ratio of expenses to average daily net assets .............. 1.23% 1.18% 1.24% 1.24% 1.29%
Ratio of net investment loss to average daily net assets ... (0.55)% (0.41)% (0.51)% (0.38)% (0.34)%
Average commission rate paid on portfolio transactions
(c) ...................................................... $ 0.0600 $ 0.0600 n/a n/a n/a
Portfolio turnover rate (excluding short-term
securities) .............................................. 51% 44% 33% 31% 30%
Ratios before waivers by the adviser and/or distributor:
Ratio of expenses to average daily net assets before
waivers ................................................ 1.39% 1.37% 1.42% 1.44% 1.49%
Ratio of net investment loss to average daily net assets
before waivers ......................................... (0.71)% (0.60)% (0.69)% (0.58)% (0.54)%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS Y
-------- --------
Period Period
Ended Ended
September September
30, 30,
1997(d) 1997(d)
-------- --------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ....................... $ 12.54 $ 12.54
-------- --------
Operations:
Net investment loss ...................................... (0.10) (0.01)
Net realized and unrealized gains on investments ......... 2.76 2.76
-------- --------
Total from operations .................................. 2.66 2.75
-------- --------
Net asset value, end of period ............................. $ 15.20 $ 15.29
-------- --------
-------- --------
SELECTED INFORMATION
Total return (b) ........................................... 21.21% 21.93%
Net assets at end of period (in millions) .................. $ 1 $ 59
Ratio of expenses to average daily net assets .............. 1.85%(e) 0.87%(e)
Ratio of net investment loss to average daily net assets ... (1.16)%(e) (0.16)%(e)
Average commission rate paid on portfolio transactions
(c) ...................................................... $0.0600 $0.0600
Portfolio turnover rate (excluding short-term
securities) .............................................. 51% 51%
</TABLE>
(a) PER-SHARE AMOUNTS HAVE BEEN ADJUSTED TO REFLECT THE EFFECT OF THE STOCK
DIVIDEND DECLARED ON DECEMBER 23, 1995. SEE NOTE 4 IN THE NOTES TO
FINANCIAL STATEMENTS.
(b) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(c) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996.
(d) COMMENCEMENT OF OFFERING OF CLASS B AND CLASS Y SHARES WAS FEBRUARY 18,
1997.
(e) ANNUALIZED.
- --------------------------------------------------------------------------------
23 1997 Annual Report - U. S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(6) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
GROWTH FUND
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------
Year Ended September 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA (a)
Net asset value, beginning of period ... $ 10.58 $ 10.20 $ 9.45 $ 9.65 $ 8.53
--------- --------- --------- --------- ---------
Operations:
Net investment income ................ 0.01 0.03 0.04 0.04 0.06
Net realized and unrealized gains
(losses) on investments ............ 3.28 1.55 1.80 (0.18) 1.12
--------- --------- --------- --------- ---------
Total from operations .............. 3.29 1.58 1.84 (0.14) 1.18
--------- --------- --------- --------- ---------
Distributions to shareholders:
From net investment income ........... (0.01) (0.03) (0.04) (0.06) (0.06)
From net realized gains .............. (1.07) (1.17) (1.05) -- --
--------- --------- --------- --------- ---------
Total distributions to
shareholders ..................... (1.08) (1.20) (1.09) (0.06) (0.06)
--------- --------- --------- --------- ---------
Net asset value, end of period ......... $ 12.79 $ 10.58 $ 10.20 $ 9.45 $ 9.65
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SELECTED INFORMATION
Total return (b) ....................... 34.09% 16.87% 20.60% (1.51)% 13.85%
Net assets at end of period (in
millions) ............................ $ 202 $ 178 $ 172 $ 195 $ 252
Ratio of expenses to average daily net
assets ............................... 1.26% 1.24% 1.27% 1.23% 1.26%
Ratio of net investment income to
average daily net assets ............. 0.13% 0.28% 0.40% 0.43% 0.66%
Average commission rate paid on
portfolio transactions (c) ........... $ 0.0600 $ 0.0600 n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) ............... 44% 19% 80% 11% 45%
Ratios before waivers by the
distributor:
Ratio of expenses to average daily net
assets before waivers .............. 1.42% 1.43% 1.45% 1.42% 1.44%
Ratio of net investment income (loss)
to average daily net assets before
waivers ............................ (0.03)% 0.09% 0.22% 0.24% 0.48%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------
Period Ended
September 30, 1997(d)
-------------------------
<S> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 10.53
----------
Operations:
Net investment loss .................. (0.03)
Net realized and unrealized gains on
investments ........................ 2.25
----------
Total from operations .............. 2.22
----------
Net asset value, end of period ......... $ 12.75
----------
----------
SELECTED INFORMATION
Total return (b) ....................... 21.08%
Net assets at end of period (in
thousands) ........................... $ 209
Ratio of expenses to average daily net
assets ............................... 1.90%(e)
Ratio of net investment loss to average
daily net assets ..................... (0.74)%(e)
Average commission rate paid on
portfolio transactions (c) ........... $0.0600
Portfolio turnover rate (excluding
short-term securities) ............... 44%
</TABLE>
(a) PER-SHARE AMOUNTS HAVE BEEN ADJUSTED TO REFLECT THE EFFECT OF THE STOCK
DIVIDEND DECLARED ON OCTOBER 21, 1996. SEE NOTE 4 IN THE NOTES TO FINANCIAL
STATEMENTS.
(b) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(c) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996.
(d) COMMENCEMENT OF OFFERING OF CLASS B SHARES WAS FEBRUARY 18, 1997.
(e) ANNUALIZED.
- --------------------------------------------------------------------------------
24 1997 Annual Report - U. S. Growth Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND September 30, 1997
...........................................................................................
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
COMMON STOCK (92.5%):
BASIC MATERIALS (7.4%):
AptarGroup Inc. ..................................... 7,000 $ 391,562
Brunswick Technologies .............................. 30,000(b) 480,000
ChiRex Inc. ......................................... 29,000(b) 739,500
Cuno Inc. ........................................... 27,000(b) 469,125
OM Group ............................................ 15,000 599,062
------------
2,679,249
------------
CAPITAL GOODS AND SERVICES (7.2%):
American Disposal Services, Inc. .................... 12,000(b) 375,000
Chicago Miniature Lamp .............................. 13,000(b) 432,250
Control Devices Inc. ................................ 15,000(b) 225,000
Dura Automotive Systems 'A' ......................... 10,800(b) 340,200
Miller (Herman) ..................................... 14,000 749,000
Rental Service ...................................... 22,000(b) 493,625
------------
2,615,075
------------
COMMERCIAL SERVICES (10.3%):
ABR Information Services ............................ 13,000(b) 359,125
American Building Maintenance ....................... 15,000 396,562
G & K Services Class A .............................. 13,500 469,125
JP Foodservice ...................................... 20,000(b) 630,000
Learning Tree International ......................... 15,000(b) 429,375
Wackenhut Corrections ............................... 17,000(b) 527,000
Watsco Inc. ......................................... 12,000 375,000
Wilmar Industries ................................... 20,000(b) 540,000
------------
3,726,187
------------
CONSUMER DURABLES (1.7%):
ITI Technologies .................................... 21,000(b) 598,500
------------
CONSUMER NON-DURABLES (1.6%):
Home Products International Inc. .................... 25,000(b) 365,625
Robert Mondavi Class A .............................. 4,150(b) 227,212
------------
592,837
------------
CONSUMER SERVICES (6.3%):
Bridgestreet Accomodations .......................... 10,000(b) 115,000
Chancellor Media Corp. .............................. 10,000(b) 526,250
Equity Corp. International .......................... 17,000(b) 396,312
PJ America Inc. ..................................... 23,000(b) 393,875
Strayer Education ................................... 10,000 455,000
York Group Inc. ..................................... 18,000 389,250
------------
2,275,687
------------
ENERGY (4.7%):
Lomak Petroleum ..................................... 16,000 309,000
Newpark Resources ................................... 18,000(b) 707,625
Tuboscope Inc. ...................................... 22,000(b) 690,250
------------
1,706,875
------------
FINANCIAL SERVICES (10.4%):
AMRESCO Inc. ........................................ 13,000(b) 482,625
Commerce Bancorp .................................... 6,825 265,322
First Republic Bancorp (CA) ......................... 20,000(b) 535,000
</TABLE>
<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
First Savings Bank of Washington .................... 15,000 $ 371,250
Money Store ......................................... 15,000 427,500
ReliaStar Financial ................................. 20,000 796,250
TCF Financial ....................................... 15,000 876,563
------------
3,754,510
------------
HEALTH CARE (15.0%):
Alpha 1 Biomedicals, Inc. ........................... 5,391(b) 539
BioReliance Corp. ................................... 2,000(b) 52,500
Biosite Diagnostics ................................. 15,000(b) 131,250
Centennial HealthCare ............................... 10,000(b) 230,000
Cytyc Corp. ......................................... 11,000(b) 276,375
Daou Systems Inc. ................................... 31,000(b) 968,750
Digene Corp. ........................................ 17,000(b) 218,875
Express Scripts 'A' ................................. 7,000(b) 377,125
FPA Medical Management Inc. ......................... 15,000(b) 515,625
Genesis Health Ventures ............................. 10,000(b) 389,375
HPR Inc. ............................................ 20,000(b) 437,500
NeXstar Pharmaceuticals ............................. 8,000(b) 142,000
Novoste Corp. ....................................... 9,000(b) 149,625
Physician Sales & Service ........................... 19,500 380,250
Physio-Control International ........................ 11,000(b) 186,313
Scherer (R.P.) ...................................... 8,000(b) 495,500
Urogen .............................................. 10,000(b) (e) --
Urologix Inc. ....................................... 20,000(b) 475,000
------------
5,426,602
------------
RETAIL TRADE (5.1%):
Hibbett Sporting Goods .............................. 5,000(b) 139,375
Mazel Stores ........................................ 10,000(b) 247,500
O'Reilly Automotive ................................. 13,000(b) 295,750
Pier 1 Imports ...................................... 30,000 538,125
Stage Stores ........................................ 14,000(b) 603,750
------------
1,824,500
------------
TECHNOLOGY (21.2%):
Advanced Energy Industries .......................... 11,000(b) 311,438
ANADIGICS Inc. ...................................... 5,000(b) 246,563
Aspect Development .................................. 5,200(b) 213,525
Coherent Communication Systems Corp. . 15,000(b) 425,625
Comverse Technology ................................. 15,000(b) 791,250
Cyberonics .......................................... 11,800(b) 190,275
DuPont Photomasks ................................... 10,000(b) 720,000
FSI International ................................... 20,000(b) 417,500
Natural MicroSystems Corp. .......................... 20,000(b) 760,000
Ontrack Data International .......................... 30,000(b) 697,500
Peerless Systems .................................... 27,000(b) 378,000
Sipex Corp. ......................................... 30,000(b) 952,500
Technology Solutions ................................ 15,000(b) 483,750
Tecnomatix Technologies Ltd. ........................ 15,000(b) (c) 573,750
TriQuint Semiconductor .............................. 8,000(b) 291,500
Wonderware Corp. .................................... 12,000(b) 220,500
------------
7,673,676
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
25 1997 Annual Report - U. S. Growth Funds
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND
(CONTINUED)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
TRANSPORTATION (1.6%):
Knightsbridge Tankers Ltd. .......................... 20,000(c) $ 566,250
------------
Total Common Stock
(cost: $21,963,168) ............................ 33,439,948
------------
SHORT-TERM SECURITIES (7.9%):
Repurchase agreement with Goldman Sachs, acquired on
9/30/97, interest of $486, 6.15%, 10/1/97
(cost: $2,842,000) ................................ 2,842,000(d) $ 2,842,000
------------
Total Investments in Securities
(cost: $24,805,168) (f) ........................ $ 36,281,948
------------
------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) CURRENTLY NON-INCOME PRODUCING.
(c) SECURITIES OF FOREIGN ISSUERS ARE DENOMINATED IN U.S. DOLLARS. THE
AGGREGATE VALUE OF THESE SECURITIES AT SEPTEMBER 30, 1997, IS $1,140,000,
WHICH REPRESENTS 3.2% OF TOTAL NET ASSETS.
(d) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(e) SECURITY IS RESTRICTED (CANNOT BE OFFERED FOR PUBLIC SALE) AND ILLIQUID.
SECURITY WAS ACQUIRED AS A RESULT OF A SPINOFF FROM MEDSTONE INTERNATIONAL.
OWNERSHIP OF SECURITY CANNOT BE LEGALLY TRANSFERRED BEFORE DEC. 31, 1997.
(f) ON SEPTEMBER 30, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $24,805,533. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 11,648,603
GROSS UNREALIZED DEPRECIATION ...... (172,188)
------------
NET UNREALIZED APPRECIATION ...... $ 11,476,415
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
26 1997 Annual Report - U. S. Growth Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING GROWTH FUND September 30, 1997
.........................................................................................
Number Market
Description of Security of Shares Value (a)
- ------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
COMMON STOCK (95.5%):
BASIC MATERIALS (4.7%):
Bemis Co. ......................................... 50,000 $ 2,237,500
Ecolab Inc. ....................................... 77,000 3,739,312
Sealed Air ........................................ 108,000(b) 5,933,250
Valspar Corp. ..................................... 128,000 4,016,000
------------
15,926,062
------------
CAPITAL GOODS AND SERVICES (8.0%):
Danaher Corp. ..................................... 100,000 5,800,000
Fastenal Co. ...................................... 37,500 1,996,875
Miller (Herman) ................................... 81,000 4,333,500
Molex Inc. Class A ................................ 75,000 3,056,250
Pentair, Inc. ..................................... 100,000 3,687,500
Tower Automotive .................................. 73,800(b) 3,321,000
USA Waste Service ................................. 112,875(b) 4,500,891
------------
26,696,016
------------
COMMERCIAL SERVICES (6.4%):
Cintas Corp. ...................................... 35,000 2,581,250
Corrections Corp. of America ...................... 70,000(b) 3,045,000
G & K Services Class A ............................ 50,000 1,737,500
JP Foodservice .................................... 105,000(b) 3,307,500
Learning Tree International ....................... 110,000(b) 3,148,750
Richfood Holdings ................................. 167,500 4,344,531
Wackenhut Corrections ............................. 110,000(b) 3,410,000
------------
21,574,531
------------
CONSUMER DURABLES (1.0%):
Newell Co. ........................................ 85,000 3,400,000
------------
CONSUMER NON-DURABLES (5.1%):
Rexall Sundown .................................... 115,000(b) 5,246,875
Robert Mondavi Class A ............................ 44,150(b) 2,417,212
Sola International ................................ 155,000(b) 5,318,438
Tommy Hilfiger .................................... 80,000(b) 3,995,000
------------
16,977,525
------------
CONSUMER SERVICES (8.5%):
Apollo Group Class A .............................. 110,000(b) 4,661,250
Chancellor Media Corp. ............................ 70,000(b) 3,683,750
Clear Channel Communication ....................... 76,000(b) 4,930,500
DeVRY Inc. ........................................ 120,000(b) 3,585,000
Papa John's International Inc. .................... 56,500(b) 1,931,594
Regal Cinemas ..................................... 130,000(b) 3,493,750
Stewart Enterprises Class A ....................... 145,000 6,343,750
------------
28,629,594
------------
ENERGY (7.6%):
Camco International ............................... 82,000 5,719,500
ENSCO International ............................... 120,000 4,732,500
Newfield Exploration .............................. 147,570(b) 4,141,183
Noble Affiliates .................................. 110,000 4,922,500
Smith International ............................... 78,000(b) 6,059,625
------------
25,575,308
------------
</TABLE>
<TABLE>
<CAPTION>
Number Market
Description of Security of Shares Value (a)
- ------------------------------------------------------- ----------- ------------
<S> <C> <C>
FINANCIAL SERVICES (15.8%):
AMRESCO Inc. ...................................... 125,000(b) $ 4,640,625
Commercial Federal ................................ 105,000 4,948,125
FINOVA Group ...................................... 87,000 8,232,375
Firstar Corp. ..................................... 100,000 3,625,000
Green Tree Financial .............................. 154,000 7,238,000
Hartford Life Class A ............................. 4,400 169,125
MGIC Investment ................................... 80,000 4,585,000
Nationwide Financial Services, Inc. ............... 7,200 200,700
PMI Group ......................................... 56,000 3,209,500
ReliaStar Financial ............................... 70,000 2,786,875
Schwab (Charles) Corp. ............................ 150,000 5,362,500
TCF Financial ..................................... 135,000 7,889,063
------------
52,886,888
------------
HEALTH CARE (12.9%):
BioChem Pharma .................................... 96,000(b) (c) 3,024,000
Cardinal Health ................................... 35,000 2,485,000
DENTSPLY International ............................ 73,000 4,088,000
Elan Corp. PLC -- ADR ............................. 130,000(b) (c) 6,508,125
Genesis Health Ventures ........................... 108,500(b) 4,224,719
Genzyme Corp. -- General Division ................. 100,000(b) 2,975,000
Health Management Association ..................... 75,000(b) 2,371,875
PhyCor Inc. ....................................... 140,625(b) 4,086,914
Physician Sales & Service ......................... 215,000(b) 4,192,500
Quintiles Transnational ........................... 51,625(b) 4,349,406
Stryker Corp. ..................................... 110,000 4,805,625
------------
43,111,164
------------
RETAIL TRADE (6.2%):
Consolidated Stores ............................... 104,687(b) 4,383,768
Dollar General .................................... 112,500 3,832,031
Kohl's Corp. ...................................... 90,000(b) 6,390,000
Stage Stores ...................................... 140,000(b) 6,037,500
------------
20,643,299
------------
TECHNOLOGY (18.5%):
ADC Telecommunications ............................ 100,000(b) 3,250,000
Altera Corp. ...................................... 90,000(b) 4,612,500
Analog Devices .................................... 133,333(b) 4,466,656
Andrew Corp. ...................................... 83,750(b) 2,193,203
ASM Lithography Holding NV ........................ 65,000(b) (c) 6,418,750
Cambridge Technology Partners Inc. ................ 145,000(b) 5,192,813
CIENA Corp. ....................................... 6,425(b) 318,238
Comverse Technology ............................... 100,000(b) 5,275,000
EMC Corp. ......................................... 100,000(b) 5,837,500
Fiserv Inc. ....................................... 80,000(b) 3,510,000
KLA-Tencor Corp. .................................. 75,000(b) 5,067,188
Sterling Commerce ................................. 120,300(b) 4,323,281
SunGard Data Systems .............................. 130,000(b) 3,152,500
Teradyne Inc. ..................................... 80,000(b) 4,305,000
Vantive Corp. ..................................... 100,000(b) 2,400,000
VERITAS Software .................................. 38,000(b) 1,669,625
------------
61,992,254
------------
</TABLE>
SEE ACCOMPANYING NOTES TO INVESTMENTS IN SECURITIES.
- --------------------------------------------------------------------------------
27 1997 Annual Report - U. S. Growth Funds
<PAGE>
Investments in Securities (continued)
- --------------------------------------------------------------------------------
EMERGING GROWTH FUND
(CONTINUED)
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Description of Security Amount Value (a)
- ------------------------------------------------------- ----------- ------------
<S> <C> <C>
TRANSPORTATION (0.8%):
Wisconsin Central Transportation .................. 82,500(b) $ 2,624,530
------------
Total Common Stock
(cost: $180,418,631) ......................... 320,037,171
------------
SHORT-TERM SECURITIES (5.9%):
Repurchase agreement with Goldman Sachs, acquired
on 9/30/97, interest of $3,420, 6.15%, 10/1/97
(cost: $20,019,000) ............................. 20,019,000(d) $ 20,019,000
------------
Total Investments in Securities
(cost: $200,437,631) (e) ..................... $340,056,171
------------
------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) CURRENTLY NON-INCOME PRODUCING.
(c) SECURITIES OF FOREIGN ISSUERS ARE DENOMINATED IN U.S. DOLLARS. THE
AGGREGATE VALUE OF THESE SECURITIES AT SEPTEMBER 30, 1997, IS $15,950,875,
WHICH REPRESENTS 4.8% OF TOTAL NET ASSETS.
(d) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(e) ON SEPTEMBER 30, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $200,437,631. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION .... $140,999,878
GROSS UNREALIZED DEPRECIATION .... (1,381,338)
------------
NET UNREALIZED APPRECIATION .... $139,618,540
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
28 1997 Annual Report - U. S. Growth Funds
<PAGE>
Investments in Securities
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH FUND September 30, 1997
.......................................................................................
Number Market
Description of Security of Shares Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
(PERCENTAGES OF EACH INVESTMENT CATEGORY RELATE TO TOTAL NET ASSETS)
COMMON STOCK (98.3%):
BASIC MATERIALS (9.9%):
Aluminum Company of America ......................... 50,000 $ 4,100,000
Morton International ................................ 150,000 5,325,000
Phelps Dodge ........................................ 50,000 3,881,250
USX -- U.S. Steel Group ............................. 80,000 2,780,000
Willamette Industries ............................... 100,000 3,825,000
------------
19,911,250
------------
CAPITAL GOODS AND SERVICES (12.3%):
AlliedSignal Inc. ................................... 200,000 8,500,000
Magna International Class A ......................... 100,000(c) 6,912,500
Pentair, Inc. ....................................... 150,000 5,531,250
Thomas & Betts ...................................... 30,000 1,638,750
Wabash National ..................................... 80,000 2,315,000
------------
24,897,500
------------
CONSUMER DURABLES (2.8%):
Ford Motor .......................................... 125,000 5,656,250
------------
CONSUMER NON-DURABLES (3.0%):
Reebok International ................................ 125,000(b) 6,085,937
------------
ENERGY (16.4%):
Anadarko Petroleum .................................. 75,000 5,385,937
Baker Hughes Inc. ................................... 175,000 7,656,250
Schlumberger Ltd. ................................... 125,000 10,523,438
Transocean Offshore Inc. ............................ 200,000 9,587,500
------------
33,153,125
------------
FINANCIAL SERVICES (16.3%):
American International Group ........................ 60,000 6,191,250
Federal National Mortgage Association ............... 70,000 3,290,000
FINOVA Group ........................................ 50,000 4,731,250
Franklin Resources .................................. 40,000 3,725,000
Norwest Corp. ....................................... 100,000 6,125,000
TCF Financial ....................................... 70,000 4,090,625
U.S. Bancorp ........................................ 50,000 4,825,000
------------
32,978,125
------------
HEALTH CARE (5.5%):
Cardiovascular Dynamics ............................. 4,000(b) 32,000
Endosonics Corp. .................................... 100,000(b) 1,468,750
HealthCare Compare .................................. 50,000(b) 3,193,750
Medtronic, Inc. ..................................... 60,000 2,820,000
St. Jude Medical .................................... 100,000(b) 3,506,250
------------
11,020,750
------------
RETAIL TRADE (7.2%):
Gap Inc. ............................................ 175,000 8,760,938
Sears, Roebuck ...................................... 100,000 5,693,750
------------
14,454,688
------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Shares or
Principal Market
Description of Security Amount Value (a)
- --------------------------------------------------------- ----------- ------------
<S> <C> <C>
TECHNOLOGY (14.9%):
ADC Telecommunications .............................. 60,000(b) $ 1,950,000
Cabletron Systems ................................... 60,000(b) 1,920,000
Cisco Systems, Inc. ................................. 30,000(b) 2,191,875
Compaq Computer ..................................... 30,000(b) 2,242,500
EMC Corp. ........................................... 70,000(b) 4,086,250
Hewlett-Packard Co. ................................. 45,000 3,130,313
Intel Corp. ......................................... 40,000 3,692,500
International Business Machines Corp. ............... 30,000 3,178,125
Oracle Corp. ........................................ 60,000(b) 2,186,250
Sensormatic Electronics ............................. 150,000 2,118,750
Tech Data Corp. ..................................... 75,000(b) 3,450,000
------------
30,146,563
------------
TRANSPORTATION (4.1%):
AMR Corp. ........................................... 40,000(b) 4,427,500
Burlington Northern Santa Fe ........................ 40,000 3,865,000
------------
8,292,500
------------
UTILITIES (5.9%):
AirTouch Communications ............................. 230,000(b) 8,150,625
Enron ............................................... 100,000 3,850,000
------------
12,000,625
------------
Total Common Stock
(cost: $113,663,599) ........................... 198,597,313
------------
SHORT-TERM SECURITIES (0.2%):
Repurchase agreement with Goldman Sachs, acquired on
9/30/97, interest of $78, 6.15%, 10/1/97
(cost: $457,000) .................................. 457,000(d) $ 457,000
------------
Total Investments in Securities
(cost: $114,120,599) (e) ....................... $199,054,313
------------
------------
</TABLE>
NOTES TO INVESTMENTS IN SECURITIES:
(a) SECURITIES ARE VALUED IN ACCORDANCE WITH PROCEDURES DESCRIBED IN NOTE 2 TO
THE FINANCIAL STATEMENTS.
(b) CURRENTLY NON-INCOME PRODUCING.
(c) SECURITIES OF FOREIGN ISSUERS ARE DENOMINATED IN U.S. DOLLARS. THE
AGGREGATE VALUE OF THESE SECURITIES AT SEPTEMBER 30, 1997, IS $6,912,500,
WHICH REPRESENTS 3.4% OF TOTAL NET ASSETS.
(d) REPURCHASE AGREEMENT IN A JOINT TRADING ACCOUNT WHICH IS COLLATERALIZED BY
U.S. GOVERNMENT AGENCY SECURITIES. ACCRUED INTEREST SHOWN REPRESENTS
INTEREST DUE AT MATURITY OF THE REPURCHASE AGREEMENT.
(e) ON SEPTEMBER 30, 1997, THE COST OF INVESTMENTS IN SECURITIES FOR FEDERAL
INCOME TAX PURPOSES WAS $114,120,599. THE AGGREGATE GROSS UNREALIZED
APPRECIATION AND DEPRECIATION OF INVESTMENTS IN SECURITIES BASED ON THIS
COST WERE AS FOLLOWS:
<TABLE>
<S> <C>
GROSS UNREALIZED APPRECIATION ...... $ 87,416,145
GROSS UNREALIZED DEPRECIATION ...... (2,482,431)
------------
NET UNREALIZED APPRECIATION ...... $ 84,933,714
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
29 1997 Annual Report - U. S. Growth Funds
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER FUNDS INC.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments in
securities, of Small Company Growth Fund, Emerging Growth
Fund and Growth Fund (funds within Piper Funds Inc.) as of
September 30, 1997, and the related statements of
operations for the year then ended, the statements of
changes in net assets for each of the years in the
two-year period ended September 30, 1997, and the
financial highlights for each of the years in the
five-year period ended September 30, 1997. 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 Small Company
Growth Fund, Emerging Growth Fund and Growth Fund as of
September 30, 1997, and the results of their operations,
the 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
November 7, 1997
- --------------------------------------------------------------------------------
30 1997 Annual Report - U. S. Growth Funds
<PAGE>
Federal Income Tax Information
- --------------------------------------------------------------------------------
The following per-share information describes the federal
tax treatment of distributions made during the fiscal
year. Distributions for the calendar year will be reported
to you on Form 1099-DIV. Please consult a tax adviser on
how to report these distributions at the state and local
levels.
INCOME DISTRIBUTIONS
(TAXABLE AS ORDINARY DIVIDENDS, 5.55%, 100% AND 100%
QUALIFYING FOR DEDUCTION BY CORPORATIONS, RESPECTIVELY)
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
PAYABLE DATE CLASS A CLASS B CLASS A CLASS B CLASS Y CLASS A CLASS B
- -------------------- ------------- ------- ------------- ------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
December 23,
1996 ............. $ 0.0190 $ -- $ -- $ -- $ -- $ 0.0142 $ --
------------- ------- ------------- ------- ------- ------------- -------
------------- ------- ------------- ------- ------- ------------- -------
</TABLE>
SHORT-TERM GAINS (TAXABLE AS ORDINARY DIVIDENDS)
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
PAYABLE DATE CLASS A CLASS B CLASS A CLASS B CLASS Y CLASS A CLASS B
- -------------------- ------------- ------- ------------- ------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
October 22, 1996 ... $ 0.6120 $ -- $ 0.0450 $ -- $ -- $ 0.1474 $ --
------------- ------- ------------- ------- ------- ------------- -------
------------- ------- ------------- ------- ------- ------------- -------
</TABLE>
LONG-TERM GAINS (TAXABLE AS CAPITAL GAINS DISTRIBUTIONS)
<TABLE>
<CAPTION>
SMALL COMPANY EMERGING
GROWTH FUND GROWTH FUND GROWTH FUND
PAYABLE DATE CLASS A CLASS B CLASS A CLASS B CLASS Y CLASS A CLASS B
- -------------------- ------------- ------- ------------- ------- ------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
October 22, 1996 ... $ 2.2310 $ -- $ 1.2028 $ -- $ -- $ 0.9233 $ --
------------- ------- ------------- ------- ------- ------------- -------
------------- ------- ------------- ------- ------- ------------- -------
</TABLE>
- --------------------------------------------------------------------------------
31 1997 Annual Report - U. S. Growth Funds
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
32 1997 Annual Report - U.S. Growth Funds
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
33 1997 Annual Report - U.S. Growth Funds
<PAGE>
THIS PAGE WAS INTENTIONALLY LEFT BLANK.
- --------------------------------------------------------------------------------
34 1997 Annual Report - U.S. Growth Funds
<PAGE>
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
As a shareholder in Piper Funds, you have access to a full range of services and
benefits.
Check your prospectus for details about services and any limitations that might
apply to your fund.
Low Minimum Investments
You may become a shareholder in Piper Funds class A shares or class B shares
with an initial investment of $250 or more. Class Y shares have a minimum
initial investment of $1 million. Add to your existing investment with any
amount, at any time.
Automatic Monthly Investment Programs
To purchase shares as part of a savings discipline, you may automatically
transfer $100 or more each month to any Piper fund from your bank, savings and
loan or other financial institution. Or, transfer $25 or more per month from any
of the Piper money market funds.*
Receiving Dividends and Other Distributions
Dividend and capital gains distributions may be reinvested in additional shares
of the fund you own, invested in shares of a different Piper fund offered in
your state, or distributed in cash. Any reinvestments must be in the same class
of shares.
Reducing the Class A Front-End Sales Charge
You may reduce, or even eliminate, the class A front-end sales charge if: your
initial investment exceeds a specified amount, your investment combined with the
value of your existing Piper Funds investments (or a related account's
investments) exceeds a specified amount or if your investments combined during a
13-month period exceed a specified amount. See your prospectus for details.
Exchanging Shares
If your investment goals or your financial needs change, you may move from one
Piper fund to the same class of another Piper fund, if the shares of that fund
are legally available in your state. There is no fee to exchange shares.
Exchanges are generally made based on the net asset value per share of each fund
at the time of the exchange. However, if your new fund has a higher sales
charge, you must pay the difference.
Taking Systematic Withdrawals
If your account has a value of $5,000 or more, you may make automatic
withdrawals from your account. You may withdraw $100 or more monthly, quarterly,
or semiannually by authorizing the sale of the appropriate number of shares on a
periodic basis.
Reinvesting After a Sale
If you sell class A shares, you may reinvest in class A shares of that fund or
another Piper fund within 30 days without a sales charge. If you sell class B
shares (or other shares subject to a CDSC) and elect to reinvest within 30 days,
that charge will be credited to your account and the reinvested shares will
continue to be subject to the CDSC.
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.
Account Statements
Whenever you add to or withdraw from your account, you will receive a monthly
statement from Piper Jaffray. Accounts with no activity receive a quarterly
statement instead. Periodic dividend and capital gains distributions, if any,
also appear on your statement.
* 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.
- --------------------------------------------------------------------------------
35 1997 Annual Report - U.S. Growth Funds
<PAGE>
GLOSSARY OF TERMS***
- --------------------------------------------------------------------------------
Correction
Reverse movement, usually downward, in the price of a stock.
Initial public offering
A corporation's first offering of stock to the public.
Market capitalization
The value of a company determined by multiplying the number of outstanding
shares by the current market price of a share.
Overweighted or overweighting
In portfolio management, overweighting means a fund's portfolio contains a
higher percentage of a certain sector than its benchmark.
Sector
Refers to a particular group of stocks, usually in one industry.
Valued or valuation
The determined or estimated value of a particular stock.
*** - This symbol represents a graduation cap, used throughout this report to
indicate terms defined in the glossary.
- --------------------------------------------------------------------------------
36 1997 Annual Report - U.S. Growth Funds
<PAGE>
DIRECTORS
- --------------------------------------------------------------------------------
DAVID T. BENNETT, Chairman, Highland Homes, Inc., USL Products, Inc., Kiefer
Built, Inc., of Counsel, Gray, Plant, Mooty, Mooty & Bennett, P.A.
JAYE F. DYER, President, Dyer Management Company
WILLIAM H. ELLIS, Retired 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.
DAVID A. HUGHEY, Retired Executive Vice President and Chief Administrative
Officer of Dean Witter InterCapital Inc. and Dean Witter Trust Co.
GEORGE LATIMER, Chief Executive Officer, National Equity Funds
OFFICERS
- --------------------------------------------------------------------------------
WILLIAM H. ELLIS, Chairman of the Board
PAUL A. DOW, President
ROBERT H. NELSON, Vice President and Treasurer
SUSAN SHARP MILEY, Secretary
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
PIPER CAPITAL MANAGEMENT INCORPORATED
222 South Ninth Street, Minneapolis, MN 55402-3804
TRANSFER AND DIVIDEND DISBURSING AGENTS
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY
1004 Baltimore, Kansas City, MO 64105-1614
PIPER JAFFRAY INC.
222 South Ninth Street, Minneapolis, MN 55402-3804
PIPER TRUST COMPANY
222 South Ninth Street, Minneapolis, MN 55402-3804
CUSTODIAN AND ACCOUNTING AGENT
- --------------------------------------------------------------------------------
INVESTORS FIDUCIARY TRUST COMPANY
801 Pennsylvania, Kansas City, MO 64105-1307
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
KPMG PEAT MARWICK LLP
4200 Norwest Center, Minneapolis, MN 55402
LEGAL COUNSEL
- --------------------------------------------------------------------------------
DORSEY & WHITNEY LLP
220 South Sixth Street, Minneapolis, MN 55402
FOR MORE INFORMATION
By Phone [GRAPHIC]
800 866-7778
FOR GENERAL INFORMATION
press 5, our Mutual Fund Services representatives are ready to answer
your questions.
TO ORDER LITERATURE
press 5, ask a service representative to mail you additional literature,
including a Quarterly Update. You can also request to be put on a mailing list
to receive this information automatically each quarter.
By Mail [GRAPHIC]
Piper Capital Management
Attn: Mutual Fund Services
222 South Ninth Street
Minneapolis, MN 55402-3804
In an effort to reduce costs to our shareholders, we have implemented a process
to reduce duplicate mailings of the funds' 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 Mutual
Fund Services area at 800 866-7778, or mail a request to us.
On-Line [GRAPHIC]
http://www.piperjaffray.com/
<PAGE>
U.S. GROWTH FUNDS
INTERNATIONAL GROWTH FUNDS
- --------------------------------------------------------------------------------
Emerging Markets Growth Fund
Pacific-European Growth Fund
U.S. GROWTH FUNDS
- --------------------------------------------------------------------------------
Small Company Growth Fund
Emerging Growth Fund
Growth Fund
GROWTH AND INCOME FUNDS
- --------------------------------------------------------------------------------
Growth and Income Fund
Balanced Fund
INCOME FUNDS
- --------------------------------------------------------------------------------
Government Income Fund
Intermediate Bond Fund
Adjustable Rate Mortgage Securities Fund
TAX-EXEMPT INCOME FUNDS
- --------------------------------------------------------------------------------
National Tax-Exempt Fund
Minnesota Tax-Exempt Fund
CASH MANAGEMENT FUNDS*
- --------------------------------------------------------------------------------
Money Market Fund
U.S. Government Money Market Fund
Tax-Exempt Money Market Fund
Institutional Money Market Fund
Portfolios that offer the opportunity for long-term capital appreciation are
valued by many investors for their potential to build wealth over time.
Piper Funds provide you with the flexibility to help you pursue your financial
goals. Among our funds, we offer a spectrum of investment objectives and
convenient shareholder services to meet the varied needs of today's investors.
Contact your Piper Jaffray Investment Executive for more information,
including prospectuses, about the Piper Funds or call Mutual Fund Services at
800 866-7778. Please read the prospectuses carefully before investing or
sending money.
* 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 JAFFRAY INC., FUND DISTRIBUTOR AND NASD MEMBER.
#10200 11/1997 265-97
- --------------------------------------------------------------------------------
[LOGO]
222 South Ninth Street
Minneapolis, MN 55402-3804 Toll Free 1 800 866-7778
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Mpls., MN
