<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Period Ended July 31,
1998*
................................................................................
<TABLE>
<CAPTION>
SMALL
COMPANY GROWTH
GROWTH FUND FUND
------------ -------------
<S> <C> <C>
INCOME:
Dividends (net of foreign withholding taxes of $0 and
$10,319, respectively) ................................... $ 98,909 $ 1,277,318
Interest ................................................... 104,698 207,331
------------ -------------
Total income ............................................. 203,607 1,484,649
------------ -------------
EXPENSES (NOTE 5):
Investment management fee .................................. 223,613 1,116,523
Distribution and service fees:
CLASS A .................................................. 146,201 790,440
CLASS B .................................................. 4,572 1,582
Transfer agent and dividend disbursing agent fees .......... 61,318 116,385
Custodian and accounting fees .............................. 40,516 127,741
Registration fees .......................................... 25,110 31,181
Reports to shareholders .................................... 20,489 39,035
Directors' fees ............................................ 7,938 7,937
Audit and legal fees ....................................... 39,226 44,526
Other expenses ............................................. 4,392 7,777
------------ -------------
Total expenses ........................................... 573,375 2,283,127
Less Class A expenses waived by the distributor ........ (49,918) (269,656)
Less expenses waived by the advisor .................... (124,271) --
------------ -------------
Net expenses before expenses paid indirectly ............. 399,186 2,013,471
Less expenses paid indirectly .......................... (695) (20)
------------ -------------
Total net expenses ....................................... 398,491 2,013,451
------------ -------------
Net investment loss ...................................... (194,884) (528,802)
------------ -------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 3) .................. 5,029,047 26,135,736
Net change in unrealized appreciation or depreciation of
investments .............................................. (5,721,008) (12,665,955)
------------ -------------
Net gain (loss) on investments ........................... (691,961) 13,469,781
------------ -------------
Net increase (decrease) in net assets resulting from
operations ........................................... $ (886,845) $ 12,940,979
------------ -------------
------------ -------------
* DATE FUNDS DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 1 IN THE
NOTES TO FINANCIAL STATEMENTS.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
1 1998 Annual Report - U.S. Growth Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
------------------------------ -------------------------------
Period Ended Year Ended Period Ended Year Ended
7/31/98* 9/30/97 7/31/98* 9/30/97
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) ............................... $ (194,884) $ (224,017) $ (528,802) $ 237,335
Net realized gain on investments ........................... 5,029,047 3,716,140 26,135,736 24,239,313
Net change in unrealized appreciation or depreciation of
investments .............................................. (5,721,008) 8,021,635 (12,665,955) 30,823,801
-------------- ------------- -------------- --------------
Net increase (decrease) in net assets resulting from
operations ............................................. (886,845) 11,513,758 12,940,979 55,300,449
-------------- ------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS:
CLASS A:
From net investment income ............................... -- (82,567) -- (284,304)
From net realized gains .................................. (5,106,576) (8,846,691) (46,834,607) (17,945,057)
Tax return of capital .................................... (195,180) -- -- --
CLASS B:
From net investment income ............................... -- -- -- --
From net realized gains .................................. (9,717) -- (25,233) --
Tax return of capital .................................... (371) -- -- --
-------------- ------------- -------------- --------------
Total distributions ...................................... (5,311,844) (8,929,258) (46,859,840) (18,229,361)
-------------- ------------- -------------- --------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
CLASS A .................................................... (29,399,924) 2,174,732 (168,038,504) (13,397,914)
CLASS B .................................................... (528,845) 400,314 (206,279) 188,390
-------------- ------------- -------------- --------------
Increase (decrease) in net assets from capital share
transactions ........................................... (29,928,769) 2,575,046 (168,244,783) (13,209,524)
-------------- ------------- -------------- --------------
Total increase (decrease) in net assets .................. (36,127,458) 5,159,546 (202,163,644) 23,861,564
Net assets at beginning of period .......................... 36,127,458 30,967,912 202,163,644 178,302,080
-------------- ------------- -------------- --------------
Net assets at end of period ................................ $ -- $ 36,127,458 $ -- $ 202,163,644
-------------- ------------- -------------- --------------
-------------- ------------- -------------- --------------
* DATE FUNDS DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 1 IN THE NOTES
TO FINANCIAL STATEMENTS.
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
2 1998 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 and Growth Fund (the funds). Each fund is classified
as a diversified series.
The funds commenced offering Class B shares on February
18, 1997. All shares existing prior to that date were
classified as Class A shares. Effective April 21, 1998,
the funds no longer offered Class B shares. Any
outstanding Class B shares of a fund were automatically
converted to Class A shares of the same fund as of the
close of business on April 27, 1998. Key features of each
class were:
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
The classes of shares had the same rights and were
identical in all respects except that each class had
different distribution expenses, had exclusive voting
rights with respect to matters affecting that class and
had different exchange privileges.
Small Company Growth Fund invested primarily in common
stocks of small-capitalization companies believed to
possess superior growth potential.
Growth Fund invested primarily in a broadly diversified
portfolio of stocks or securities convertible into or
carrying rights to buy common stocks.
On May 1, 1998, Piper Jaffray Companies Inc., the parent
company of the funds' investment advisor, was acquired by
U.S. Bancorp. U.S. Bancorp is a multi-state bank holding
company headquartered in Minneapolis, Minnesota with a
geographic service area spanning 17 states. As of June 30,
1998, U.S. Bancorp was the 14th largest U.S. commercial
bank holding company, with assets of nearly $73.8 billion.
U.S. Bank National Association ("U.S. Bank"), a wholly
owned subsidiary of U.S. Bancorp, currently acts as the
investment advisor to 32 mutual funds (the "First American
Funds"). As of June 30, 1998, U.S. Bank, acting through
its First American Asset Management group, managed more
than $77.5 billion in assets, including approximately
$28.4 billion in assets of the First American Funds.
- --------------------------------------------------------------------------------
3 1998 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
As discussed in note 6, all of the net assets of Small
Company Growth Fund and Growth Fund were acquired by First
American Investment Funds, Inc. - Small Cap Growth Fund
and Large Cap Growth Fund, respectively, effective at the
close of business on July 31, 1998. It is anticipated that
the company will be dissolved under Minnesota law as soon
as practicable.
(2) SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
................................
INVESTMENTS IN SECURITIES
Portfolio securities for which market quotations were
readily available were valued at current market value. If
market quotations or valuations were not readily
available, or if such quotations or valuations were
believed to be inaccurate, unreliable or not reflective of
market value, portfolio securities were valued according
to procedures adopted by the funds' board of directors in
good faith at 'fair value', that is, a price that the fund
might have reasonably expected to receive for the security
or other asset upon its current sale.
Pricing services valued 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
were no reported sales of a security on the valuation
date, the security was valued at the mean between the
published bid and asked prices reported by the exchange or
Nasdaq. If there were no sales and no published bid and
asked quotations for a security on the valuation date or
the security was not traded on an exchange or Nasdaq, the
pricing service may have obtained market quotations
directly from broker-dealers.
Securities transactions were accounted for on the date
securities were purchased or sold. Realized gains and
losses were calculated on the identified-cost basis.
Dividend income was recognized on the ex-dividend date and
interest income, including amortization of bond discount
and premium, was recorded on an accrual basis.
FEDERAL TAXES
Each fund is treated separately for federal income tax
purposes. Prior to the mergers, each fund complied with
the requirements of the Internal Revenue Code applicable
to regulated investment companies in order to avoid the
payment of federal income tax. The funds distributed their
taxable net investment income and realized gains to avoid
the payment of any federal excise taxes.
Net investment income and net realized gains (losses) may
have differed for financial statement and tax purposes
primarily because of losses deferred due to "wash sale"
transactions. The character of distributions made during
the period from net investment income or net realized
gains may have differed from its ultimate characterization
for federal income tax purposes. In addition, due to the
timing of dividend distributions, the fiscal year in which
amounts were distributed may have differed from the year
that the income or realized gains or losses were recorded
by the funds.
- --------------------------------------------------------------------------------
4 1998 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
As a result of permanent book-to-tax differences,
reclassification adjustments were made prior to the
mergers of the funds as follows:
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH GROWTH
FUND FUND
-------------- ----------
<S> <C> <C>
Decrease accumulated net investment
loss ................................. $ 194,884 $ 528,802
Increase/(decrease) accumulated net
realized gains ....................... $ (194,884) $ 789
Decrease additional paid in capital .... $ -- $ 529,591
</TABLE>
ALLOCATION OF INCOME, EXPENSES AND GAINS (LOSSES)
Income, expenses (other than class-specific expenses) and
realized and unrealized gains and losses were allocated
daily to each class of shares based upon the relative
proportion of net assets represented by such class.
Class-specific expenses, which included distribution and
service fees, were charged directly to such class.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income
were declared separately for each class and paid at least
annually. Net realized gains distributions, if any, were
made at least annually. Distributions were 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, transferred uninvested
cash balances to a joint trading account, the daily
aggregate of which was invested in repurchase agreements
secured by U.S. government or agency obligations.
Securities pledged as collateral for all individual and
joint repurchase agreements were held by the funds'
custodian bank until maturity of the repurchase agreement.
Provisions for all agreements ensured that the daily
market value of the collateral was 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 required
management to make estimates and assumptions that affected
the reported amounts in the financial statements. Actual
results could have differed 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 period ended July 31, 1998, were as follows:
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH GROWTH
FUND FUND
-------------- -------------
<S> <C> <C>
Purchases .............................. $23,120,025 $ 82,051,979
Proceeds from sales .................... $24,612,940 $ 127,947,360
</TABLE>
During the period ended July 31, 1998, brokerage
commissions paid to Piper Jaffray Inc., an affiliated
broker, amounted to $13,032 and $2,400 for Small Company
Growth Fund and Growth Fund, respectively.
- --------------------------------------------------------------------------------
5 1998 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(4) CAPITAL SHARE
TRANSACTIONS
................................
Small Company Growth Fund and Growth Fund both declared
100% stock dividends on October 21, 1996. 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.
Capital share transactions for the funds were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
JULY 31, 1998 (b) SEPTEMBER 30, 1997
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SMALL COMPANY GROWTH FUND:
CLASS A
Sales of fund shares ............................. 450,005 $ 4,176,885 1,030,455 $ 7,678,103
Sales in exchange for Class B shares ............. 99,782 974,873 -- --
Issued for reinvested distributions .............. 636,893 5,156,111 1,298,315 8,636,664
Redemptions of fund shares ....................... (838,490) (7,916,828) (1,806,030) (14,140,035)
Issued for stock dividend ........................ -- -- 1,555,872 --
Merger into Small Cap Growth Fund Class A (note 6) (4,073,275) (31,790,965) -- --
------------- ------------- ------------- -------------
(3,725,085) $ (29,399,924) 2,078,612 $ 2,174,732
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
APRIL 27, 1998 (c) SEPTEMBER 30, 1997 (a)
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS B
Sales of fund shares ................. 64,980 $ 585,953 53,821 $ 424,004
Issued for reinvested
distributions ...................... 1,139 10,088 -- --
Redemptions of fund shares ........... (15,974) (150,013) (3,567) (23,690)
Conversion of fund shares into Class
A .................................. (100,399) (974,873) -- --
----------- ------------- ---------- ------------
(50,254) $ (528,845) 50,254 $ 400,314
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
JULY 31, 1998 (b) SEPTEMBER 30, 1997
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
GROWTH FUND:
CLASS A
Sales of fund shares ............................. 1,215,247 $ 14,523,376 1,726,718 $ 18,865,295
Sales in exchange for Class B shares ............. 27,866 337,738 -- --
Issued for reinvested distributions .............. 4,352,924 46,290,419 1,772,740 17,663,981
Redemptions of fund shares ....................... (4,941,143) (58,901,487) (4,513,968) (49,927,190)
Issued for stock dividend ........................ -- -- 8,376,464 --
Merger into Large Cap Growth Fund Class A (note 6) (16,443,730) (170,288,550) -- --
-------------- -------------- -------------- --------------
(15,788,836) $ (168,038,504) 7,361,954 $ (13,397,914)
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
APRIL 27, 1998 (c) SEPTEMBER 30, 1997 (a)
-------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS B
Sales of fund shares ................. 11,688 $ 134,882 16,775 $ 191,828
Issued for reinvested
distributions ...................... 2,317 25,233 -- --
Redemptions of fund shares ........... (2,333) (28,656) (349) (3,438)
Conversion of fund shares into Class
A .................................. (28,098) (337,738) -- --
----------- ------------- ---------- ------------
(16,426) $ (206,279) 16,426 $ 188,390
----------- ------------- ---------- ------------
----------- ------------- ---------- ------------
</TABLE>
(a) REPRESENTS PERIOD FROM FEBRUARY 18, 1997 (COMMENCEMENT OF OFFERING OF
SHARES) TO SEPTEMBER 30, 1997.
(b) REPRESENTS PERIOD FROM OCTOBER 1, 1997 TO JULY 31, 1998 (DATE OF FUND
MERGER).
(c) REPRESENTS PEROD FROM OCTOBER 1, 1997 TO APRIL 27, 1998 (CONVERSION OF
CLASS B SHARES TO CLASS A SHARES).
- --------------------------------------------------------------------------------
6 1998 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
Piper Jaffray Inc. (Piper Jaffray) acted as distributor
for the funds from inception through April 30, 1998. On
May 1, 1998, SEI Investments Distribution Co. (SEI)
assumed the role of the funds' distributor. SEI is not an
affilate of Piper Capital Management Incorporated or of
the funds. Sales charges received by Piper Jaffray Inc.
for distributing the funds' shares for the period from
October 1, 1997 to April 30, 1998, were as follows:
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
----------------- -------------------
CLASS A CLASS B CLASS A CLASS B
------- -------- -------- --------
<S> <C> <C> <C> <C>
Front-end sales charges ................ $59,435 $ -- $ 49,713 $ --
Contingent deferred sales charges ...... 3,107 7,106 3,572 452
------- -------- -------- --------
$62,542 $7,106 $ 53,285 $452
------- -------- -------- --------
------- -------- -------- --------
</TABLE>
(5) EXPENSES
................................
INVESTMENT MANAGEMENT FEE
The company entered into an investment management
agreement with Piper Capital Management Incorporated
(Piper Capital) under which Piper Capital managed each
fund's assets and furnished related office facilities,
equipment, research and personnel. The agreement required
each fund to pay Piper Capital a monthly fee based on
average daily net assets. The fee for each fund was 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 period ended July 31, 1998, the
effective investment management fees paid by the funds
were 0.75% and 0.70% on an annual basis for Small Company
Growth Fund and Growth Fund, respectively.
DISTRIBUTION AND SERVICE FEES
Piper Jaffray Inc. (Piper Jaffray) acted as distributor
for the funds from inception through April 30, 1998. On
May 1, 1998, SEI Investments Distribution Co. (SEI)
assumed the role of the funds' distributor. Each fund paid
Piper Jaffray and SEI fees accrued daily and paid
quarterly, for providing shareholder services and
distribution-related services for the periods referred to
above. The fees for each class, which were being
voluntarily limited for Class A for the period from
October 1, 1997 to July 31, 1998, are stated below as a
percent of average daily net assets attributable to such
shares.
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
----------------- -----------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
Distribution fee ....................... 0.25% 0.75% 0.25% 0.75%
Service fee ............................ 0.25% 0.25% 0.25% 0.25%
------- ------- ------- -------
Total distribution and service fees .... 0.50% 1.00% 0.50% 1.00%
------- ------- ------- -------
------- ------- ------- -------
Total distribution and service fees
after voluntary limitation ........... 0.34% 1.00% 0.34% 1.00%
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
SHAREHOLDER ACCOUNT SERVICING FEES
The company also entered into shareholder account
servicing agreements under which Piper Jaffray and Piper
Trust Company (Piper Trust) performed various transfer and
dividend disbursing agent services for accounts held at
the respective company. The fees, which were paid monthly
to Piper Jaffray and Piper Trust for providing these
services, were equal to an annual rate of $6.00 per active
- --------------------------------------------------------------------------------
7 1998 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
shareholder account and $1.60 per closed account. For the
period ended July 31, 1998, Piper Jaffray and Piper Trust
received the following amounts in connection with the
shareholder account servicing agreements:
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
-------------- ------------
<S> <C> <C>
Piper Jaffray .......................... $24,283 $61,351
Piper Trust ............................ 961 18,938
-------------- ------------
$25,244 $80,289
-------------- ------------
-------------- ------------
</TABLE>
OTHER FEES AND EXPENSES
In addition to the investment management, distribution and
shareholder account servicing fees, each fund was
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 period ended July 31,
1998, 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.
(6) MERGER
................................
At a special meeting held July 10, 1998, shareholders of
Small Company Growth Fund and Growth Fund approved a plan
under which each fund's net assets were aquired by First
American Investment Funds, Inc. - Small Cap Growth Fund
and Large Cap Growth Fund, respectively, each of which is
a diversified series of an open-end investment management
company, in exchange for Class A shares. These tax-free
reorganizations were effective July 31, 1998.
The following table presents the composition of the net
assets of the funds immediately prior to the mergers.
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
-------------- -------------
<S> <C> <C>
Capital stock and additional paid-in
capital .............................. $26,035,558 $ 98,020,791
Accumulated net realized loss .......... (365) --
Unrealized appreciation of
investments .......................... 5,755,772 72,267,759
-------------- -------------
Total - representing net assets
applicable to capital stock .......... $31,790,965 $ 170,288,550
-------------- -------------
-------------- -------------
Net asset value ........................ $ 7.805 $ 10.356
-------------- -------------
-------------- -------------
Shares outstanding ..................... 4,073,275 16,443,730
-------------- -------------
-------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
8 1998 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
SMALL COMPANY GROWTH FUND
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
Period Ended Year Ended September 30,
July 31, ----------------------------------------------------
1998(e) 1997 1996 1995 1994 1993
------------ --------- --------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA (A)
Net asset value, beginning of period ... $ 9.57 $ 9.41 $ 9.73 $ 8.59 $ 8.42 $ 6.79
------------ --------- --------- ------- ------- --------
Operations:
Net investment income (loss) ......... (0.05) (0.09) 0.03 0.05 0.04 0.01
Net realized and unrealized gains
(losses) on investments ............ (0.22) 3.11 0.48 1.14 0.15 1.65
------------ --------- --------- ------- ------- --------
Total from operations .............. (0.27) 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 .............. (1.44) (2.84) (0.79) -- -- --
Tax return of capital ................ (.06) -- -- -- -- --
------------ --------- --------- ------- ------- --------
Total distributions to
shareholders ..................... (1.50) (2.86) (0.83) (0.05) (0.02) (0.03)
------------ --------- --------- ------- ------- --------
Net asset value, date of merger
(7/31/98) ........................ (7.80) -- -- -- -- --
------------ --------- --------- ------- ------- --------
Net asset value, end of period ..... $ -- $ 9.57 $ 9.41 $ 9.73 $ 8.59 $ 8.42
------------ --------- --------- ------- ------- --------
------------ --------- --------- ------- ------- --------
SELECTED INFORMATION
Total return (b) ....................... (2.99)% 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 ............................... 1.33%(g) 1.34% 1.32% 1.40% 1.32% 1.28%
Ratio of net investment income (loss) to
average daily net assets ............. (0.64)%(g) (0.75)% 0.20% 0.43% 0.37% 0.50%
Average commission rate paid on
portfolio transactions (c) ........... $0.0600 $ 0.0600 $ 0.0600 n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) ............... 69% 109% 125% 182% 177% 154%
Ratios before waivers by the advisor
and/or distributor:
Ratio of expenses to average daily net
assets before waivers .............. 1.92%(g) 1.98% 1.79% 1.63% 1.54% 1.86%
Ratio of net investment income (loss)
to average daily net assets before
waivers ............................ (1.23)%(g) (1.39)% (0.27)% 0.20% 0.15% (0.08)%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------
Period Ended Period Ended
April 27, 1998(f) September 30, 1997(d)
--------------------- -------------------------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 9.54 $ 7.24
---------- ----------
Operations:
Net investment loss .................. (0.06) (0.03)
Net realized and unrealized gains on
investments ........................ 0.39 2.33
---------- ----------
Total from operations .............. 0.33 2.30
---------- ----------
Distributions to shareholders:
From net realized gains on
investments ........................ (0.15) --
Tax return on capital ................ (.01) --
---------- ----------
Total distributions to
shareholders ..................... (0.16) --
---------- ----------
---------- ----------
Net asset value, date of conversion
to Class A (4/27/98) ............. (9.71) --
---------- ----------
Net asset value, end of period ..... $ -- $ 9.54
---------- ----------
---------- ----------
SELECTED INFORMATION
Total return (b) ....................... 3.61% 31.77%
Net assets at end of period (in
thousands) ........................... -- $ 480
Ratio of expenses to average daily net
assets (g) ........................... 2.03% 1.98%
Ratio of net investment loss to average
daily net assets (g) ................. (1.30)% (1.49)%
Average commission rate paid on
portfolio transactions (c) ........... $0.0600 $0.0600
Portfolio turnover rate (excluding
short-term securities) ............... 69% 109%
Ratios before waivers by the advisor:
Ratio of expenses to average daily net
assets before waivers (g) .......... 2.40% 2.15%
Ratio of net investment loss to
average daily net assets before
waivers (g) ........................ (1.67)% (1.66)%
</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) DATE FUND DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 1 IN THE NOTES TO
FINANCIAL STATEMENTS.
(f) ON APRIL 27, 1998, ALL OUTSTANDING CLASS B SHARES WERE CONVERTED TO CLASS A
SHARES.
(g) ANNUALIZED.
- --------------------------------------------------------------------------------
9 1998 Annual Report - U.S. Growth Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(7) FINANCIAL
HIGHLIGHTS
................................
Per-share data for a share of capital stock outstanding
throughout each period and selected information for each
period are as follows:
<TABLE>
<CAPTION>
GROWTH FUND
CLASS A
------------------------------------------------------------------
Period Ended Year Ended September 30,
July 31, ---------------------------------------------------
1998(e) 1997 1996 1995 1994 1993
------------ --------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA (A)
Net asset value, beginning of
period ............................ $ 12.79 $ 10.58 $ 10.20 $ 9.45 $ 9.65 $ 8.53
------------ --------- -------- ------- -------- -------
Operations:
Net investment income (loss) ...... (0.03) 0.01 0.03 0.04 0.04 0.06
Net realized and unrealized gains
(losses) on investments ......... 0.78 3.28 1.55 1.80 (0.18) 1.12
------------ --------- -------- ------- -------- -------
Total from operations .............. 0.75 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 ........... (3.18) (1.07) (1.17) (1.05) -- --
------------ --------- -------- ------- -------- -------
Total distributions to
shareholders ..................... (3.18) (1.08) (1.20) (1.09) (0.06) (0.06)
------------ --------- -------- ------- -------- -------
Net asset value, date of merger
(7/31/98) ........................ (10.36) -- -- -- -- --
------------ --------- -------- ------- -------- -------
Net asset value, end of period ..... $ -- $ 12.79 $ 10.58 $ 10.20 $ 9.45 $ 9.65
------------ --------- -------- ------- -------- -------
------------ --------- -------- ------- -------- -------
SELECTED INFORMATION
Total return (b) .................... 6.95% 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 . 1.27%(g) 1.26% 1.24% 1.27% 1.23% 1.26%
Ratio of net investment income (loss)
to average daily net assets ....... (0.33)%(g) 0.13% 0.28% 0.40% 0.43% 0.66%
Average commission rate paid on
portfolio transactions (c) ........ $0.0600 $ 0.0600 $ 0.0600 n/a n/a n/a
Portfolio turnover rate (excluding
short-term securities) ............ 44% 44% 19% 80% 11% 45%
Ratios before waivers by the
distributor:
Ratio of expenses to average daily
net assets before waivers ....... 1.44%(g) 1.42% 1.43% 1.45% 1.42% 1.44%
Ratio of net investment income
(loss) to average daily net
assets before waivers ........... (0.50)%(g) (0.03)% 0.09% 0.22% 0.24% 0.48%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------
Period Ended Period Ended
April 27, 1998(f) September 30, 1997(d)
--------------------- -------------------------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of
period ............................ $ 12.75 $ 10.53
---------- ----------
Operations:
Net investment loss ............... (0.06) (0.03)
Net realized and unrealized gains
on investments .................. 0.68 2.25
---------- ----------
Total from operations .............. 0.62 2.22
---------- ----------
Distributions to shareholders:
From net realized gains on
investments ..................... (1.35) --
---------- ----------
Net asset value, date of conversion
to Class A (4/27/98) ............. (12.02) --
---------- ----------
Net asset value, end of period ..... $ -- $ 12.75
---------- ----------
---------- ----------
SELECTED INFORMATION
Total return (b) .................... 5.94% 21.08%
Net assets at end of period (in
thousands) ........................ -- $ 209
Ratio of expenses to average daily
net assets (g) .................... 1.94% 1.90%
Ratio of net investment loss to
average daily net assets (g) ...... (1.07)% (0.74)%
Average commission rate paid on
portfolio transactions (c) ........ $0.0600 $0.0600
Portfolio turnover rate (excluding
short-term securities) ............ 44% 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) DATE FUND DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 1 IN THE NOTES TO
FINANCIAL STATEMENTS.
(f) ON APRIL 27, 1998, ALL OUTSTANDING CLASS B SHARES WERE CONVERTED TO CLASS A
SHARES.
(g) ANNUALIZED.
- --------------------------------------------------------------------------------
10 1998 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 operations
of Small Company Growth Fund and Growth Fund (funds within
Piper Funds Inc.) for the period from October 1, 1997 to
July 31, 1998 (date of fund mergers), the statements of
changes in net assets for the period from October 1, 1997
to July 31, 1998, and the year ended September 30, 1997,
and the financial highlights for periods presented in note
7 to the financial statements. 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. 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, for Small Company Growth Fund and
Growth Fund, 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.
As described in note 1 to the financial statements, Small
Company Growth Fund and Growth Fund merged into Small Cap
Growth Fund and Large Cap Growth Fund (series of First
American Investment Funds, Inc.), respectively, on July
31, 1998.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 11, 1998
- --------------------------------------------------------------------------------
11 1998 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
on Form 1099-DIV. Please consult a tax advisor on how to
report these distributions at the state and local levels.
SHORT-TERM GAINS (96.3% TAXABLE AS ORDINARY DIVIDENDS,
3.7% TAX RETURN OF CAPITAL)
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
---------------- ----------------
PAYABLE DATE CLASS A CLASS B CLASS A CLASS B
- ---------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
October 31, 1997 ....................... $0.1590 $0.1590 $ -- $ --
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
MID-TERM GAINS (96.3% TAXABLE AS CAPITAL GAINS
DISTRIBUTIONS AT 28%, 3.7% TAX RETURN OF CAPITAL)
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
---------------- ----------------
PAYABLE DATE CLASS A CLASS B CLASS A CLASS B
- ---------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
July 30, 1998 .......................... $0.2972 $ -- $ -- $ --
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
LONG-TERM GAINS (96.3% AND 100% TAXABLE AS CAPITAL GAINS
DISTRIBUTIONS AT 20%, 3.7% AND 0% TAX RETURN OF CAPITAL
FOR SMALL COMPANY GROWTH FUND AND GROWTH FUND,
RESPECTIVELY.)
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
---------------- ----------------
PAYABLE DATE CLASS A CLASS B CLASS A CLASS B
- ---------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
October 31, 1997 ....................... $ -- $ -- $1.3473 $1.3473
July 30, 1998 .......................... 1.0446 -- 1.8310 --
------- ------- ------- -------
Total .............................. $1.0446 $ -- $3.1783 $1.3473
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
- --------------------------------------------------------------------------------
12 1998 Annual Report - U.S. Growth Funds
<PAGE>
Shareholder Update
- --------------------------------------------------------------------------------
SPECIAL MEETING RESULTS
A special meeting of the fund's shareholders was held on
July 10, 1998. Each matter voted upon at that meeting, as
well as the number of votes cast for, against or withheld,
the number of abstentions, and the number of broker
non-votes with respect to such matters, are set forth
below.
1. PROPOSAL TO RATIFY AND APPROVE AN INTERIM ADVISORY
AGREEMENT between the fund and Piper Capital
Management Incorporated ("Piper Capital"), and the
receipt of investment advisory fees by Piper Capital
under such agreement.
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
------------- ------------
SHARES VOTED SHARES VOTED
------------- ------------
<S> <C> <C>
For .................................... 3,495,892 14,414,911
Against ................................ 69,038 264,555
Abstain ................................ 118,625 526,889
------------- ------------
Total ................................ 3,683,555 15,206,355
------------- ------------
------------- ------------
</TABLE>
2. PROPOSAL TO APPROVE AN AGREEMENTAND PLAN OF
REORGANIZATION providing for the transfer of the
assets and liabilities of Small Company Growth Fund
and Growth Fund, respectively, to FAIF Small Cap
Growth Fund and FAIF Large Cap Growth Fund, funds of
First American Investment Funds, Inc. ("FAIF"), in
exchange for Class A shares of such FAIF funds.
<TABLE>
<CAPTION>
SMALL COMPANY
GROWTH FUND GROWTH FUND
------------- ------------
SHARES VOTED SHARES VOTED
------------- ------------
<S> <C> <C>
For .................................... 1,893,509 7,903,724
Against ................................ 64,045 240,097
Abstain ................................ 124,827 547,075
Broker Non-Vote ........................ 1,601,175 6,515,460
------------- ------------
Total ................................ 3,683,556 15,206,356
------------- ------------
------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
13 1998 Annual Report - U.S. Growth Funds
