<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS For the Period Ended July 31,
1998*
................................................................................
<TABLE>
<CAPTION>
GROWTH AND
INCOME BALANCED
FUND FUND
------------ -------------
<S> <C> <C>
INCOME:
Dividends .................................................. $ 1,763,218 $ 261,321
Interest ................................................... 194,777 1,269,432
------------ -------------
Total income ............................................. 1,957,995 1,530,753
------------ -------------
EXPENSES (NOTE 5):
Investment management fee .................................. 875,402 305,538
Distribution and service fees:
CLASS A .................................................. 538,648 202,702
CLASS B .................................................. 6,989 433
CLASS Y .................................................. -- --
Custodian and accounting fees .............................. 101,352 52,984
Transfer agent and dividend disbursing agent fees .......... 86,016 64,081
Registration fees .......................................... 41,623 23,923
Reports to shareholders .................................... 44,407 37,241
Directors' fees ............................................ 7,937 7,937
Audit and legal fees ....................................... 39,226 39,227
Other expenses ............................................. 6,470 4,689
------------ -------------
Total expenses ........................................... 1,748,070 738,755
Less Class A expenses waived by the distributor ........ (183,942) (69,215)
Less expenses waived by the advisor .................... (25,415) (128,824)
------------ -------------
Net expenses before expenses paid indirectly ............. 1,538,713 540,716
Less expenses paid indirectly .......................... (80) (95)
------------ -------------
Total net expenses ....................................... 1,538,633 540,621
------------ -------------
Net investment income .................................... 419,362 990,132
------------ -------------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gain on investments (note 3) .................. 10,560,552 5,129,977
Net change in unrealized appreciation or depreciation of
investments .............................................. 6,839,510 (1,007,985)
------------ -------------
Net gain on investments .................................. 17,400,062 4,121,992
------------ -------------
Net increase in net assets resulting from operations ... $17,819,424 $ 5,112,124
------------ -------------
------------ -------------
* 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 - Growth and Income Funds
<PAGE>
Financial Statements (continued)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
................................................................................
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED 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 ...................................... $ 419,362 $ 1,129,415 $ 990,132 $ 1,395,733
Net realized gain on investments ........................... 10,560,552 12,833,367 5,129,977 3,266,517
Net change in unrealized appreciation or depreciation of
investments .............................................. 6,839,510 19,936,662 (1,007,985) 4,157,249
------------- ------------- ------------- -------------
Net increase in net assets resulting from operations ..... 17,819,424 33,899,444 5,112,124 8,819,499
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
CLASS A:
From net investment income ............................... (313,350) (1,123,538) (1,005,679) (1,402,111)
From net realized gains .................................. (20,293,115) (6,538,320) (8,228,202) (2,554,492)
Tax return of capital .................................... (20,847) -- (35,425) --
CLASS B:
From net investment income ............................... -- (1,110) (935) (433)
From net realized gains .................................. (102,118) -- (2,474) --
Tax return of capital .................................... (103) -- (15) --
CLASS Y:
From net investment income ............................... (109,196) (70,694) -- --
From net realized gains .................................. (2,343,384) -- -- --
Tax return of capital .................................... (2,482) -- -- --
------------- ------------- ------------- -------------
Total distributions .................................... (23,184,595) (7,733,662) (9,272,730) (3,957,036)
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS (NOTE 4):
CLASS A .................................................... (122,172,975) 4,970,887 (44,707,944) (1,431,461)
CLASS B .................................................... (929,346) 827,747 (40,171) 34,648
CLASS Y .................................................... (13,426,486) 12,692,933 -- --
------------- ------------- ------------- -------------
Increase (decrease) in net assets from capital share
transactions ........................................... (136,528,807) 18,491,567 (44,748,115) (1,396,813)
------------- ------------- ------------- -------------
Total increase (decrease) in net assets .................. (141,893,978) 44,657,349 (48,908,721) 3,465,650
Net assets at beginning of period .......................... 141,893,978 97,236,629 48,908,721 45,443,071
------------- ------------- ------------- -------------
Net assets at end of period ................................ $ -- $ 141,893,978 $ -- $ 48,908,721
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Undistributed net investment income ........................ $ -- $ 3,184 $ -- $ 16,482
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
* 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 - Growth and Income 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 Growth and Income Fund
and Balanced Fund (the funds). Each fund is classified as
a diversified series.
The funds commenced offering Class B shares and Growth and
Income Fund commenced offering Class Y 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
CLASS Y:
- Required a minimum initial investment of $1 million
- No front-end or contingent deferred sales charges
- No distribution and service fees
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.
Growth and Income Fund invested primarily in stocks of
large, established companies that appeared undervalued and
potentially offered long-term dividend and earnings
growth. The fund also could invest in debt securities
including U.S. government securities and nonconvertible
preferred stock.
Balanced Fund invested in both common stocks and fixed
income securities that appeared to have some potential for
capital appreciation.
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,
- --------------------------------------------------------------------------------
3 1998 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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.
As discussed in note 6, all of the net assets of Growth
and Income Fund and Balanced Fund were acquired by First
American Investment Funds, Inc. - Large Cap Value Fund and
Balanced 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.
The current market value of certain fixed income
securities was provided by an independent pricing service.
Fixed income securities for which prices were not
available from an independent pricing service but where an
active market exists were valued using market quotations
obtained from one or more dealers that make markets in the
securities or from a widely-used quotation system.
Short-term securities with maturities of 60 days or less
were valued at amortized cost, which approximated market
value.
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.
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
- --------------------------------------------------------------------------------
4 1998 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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 differ from the year that the income
or realized gains or losses were recorded by the funds.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders from net investment income
were declared separately for each class and paid
quarterly. 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.
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.
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.
- --------------------------------------------------------------------------------
5 1998 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(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>
GROWTH
AND INCOME BALANCED
FUND FUND
----------- -----------
<S> <C> <C>
Purchases .............................. $39,153,346 $11,640,772
Proceeds from sales .................... $58,975,133 $20,513,712
</TABLE>
During the period ended July 31, 1998, brokerage
commissions paid to Piper Jaffray Inc., an affiliated
broker, amounted to $852.
(4) CAPITAL SHARE
TRANSACTIONS
................................
Capital share transactions for the funds were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
JULY 31, 1998 (a) SEPTEMBER 30, 1997
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
GROWTH AND INCOME FUND:
CLASS A
Sales of fund shares ................. 607,285 $ 10,610,367 2,164,442 $ 33,710,309
Sales in exchange from Class B
shares ............................. 78,730 1,414,784 -- --
Issued for reinvested
distributions ...................... 1,210,482 19,623,146 483,550 7,152,088
Redemptions of fund shares ........... (1,692,481) (30,451,128) (1,460,532) (23,640,495)
Redemptions in exchange for Class Y
shares ............................. (64,486) (1,053,083) (734,641) (12,251,015)
Merger into Large Cap Value Fund Class
A (note 6) ......................... (7,056,617) (122,317,061) -- --
---------- ------------- ---------- ------------
(6,917,087) $(122,172,975) 452,819 $ 4,970,887
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
APRIL 27, 1998 (c) SEPTEMBER 30, 1997 (b)
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS B
Sales of fund shares ................. 26,697 $ 444,228 51,933 $ 869,013
Issued for reinvested
distributions ...................... 6,404 99,170 66 1,105
Redemptions of fund shares ........... (3,374) (57,960) (2,644) (42,371)
Conversion of fund shares into Class
A .................................. (79,082) (1,414,784) -- --
---------- ------------- ---------- ------------
(49,355) $ (929,346) 49,355 $ 827,747
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
JULY 31, 1998 (a) SEPTEMBER 30, 1997 (b)
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS Y
Sales of fund shares ................. 114,599 $ 2,014,813 149,097 $ 2,539,485
Sales in exchange from Class A
shares ............................. 64,486 1,053,083 734,994 12,251,015
Issued for reinvested
distributions ...................... 151,148 2,456,148 4,142 70,694
Redemptions of fund shares ........... (229,128) (4,089,867) (129,873) (2,168,261)
Merger into Large Cap Value Fund Class
Y (note 6) ......................... (859,465) (14,860,663) -- --
---------- ------------- ---------- ------------
(758,360) $ (13,426,486) 758,360 $ 12,692,933
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
</TABLE>
- --------------------------------------------------------------------------------
6 1998 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
JULY 31, 1998 (a) SEPTEMBER 30, 1997
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCED FUND:
CLASS A
Sales of fund shares ................. 426,907 $ 6,439,374 819,933 $ 11,658,196
Sales in exchange from Class B
shares ............................. 7,022 108,013 -- --
Issued for reinvested
distributions ...................... 636,161 9,021,489 269,167 3,740,957
Redemptions of fund shares ........... (1,065,701) (16,393,271) (1,170,542) (16,830,614)
Merger into Balanced Fund Class A
(note 6) ........................... (3,150,040) (43,883,549) -- --
---------- ------------- ---------- ------------
(3,145,651) $ (44,707,944) (81,442) $ (1,431,461)
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
APRIL 27, 1998 (c) SEPTEMBER 30, 1997 (b)
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS B
Sales of fund shares ................. 5,323 $ 78,457 2,366 $ 34,215
Issued for reinvested
distributions ...................... 238 3,423 29 433
Redemptions of fund shares ........... (906) (14,038) -- --
Conversion of fund shares into Class
A .................................. (7,050) (108,013) -- --
---------- ------------- ---------- ------------
(2,395) $ (40,171) 2,395 $ 34,648
---------- ------------- ---------- ------------
---------- ------------- ---------- ------------
</TABLE>
(a) REPRESENTS PERIOD FROM OCTOBER 1, 1997 TO JULY 31, 1998 (MERGER OF FUNDS).
(b) REPRESENTS PERIOD FROM FEBRUARY 18 (COMMENCEMENT OF OFFERING OF SHARES) TO
SEPTEMBER 30, 1997.
(c) REPRESENTS PERIOD FROM OCTOBER 1, 1997 TO APRIL 27, 1998 (CONVERSION OF
CLASS B SHARES TO CLASS A SHARES).
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
affiliate of Piper Capital Management Incorporated or of
the funds. Sales charges received by Piper Jaffray for
distributing the funds' shares for the period from October
1, 1997 to April 30, 1998, were as follows:
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED FUND
---------------------------- ---------------------
CLASS A CLASS B CLASS Y CLASS A CLASS B
------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Front-end sales charges ................ $86,209 $ -- $-- $ 18,016 $ --
Contingent deferred sales charges ...... 7,626 2,289 -- 810 239
------- -------- --- ---------- --------
$93,835 $2,289 $-- $ 18,826 $239
------- -------- --- ---------- --------
------- -------- --- ---------- --------
</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 fee paid by the funds was
0.72% and 0.75% on an annual basis for Growth and Income
Fund and Balanced Fund, respectively.
- --------------------------------------------------------------------------------
7 1998 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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>
GROWTH AND INCOME FUND BALANCED FUND
--------------------------- -----------------
CLASS CLASS CLASS CLASS CLASS
A B Y A B
------ ------ ----- ------ ------
<S> <C> <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
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>
GROWTH AND
INCOME FUND BALANCED FUND
------------ --------------
<S> <C> <C>
Piper Jaffray .......................... $29,107 $ 7,257
Piper Trust ............................ 1,304 3,312
------------ --------------
$30,411 $10,569
------------ --------------
------------ --------------
</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 Growth and Income Fund to annual rates of
1.34%, 2.00% and 1.00% of average daily net assets
attributable to such shares for Class A, Class B and Class
Y, respectively, and for Balanced 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.
- --------------------------------------------------------------------------------
8 1998 Annual Report - Growth and Income Funds
<PAGE>
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
(6) MERGER
................................
At a special meeting held July 10, 1998, shareholders of
Growth and Income Fund and Balanced Fund approved a plan
under which each fund's net assets were acquired by First
American Investment Funds, Inc. - Large Cap Value Fund and
Balanced Fund, respectively, each of which is a
diversified series of an open-end investment management
company, in exchange for shares of the same class. 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>
GROWTH AND BALANCED
INCOME FUND FUND
------------ -----------
<S> <C> <C>
Capital stock and additional paid-in
capital .............................. $ 83,652,388 $33,376,465
Unrealized appreciation of
investments .......................... 53,525,336 10,507,084
------------ -----------
Total - representing net assets
applicable to capital stock ........ $137,177,724 $43,883,549
------------ -----------
------------ -----------
CLASS A:
Net asset value ........................ $ 17.334 $ 13.931
Shares outstanding ..................... 7,056,617 3,150,040
Net assets ............................. $122,317,061 $43,883,549
CLASS Y:
Net asset value ........................ $ 17.291 $ --
Shares outstanding ..................... 859,465 --
Net assets ............................. $ 14,860,663 $ --
</TABLE>
- --------------------------------------------------------------------------------
9 1998 Annual Report - Growth and Income 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:
GROWTH AND INCOME 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
Net asset value, beginning
of period .............. $ 18.37 $ 15.04 $ 12.93 $ 10.27 $ 10.30 $ 10.01
----------- -------- -------- -------- -------- --------
Operations:
Net investment
income ............... 0.05 0.15 0.18 0.19 0.24 0.24
Net realized and
unrealized gains on
investments .......... 1.93 4.35 2.31 2.70 0.02 0.29
----------- -------- -------- -------- -------- --------
Total from
operations ......... 1.98 4.50 2.49 2.89 0.26 0.53
----------- -------- -------- -------- -------- --------
Distributions to
shareholders:
From net investment
income ............... (0.05) (0.16) (0.20) (0.19) (0.24) (0.24)
From net realized gains
on investments ....... (2.97) (1.01) (0.18) (0.04) (0.05) --
Tax return of
capital .............. -- -- -- -- -- --
----------- -------- -------- -------- -------- --------
Total distributions to
shareholders ....... (3.02) (1.17) (0.38) (0.23) (0.29) (0.24)
----------- -------- -------- -------- -------- --------
Net asset value, date
of merger
(7/31/98) .......... (17.33) -- -- -- -- --
----------- -------- -------- -------- -------- --------
Net asset value, end
of period .......... $ -- $ 18.37 $ 15.04 $ 12.93 $ 10.27 $ 10.30
----------- -------- -------- -------- -------- --------
----------- -------- -------- -------- -------- --------
SELECTED INFORMATION
Total return (a) ......... 12.67% 31.87% 19.56% 28.81% 2.53% 5.41%
Net assets at end of
period (in millions) ... -- $ 127 $ 97 $ 73 $ 73 $ 96
Ratio of expenses to
average daily net
assets ................. 1.29%(d) 1.34% 1.32% 1.32% 1.29% 1.32%
Ratio of net investment
income to average daily
net assets ............. 0.31%(d) 0.90% 1.26% 1.93% 2.26% 2.51%
Average commission rate
paid on portfolio
transactions (b) ....... $0.0600 $ 0.0600 $ 0.0600 n/a n/a n/a
Portfolio turnover rate
(excluding short-term
securities) ............ 28% 46% 22% 14% 20% 26%
Ratios before waivers by
the advisor and
distributor:
Ratio of expenses to
average daily net
assets before
waivers .............. 1.48%(d) 1.52% 1.56% 1.60% 1.62% 1.58%
Ratio of net investment
income to average
daily net assets
before waivers 0.12%(d) 0.72% 1.02% 1.65% 1.93% 2.25%
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS Y
------------------------------------------------- ------------------------------------------------
Period Ended Period Ended Period Ended Period Ended
April 27, 1998(f) September 30, 1997(c) July 31, 1998(e) September 30, 1997(c)
--------------------- ------------------------- -------------------- -------------------------
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of
period ..................... $ 18.33 $ 16.14 $ 18.36 $ 16.14
---------- ---------- ---------- ----------
Operations:
Net investment income
(loss) ................... (0.03) 0.03 0.09 0.12
Net realized and unrealized
gains on investments ..... 1.56 2.21 1.94 2.21
---------- ---------- ---------- ----------
Total from operations .... 1.53 2.24 2.03 2.33
---------- ---------- ---------- ----------
Distributions to shareholders:
From net investment
income ................... -- (0.05) (0.13) (0.11)
From net realized gains on
investments .............. (1.97) -- (2.96) --
Tax return of capital ...... -- -- (.01) --
---------- ---------- ---------- ----------
Total distributions to
shareholders ........... (1.97) (0.05) (3.10) (0.11)
---------- ---------- ---------- ----------
Net asset value, date of
conversion (Class B) and
date of merger (Class
Y) ..................... (17.89) -- (17.29) --
---------- ---------- ---------- ----------
Net asset value, end of
period ................. $ -- $ 18.33 $ -- $ 18.36
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
SELECTED INFORMATION
Total return (a) ............. 9.98% 13.93% 13.00% 14.51%
Net assets at end of period
(in thousands and millions
for Class B and Class Y,
respectively) .............. -- $ 905 -- $ 14
Ratio of expenses to average
daily net assets ........... 1.99%(d) 1.98%(d) 0.97%(d) 0.99%(d)
Ratio of net investment income
(loss) to average daily net
assets ..................... (0.40)%(d) 0.04%(d) 0.64%(d) 1.12%(d)
Average commission rate paid
on portfolio transactions
(b) ........................ $0.0600 $0.0600 $0.0600 $0.0600
Portfolio turnover rate
(excluding short-term
securities) . 28% 46% 28% 46%
Ratios before waivers by the
advisor:
Ratio of expenses to average
daily net assets before
waivers .................. 1.99%(d) 1.98%(d) 0.99%(d) 1.00%(d)
Ratio of net investment
income (loss) to average
daily net assets before
waivers .................. (0.40)%(d) 0.04%(d) 0.62%(d) 1.11%(d)
</TABLE>
(a) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(b) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996.
(c) COMMENCEMENT OF OFFERING OF CLASS B AND CLASS Y SHARES WAS FEBRUARY 18,
1997.
(d) ANNUALIZED.
(e) DATE FUND DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 6 IN THE NOTES TO
FINANCIAL STATEMENTS.
(f) ON APRIL 27, 1998, ALL CLASS B SHARES WERE CONVERTED TO CLASS A SHARES.
- --------------------------------------------------------------------------------
10 1998 Annual Report - Growth and Income 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:
BALANCED 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
Net asset value, beginning of
period ..................... $ 15.54 $ 14.08 $ 13.74 $ 11.81 $ 12.23 $ 11.88
-------- -------- -------- -------- -------- --------
Operations:
Net investment income ...... 0.31 0.42 0.44 0.47 0.38 0.34
Net realized and unrealized
gains (losses) on
investments .............. 1.23 2.26 0.89 1.93 (0.26) 0.65
-------- -------- -------- -------- -------- --------
Total from operations .... 1.54 2.68 1.33 2.40 0.12 0.99
-------- -------- -------- -------- -------- --------
Distributions to shareholders:
From net investment
income ................... (0.32) (0.42) (0.44) (0.35) (0.37) (0.34)
From net realized gains .... (2.82) (0.80) (0.55) (0.12) (0.17) (0.30)
Tax return of capital ...... (.01) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions to
shareholders ........... (3.15) (1.22) (0.99) (0.47) (0.54) (0.64)
-------- -------- -------- -------- -------- --------
Net asset value, date of
merger (7/31/98) ....... (13.93) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of
period ................. $ -- $ 15.54 $ 14.08 $ 13.74 $ 11.81 $ 12.23
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
SELECTED INFORMATION
Total return (a) ............. 10.77% 20.24% 10.16% 21.78% 1.00% 8.51%
Net assets at end of period
(in millions) .............. -- $ 49 $ 45 $ 44 $ 46 $ 57
Ratio of expenses to average
daily net assets ........... 1.33%(d) 1.34% 1.32% 1.32% 1.32% 1.32%
Ratio of net investment income
to average daily net
assets ..................... 2.43%(d) 2.89% 3.16% 3.54% 3.03% 3.13%
Average commission rate paid
on portfolio transactions
(b) ........................ $0.0600 $ 0.0600 $ 0.0600 n/a n/a n/a
Portfolio turnover rate
(excluding short-term
securities) ................ 24% 42% 27% 39% 62% 41%
Ratios before waivers by the
advisor and distributor:
Ratio of expenses to average
daily net assets before
waivers .................. 1.81%(d) 1.73% 1.69% 1.65% 1.60% 1.62%
Ratio of net investment
income to average daily
net assets before
waivers .................. 1.95%(d) 2.50% 2.79% 3.21% 2.75% 2.83%
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------
Period Ended Period Ended
April 27, 1998(f) September 30, 1997(c)
--------------------- -------------------------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period ... $ 15.51 $ 14.46
-------- --------
Operations:
Net investment income ................ 0.15 0.20
Net realized and unrealized gains on
investments ........................ 0.84 1.10
-------- --------
Total from operations .............. 0.99 1.30
-------- --------
Distributions to shareholders:
From net investment income ........... (0.15) (0.25)
From net realized gains on
investments ........................ (1.02) --
Tax return of capital ................ (.01) --
-------- --------
Total distributions to
shareholders ..................... (1.18) (0.25)
-------- --------
Net asset value, date of conversion
to Class A ....................... (15.32) --
-------- --------
Net asset value, end of period ..... $ -- $ 15.51
-------- --------
-------- --------
SELECTED INFORMATION
Total return (a) ....................... 7.05% 9.08%
Net assets at end of period (in
thousands) ........................... -- $ 37
Ratio of expenses to average daily net
assets ............................... 2.03%(d) 1.99%(d)
Ratio of net investment income to
average daily net assets ............. 1.72%(d) 2.11%(d)
Average commission rate paid on
portfolio transactions (b) ........... $0.0600 $0.0600
Portfolio turnover rate (excluding
short-term securities) ............... 24% 42%
Ratios before waivers by the advisor:
Ratio of expenses to average daily net
assets before waivers .............. 2.38%(d) 2.11%(d)
Ratio of net investment income to
average daily net assets before
waivers ............................ 1.37%(d) 1.99%(d)
</TABLE>
(a) TOTAL RETURN ASSUMES REINVESTMENT OF DISTRIBUTIONS AND DOES NOT REFLECT A
SALES CHARGE.
(b) DISCLOSED IN ACCORDANCE WITH GUIDELINES ADOPTED IN 1996.
(c) COMMENCEMENT OF OFFERING OF CLASS B SHARES WAS FEBRUARY 18, 1997.
(d) ANNUALIZED.
(e) DATE FUND DISCONTINUED OPERATIONS DUE TO MERGER. SEE NOTE 6 IN THE NOTES TO
FINANCIAL STATEMENTS.
(f) ON APRIL 27, 1998, ALL CLASS B SHARES WERE CONVERTED TO CLASS A SHARES.
- --------------------------------------------------------------------------------
11 1998 Annual Report - Growth and Income Funds
<PAGE>
Independent Auditors' Report
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS AND SHAREHOLDERS
PIPER FUNDS INC.:
We have audited the accompanying statements of operations
of Growth and Income Fund and Balanced 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 the 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 Growth and Income Fund and Balanced
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, Growth
and Income Fund and Balanced Fund merged into Large Cap
Value Fund and Balanced Fund (each a series of First
American Investment Funds, Inc.), respectively, on July
31, 1998.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 11, 1998
- --------------------------------------------------------------------------------
12 1998 Annual Report - Growth and Income 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.
INCOME DISTRIBUTIONS (99.9% AND 99.6% TAXABLE AS ORDINARY
DIVIDENDS, 0.1% AND 0.4% TAX RETURN OF CAPITAL, 78.16% AND
26.39% QUALIFYING FOR DEDUCTION BY CORPORATIONS FOR GROWTH
AND INCOME FUND AND BALANCED FUND, RESPECTIVELY)
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED FUND
------------------------- ----------------
PAYABLE DATE CLASS A CLASS B CLASS Y CLASS A CLASS B
- ---------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
31-Dec-97 .............................. $0.0180 $ -- $0.0319 $0.0983 $0.0910
23-Mar-98 .............................. 0.0192 -- 0.0452 0.0831 0.0628
22-Jun-98 .............................. 0.0072 -- 0.0509 0.0903 --
30-Jul-98 .............................. -- -- -- 0.0472 --
------- ------- ------- ------- -------
Total ................................ $0.0444 $ -- $0.1280 $0.3189 $0.1538
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
SHORT-TERM GAINS (99.9% AND 99.6% TAXABLE AS ORDINARY
DIVIDENDS, AND 0.1% AND 0.4% TAX RETURN OF CAPITAL FOR
GROWTH AND INCOME FUND AND BALANCED FUND, RESPECTIVELY)
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED FUND
------------------------- ----------------
PAYABLE DATE CLASS A CLASS B CLASS Y CLASS A CLASS B
- ---------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
31-Oct-97 .............................. $0.0761 $0.0761 $0.0761 $ -- $ --
30-Jul-98 .............................. 0.1824 -- 0.1824 -- --
------- ------- ------- ------- -------
Total ................................ $0.2585 $0.0761 $0.2585 $ -- $ --
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
MID-TERM GAINS (99.9% AND 99.6% TAXABLE AS CAPITAL GAINS
DISTRIBUTIONS AT A MAXIMUM RATE OF 28%, 0.1% AND 0.4% TAX
RETURN OF CAPITAL FOR GROWTH AND INCOME FUND AND BALANCED
FUND, RESPECTIVELY)
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED FUND
------------------------- ----------------
PAYABLE DATE CLASS A CLASS B CLASS Y CLASS A CLASS B
- ---------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
31-Oct-97 .............................. $0.9917 $0.9917 $0.9917 $0.5479 $0.5479
30-Jul-98 .............................. 0.0042 -- 0.0042 -- --
------- ------- ------- ------- -------
Total ................................ $0.9959 $0.9917 $0.9959 $0.5479 $0.5479
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
LONG-TERM GAINS (99.9% AND 99.6% TAXABLE AS CAPITAL GAINS
DISTRIBUTIONS AT A MAXIMUM RATE OF 20%, 0.1% AND 0.4% TAX
RETURN OF CAPITAL FOR GROWTH AND INCOME FUND AND BALANCED
FUND, RESPECTIVELY)
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND BALANCED FUND
------------------------- ----------------
PAYABLE DATE CLASS A CLASS B CLASS Y CLASS A CLASS B
- ---------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
31-Oct-97 .............................. $0.8973 $0.8973 $0.8973 $0.4840 $0.4840
30-Jul-98 .............................. 0.8211 -- 0.8211 1.7985 --
------- ------- ------- ------- -------
Total ................................ $1.7184 $0.8973 $1.7184 $2.2825 $0.4840
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
- --------------------------------------------------------------------------------
13 1998 Annual Report - Growth and Income 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 each fund and Piper Capital
Management Incorporated ("Piper Capital") and the
receipt of investment advisory fees by Piper Capital
under such agreement.
<TABLE>
<CAPTION>
BALANCED
GROWTH AND INCOME FUND FUND
--------------------------- ------------
CLASS A CLASS Y CLASS A
SHARES VOTED SHARES VOTED SHARES VOTED
------------ ------------ ------------
<S> <C> <C> <C>
For .................................... 6,781,189 783,431 2,719,756
Against ................................ 150,030 0 30,835
Abstain ................................ 193,758 80,850 277,976
------------ ------------ ------------
Total ................................ 7,124,977 864,281 3,028,567
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
2. Proposal to approve an agreement and plan of
reorganization providing for the transfer of the
assets and liabilities of Growth and Income Fund and
Balanced Fund, respectively, to FAIF Large Cap Value
Fund and FAIF Balanced Fund, funds of First American
Investment Funds, Inc. ("FAIF"), in exchange for
shares of the same class of shares.
<TABLE>
<CAPTION>
BALANCED
GROWTH AND INCOME FUND FUND
--------------------------- ------------
CLASS A CLASS Y CLASS A
SHARES VOTED SHARES VOTED SHARES VOTED
------------ ------------ ------------
<S> <C> <C> <C>
For .................................... 3,716,087 553,073 1,542,281
Against ................................ 156,573 0 33,897
Abstain ................................ 211,148 80,850 279,330
Broker non-vote ........................ 3,041,171 230,359 1,173,060
------------ ------------ ------------
Total ................................ 7,124,979 864,282 3,028,568
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- --------------------------------------------------------------------------------
14 1998 Annual Report - Growth and Income Funds
